Exhibit 11.01
Sylvan Learning Systems, Inc.
$100,000,000
5% Convertible Subordinated Debentures due 2010
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PURCHASE AGREEMENT
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Dated as of February 23, 2000
TABLE OF CONTENTS
SECTION PAGE
1. PRELIMINARY MATTERS......................................................................................1
1.1 Authorization of Debentures.....................................................................1
1.2 Issue Taxes.....................................................................................1
1.3 Direct Payment..................................................................................1
1.4 Replacement Debentures..........................................................................2
1.5 Indemnification.................................................................................2
2. SALE AND PURCHASE OF DEBENTURES..........................................................................4
3. CLOSING..................................................................................................4
4. CONDITIONS TO CLOSING....................................................................................4
4.1 Representations and Warranties..................................................................4
4.2 Performance; No Default.........................................................................5
4.3 Compliance Certificates.........................................................................5
4.4 Opinions of Counsel.............................................................................5
4.5 Purchase Permitted By Applicable Law, etc.......................................................5
4.6 Other Agreement.................................................................................5
4.7 Market Conditions...............................................................................6
4.8 Proceedings and Documents.......................................................................6
4.9 Consents and Permits............................................................................6
4.10 New Members of the Board of Directors...........................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Organization; Power and Authority...............................................................6
5.2 Authorization, etc..............................................................................7
5.3 Capitalization..................................................................................7
5.4 Organization and Ownership of Shares of Subsidiaries............................................7
5.5 Filed Documents and Financial Statements........................................................8
5.6 No Current Violation, Default...................................................................8
5.7 Compliance with Laws, Other Instruments, etc....................................................9
5.8 Consents, Approvals, etc........................................................................9
5.9 Litigation; Observance of Statutes and Orders...................................................9
5.10 Environmental..................................................................................10
5.11 Taxes..........................................................................................10
5.12 Title to Property and Assets; Leases...........................................................10
5.13 Licenses, Permits, etc.........................................................................10
5.14 Compliance with ERISA..........................................................................11
5.15 Private Offering by the Company................................................................12
5.16 Use of Proceeds; Margin Regulations............................................................12
5.17 Status under Certain Statutes..................................................................13
5.18 Certain Payments...............................................................................13
5.19 No Brokers or Finders..........................................................................13
5.20 Insurance......................................................................................13
5.21 Accounting.....................................................................................14
5.22 Registration Rights............................................................................14
5.23 [Intentionally Omitted.].......................................................................14
5.24 Securities Ratings.............................................................................14
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5.25 Similar Securities Not Listed..................................................................14
5.26 Intellectual Property..........................................................................14
5.27 Authorization of Shares Issuable Upon Conversion...............................................15
5.28 Affiliate Transactions.........................................................................15
5.29 Representations and Warranties in the Prometric Agreements.....................................15
5.30 Investment Company Act.........................................................................15
5.31 Antitakeover Matters...........................................................................15
5.32 Formation and Capitalization of Incubator......................................................16
6. REPRESENTATIONS OF THE PURCHASER........................................................................16
6.1 Organization; Power and Authority..............................................................16
6.2 Authorization, etc.............................................................................17
6.3 Purchase for Investment........................................................................17
7. COVENANTS...............................................................................................17
7.1 Transaction Expenses...........................................................................17
7.2 Operation of Business..........................................................................18
7.3 Access to Books and Records....................................................................18
7.4 Agreement to Take Necessary and Desirable Actions..............................................18
7.5 Compliance with Conditions; Best Efforts.......................................................19
7.6 HSR Act Filings................................................................................19
7.7 Prometric Transaction..........................................................................19
7.8 Antitakeover Matters...........................................................................19
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT............................................19
9. AMENDMENT AND WAIVER....................................................................................20
10. NOTICES.................................................................................................20
11. REPRODUCTION OF DOCUMENTS...............................................................................20
12. SUBSTITUTION OF PURCHASER...............................................................................20
13. MISCELLANEOUS...........................................................................................21
13.1 Successors and Assigns.........................................................................21
13.2 Severability...................................................................................21
13.3 Construction...................................................................................21
13.4 Counterparts...................................................................................21
13.5 Governing Law; Submission to Jurisdiction......................................................21
13.6 Confidentiality................................................................................21
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SCHEDULE A -- DEFINED TERMS
SCHEDULE 1.3 -- Purchaser's Bank Accounts
SCHEDULE 2 -- Debenture Purchase Commitments
SCHEDULE 5.3 -- Capitalization
SCHEDULE 5.4 -- Subsidiaries
SCHEDULE 5.5(b) -- Unaudited Interim Financial Statements of the Company
SCHEDULE 5.5(c) -- 2000 Budget
SCHEDULE 5.8 -- Consents
SCHEDULE 5.13 -- Restricted Licenses and Permits
SCHEDULE 5.14 -- Employee Benefit Plans
SCHEDULE 5.22 -- Registration Rights
SCHEDULE 5.28 -- Affiliate Transactions
EXHIBIT 1 -- Form of Indenture
EXHIBIT 4.4(a) -- Form of Opinion of Venable, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
EXHIBIT 4.4(b) -- Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel of the Company
EXHIBIT 5.8 -- Form of Registration Rights Agreement
EXHIBIT 5.28 -- Form of Investors Agreement
EXHIBIT 7.4 -- Terms of Incubator Agreement
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Sylvan Learning Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
$100,000,000
5% Convertible Subordinated Debentures due 2010
As of February 23, 2000
The Purchasers named on the signature pages hereto
Ladies and Gentlemen:
Sylvan Learning Systems, Inc., a Maryland corporation (the "Company"),
agrees with each of the purchasers named on the signature pages hereto (each, a
"Purchaser") as follows:
1. PRELIMINARY MATTERS.
1.1 AUTHORIZATION OF DEBENTURES.
The Company has authorized the issue and sale of $100,000,000 aggregate
principal amount of its 5% Convertible Subordinated Debentures due 2010 (the
"DEBENTURES"), such term to include any such Debentures issued in substitution
therefor pursuant to the terms of the Indenture. The Debentures shall be issued
pursuant to an Indenture substantially in the form set out in Exhibit 1. Certain
capitalized terms used in this Agreement are defined in Schedule A; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
1.2 ISSUE TAXES.
The Company agrees to pay all taxes (other than taxes in the nature of
income, franchise or gift taxes) and governmental fees in connection with the
issuance, sale, delivery or transfer by the Company to the Purchasers of the
Debentures and the execution and delivery of this Agreement and the Other
Agreements and any modification of any of this Agreement or the Other Agreements
and will save each and all of the Purchasers harmless without limitation as to
time against any and all liabilities with respect to all such taxes and fees.
