Document:

Exhibit 10.101

 

AMENDMENT NO. 1 TO THE 

SECOND AMENDED AND RESTATED ADVISORY SERVICES AGREEMENT

 

AMENDMENT NO. 1 to the SECOND AMENDED
AND RESTATED ADVISORY SERVICES AGREEMENT, dated as of March 31, 2006, among SECURITY
CAPITAL CORPORATION, a Delaware corporation (“Security
Capital”), and CAPITAL PARTNERS, INC., a Connecticut corporation (“Capital Partners”). 
Capitalized terms used but defined herein shall have the meanings
ascribed to such terms in the Advisory Services Agreement (as defined below).

 

W I T N E S S E T
H:

 

WHEREAS, Security Capital and
Capital Partners entered into that certain Second Amended and Restated Advisory
Services Agreement, dated as of December 23, 2005, and effective as of January
1, 2006 (the “Advisory Services Agreement”),
pursuant to which Capital Partners agreed to, among other things, continue,
from and after January 1, 2006, to provide advisory services to Security
Capital and its subsidiaries in the areas of investments, general
administration, corporate development, strategic planning, stockholder
relations, financial matters and general business policy for a fee of
$1,550,000 per annum;

 

WHEREAS, Security Capital has
commenced a formal sale process for the Sale of Security Capital in an effort
to maximize stockholder value by seeking for its stockholders the highest price
reasonably attainable for Security Capital; and

 

WHEREAS, pursuant to the
Advisory Services Agreement, the Board of Directors of Security Capital (the “Board”) has assigned Capital Partners, and its President and
Chief Executive Officer, the responsibility to manage the
formal sale process; and

 

WHEREAS, the Board has
determined that the appropriate structure for maximizing stockholder value in
the formal sale process and to receive the highest price reasonably attainable
for Security Capital is to engage in a Sale of Primrose prior to a Sale of
Security Capital; and

 

WHEREAS, Security Capital and Primrose
Holdings, Inc. (“Primrose”) have entered into that
certain Stock Purchase Agreement (the “Stock Purchase Agreement”),
dated as of February 10, 2006, among PHC Acquisition, Inc. (“PHC”), Primrose, Security Capital and the other parties set
forth on Schedule A and Schedule B thereto, pursuant to which PHC will acquire
all of the shares of Primrose held by Security Capital; and

 

WHEREAS, as a condition to
entering into the Stock Purchase Agreement, PHC required that Security Capital,
Capital Partners and Primrose amend the Advisory Services Agreement to remove
Primrose as a party without liability to Primrose or its subsidiaries other
than the payment of the $193,750 Fee that is payable by Primrose to Capital
Partners pursuant to the Advisory Services Agreement, which amount is being paid
by Primrose to Security Capital simultaneously with the execution of this Agreement;
and

 

WHEREAS, the Compensation
Committee of the Board, the Audit Committee of the Board and the full Board, a
majority of the members of which are independent directors, have

 

 

unanimously determined
that such an amendment to the Advisory Services Agreement is in the best
interests of Security Capital and all of its stockholders; and

 

WHEREAS, Security Capital and
Capital Partners desire to amend the Advisory Services Agreement to reflect
such matters.

 

NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree, intending to be legally bound, to amend the Advisory Services
Agreement, as follows:

 

1.             Primrose is hereby
removed as a party to the Advisory Services Agreement and is hereby released
from, and Security Capital and Capital Partners shall indemnify and save
Primrose harmless against, any and all liabilities, obligations, claims and
expense arising under, or with respect to, the Advisory Services Agreement.

 

2.             Section 1(b) of the
Advisory Services Agreement is hereby deleted in its entirety without liability.

 

3.             Section 2(b) of the
Advisory Services Agreement is hereby deleted in its entirety and replaced with
the following:

 

(b)           Notwithstanding
anything in this Agreement to the contrary, in the event of a Sale of Security
Capital, this Agreement shall automatically terminate on the earlier of (A) the
six-month anniversary of the consummation of the Sale of Security Capital and
(B) December 31 of the year in which the Sale of Security Capital is
consummated.

 

4.             Section 3 of the
Advisory Services Agreement is hereby deleted in its entirety and replaced with
the following:

 

3.             Advisory Fee.

 

(a)           Security Capital shall
pay to Capital Partners an advisory fee (the “Fee”)
at the rate of $1,550,000 per annum for the services described in Section
1.  The Fee shall be payable in equal
quarterly installments, in advance, with the installment for each quarter
payable on the first day of the first month of such quarter; provided
that, (i) in the event that a Sale of Security Capital is consummated on or
prior to March 31, 2006, Capital Partners shall not be entitled to receive the
$387,500 payment for the fourth quarter of 2006, (ii) in the event that a
Sale of Security Capital is consummated after March 31, 2006 but on or prior to
June 30, 2006, the $387,500 payment for the fourth quarter of 2006 shall be
prorated and adjusted for the number of days elapsed during the fourth quarter
of 2006 prior to the date of the termination of this Agreement pursuant to
Section 2(b) of this Agreement and (iii) the portion of the Fee payable by
Security Capital with respect to each of the second and third quarters of 2006
will be reduced by $96,875 (which amount represents the portion of the Fee paid
by Primrose to Security Capital).  The
Fee shall be subject to an appropriate adjustment, as reasonably agreed by the
affected parties pursuant to Section 9, whenever there is the occurrence of any
material unforeseen event, including, but not limited to, any significant
change in the scope of the operations of Security Capital such as, for example,
a significant change in

 

2

 

scope which results from any acquisition or
disposition made by Security Capital (other than a Sale of Security Capital or
a Sale of Primrose).  The Fee shall be
exclusive of reasonable out-of-pocket costs incurred by Capital Partners directly
in the performance of the services described in Section 1, which out-of-pocket
costs shall be reimbursed in accordance with 

Section 4.

 

(b)           Notwithstanding
anything in this Agreement to the contrary, in the event of a Sale of Security
Capital, Security Capital shall be obligated to (i) pay its portion of the next
installment payment of the Fee simultaneously with the consummation of the Sale
of Security Capital and (i) pay its portion of any other installment payment of
the Fee due during the six-month period following the Sale of Security Capital
at the time such installment payment is payable under this Agreement.

 

5.             Section 4 of the
Advisory Services Agreement is hereby deleted in its entirety and replaced with
the following:

 

4.             Costs.  Security Capital shall promptly reimburse
Capital Partners for all reasonable out-of-pocket costs incurred directly in
connection with the services to be provided under this Agreement to Security
Capital, except for rent, utilities and compensation for any employees of
Capital Partners; provided that nothing in this Agreement shall be
deemed to require Capital Partners to advance funds on behalf of Security
Capital for payment of out-of-pocket expenses. 
In particular, except as otherwise determined by a majority of the
independent directors on the Board, in their sole discretion, no separate
compensation shall be paid by Security Capital to, among any others, Brian D.
Fitzgerald, A. George Gebauer, William R. Schlueter or Richard O’Connor,
or their successors, who serve as officers of Security Capital, and who are
also employees of Capital Partners.  Such
reimbursement shall be made promptly after receipt of invoices therefor
submitted by Capital Partners to Security Capital from time to time.

 

6.             The proviso set forth
at the end of the first sentence of Section 9 of the Advisory Services
Agreement is hereby deleted in its entirety.

 

7.             Except as expressly
set forth herein, this amendment to the Advisory Services Agreement shall not
by implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the
Advisory Services Agreement, all of which shall remain in full force and
effect.  This amendment may be executed
in counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. 
This amendment shall be governed by and construed in accordance with the
laws of the State of Connecticut.

 

3

 

IN WITNESS WHEREOF, the parties
hereto have caused this amendment to be duly executed as of the date first
above written.

 

	
   

  	
  SECURITY CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/ Richard W.
  O’Connor

  	
   

  
	
   

  	
   

  	
  Name: Richard W. O’Connor

  
	
   

  	
   

  	
  Title: Controller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAPITAL PARTNERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  William R. Schlueter

  	
   

  
	
   

  	
   

  	
  Name: William R. Schlueter

  
	
   

  	
   

  	
  Title: Managing Director and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AGREED AND ACKNOWLEDGED BY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PRIMROSE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/ Jo
  Kirchner

  	
   

  
	
   

  	
   

  	
  Name: Jo Kirchner

  
	
   

  	
   

  	
  Title: Vice President

  
					

 

[Signature Page to Amendment No. 1 to the
Second Amended and Restated Advisory Services Agreement]Exhibit 10.102

 

STOCK PURCHASE AGREEMENT,

 

dated as of February 10, 2006,

 

among

 

PHC ACQUISITION, INC.,

 

PRIMROSE HOLDINGS, INC.

 

and

 

THE PARTIES SET FORTH ON SCHEDULE A AND SCHEDULE B

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
  2

  
	
  1.1

  	
   

  	
  Certain Definitions

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  PURCHASE AND SALE OF THE SHARES;
  TERMINATION AND CANCELLATION OF THE COMPANY STOCK OPTIONS

  	
  12

  
	
  2.1

  	
   

  	
  Purchase and Sale of the Shares

  	
  12

  
	
  2.2

  	
   

  	
  Exercise of Company Stock Options; Termination and
  Cancellation of Company Stock Options

  	
  12

  
	
  2.3

  	
   

  	
  Closing

  	
  13

  
	
  2.4

  	
   

  	
  Transactions to be Effected at the Closing

  	
  14

  
	
  2.5

  	
   

  	
  Section 338 Elections

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  REPRESENTATIONS AND WARRANTIES
  OF THE SELLERS

  	
  15

  
	
  3.1

  	
   

  	
  Organization; Authority and Enforceability

  	
  16

  
	
  3.2

  	
   

  	
  Noncontravention

  	
  16

  
	
  3.3

  	
   

  	
  The Shares and the Company Stock Options

  	
  17

  
	
  3.4

  	
   

  	
  Brokers’ Fees

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES CONCERNING THE COMPANY

  	
  17

  
	
  4.1

  	
   

  	
  Organization, Qualification and Corporate Power;
  Authority and Enforceability

  	
  18

  
	
  4.2

  	
   

  	
  Subsidiaries

  	
  18

  
	
  4.3

  	
   

  	
  Capitalization

  	
  19

  
	
  4.4

  	
   

  	
  Noncontravention

  	
  20

  
	
  4.5

  	
   

  	
  Financial Statements

  	
  21

  
	
  4.6

  	
   

  	
  Taxes

  	
  21

  
	
  4.7

  	
   

  	
  Compliance with Laws and Orders; Permits

  	
  23

  
	
  4.8

  	
   

  	
  No Undisclosed Liabilities

  	
  23

  
	
  4.9

  	
   

  	
  Tangible Personal Assets

  	
  24

  
	
  4.10

  	
   

  	
  Real Property

  	
  24

  
	
  4.11

  	
   

  	
  Intellectual Property

  	
  25

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  4.12

  	
   

  	
  Absence of Certain Changes or Events

  	
  26

  
	
  4.13

  	
   

  	
  Contracts

  	
  27

  
	
  4.14

  	
   

  	
  Litigation

  	
  28

  
	
  4.15

  	
   

  	
  Employee Benefits

  	
  28

  
	
  4.16

  	
   

  	
  Labor and Employment Matters

  	
  30

  
	
  4.17

  	
   

  	
  Environmental

  	
  31

  
	
  4.18

  	
   

  	
  Franchise Agreements

  	
  31

  
	
  4.19

  	
   

  	
  Franchisees, Suppliers,
  Vendors and Referral Sources

  	
  31

  
	
  4.20

  	
   

  	
  New Franchises

  	
  31

  
	
  4.21

  	
   

  	
  No Set-Off Rights

  	
  31

  
	
  4.22

  	
   

  	
  UFOC

  	
  31

  
	
  4.23

  	
   

  	
  Restricted Cash

  	
  32

  
	
  4.24

  	
   

  	
  Insurance

  	
  32

  
	
  4.25

  	
   

  	
  Brokers’ Fees

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE BUYER

  	
  32

  
	
  5.1

  	
   

  	
  Organization

  	
  32

  
	
  5.2

  	
   

  	
  Authorization

  	
  32

  
	
  5.3

  	
   

  	
  Noncontravention

  	
  33

  
	
  5.4

  	
   

  	
  Availability of Funds

  	
  33

  
	
  5.5

  	
   

  	
  Solvency

  	
  33

  
	
  5.6

  	
   

  	
  Brokers’ Fees

  	
  34

  
	
  5.7

  	
   

  	
  Affiliates

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  COVENANTS

  	
  34

  
	
  6.1

  	
   

  	
  Regulatory Matters and Approvals

  	
  34

  
	
  6.2

  	
   

  	
  Consents

  	
  35

  
	
  6.3

  	
   

  	
  Operation of the Company’s Business

  	
  35

  
	
  6.4

  	
   

  	
  Access

  	
  36

  
	
  6.5

  	
   

  	
  Resignations

  	
  37

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  6.6

  	
   

  	
  Excess Cash; Stay Bonuses

  	
  37

  
	
  6.7

  	
   

  	
  Notice of Developments

  	
  37

  
	
  6.8

  	
   

  	
  Support Services

  	
  38

  
	
  6.9

  	
   

  	
  No Solicitation

  	
  38

  
	
  6.10

  	
   

  	
  Indemnification Following the Closing

  	
  39

  
	
  6.11

  	
   

  	
  Taking of Necessary Action; Further Action

  	
  40

  
	
  6.12

  	
   

  	
  [RESERVED]

  	
  40

  
	
  6.13

  	
   

  	
  Tax Matters

  	
  40

  
	
  6.14

  	
   

  	
  Insurance

  	
  44

  
	
  6.15

  	
   

  	
  Financing

  	
  44

  
	
  6.16

  	
   

  	
  Stockholders’ Agreement

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  CONDITIONS TO OBLIGATIONS TO
  CLOSE

  	
  44

  
	
  7.1

  	
   

  	
  Conditions to Obligation of the Buyer

  	
  44

  
	
  7.2

  	
   

  	
  Conditions to Obligation of the Sellers

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  TERMINATION; AMENDMENT; WAIVER

  	
  47

  
	
  8.1

  	
   

  	
  Termination of Agreement

  	
  47

  
	
  8.2

  	
   

  	
  Certain Fees and Expenses

  	
  48

  
	
  8.3

  	
   

  	
  Effect of Termination

  	
  48

  
	
  8.4

  	
   

  	
  Amendments

  	
  48

  
	
  8.5

  	
   

  	
  Waiver

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  MISCELLANEOUS

  	
  49

  
	
  9.1

  	
   

  	
  Press Releases and Public Announcement

  	
  49

  
	
  9.2

  	
   

  	
  No Third-Party Beneficiaries

  	
  49

  
	
  9.3

  	
   

  	
  Entire Agreement

  	
  49

  
	
  9.4

  	
   

  	
  Succession and Assignment

  	
  50

  
	
  9.5

  	
   

  	
  Construction

  	
  50

  
	
  9.6

  	
   

  	
  Notices

  	
  50

  
	
  9.7

  	
   

  	
  Governing Law

  	
  52

  
	
  9.8

  	
   

  	
  Dispute Resolution

  	
  52

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  9.9

  	
   

  	
  Headings

  	
  53

  
	
  9.10

  	
   

  	
  Severability

  	
  53

  
	
  9.11

  	
   

  	
  Expenses

  	
  53

  
	
  9.12

  	
   

  	
  Non-Survival of Representations, Warranties and
  Agreements

  	
  53

  
	
  9.13

  	
   

  	
  Incorporation of Exhibits and Schedules

  	
  53

  
	
  9.14

  	
   

  	
  Limited Recourse

  	
  53

  
	
  9.15

  	
   

  	
  Specific Performance

  	
  54

  
	
  9.16

  	
   

  	
  Counterparts

  	
  54

  

 

iv

 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of February 10,
2006 (the “Agreement”), among PHC
ACQUISITION, INC., a Delaware corporation (the “Buyer”), PRIMROSE
HOLDINGS, INC., a Delaware corporation (the “Company”),
the parties set forth on Schedule A (the “Stockholders”)
and the parties set forth on Schedule B (the “Optionholders”).

 

RECITALS

 

WHEREAS, each Stockholder is the record and beneficial owner of the
number of shares (the “Shares”) of Common
Stock, $0.01 par value per share, of the Company (the “Common Stock”),
set forth opposite each such Stockholder’s name on Schedule A under the
heading “Number of Shares Owned”; and

 

WHEREAS, the Stockholders collectively own 100% of the issued and
outstanding shares of Common Stock; and

 

WHEREAS, the Stockholders desire to sell all of the Shares set forth
opposite each such Stockholder’s name on Schedule A under the heading “Number
of Sale Shares” (such Shares, the “Sale Shares”) to
the Buyer, and the Buyer desires to purchase all of the Sale Shares from the Stockholders,
upon the terms and subject to the conditions set forth in this Agreement (such
sale and purchase of the Sale Shares, the “Share Purchase”);
and

 

WHEREAS, each Optionholder holds all of the Company Stock Options (as
defined below) for the purchase of the number of Shares set forth opposite each
such Optionholder’s name on Schedule B under the heading “Number of Option
Shares Owned”; and

 

WHEREAS, upon the terms and conditions set forth in this Agreement,
each Optionholder consents to the termination and cancellation by the Company of
the Company Stock Options (as defined below) for the purchase of the number of
Shares set forth opposite each such Optionholder’s name on Schedule B
under the heading “Number of Option Shares to be Terminated and Canceled” (such
termination and cancellation of the Company Stock Options, the “Option Cancellation”).

 

NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations and warranties, covenants and agreements contained
herein, the parties hereto agree as follows:

 

1

 

ARTICLE
I

 

DEFINITIONS

 

1.1           Certain Definitions.

 

(a)           When used in this
Agreement, the following terms will have the meanings assigned to them in this
Section 1.1(a):

 

“Acquisition” means the Share Purchase
and the Option Cancellation.

