EXHIBIT 10.23
AGREEMENT TO PURCHASE ASSETS
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This Agreement to Purchase Assets (the "Agreement") is made and entered
into on August 26, 1997, by and among ACADEMIC REVIEW, INC., an Illinois
corporation ("Purchaser"), ACADEMIC REVIEW, INC., a California corporation
("Seller"), and XXXXXX X. XXXXXXX ("Xxxxxxx"), with respect to the following
facts:
A. Seller is engaged in the business (the "Business") of creating,
producing and delivering instructional courses, materials and products designed
to assist individuals in preparing for and passing a variety of professional and
other practice examinations administered nationally, regionally, or by
individual states or local jurisdictions.
X. Xxxxxxx is the sole shareholder of Seller, and Xxxxxxx is responsible
for and the beneficiary of this Agreement as the sole shareholder and owner of
Seller and the Business.
C. Seller currently delivers its products to its customers in the form
of classroom instruction, printed materials, audio cassettes, computer media, or
some combination thereof.
D. Subject to the terms and conditions contained herein, and subject to
the completion of Purchaser's due diligence, Purchaser wishes to purchase from
Seller, and Seller wishes to sell to Purchaser, substantially all the operating
assets of the Business.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Sale and Purchase. Seller hereby agrees to sell to Purchaser, and
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Purchaser hereby agrees to purchase from Seller, the assets described in Section
3 below, for the purchase price set forth in Section 6 below, on the payment
terms set forth in Section 7 below, pursuant and subject to all the terms and
conditions of this Agreement, free and clear of all security interests, claims,
liens, encumbrances, equities, liabilities and other charges and interest of
others of any nature whatsoever, except for the Assumed Liabilities (as defined
in Section 5.2 below).
2. Date of Sale and Purchase. The sale and purchase hereunder shall
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take place and shall be effective before the opening of business on August 27,
1997, or on such other date as may be determined by unanimous agreement of the
parties (the "Closing Date").
3. Assets Sold and Purchased. The assets sold and purchased hereunder
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(the "Assets") shall consist of all of Seller's interest to and in all the
properties and assets of the, Seller as a going business of every kind, nature,
and description whatsoever, tangible and intangible, real and personal,
specifically including (without limitation) all properties and assets used in
and necessary to conduct the Business in the normal course in its present form,
whether or not specifically listed herein and whether or not reflected on
Seller's balance sheet or other financial statements required to be
furnished hereunder or on any exhibits attached to this Agreement. Without
limiting the foregoing, the Assets shall include, but shall not be limited to:
3.1 Exclusive right and title to the name, trademark and service
xxxx "Academic Review," "Academic Review, Inc." and any other trademarks, trade
names, service marks. assumed names and other intellectual property.
3.2. All copyrights, any pending applications for copyrights and
copyrighted materials published under the name "Academic Review" or "Academic
Review, Inc."
3.3. All non-copyrighted materials which have been or may be
utilized in the conduct of the Business (such as advertising text, brochures,
flyers, etc.) or which have been prepared by or on behalf of Seller.
3.4. All research materials prepared by or on behalf of, or in the
possession of Seller including without limitation materials which may be
necessary to maintain, upgrade and improve the products of the Business.
3.5. All products produced for or on behalf of Seller, and all
products currently under development.
3.6. All rights under any employment agreements with current
employees of the Business, and/or contracts with such professional consultants
as may be used to maintain, update or deliver the Business's products to its
customers, except as may be specifically excluded; all contract rights of Seller
except as may be specifically excluded.
3.7. All physical inventories.
3.8. All printing, binding, and pre-press equipment and other
manufacturing machinery (excluding the specifically identified commercial
printing equipment described in Schedule 4 attached) used in the preparation and
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manufacture of the Business's products.
3.9. All office furniture, supplies, computer equipment, and such
other equipment as have been or may be utilized in the conduct of the Business.
3.10. All lead, prospect, mailing lists, customer files, and similar
items, both current and historic.
3.11. All vendor files and contracts.
3.12. Covenants not to compete or non-competition agreements owned
by the Business.
3.13. Seller's and Xxxxxxx'x agreements not to compete, as set forth
in Section 12 herein.
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3.14. Copies of Seller's past and current records as may exist on
the Closing Date, including without limitation, those related to the operation
of the Business, but excluding any records which may relate to the Excluded
Assets (defined below) and Excluded Liabilities (defined below).
3.15. Seller's goodwill and goodwill of the Business.
3.16. Subject to Section 8.4 below, all accounts receivable.
4. Excluded Assets. Notwithstanding anything to the contrary in this
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Agreement, Seller shall not sell to Purchaser and Purchaser shall not purchase
from Seller, the assets, properties, interests and/or rights of Seller
specifically identified on Schedule 4 and Schedule 4.1 attached hereto and
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incorporated by reference (the "Excluded Assets").
5. Liabilities.
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5.1. Excluded Liabilities. Except as set forth in Section 5.2
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below, Purchaser is not assuming and shall not be responsible or liable for any
liabilities, debts, obligations, contracts or agreements of Seller of any kind
or nature whatsoever, whether fixed or contingent, and whether known or unknown
(the "Excluded Liabilities"). The Excluded Liabilities shall include, without
limitation, the following:
5.1.1. Seller's accounts payable as of the day before the
Closing Date actually existing as of the day before the Closing Date and that
arise at any time as a result of actions occurring prior to the Closing Date.
5.1.2. Any and all tax liabilities arising for whatever
reason which may exist as of the day before the Closing Date, or which may occur
on or after the Closing Date, but as a result of activities of the Business
prior to the Closing Date.
5.1.3. Liabilities arising on account of any and all
claims, disputes, lawsuits, or liabilities arising from the administrative
actions of governmental units, as such liabilities may exist on the day before
the Closing Date, or which may occur on or after the Closing Date, but as a
result of activities of the Business prior to the Closing Date.
5.1.4. Obligations on notes to banks, equipment leases,
employee obligations, obligations to vendors, and any other obligations which
are not specifically assumed.
5.1.5. Any leases of real or personal property.
5.1.6. Accrued pension plan contributions, vacation pay,
sick pay, other employee benefits and retiree medical expenses.
5.1.7. All obligations on the lease or purchase of the
Heidelberg press and any other Excluded Assets.
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5.2. Assumed Liabilities. Notwithstanding anything to the contrary
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in Section 5.1 above, as partial consideration for the transactions described
herein. Purchaser shall specifically assume and be responsible and liable for
the liabilities, debts, obligations, contracts and agreements specifically
identified on Schedule 5.2 attached hereto and incorporated by reference in each
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case only as to the total dollar amount set forth with respect to each liability
on Schedule 5.2 in the event a dollar amount is specified for such liability
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(the "Assumed Liabilities"), including without limitation, Seller's obligations
under executory contracts existing as of the Closing Date and listed on Schedule
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5.2 to provide services in workshops, seminars and courses, and to provide study
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materials and other products and materials pursuant to the terms of each such
executory contract. A true and complete copy of each such written executory
contract shall be attached to Schedule 5.2.
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5.3. Discharge of Assumed Liabilities. Purchaser shall timely pay
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or otherwise timely and properly discharge or satisfy any and all Assumed
Liabilities according to the terms of such Assumed Liabilities.
5.4. Discharge of Excluded Liabilities. Xxxxxxx and/or Seller shall
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timely pay or otherwise timely and properly discharge or satisfy any and all
Excluded Liabilities according to the terms of such Excluded Liabilities.
6. Purchase Price. Subject to Section 8 below, the purchase price (the
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"Purchase Price") for the Assets sold and purchased hereunder shall be the sum
of:
6.1. Two Million Three Hundred Thousand and 00/100 Dollars
($2,300,000.00); plus
6.2. The amount of the Assumed Liabilities that were incurred and
relate or are attributable to periods ending prior to the Closing Date.
7. Terms of Purchase. The Purchase Price shall be paid as follows:
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7.1. Assumed Liabilities. The Assumed Liabilities shall be assumed
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by Purchaser as of the Closing Date.