The obligations of the Company under this Section 1.2 are in addition to any
other obligations of the Company contained elsewhere in this Agreement and shall
survive the payment or prepayment of the Debentures, at maturity, upon
redemption or otherwise and the termination of this Agreement and the Other
Agreements.
1.3 DIRECT PAYMENT.
Notwithstanding any provision to the contrary in the Indenture or the
Debentures, the Company will pay or cause to be paid all amounts payable with
respect to any Debenture held by the Purchasers (without any presentment of such
Debenture and without any notation of such payment being made thereon) by
crediting (before 12:00 Noon, New York time), by Federal funds bank wire
transfer in same day funds to such holder's account in any bank in the United
States of America as may be designated
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and specified in writing by such holder at least two Business Days prior
thereto. Each Purchaser's initial bank account for this purpose is on SCHEDULE
1.3 hereto.
1.4 REPLACEMENT DEBENTURES.
If a mutilated Debenture that is a Transfer Restricted Security (as
defined in the Indenture) is surrendered to the Company or if a Purchaser or any
other institutional holder (or nominee thereof) of a Debenture that is a
Transfer Restricted Security claims and submits an affidavit or other evidence,
satisfactory to the Company, to the effect that the Debenture has been lost,
destroyed or wrongfully taken, the Company shall issue a replacement Debenture
without the need to post any bond, and no further indemnity shall be required as
a condition to the execution and delivery of a new Debenture other than the
unsecured written agreement of such owner reasonably satisfactory to the
Company, to indemnify the Company. With respect to any Debenture that is not a
Transfer Restricted Security which is surrendered to the Company or which is
claimed by the Purchaser or its holder to be lost, destroyed or wrongfully
taken, the Company may require the Purchaser or such holder to post a bond
against any loss arising in connection therewith as a condition to the execution
and delivery of a new Debenture and to indemnify the Company, in each case, to
the extent provided in the Indenture.
1.5 INDEMNIFICATION.
(a) In addition to all other sums due hereunder or provided
for in this Agreement or any Other Agreement and any and all
obligations of the Company to indemnify any Purchaser hereunder or
under any Other Agreement, the Company hereby agrees, without
limitation as to time, to indemnify each Purchaser, each Affiliate of
each Purchaser and each director, officer, employee, counsel, agent or
representative of each Purchaser and its Affiliates (collectively, the
"INDEMNIFIED PARTIES") against, and hold it and them harmless from, to
the fullest extent lawful, all losses, claims, damages, liabilities,
costs (including, without limitation, costs of preparation and
attorneys' fees and disbursements) and expenses, including expenses of
investigation (collectively, "LOSSES"), incurred by it or them and
arising out of or in connection with this Agreement or any Other
Agreement, or the Transactions, regardless of whether the Transactions
are consummated and regardless of whether any Indemnified Party is a
formal party to any proceeding; PROVIDED, that the Company shall not be
liable to any Indemnified Party for any Losses to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or review) that such Losses
arose from the gross negligence or willful misconduct of such
Indemnified Party, which (i) is independent of any wrongful act by the
Company, its Affiliates or any of its representatives and (ii) was not
taken by such Indemnified Party in reliance upon any of the
representations, warranties, covenants or promises of the Company
herein or in the Other Agreements, including (without limitation) the
certificates delivered by the Company pursuant hereto or thereto. The
Company agrees to reimburse each Indemnified Party promptly for all
such Losses as they are incurred by such Indemnified Party (regardless
of whether it is or may be ultimately determined that such Indemnified
Party is not entitled to indemnification hereunder), subject to
repayment in the event that the Indemnified Party is ultimately
determined not entitled to indemnification hereunder (as finally
determined by a court of competent jurisdiction (which determination is
not subject to review or appeal)). The obligations of the Company to
each Indemnified Party hereunder shall be separate obligations, and the
Company's liability to any such Indemnified Party hereunder shall not
be extinguished solely because any other Indemnified Party is not
entitled to indemnity hereunder. The obligations of each Indemnifying
Party under this Section 1.5 shall survive the payment or prepayment of
the Debentures, at maturity, upon acceleration, redemption or
otherwise, the
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redemption or repurchase of any Common Stock, any transfer of the
Debentures or Common Stock by any Purchaser and the termination of this
Agreement or any of the Other Agreements.
(b) In case any action, claim or proceeding shall be brought
against any Indemnified Party with respect to which indemnity may be
sought hereunder, such Indemnified Party shall promptly notify the
Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all fees and expenses incurred in
connection with the defense thereof; PROVIDED, that the failure to so
notify the Company shall not affect any obligation it may have to any
Indemnified Party under this Agreement or otherwise except to the
extent that (as finally determined by a court of competent jurisdiction
(which determination is not subject to review or appeal)) such failure
materially and adversely prejudiced the Company. The Company shall not,
without the Indemnified Party's prior written consent, consent to entry
of any judgment or settle or compromise any pending or threatened
claim, action or proceeding in respect of which indemnification or
contribution may be sought hereunder unless the foregoing contains an
unconditional release, in form and substance reasonably satisfactory to
the Indemnified Parties, of the Indemnified Parties from all liability
and obligation arising therefrom. Each Indemnified Party shall have the
right to employ separate counsel in such action, claim or proceeding
and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of each Indemnified Party unless:
(i) the Company has agreed to pay such expenses; or (ii) the Company
has failed to promptly assume the defense and employ counsel reasonably
satisfactory to such Indemnified Party; or (iii) the named parties to
any such action, claim or proceeding (including any impleaded parties)
include any Indemnified Party and the Company or an Affiliate of the
Company, and such Indemnified Party shall have been advised by counsel
that either (x) there may be one or more legal defenses available to it
that are different from or in addition to those available to the
Company or such Affiliate or (y) a conflict of interest may exist if
such counsel represents such Indemnified Party and the Company or its
Affiliate; PROVIDED that, if such Indemnified Party notifies the
Company in writing that it elects to employ separate counsel in the
circumstances described in clause (ii) or (iii) above, the Company
shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Parties.