 

“Acquisition Agreement” has the meaning
set forth in Section 6.9(c).

 

“Action” means any claim, action, suit,
inquiry, hearing, proceeding or other investigation.

 

“Actual Knowledge of the
Sellers” means the actual knowledge of any of the following persons:
Brian D. Fitzgerald, Jo Kirchner, Robert Benowitz, Lee-Allison Scott, James T.
Steger and Derek Fuller, in each case without obligation of inquiry.

 

“Adjustment Amount”
means an amount equal to (a) $1,110,000 minus  (b)
the Company’s and its Subsidiaries’ assignment development costs related to the
purchase of land as of the Closing Date (which amount will be calculated in
accordance with the Company’s past practices).

 

“Affiliate” means, with respect to a
Person, any other Person that, directly or indirectly, through one or more
intermediaries, Controls, is Controlled by or is under common Control with,
such Person.  For purposes of this
definition, “Control” (including the terms “Controlled by” and “under common Control with”)
means possession of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock, as
trustee or executor, by Contract or otherwise.

 

“Affiliated Group” means any
affiliated group within the meaning of Code §1504(a) or any similar group
defined under a similar provision of state, local or foreign law.

 

“Aggregate Option Payment” means the aggregate
consideration payable to the Optionholders in connection with the Option
Cancellation.

 

“Aggregate Share Payment” means the aggregate consideration
payable to the Stockholders in connection with the Share Purchase.

 

“Agreement” has the meaning set forth in
the preamble.

 

“Annual Financial Statements” has the
meaning set forth in Section 4.5.

 

“Benefit Plan” means any “employee
benefit plan” as defined in ERISA Section 3(3), including any (a) nonqualified
deferred compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined

 

2

 

benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in
ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA
Section 3(1)) or material fringe benefit plan or program, or (e) stock
purchase, stock option, severance pay, employment, change-in-control, vacation
pay, company award, salary continuation, sick leave, excess benefit, bonus or
other incentive compensation, life insurance, or other employee benefit plan,
contract, program, policy or other arrangement, whether or not subject to
ERISA, under which any present or former employee of the Company or any of its
Subsidiaries has any present or future right to benefits sponsored or
maintained by the Company, any Subsidiary of the Company or any ERISA Affiliate.

 

“Business Day” means a day other than a
Saturday, Sunday or other day on which banks located in New York City or
Bethesda, Maryland are authorized or required by Law to close.

 

“Buyer” has the meaning set forth in the
preamble.

 

“Capital Partners  Advisory Services Agreement” has the meaning set forth in
Section 6.8.

 

“Closing” has the meaning set forth in
Section 2.3.

 

“Closing Date” has the meaning set forth
in Section 2.3.

 

“Code” means the
Internal Revenue Code of 1986.

 

“Common Stock”
has the meaning set forth in the recitals.

 

“Company” has
the meaning set forth in the preamble.

 

“Company Benefit Plans”
has the meaning set forth in Section 4.15(a).

 

“Company-Leased Real Property” has the
meaning set forth in Section 4.10(b).

 

“Company-Owned Intellectual Property” has the meaning set forth in Section 4.11(b).

 

“Company-Owned Real Property” has the meaning set forth in Section 4.10(a).

 

“Company Stock Options”
has the meaning set forth in Section 4.3(b).

 

“Contract” means
any written or oral agreement, contract, commitment, arrangement or understanding.

 

3

 

“Disclosure Schedule”
has the meaning set forth in the introductory paragraph to Article III.

 

“DOJ” has the
meaning set forth in Section 6.1(a).

 

“Election Allocations”
has the meaning set forth in Section 2.5(c).

 

“Election Corporation” means the Company
and any of its Subsidiaries to the extent that the Company and any such
Subsidiary is subject to a Section 338(h)(10) Election.

 

“Environmental, Health, and
Safety Requirements” shall mean all applicable federal, state,
local, and foreign statutes, regulations, ordinances, and other provisions
having the force or effect of Law, all final and binding judicial and
administrative orders and determinations, and all common law (“Requirements”), in each case, in effect as of the Closing
Date and that regulate worker health and safety, and pollution or protection of
the environment, including, without limitation, all such Requirements that
regulate the aforementioned aspects of the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, hazardous substances,
or hazardous wastes, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise,
or radiation.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974.

 

“ERISA Affiliate” means any Person who
is, or at any time was, a member of a “controlled group of corporations” within
the meaning of Section 414(b) or (c) of the Code and, for the purpose of
Section 302 of ERISA and/or Section 412, 4971, 4977, 4980D, 4980E and/or each “applicable
section” under Section 414(f)(2) of the Code, within the meaning of Section
412(n)(6) of the Code that includes, or at any time included, the Company or
any Affiliate thereof, or any predecessor of any of the foregoing.

 

“Estimated
Election Allocations” has the meaning set forth in Section 2.5(c).

 

“Excess Cash Amount”
means an amount (which may be positive or negative) equal to (i) the amount of
cash and cash equivalents held by the Company and its Subsidiaries, in the
aggregate, as of immediately prior to the Closing (but prior to paying any of
the amounts set forth in items (iv) through (vii) below) minus (ii) the
amount of the Fund (as such term is defined in the Form Franchise Agreement) as
of the Closing minus (iii) the amount of the cooperative advertising
fund described in item 2 of Section 4.23 of the Disclosure Schedule, minus
(iv) $193,750.00 (which amount is the aggregate amount of the Advisory Fee (as
such term is defined in the Capital Partners Advisory Services

 

4

 

Agreement) payable by the
Company to Capital Partners, Inc. pursuant to the Capital Partners Advisory
Services Agreement) minus (v) the aggregate amount of the Fee (as such
term is defined in the Security Capital Advisory Services Agreement) payable by
the Company to Security Capital pursuant to the Security Capital Advisory
Services Agreement minus (vi) the aggregate amount of Stay Pay Bonuses, minus
(vii) the aggregate amount of Transaction Expenses, minus (viii) the
Adjustment Amount.

 

“Exchange Act” means the Securities
Exchange Act of 1934.

 

“Expenses” has the meaning set forth in
Section 9.11.

 

“Final Election Allocations” has the meaning set forth in Section 2.5(c).

 

“Financial Statements”
has the meaning set forth in Section 4.5.

 

“Financing” has
the meaning set forth in Section 5.4.

 

“Form Franchise Agreement”
means the form of franchise agreement attached as Exhibit B to the Company’s
Uniform Franchise Offering Circular effective as of March 28, 2005.

 

“Franchise Agreement”
means any Contract pursuant to which
Franchisees operate schools.

 

“Franchisee”
means any franchisee of the Company.

 

“FTC” has the
meaning set forth in Section 6.1(a).

 

“GAAP” means
United States generally accepted accounting principles, consistently applied.

 

“Governmental Entity” means any entity
or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to United States federal, state or
local government or foreign, international, multinational or other government,
including any department, commission, board, agency, bureau, official or other
regulatory, administrative or judicial authority thereof.

 

“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.

 

“Independent Accounting Firm” means any
nationally recognized independent registered public accounting firm which has
not represented any Security Capital Company or the Buyer or any of its
Affiliates for the past five years as will be agreed by Security Capital and the
Buyer in writing.

 

“Intellectual Property” has the meaning
set forth in Section 4.11(a).

 

5

 

“Interim Financial Statements” has the
meaning set forth in Section 4.5.

 

“IRS” means the Internal Revenue Service.

 

“Knowledge  of the Sellers”
or any similar phrase means the actual knowledge of any of the following
persons if such persons had made reasonable inquiry of the appropriate
directors, officers and employees of the Company: Brian D. Fitzgerald, Jo Kirchner,
Robert Benowitz, Lee-Allison Scott, James T. Steger and Derek Fuller.

 

“Law” means any statute, law, ordinance,
rule, regulation or binding policy of any Governmental Entity.

 

“Liability”
means all indebtedness, obligations and other liabilities and contingencies of
a Person, of whatever kind or nature, whether known or unknown, whether
asserted or unasserted, whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due, including any liability for Taxes.

 

“Lien” means, with respect to any
property or asset, any mortgage, lien, pledge, charge, security interest,
hypothecation or other encumbrance in respect of such property or asset.

 

“Losses” has the meaning set forth in
Section 6.13(a).

 

“Material Adverse Effect” means any effect
or change that would be materially adverse to the ability of the Sellers to
consummate timely the transactions contemplated hereby, or any material adverse
effect on the assets, properties, condition (financial or otherwise) or
operations of the Company and its Subsidiaries, taken as a whole, other than
any such effect or change, directly or indirectly, (a) resulting from or
arising in connection with (i) general political, economic, financial, capital
market or industry-wide conditions, (ii) regulatory changes, changes in Law or
changes in GAAP, (iii) any acts of war, sabotage or terrorism involving the
United States of America or its interests, or an escalation or worsening
thereof, (iv) this Agreement, the proposed sale of Security Capital, the transactions
contemplated hereby or the announcement or other disclosure of this Agreement, the
transactions contemplated hereby or a sale of Security Capital, (v) any
condition described in the Disclosure Schedule, or (vi) any breach by the Buyer
of this Agreement, or (b) attributable to the fact that the prospective owner
of the Company and any of its Subsidiaries is the Buyer or any Affiliate of the
Buyer.

 

“New Franchise” has the meaning set forth in Section 4.20.

 

“One-Step Transaction”
means any of the following transactions (or series of related transactions): (i)
any direct or indirect acquisition or purchase of 50% or more of the
consolidated assets of Security Capital, as of September 30,

 

6

 

2005, which acquisition or purchase includes substantially
all of the consolidated assets of the Company, or (ii) so long as immediately
following the consummation of such transaction, Security Capital continues to
own 50% or more of the voting power of WC Holdings, Inc. and its direct and
indirect Subsidiaries, as of September 30, 2005, (A) any direct or indirect
acquisition or purchase of 50% or more of the combined voting power of Security
Capital, which acquisition or purchase contemplates Security Capital remaining
the direct or indirect owner of 90% or more of the combined voting power of the
Shares, (B) any tender offer or exchange offer that if consummated would result
in any Person beneficially owning 50% or more of Security Capital’s Class A
common stock and common stock, collectively, which acquisition contemplates
Security Capital remaining the direct or indirect owner of 90% or more of the
combined voting power of the Shares or (C) any merger, consolidation, business
combination, sale of significant assets, recapitalization, liquidation,
dissolution or similar transaction involving Security Capital in which the
other party thereto or its stockholders will own 50% or more of the combined
voting power of the parent entity resulting from any such transaction, which
transaction contemplates Security Capital or the surviving or resulting entity,
as applicable, remaining the direct or indirect owner of 90% or more of the
combined voting power of the Shares.

 

“Option Cancellation”
has the meaning set forth in the recitals.

 

“Option Plans”
has the meaning set forth in Section 4.3(b).

 

“Optionholders”
has the meaning set forth in the preamble.

 

“Order” means any award, injunction,
judgment, decree, order, ruling, subpoena or verdict or other decision issued,
promulgated or entered by or with any Governmental Entity of competent
jurisdiction.

 

“Ordinary Course of Business” means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency).

 

“Other Antitrust Laws” means the
antitrust and competition Laws of all jurisdictions other than those of the
United States and any other similar applicable Law.

 

“Per Share  Cash Deficit Adjustment” means, if the Excess Cash Amount is
negative, (a) the absolute value of such amount divided  by (b) 27,971.67.

 

“Per Share Payment” has the meaning set
forth in Section 2.1(a).

 

“Permit” means
any authorization, approval, consent, certificate, license, permit or franchise
of or from any Governmental Entity of competent jurisdiction

 

7

 

or pursuant to any Law.

 

“Permitted Liens” means (a) Liens
for current real or personal property Taxes that are not yet due and payable or
that are being contested in good faith through appropriate proceedings,
(b) statutory Liens of landlords and workers’, carriers’ and mechanics’ or
other like Liens incurred in the Ordinary Course of Business or that are being
contested in good faith, (c) Liens arising under this Agreement, (d) Liens
created by or through the Buyer, (e) Liens arising under the Stockholders’
Agreement and (f) Liens set forth on Section 1.1 of the Disclosure Schedule.

 

“Person” means an individual, a
corporation, a partnership, a limited liability company, a trust, an
unincorporated association, a Governmental Entity or any agency,
instrumentality or political subdivision of a Governmental Entity, or any other
entity or body.

 

“Policies” has the meaning set forth in Section 4.24.

 

“Pre-Closing Bonuses and Expenses” has the meaning set forth in Section 7.1(k).

 

“Pro Rata Share”
means, with respect to any Optionholder, a percentage equal to (i) the number
of Shares set forth opposite such Optionholder’s name on Schedule B
under the heading “Number of Option Shares Owned” divided  by (ii)
1,971.67.

 

“Real Property”
has the meaning set forth in Section 4.10(b).

 

“Real Property Leases” has the meaning
set forth in Section 4.10(b).

 

“Reg.” means Income Tax or other
Treasury regulations relating to Taxes.

 

“Representatives”
means, with respect to any Person, the respective directors, officers,
employees, counsel, accountants and other representatives of such Person.

 

“Rules” has the
meaning set forth in Section 9.8.

 

“Sale Shares”
has the meaning set forth in the recitals.

 

“SEC” means the United States Securities
and Exchange Commission.

 

“Section 338(h)(10) Election”
has the meaning set forth in Section 2.5(a).

 

“Section 338(h)(10) Forms” has the
meaning set forth in Section 2.5(b).

 

“Section 338(h)(10) Tax” means a Tax
that is attributable to, or arises from, a Section 338(h)(10) Election (or any
similar state or local election).

 

8

 

“Security Capital”
means Security Capital Corporation, a Delaware corporation.

 

“Security Capital Advisory Services Agreement” has the meaning set forth in
Section 6.8.

 

“Security Capital Board”
means the Board of Directors of Security Capital.

 

“Security Capital Company” means
Security Capital and any Subsidiary or Affiliate of Security Capital, other
than the Company or any of its Subsidiaries.

 

“Security Capital Group” means the
affiliated group of corporations, within the meaning of Section 1504(a) of the
Code, of which Security Capital is the common parent corporation.

 

“Security Capital
Stockholders” means the stockholders of Security Capital.

 

“Sellers” means, collectively, the
Stockholders and the Optionholders.

 

“Share Purchase” has the meaning set
forth in the recitals.

 

“Shares” has the
meaning set forth in the recitals.

 

“Special Bonus Amount”
means, if the Excess Cash Amount is positive, an amount equal to 7.05% of the
Excess Cash Amount.

 

“Stay Pay Agreements” means the
Contracts listed in item 11 of Section 4.15(a) of the Disclosure Schedule.

 

“Stay Pay Bonuses” means the stay pay
bonuses contemplated by the Stay Pay Agreements.

 

 “Stockholders” has the meaning set forth in the preamble.

 

“Stockholders’ Agreement” means that
certain Amended and Restated Stockholders’ Agreement, dated as of January 1,
2003, among the Company, Security Capital, Jo Kirchner and Robert Benowitz to
which Derek Fuller, Jim Steger and Lee Scott have been joined as Additional
Stockholders (as such term is defined in the Stockholders’ Agreement).

 

“Subsidiary” means, with respect to any
Person, any corporation, partnership, joint venture or other legal entity of
which such Person (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, more than 50% of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of a non-corporate
Person.

 

9

 

“Superior Proposal” means any written
bona fide proposal made by a third party
relating to a One-Step Transaction, on terms that the Security Capital Board
determines in its good faith judgment (after consultation with its financial
advisor), taking into account legal, financial, Tax, regulatory and other
aspects of the proposal deemed appropriate by the Security Capital Board,
(A) to be more favorable from a financial point of view than the Two-Step
Transaction to the Security Capital Stockholders (taking into account any
amendments to this Agreement proposed by the Buyer in response to the receipt
by any of the Sellers of their Affiliates of the proposal) and (B) for
which financing, to the extent required, is then committed.

 

“Tax Claim” means any claim with respect
to Taxes made by any Taxing Authority or other Person that, if pursued
successfully, could serve as the basis for a claim for indemnification under
Section 6.13.

 

“Taxes” means
all federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severance, stamp,
payroll, sales, transfer, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes, duties
or assessments of any nature whatsoever.

 

“Taxing Authority” means any
Governmental Entity having or purporting to exercise jurisdiction with respect
to any Tax.

 

“Tax Returns” means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.

 

“Termination Fee” has the meaning set
forth in Section 8.2(b).

 

“Transaction Expenses” means (a) all
costs and expenses incurred by the Company, or allocated by Security Capital to
the Company, which arise out of or are otherwise related to the transactions contemplated
by this Agreement, including the sale process and the drafting, negotiation and
execution of this Agreement and (b) all reasonable out-of-pocket costs and
expenses incurred by the Sellers (other than Security Capital) which arise out
of or are otherwise related to the transactions contemplated by this Agreement,
including the drafting, negotiation and execution of this Agreement and of
agreements related to post-closing employment and securities ownership.  For the avoidance of doubt, “Transaction
Expenses” shall include all payments with respect to the agreements listed in Sections
3.4 and 4.25 of the Disclosure Schedule, any filing fees payable (or
portion thereof) by the Company in accordance with the last sentence of Section
6.1(a) and any Transfer Taxes (or portion thereof) payable by the Company in
accordance with Section 6.13(h).

 

“Transaction Proposal” means any
proposal made by a third party (other than the transactions contemplated by
this Agreement or a One-Step Transaction)

 

10

 

relating to (i) any direct or indirect acquisition or
purchase of any of the assets of the Company or its Subsidiaries outside of the
Ordinary Course of Business, (ii) any direct or indirect acquisition or
purchase of the Shares, (iii) any tender offer or exchange offer that if
consummated would result in any Person beneficially owning any of the Shares,
(iv) any merger, consolidation, business combination, sale of assets outside of
the Ordinary Course of Business, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries, or (v)
any other transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay the Acquisition
or which would reasonably be expected to dilute the benefits to the Buyer of
the Acquisition and the other transactions contemplated by this Agreement.