7.2. Payment at Closing. The amount of Two Million Two Hundred
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Seventy-Five Thousand and 00/100 Dollars ($2,275,000.00) shall be paid by
Purchaser to Seller in immediately available funds on the Closing Date.
7.3. Payment into Escrow; Terms of Escrow.
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7.3.1. The remaining Twenty-Five Thousand and 00/100 Dollars
($25,000.00) of the Purchase Price shall be paid by Purchaser in immediately
available funds to Xxxxxxxxx X. Xxxxxx, Inc., a California professional law
corporation (the "Escrow Agent") for deposit into a segregated interest-bearing
account (the "Escrow Account") to be governed by the terms of this Section 7.3
pending resolution by the parties of the adjustments required by Section 8 of
this Agreement.
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7.3.2. The Escrow Agent shall not pay to any person any amount held
by the Escrow Agent hereunder or release any funds from the Escrow Account
except upon the joint agreement and written direction of Seller and Purchaser.
7.3.3. All interest earned during any calendar year on amounts held
in the Escrow Account shall be deemed to be earned by and taxable to Seller. In
furtherance thereof, the Escrow Agent shall issue to Seller a Form 1099-INT with
respect to such calendar year in the amount of such interest.
7.3.4. All costs and expenses of the Escrow Account and the Escrow
Agent shall be borne and paid solely by Seller and Xxxxxxx.
7.3.5. In the event the Escrow Agent resigns as escrow agent, or
the Escrow Agent is, for whatever reason, unable to serve as escrow agent
hereunder, Purchaser and Seller shall mutually agree on and appoint a new Escrow
Agent. Such new Escrow Agent shall succeed to any funds then held in the Escrow
Account and shall agree to be bound by the terms of this Section 7.3.
7.3.6. Seller and Xxxxxxx shall indemnify the Escrow Agent and the
Escrow Agent's officers, directors and employees against, and hold the Escrow
Agent and the Escrow Agent's officers, directors and employees harmless from,
all costs and expenses incurred by the Escrow Agent in furtherance of its duties
and obligations hereunder, except for the Escrow Agent's fraud, willful neglect
or gross negligence.
8. Adjustments.
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8.1. Adjustment Items. Within thirty (30) days after Closing,
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Purchaser and Seller each shall prepare and deliver to each other an accounting
showing, any proposed adjustments to the items described in this Section 8.
Within thirty (30) days of such delivery, Purchaser and Seller shall agree upon
the adjustments to be made pursuant to such accountings. In the event Purchaser
and Seller do not agree by the end of that period, the provisions of Section 26
of this Agreement regarding mediation and arbitration shall be implemented.
8.2. Payment. Except as provided in Sections 8.3 and 8.4 below, the
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amount of any adjustment shall be paid in cash by Purchaser to Seller, or by
Seller to Purchaser, as the case may, within thirty (30) days after Purchaser
and Seller agree on the amount of the adjustment.
8.3. Future Courses. The adjustments shall include the amount of
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(a) all prepayments received by Seller prior to the Closing Date for or on
account of courses, workshops, seminars, products or materials to be presented
or provided on or after the Closing Date, and (b) the amount of all costs and
expenses paid by Seller prior to the Closing Date for or on account of such
courses, workshops, seminars, products and materials. For the purpose of this
Section 8.3, all workshop deposits shall be treated as payment in full for the
written materials provided with such workshop, and this Section 8.3 shall not
apply to any workshop deposit received before the Closing Date if the written
materials provided with such workshop are shipped before the Closing Date. Any
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excess of costs and expenses paid over prepayments received, or excess of
prepayments received over costs and expenses paid, as the case may be, shall be
paid pursuant to Section 8.5 below.
8.4. Accounts Receivable. The aggregate of any payments on
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accounts receivable (including purchase or other orders received before the
Closing Date for products, materials or services if the products or materials
were shipped or such services were fully performed fully before the Closing
Date, but such purchase or other orders were not paid before the Closing Date)
received by Purchaser within one year after the Closing Date shall, if retained
by Purchaser, be paid pursuant to Section 8.5 below. In applying payments
received to accounts receivable generated as of varying dates, if the customer
specifies the particular invoice or xxxx to which a payment relates, the payment
will be applied to such invoice or xxxx. In the absence of any specification,
the payments will be applied first to the invoice or xxxx outstanding for the
longer period of time.
8.5. Payment of Future Course and Accounts Receivable Adjustments.
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Purchaser and Seller shall compute the net amount of the adjustments required by
Sections 8.3 and 8.4 above, and the net amount owed by Seller to Purchaser, or
by Purchaser to Seller, as the case may be.
8.5.1. If, as a result of such computation, Seller owes to
Purchaser an amount in excess of the amount then in the Escrow Account
(including interest), (a) Purchaser and Seller shall jointly direct the Escrow
Agent in writing to pay all funds in the Escrow Account to Purchaser, and (b)
Seller shall forthwith pay to Purchaser in cash the difference between the
amount owed by Seller to Purchaser and the amount paid to Purchaser from the
Escrow Account.
8.5.2. If, as a result of such computation, Seller owes to
Purchaser an amount that is less than the amount then in the Escrow Account
(including interest), Purchaser and Seller shall jointly direct the Escrow Agent
in writing to pay to Purchaser an amount equal to the amount owed by Seller to
Purchaser, and to pay the remaining funds in the Escrow Account to Seller.
8.5.3. If, as a result of such computation, Purchaser owes
any amount to Seller, (a) Purchaser and Seller shall jointly direct the Escrow
Agent in writing to pay all funds in the Escrow Account to Seller, and (b)
Purchaser shall forthwith pay to Seller in cash the amount owed by Purchaser to
Seller.
9. Allocation of Purchase Price. The Purchase Price shall be allocated
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among the Assets as set forth in Schedule 9 attached hereto and incorporated by
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reference, to be completed prior to the Closing Date, and this allocation shall
be binding on the parties for all purposes, including the determination and
reporting of any federal or state income tax liability of the parties.
10. [Reserved]
11. Title and Possession. Title to the Assets shall be transferred from
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Seller to Purchaser on the Closing Date. Seller shall execute and deliver to
Purchaser a xxxx of sale and such duly executed endorsements, assignments and
other instruments (collectively, the "Transfer Documents") as are necessary to
vest in Purchaser good and marketable title to the Assets, free and clear of all
security interests, claims, liens, encumbrances, equities, liabilities and other
charges and interest of others of any nature whatsoever. The form of the xxxx
of sale to be executed by Seller is attached
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hereto as Exhibit A and incorporated by reference. Purchaser shall be entitled
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to possession of the Assets on the Closing Date.
12. Agreement Not to Compete.
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12.1. Agreement. In recognition of the irreparable harm which will
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be done to the value of the Business should Seller or Xxxxxxx re-engage in a
business similar to the Business, and for the consideration, as herein granted,
Xxxxxxx and Seller hereby agree, and Xxxxxxx hereby agrees to cause Seller, to
not engage in any business, directly or indirectly, in competition with the
Business as an owner, shareholder, investor, advisor, employee, consultant or
any other manner, on a full-time or part-time basis, for compensation or not, or
for any other consideration, for so long as Purchaser, or any person deriving
tide to the goodwill of the Business from Purchaser, or ten (10) years from the
Closing Date, whichever occurs first, in each county of California as specified
in Schedule 12.1 (a) attached hereto and incorporated by reference, and in each
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county of the United States, as specified in Schedule 12.1(b) attached hereto
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and incorporated by reference. The area within which Seller and Xxxxxxx shall be
subject to this agreement not to compete shall include any area in which Seller
has conducted its business in the United States up to the Closing Date, and any
area designated by Purchaser on Schedule 12.1(c) attached hereto and
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incorporated by reference as an area in which Purchaser intends to initiate
Seller's business.
12.2. Family Members. Seller and Xxxxxxx further agree that any
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person related, on or after the Closing Date (by blood or marriage), to Xxxxxxx,
or to any officer or shareholder of Seller, including present or future spouses
and children (natural, by marriage or adoption), shall likewise be bound by the
agreement not to compete set forth in Section 12.1 above. Should a person
described in the preceding sentence violate this Agreement, Seller and Xxxxxxx
agree that it will be construed as if Seller and Xxxxxxx jointly and severally
violated the agreement not to compete and the liquidated damages provided for in
Section 12.6 below shall become due and payable.