Notwithstanding any other provision hereof the Company shall
not (i) in connection with any one such action or proceeding, be
responsible hereunder for the fees and expenses of more than one such
firm of separate counsel (in addition to any local counsel), which
counsel shall be designated by such Indemnified Party, (ii) be liable
for any settlement of any such action effected without its written
consent (which shall not be unreasonably withheld or delayed), or (iii)
be responsible hereunder for attorneys' fees or expenses incurred by
the Indemnified Parties in excess of $500,000 in the aggregate other
than 50% of such attorneys' fees and expenses in excess of $1,000,000.
(c) If the indemnification provided for in this Section 1.5 is
unavailable to, or insufficient to hold harmless, any Indemnified Party
in respect of any Losses referred to herein, then the Company shall
contribute to the amount paid or payable by such Persons as a result of
such Losses in such proportion as is appropriate to reflect the
relative fault of the Company, its subsidiaries and Affiliates, on the
one hand, and such Indemnified Party, on the other hand, in connection
with the actions which resulted in such Losses, as well as any other
relevant equitable considerations. The amount paid or payable by any
such Person as a result of the Losses referred to above shall be deemed
to include any legal or other fees or expenses reasonably incurred by
such Person in connection with any investigation, lawsuit or legal or
administrative action or proceeding.
(d) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.5 were determined
by pro rata allocation or by any other method of
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allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who is not guilty of such fraudulent misrepresentation.
2. SALE AND PURCHASE OF DEBENTURES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each Purchaser, and each Purchaser will severally purchase
from the Company, at the Closing, Debentures in the respective amounts as set
forth in Schedule 2 at a purchase price of 100% of the principal amount thereof.
In connection with the Transactions, the Company shall pay to the Persons
designated by Apollo Management IV, L.P. ("APOLLO MANAGEMENT") a closing fee
equal to 1% of the aggregate principal amount of Debentures purchased by the
Purchasers (the "CLOSING FEE").
3. CLOSING.
The sale and purchase of the Debentures shall occur at the offices of
Venable, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP, 1800 Mercantile Bank and Trust Building, ▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m., local time, at a closing
(the "CLOSING"), which shall occur as soon as practicable after satisfaction or
waiver of each of the conditions to closing set forth herein (but in no event
prior to March 20, 2000) or on such other Business Day thereafter as may be
agreed upon by the Company and Apollo Management. The date on which the Closing
occurs is referred to herein as the "CLOSING DATE." At the Closing (a) the
Company will deliver to each Purchaser the Debentures to be purchased by such
Purchaser in the form of a single Debenture (or such greater number of
Debentures as Apollo Management may request), dated the Closing Date, and
registered in such Purchaser's name (or in the name of such Purchaser's
nominee), against delivery by such Purchaser to the Company of immediately
available funds in the amount of the purchase price therefor by wire transfer to
such bank account as the Company shall have notified Apollo Management in
writing and (b) the Company shall pay the Closing Fee in immediately available
funds by wire transfer to such bank accounts as Apollo Management shall have
notified the Company in writing. If at the Closing the Company shall fail to
tender such Debentures to such Purchaser or pay the Closing Fee as provided
above in this Section 3, or any of the conditions specified in Section 4 shall
not have been fulfilled to such Purchaser's reasonable satisfaction, such
Purchaser shall, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights it may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Each Purchaser's obligation to purchase and pay for the Debentures to
be sold to such Purchaser at the Closing is subject to the fulfillment or
waiver, prior to or at the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement and
each of the Other Agreements shall be correct when made and at the time of the
Closing except where such representations and warranties expressly relate to an
earlier date.
4.2 PERFORMANCE; NO DEFAULT.
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The Company shall have performed and complied with all agreements and
conditions contained in this Agreement and each of the Other Agreements required
to be performed or complied with by it prior to or at the Closing. After giving
effect to the Transactions (including, without limitation, the issue and sale of
the Debentures (and the application of the proceeds thereof as contemplated by
Section 5.16)), no Default or Event of Default (as both terms are defined in the
Indenture) shall have occurred and be continuing.
4.3 COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Purchasers an Officer's Certificate, dated the Closing Date, in
form and substance reasonably satisfactory to Apollo Management,
certifying that the conditions specified in Sections 4.1, 4.2, 4.9 and
4.10 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered
to the Purchasers a certificate of the secretary of the Company, dated
the Closing Date, in form and substance reasonably satisfactory to
Apollo Management, certifying, among other things, as to the
resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of this Agreement and the
Other Agreements and the approval of the Transactions.
4.4 OPINIONS OF COUNSEL.
(a) The Purchasers shall have received an opinion, dated the
Closing Date, from, Venable, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, special counsel for
the Company, in the form set forth in Exhibit 4.4(a) (and the Company
hereby instructs such counsel to deliver such opinion to the
Purchasers).
(b) The Purchasers shall have received an opinion, dated the
Closing Date, from, ▇▇▇▇▇▇ ▇▇▇▇▇, General Counsel of the Company, in
the form set forth in Exhibit 4.4(b) (and the Company hereby instructs
such counsel to deliver such opinion to the Purchasers).
(c) The Purchasers shall have received the opinions, dated the
Closing Date, as to certain tax matters, described in Exhibit 7.4 (and
the Company hereby instructs such counsel to deliver such opinion to
the Purchasers).
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
The Purchaser's purchase of Debentures shall (i) not violate any
applicable Law and (ii) not subject any Purchaser to any tax, penalty or
liability under or pursuant to any applicable Law.
4.6 OTHER AGREEMENTS.
Each Other Agreement (other than the Incubator Agreement) shall have
been executed and delivered by all parties thereto and shall be in full force
and effect, each party to each Other Agreement shall have performed all of its
obligations to be performed thereunder on or prior to the Closing Date, and each
of ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered into employment
agreements (collectively, the "EMPLOYMENT AGREEMENTS") with the Incubator, each
in a form approved by Apollo Management.
4.7 MARKET CONDITIONS.
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During the seven-calendar-day period ending on the Closing Date, (a)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ Stock Market shall not have been suspended and
minimum prices shall not have been established on either of such exchanges or
such market by such exchange or by the SEC, (b) a general banking moratorium
shall not have been declared by Federal or New York or California authorities,
and (c) no change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened that, in the reasonable
judgment of the Purchasers, has had or could, individually or in the aggregate,
reasonably be expected to have a material adverse effect upon the prices or
trading of securities generally traded on financial markets in the United
States.