 

“Transfer Taxes” means sales, use,
transfer, real property transfer, recording, documentary, stamp, registration
and stock transfer Taxes and any similar Taxes.

 

“Two-Step Transaction” means (a) the
sale of the Shares in accordance with this Agreement and (b) the subsequent
sale of Security Capital or its assets.

 

“$” means United States dollars.

 

(b)           For purposes of this
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires: (i) the meaning assigned to each term defined herein will
be equally applicable to both the singular and the plural forms of such term
and vice versa, and words denoting any gender will include all genders as the
context requires; (ii) where a word or phrase is defined herein, each of its
other grammatical forms will have a corresponding meaning; (iii) the terms “hereof”,
“herein”, “hereunder”, “hereby” and “herewith” and words of similar import will,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement; (iv) when a reference is
made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule
without reference to a document, such reference is to an Article, Section,
paragraph, Exhibit or Schedule to this Agreement; (v) a reference to a
subsection without further reference to a Section is a reference to
such subsection as contained in the same Section in which the
reference appears, and this rule will also apply to paragraphs and other
subdivisions; (vi) the word “include”, “includes” or “including” when used in
this Agreement will be deemed to include the words “without limitation”, unless
otherwise specified; (vii) a reference to any party to this Agreement or any
other agreement or document will include such party’s predecessors, successors
and permitted assigns; (viii) a reference to any Law means such Law as amended,
modified, codified, replaced or reenacted as of the date hereof, and all rules
and regulations promulgated thereunder as of the date hereof; and (ix) all
accounting terms used and not defined herein have the respective meanings given
to them under GAAP.

 

11

 

ARTICLE
II

 

PURCHASE
AND SALE OF THE SHARES; TERMINATION AND CANCELLATION OF THE COMPANY STOCK OPTIONS

 

2.1           Purchase and Sale of
the Shares.

 

(a)           Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing each Stockholder
will sell, transfer and deliver, and the Buyer will purchase from each Stockholder,
all of its respective Sale Shares for a purchase price per Share of $3,078.25
(the “Per Share Payment”) minus the
Per Share Cash Deficit Adjustment (if any), in cash, payable as set forth in
Section 2.4.  For the purposes of
clarity, the parties acknowledge and agree that the portion of the Aggregate
Share Payment payable to each Stockholder (before deduction of the Per Share
Cash Deficit Adjustment, if any) is set forth opposite such Stockholder’s name
on Schedule A under the heading “Share Payment”.

 

(b)           Notwithstanding
anything in this Agreement to the contrary, each Stockholder (other than
Security Capital) shall be entitled to elect not to sell, transfer and deliver
to the Buyer all or any portion of the Sale Shares.  Such Stockholder may exercise such election
by providing the Buyer, Security Capital and the Company with written notice of
such election no later than 5 Business Days prior to the Closing, which notice
shall include the number of Sale Shares which such Stockholder elects not to sell,
transfer and deliver to the Buyer pursuant to this Agreement.  Upon receipt of such notice, Security Capital
and the Buyer shall appropriately amend the amounts set forth on Schedule A
under the headings “Number of Sale Shares” and “Share Payment”.

 

2.2           Exercise
of Company Stock Options; Termination and Cancellation of Company Stock Options.

 

(a)           The Company and each
Optionholder consents and agrees that the terms of all Company Stock Options held
by such Optionholder are hereby amended to provide that the Company Stock
Options are not exercisable during the period from the date hereof through and
including the date of termination of this Agreement in accordance with its
terms, and any attempted exercise of a Company Stock Option during such period will
not be effective.

 

(b)           Subject to the terms
and conditions set forth in this Agreement, (i) each Optionholder consents and
agrees to the termination and cancellation, effective immediately prior to the
Closing, of the number of Company Stock Options related to the Shares set forth
opposite such Optionholder’s name on Schedule B under the heading “Number
of Option Shares to be Terminated and Canceled” (whether vested or unvested);
and (ii) as consideration for the termination and cancellation of such number
of Company Stock Options, at the Closing, the Buyer will pay to each
Optionholder an amount equal to (x) (1) the sum of (A) the Per Share Payment minus
(B) the Per Share Cash Deficit Adjustment (if any) multiplied  by
(2) the number of Shares set forth opposite such Optionholder’s name on Schedule
B under the heading “Number of Option Shares to be Terminated and Canceled”,
minus (y) the aggregate exercise price for such Company Stock Options,
as set forth opposite such Optionholder’s name on Schedule B

 

12

 

under the heading “Aggregate Exercise Price for Option
Shares to be Terminated and Canceled”, payable as set forth in Section 2.4.  For the purposes of clarity, the parties
acknowledge and agree that the portion of the Aggregate Option Payment payable
to each Optionholder (before deduction of the Per Share Cash Deficit Adjustment,
if any) is set forth opposite such Optionholder’s name on Schedule B
under the heading “Option Payment”.

 

(c)           The Company will be entitled to, and the Buyer will
cause the Company at Closing to, deduct and withhold from the amounts otherwise
payable pursuant to this Section 2.2 to any Optionholder such amounts as the
Company is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign Tax
Law.  To the extent that amounts are so deducted
and withheld by the Company, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the Optionholder  in respect of which such deduction and
withholding were made by the Company.

 

(d)           The
Sellers and the Buyer shall treat, and cause their Affiliates to treat, the
U.S. federal and state income tax deductions resulting from the payment
obligations in cancellation of the Company Stock Options described in this
Section 2.2 as deductible in the taxable period of the Company and its
Subsidiaries ending on the Closing Date, and shall not take any position
inconsistent therewith.  For the
avoidance of doubt, the Sellers and the Buyer shall not treat, and shall cause
their Affiliates not to treat, the “next day” rule of Treas. Reg. Sec.
1.1502-76(b)(1)(ii)(B) or any similar provision of state or local Tax Law as
applying to the deductions described in the previous sentence, and no elections
that would result in the ratable allocation of such deductions shall be made under
Treas. Reg. Sec. 1.1502-76(b)(2) or any similar provision of state or local Tax
Law.

 

(e)           Notwithstanding
anything in this Agreement to the contrary, each Optionholder shall be entitled
to elect not to cancel (and to retain) all or any portion of his or her Company
Stock Options.  An Optionholder may
exercise such election by providing the Buyer, Security Capital and the Company
with written notice of such election no later than 5 Business Days prior to the
Closing, which notice shall include the number of Shares subject to Company
Stock Options which such Optionholder elects not to have terminated and canceled
under this Agreement.  Upon receipt of
such notice, Security Capital and the Buyer shall appropriately amend the
amounts set forth on Schedule B under the headings “Number of Option
Shares to be Terminated and Canceled”, “Aggregate Exercise Price for Option
Shares to be Terminated and Canceled” and “Option Payment”.

 

2.3           Closing. The
consummation of the Acquisition (the “Closing”) will
take place (a) at the offices of Morgan, Lewis & Bockius LLP, 101 Park
Avenue, New York, New York, at 10:00 a.m. New York City time, on a date to be
specified by the Buyer and Security Capital which will be no later than two
Business Days immediately following the day on which the last of the conditions
to closing contained in Article VI (other than any conditions that by
their nature are to be satisfied at the Closing) is satisfied or waived

 

13

 

in accordance with this Agreement or (b) at such other
place and time or on such other date as the Buyer and Security Capital may
mutually determine (the date on which the Closing actually occurs is referred
to as the “Closing Date”).

 

2.4           Transactions to be
Effected at the Closing.

 

(a)           At the Closing, the
Buyer will (i) pay to the Stockholders the Aggregate Share Payment by paying to
each Stockholder by transfer of immediately available funds in accordance with
the instructions set forth for such Stockholder on Schedule A the amount
set forth opposite such Stockholder’s name on Schedule A under the
heading “Share Payment” (as such amount may be adjusted in accordance with
Section 2.1(b)) minus the Per Share Cash Deficit Adjustment (if any)
applicable to such payment as provided in Section 2.1(a), and (ii) deliver to
the Stockholders all other documents, instruments or certificates required to
be delivered by the Buyer at or prior to the Closing pursuant to this
Agreement.

 

(b)           At the Closing, the
Buyer will (i) pay to the Optionholders the Aggregate Option Payment by paying to
each Optionholder by transfer of immediately available funds in accordance with
the instructions set forth for such Optionholder on Schedule B the
amount set forth opposite such Optionholder’s name on Schedule B under
the heading “Option Payment” (as such amount may be adjusted in accordance with
Section 2.2(e)) minus the Per Share Cash Deficit Adjustment (if any)
applicable to such payment as provided in Section 2.2(b), and (ii) deliver to
each Optionholder all other documents, instruments or certificates required to
be delivered by the Buyer at or prior to the Closing pursuant to this
Agreement.

 

(c)           At the Closing, (i) the
Stockholders will deliver to the Buyer a certificate or certificates
representing the Sale Shares duly endorsed or accompanied by stock powers duly
endorsed in blank and (ii) the Sellers will deliver to the Buyer all other
documents, instruments or certificates required to be delivered by the Sellers at
or prior to the Closing pursuant to this Agreement.

 

2.5           Section 338
Elections.

 

(a)           The parties will make
an election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local, or foreign Law) with respect to the Company and each
Subsidiary of the Company (each, a “Section 338(h)(10)
Election”).  Security Capital will
pay any Section 338(h)(10) Taxes.  No
election under Section 338(g) of the Code will be made with respect to the
Company or any of its Subsidiaries.

 

(b)           As requested from time
to time by the Buyer (whether before, at or after the Closing), Security
Capital will assist the Buyer in, and will provide the necessary information to
the Buyer, in connection with the preparation of any form or document required
to timely effect the Section 338(h)(10) Elections, including IRS
Form 8883, any similar form under state, local or other Law and any
schedules or attachments thereto (collectively, the “Section
338(h)(10) Forms”).  Upon
delivery of

 

14

 

any Section 338(h)(10) Form by the Buyer to Security
Capital, Security Capital will cause such Section 338(h)(10) Form to be duly
and promptly executed and will deliver such executed Section 338(h)(10) Form to
the Buyer.

 

(c)           Notwithstanding any
provision in Section 2.5(b), the Aggregate Share Payment and the Aggregate
Option Payment (without including any consideration payable to Optionholders with
respect to Company Stock Options which will not be terminated and canceled in
accordance with this Agreement), along with the liabilities of any Election
Corporation for Tax purposes, will be allocated among the assets of each
Election Corporation in connection with each Section 338(h)(10) Election (the “Election Allocations”) in accordance with this Section
2.5(c).  For purposes of the Election
Allocations, attached hereto in Schedule 2.5(c) are: (i) the relative
values of the Election Corporations; (ii) the best available estimates of the long-term
assets and the long-term liabilities of each Election Corporation; (iii) the
best available estimates of the short-term assets and short-term liabilities of
each Election Corporation; (iv) estimates of the Election Allocations based on
items (i), (ii) and (iii) above (the “Estimated Election
Allocations”); and (iv) the methodology for calculating the final
Election Allocations (the “Final Election Allocations”)
once final determinations of the value of the assets and the amount of the liabilities
of each Election Corporation are available. 
The Buyer will prepare the Final Election Allocations based on its
determination of the final values of the assets and the amount of the liabilities
of each Election Corporation, using the methodology set forth in Schedule
2.5(c) for converting the Estimated Election Allocations contained in Schedule
2.5(c) into the Final Election Allocations, and will furnish such Final
Election Allocations to Security Capital within 30 days after the Closing.  If the Buyer does not prepare and furnish the
Final Election Allocations to Security Capital within 30 days after the
Closing, Security Capital shall itself prepare the Final Election Allocations
instead of the Buyer and shall furnish them to the Buyer within 60 days after
the Closing.  The Final Election
Allocations will be final and binding on Security Capital and the Buyer, except
in the case of (i) manifest error or (ii) inconsistency with the methodology
set forth in Schedule 2.5(c).  The
Buyer and Security Capital will file or cause to be filed all Tax Returns in a
manner consistent with the Final Election Allocations.

 

ARTICLE
III

 

REPRESENTATIONS
AND WARRANTIES OF THE SELLERS

 

Each of the Sellers, severally but not jointly, and solely with respect
to such Seller, represents and warrants to the Buyer that each statement
contained in this Article III as it applies to such Seller is true and correct
as of the date hereof, except as set forth in the Schedules accompanying this
Agreement (collectively, the “Disclosure Schedule”).  Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Disclosure Schedule identifies the exception with
reasonable particularity.  Without
limiting the generality of the foregoing, (i) the mere listing (or inclusion of
a copy) of a document or

 

15

 

other item shall
not be deemed adequate to disclose an exception to a representation or warranty
made herein (unless the representation or warranty has to do with the existence
of the document or other item itself) and (ii) any item listed or referred to
in any section or subsection of the Disclosure Schedule will be deemed to be
incorporated by reference into each other Disclosure Schedule where it is
reasonably apparent from the context of the disclosure that such listing or
description would be appropriate. The Disclosure Schedule will be arranged in
sections corresponding to the Sections of this Article III and Article IV.

 

3.1           Organization; Authority
and Enforceability.  Such Seller, if
a legal entity, is duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation or other formation.  Such Seller has the requisite power and
authority, and, in the case of any Seller that is an individual, the requisite
legal capacity, to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Acquisition and the other
transactions contemplated hereby.  The
execution, delivery and performance by such Seller of this Agreement and the
consummation by such Seller of the Acquisition and the other transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Seller and no other action is necessary on the part of such Seller
to authorize this Agreement or to consummate the Acquisition or the other
transactions contemplated hereby (other than compliance with the filing and
notice requirements set forth in Section 3.2(b)(i)).  This Agreement has been duly executed and
delivered by such Seller and, assuming the due authorization, execution and
delivery by each other party hereto, constitutes a legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as limited by (a) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws relating to creditors’
rights generally and (b) general principles of equity, whether such
enforceability is considered in a proceeding in equity or at Law.

 

3.2           Noncontravention.

 

(a)           Neither the execution
and the delivery of this Agreement nor the consummation of the Acquisition or
the other transactions contemplated by this Agreement, will, with or without
the giving of notice or the lapse of time or both, (i) assuming compliance with
the filing and notice requirements set forth in Section 3.2(b)(i), violate any
Law applicable to such Seller or (ii) violate any Contract to which such Seller
is a party, except in the case of clauses (i) and (ii) to the extent that any
such violation would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(b)           The execution and
delivery of this Agreement by such Seller does not, and the performance of this
Agreement by such Seller will not, require any consent, approval, authorization
or Permit of, or filing with or notification to, any Governmental Entity,
except for (i) such filings as may be required under the HSR Act or the
Other Antitrust Laws, (ii) the filings set forth in Section 3.2(b) of the
Disclosure Schedule or

 

16

 

(iii) where the
failure to take such action would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

3.3           The Shares and the Company Stock Options.

 

(a)           Such Seller, if a Stockholder, holds
of record and owns beneficially all of the issued and outstanding shares of
capital stock of the Company set forth opposite such Stockholder’s name on Schedule
A under the heading “Number of Shares Owned”, free and clear of all Liens
(other than Permitted Liens). The number of Shares set forth opposite such Stockholder’s
name on Schedule A under the heading “Number of Shares Owned” correctly
sets forth all of the capital stock of the Company owned of record or
beneficially by such Stockholder other than, in the event such Stockholder is
also an Optionholder, the Company Stock Options to acquire the number of Shares
set forth opposite such Optionholder’s name on Schedule B under the
heading “Number of Option Shares Owned”.

 

(b)           Such Seller, if an Optionholder,
holds of record and owns beneficially all of the Company Stock Options to
acquire the number of shares of Common Stock set forth opposite such
Optionholder’s name on Schedule B under the heading “Number of Option
Shares Owned”, free and clear of all Liens (other than Permitted Liens). The
number of Shares set forth opposite such Optionholder’s name on Schedule B
under the heading “Number of Option Shares Owned” correctly sets forth the
number of Shares issuable upon the exercise of Company Stock Options owned of
record or beneficially by such Optionholder.

 

(c)           Except as set forth in this Agreement,
the Stockholders’ Agreement or in Section 3.3(c) of the Disclosure Schedule,
such Seller is not party to (i) any voting trust, registration rights agreement
or stockholder agreement with respect to the voting of the capital stock of the
Company or a Subsidiary of the Company or (ii) any Contract obligating such
Seller to vote or dispose of any shares of the capital stock of, or other
equity or voting interests in, the Company or any of its Subsidiaries

 

3.4           Brokers’
Fees. Except as set forth in Section 3.4 of the Disclosure Schedule,
such Seller does not have any Liability to pay any fees or commissions to any
broker, finder or agent with respect to this Agreement, the Acquisition or the
transactions contemplated by this Agreement. Such Seller has furnished to the
Buyer correct and complete copies of engagement letters relating to any such
services, and there have been no amendments or revisions to such engagement
letters.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY

 

Security Capital represents
and warrants to the Buyer that each statement contained in this Article IV is
true and correct as of the date hereof, except as set forth in the Disclosure
Schedule. Nothing in the Disclosure Schedule shall be deemed adequate

 

17

 

to disclose an exception
to a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with reasonable particularity. Without
limiting the generality of the foregoing, (i) the mere listing (or inclusion of
a copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or
other item itself) and (ii) any item listed or referred to in any section or
subsection of the Disclosure Schedule will be deemed to be incorporated by
reference into each other Disclosure Schedule where it is reasonably apparent
from the context of the disclosure that such listing or description would be
appropriate. The Disclosure Schedule will be arranged in sections corresponding
to the Sections of Article III and this Article IV.