12.3. Exclusion of Software Development Business. Purchaser, Seller
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and Xxxxxxx agree that any activities of Seller and/or Xxxxxxx in the software
development business, whether commercial or retail, excluding any test
preparation software development, shall not be considered a violation of the
agreement not to compete set forth in this Section 12. Any such software shall
be unrelated to the Business, as the Business exists on the Closing Date.
12.4. Exclusion of Continuing Education Business. Purchaser, Seller
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and Xxxxxxx agree that Seller and/or Xxxxxxx and/or any entity controlled by
Seller or Xxxxxxx shall be permitted to develop and provide continuing education
courses, workshops, seminars, tapes, products and materials in any and all
fields whatsoever, including fields that are competitive with the Business, and
such activities shall not be considered a violation of the agreement not to
compete set forth in this Section 12. For this purpose, the term "continuing
education" means and includes courses, workshops, seminars, tapes, products and
materials intended to further the education of individuals who have already
obtained a license or passed a professional examination and to prepare them for
license renewals, but does not include preparation for licensure or professional
examinations. In connection with any such continuing education activity,
Purchaser acknowledges that Seller and/or Xxxxxxx and/or any entity controlled
by Seller or Xxxxxxx may use the name "Association for Continuing Education."
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12.5. Consideration. As consideration for the agreement not to
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compete set forth in this Section 12, Purchaser shall pay the amount of Fifty
Thousand and 00/100 Dollars ($50,000.00) to Xxxxxxx in immediately available
funds on the Closing Date.
12.6. Liquidated Damages. Purchaser, Seller and Xxxxxxx acknowledge
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and agree that it would be impractical or extremely difficult to determine
Purchaser's or its assignees' actual damages in the event of a breach by Seller
and/or Xxxxxxx of this agreement not to compete and, taking into account all the
circumstances existing on the date of this Agreement, the sum of One Million and
00/100 Dollars ($1,000,000.00) is a reasonable estimate of Purchaser's actual
damages in such event. Consequently, in the event of a breach by Seller and/or
Xxxxxxx of this agreement not to compete, Purchaser shall be entitled to
liquidated damages in the sum of One Million and 00/100 Dollars ($1,000,000.00).
12.7. Equitable Remedies. Purchaser, or its assigns, shall also be
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entitled to seek specific performance and injunctive relief to prevent further
breach by Seller and/or Xxxxxxx of this agreement not to compete.
12.8. Exception For AATBS Business. Notwithstanding anything to the
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contrary in this Section 12, Xxxxxxx'x conduct of the business of Association
For Advanced Training in the Behavioral Sciences ("AATBS") subsequent to and as
a consequence of Xxxxxxx'x foreclosure on, repossession of, or other acquisition
of the business of AATBS after the Closing Date, shall not be considered a
violation of the agreement not to compete set forth in this Section 12.
13. Closing.
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13.1. Time and Place. The closing (the "Closing") of the
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transactions contemplated by this Agreement shall take place on the Closing Date
at the offices of American Schools of Professional Psychology, 00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx, or at such other place or time as may be determined
by mutual agreement of the parties but in no event later than October 1, 1997.
13.2. Deliveries By Seller. At the Closing, Seller shall deliver to
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Purchaser:
13.2.1. If not previously executed and delivered by Seller,
this Agreement, duly executed by Seller.
13.2.2. The Transfer Documents, duly executed by Seller.
13.2.3. All other previously undelivered documents required
to be delivered by Seller to Purchaser on or prior to the Closing Date pursuant
to this Agreement, and all documents reasonably deemed necessary by Purchaser's
counsel to effectuate the transactions contemplated herein, including
assignments of contract rights.
13.2.4. A Certificate of Good Standing for Seller, certifying
that Seller is a corporation in good standing under the laws of the State of
California.
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13.2.5. Duly executed and authorized Certificates of
Amendment to the Articles of Incorporation of Seller changing Seller's corporate
name to "Advanced Commercial Graphics," in form acceptable for filing with the
California Secretary of State; and forms abandoning or assigning the right to
the name "Academic Review" wherever used by Seller.
13.3. Deliveries By Xxxxxxx.
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13.3.1. If not previously executed and delivered by Xxxxxxx,
this Agreement, duly executed by Xxxxxxx.
13.3.2. All other previously undelivered documents required
to be delivered by Xxxxxxx to Purchaser on or prior to the Closing Date pursuant
to this Agreement, and all documents reasonably deemed necessary by Purchaser's
counsel to effectuate the transactions contemplated herein.
13.4. Deliveries By Purchaser.
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13.4.1. If not previously executed and delivered by
Purchaser, this Agreement, duly executed by Purchaser.
13.4.2. The amount of Two Million Two Hundred Seventy-Five
Thousand and 00/100 Dollars ($2,275,000.00), payable to Seller in immediately
available funds and the amount of Twenty-Five Thousand and 00/100 Dollars
($25,000) payable to the Escrow Agent in immediately available funds.
13.4.3. The amount of Fifty Thousand and 00/100 Dollars
($50,000.00), payable to Xxxxxxx in immediately available funds.
13.4.4. All previously undelivered documents required to be
delivered by Purchaser to Seller and/or Xxxxxxx on or prior to the Closing Date
pursuant to this Agreement.
14. Release of Liability For Personal Injury. Notwithstanding anything
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to the contrary in this Agreement, Seller shall not have any liability on or
after the Closing Date for any personal injury to any employee of the Business
as conducted by Purchaser on or after the Closing Date resulting from the
operation of any equipment or other assets conveyed by Seller to Purchaser
hereunder.
15. Due Diligence Investigation.
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15.1. Right of Review and Access. During the period beginning on
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April 1, 1997 and ending on the day before the Closing Date, American Education
Corporation, an Illinois corporation ("AEC"), Purchaser, and their authorized
officers, employees, agents and representatives shall have the right to review
and inspect all of Seller's financial and other records relating to the
Business. AEC and Purchaser shall have the right to inspect the premises where
the Business is conducted and interview employees of the Business with respect
to matters reasonably relating to the Business and the performance of the
employees in the Business. Seller shall afford AEC and Purchaser access to the
Premises for the purpose of the foregoing review and inspection on
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reasonable notice during regular business hours. Seller and Xxxxxxx acknowledge
that any such investigations shall be independent of and in addition to their
representations and warranties set forth herein and that Purchaser may continue
to rely upon the accuracy and completeness of such representations and
warranties at the Closing of the transactions herein contemplated and
thereafter.
15.2. Nondisclosure Agreement. AECs and Purchaser's review and
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inspection pursuant to Section 15.1 above shall be governed by and subject to
that certain Nondisclosure Agreement (the "Nondisclosure Agreement") dated
February 3, 1997, by and between, among others, Seller and AEC. A copy of the
Nondisclosure Agreement is attached hereto as Exhibit B and incorporated by
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reference.
16. Obligations of Seller Before Closing Date. During the period
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beginning on the date of this Agreement and ending on the Closing Date, Xxxxxxx
and Seller covenant as follows:
16.1. Conduct of Business. Seller shall conduct the Business
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diligently and substantially in the same manner as heretofore conducted. Except
as set forth on Schedule 16.1 attached hereto and incorporated by reference,
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Seller shall not acquire any capital assets having an aggregate value of more
than Ten Thousand and 00/100 Dollars ($10,000.00) or acquire any capital stock
or equity of any corporation or other entity, or enter into any other material
activities or transactions without the written consent of Purchaser, shall not
substitute or exchange any assets used in the Business except in the ordinary
course of business, shall diligently preserve its existing licenses, permits,
franchises, rights and privileges pertinent to the Business and credit
arrangements with banks and other financial institutions, shall diligently
preserve intact its business organization and retain its present employees,
shall diligently preserve its goodwill and relationships with suppliers,
customers, vendors and others with whom it deals, and shall use best efforts to
continue to develop the Business.
16.2. Compensation. Except as set forth on Schedule 16.2 attached
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hereto and incorporated by reference, Seller shall not grant any increases in
wage or salary rates, or authorize the payment of bonuses, to its employees,
officers or directors.