4.8 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the Transactions
and all documents and instruments executed or delivered in connection with such
Transactions shall be reasonably satisfactory in form and substance to Apollo
Management and Apollo Management shall have received all such counterpart
originals or certified or other copies of such documents as Apollo Management
may reasonably request.
4.9 CONSENTS AND PERMITS.
The Company shall have received all consents, permits, approvals and
authorizations and sent or made all notices, filings, registrations and
qualifications as may be required pursuant to any Law or pursuant to any
Applicable Agreement, in connection with the Transactions to be consummated on
or prior to the Closing Date.
4.10 NEW MEMBERS OF THE BOARD OF DIRECTORS.
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇ shall have been appointed as members of
the board of directors of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the power and authority to own or hold under
lease the properties it purports to own or hold under lease, to transact the
business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and to perform the provisions hereof and
thereof.
5.2 AUTHORIZATION, ETC.
(a) This Agreement has been duly authorized, executed and
delivered by the Company and is enforceable against the Company in
accordance with its terms, except as the enforceability
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thereof may be limited by (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally and (ii) general principals of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding at law or in equity).
(b) Each of the Other Agreements has been duly authorized by
the Company and, on the Closing Date, will have been validly executed
and delivered by the Company. When each Other Agreement has been duly
executed and delivered by the Company such Other Agreement will be a
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforceability
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally and (ii) general principals of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding at law or in equity). On the Closing Date the Indenture will
conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE ACT"),
and the rules and regulations of the SEC applicable to an indenture
which is qualified thereunder.
5.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the
Company consists of: (i) 90,000,000 shares of common stock, par value
$0.01 per share ("Common Stock"), of which 50,915,574 shares are issued
and outstanding and (ii) 10,000,000 shares of preferred stock, par
value $0.01 per share ("Preferred Shares"), of which no shares are
issued and outstanding.
(b) The outstanding shares of Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive or similar rights (and were
not issued in violation of any preemptive or similar rights). Except as
disclosed in the previous paragraph and in Schedule 5.3, there are no
other shares of capital stock of the Company authorized and reserved
for issuance and the Company does not have any commitment to authorize,
issue or sell any of its capital stock or securities convertible into
its capital stock. Schedule 5.3 sets forth the number of shares of
Common Stock, or other ownership interests, issuable or reserved for
issuance upon exercise of subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or Liens related to
or entitling any person to purchase or otherwise to acquire any shares
of the capital stock of the Company (and the exercise price thereof).
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) Except as set forth on Schedule 5.4, all of the
outstanding shares of capital stock or similar equity interests of each
Subsidiary of the Company have been duly authorized, validly issued,
are fully paid and nonassessable, and are owned by the Company or
another Subsidiary free and clear of any Lien. Schedule 5.4 sets forth
the number of shares of capital stock, or other ownership interests,
issuable or reserved for issuance upon exercise of subscriptions,
rights, warrants, options, calls, convertible securities, commitments
of sale or Liens related to or entitling any person to purchase or
otherwise to acquire any shares of the capital stock of each Subsidiary
(and the exercise price thereof).
(b) Each Subsidiary of the Company is a corporation or other
legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization,
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and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the power and
authority to own or hold under lease the properties it purports to own
or hold under lease and to transact the business it transacts and
proposes to transact.
5.5 FILED DOCUMENTS AND FINANCIAL STATEMENTS.
(a) The Company has filed all required forms, reports and
documents with the SEC since January 1, 1995 (the "SEC DOCUMENTS"),
each of which complied in all material respects with all of the
requirements of the Securities Act or the Exchange Act, as applicable,
and did not contain any untrue statement of a material fact or omit to
state any material fact required to be contained therein or necessary
in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. All financial
statements contained in such filings (including in each case the
related schedules and notes) fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries
as of the respective dates and the consolidated results of their
operations and cash flows for the respective periods and have been
prepared in accordance with GAAP, consistently applied throughout the
periods involved, except as set forth in the notes thereto (subject, in
the case of any interim financial statements, to normal year-end
adjustments).
(b) The Company's unaudited financial statements attached as
Schedule 5.5(b), were prepared on the same basis as the financial
statements contained in the SEC Documents and fairly present the
consolidated financial position of the Company and its Subsidiaries as
of the dates referenced therein and the consolidated results of their
operations and cash flow for the respective periods, and have been
prepared in accordance with GAAP consistently applied throughout the
periods involved, except such statements do not contain footnotes or
related schedules. Since December 31, 1999, there has been no material
adverse change in the business, operations, properties, prospects or
condition (financial or otherwise) of the Company or any of its
Subsidiaries. Since December 31, 1999, the Company has conducted its
business in the usual, regular and ordinary course.
(c) The Company's budget for 2000 attached as Schedule 5.5(c)
was prepared in good faith based on assumptions and projections
believed to have been reasonable at the time made and were prepared in
all material respects consistent with past accounting practices.
5.6 NO CURRENT VIOLATION, DEFAULT.
Neither the Company nor any of its Subsidiaries is (a) in violation of
its respective charter, by-laws, partnership agreement or similar governing
documents ("CHARTER"), as the case may be, or (b) in default (and no condition
exists that with notice or lapse of time or both would constitute a default) in
the performance of any obligation, agreement or condition contained in any
Applicable Agreement, except in case of this clause (b) to the extent such
violation or default, if any, could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries is in default (and no condition
exists that with notice or lapse of time or both would constitute a default) in
the performance of any obligation, agreement or condition contained in the
Prometric Agreements except to the extent such violation or default, if any,
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8
5.7 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Other Agreements, and the consummation of the Transactions,
will not violate, contravene, trigger any rights of any shareholder of the
Company under, result in any breach of, conflict with, constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, (a) any Charter, (b) any Applicable Agreement
or (c) any Law, except in the case of clause (b), to the extent such violation
or default could not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
5.8 CONSENTS, APPROVALS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority or any other Person is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Other Agreements or the consummation of the Transactions,
except (i) a filing pursuant to the HSR Act as may be required in connection
with the conversion of the Debentures, (ii) filings with the SEC required by the
Registration Rights Agreement, dated as of the Closing Date, to be entered into
among the Company and the Purchasers , in the form attached as Exhibit 5.8
hereto (the "REGISTRATION RIGHTS AGREEMENT"), (iii) any filings required to
perfect an exemption from registration under the Securities Act and similar
state securities laws for the sale of the Debentures and Common Stock issuable
on conversion thereof, (iv) any applicable filing to list the Common Stock
issuable on conversion of the Debentures on the applicable national securities
exchange or Nasdaq market,and (v) the consents listed on Schedule 5.8. The
Company is not aware of any consents listed on Schedule 5.8 that will not be
obtained in a timely manner. Schedule 5.8 indicates whether each of the consents
listed thereon has been obtain on or prior to the date hereof.