 

4.1           Organization, Qualification and
Corporate Power; Authority and Enforceability.

 

(a)           The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and has all requisite corporate power and authority, directly or
indirectly, to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted. The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties or assets owned, leased
or operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed would
not be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

(b)           The Company has the requisite power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Company, and no
other action is necessary on the part of the Company to authorize this
Agreement or to consummate the Acquisition or the other transactions
contemplated hereby (other than compliance with the filing and notice
requirements set forth in Section 4.4(b)(i)). This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by each other party hereto, constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws
relating to creditors’ rights generally and (b) general principles of equity,
whether such enforceability is considered in a proceeding in equity or at Law.

 

4.2           Subsidiaries.

 

(a)           A true and complete list of each
Subsidiary of the Company, together with the jurisdiction of incorporation of
each such Subsidiary, the authorized and issued capital stock of each such Subsidiary
and the name of each holder thereof is set forth in Section 4.2(a) of the
Disclosure Schedule. Except for the ownership interests set

 

18

 

forth in Section
4.2(a) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
owns, directly or indirectly, any capital stock or other ownership interest in
any other Person. Except as set forth in Section 4.2(a) of the Disclosure
Schedule, all of the outstanding shares of capital stock of each Subsidiary
of the Company are owned, directly or indirectly, by the Company, free and
clear of any Liens (other than Permitted Liens).

 

(b)           Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, as applicable, and has all
requisite power to own, lease and operate its properties and to carry on its
business as now being conducted. Each such Subsidiary of the Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties or assets
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.

 

4.3           Capitalization.

 

(a)           The authorized capital stock of the Company
consists of 33,000 shares of Common Stock, par value $0.01 per share, of which
26,000 shares are issued and outstanding. No other capital stock of the Company
is authorized, issued or outstanding. No Shares are owned by any Subsidiary of
the Company.

 

(b)           Section 4.3(b) of the Disclosure
Schedule sets forth (i) all plans or agreements (the “Option Plans”)
pursuant to which the Company or any of its Subsidiaries has granted or
committed to grant any option or right to acquire capital stock or any other
award payable in or based upon the capital stock of the Company or any such
Subsidiary; (ii) the number of Shares reserved for issuance under the Option
Plans, as of the date hereof; (iii) the number of Shares subject to outstanding
stock options, as of the date hereof (the “Company Stock Options”);
(iv) the grant dates and exercise prices of each such Company Stock Option and
the names of the holders thereof; and (v) all other rights to purchase or
receive Shares (if any). Except as set forth in Section 4.3(b) of the
Disclosure Schedule, there are no outstanding options, warrants or other
securities or subscription, preemptive or other rights convertible into or
exchangeable or exercisable for any shares of capital stock or other equity or
voting interests of the Company or any of its Subsidiaries and there are no “phantom
stock” rights, stock appreciation rights or other similar rights with respect
to the Company or any of its Subsidiaries. Except for the Stockholders’
Agreement or as set forth above or as set forth in Section 4.3(b) of the
Disclosure Schedule, there are no Contracts of any kind to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound, obligating the Company or any such Subsidiary to
issue, deliver, grant or sell, or cause to be issued, delivered, granted or
sold, additional shares of capital stock of, or other equity or voting
interests in, or options, warrants or other securities or subscription,
preemptive or other rights convertible into, or exchangeable or exercisable
for, shares of capital stock of, or other equity or voting interests in, the
Company or any of its Subsidiaries, or any

 

19

 

“phantom stock”
right, stock appreciation right or other similar right with respect to the
Company or any of its Subsidiaries, or obligating the Company or any of its
Subsidiaries to enter into any such Contract.

 

(c)           All outstanding Shares and shares of
capital stock of any Subsidiary of the Company are, and all Shares that may be
issued pursuant to the Option Plans will be when issued in accordance with the
terms thereof, duly authorized and validly issued, fully paid and
non-assessable. There are no securities or other instruments or obligations of
the Company or any of its Subsidiaries, the value of which is in any way based
upon or derived from any capital or voting stock of the Company or any such
Subsidiary or having the right to vote (or convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any matters on which
the Company’s stockholders or any stockholder (or its equivalent) of a
Subsidiary may vote.

 

(d)           Except for the Stockholders’
Agreement or as set forth in Section 4.3(d) of the Disclosure Schedule,
there are no Contracts, contingent or otherwise, obligating the Company or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of, or other equity or voting interests in, the Company or any such
Subsidiary. Except for the Stockholders’ Agreement or as set forth in Section
4.3(d) of the Disclosure Schedule, there are no voting trusts, registration
rights agreements or stockholder agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or a Subsidiary of the Company or with respect to the granting of
registration rights for any of the capital stock of the Company or any of its
Subsidiaries. Except for the Stockholders’ Agreement, there are no rights plans
affecting the Company or any of its Subsidiaries. There are no Contracts
obligating the Company or any of its Subsidiaries to vote or dispose of any
shares of the capital stock of, or other equity or voting interests in, any
Subsidiary of the Company.

 

(e)           Except as set forth in Section 4.3(e)
of the Disclosure Schedule, there are no bonds, debentures, notes or other
indebtedness of the Company or any of its Subsidiaries.

 

4.4           Noncontravention.

 

(a)           Neither the execution and delivery of
this Agreement nor the consummation of the Acquisition and the other
transactions contemplated by this Agreement will, with or without the giving of
notice or the lapse of time or both, (i) violate any provision of the certificate
of incorporation or bylaws (or comparable organization documents, as applicable)
of the Company or any of its Subsidiaries, (ii) assuming compliance with the
filing and notice requirements set forth in Section 4.4(b)(i), violate any Law
applicable to the Company or any of its Subsidiaries on the date hereof or (iii)
except as set forth in Section 4.4(a) of the Disclosure Schedule,
violate any Contract to which the Company or any of its Subsidiaries is a party,
except in the case of clauses (ii) and (iii) to the extent that any such
violation would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

20

 

(b)           The execution and delivery of this
Agreement by the Company does not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or Permit of, or
filing with or notification to, any Governmental Entity, except for
(i) such filings as may be required under the HSR Act or the Other
Antitrust Laws, (ii) the filings set forth in Section 4.4(b) of the
Disclosure Schedule or (iii) where the failure to take such action would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

4.5           Financial Statements. Section
4.5 of the Disclosure Schedule contains true and complete copies of (i) the
audited consolidated balance sheets of the Company and each of its Subsidiaries
as of December 31, 2002, December 31, 2003 and December 31, 2004 and the
related consolidated statements of income, stockholders’ equity and cash flows
for the years ended December 31, 2002, December 31, 2003 and December 31, 2004 (the
“Annual Financial Statements”) and (ii)
the unaudited consolidated balance sheet of the Company and each of its
Subsidiaries as of November 30, 2005 and the related consolidated statements of
income, retained earnings and cash flows for the eleven-month period ended November
30, 2005 (the “Interim Financial Statements” and,
together with the Annual Financial Statements, the “Financial
Statements”). The Financial Statements (including the notes thereto)
have been prepared in all material respects in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and, fairly present, in all material respects, the consolidated
financial condition, results of operations and cash flows of the Company and its
Subsidiaries as of the indicated dates and for the indicated periods and are
consistent with the books and records of the Company and its Subsidiaries
(which books and records are correct and complete in all material respects) (subject,
in the case of the Interim Financial Statements, to normal year-end adjustments
and the absence of notes).

 

4.6           Taxes.

 

(a)           All Tax Returns required to have been
filed by or with respect to the Company and each of its Subsidiaries under
applicable Law have been filed, and each such Tax Return was correct and
complete in all material respects and has been prepared in substantial
compliance with all applicable Laws. All Taxes due and owing by or with respect
to any of the Company and its Subsidiaries (whether or not shown on any Tax
Return) have been paid. Neither the Company nor any of its Subsidiaries
currently is the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by an authority in a jurisdiction where
any of the Company and its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.

 

(b)           Except as set forth on Section
4.6(b) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received from any foreign, federal, state, or local taxing
authority (including jurisdictions where the Company or its Subsidiaries have
not filed Tax Returns) any (i) written or, to the Knowledge of the Sellers,
oral notice indicating an intent to open an audit or other review, (ii) request
for

 

21

 

information
related to Tax matters, or (iii) notice of deficiency or proposed adjustment
for any amount of Tax proposed, asserted, or assessed by any taxing authority
against the Company or any of its Subsidiaries. Section 4.6(b) of the
Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to any of the Company and its Subsidiaries for
taxable periods ended on or after December 31, 2002, indicates those income Tax
Returns that have been audited, and indicates those income Tax Returns that
currently are the subject of audit. The Sellers have delivered or otherwise
made available to the Buyer true and complete copies of all federal income Tax
Returns that include the income of the Company or any of its Subsidiaries,
examination reports that may affect the Tax liability attributable to the Company
or any of its Subsidiaries, and statements of deficiencies assessed against or
agreed to by any of the Company and its Subsidiaries filed or received since
December 31, 2002.

 

(c)           There are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of the Company or
any of its Subsidiaries.

 

(d)           The Company and each of its
Subsidiaries has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.

 

(e)           Neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(f)            Neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or sharing agreement, except for the
agreements set forth in Section 4.6(e) of the Disclosure Schedule. Neither
the Company nor any of its Subsidiaries (A) has, since December 31, 2002, been
a member of an Affiliated Group filing a consolidated federal income Tax Return
other than the Security Capital Group or (B) has any Liability for the Taxes of
any Person (other than any of the Company and its Subsidiaries) under Reg. §1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.

 

(g)           Neither the Company nor any of its
Subsidiaries is a party to any Contract that has resulted or would result,
separately or in the aggregate, in the payment of any amount that will not be
fully deductible as a result of Code §162(m) (or any corresponding provision of
state, local or foreign Tax Law). Neither the Company nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of Code §897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii).

 

(h)           The unpaid Taxes of the Company and
its Subsidiaries (A) did not, as of the date of the Interim Financial
Statements, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Interim Financial Statements (rather than
in any notes thereto) and (B) do not exceed that reserve as adjusted for the

 

22

 

passage of time
through the Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries in filing their Tax Returns, other than any
Section 338(h)(10) Taxes. Since the date of the Interim Financial Statements,
neither the Company nor any of its Subsidiaries has incurred any material
liability for Taxes arising from extraordinary gains or losses, as that term is
used in GAAP, outside the Ordinary Course of Business consistent with past
custom and practice, other than any Section 338(h)(10) Taxes.

 

(i)            None of the Company and its
Subsidiaries will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any: (A) change in method
of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing
agreement” as described in Code §7121 (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to
the Closing Date that will be in effect after the Closing Date and the Section
338(h)(10) Election; (C) intercompany transactions or any excess loss account
described in Treasury Regulations under Code §1502 (or any corresponding or
similar provision of state, local or foreign income Tax law); (D) installment
sale or open transaction disposition made on or prior to the Closing Date; or
(E) prepaid amount received on or prior to the Closing Date in each case, other
than items that would be accelerated by the Section 338(h)(10) Election or
taken into account as part of the Section 338(h)(10) Tax.

 

4.7           Compliance with Laws and Orders; Permits.

 

(a)           Except as set forth in Section
4.7(a) of the Disclosure Schedule, the Company and each of its Subsidiaries
and, to the Actual Knowledge of the Sellers, each Franchisee, is in compliance
with all Laws and Orders to which the business of such Person is subject, except
where such failure to comply would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

(b)           Except as set forth in Section
4.7(b) of the Disclosure Schedule, the Company and each of its Subsidiaries
and, to the Actual Knowledge of the Sellers, each Franchisee, owns, holds,
possesses or lawfully uses in the operation of its business all Permits that are
necessary for it to conduct its business as now conducted, except where such
failure to own, hold, possess or lawfully use such Permit would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

 

4.8           No Undisclosed Liabilities. Except
as set forth in Section 4.8 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any Liabilities of a nature required by
GAAP to be reflected in a consolidated balance sheet or the notes thereto,
other than Liabilities that (a) are accrued or reserved against in the most
recent balance sheet included in the Financial Statements or are reflected in
the notes thereto, (b) were incurred in the Ordinary Course of Business since
the date of the most recent balance sheet included in the Financial Statements
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement,
or violation of law), (c) have been discharged or paid in full

 

23

 

prior to the date
of this Agreement in the Ordinary Course of Business or (d) would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

4.9           Tangible Personal Assets.

 

(a)           The Company and its Subsidiaries, in
the aggregate, have good title to, or a valid leasehold interest in, all of
their respective tangible personal assets, free and clear of all Liens, other
than (i) Permitted Liens or (ii) Liens that, individually or in the aggregate,
do not materially interfere with the ability of the Company or any Subsidiary
thereof to conduct its business as currently conducted and do not adversely
affect the value of, or the ability to sell, such personal properties and
assets.

 

(b)           The Company’s and its Subsidiaries
tangible personal assets, together with the Real Property, constitute all the
tangible assets necessary for the conduct of the businesses of the Company and
its Subsidiaries as presently conducted. The Company’s and its Subsidiaries’
tangible personal assets are in good operating condition, working order and
repair, subject to ordinary wear and tear, free from defects (other than
defects that do not interfere with the continued use thereof in the conduct of
normal operations) and are suitable for the purposes for which they are
currently being used.

 

4.10         Real Property.

 

(a)           Owned Real Property. Section
4.10(a) of the Disclosure Schedule contains a list of all real property
owned by the Company and its Subsidiaries (the “Company-Owned
Real Property”). The Company and its Subsidiaries, in the aggregate,
have fee title to each parcel of Company-Owned Real Property free and clear of
all Liens, except for (i) Permitted Liens, (ii) zoning and building
restrictions, (iii) Liens and other matters set forth on Section 4.10(a)(iv)
of the Disclosure Schedule, or (iv) any Lien which a reputable title
insurance company would be willing to omit as an exception, or affirmatively
insure, in its title insurance policy for the applicable Company-Owned Real
Property.

 

(b)           Leased Real Property. Section
4.10(b) of the Disclosure Schedule contains a list of all leases and
subleases (collectively, the “Real Property Leases”)
under which the Company or any of its Subsidiaries is either lessor or lessee
(the “Company-Leased Real Property” and,
together with the Company-Owned Real Property, the “Real
Property”). The Sellers have heretofor made available to the Buyer
true and complete copies of each Real Property Lease. All Real Property Leases
are valid and binding Contracts of the Company or any of its Subsidiaries and
are in full force and effect (except for those that have terminated or will
terminate by their own terms), and neither the Company or any of its
Subsidiaries, nor, to the Knowledge of the Sellers, any other party thereto, is
in violation or breach of or default (or with notice or lapse of time, or both,
would be in violation or breach of or default) under the terms of any such
Contract, in each case, except where such default would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

 

24

 

4.11         Intellectual
Property.

 

(a)           “Intellectual Property”
means (i) trade secrets, inventions, confidential and proprietary information,
know-how, formulae and processes, (ii) patents (including all provisionals,
reissues, divisions, continuations and extensions thereof) and patent
applications, (iii) trademarks, trade names, trade dress, brand names, domain
names, trademark registrations, trademark applications, service marks, service
mark registrations and service mark applications (whether registered,
unregistered or existing at common law, including all goodwill attaching
thereto), (iv) copyrights, including copyright registrations, copyright
applications and unregistered common law copyrights; (v) and all licenses for
the Intellectual Property listed in items (i) – (iv) above.

 

(b)           Section 4.11(b) of the Disclosure
Schedule sets forth a list that includes all Intellectual Property owned by
the Company or any of its Subsidiaries (the “Company-Owned
Intellectual Property”) that is registered or subject to an
application for registration (including the jurisdictions where such Company-Owned
Intellectual Property is registered or where applications have been filed, and
all registration or application numbers, as appropriate).

 

(c)           Except as set forth on Section 4.11(c)
of the Disclosure Schedule, all necessary registration, maintenance and
renewal fees have been paid and all necessary documents have been filed with
the United States Patent and Trademark Office or foreign patent and trademark
office in the relevant foreign jurisdiction for the purposes of maintaining the
registered Company-Owned Intellectual Property.

 

(d)           Except as set forth on Section
4.11(d) of the Disclosure Schedule, (i) the Company and its Subsidiaries,
in the aggregate, are the exclusive owners of the Company-Owned Intellectual
Property free and clear of all Liens (other than Permitted Liens); (ii) to the
Knowledge of the Sellers, all of the Company-Owned Intellectual Property is valid
and enforceable; (iii) neither the use of the Company-Owned Intellectual
Property as currently used by the Company and its Subsidiaries in the conduct
of the Company’s business, nor the conduct of the business as presently
conducted by the Company and any of its Subsidiaries, infringes, dilutes,
misappropriates or otherwise violates in any material respect the Intellectual
Property rights of any Person; and (iv) as of the date of this Agreement, the
Company and any of its Subsidiaries have made no claim of a violation,
infringement, misuse or misappropriation by any Person, of their rights to, or
in connection with, the Company-Owned Intellectual Property and, to the
Knowledge of the Sellers, there is no basis for any such claim.

 

(e)           Except as set forth in Section
4.11(e) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries has permitted or licensed any Person to use any Company-Owned
Intellectual Property.

 

(f)            Section 4.11(f) of the Disclosure
Schedule sets forth a complete and accurate list of all licenses, other
than “off the shelf” commercially available software programs, pursuant to
which the Company or its Subsidiaries licenses from a

 

25

 

Person
Intellectual Property that is used in the conduct of the business by the
Company or its relevant Subsidiary.