16.3. Notice. Seller shall give Purchaser prompt written notice of
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any fact which, if existing or known on the date of this Agreement, would have
been required to be set forth or disclosed in this Agreement, which does or with
the passage of time will render materially inaccurate any representation,
warranty, covenant or agreement of Seller made in or pursuant to this Agreement.
17. Representations and Warranties of Seller and Xxxxxxx. Seller and
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Xxxxxxx, jointly and severally, represent and warrant to Purchaser that, as of
the Closing Date:
17.1. Corporate Organization; Power, Good Standing. Seller is a
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corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation and has the corporate power to carry on
its business as it is being conducted. Seller has the corporate power to enter
into and perform its obligations under this Agreement.
17.2. Authorization. The execution, delivery and performance of
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this Agreement by Seller and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite action on the
part of Seller and no other proceedings by Seller are
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necessary to authorize and approve this Agreement and the consummation of the
transactions contemplated hereby, and to make this Agreement valid and binding
upon and enforceable against Seller in accordance with the terms hereof or to
carry out the transactions contemplated hereby. Seller shall deliver to
Purchaser on or before the Closing Date certified copies of directors and
shareholders resolutions authorizing and approving the transactions contemplated
hereby.
17.3. Execution; Delivery; Binding Effect. This Agreement has been
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duly executed and delivered by Seller and Xxxxxxx and constitutes the legal,
valid and binding obligation of Seller and Xxxxxxx enforceable against Seller
and Xxxxxxx in accordance with its terms.
17.4. Financial Information. Financial information relating to the
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Business, in the form of, but not limited to income statements and balance
sheets for prior and current periods, notes, bank statements and
representations, have been provided by Seller previously and during Purchaser's
due diligence investigation period prior to the Closing Date (collectively, the
"Financial Statements"). The most recent annual balance sheet dated December
31, 1996 and the income statement for the period then ended, and the most recent
interim balance sheet dated June 30, 1997 and the income statement for the
period then ended (collectively, the "Recent Financial Statements") are attached
hereto as Schedule 17.4. The Financial Statements are in accordance with the
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books and records of Seller and present fairly on the cash method of accounting
and in accordance with generally accepted accounting principles, consistently
applied throughout the periods involved. the financial condition and results of
operations of Seller as of the respective dates thereof and for the respective
periods covered thereby. The books, records, and accounts of Seller maintained
with respect to its business maintained on the cash method of accounting, are
complete in all material respects and present fairly and accurately
transactions, assets and liabilities of Seller with respect to its business.
17.5. Absence of Undisclosed Liabilities. Except as and to the
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extent reflected or reserved against in the Recent Financial Statements, or
otherwise described in Schedule 17.5 hereto, and except for liabilities
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occurring in the ordinary course of business subsequent to June 30, 1997, Seller
has no liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any liabilities for federal or state taxes in respect of or measured
by income or for a federal, state or local environmental law or ordinance
violation.
17.6. No Changes. Since June 30, 1997, except as described in
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Schedule 17.6 hereto.
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17.6.1. there have been no changes in the assets, liabilities,
financial condition, business, operations, affairs or prospects of Seller from
those reflected in the Recent Financial Statements, except changes reflected in
such statements or occurring in the ordinary course of business, which have,
either in any case or in the aggregate, a Material Adverse Effect, as defined
herein;
17.6.2. neither the business, operations, affairs or prospects
of Seller, nor any of its properties or assets, has been materially adversely
affected by any occurrence or development, whether or not insured against;
11
17.6.3. there have been no declarations or payments of any
dividends or other distributions in respect of, or any direct or indirect
retirement, redemption, purchase or other acquisition of, any shares of its
common stock by Seller; and
17.6.4. Seller has not obligated itself in any way with respect
to the payment of employee bonuses or increased compensation or the providing of
any other compensatory arrangement, whether current or deferred, and whether
payable in cash or other consideration; nor obligated itself to make further
additions to its business properties or further purchases of additional
equipment, except in the ordinary course of business or under existing
contractual commitments the terms of which have been disclosed to Purchaser in a
schedule appended hereto; nor made any loans or other advances (other than in
exchange for consideration having an equivalent value) to any of its officers,
directors or shareholders, as applicable; nor incurred or canceled any
indebtedness, encumbered any of its properties or assets, or engaged in any
material transaction not in the ordinary course of its business.
17.7. No Conflicts. The execution, delivery and performance by Seller
------------
of this Agreement and the consummation of the transactions contemplated hereby
will not:
17.7.1. violate any provision of law, rule, regulation, order,
judgment or decree of any governmental, administrative or judicial authority
applicable to Seller that would, individually or in the aggregate, have a
material adverse effect on the financial condition, results of operations or
reasonable business prospects of the Business (referred to hereinafter as a
"Material Adverse Effect");
17.7.2. require any consent or approval of, filing of notice
to, any governmental or regulatory authority under any provision of law
applicable to Seller;
17.7.3. violate any provision of the Articles of
Incorporation or Bylaws of Seller; or
17.7.4. require any consent (other thari consents that have
already been obtained), approval or notice under, or conflict with, or result in
the breach or termination of, or constitute a default under, or result in the
acceleration of the performance by Seller under, any indenture, mortgage, deed
of trust, lease, license, franchise, contract, agreement, or other instrument to
which Seller is a party or by which it or any of its properties or assets is
bound or encumbered that would have, individually or in the aggregate, a
Material Adverse Effect.
17.8. Absence of Changes Other Than In Ordinary Course. For the past
------------------------------------------------
four years, the Business has been operated only in the usual and ordinary course
of business consistent with prior practice.
17.9. Title to Assets. Seller has good, valid and marketable title to
---------------
all the Assets and the Assets are held free and clear of all material title
defects, liens, encumbrances and restrictions, except liens for current taxes
and assessments not yet due and payable.
12
17.10. Leases. Except for the Premises Lease, Seller is not a party
------
to any leases of real or personal property.
17.11. Intellectual Property Matters. Schedule 17.11 attached hereto
----------------------------- --------------
and incorporated by reference lists all trademarks, service marks, trade names
and copyrights used in the Business. Seller owns or, as specified on Schedule
--------
17.11, has the right to use all trademarks, service marks, trade names and
-----
copyrights used in or necessary in operating the Business in the ordinary course
of business and, to the best knowledge of Seller, the consummation of the
transactions contemplated hereby will not impair the exploitation or use of any
such rights by Purchaser. Schedule 17.11 includes a copy of any license or other
--------------
document granting Purchaser the right to use any such trademark, service xxxx,
trade name or copyright used by it, and each such license or document has been
assigned to Purchaser. To the best knowledge of Seller, all trademarks, service
marks. trade names and copyrights owned by Seller, all applications or
registrations thereof, all licenses and other agreements relating thereto, and
all agreements relating to the use of technology, know-how or processes do not
violate or infringe any patent, trademark, trade name, copyright, technology,
know-how or process, or other proprietary or trade rights of any third party. To
the best knowledge of Seller and Xxxxxxx, there is no material infringement by
any third party of any trademark, service xxxx, trade name or copyright owned or
licensed by Seller.
17.12. Litigation. Except as set forth on Schedule 17.12 attached
---------- --------------
hereto and incorporated by reference, there are no suits, actions, claims,
proceedings or investigations, investigations pending or, to the best knowledge
of Seller, threatened, against Seller before any court, arbitrator or
administrative or governmental body, United States or foreign, which, if finally
determined adversely, is likely, individually or in the aggregate, to have a
Material Adverse Effect on the Assets.
17.13. Condition of Assets. All the Assets are in good operating
-------------------
condition, order and repair, ordinary wear and tear excepted and, to the best
knowledge of Seller, are operated in conformity with all applicable laws and
regulations.
17.14. Adequacy of Assets. Other than bookkeeping, management,
------------------
administrative and other services provided by Seller and services of certified
public accountants and attorneys contracted for by Seller, the Assets constitute
all the assets necessary to operate the Business in the ordinary course of
business from and after the Closing Date.