5.9 LITIGATION; OBSERVANCE OF STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any property of the Company or any
Subsidiary before or by any Governmental Authority that, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under
any order, judgment, decree or ruling of any Governmental Authority or
is in violation of any applicable Law, which default or violation,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
5.10 ENVIRONMENTAL.
(a) The Company and its Subsidiaries are in compliance with
all Environmental Laws, except where such non-compliance could not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any notice that alleges that the Company or its Subsidiaries
is not in compliance with any Environmental Laws, and to the best of
the Company's knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future.
9
(b) There is no Environmental Claim pending or threatened, to
the knowledge of the Company, against the Company or any of its
Subsidiaries with respect to the operations or business of the Company
or its Subsidiaries, or against any Person whose liability for any
Environmental Claim the Company or its Subsidiaries has retained or
assumed either contractually or by operation of law, and to the best of
the Company's knowledge, there are no circumstances that could form the
basis of any such Environmental Claim in the future.
5.11 TAXES.
(a) All Tax returns required to be filed by the Company and
each of its Subsidiaries have been filed and all such returns are true,
complete, and correct in all material respects. All Taxes that are due
or claimed to be due from the Company and each of its subsidiaries have
been paid, other than those (i) currently payable without penalty or
interest or (ii) being contested in good faith and by appropriate
proceedings and for which, in the case of both clauses (i) and (ii),
adequate reserves have been established on the books and records of the
Company and its subsidiaries in accordance with GAAP. There are no
proposed Tax assessments against the Company or any of its
subsidiaries. To the best knowledge and belief of the Company, the
accruals and reserves on the books and records of the Company and its
Subsidiaries in respect of any Tax liability for any taxable period not
finally determined are adequate to meet any assessments of Tax for any
such period.
(b) The Company is not currently a United States real property
holding corporation as defined in Section 897(c)(2) of the Code. The
Company will use its best efforts to not become a United States real
property holding corporation in the future.
5.12 TITLE TO PROPERTY AND ASSETS; LEASES.
Except as set forth in the SEC Documents filed on or after January 1,
1999, each of the Company and each of its Subsidiaries has good and marketable
title, free and clear of all Liens to all of its assets except (i) Liens for
taxes not yet due and payable and (ii) immaterial Liens that do not interfere
with the use of such assets. All leases to which the Company or any of its
Subsidiaries is a party are valid and binding and no default has occurred or is
continuing thereunder, other than any such defaults that, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
The Company and its Subsidiaries enjoy a peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with such
exceptions as do not materially interfere with the use made by the Company or
such Subsidiary.
5.13 LICENSES, PERMITS, ETC.
The Company and each of its Subsidiaries has such material permits,
licenses, franchises, authorizations of governmental or regulatory authorities,
patents, copyrights, service marks, trademarks and trade names, or rights
thereto ("licenses and permits") including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate its
respective properties and to conduct its business. The Company and each of its
Subsidiaries has fulfilled and performed in all material respects all of its
obligations with respect to such licenses and permits. No event has occurred
that allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other impairment of the rights of the
holder of any such license or permit if the revocation, termination or
impairment thereof could, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and, except as described in Schedule 5.13, such
licenses and permits contain no restrictions that are materially burdensome to
the Company or any of its Subsidiaries.
10
5.14 COMPLIANCE WITH ERISA.
(a) Schedule 5.14 sets forth a true and complete list of each
employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other stock-based
incentive, severance, change-in-control, or termination pay,
hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement and each other
employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the
Company or any of its Subsidiaries, or by any trade or business,
whether or not incorporated (an "ERISA AFFILIATE"), that together with
the Company or any of its Subsidiaries would be deemed a "single
employer" within the meaning of Section 4001(b)(1) of ERISA, for the
benefit of any current or former employee or director of the Company,
or any of its Subsidiaries or any ERISA Affiliate (the "PLANS").
(b) The Company has made available to the Purchasers with
respect to all Plans, true, complete and correct copies of the
following: all plan documents and the most recent summary plan
descriptions and any subsequent summaries of material modifications;
forms 5500 as filed with the IRS for the most recent plan year; all
trust agreements with respect to the Plans; the most recent IRS
determination letter for all plans qualified under Code section 401(a);
all handbooks, manuals, and similar documents governing material
employment policies, practices and procedures and each form S-8 and
each prospectus related thereto filed or used in the past three years.
(c) There are no proceedings (other than routine claims for
benefits) pending or to the knowledge of the Company threatened with
respect to any Plan, the assets of any trust thereunder, or the Plan
sponsor or the Plan administrator with respect to the design or
operation of any Plan. Each Plan which is intended to be "qualified"
within the meaning of section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to its tax-qualified status and to the knowledge of the
Company, nothing has occurred since the date of the most recent
applicable determination letter that would adversely affect the
tax-qualified status of any such Plan;
(d) The consummation of the Transactions will not, either
alone or in combination with another event, (i) entitle any employee of
the Company or any Subsidiary of the Company to severance pay,
unemployment compensation or any other payment, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due
to any such employee, or (iii) result in any liability under Title IV
of ERISA.
(e) Except with respect to any act that would not have a
Material Adverse Effect on the Company, any Subsidiary or ERISA
Affiliate, the Company has operated and administered each Plan in
substantial compliance with all applicable Laws.
(f) None of the Company, any of its Subsidiaries, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder, nor to
the Company's knowledge, any trustee or administrator thereof has
engaged in a transaction or has taken or failed to take any action in
connection with which the Company, any of its Subsidiaries or any ERISA
Affiliate could be subject to any material liability for either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of the Code.
11
(g) At no time has the Company, any of its Subsidiaries or any
ERISA Affiliate ever, maintained, established, sponsored, participated
in or contributed to any ERISA Plan that is subject to Title IV of
ERISA.
(h) At no time has the Company, any of its Subsidiaries or any
ERISA Affiliate ever contributed to or been obliged to contribute to
any "multiemployer pension plan, " as such term is defined in Section
3(37) of ERISA.