 

(g)           Neither
the Company nor any of its Subsidiaries is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any Contract pursuant to which any third party is authorized to use any Company-Owned
Intellectual Property or pursuant to which the Company or any of its
Subsidiaries is licensed to use Intellectual Property owned by a third party,
except where such default would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

4.12         Absence of Certain Changes or Events.
Since November 30, 2005, no event or change has occurred that has had,
individually or in the aggregate, a Material Adverse Effect. Without limiting
the generality of the foregoing and except as set forth in Section 4.12 of
the Disclosure Schedule, since November 30, 2005:

 

(a)           none of the Company and its
Subsidiaries has sold, leased, transferred, or assigned any of its material assets,
tangible or intangible, other than in the Ordinary Course of Business;

 

(b)           no party (including the Company and
any of its Subsidiaries) has accelerated, terminated, modified, or canceled any
Contract (or series of related Contracts) involving more than $75,000 to which
the Company or any of its Subsidiaries is a party or by which any of them is
bound;

 

(c)           none of the Company and its
Subsidiaries has made any capital expenditure (or series of related capital
expenditures) involving more than $75,000;

 

(d)           none of the Company and its
Subsidiaries has made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions), in each case, outside
the Ordinary Course of Business;

 

(e)           none of the Company and its
Subsidiaries has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $75,000 singly or $150,000
in the aggregate;

 

(f)            none of the Company and its
Subsidiaries has delayed or postponed the payment of accounts payable or other
Liabilities, in each case, outside the Ordinary Course of Business;

 

(g)           none of the Company and its
Subsidiaries has canceled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more than $75,000 or outside
the Ordinary Course of Business;

 

26

 

(h)           none of the Company and its
Subsidiaries has transferred, assigned, or granted any license or sublicense of
any rights under or with respect to any Intellectual Property, in each case,
outside the Ordinary Course of Business;

 

(i)            there has been no change made or
authorized in the charter or bylaws of any of the Company and its Subsidiaries;

 

(j)            none of the Company and its
Subsidiaries has experienced any material damage, destruction, or loss (whether
or not covered by insurance) to any of its material assets;

 

(k)           none of the Company and its
Subsidiaries has made any loan to, or entered into any other transaction with,
any of its directors, officers, and employees, in each case, outside the
Ordinary Course of Business;

 

(l)            none of the Company and its
Subsidiaries has granted any increase in the base compensation of any of its
directors, officers, and employees, in each case, outside the Ordinary Course
of Business;

 

(m)          none of the Company and its
Subsidiaries has adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Benefit Plan);

 

(n)           none of the Company and its
Subsidiaries has made any other change in employment terms for any of its
directors, officers, and employees, in each case, outside the Ordinary Course
of Business;

 

(o)           none of the Company and its
Subsidiaries pledged to make any charitable or other capital contribution which
contribution has not yet been made, in each case, outside the Ordinary Course
of Business;

 

(p)           none of the Company and its
Subsidiaries has discharged a material Liability or Lien outside the Ordinary
Course of Business; and

 

(q)           none of the Company and its
Subsidiaries has committed to any of the foregoing.

 

4.13         Contracts.

 

(a)           Except as set forth in Section 4.13(a)
of the Disclosure Schedule, and except as set forth in any forms, reports
or other documents (or any amendments thereof) filed by Security Capital with
the SEC prior to the date of this Agreement, as of the date hereof, none of the
Company nor any of its Subsidiaries is a party to or bound by any: (i) Contract
that would be required to be, but has not been, filed by Security Capital as a
material contract pursuant to Item 601(b)(10) of Regulation S-K; (ii) Contract
not contemplated by this Agreement that materially limits the ability of the
Company or any

 

27

 

of its
Subsidiaries to engage or compete in any manner of the business presently
conducted by the Company or any of its Subsidiaries; (iii) Contract that
creates a partnership or joint venture or similar arrangement with respect to
any material business of the Company or any of its Subsidiaries; (iv)
indenture, credit agreement, loan agreement, security agreement, guarantee,
note, mortgage or other evidence of indebtedness or agreement providing for
indebtedness in excess of $75,000; (v) Contract that relates to the acquisition
or disposition of any material business (whether by merger, sale of stock, sale
of assets or otherwise) other than this Agreement; (vi) Contract that involves
performance of services or delivery of goods or materials by or to the Company
or any of its Subsidiaries in an amount or with a value in excess of $75,000 in
any 12-month period (which period may extend past the Closing); and (vii)
Contract between the Company or any of its Subsidiaries, on the one hand, and
any Franchisee, on the other hand.

 

(b)           The Sellers have heretofor made
available to the Buyer true and complete copies of each of the Contracts set
forth in Section 4.13(a) of the Disclosure Schedule. All such Contracts
are valid and binding and in full force and effect (except for those that have
terminated or will terminate by their own terms), and neither the Company nor
any of its Subsidiaries, nor, to the Knowledge of the Sellers, any other party
thereto, is in violation or breach of or default under (or with notice or lapse
of time, or both, would be in violation or breach of or default under) the
terms of any such Contract, in each case, except where such default would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

4.14         Litigation. Except as set forth
in Section 4.14 of the Disclosure Schedule, there is no Action pending
or, to the Knowledge of the Sellers, threatened in writing against the Company
or any of its Subsidiaries that (a) challenges or seeks to enjoin, alter or
materially delay the Acquisition or (b) would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. Except as set
forth in Section 4.14 of the Disclosure Schedule, no officer or director
of the Company or any of its Subsidiaries is a defendant in any Action
commenced by any stockholder of the Company or any of its Subsidiaries with
respect to the performance of his duties as an officer or a director of the
Company or any such Subsidiary under any applicable Law. There is no unsatisfied
judgment, penalty or award against the Company or any of its Subsidiaries.

 

4.15         Employee Benefits.

 

(a)           Section 4.15(a) of the Disclosure
Schedule includes a list of all Benefit Plans maintained or contributed to
by the Company or any of its Subsidiaries (the “Company
Benefit Plans”). The Sellers have delivered or otherwise made
available to the Buyer copies of (i) each Company Benefit Plan, (ii) the most
recent summary plan description for each Company Benefit Plan for which such a
summary plan description is required and (iii) the most recent favorable
determination letters from the Internal Revenue Service with respect to each
Company Benefit Plan intended to qualify under Section 401(a) of the Code.

 

28

 

(b)           Except as set forth in Section 4.15(b)
of the Disclosure Schedule:

 

(i)            none of the Company Benefit Plans is
subject to Section 302 or Title IV of ERISA or Section 412 of the Code; none of
the Sellers, the Company, or any ERISA Affiliate either has or has had any
liability or obligation of any nature to any Company Benefit Plans, the Pension
Benefit Guaranty Corporation, or any other Person arising directly or
indirectly under Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA,
or Section 412 of the Code that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;

 

(ii)           each Company Benefit Plan that is
intended to be qualified under Section 401(a) of the Code is subject to a
favorable determination letter from the IRS and, to the Knowledge of the
Sellers, no event has occurred and no condition exists that is reasonably
likely to result in the revocation of any such determination;

 

(iii)          each Company Benefit Plan is and has been
in full force and effect in accordance with its terms and is and has been, and
each plan administrator and fiduciary of each such Company Benefit Plan is and
has been, in compliance (both in form and operation) with all applicable
requirements and provisions of ERISA, and the Code and other applicable laws,
regulations and rulings, including, but not limited to, the Health Insurance
Portability and Accountability Act of 1996, as amended, and the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
except for instances of noncompliance that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; and

 

(iv)          none of the Sellers, the Company or
any ERISA Affiliate has, or could have, any liability to a Company Benefit Plan
(other than for premiums or contributions that are not yet due), a governmental
agency, or any other Person in respect of any Company Benefit Plan, that could
be expected to have, individually or in the aggregate, a Material Adverse
Effect.

 

(c)           No Company Benefit Plan is or has
been funded by, associated with, or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of the Code, a
“welfare benefit fund” within the meaning of Section 419 of the Code, a “qualified
asset account” within the meaning of Section 419A of the Code or a “multiple
employer welfare arrangement” within the meaning of Section 3(40) of ERISA.

 

(d)           No Company Benefit Plan or any trust
created under one of the Company Benefit Plans or any trustee, administrator or
sponsor thereof, has engaged in a “prohibited transaction” as that term is
defined in Section 4975(c)(1) of the Code, which could subject the Company
Benefit Plan, trust, trustee, administrator or sponsor thereof, or any party
dealing with the Company Benefit Plan or any such trust to any material tax or
material penalty on prohibited transactions imposed by said Section 4975 of the
Code, nor, to the Knowledge of the Sellers, is any fiduciary of any Company
Benefit Plan acting in a manner which constitutes, or has constituted, a breach
of its fiduciary duty, as

 

29

 

set forth in ERISA
that would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

(e)           There does not exist any pending or,
to the Knowledge of the Sellers, threatened Actions with respect to any Company
Benefit Plan or any related trust or other funding medium thereunder or with
respect to any of the Sellers or the Company, as the sponsor or fiduciary
thereof. No Company Benefit Plan or any related trust or other funding medium
thereunder or any fiduciary thereof has been the subject of an audit,
investigation or examination by a governmental agency.

 

(f)            None of the Sellers, the Company, or
any ERISA Affiliate has any commitment, intention or understanding to create or
adopt any new Company Benefit Plan, and since the beginning of the current
fiscal year of the Company, no event has occurred and no condition or
circumstance has existed that reasonably would be expected to result in a
material increase in the benefits under, or the expense of, maintaining a
Company Benefit Plan from the level of benefits or expense incurred for the
most recently completed fiscal year of the Company.

 

(g)           Except as set forth in Section
4.15(g) of the Disclosure Schedule, the execution of, and performance of
the transactions contemplated by, this Agreement will not (either along with or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Benefit Plan or agreement that will or may reasonably be
expected to result in any payment (whether severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting or increase in benefits or
obligation to fund benefits under any Company Benefit Plan with respect to any
employee or former employee of the Company. No payment or benefit which will or
may be made under any Company Benefit Plan by the Sellers, the Company, or any
ERISA Affiliate with respect to any employee or former employee of the Company
will be characterized as a “parachute payment” (within the meaning of Section
280G of the Code).

 

(h)           None of the assets of any Company
Benefit Plan is or has been invested in any property constituting employer real
property or any employer security within the meaning of Section 407(d) of
ERISA.

 

(i)            None of the Company Benefit Plans
promises or provides, or has promised or provided, medical or other welfare
benefits, including but not limited to any retiree benefits, to any Person (or
such Person’s dependent, spouse or beneficiaries) after such Person’s
termination of employment with the Sellers, the Company or any ERISA Affiliate,
except as required by COBRA.

 

4.16         Labor and Employment Matters. Section
4.16 of the Disclosure Schedule sets forth a list of all written employment
agreements that obligate the Company or any of its Subsidiaries to pay an
annual salary of $100,000 or more and to which the Company or any of its
Subsidiaries is a party. To the Knowledge of the Sellers, there are no pending
labor disputes, work stoppages, requests for representation, pickets, work
slow-downs due to labor disagreements or any actions or arbitrations that involve
the

 

30

 

labor or
employment relations of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is party to any collective bargaining
agreement.

 

4.17         Environmental.
Except (i) as set forth in Section 4.17 of the Disclosure Schedule or
(ii) for any matter that would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, (a) the Company and each of its
Subsidiaries is in compliance with all applicable Environmental, Health and
Safety Requirements, (b) the Company and each of its Subsidiaries possesses and
is in compliance with all Permits required under Environmental, Health and
Safety Requirements for the conduct of their respective operations and (c)
there are no Actions pending against the Company or any of its Subsidiaries
alleging a violation of any Environmental, Health and Safety Requirements.

 

4.18         Franchise
Agreements. All Franchise Agreements are valid and binding, are in full
force and effect (except for those that have terminated or will terminate by
their own terms), and neither the Company nor any of its Subsidiaries, nor, to
the Actual Knowledge of the Sellers, any other party thereto, is in violation
or breach of or default under (or with notice or lapse of time, or both, would
be in violation or breach of or default under) the terms of any Franchise
Agreement, in each case, except where such default would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect. All
Franchise Agreements were, in all material respects, prepared, offered and sold
in compliance with each applicable federal, state and local law, rule,
regulation or other pronouncement having the effect of law that governs the
offer and sale of franchises and the Company’s Uniform Franchise Offering
Circular. Except as set forth in Section 4.18 of the Disclosure Schedule,
the Company has, in all material respects, good working relationships with all
of its Franchisees.

 

4.19         Franchisees,
Suppliers, Vendors and Referral Sources. Except as set forth in Section
4.19 of the Disclosure Schedule, to the Actual Knowledge of the Sellers, no
fact, occurrence, situation or circumstance exists with respect to any
Franchisee or any supplier, vendor or referral source of the Company or any of
its Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.

 

4.20         New
Franchises. Section 4.20 of the Disclosure Schedule sets forth all
of the Franchise Agreements that have been executed but for which the school
for such new franchise (“New Franchise”)
has not yet opened for business and, to the Actual Knowledge of the Sellers and
subject to customary variances, such New Franchises are expected to open for
business in a timely manner.

 

4.21         No
Set-Off Rights. Except as set forth in Section 4.21 of the Disclosure
Schedule, there is no contest, claim or right of set-off with any
Franchisee against any amounts payable, due or owed, including, without
limitation, any royalty payments, to the Company or any of its Subsidiaries by
any Franchisee.

 

4.22         UFOC.
None of the Company or any of its Subsidiaries or any of their agents or
representatives has made or provided any representations or warranties, whether
written or oral, in each case that is binding upon the Company or any of its
Subsidiaries,

 

31

 

to any Franchisee or potential Franchisee other than such representations
and warranties as are set forth in the Company’s Uniform Franchise Offering
Circulars or in the Franchise Agreements.

 

4.23         Restricted
Cash. Section 4.23 of the Disclosure Schedule sets forth the amount
of the Fund (as such term is defined in the Form Franchise Agreement) as of December
31, 2005. Except as set forth in Section 4.23 of the Disclosure Schedule,
the Fund has been maintained in compliance with the terms and provisions of the
Form Franchise Agreement.

 

4.24         Insurance. Section 4.24 of
the Disclosure Schedule sets forth a list of each insurance policy that
covers the Company or any of its Subsidiaries or their respective businesses,
properties, assets, directors, officers or employees (the “Policies”).
Such Policies are in full force and effect in all material respects and neither
the Company nor any of its Subsidiaries is in violation or breach of or default
under any of its obligations under any such Policy, except where such default
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

4.25         Brokers’
Fees. Except as set forth in Section 4.25 of the Disclosure Schedule,
neither the Company nor any Subsidiary thereof has any Liability to pay any
fees or commissions to any broker, finder or agent with respect to this
Agreement, the Acquisition or the transactions contemplated by this Agreement. The
Sellers have furnished to the Buyer true, correct and complete copies of
engagement letters relating to any such services, and there have been no
amendments or revisions to such engagement letters.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and
warrants to each of the Sellers that each statement contained in this Article V
is true and correct as of the date hereof.

 

5.1           Organization. The Buyer is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware.

 

5.2           Authorization. The Buyer has the
requisite power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Buyer of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary action, and no other action on the part of the
Buyer is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than compliance with the filing and notice requirements
set forth in Section 5.3(b)(i)). This Agreement has been duly executed and
delivered by the Buyer and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Buyer enforceable

 

32

 

against the Buyer
in accordance with its terms, except as limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws
relating to creditors’ rights generally and (b) general principles of equity,
whether such enforceability is considered in a proceeding in equity or at Law.

 

5.3           Noncontravention.

 

(a)           Neither the execution and the
delivery of this Agreement, nor the consummation of the Acquisition and the
other transactions contemplated by this Agreement, will, with or without the
giving of notice or the lapse of time or both, (i) violate any provision
of the certificate of incorporation or bylaws (or comparable organization
documents, as applicable) of the Buyer, (ii) assuming compliance with the
filing and notice requirements set forth in Section 5.3(b)(i), violate any Law
applicable to the Buyer on the date hereof or (iii) violate any Contract
to which the Buyer is a party, except in the case of clauses (ii) and (iii) to
the extent that any such violation would not reasonably be expected to prevent
or materially delay the consummation of the Acquisition and the other
transactions contemplated by this Agreement.

 

(b)           The execution and delivery of this
Agreement by the Buyer does not, and the performance of this Agreement by the
Buyer will not, require any consent, approval, authorization or Permit of, or
filing with or notification to, any Governmental Entity, except for
(i) such filings as may be required under the HSR Act or the Other
Antitrust Laws or (ii) where the failure to take such action would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

5.4           Availability of Funds. The
Buyer has cash available or has existing committed borrowing facilities (the “Financing”) which together are sufficient to enable it to
consummate the transactions contemplated by this Agreement. Copies of the
documents governing any such facilities have been provided to the Sellers prior
to the date hereof. The Financing will be available to the Buyer on a timely
basis to consummate the transactions contemplated by this Agreement and the
Buyer knows of no fact or circumstance that would cause the Financing to be
unavailable on such basis.

 

5.5           Solvency. The Buyer is not
entering into the transactions contemplated by this Agreement with the actual
intent to hinder, delay or defraud either present or future creditors of the
Company or any of its Subsidiaries. Assuming that the representations and
warranties concerning the Company contained in this Agreement are true and
correct in all material respects, at and immediately after the Closing, and
after giving effect to the Acquisition and the other transactions contemplated
by this Agreement (including the proposed financing structure for the
Acquisition), the Company (a) will be solvent (in that both the fair value of its
assets will not be less than the sum of its debts and that the present fair
saleable value of its assets will not be less than the amount required to pay
its probable Liabilities on its debts as they become absolute and matured); (b)
will have adequate capital and liquidity with which to engage in its business;
and (c) will not have incurred and does not plan to incur debts beyond its
ability to pay as they become absolute and matured.

 

33

 

5.6           Brokers’ Fees. The Buyer has
no Liability to pay any fees or commissions to any broker, finder or agent with
respect to this Agreement, the Acquisition or the transactions contemplated by
this Agreement that could result in any Liability being imposed on the Sellers,
the Company or any Subsidiary of the Company.

 

5.7           Affiliates. Neither the Buyer
nor any Affiliate of the Buyer controls any companies that compete with the
business of the Company or any of its Subsidiaries. For purposes of this
Section 5.7, the term “control” shall have the meaning provided in 16 CFR
§801.1(b).