17.15. Insolvency. Seller is not insolvent, its liabilities do not
----------
exceed its assets, it is paying its debts as they come due and the transactions
contemplated by this Agreement will not cause insolvency of the Business.
17.16. Licenses. Seller and its employees have all governmental
--------
licenses and permits (federal, state and local) necessary for the conduct of the
business as now carried on by Seller and such licenses are in full force and
effect. No violations are or have been recorded in respect of any such licenses
or permits and no proceeding is pending or threatened concerning the revocation
or limitation of any such license or permit.
13
17.17. Compliance With Applicable Laws. To the best of Seller's
-------------------------------
knowledge, Seller and Xxxxxxx have complied with all federal, state and local
laws, statutes, rules, regulations, ordinances, licenses and orders presently in
effect, applicable to the operation of the Business conducted by Seller. Seller
has not taken any action, or failed to take any action, which action or failure
will or would, in any way, preclude or prevent Purchaser from operating the
Business after the Closing in the same general manner as theretofore operated by
Seller.
17.18. Broker and Finders. Neither Seller, Xxxxxxx, or any person
------------------
acting on behalf of Seller or Xxxxxxx, has employed any broker, agent or finder
or incurred any liability for any broker's fees, agent's commissions, finder's
fees or sirrilar payments in connection with the transactions contemplated
hereby.
17.19. Employee Benefits.
-----------------
(i) Schedule 17.19 hereto lists each Employee that Seller
--------------
maintains or to which it contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), and other
applicable laws.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s, and Summary Plan
Descriptions as those forms and reports are established under ERISA)
have been filed or distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B have been met with respect
to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of Seller. All premiums
or other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received all required favorable
determination letters from the Internal Revenue Service.
14
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan equals or
exceeds the present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan terminating
on the date for determination.
(F) Seller has attached to Schedule 17.19 hereto correct
--------------
and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that Seller
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been the subject of any event as to which
notices would be required to be filed with the PBGC (each, a
"Reportable Event"). No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan has been instituted or, to the knowledge
of any of Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller, threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect, to the administration or the
investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the knowledge of any of
Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller, threatened.
None of the Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of Seller has any
knowledge of any basis for any such action, suit, proceeding, hearing,
or investigation.
(C) Seller has not incurred, and none of Seller and the
directors and officers (and employees with responsibility for employee
benefits matters) of Seller has any reason to expect that Seller will
incur, any liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit Plan which
is an Employee Pension Benefit Plan.
(iii) Seller does not contribute to, never has contributed to,
or never has been required to contribute to any Multiemployer Plan or has
any liability (including withdrawal liability) under any Multiemployer
Plan.
15
(iv) Seller never has maintained, never has contributed to, or
never has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Section 4980B).
(v) For purposes of this Section 17, the following definitions
shall apply:
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
---------------------
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
-----------------------------
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Prohibited Transactions" shall mean any transaction or event treated as a
-----------------------
prohibited transaction under or as defined in Code Section 4975 or ERISA Section
406.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
----
thereto.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
------------------
3(37).
17.20. Guaranties. Seller is not a guarantor of and is not otherwise
----------
liable for any Liability or obligation (including indebtedness) of any other
person or entity.
17.21. Environment, Health, and Safety.
-------------------------------
(i) To the best knowledge of Seller and Xxxxxxx, Seller has
complied with all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against Seller alleging any failure
so to comply. Without limiting the generality of the preceding sentence, to
the best knowledge of Seller and Xxxxxxx, Seller has obtained and been in
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws.
(ii) To the best knowledge of Seller and Xxxxxxx after due
diligence and investigation, Seller has not handled or disposed of any
substance, arranged for the disposal of any substance, exposed any employee
or other individual to any substance or condition,
16
or owned or operated any property or facility in any manner that could form
the basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Seller giving
rise to any liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(iii) To the best knowledge of Seller and Xxxxxxx, no predecessor or
affiliate of Seller has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility
in any manner that could form the basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Seller giving rise to any liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iv) Except as set forth on Schedule 17.21 hereto, all properties
and equipment used in the business of Seller, its predecessors and
affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins dibenzofurans, and
other hazardous substances or wastes regulated under any Environmental,
Health and Safety Laws.
(v) For purposes of this Agreement, the term "Environmental,
Health and Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of 1970,
each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection
of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes.
17.22. Certain Business Relationships with Xxxxxxx. Seller has not
-------------------------------------------
been involved in any business arrangement or relationship with Xxxxxxx within
the past 12 months, and Xxxxxxx does not own any asset, tangible or intangible,
which is used in the business of Seller.
17.23. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Purchaser by or on behalf of Seller or
Xxxxxxx in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading; and
there is no fact which materially adversely affects, or in the future may (so
far as Seller or Xxxxxxx can now reasonably foresee) materially adversely affect
the assets, business, operations or prospects of Seller which has not been set
forth herein or in a schedule or statement furnished to Xxxxxxxxx.
00
00. Representations and Warranties of Purchaser. Purchaser represents
-------------------------------------------
and warrants to Seller and Xxxxxxx that, as of the Closing Date:
18.1. Corporate Organization, Power, Good Standing. Purchaser is a
--------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Illinois. Purchaser is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where it is required to be so
qualified. Purchaser has the corporate power to enter into and perform its
obligations under this Agreement.
18.2. Ownership. All of Purchaser's issued and outstanding stock is
---------
owned by Argosy International, Inc., an Illinois corporation ("Argosy"). All of
Argosy's issued and outstanding stock is owned by AEC. All of AECs issued and
outstanding stock is owned by Xxxxxxx X. Xxxxxxxxx, Ph.D.
18.3. Authorization. The execution, delivery and performance of
-------------
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all requisite
corporate action on the part of Purchaser and no other corporate action on the
part of Purchaser and no other corporate proceedings are necessary to authorize
and approve this Agreement and the transactions contemplated hereby, and to make
this Agreement valid and binding upon and enforceable against Purchaser in
accordance with the terms hereof or to carry out the transactions contemplated
hereby. Purchaser shall deliver to Seller on or before the Closing Date
certified copies of directors and shareholders resolutions authorizing and
approving the transactions contemplated hereby.
18.4. Execution; Delivery; Binding Effect. This Agreement has been
-----------------------------------
duly executed and delivered by Purchaser and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
18.5. No Conflicts. The execution, delivery and performance by
------------
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby will not:
18.5.1. violate any provision of law, rule, regulation,
order, judgment or decree of any governmental, administrative or judicial
authorities applicable to Purchaser;
18.5.2. require any consent or approval of, filing of notice
to, any governmental or regulatory authority under any provision of law
applicable to Purchaser;
18.5.3. violate any provision of the Articles of
Incorporation or Bylaws of Purchaser; or
18.5.4. require any consent (other than consents that have
been obtained), approval or notice under, or conflict with, or result in the
breach or termination of, or constitute a default under any indenture, mortgage,
deed of trust, lease, license, franchise, contract, agreement, or other
instrument to which Purchaser is a party or by which it or any of its assets are
bound or encumbered.
18
18.6. Brokers and Finders. Neither Purchaser, AEC, or any person
-------------------
acting on behalf of Purchaser or AEC, has employed any broker, agent or finder
or incurred any liability for any broker's fees, agent's commissions, finder's
fees or similar payments in connection with the transactions contemplated
hereby.
18.7. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to Seller by or on behalf of Purchaser in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
19. Contingencies to Closing. The Closing of the transactions
------------------------
contemplated by this Agreement is subject to and conditioned on the satisfaction
of all the following conditions on or before the Closing Date, unless waived by
the appropriate party:
19.1. Other Agreements and Documents. The execution and delivery of
------------------------------
this Agreement.
19.2. Corporate Resolutions. The delivery by Seller to Purchaser,
---------------------
and by Purchaser to Seller, of certified copies of directors and shareholders
resolutions of Seller and Purchaser authorizing and approving the transactions
contemplated hereby.
19.3. Deliveries At Closing. The delivery of all the items required
---------------------
to be delivered at or before the Closing.