(i) No amounts payable under any of the Plans or any other
contract, agreement or arrangement with respect to which the Company or
any of its Subsidiaries may have any liability could fail to be
deductible for federal income tax purposes by virtue of Section 162(m)
or Section 280G of the Code.
(j) The Company, its Subsidiaries and its ERISA Affiliates do
not have any obligations in connection with any medical, death or other
welfare benefit for its employees after they retire, except to the
extent required under the group health plan continuation requirements
of Section 601 of ERISA or under any applicable state law.
5.15 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Debentures or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than the Purchasers, which have been offered the
Debentures at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Debentures to the registration requirements of Section 5
of the Securities Act. No securities of the same class as the Debentures have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof. Prior to the effectiveness of any registration
statement filed under the Securities Act, the Indenture is not required to be
qualified under the TIA.
5.16 USE OF PROCEEDS; MARGIN REGULATIONS.
At all times after the Closing and prior to contribution thereof to the
Incubator in accordance with the Incubator Agreement, the Company will set aside
and keep available for such contribution an amount equal to the proceeds from
the sale of the Debentures (the "CONTRIBUTION AMOUNT"). Pending such
contribution, the Contribution Amount and any portion thereof held by the
Company will be held solely in the form of: (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof), (iii) time deposits and certificates of deposit and commercial paper
issued by the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000 and (iv)
commercial paper issued by others rated at least A-2 or the equivalent thereof
by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
▇▇▇▇▇'▇ Investors Service, Inc. and in the case of each of (ii), (iii), and (iv)
maturing within one year of the Closing Date.
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is, nor after giving effect to
the Transactions will any of them be, subject to regulation under the Investment
Company Act of 1940, as amended, the Public
12
Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as
amended, or the Federal Power Act, as amended.
5.18 CERTAIN PAYMENTS.
Neither the Company nor any Subsidiary, nor any director, officer,
agent, employee, or other person associated with or acting on behalf of any of
them, has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any
Subsidiary or any Affiliate of the Company or any Subsidiary, or (iv) in
violation of any Law, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company.
5.19 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker or other
Person engaged by or acting on behalf of the Company or any Subsidiary, is or
will be entitled to any brokerage or finder's or similar fee or other commission
as a result of this Agreement, the Other Agreements or the Transactions, other
than Chase Securities, Inc., which will be entitled to receive an amount not to
exceed $750,000 in the aggregate in exchange for delivering a fairness opinion
to the Company and all other services in connection with such matters.
5.20 INSURANCE.
The Company and its Subsidiaries maintain, with reputable insurers,
insurance in such amounts, including deductible arrangements, and of such a
character as is usually maintained by reasonably prudent managers of companies
engaged in the same or similar business. All policies of title, fire, liability,
casualty, business interruption, workers' compensation and other forms of
insurance including, but not limited to, directors and officers insurance, held
by the Company and its Subsidiaries, are in full force and effect in accordance
with their terms. Neither the Company nor any of its Subsidiaries is in default
under any provisions of any such policy of insurance and no such Person has
received notice of cancellation of any such insurance.
5.21 ACCOUNTING.
The Company and each of its Subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
5.22 REGISTRATION RIGHTS.
Except for the Registration Rights Agreement and as set forth on
Schedule 5.22, there are no contracts, agreements or understandings between the
Company and any Person granting such Person the right to require the Company to
file a registration statement under the Act with respect to any securities of
13
the Company or to require the Company to include such securities with the
Debentures or the Common Stock issuable upon conversion thereof registered
pursuant to the Registration Rights Agreement.
5.23 [INTENTIONALLY OMITTED.]
5.24 SECURITIES RATINGS.
No "nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company or any securities of the Company or (ii) has indicated
to the Company that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company or any securities of the Company.
5.25 SIMILAR SECURITIES NOT LISTED.
When the Debentures are issued and delivered pursuant to this
Agreement, the Debentures will not be of the same class (within the meaning of
Rule 144A under the Securities Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
5.26 INTELLECTUAL PROPERTY.
The Company and its Subsidiaries own in all material respects the
entire and unencumbered right, title and interest in and to, or possess adequate
licenses or other rights to use, all intellectual property, including but not
limited to, patents, trademarks, service marks, trade names, copyrights,
computer software and know-how used in, or necessary to, the business conducted
by the Company or any of its Subsidiaries (the "INTELLECTUAL PROPERTY"). All
such Intellectual Property is valid and enforceable and the Company and each of
its Subsidiaries has performed all acts and has paid all required fees and Taxes
to maintain all registrations and applications of such Intellectual Property in
full force and effect. None of the Company or any of its Subsidiaries has
received any notice of infringement of or conflict with (or knows or has known
of such infringement of or conflict with) asserted rights of others with respect
to the use of Intellectual Property. To the Company's knowledge, the Company and
its Subsidiaries do not in the conduct of their business infringe or conflict
with any right of any third party. None of the Company or any of its
Subsidiaries is, nor will any of them be as a result of the execution and
delivery of this Agreement or the performance of any obligations hereunder, in
breach of any Applicable Agreement relating to any Intellectual Property.
5.27 AUTHORIZATION OF SHARES ISSUABLE UPON CONVERSION.
The shares of Common Stock issuable upon conversion of the Debentures
have been duly authorized and reserved for issuance upon such conversion and,
when issued upon such conversion, will be validly issued, fully paid and
nonassessable; and the stockholders of the Company or other holders of the
Company's securities have no preemptive or similar rights with respect to the
Debentures or the Common Stock issuable upon conversion of the Debentures.
5.28 AFFILIATE TRANSACTIONS.
14
Except for transactions described on Schedule 5.28 and transactions
contemplated by the Other Agreements, neither the Company nor any of its
Subsidiaries is or has been a party to any transaction or series of transactions
described in (a) Item 404 of Regulation S-K under the Securities Act; PROVIDED,
HOWEVER, that for purposes hereof, references in such Item 404 to the
"registrant" shall be deemed to be references to the Company or such Subsidiary,
as the case may be, and references to the "beginning of the registrant's last
fiscal year" shall be deemed to be references to the beginning of the Company's
fiscal year ended December 31, 1996 or (b) Section 4(b)(i) of the Investors
Agreement, to be entered into and dated as of the Closing Date, among the
Company and the Purchasers, in the form attached as Exhibit 5.28 hereto (the
"INVESTORS AGREEMENT").