 

ARTICLE VI

 

COVENANTS

 

6.1           Regulatory
Matters and Approvals.

 

(a)           Each of the Buyer and Security
Capital will, as promptly as practicable and before the expiration of any
relevant legal deadline, but in no event later than ten Business Days following
the execution and delivery of this Agreement, file with (i) the United States
Federal Trade Commission (the “FTC”) and the
United States Department of Justice (the “DOJ”) the
notification and report form required for
the transactions contemplated by this Agreement and any supplemental
information requested in connection therewith pursuant to the HSR Act, which forms will specifically request early
termination of the waiting period prescribed by the HSR Act, and (ii)
any other Governmental Entity, any other filings, reports, information and
documentation required for the transactions contemplated hereby pursuant to any
Other Antitrust Laws. Each of the Buyer, the Company and Security Capital will
furnish to each other’s counsel such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing or submission that is necessary under the HSR Act and any Other
Antitrust Laws. Each of the Buyer and the Company will be responsible for fifty
percent (50%) of the filing fees payable in connection with such filings.

 

(b)           Each of the Buyer, the Company and Security
Capital will use its respective commercially reasonable efforts to promptly
obtain any clearance required under the HSR Act and any Other Antitrust Laws
for the consummation of the transactions contemplated by this Agreement and will
keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from any Governmental Entity
and will comply promptly with any such inquiry or request.

 

(c)           Each of the Buyer and Security
Capital agrees to instruct their respective counsel to cooperate with each other
and use their respective commercially reasonable efforts to facilitate and
expedite the identification and resolution of any issues arising under the HSR
Act and any Other Antitrust Laws at the earliest practicable dates. Such efforts
and cooperation will include causing its counsel (i) to promptly inform the

 

34

 

other of any oral
communication with, and provide copies of written communications with, any
Governmental Entity regarding any such filings or applications or any such
transaction, and (ii) to confer with each other regarding appropriate contacts
with and response to personnel of such Governmental Entity. None of the Buyer,
the Company, Security Capital nor any of their respective Affiliates will
independently participate in any meeting or discussion with any Governmental
Entity in respect of any such filings, applications, investigation or other
inquiry without giving, in the case of the Buyer and its Affiliates, Security
Capital, and in the case of the Company or Security Capital and their respective
Affiliates, the Buyer, prior notice of the meeting and, to the extent permitted
by the relevant Governmental Entity, the opportunity to attend and participate (which,
at the request of the Buyer, the Company or Security Capital, as applicable, will
be limited to outside antitrust counsel only).

 

6.2           Consents.
The Company will, and will cause each of its Subsidiaries to, use its commercially
reasonable efforts to obtain any required third-party consents to the
Acquisition and the other transactions contemplated by this Agreement in
writing from each Person.

 

6.3           Operation of the Company’s
Business. During the period commencing on the date hereof and ending at the
earlier of the Closing and the termination of this Agreement in accordance with
Article VIII, the Company, except (i) as set forth on Section 6.3 of the
Disclosure Schedule, (ii) as otherwise contemplated by this Agreement,
(iii) as required by applicable Law or (iv) with the prior written consent of
the Buyer (which consent will not be unreasonably withheld or delayed), will
use commercially reasonable efforts to, and will use commercially reasonable
efforts to cause each of its Subsidiaries to, carry on its business in a manner
consistent with past practice and not take any action or enter into any
transaction that would result in the following:

 

(a)           any change in the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries or any
amendment of any material term of any outstanding security of the Company or
any of its Subsidiaries;

 

(b)           any declaration, setting aside or
payment of any dividend or other distribution (whether in stock or property, or
any combination thereof) with respect to any shares of capital stock of the
Company or any of its Subsidiaries (other than as permitted in Section 6.6), or
any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries
of any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any of its Subsidiaries, other than any
retirement of, or issuance of, shares of capital stock pursuant to the exercise
of Company Stock Options that are outstanding as of the date hereof;

 

(c)           any issuance or sale of any
additional shares of, or rights of any kind to acquire any shares of, any capital
stock of any class of the Company or any of its Subsidiaries (whether through
the issuance or granting of Company Stock Options or otherwise);

 

35

 

(d)           any incurrence, guarantee or
assumption by the Company or any of its Subsidiaries of any indebtedness for borrowed
money other than in the Ordinary Course of Business in amounts and on terms
consistent with past practice;

 

(e)           any change in any method of
accounting, accounting principle or accounting practice by the Company or any of
its Subsidiaries;

 

(f)            (i) any adoption or material amendment
of any Company Benefit Plan, (ii) any entry into any collective bargaining
agreement with any labor organization or union, (iii) any entry into an
employment agreement or (iv) any increase in the rate of compensation to any
employee in an amount that exceeds 10% of such employee’s current compensation;
provided, that the Company or any of its Subsidiaries may (A) take any
such action for employees in the Ordinary Course of Business or pursuant to any
existing Contracts or Company Benefit Plans and (B) adopt
or amend any Company Benefit Plan if the cost to such Person of providing
benefits thereunder is not materially increased;

 

(g)           except in the Ordinary Course of Business,
any cancellation, modification, termination or grant of waiver of any material
Permits or Contracts to which the Company or any of its Subsidiaries is a
party, which cancellation, modification, termination or grant of waiver would,
individually or in the aggregate, have a Material Adverse Effect;

 

(h)           any change in the Tax elections made
by the Company or any of its Subsidiaries or in any accounting method used by
the Company or any of its Subsidiaries for Tax purposes, where such Tax
election or change in accounting method may have a material effect upon the Tax
Liability of the Company or any of its Subsidiaries for any period or set of
periods, or the settlement or compromise of any material income Tax Liability
of the Company or any of its Subsidiaries;

 

(i)            any acquisition or disposition of
any business or any material property or asset of any Person (whether by
merger, consolidation or otherwise) by the Company or any of its Subsidiaries; provided,
that nothing in this Agreement will prohibit the Company or any of its
Subsidiaries from (i) acquiring any Company-Owned Real Property which it is
acquiring to sell to a potential franchisee or (ii) selling any Company-Owned
Real Property to a franchisee, in case of clause (i) or (ii), in the Ordinary
Course of Business consistent with past practice;

 

(j)            any grant of a Lien on any properties
and assets of the Company or any of its Subsidiaries that would have,
individually or in the aggregate, a Material Adverse Effect; or

 

(k)           any entry into any agreement or
commitment to do any of the foregoing.

 

6.4           Access. The Company will, and will
cause each of its Subsidiaries to, permit the Buyer and its Representatives to
have reasonable access at all reasonable

 

36

 

times, and in a
manner so as not to interfere with the normal business operations of the
Company and each of its Subsidiaries, to the premises, properties, personnel,
books, records (including Tax records), Contracts and documents of or
pertaining to the Company and any of its Subsidiaries; provided, that
any such access will be conducted at the Buyer’s expense and the Buyer will not
have access to individual performance or evaluation records, medical histories
or other information that in the opinion of the Company is sensitive or the
disclosure of which could reasonably be expected to subject the Company or any
of its Subsidiaries to risk of liability; provided, further, that
such access will comply with all applicable Law and all applicable Real
Property Leases.

 

6.5           Resignations. As of the
Closing, the Sellers will cause to be delivered to the Buyer duly signed
resignations, effective immediately upon the Closing, of each director of his position
as a director (and, if requested by the Buyer in writing at least ten Business
Days prior to the Closing, of each officer of his position as an officer) of
the Company and each Subsidiary of the Company; provided that no such
resignation by any individual will be a resignation from employment with the Company
or such Subsidiary if such individual is so employed.

 

6.6           Excess Cash; Stay Bonuses.

 

(a)           On or prior to the Closing, the Company
shall (and the Sellers shall cause the Company to) (i) pay to the Optionholders
a one-time special bonus equal to such Optionholder’s Pro Rata Share of the
Special Bonus Amount (if any) and (ii) if the Excess Cash Amount is positive, transfer
by dividend to the Stockholders an amount equal to (A) the Excess Cash Amount minus
(B) the Special Bonus Amount.

 

(b)           Immediately prior to the Closing, the
Company shall pay 100% of the Stay Pay Bonuses to the employees who at such
time are eligible to receive such Stay Pay Bonuses. Notwithstanding anything in
the Stay Pay Agreements to the contrary, the parties acknowledge and agree that,
immediately prior to the Closing, (i) payment of the entire Stay Pay Bonuses
will be accelerated and (ii) the retention of such Stay Pay Bonuses after the
Closing shall not be conditioned on continued post-closing employment by the employees.

 

6.7           Notice of Developments. The
Sellers and the Company will give prompt written notice to the Buyer of any
event that would reasonably be expected to give rise to, individually or in the
aggregate, a Material Adverse Effect or would reasonably be expected to cause a
breach of any of its respective representations, warranties, covenants or other
agreements contained herein. The Buyer will give prompt written notice to the
Sellers and the Company of any event that could reasonably be expected to cause
a breach of any of its representations, warranties, covenants or other
agreements contained herein or could reasonably be expected to, individually or
in the aggregate, prevent or materially delay the consummation of the
Acquisition and the other transactions contemplated by this Agreement. The
delivery of any notice pursuant to this Section 6.7 will not limit, expand or
otherwise affect the remedies available hereunder (if any) to the party
receiving such notice.

 

37

 

6.8           Support Services.  The
Buyer agrees that as of the Closing, the Sellers will have no obligation to
provide any support or other services to the Company or any of its
Subsidiaries.  In furtherance and
not in limitation of the foregoing, the parties acknowledge and agree that, (a)
the Second Amended and Restated Advisory Services Agreement, dated as of
December 23, 2005, among Security Capital, Capital Partners, Inc. and the
Company (the “Capital Partners  Advisory Services Agreement”) shall be amended as of the
Closing Date to remove the Company as a party without liability to the Company
or its Subsidiaries other than the requirement that the Company comply with its
obligations in Section 6.8(b), (b) the aggregate amount of the Advisory Fee (as
such term is defined in the Capital Partners Advisory Services Agreement) which
is payable by the Company to Capital Partners, Inc. pursuant to the Capital
Partners Advisory Services Agreement is $193,750.00 and the Company will pay such
amount to Capital Partners, Inc. at the Closing, (c) the Amended and Restated
Management Advisory Services Agreement, dated as of April 5, 2002, among
Security Capital, Jewel I, Inc. (d/b/a Primrose Country Day School) and
Primrose School Franchising Company, Inc. (the “Security Capital Advisory Services
Agreement”) shall be terminated as of the Closing Date without
liability to the Company or its Subsidiaries other than the requirement that
the Company comply with its obligations in Section 6.8(d) and (d) the Company
will pay to Security Capital at the Closing the aggregate amount of the Fee (as
such term is defined in the Security Capital Advisory Services Agreement) which
is payable by the Company to Security Capital pursuant to the Security Capital
Advisory Services Agreement.

 

6.9           No
Solicitation.

 

(a)           The
Sellers and the Company will, and will cause each of their Representatives to,
cease immediately any existing discussions regarding a Transaction Proposal.

 

(b)           From
and after the date of this Agreement, without the prior consent of the Buyer, none
of the Sellers nor the Company will, nor will they authorize or permit any of the
Company’s Subsidiaries to, nor will they authorize or permit any of their
respective Representatives, agents or advisors to, directly or indirectly through
another Person to, (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed to facilitate any
inquiries, proposals or offers from any Person that constitute, or would
reasonably be expected to constitute, a Transaction Proposal,
(ii) participate in any discussions or negotiations (including by way of
furnishing information) regarding any Transaction Proposal or (iii) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.

 

(c)           Notwithstanding
the foregoing, nothing in this Agreement will prohibit or restrict Security
Capital or any of its Subsidiaries (including the Company and each of its
Subsidiaries) or Representatives from (i) soliciting, initiating or
encouraging (including by way of furnishing information), or taking any other
action designed to facilitate any inquiries, proposals or offers from any
Person that constitute a proposal for

 

38

 

a One-Step
Transaction, (ii) participating in any discussions or negotiations
(including by way of furnishing information) regarding any proposal for a One-Step
Transaction, (iii) approving or recommending, or proposing to approve or
recommend, any Superior Proposal or (iv) approving or recommending, or
proposing to approve or recommend, or executing or entering into, any letter of
intent, agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement related to any Superior Proposal (each, an
“Acquisition Agreement”) or proposing
publicly or agreeing to do any of the foregoing.  Security Capital will promptly advise the
Buyer of the receipt of any Superior Proposal, including the material terms and
conditions of such Superior Proposal and the identity of the Person making such
Superior Proposal, and will keep the Buyer reasonably and promptly informed of
the status of any such Superior Proposal and the substance of any discussions
relating to such Superior Proposal.

 

(d)           Nothing
contained in this Section 6.9 will prohibit Security Capital from taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or from making any disclosure to its
stockholders if, in the good faith judgment of the Security Capital Board,
failure so to disclose would be inconsistent with its obligations under
applicable law.

 

6.10         Indemnification
Following the Closing.

 

(a)           The
Sellers, the Company and the Buyer agree that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Closing (including rights for advancement of expenses) now existing in favor of
the current or former directors or officers of the Company or any of its
Subsidiaries as provided in their respective certificate of incorporation or
bylaws (or comparable organizational documents) will survive the Acquisition
and will continue in full force and effect in accordance with their terms.

 

(b)           For
six years after the Closing, the Buyer will maintain in effect the current
directors’ and officers’ liability insurance covering acts or omissions
occurring prior to the Closing with respect to those Persons who are currently
covered by the directors’ and officers’ liability insurance policy which covers
the Company’s directors and officers on terms with respect to such coverage and
amounts no less favorable than those of such policy in effect on the date hereof.  In lieu of the foregoing, the Buyer may
purchase six-year “tail” coverage covering acts or omissions prior to the
Closing on substantially similar terms to the existing policy.

 

(c)           In
the event that, following the Closing, the Buyer, the Company or any of their respective
successors or assigns (i) consolidates with or merges into any other
Person and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case,
reasonable provision will be made so that such successors and assigns will
assume the obligations of the Buyer, the Company or their respective Affiliates,
as applicable, including those set forth in this Section 6.10.

 

39

 

(d)           The
provisions of this Section 6.10 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his heirs and
his representatives and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such Person
may have by contract or otherwise.

 

(e)           Each
Stockholder hereby agrees that it shall not make any claim for indemnification
against the Buyer, the Company or any of their respective Affiliates by reason
of the fact that such Stockholder is or was a stockholder of the Company or any
of its Affiliates (whether such claim is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw,
agreement or otherwise) with respect to any Action brought by the Buyer against
such Stockholder (solely in such Stockholder’s capacity as a stockholder of the
Company) pursuant to this Agreement or applicable Law or otherwise, and such
Stockholder hereby acknowledges and agrees that it shall not have any claim or
right to contribution or indemnity from the Company or any of its Affiliates
with respect to any amounts paid by such Stockholder (solely in such
Stockholder’s capacity as a stockholder of the Company) pursuant to this
Agreement or otherwise.  Effective upon
the Closing, each Stockholder hereby irrevocably waives, releases and discharges
the Company and its Affiliates from any and all Liabilities and obligations to
such Stockholder of any kind or nature whatsoever, which solely arise out of such
Stockholder’s capacity as a stockholder of the Company (including in respect of
any rights of contribution or indemnification), whether arising under any Contract
(other than this Agreement and any of the other agreements executed and
delivered in connection herewith) or otherwise at law or in equity, and each
Stockholder agrees that it shall not seek to recover any amounts in connection
therewith or thereunder from the Company or any of its Affiliates.  In no event shall the Company or any of its
Affiliates have any liability whatsoever to any Stockholder for any breaches of
the representations, warranties, agreements or covenants of the Company
hereunder, and in any event no Stockholder may seek contribution from the
Company or any of its Affiliates in respect of any payments required to be made
by such Stockholder pursuant to this Agreement.

 

6.11         Taking
of Necessary Action; Further Action. 
Subject to the terms and conditions of this Agreement, each of the Sellers,
the Company and the Buyer will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Acquisition in
accordance with this Agreement as promptly as practicable.

 

6.12         [RESERVED]

 

6.13         Tax Matters.

 

(a)           From
and after the Closing Date, Security Capital will pay or cause to be paid, and will
indemnify the Buyer against any and all damages, fines, fees, penalties, Taxes,
deficiencies, losses and expenses, including, without limitation, interest,
reasonable expenses of investigation, court costs, arbitration costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation or other proceedings or of any claim, default or
assessment (“Losses”) arising in respect of any
Tax of any Security Capital Company for any period.

 

40

 

(b)           From
and after the Closing Date, the Buyer will pay or cause to be paid, and will
indemnify Security Capital against any and all Losses arising in respect of any
Tax of the Company or any of its Subsidiaries for any period.

 

(c)           Notwithstanding
Section 6.13(b), any Section 338(h)(10) Tax will be paid by Security Capital.  For purposes of this Section 6.13, the
Section 338(h)(10) Tax will be deemed to be reduced by the total Tax benefit,
as determined by Security Capital, of the U.S. federal and state Tax income
deductions resulting from (i) the payment obligations in cancellation of the
Company Stock Options described in Section 2.2, (ii) any Section 338(h)(10) Tax
itself and (iii) the payment obligations in respect of the Stay Pay Bonuses
described in Section 6.6(b).  Any U.S.
federal and state Tax income deductions resulting from the items described in
the previous sentence shall only be used in accordance with the second sentence
of this Section 6.13(c).