19.4. No Litigation. There shall not be any litigation or
-------------
proceeding to restrain or invalidate the consummation of the transactions
contemplated hereby the defense of such involves either expense or lapse or time
that would be materially adverse to the interests of any party.
19.5. Additional Conditions Precedent to Purchaser's Obligation to
------------------------------------------------------------
Close. Without limiting the foregoing, the obligations of Purchaser under this
-----
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (the fulfillment of any of which may be waived in
writing by Purchaser):
19.5.1. The representations, warranties and covenants of
Seller and Xxxxxxx contained in this Agreement shall not only have been true and
complete in all material respects as of the date of this Agreement and when
made, but shall also be true and complete in all material respects as though
again made on the Closing Date, except to the extent that they are incorrect as
of the Closing Date by reason of events occurring after the date of this
Agreement in compliance with the terms hereof which have been disclosed in
writing to Purchaser and written consent to which has been given by Purchaser.
19.5.2. Each of Xxxxxxx and Seller shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by each of them at or prior to the
Closing.
19
19.5.3. Purchaser shall have received a certificate
executed by the Secretary of State of the State of California dated as of a
recent date certifying that Seller is a corporation in good standing under the
laws of the State of California.
19.5.4. Since the date of execution of this Agreement, there
shall have been no change having a Material Adverse Effect on the financial
condition, business, properties, operations or prospects of Seller.
19.5.5. All actions, proceedings, instruments, agreements and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
reasonably satisfactory to Purchaser, which shall have been furnished with such
copies (certified if requested) of all such actions, proceedings, instruments,
agreements and documents as it shall have reasonably requested.
19.5.6. Purchaser's having completed its due diligence
investigation, with the results being satisfactory to Purchaser, in its sole and
absolute discretion.
20. Name Change. Seller agrees that, immediately after the Closing, it
-----------
will formally and officially change its name to "Advanced Commercial Graphics."
In furtherance thereof, Seller will prepare, execute and provide copies to
Purchaser at the Closing, all documents necessary to implement the name change,
including all documents required to be filed with the California Secretary of
State to effectuate the name change. Seller will immediately file with the
California Secretary of State all of such documents as may be necessary to
change Seller's name to "Advanced Commercial Graphics," and thereafter, provide
certified copies of documents evidencing the name change to Purchaser.
21. Employees.
---------
21.1. Employees of Business. Schedule 21.1(a) attached hereto and
--------------------- ----------------
incorporated by reference is a true and accurate list of the employees of the
Business as of July 24. 1997. Seller and Xxxxxxx shall use commercially
reasonable efforts to retain the employees listed on Schedule 21.1(a) attached
----------------
as employees of the Business and shall not terminate any such employee except
for cause. Schedule 21.1(b) to be prepared on or immediately after the Closing
---------------- -------
Date and to be attached hereto and incorporated herein by reference shall be a
----
true and accurate list of the employees (the "Employees") of the Business as of
the Closing Date.
21.2. Discretionary Employment by Purchaser. In its sole judgment
-------------------------------------
and discretion, Purchaser may offer employment to and may hire any or all of the
Employees. Purchaser shall have no duty or obligation to hire any Employee.
21.3. Nonsolicitation. In recognition of the irreparable harm that
---------------
may or will be caused to the Business, Seller and Xxxxxxx agree that neither
they, individually or collectively, nor any business, partnership, corporation,
joint venture or other entity with which either is indirectly or indirectly
involved, employed by, or a beneficial owner of or participant in, will hire or
attempt to hire or engage or attempt to engage or lure away, directly or
indirectly, from Purchaser any of the Employees, or otherwise cause or encourage
any Employee to leave the Business on or after the
20
Closing Date, except Xxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx
Xxxxx and Xxx Xxxx. The agreement set forth in this Section 21.3 shall expire
ten (10) years after the Closing Date.
21.4. Liquidated Damages. The parties acknowledge and agree that:
------------------
(a) it would be impractical or extremely difficult to determine Purchaser's
damages in the event of a breach by Seller and/or Xxxxxxx of Section 21.3 above;
and (b) taking into account all the circumstances existing on the date of this
Agreement, the sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) per occurrence is a reasonable estimate of Purchaser's actual
damages in such event. Consequently, in the event of a breach by Seller and/or
Xxxxxxx of Section 21.3 above, Purchaser shall be entitled to liquidated damages
in the sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) per
occurrence. Purchaser and its successors and permitted assigns shall also be
entitled to seek specific performance and injunctive relief to prevent further
breaches of Section 21.3 above by Seller and/or Xxxxxxx.
22. Non-Solicitation of Other Offers. During the period beginning April
--------------------------------
1, 1997 and ending on the Closing Date, Seller and Xxxxxxx each agree to not
conduct any other sale negotiations, accept any letters of intent negotiating a
sale, merger, exchange or other transaction involving the Seller or Xxxxxxx'x
interest in the Seller, or conduct their affairs in a way to indicate their
interest in negotiating a sale of the Business to any other potential buyer or
entity. Seller and Xxxxxxx agree to promptly notify Purchaser of any
unsolicited offer.
23. Records. Notwithstanding anything to the contrary in this Agreement,
-------
Seller shall retain any and all records and documents deemed reasonably
necessary by Seller to prepare tax returns, financial statements, respond to
governmental authorities or other third parties, and wind up all matters related
to the Business so long as Seller maintains the confidentiality of all such
items. Seller shall provide copies of or access to such records and documents to
Purchaser, as determined by mutual agreement of Seller and Purchaser. Seller
shall have the right of access to and the right to copy, at Seller's expense,
any records not retained by Seller, for the sole purpose of responding to
inquiries, audits, examinations or litigation initiated by tax authorities,
other governmental authorities or other third parties.
24. Indemnifications.
-----------------
24.1. Indemnification By Seller and Xxxxxxx. Seller and Xxxxxxx,
-------------------------------------
jointly and severally, shall save, defend and indemnify Purchaser and
Purchaser's officers, directors, employees, agents and representatives against,
and hold Purchaser and Purchaser's officers, directors, employees, agents and
representatives harmless from, any and all claims, demands, damages, debts,
liabilities, obligations, actions, costs and expenses (including without
limitation, attorneys' fees and costs, court costs and costs of appeal), of
every kind nature and description whatsoever, absolute, fixed or contingent,
relating or attributable to, which arise out of or result from:
24.1.1. Any failure of Seller to pay, discharge or
comply with any debt, obligation, liability or commitment other than an Assumed
Liability pursuant to the terms thereof;
24.1.2. Any inaccuracy in, or breach of, any
representation, warranty, covenant or agreement made by Seller or Xxxxxxx in
this Agreement, the Exhibits hereto or any
21
executed document or paper prepared by Seller or Xxxxxxx or delivered in
connection with the transactions contemplated hereby;
24.1.3. Any failure of Seller duly to perform or observe
any term, provision, covenant, agreement or condition hereunder on the part of
Seller to be performed or observed;
24.1.4. Any claim, litigation or other action of any
nature arising out of any action or inaction of Seller prior to the Closing
Date;
24.1.5. Any claim of any employee of Seller, or of any
other person, arising out of or relating to any employee stock option, bonus,
retirement, medical, profit sharing, pension or other similar plan of Seller or
the operation or termination of such plan, to the extent relating or
attributable to periods ending before the Closing Date; and
24.1.6. Any action, suit, proceeding, assessment or
judgment arising out of or incident to any of the matters indemnified against by
Seller or Xxxxxxx under this Agreement.