5.29 REPRESENTATIONS AND WARRANTIES IN THE PROMETRIC AGREEMENTS.
The representations and warranties of the Company to the Prometric
Agreements were true in all material respects as of the date thereof and are
true in all material respects on the date hereof.
5.30 INVESTMENT COMPANY ACT.
Neither the Company nor each of its Subsidiaries is and, after giving
effect to consummation of the transactions contemplated hereby and by the Other
Agreements, none of them will be, an "investment company" (as such term is
defined in the Investment Company Act of 1940, as amended).
5.31 ANTITAKEOVER MATTERS.
Prior to the Closing Date, the Company, its shareholders and its Board
of Directors shall have each taken all action required in order to (i) exempt
the Purchasers, in respect to their purchase and conversion of the Debentures,
from "interested stockholder" status as defined by Title 3, Subtitle 6 of the
General Corporation Law of Maryland and (ii) exempt the execution, delivery, and
performance of this Agreement and the Other Agreements, and the issuance and
conversion of the Debentures, from the requirements of, and from triggering any
provisions under, the Rights Agreement or any Antitakeover Law.
5.32 FORMATION AND CAPITALIZATION OF INCUBATOR.
Immediately following the Closing:
(a) The Incubator will be duly organized and validly existing
as a limited liability company in good standing under the laws of the
State Delaware. The Incubator will be duly qualified to transact
business and in good standing in each jurisdiction in which such
qualification is required. The Incubator will have full power and
authority to (i) own, lease and operate its properties and to conduct
its business as proposed to be conducted and (ii) consummate the
Transactions and enter into and perform its obligations under each
Other Agreement to which it is a party.
(b) The issuance and sale of all the then issued and
outstanding membership interests in the Incubator will be duly
authorized by all necessary action of the Incubator. Each membership
interest of the Incubator that is then issued and outstanding will be
duly authorized and validly issued, and not issued in violation of, or
subject to, any preemptive or similar rights. Except as set forth in
the Incubator Agreement, there will be no outstanding (i) securities
convertible into or exchangeable for any membership interests or other
equity securities of the Incubator, (ii) options, warrants or other
rights to purchase or subscribe to any membership interests or other
equity
15
securities of the Incubator or (iii) contracts, commitments,
agreements, understandings, arrangements, calls or claims of any kind
relating to the issuance of any membership interests or other equity
securities of the Incubator, any such convertible or exchangeable
securities, or any such options, warrants or rights.
(c) The Incubator will have duly authorized, executed and
delivered each of the Other Agreements to which it is a party, and each
of such Other Agreements will be a valid and binding agreement of the
Incubator, enforceable against the Incubator in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(d) The Company will have contributed the Initial Company
Contribution to the Incubator.
6. REPRESENTATIONS OF THE PURCHASER.
6.1 ORGANIZATION; POWER AND AUTHORITY.
Each Purchaser represents that (a) it is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and is duly qualified and in good standing in each jurisdiction in
which such qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on its ability to perform its obligations under the Agreement and
the Other Agreements to which it is or becomes a party, or the validity or
enforceability of this Agreement or the Other Agreements to which it is or
becomes a party and (b) it has the organizational power and authority to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements to which it is or becomes a
party, and to perform the provisions hereof and thereof.
6.2 AUTHORIZATION, ETC.
Each Purchaser represents that this Agreement and the Other Agreements
to which it is or becomes a party, has been duly authorized by all necessary
organizational action on the part of it, and this Agreement and the Other
Agreements to which it is or becomes a party, constitutes, and upon execution
and delivery by the Company of such Agreements, will constitute, legal, valid
and binding obligations of it enforceable against it in accordance with their
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
6.3 PURCHASE FOR INVESTMENT; ACCREDITED INVESTOR STATUS
Each Purchaser represents that it is purchasing the Debentures for its
own account or for one or more separate accounts maintained by it and not with a
view to the distribution thereof, provided that the disposition of its or their
property shall at all times be within its or their control. Each Purchaser
understands that the Debentures have not been registered under the Securities
Act and may be resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available, except under
16
circumstances where neither such registration nor such an exemption is required
by law. Each Purchaser represents that it is an Accredited Investor as defined
under Regulation D promulgated pursuant to the Securities Act of 1933.
7. COVENANTS.
7.1 TRANSACTION EXPENSES.
Whether or not any of the Transactions are consummated, the Company
will pay all reasonable and documented out-of-pocket fees and expenses incurred
by the Purchasers or Apollo Management (including the reasonable and documented
fees and expenses of a special counsel and other representatives engaged by the
Purchasers or Apollo Management) up to an aggregate of $1,500,000 in connection
with (i) such Transactions, (ii) any amendments, waivers or consents under or in
respect of this Agreement or the Other Documents (whether or not such amendment,
waiver or consent becomes effective) or (iii) the Purchaser's investment in the
Debentures, including, without limitation: (a) the costs and expenses incurred
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or any of the Other Documents, or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or any of the Other Documents, or by reason of
being a holder of any Debenture, (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the Transactions, and (c) any filing fees payable by the Company or the
Purchasers in connection with any filings or submissions required under the HSR
Act in connection with the conversion of the Debentures. Prior to paying such
expenses, the Company will be given an opportunity to review reasonably detailed
invoices related thereto. The obligations of the Company under this Section 7.1
will survive the payment or transfer of any Debenture, the enforcement,
amendment or waiver of any provision of this Agreement or any Other Agreement,
and the termination of this Agreement or any Other Agreement. All such fees and
expenses incurred as of the Closing Date shall be paid at the Closing in
immediately available funds by wire transfer to such bank accounts as the
Purchasers or Apollo Management shall have notified the Company in writing.
7.2 OPERATION OF BUSINESS.
From the date hereof until the Closing Date, except as contemplated by
this Agreement and the Other Agreements (including the schedules hereto or
thereto),
(a) the Company shall, and shall cause each of the
Subsidiaries to, (i) operate its business in the normal course and use
its reasonable best efforts to preserve its present business
organization intact and its present relationships with persons having
material business dealings with it; and (ii) continue to maintain, in
all material respects, its assets and properties and keep its books in
accordance with present practices in a condition suitable for its
current use; and
(b) the Company shall not, and shall not permit any of the
Subsidiaries to, (i) take any action regarding any matter described in
Section 4 of the Investors Agreement; or (ii) take any action that
would cause any of the representations and warranties made by the
Company in this Agreement not to remain true and correct as if made at
and as of the Closing Date.