 

(d)           For
purposes of Sections 6.13(a), (b), and (c) any Tax that relates to any U.S.
consolidated federal income Tax return filed for any period which include any
Security Capital Company, on the one hand, and the Company and any of its
Subsidiaries, on the other hand, the responsibility for such Tax as between the
Buyer, on the one hand, and the Company and each of its Subsidiaries, on the
other hand, will be determined as follows:

 

(i)            to
the extent that any Tax results from an adjustment to the taxable income of any
Security Capital Company, computed without taking into account any net
operating loss or other Tax attribute of the Company or any of its Subsidiaries,
such Tax is the responsibility of Security Capital under Section 6.13(a);

 

(ii)           to
the extent that any Tax results from an adjustment to the taxable income of the
Company or any of its Subsidiaries, computed without taking into account any
net operating loss or other Tax attribute of any Security Capital Company, such
Tax is the responsibility of the Buyer under Section 6.13(b);

 

(iii)          to
the extent that any Tax results from an adjustment to a net operating loss or
other Tax attribute of any Security Capital Company, such Tax is the
responsibility of Security Capital under Section 6.13(a);

 

(iv)          to
the extent that any Tax results from an adjustment to a net operating loss or
other Tax attribute of the Company or any of its Subsidiaries, such Tax is the
responsibility of the Buyer under Section 6.13(b);

 

(v)           to the extent that any Tax results from an
increase in a Section 338(h)(10) Tax or an adjustment to a U.S. federal or
state income tax deduction resulting from the payments in cancellation of the
Company Stock Options described in Section 2.2 above, or from any Section
338(h)(10) Tax itself, such Tax is the responsibility of Security Capital; and

 

(vi)          responsibility
for any U.S. federal income Taxes required to be filed with the Tax Returns
described in Section 6.13(e) below is as set forth therein.

 

41

 

(e)           Security
Capital will file all U.S. federal income Tax Returns of, or that include, the
Company and its Subsidiaries for taxable periods ending on or before the
Closing Date and due after the Closing Date. 
Security Capital will pay all Taxes due with respect to such Tax Returns,
except that the Buyer will pay all such Taxes due with respect to such Tax
Returns equal to the lesser of (i) the U.S. federal income Taxes of the Company
and its Subsidiaries computed for the applicable taxable period as if the
Company and its Subsidiaries did not file a U.S. consolidated federal income Tax
return with any Security Capital Company, excluding any Section 338(h)(10) Tax
or (ii) the total amount of U.S. federal income Taxes due with respect to the
U.S. federal consolidated group which includes each Security Capital Company and
the Company and its Subsidiaries, excluding any Section 338(h)(10) Tax.  In the event that the purchase by the Buyer
of the Shares results in any excess loss account triggered into income under
Section 1.1502-19 of the Treasury Regulations, Security Capital will be
responsible for such amounts.  In the
event that the purchase by the Buyer of the Shares results in any deferred
amounts triggered into income under Section 1.1502-13 of the Treasury
regulations, the Buyer will be responsible for the U.S. federal income Tax
related to such income if income on the original transaction would have been
recognized by the Company or any of its Subsidiaries, and Security Capital will
be responsible for any other such Tax. 
In the event that Security Capital determines that the Buyer has any
obligation for U.S. federal income Taxes pursuant to this Section 6.13(e),
Security Capital will furnish the Buyer with the draft U.S. consolidated
federal income Tax Return related thereto, along with any related workpapers
showing the proposed amount due from the Buyer, at least 20 Business Days prior
to the due date for such Tax Return. 
Security Capital’s estimate will become final unless the Buyer objects
in writing before 10 Business Days prior to the due date for filing such Tax
Return.  In the event of any disagreement
as to the U.S. federal income Taxes owed by the Buyer with respect to such Tax
Return, Security Capital will file such Tax Return and pay the amount of Tax
due with respect thereto, and the dispute will be resolved by the Independent
Accounting Firm, who will be directed to resolve such dispute within 30
Business Days after the date of the Buyer’s objection, at which point the Buyer
will pay to Security Capital the amount of U.S. federal income Taxes determined
by such Independent Accounting Firm to be due from the Buyer pursuant to this
Section 6.13(e), and the Buyer and Security Capital will each pay one-half of
the fees of the Independent Accounting Firm. 
The Company and any of its Subsidiaries will furnish information to
Security Capital for inclusion in the U.S. federal consolidated federal income
Tax Return for the Security Capital Group for the period that includes the
Closing Date in accordance with the past custom and practice of Security
Capital, the Company and its Subsidiaries. 
Security Capital will be entitled to all refunds relating to Tax Returns
which include any Security Capital Company and/or any of the Company and its
Subsidiaries for any taxable period ending on or before the Closing Date whenever
paid.

 

(f)            If
any Taxing Authority or other person asserts a Tax Claim against Security
Capital or the Buyer, then the party first receiving notice of such Tax Claim
promptly will provide written notice thereof to the other party.  Such notice will specify in reasonable detail
the basis for such Tax Claim and will include a copy of any relevant correspondence
received from the Taxing Authority or other person.  If the Tax

 

42

 

Claim relates to a
U.S. federal consolidated income Tax Return of the Security Capital Group,
Security Capital will control such contest. 
However, Security Capital will permit the Buyer to participate in the
defense of such Tax Claim, to the extent such contest within which such Tax Claim
arises relates to such Tax Claim. 
Neither the Buyer nor Security Capital will enter into any settlement of
such Tax Claim without the written consent of the other, not to be unreasonably
withheld, it being understood that the Buyer will control the settlement of a
Tax Claim to the extent the settlement thereof would not result in any Tax
detriment to Security Capital.

 

(g)           Each
of Security Capital and the Buyer will, and will cause its Subsidiaries and Affiliates
to, provide to the other such cooperation and information as any of them
reasonably may request in filing any Tax Return, determining a liability for
Taxes or in conducting any audit or other proceeding in respect of Taxes.  Such cooperation and information will include
providing copies of all relevant portions of relevant Tax Returns, together
with relevant accompanying schedules and relevant work papers, relevant
documents relating to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of property, which any
such party may possess.  Each of Security
Capital and the Buyer will retain all Returns, schedules and work papers, and
all material records and other documents relating to Tax matters, of the
Company and its Subsidiaries for their Tax period first ending after the
Closing Date and for all prior Tax periods until the later of (i) the
expiration of the statute of limitations for the Tax periods to which the Tax
Returns and other documents relate or (ii) eight years following the due date
(without extension) for such Tax Returns. 
Thereafter, the party holding such Tax Returns or other documents may
dispose of them; provided, that such disposing party will give to the non-disposing
party notice of such disposal in accordance with Section 9.6 prior to doing
so.  Each of Security Capital and the
Buyer will make its employees reasonably available on a mutually convenient
basis at its cost to provide explanation of any documents or information so
provided.

 

(h)           Each
of the Buyer and the Company will pay one-half of all Transfer Taxes arising
out of or in connection with the transactions effected pursuant to this
Agreement.  The Buyer will file, at the
Closing, all necessary documentation and Tax Returns with respect to such
Transfer Taxes.

 

(i)            Any
and all Tax allocation or sharing agreements or other agreements or
arrangements relating to Tax matters between any Security Capital Company on
the one hand and the Company and its Subsidiaries on the other hand will be
terminated with respect to the Company and its Subsidiaries as of the day
before the Closing and, from and after the Closing Date, neither the Company
and its Subsidiaries, on the one hand, nor any Security Capital Company, on the
other hand, will be obligated to make any payment to the other in respect of
any such agreement; provided that nothing in this Section 6.13(i) shall
affect any rights or obligations of any Person under Section 6.13(e).

 

43

 

(j)            The
Buyer and Sellers will treat, and cause their Affiliates to treat, the U.S.
federal and state income tax deductions resulting from the payment of the Stay Pay
Bonuses (which, pursuant to Section 6.6(b), are required to be paid immediately
prior to the Closing) as deductible in the taxable period of the Company and
its Subsidiaries ending on the Closing Date and shall not take any position
inconsistent therewith.  For the
avoidance of doubt, the Sellers and the Buyer shall not treat, and shall cause
their Affiliates not to treat, the “next day” rule of Treas. Reg. Sec.
1.1502-76(b)(1)(ii)(B) or any similar provision of state or local Tax Law as
applying to the deductions described in the previous sentence, and no elections
that would result in the ratable allocation of such deductions shall be made
under Treas. Reg. Sec. 1.1502-76(b)(2) or any similar provision of state or
local Tax Law.

 

6.14         Insurance.
 Effective 12:01 a.m. on the Closing Date,
the Company and each of its Subsidiaries will cease to be insured by Security
Capital’s or its Affiliates’ (other than the Company and its Subsidiaries)
Policies.

 

6.15         Financing.  The Buyer will not take any action that would
reasonably be expected to make the Financing unavailable for any reason, will
keep the Sellers and the Company reasonably apprised as to the status of the
Financing, and will promptly notify the Sellers if it becomes aware of any fact
or circumstance that could reasonably be expected to make the Financing
unavailable for any reason.

 

6.16         Stockholders’
Agreement.

 

(a)           The
Company and each of the Sellers irrevocably consent to the transactions
contemplated by this Agreement and waives any and all rights such Person may
have under the Stockholders’ Agreement with respect to such transactions other
than any rights such Person may have under Section 6.1 of the Stockholders’
Agreement.

 

(b)           The
Company and each of the Sellers agree that, effective as of the Closing, the
Stockholders’ Agreement will be terminated, and no party thereto will have any
continuing rights or Liabilities under the Stockholders’ Agreement.

 

ARTICLE VII

 

CONDITIONS TO OBLIGATIONS
TO CLOSE

 

7.1           Conditions
to Obligation of the Buyer.  The
obligation of the Buyer to consummate the Acquisition is subject to the
satisfaction or waiver by the Buyer of the following conditions:

 

(a)           The
representations and warranties of the Sellers set forth in this Agreement will
be true and correct in all respects as of the date of this Agreement and as of
the Closing Date (except to the extent such representations and warranties
speak as of another date, in which case such representations and warranties will
be true and correct as of such other date), except where the failure of such
representations and warranties to be

 

44

 

so true and
correct (without giving effect to any limitation as to “materiality” or “Material
Adverse Effect” set forth therein) does not have, and would be not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.  The Buyer will have received a
certificate signed by Security Capital on behalf of the Sellers by a duly
authorized officer of Security Capital to such effect.

 

(b)           Each
of the Sellers and the Company will have performed all of the covenants
required to be performed by it under this Agreement at or prior to the Closing,
except where the failure to perform does not have, and would be not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect or materially adversely affect the ability of each of the Sellers and
the Company to consummate the Acquisition or perform its other obligations
hereunder.  The Buyer will have received
a certificate signed by Security Capital on behalf of the Sellers and the Company
by a duly authorized officer of Security Capital to such effect.

 

(c)           All
applicable waiting periods (and any extensions thereof) under the HSR Act and any
Other Antitrust Laws will have expired or otherwise been terminated, and the
parties hereto will have received all other authorizations, consents and
approvals of all Governmental Entities (including under any Other Antitrust
Laws) in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby (including the Acquisition).

 

(d)           No
temporary, preliminary or permanent restraining Order preventing the
consummation of the Acquisition will be in effect; provided, that prior
to invoking this condition the Buyer will have used all commercially reasonable
efforts to have any such Order vacated.

 

(e)           No
damage or destruction or other change has occurred with respect to any of the
Real Property or any portion thereof that, individually or in the aggregate,
would materially impair the use or occupancy of the Real Property or the
operation of the Company’s or its Subsidiaries’ business as currently conducted
thereon.

 

(f)            Each
of the Capital Partners Advisory Services Agreement and the Security Capital
Advisory Services Agreement shall have been amended or terminated, as
applicable, by the parties in accordance with Section 6.8.

 

(g)           The
Buyer shall have received from Morgan, Lewis & Bockius LLP, counsel for
Security Capital, an opinion which shall be addressed to the Buyer, dated as of
the Closing Date, substantially in the form of Exhibit A.

 

(h)           The
Company shall have obtained and delivered to the Buyer and the Buyer’s lenders
payoff letters with respect to the Loan Agreement dated April 5, 2002, by and
between the Company, Primrose School Franchising Company, Security Capital and
Bank One, N.A., as amended, all obligations of the Company and its Subsidiaries
under such Loan Agreement shall have been satisfied in full, and the Buyer
shall have received evidence satisfactory to it in its reasonable discretion
that all Liens on

 

45

 

the assets of the
Company and its Subsidiaries arising thereunder shall have been released.

 

(i)            All
intercompany indebtedness owed by the Company and its Subsidiaries to Security
Capital and its Subsidiaries (other than the Company and its Subsidiaries)
shall have been extinguished, and the Buyer shall have received evidence reasonably
satisfactory to it as to such extinguishment; provided that nothing in
this Section 7.1(i) shall affect any rights or obligations of any Person under
Section 6.13.

 

(j)            The
Buyer will have received a certificate signed on behalf of Security Capital by
a duly authorized officer of Security Capital setting forth the calculation of
the Excess Cash Amount.

 

(k)           The
Company shall have paid the amounts set forth in clauses (iv) through (vii) of
the definition of “Excess Cash Amount” (such amounts, the “Pre-Closing
Bonuses and Expenses”) and the Buyer shall have received evidence
reasonably satisfactory to it as to such payment.  Notwithstanding
anything in this Agreement to the contrary, in the event that the amount of
cash and cash equivalents held by the Company and its Subsidiaries, in the
aggregate, as of immediately prior to the Closing (but prior to paying any of the
Pre-Closing Bonuses and Expenses) is
less than the aggregate amount required to pay all of the Pre-Closing
Bonuses and Expenses, then (i) immediately
prior to the Closing the Company shall pay all of the Pre-Closing
Bonuses and Expenses for which it has sufficient cash and cash equivalents to
pay and (ii) simultaneously with the
Closing the Buyer shall pay all of the Pre-Closing Bonuses and Expenses
which were not paid by the Company.

 

7.2           Conditions
to Obligation of the Sellers.  The
obligation of the Sellers to consummate the Acquisition is subject to the
satisfaction or waiver by the Sellers of the following conditions:

 

(a)           The
representations and warranties of the Buyer set forth in this Agreement will be
true and correct in all respects as of the date of this Agreement and as of the
Closing Date (except to the extent such representations and warranties speak as
of another date, in which case such representations and warranties will be true
and correct as of such other date), except where the failure of such
representations and warranties to be so true and correct does not adversely
affect the ability of the Buyer to consummate the Acquisition and the other
transactions contemplated by this Agreement. 
The Sellers will have received a certificate signed on behalf of the
Buyer by a duly authorized officer of the Buyer to such effect.

 

(b)           The
Buyer will have performed in all material respects all of the covenants required
to be performed by it under this Agreement at or prior to the Closing except
such failures to perform as do not materially adversely affect the ability of
the Buyer to consummate the Acquisition and the other transactions contemplated
by this Agreement.  The Sellers will have
received a certificate signed on behalf of the Buyer by a duly authorized
officer of the Buyer to such effect.

 

46

 

(c)           All
applicable waiting periods (and any extensions thereof) under the HSR Act and any
Other Antitrust Laws will have expired or otherwise been terminated and the
parties hereto will have received all other authorizations, consents and
approvals of all Governmental Entities (including under any Other Antitrust
Laws) in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby (including the Acquisition).

 

(d)           No
temporary, preliminary or permanent restraining Order preventing the
consummation of the Acquisition will be in effect; provided, that prior
to invoking this condition the Sellers and the Company will have used all
commercially reasonable efforts to have any such Order vacated.

 

(e)           The
Sellers shall have received from Patton Boggs LLP, counsel for the Buyer, an
opinion addressing the matters set forth in Sections 5.1 and 5.2, and otherwise
in form and substance reasonably satisfactory to Security Capital, which shall
be addressed to the Sellers, dated as of the Closing Date.

 

ARTICLE
VIII

 

TERMINATION;
AMENDMENT; WAIVER

 

8.1           Termination
of Agreement.  This Agreement may be
terminated as follows (the date of such termination, the “Termination
Date”):

 

(a)           by
mutual written consent of the Buyer and Security Capital at any time prior to
the Closing;

 

(b)           by
either the Buyer or Security Capital if any Governmental Entity will have
issued an Order or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement and such
Order or other action will have become final and nonappealable;

 

(c)           by
either the Buyer or Security Capital if the Closing does not occur on or before
April 15, 2006; provided that the right to terminate this Agreement
under this Section 8.1(c) will not be available to any party whose breach of any
provision of this Agreement results in the failure of the Closing to occur by
such time;

 

(d)           by
Security Capital if the Security Capital Board determines that it has received
a Superior Proposal;

 

(e)           by
the Buyer if any of the Sellers or the Company has breached their respective representations
and warranties or any covenant or other agreement to be performed by it in a
manner such that the Closing conditions set forth in Section 7.1(a) or 7.1(b)
would not be satisfied; or

 

47

 

(f)            by
Security Capital if the Buyer has breached its representations and warranties
or any covenant or other agreement to be performed by it in a manner such that
the Closing conditions set forth in Section 7.2(a) or 7.2(b) would not be
satisfied.

 

8.2           Certain
Fees and Expenses.

 

(a)           If
this Agreement is terminated by Security Capital pursuant to Section 8.1(d),
then, within five Business Days after the Termination Date, the Company will
pay to the Buyer, in immediately available funds, an amount equal to the
Termination Fee.

 

(b)           As
used in this Agreement, “Termination Fee”
means an amount equal to $2,550,000.

 

8.3           Effect
of Termination.  In the event of
termination of this Agreement by either Security Capital or the Buyer as
provided in Section 8.1, this Agreement will forthwith become void and
have no effect, without any Liability (other than as set forth in Section
8.2(a) or with respect to any suit for breach of this Agreement) on the part of
the Buyer, the Company or the Sellers (or any stockholder, agent, consultant or
Representative of any such party); provided, that the provisions of
Sections 8.2, 9.1, 9.6, 9.7, 9.8, 9.11, 9.14, 9.15 and this Section 8.3 will
survive any termination hereof pursuant to Section 8.1.

 

8.4           Amendments.  This Agreement may be amended by the parties
hereto, by action taken or authorized by, in the case of the Buyer, by the
Buyer’s Board of Directors, in the case of the Company, by its Board of
Directors, and in the case of the Sellers, by Security Capital; provided
that no such amendment will have a disproportionate effect on any Seller that
did not consent to such amendment.  This
Agreement may not be amended except by an instrument in writing signed on
behalf of the Buyer, the Company and Security Capital.