24.2. Indemnification By Purchase. Purchaser shall save, defend and
---------------------------
indemnify Seller and Xxxxxxx and Seller's officers, directors, employees, agents
and representatives against, and hold Seller and Xxxxxxx and Seller's officers,
directors, employees, agents and representatives harmless from, any and all
claims, demands, damages, debts, liabilities, obligations, actions, costs and
expenses (including without limitation, attorneys' fees and costs, court costs
and costs of appeal), of every kind, nature and description whatsoever,
absolute. fixed or contingent, relating or attributable to, which arise out of
or result from:
24.2.1. Any failure of Purchaser to timely pay, discharge,
satisfy or comply with an Assurned Liability assumed by Purchaser according to
such liability's terms, except for liabilities attributable to Seller's asserted
breach of a representation, warranty, covenant or obligation of Seller;
24.2.2. Any inaccuracy in, or breach of, any
representation, warranty, covenant or agreement made by Purchaser in this
Agreement, the Exhibits hereto or any executed document or paper prepared by
Purchaser and delivered in connection with the transactions contemplated hereby;
24.2.3. Any failure of Purchaser to timely pay, discharge
or comply with any liability, debt or obligation incurred by Purchaser on or
after the Closing Date;
24.2.4. Any failure of Purchaser to make when due any
payment required under this Agreement, except with respect to any asserted
offset rights, or duly to perform or observe any term, provision, covenant,
agreement or condition hereunder on the part of Purchaser to be performed or
observed;
24.2.5. Any claim, litigation or other action of any
nature arising out of any action or inaction of Purchaser or Purchaser's
officers, directors, employees, agents, or representatives before, on or after
the Closing Date;
22
24.2.6. Purchaser's operation of the Business on and after
the Closing Date; and
24.2.7. Any action, suit, proceeding, assessment or
judgment arising out of or incident to any of the matters indemnified against by
Purchaser, under this Agreement.
24.3. Claims For Indemnification. Whenever any claim shall arise
--------------------------
for indemnification under this Section 24, the party or parties entitled to
indemnification (individually and collectively, the "Indemnified Party") shall
notify the party or parties against whom indemnification is sought (individually
and collectively, the "Indemnifying Party") in writing of the claim. Such
written notice shall specify all material facts known to the Indemnified Party
giving rise to the indemnification right and the amount, or an estimate thereof,
of the expense or liability incurred or expected to be incurred by the
Indemnified Party. The right to indemnification hereunder and the amount
thereof (but not an estimate of the amount thereof) as set forth in the written
notice shall be deemed agreed to by the Indemnifying Party unless, within thirty
(30) days after the receipt of such notice, the Indemnified Party is notified in
writing that the Indemnifying Party disputes the right to indemnification and/or
the amount thereof.
24.4. Right to Defend Third-Party Claims. If the claim for
----------------------------------
indemnification involves any actual, threatened or potential claim or demand by
any third party against the Indemnified Party (a "Third-Party Claim"), the
Indemnifying Party may, at its option, elect to undertake full responsibility
for the defense of the Third-Party Claim and may contest or settle the Third-
Party Claim on such terms as the Indemnifying Party may determine in its sole
discretion. If the Indemnifying Party elects to undertake full responsibility
for the defense of the Third-Party Claim, the Indemnifying Party shall be
responsible and liable for all costs and expenses of such defense and
settlement, and shall be responsible and liable for any judgment rendered by the
court in favor of the Third Party against the Indemnified Party. If the
Indemnifying Party does not elect to undertake full responsibility for the
defense of the Third-Party Claim, the Indemnifying Party at its own expense may
nevertheless participate with the Indemnified Party in the defense of the Third-
Party Claim and in any and all settlement negotiations relating thereto. The
Indemnified Party and the Indemnifying Party shall cooperate with respect to the
defense and negotiation of any settlement of the Third-Party Claim, and the
Indemnified Party shall not settle the Third-Party Claim without the concurrence
of the Indemnifying Party. Any such participation shall not relieve the
Indemnifying Party of its indemnification obligations under this Section 24.
24.5. Cooperation. The parties shall execute and deliver such
-----------
powers of attorney and other documents as may be reasonably necessary or
appropriate to permit participation of counsel selected by any party in any and
all relevant proceedings. Each party shall provide access to the other party or
parties and their respective counsel, accountants and other representatives and
advisors during regular business hours to all books, records, documents, papers,
materials, personnel, agreements, contracts and any and all relevant business
records as may reasonably be necessary to defend and/or settle any claims under
this Section 24.
24.6. Duration. The indemnification rights of the parties hereunder
--------
shall survive the Closing Date for a period of eleven (11) years; provided,
however, that any indemnification right related to federal, state or local taxes
shall survive the Closing Date for a period of one hundred
23
twenty (120) days after the last date on which such tax claim may be asserted by
the relevant taxing authority. The expiration of the indemnification rights as
herein provided shall not affect claims for indemnification pending on the date
of such expiration. Such pending claims shall remain valid and enforceable.
24.7. Payment. Except as provided in Section 24.8 below, the
-------
Indemnifying Party shall promptly pay to the Indemnified Party the amount of the
indemnification required by this Section 24.
24.8. Offset. The Indemnifying Party shall have the right to offset
------
any amounts payable to the Indemnifying Party by the Indemnified Party under
this Section 24 against any amounts payable by the Indemnifying Party to the
Indemnified Party under this Section 24. Such right of offset shall be exercised
by written notice sent by certified or registered mail to the Indemnified Party.
The notice shall be given in accordance with the notice provisions of this
Agreement and shall state the amount of the offset and the payment or payments
that are being offset. If not disputed in writing sent by certified or
registered mail by the Indemnified Party within fourteen (14) days of the
effective date of such notice, the offset shall be final and deemed agreed to by
both Parties. If the Indemnified Party disputes such offset within such fourteen
(14) day period then, within ten 10) days after the Indemnified Party gives
notice that it disputes the offset, the dispute shall be referred to binding
arbitration. The arbitration shall be conducted before a single arbitrator
pursuant to the provisions of Section 26.2 below except that the decision of the
arbitrator shall be conclusive and binding on, and non-appealable by, the
Parties. During the pendency of such dispute, the Indemnifying Party shall pay
the disputed amount into an escrow account governed by the provisions of
Section 28 below. Notwithstanding the foregoing, any failure by the Indemnifying
Party to make any such payment into the escrow account shall not preclude, or
act as a condition precedent to, any arbitration or litigation between the
Parties.
25. Termination. This Agreement shall terminate on the first to occur
-----------
of:
25.1. If the transactions contemplated by this Agreement are not
consummated on or before October 1, 1997.
25.2. If any condition to Closing set forth in Section 19 above is
not satisfied or waived on or before the Closing Date.
25.3. Mutual agreement of the parties.
25.4. If, before the Closing Date, Purchaser determines in its sole
discretion, that Purchaser's and AEC's due diligence investigation pursuant to
Section 15 above is not satisfactory to Purchaser.
26. Pre-Litigation Mediation and Non-Binding Arbitration of Disputes.
----------------------------------------------------------------
26.1. Mediation. Except as provided in Section 26.3 below, any
---------
dispute, controversy or claim relating to this Agreement, including but not
limited to the interpretation thereof, or its breach or existence, which cannot
be resolved amicably by Seller and Purchaser shall first be
24
referred to mediation administered by the American Arbitration Association
under its Commercial Mediation Rules, before resorting to arbitration or
litigation. The mediation shall be conducted in Ventura County, California, or
such other location as may be determined by mutual agreement of Seller and
Purchaser. The mediation referral required hereunder shall occur as soon as it
becomes clear that Seller and Purchaser cannot resolve the matter in dispute and
the mediation shall be conducted as swiftly as is reasonably possible under the
circumstances.
26.2. Non-Binding Arbitration. Within ten (10) days or as soon as
-----------------------
reasonably feasible after mediation is completed, any unresolved controversy or
claim arising out of or relating to this Agreement, or breach thereof, shall be
referred to non-binding arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules. The
arbitration shall be conducted as swiftly as is reasonably possible under the
circumstances. The arbitration shall be conducted before one neutral arbitrator
to be selected in accordance with the Commercial Rules of the American
Arbitration Association and shall proceed under the Expedited Procedures of said
Rules, irrespective of the amount in dispute. The arbitration shall be held in
Ventura County, California, unless Seller and Purchaser mutually agree upon
another place. In its award, the arbitral authority shall fix and apportion the
costs of arbitration. Except as provided in Section 26.3 below, no lawsuit
shall be filed prior to the entry of a written award by the arbitral authority.
The award of the arbitral authority shall be non-binding upon Seller and
Purchaser. However, if after forty-five (45) days from the date of the award, no
party files a separate lawsuit in a court of competent jurisdiction to resolve
the dispute, controversy or claim, the award will become final and non-
appealable and the award may be enforced by any court having jurisdiction over
the party against which the award has been rendered or where assets of the party
against which the award has been rendered can be located.