7.3 ACCESS TO BOOKS AND RECORDS.
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The Company shall afford, and shall cause each of its Subsidiaries to
afford, to each of the Purchasers and the Purchasers' accountants, counsel and
representatives full access during normal business hours throughout the period
prior to the Closing Date to all the Company's and its Subsidiaries' properties,
books, contracts, commitments and records (including, but not limited to, tax
returns) and, during such period, shall furnish promptly to each of the
Purchasers (a) a copy of each report, schedule and other document filed or
received by the Company or any of its Subsidiaries pursuant to the requirements
of federal or state securities laws, and (b) all other information concerning
the Company's and its Subsidiaries' business, properties and personnel as the
Purchasers may reasonably request, PROVIDED that no investigation or receipt of
information pursuant to this Section 7.3 shall affect any representation or
warranty of the Company or the conditions to the obligations of the Purchasers.
7.4 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS.
(a) The Company shall, and shall cause each of its
Subsidiaries to, execute and deliver this Agreement and the Other
Agreements to which each is a party and such other documents,
certificates, agreements and other writings and to take such other
actions as may be necessary, desirable or reasonably requested by the
Purchasers in order to consummate or implement expeditiously the
Transactions.
(b) The Company and the Purchasers party thereto shall in good
faith negotiate, and shall execute and deliver on the Closing Date the
Incubator Agreement, which agreement shall contain the terms specified
on Exhibit 7.4 (which Exhibit reflects the parties agreement as to the
terms of the Incubator). The Company shall, and shall cause each of its
Subsidiaries to, execute and deliver such documents, certificates,
agreements and other writings and to take such other actions as may be
necessary, desirable or reasonably requested by the Purchasers in order
to contribute the Initial Company Contribution to the Incubator.
7.5 COMPLIANCE WITH CONDITIONS; BEST EFFORTS.
The Company shall use its best efforts to cause all of the obligations
imposed upon it in this Agreement to be duly complied with and to cause all
conditions precedent to the obligations of the Company and the Purchasers to be
satisfied. Upon the terms and subject to the conditions of this Agreement, the
Company will use its best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to consummate and make effective in the most expeditious
manner practicable the Transactions.
7.6 HSR ACT FILINGS.
The Company and each of its Subsidiaries shall file all reports and
documents as may be necessary to comply with the HSR Act. The Company shall
cooperate with and assist the other parties hereto and take such action as may
be reasonably required and as permitted under law in connection with such
filings (including cooperating with additional requests for information,
documents and interviews of officers and personnel by either of the antitrust
enforcement agencies).
7.7 PROMETRIC TRANSACTION.
The Company agrees promptly to inform Apollo Management in writing of
(a) any material development in the proceedings and negotiations related to the
Prometric Transaction and (b) the receipt of any notices under the Prometric
Agreements.
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7.8 ANTITAKEOVER MATTERS.
Prior to the Closing Date, the Company, its shareholders and its Board
of Directors shall take all action required to be taken by in order to (i)
exempt the Purchasers, in respect to their purchase and conversion of the
Debentures, from "interested stockholder" status as defined by Title 3, Subtitle
6 of the General Corporation Law of Maryland and (ii) exempt the execution,
delivery, and performance of this Agreement and the Other Agreements, and the
issuance and conversion of the Debentures, from the requirements of, and from
triggering any provisions under, the Rights Agreement or any Antitakeover Law.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Other Agreements, the purchase
or transfer by the Purchasers of any Debenture or portion thereof or interest
therein, and the payment or conversion of any Debenture, and may be relied upon
by any Person who purchases any of the first $25,000,000 in principal amount of
Debentures sold by any Affiliate of Apollo Management on or prior to the 90th
day following the Closing Date, regardless of any investigation made at any time
by or on behalf of the Purchasers or any other holder of a Debenture. All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant to this Agreement or any other Agreement shall be
deemed representations and warranties of the Company under this Agreement.
9. AMENDMENT AND WAIVER.
This Agreement may be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may be given, provided that
the same are in writing and signed by each of the parties hereto.
10. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or a Purchaser's nominee, to such
address such Purchaser shall have specified to the Company in writing,
(ii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, or at such other address as the Company shall have specified
to the holder of each Debenture in writing.
Notices under this Section 10 will be deemed given only when actually received.
11. REPRODUCTION OF DOCUMENTS.
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This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by Apollo Management at the Closing (except the
Debentures themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to Apollo Management, may be
reproduced by Apollo Management or any Purchaser by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and Apollo Management or such Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by Apollo Management or such Purchaser in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 11
shall not prohibit the Company or any other holder of Debentures from contesting
any such reproduction to the same extent that it could contest the original, or
from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
12. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any designee
reasonably acceptable to the Company as the purchaser of the Debentures that
such Purchaser has agreed to purchase hereunder, by written notice to the
Company. Any affiliate of a Purchaser shall be deemed acceptable to the Company.
Upon receipt of such notice, wherever the word "Purchaser" is used in this
Agreement (other than in this Section 12), such word shall be deemed to refer to
such designee in lieu of such Purchaser.
13. MISCELLANEOUS.
13.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any permitted
subsequent holder of a Debenture) whether so expressed or not.
13.2 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
13.3 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
13.4 COUNTERPARTS.
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This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
13.5 GOVERNING LAW; SUBMISSION TO JURISDICTION;.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE CONFLICT OF LAW RULES
THEREOF. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY MARYLAND STATE COURT SITTING IN THE CITY OF BALTIMORE OR ANY
FEDERAL COURT SITTING IN THE CITY OF BALTIMORE IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND IRREVOCABLY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
13.6 CONFIDENTIALITY.
The terms of this Agreement shall remain confidential until all parties
to this Agreement agree in writing to the extent and form of disclosure.
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
SYLVAN LEARNING SYSTEMS, INC.
By:
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Name:
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Title:
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The foregoing is hereby agreed to
as of the date first written above.
APOLLO INVESTMENT FUND IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:
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Name:
--------------------------------------
Title:
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APOLLO OVERSEAS PARTNERS IV, L.P.
By: Apollo Advisors IV, L.P.,
its general partner
By: Apollo Capital Management IV, Inc.,
its general partner
By:
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Name:
--------------------------------------
Title:
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INVESTOR (GUERNSEY) LTD.
By:
----------------------------------------
Name:
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Title:
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and
By:
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Name:
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Title:
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