 

8.5           Waiver.  At any time prior to the Closing, the Buyer
may (a) extend the time for the performance of any of the covenants,
obligations or other acts of the Sellers and the Company or (b) waive any
inaccuracy of any representations or warranties or compliance with any of the
agreements, covenants or conditions of the Sellers or any conditions to its own
obligations.  Any agreement on the part
of the Buyer to any such extension or waiver will be valid only if such waiver
is set forth in an instrument in writing signed on its behalf by its duly
authorized officer.  At any time prior to
the Closing, Security Capital (on behalf of the Sellers) and the Company, may
(a) extend the time for the performance of any of the covenants,
obligations or other acts of the Buyer or (b) waive any inaccuracy of any
representations or warranties or compliance with any of the agreements,
covenants or conditions of the Buyer or any conditions to their own obligations.  Any agreement on the part of Security Capital
(on behalf of the Sellers) and the Company to any such extension or waiver will
be valid only if such waiver is set forth in an instrument in writing signed (on
behalf of the Sellers and the Company) by a duly authorized officer of Security
Capital; provided that no such extension or waiver will

 

48

 

have a disproportionate effect on any Seller that did
not consent to such extension or waiver. 
The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such
rights.  The waiver of any such right
with respect to particular facts and other circumstances will not be deemed a
waiver with respect to any other facts and circumstances, and each such right will
be deemed an ongoing right that may be asserted at any time and from time to
time.

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1           Press
Releases and Public Announcement.  Prior
to the Closing, the Buyer will not issue any press release or make any public
announcement relating to this Agreement, the Acquisition or the other
transactions contemplated by this Agreement without the prior written approval
of Security Capital.  Neither the Sellers
(other than Security Capital) nor the Company will issue any press release or
make any public announcement relating to this Agreement, the Acquisition or the
other transactions contemplated by this Agreement without the prior written
approval of the Buyer and Security Capital. 
Prior to the Closing, Security Capital will not issue any press release
or make any public announcement relating to this Agreement, the Acquisition or
the other transactions contemplated by this Agreement without the prior written
approval of the Buyer; provided, that Security Capital may issue any
such press release or make such public announcement it believes in good faith
is required to be made by applicable Law or any applicable rule or regulation
promulgated by the American Stock Exchange after consultation with legal
counsel, in which case Security Capital will use its commercially reasonable
efforts to advise the Buyer of any such press release or other announcement
prior to making any such disclosure; provided, further, that
nothing in this Section 9.1 will restrict the ability of any Person from
preparing and filing with the SEC a Schedule 13D or any amendments to Schedule
13D that such Person believes in good faith it is required to be filed by
applicable Law.  Notwithstanding anything
in this Agreement to the contrary, the Company and its Subsidiaries may amend
its Uniform Franchise Offering Circular in order to disclose the transactions
contemplated by this Agreement and may amend its franchise registrations in
Illinois, Michigan, Minnesota, Virginia and Wisconsin to reflect the amendments
to the Uniform Franchise Offering Circular. 
For the purposes of clarity, the parties hereto acknowledge and agree
that Security Capital shall have the right to provide potential acquirors of
the outstanding shares or assets of Security Capital with a copy of this
Agreement and the related schedules and exhibits.

 

9.2           No
Third-Party Beneficiaries.  This
Agreement will not confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns, other
than Section 6.10, which will be for the benefit of the Persons set forth
therein, and any such Person will have the independent right to enforce its
rights under such Section.

 

9.3           Entire
Agreement.  This Agreement (including
the Exhibits and the Schedules hereto) constitutes the entire agreement among
the parties hereto and

 

49

 

supersedes any prior understandings, agreements or
representations, including any agreements related to the reimbursement of the
Buyer’s due diligence related expenses, by or among the parties hereto, written
or oral, to the extent they related in any way to the subject matter hereof.

 

9.4           Succession
and Assignment.  This Agreement will
be binding upon and inure to the benefit of the parties named herein and their
respective successors and permitted assigns. 
No party hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval, in the
case of assignment by the Buyer, Security Capital, and, in the case of
assignment by the Sellers or the Company, the Buyer.

 

9.5           Construction.  The parties have participated jointly in the
negotiation and drafting of this Agreement, and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties, and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.

 

9.6           Notices.  All notices, requests and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally against written receipt or by facsimile
transmission or mailed (by registered or certified mail, postage prepaid,
return receipt requested) or delivered by reputable overnight courier, fee prepaid,
to the parties hereto at the following addresses or facsimile numbers:

 

If to any Seller, to the address set forth for such
Seller on Schedule A, with copies to:

 

	
  Security
  Capital Corporation

  
	
  Eight Greenwich Office
  Park, Third Floor

  
	
  Greenwich, Connecticut
  06831

  
	
  Facsimile:

  	
  (203) 625-0423

  
	
  Attention:

  	
  Brian D.
  Fitzgerald

  
	
   

  	
  Chairman and
  Chief Executive Officer

  
	
  and

  
	
   

  
	
  Morgan, Lewis &
  Bockius LLP

  
	
  101 Park Avenue

  
	
  New York, New York
  10178-0060

  
	
  Facsimile:

  	
  212-309-6001

  
	
  Attention:

  	
  Christopher T.
  Jensen, Esq. and

  
	
   

  	
  George G.
  Yearsich, Esq.

  
	
  and

  
	
   

  
	
  Richards, Layton &
  Finger, P.A.

  
	
  One Rodney Square

  
	
  920 North King Street

  

 

50

 

	
  Wilmington, DE 19801

  
	
  Facsimile:

  	
  (302) 498-7748

  
	
  Attention:

  	
  Srinivas M. Raju, Esq.

  
	
   

  
	
  If to the
  Company, to :

  
	
   

  
	
  Primrose Holdings, Inc.

  
	
  c/o Security Capital Corporation

  
	
  Eight Greenwich Office
  Park, Third Floor

  
	
  Greenwich, Connecticut
  06831

  
	
  Facsimile:

  	
  (203) 625-0423

  
	
  Attention:

  	
  Brian D.
  Fitzgerald

  
	
   

  	
  Chairman and
  Chief Executive Officer

  
	
   

  
	
  with copies to:

  
	
   

  
	
  Morgan, Lewis &
  Bockius LLP

  
	
  101 Park Avenue

  
	
  New York, New York
  10178-0060

  
	
  Facsimile:

  	
  212-309-6001

  
	
  Attention:

  	
  Christopher T.
  Jensen, Esq. and

  
	
   

  	
  George G.
  Yearsich, Esq.

  
	
   

  
	
  and

  
	
   

  
	
  Richards, Layton &
  Finger, P.A.

  
	
  One Rodney Square

  
	
  920 North King Street

  
	
  Wilmington, Delaware
  19801

  
	
  Facsimile:

  	
  (302) 498-7748

  
	
  Attention:

  	
  Srinivas M. Raju, Esq.

  
	
   

  
	
  If to the Buyer, to:

  
	
   

  
	
  PHC Acquisition, Inc.

  
	
  c/o American Capital

  
	
  2 Bethesda Metro
  Center, 14th Floor

  
	
  Bethesda, Maryland
  20814

  
	
  Facsimile:

  	
  (301) 654-6714

  
	
  Attention:

  	
  Compliance
  Officer

  
	
   

  
	
   

  
	
  with copies to:

  
	
   

  
	
  American Capital

  
	
  Three Hundred Four
  Falls

  
	
  300 Conshohocken State
  Road, Suite 380

  
						

 

51

 

	
  West Conshohocken,
  Pennsylvania 19428

  
	
  Facsimile:

  	
  (610) 238-0230

  
	
  Attention:

  	
  Kenneth E. Jones

  
	
   

  
	
  and

  
	
   

  
	
  Patton Boggs, LLP

  
	
  2001 Ross Avenue

  
	
  Suite 3000

  
	
  Dallas, Texas 75201

  
	
  Facsimile:

  	
  (214) 758-1550

  
	
  Attention:

  	
  Charles P.
  Miller

  
			

 

Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth herein.

 

9.7           Governing
Law.  This Agreement will be governed
by, and construed in accordance with, the Laws of the State of Delaware, without giving effect to any choice of Law or
conflict of Law provision or rule that would cause the application of the Laws
of any jurisdiction other than the State of Delaware.

 

9.8           Dispute
Resolution.  If a dispute of any kind
arises in connection with this Agreement, and such dispute cannot be settled
through direct discussions between representatives of Security Capital (or, if
Security Capital is not involved in such dispute, representatives of the
Sellers who are involved in such dispute) and representatives of the Buyer
within thirty (30) days following receipt of notice of such dispute, the
parties agree that such dispute shall be submitted within fifteen (15) days of
the date which is the end of the 30-day period to, and settled finally by,
binding arbitration in New York, New York, administered by the American
Arbitration Association under its Commercial Arbitration Rules as then in
effect (the “Rules”).  The arbitration shall be conducted before
three (3) arbitrators of exemplary qualifications and stature, who shall be
selected in accordance with the Rules. 
At the request of either Security Capital (or, if Security Capital is
not involved in such dispute, at the request of any of the Sellers who are
involved in such dispute) or the Buyer, the arbitrators may take any interim
measure they deem necessary, including measures for the conservation of any
items forming the subject matter in dispute, which measures may take the form
of an interim award.  The arbitrators
shall not award punitive, consequential, incidental or special damages.  In rendering their award, the arbitrators
shall be required to adopt the position of either the party bring the claim or
the party opposing the claim.  The parties
hereby waive any form of notification or deposit of the award except as
required by the Rules.  Judgment on the
award may be entered in any court having competent jurisdiction over such award
or having jurisdiction over the parties or their respective assets.  The laws of the State of Delaware shall
govern any arbitration and the validity and scope and effect of this Section
9.8.  The non-prevailing party shall bear
all expenses of the arbitrators incurred in any arbitration hereunder.  In the event of arbitration arising under
this Agreement, the

 

52

 

prevailing party shall be entitled to recover from the
non-prevailing party its reasonable attorney’s fees and expenses incurred in
connection with such arbitration.

 

9.9           Headings.  The descriptive headings contained in this
Agreement are included for convenience of reference only and will not affect in
any way the meaning or interpretation of this Agreement.

 

9.10         Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom and (d) in lieu
of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms of such illegal, invalid or unenforceable
provision as may be possible.

 

9.11         Expenses.  Except as otherwise provided in this
Agreement (including, Sections 2.5, 6.1, 6.10, 6.13 and 8.2), whether or not
the Acquisition is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such Expenses; provided that all Transaction Expenses will be
paid by the Company immediately prior to the Closing; provided  further,
in no event shall the Company be responsible for any Transaction Expenses in excess
of the amount of Transaction Expenses used to calculate the Excess Cash Amount.
As used in this Agreement, “Expenses” means
the out-of-pocket fees and expenses of the financial advisor, counsel and
accountants incurred in connection with this Agreement and the transactions
contemplated hereby.

 

9.12         Non-Survival
of Representations, Warranties and Agreements.  None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and other agreements, will survive
the Closing; except that nothing in this Agreement (including this Section
9.12) shall limit or restrict any of the parties’ right to maintain or recover
any amounts in connection with the breach of any covenants or agreements set forth
in Sections 2.1, 2.2, 2.4, 2.5, 6.1, 6.2, 6.3(a), (b) and (c), 6.6, 6.8, 6.10, 6.11,
6.13 and 9.1 or in connection with fraud, intentional misrepresentation or
willful or criminal misconduct.

 

9.13         Incorporation
of Exhibits and Schedules.  The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

 

9.14         Limited
Recourse.  Notwithstanding anything
in this Agreement to the contrary, the obligations and Liabilities of the
parties hereunder will be without recourse to any stockholder of such party or
any of such stockholder’s Affiliates (other than such party), or any of their
respective Representatives or agents (in each case, in their capacity as such).

 

53

 

9.15         Specific
Performance.  The parties hereto
agree that irreparable damage would occur in the event that any provision of
this Agreement was not performed in accordance with the terms hereof and that
the parties will be entitled to specific performance of the terms hereof in
addition to any other remedy at law or equity.

 

9.16         Counterparts.  This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed will be deemed to be an original but all of which
taken together will constitute one and the same instrument.  Delivery of an executed counterpart of a
signature page to this Agreement by facsimile will be effective as delivery of
a manually executed counterpart of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]

 

54

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first above written.

 

	
  BUYER:

  	
  COMPANY:

  
	
   

  	
   

  
	
  PHC ACQUISITION,
  INC.

  	
  PRIMROSE
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Kenneth E.
  Jones

  	
   

  	
  By:

  	
  /s/ Jo Kirchner

  	
   

  
	
   

  	
  Name: Kenneth E.
  Jones

  	
   

  	
  Name: Jo
  Kirchner

  
	
   

  	
  Title: Vice
  President

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
  SELLERS:

  	
   

  
	
   

  	
   

  
	
  SECURITY CAPITAL
  CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Brian D.
  Fitzgerald

  	
   

  	
  /s/ Jo Kirchner

  	
   

  
	
   

  	
  Name: Brian D.
  Fitzgerald

  	
  Jo Kirchner

  
	
   

  	
  Title: Chairman,
  President & CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Robert
  Benowitz

  	
   

  	
  /s/ Derek Fuller

  	
   

  
	
  Robert Benowitz

  	
  Derek Fuller

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Jim Steger

  	
   

  	
  /s/ Lee Scott

  	
   

  
	
  Jim Steger

  	
  Lee Scott

  
											

 

 

[Signature Page to Stock Purchase Agreement]

 

 

Schedule A

 

Stockholders

 

	
  Name

  	
   

  	
  Number of

  Shares Owned

  	
   

  	
  Number of

  Sale Shares

  	
   

  	
  Share

  Payment(1)

  	
   

  	
  Payment Instructions

  	
   

  	
  Address

  	
   

  
	
  Security Capital Corporation

  	
   

  	
  25,600

  	
   

  	
  25,600

  	
   

  	
  $

  	
  78,803,200.00

  	
   

  	
  To:
  Mellon Bank, Pittsburgh,PA,

  ABA#: 0430-00261 

   

  For credit to:
  Merrill Lynch,

  Acct #: 101-1730

   

  For further
  credit to: Security Capital Corporation,

  Acct#: 832-07913

  	
   

  	
  Eight Greenwich Office Park

  Third Floor

  Greenwich,

  CT 06831

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jo Kirchner

  	
   

  	
  300

  	
   

  	
  186

  	
   

  	
  $

  	
  572,554.50

  	
   

  	
  To:
  Wachovia Bank,

  ABA#: 061000227

   

  For credit to: Mary Jo Kirchner,

  Acct#: 1000207957243

  	
   

  	
  1491 Benson Road

  Dallas,

  Ga.  30132

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert Benowitz

  	
   

  	
  100

  	
   

  	
  51

  	
   

  	
  $

  	
  156,990.75

  	
   

  	
  To:
  Bank of America,

  ABA#: 026009593

   

  For credit to: Robert A. Benowitz
  and Judy M. Benowitz,

  Acct#: 003273385841

  	
   

  	
  33 Westchester Drive Cartersville, GA 30120

  	
   

  

 

(1) The Share Payments listed are before the deduction
of the Per Share Cash Deficit Adjustment (if any).

 

 

Schedule B

Optionholders

 

	
  Name

  	
   

  	
  Number of Option

  Shares Owned

  	
   

  	
  Number of

  Option Shares to

  be Terminated

  and Canceled

  	
   

  	
  Option

  Payment(2)

  	
   

  	
  Aggregate 

  Exercise Price

  for Option

  Shares to be

  Terminated

  and Canceled

  	
   

  	
  Payment Instructions

  	
   

  	
  Address

  	
   

  
	
  Jo Kirchner

  	
   

  	
  1,040

  	
   

  	
  1,040

  	
   

  	
  $

  	
  2,681,380.00

  	
   

  	
  $

  	
  520,000.00

  	
   

  	
  To:
  Wachovia Bank,

  ABA#: 061000227

   

  For credit to:
  Mary Jo Kirchner,

  Acct#: 1000207957243

  	
   

  	
  1491 Benson

  Road

  Dallas,

  GA 30132

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert Benowitz

  	
   

  	
  346.67

  	
   

  	
  346.67

  	
   

  	
  $

  	
  893,801.93

  	
   

  	
  $

  	
  173,335.00

  	
   

  	
  To:
  Bank of America,

  ABA#: 026009593

   

  For credit to:

  Robert A. Benowitz and

  Judy M. Benowitz,

  Acct#: 003273385841

  	
   

  	
  33 Westchester
  Drive

  Cartersville,

  GA 30120

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jim Steger

  	
   

  	
  195

  	
   

  	
  195

  	
   

  	
  $

  	
  463,464.30

  	
   

  	
  $

  	
  136,794.00

  	
   

  	
  To:
  Digital Credit Union,

  ABA#: 211391825

   

  For credit to:

  James T. Steger and

  Kathleen J. Steger,

  Acct#: 11602570

  	
   

  	
  272 Flagstone

  Way Acworth,

  GA 30101

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Derek Fuller

  	
   

  	
  195

  	
   

  	
  195

  	
   

  	
  $

  	
  463,464.30

  	
   

  	
  $

  	
  136,794.00

  	
   

  	
  To:
  Regions Bank,

  ABA#: 062005690

   

  For credit to:
  J. Derek

  and Deborah Fuller,

  Acct#: 0600782918

  	
   

  	
  44 Potomac

  Drive Dallas,

  GA 30132

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lee Scott

  	
   

  	
  195

  	
   

  	
  195

  	
   

  	
  $

  	
  463,464.30

  	
   

  	
  $

  	
  136,794.00

  	
   

  	
  To:
  Bank of America,

  ABA#: 061000052

   

  For credit to:

  Lee A. Scott,

  Acct#: 003267037051

  	
   

  	
  3530 Piedmont
  Road,

  PH4 Atlanta,

  GA 30305

  	
   

  

 

(2)  The Option Payments listed are before the
deduction of the Per Share Cash Deficit Adjustment (if any).

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}]]