26.3. Exceptions to Mediation/Arbitration. Notwithstanding Sections
-----------------------------------
26.1 and 26.2 above, Purchaser shall be permitted to seek specific performance
or injunctive relief in a court of competent jurisdiction for any breach of
Section 12 (regarding agreement not to compete) or Section 21.3 (dealing with
Nonsolicitation) without submitting the dispute to mediation and arbitration.
27. Venue. Subject to Section 26 above, the parties hereby stipulate and
-----
agree that venue for any litigation involving this Agreement shall be in Ventura
County, California. The parties hereby stipulate and consent to the
jurisdiction of the Ventura County Superior Court with respect to any such
litigation. Purchaser hereby waives its right to assert diversity jurisdiction
and its right to file any lawsuit in or have a lawsuit removed to federal court.
28. Escrow. The escrow account required by Section 24 above shall be
------
governed by this Section 28.
28.1 Escrow Agent. The escrowholder (the "Escrow Agent") shall be
------------
Xxxxxxxxx X. Xxxxxx, Inc., a California professional law corporation.
28.2. Deposit. Immediately after the Indemnified Party gives
-------
written notice to the Indemnifying Party disputing the asserted offset, the
Indemnifying Party shall pay to the Escrow Agent an amount of money equal to the
disputed offset. The Escrow Agent shall thereupon deposit
25
such amount into an interest-bearing account (the "Escrow Account") subject to
the terms of this Section 28.
28.3. Interest On Escrowed Funds. All interest earned during any
--------------------------
calendar year on funds held in the Escrow Account shall be deemed for tax
purposes to be earned by and taxable to the Indemnifying Party. In furtherance
thereof, the Escrow Agent shall issue to the Indemnifying Party a Form 1099-INT
with respect to such calendar year in the amount of such interest.
Notwithstanding the foregoing, any such interest on funds that are paid out of
the Escrow Account to the Indemnified Party during such year pursuant to the
provisions of Section 28.4 below shall be deemed to be earned by and taxable to
the Indemnified Party and the Escrow Agent shall issue to the Indemnified Party
a Form 1099-INT in the amount of such interest.
28.4. Release of Funds. The Escrow Agent shall not pay to any
----------------
person any amount held by the Escrow Agent hereunder or release any funds from
the Escrow Account except (a) upon the joint agreement and written direction of
the Indemnified Party and the Indemnifying Party, or (b) as directed in writing
by the arbitrator in furtherance of the arbitrator's decision with respect to
the disputed offset pursuant to the binding arbitration required by Section 24.8
above. Interest shall be paid out of the Escrow Account in proportion to
principal.
28.5. Costs and Expenses. All costs and expenses of the Escrow
------------------
Agent and the Escrow Account shall be borne and paid solely by Seller and
Xxxxxxx.
28.6. Successor Escrow Agent. In the event the Escrow Agent resigns
----------------------
as escrow agent, or the Escrow Agent is, for whatever reason, unable to serve as
escrow agent hereunder, the Indemnifying Party and the Indemnified Party shall
mutually agree on and appoint a new Escrow Agent. Such new Escrow Agent shall
succeed to any funds then held in the Escrow Account and shall agree to be bound
by the terms of this Section 28.
28.7. Indemnification. Seller and Xxxxxxx shall indemnify the
---------------
Escrow Agent and the Escrow Agent's officers, directors and employees against,
and hold the Escrow Agent and the Escrow Agent's officers, directors and
employees harmless from, all costs and expenses incurred by the Escrow Agent in
furtherance of its duties and obligations hereunder, except for the Escrow
Agent's fraud, willful neglect or gross negligence.
29. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY VOLUNTARILY AND
--------------------
KNOWINGLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT.
30. Miscellaneous.
-------------
30.1. Modification, Amendment or Waiver. This Agreement may not be
---------------------------------
amended, supplemented or otherwise modified, and none of its terms may be
waived, unless such amendment, supplement, modification or waiver is in writing
and executed by the party or parties to be bound thereby. The failure of any
party at any time or times to require performance of any provision hereof
26
shall not affect the right of such party at a later time to enforce the same,
and no waiver of any term or provision hereof on any one occasion shall be
deemed to be a waiver of the same or any other provision hereof at any
subsequent time or times.
30.2. Notices. Any notices or other communication required or
-------
permitted hereunder must be in writing and shall be deemed given on the date
that the same shall have been cabled or telegraphed, sent by telecopier or other
facsimile equipment, delivered personally via messenger or overnight carrier, or
48 hours after deposit in the United States mail, mailed by certified or
registered mail, postage prepaid, return receipt requested. and duly addressed
to the party to be notified:
Purchaser: Academic Review, Inc.
---------
Two First National Plaza
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Chairman
with a copy to:
Xxxxxxx Xxxxxx, Esq.
Trenam, Kemker, et al.
000 X. Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, XX 00000
Seller: Academic Review, Inc.
------
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, President
Xxxxxxx: Xxxxxx X. Xxxxxxx
-------
000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Any party may change tile person or address to which any notice or other
communication is to be sent by giving written notice thereof in the manner
provided herein.
30.3. Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon, and shall inure to the benefit of and be enforceable by, the parties
hereto, and their respective heirs, successors, assigns and legal
representatives; provided, however, that no assignment of any rights or
delegation of any obligations provided for herein may be made by any party
hereto without the prior written consent of the other parties, which consent
shall not be unreasonably withheld.
30.4. Entire Agreement. This Agreement (together with all Exhibits,
----------------
certificates, documents, agreements and instruments executed or furnished in
connection herewith) contains the entire agreement among the parties with
respect to the subject matter hereof, and supersedes any and all prior or
contemporaneous written or oral negotiations, agreements, discussions and
27
representations of the parties with respect to such subject matter. More
specifically, but not in limitation of the foregoing, this Agreement revokes and
supersedes that certain Agreement to Purchase Assets dated as of April 29, 1997,
by and among the parties.
30.5. Governing Law. This Aereement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Illinois.
30.6. Severability. If any provision or covenant of this Agreement,
------------
or any portion of any provision or covenant, shall be deemed invalid,
unreasonable, arbitrary or against public policy, then such portion of such
provision or covenant shall be considered divisible both as to time,
geographical area and amount and a lesser period, geographical area or amount
may be enforced. The parties agree that this Agreement shall be interpreted in
such a manner as to give effect, as far as possible, to the intent of the
parties as set forth herein. Any such invalid or unenforceable provision or
covenant shall not affect the enforceability and validity of the remaining
provisions and covenants hereof.
30.7. Attorneys' Fees. If any legal action or other proceeding is
---------------
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
30.8. Headings. The headings in this Agreement are intended solely
--------
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
30.9. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which shall constitute the
same agreement.
30.10. Facsimile Signatures. A signature that is transmitted by
--------------------
telecopier or other facsimile equipment shall be deemed an original signature.
30.11. Gender, Number, Etc. As used herein, the masculine, feminine
--------------------
or neuter gender and the singular and plural number or tense each shall be
deemed to include the others whenever the context so indicates.
28
IN WITNESS WHEREOF, the parties have executed this Agreement on the date or
dates set forth below.
ACADEMIC REVIEW, INC., an Illinois
Corporation
Date:___________________________, 1997 By_________________________________
XXXXXXX X. XXXXXXXXX, Ph.D.
President and Chairman
ACADEMIC REVIEW, INC., a California
corporation
Date: 8/26 , 1997 By /s/ Xxxxxx X. Xxxxxxx
-------------------------- ---------------------------------
XXXXXX X.. XXXXXXX, President
Date: 8/26 , 1997 By /s/ Xxxxxx X. Xxxxxxx
-------------------------- ---------------------------------
XXXXXX X. XXXXXXX
The undersigned executed and joins in this Agreement in its capacity as Escrow
Agent pursuant to Sections 7.3 and 28 hereof solely for purposes of such
Sections 7.3 and 28.
XXXXXXXXX X. XXXXXX, INC.
BY:_________________________________
ITS: President
-------------------------------
29
