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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
Agreement dated as of February 14, 1998 among EDUCATIONAL MEDICAL,
INC., a Delaware corporation ("EMI"), CHI ACQUISITION CORP., a Delaware
corporation wholly owned by EMI (the "Buyer"), COMPUTER HARDWARE SERVICE
COMPANY, INC., a Pennsylvania corporation (the "Corporation"), XXXXXX XXXXXX, an
individual residing within the State of Pennsylvania ("Xxxxxx"), XXXXXX X.
XXXXXX, an individual residing within the State of Pennsylvania ("Xxxxxx"), and
XXXXX XXXXX, an individual residing within the State of Pennsylvania ("Xxxxx").
(Xxxxxx, Xxxxxx and Xxxxx shall be collectively referred to hereinafter as the
"Shareholders").
PRELIMINARY STATEMENT
The Corporation is the owner of two (2) postsecondary educational
institutions located at Westchester Pike and Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxx
00000 and 000 Xxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxxxxx 00000 (collectively, the
"Schools"). The Shareholders own all of the outstanding and issued capital stock
(the "Stock") of the Corporation. Subject to the terms and conditions contained
in this Agreement, the Buyer wants to buy the Stock, and the Shareholders want
to sell the Stock to the Buyer.
This Agreement contains the terms pursuant to which the Shareholders
have agreed to sell to Buyer all of the Stock. In addition, the Shareholders
have agreed not to compete with EMI and its schools pursuant to the terms of
this Agreement. EMI has entered into this Agreement to reflect that it is
jointly and severally liable with the Buyer with regard to the obligations of
the Buyer provided for in it.
IN CONSIDERATION OF THE COVENANTS CONTAINED IN THIS AGREEMENT, AND THE
OTHER CONSIDERATION PROVIDED FOR IN IT, THE PARTIES, EACH INTENDING TO BE
LEGALLY BOUND, AGREE AS FOLLOWS:
1. THE PURCHASE PRICE; CONVEYANCE OF THE STOCK; CERTAIN DEFINITIONS;
EFFECTIVE DATE OF TRANSACTION.
(a) The Purchase Price. The purchase price for the Stock is
$11,750,000 (the "Purchase Price"). The Purchase Price will be allocated as
follows: (i) $11,650,000 to the Stock, and (ii) $100,000 to the Non-Competition
Agreement (the "Non-Competition Agreement") contained in Section 7 of this Stock
Purchase Agreement.
(b) Conveyance of the Stock; Exclusive Right to Purchase the Stock.
On February 14, 1998 (the "Closing Date"), or such other date as the parties may
specify prior to March 31, 1998 (the "Termination Date"), the Shareholders shall
convey to Buyer all of their Stock (the "Closing"). The Parties to this
Agreement agree that EMI and the Buyer shall have the exclusive right to
consummate the transactions contemplated herein prior to the Termination Date
and that the Corporation and/or Shareholders shall not negotiate with any other
potential buyer during such exclusivity period.
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(c) Cash Payments by the Buyer. On the Closing Date the Buyer shall
pay to the Shareholders $1,500,000 (the "Initial Payment"), by wire transfer or
otherwise in immediately available funds. Of the Initial Payment, $84,755 shall
be paid to Xxxxx as payment in full for his 250 shares of stock and payments of
$707,622 shall be made to each of Xxxxxx and Xxxxxx, as the initial payment on
account of their 16,820 shares of Stock held by each of them.
(d) Delivery of Second Payment Note, the Purchase Money Promissory
Note, the Pledge Agreement, Security Agreement and the EMI Stock by the Buyer.
On the Closing Date the Buyer shall deliver to Messrs. Xxxxxx and Xxxxxx:
(e) its Promissory Notes in the aggregate principal amount of
$3,000,000 (the "Second Payment Note") in the form attached to this Agreement as
EXHIBIT 1, payable with interest as provided below on the earlier of the last
business day within the first 30 calendar days following the date on which the
Prerequisite Student Aid Approvals are obtained, but no later than six months
from the date of Closing with interest accruing at an interest rate equal to 8%
per annum commencing ninety (90) days from the Closing Date. "Prerequisite
Student Aid Approvals" mean approvals by the United States Department of
Education and all other applicable private and governmental agencies and
organizations of the change in control resulting from the change in ownership of
the Schools resulting from the sale of the Schools pursuant to this Stock
Purchase Agreement which are a prerequisite to receipt of federal and state aid
by the Schools' students, and
(f) its Promissory Notes in the aggregate amount of $5,750,000 (the
"Purchase Money Promissory Note") in the form attached to this Agreement as
EXHIBIT 2, pursuant to which the Buyer shall pay to the Shareholders an initial
payment equal to One Million One Hundred Thousand and no/100 Dollars
($1,100,000) plus interest at 8% per annum on the first anniversary of the
Closing Date and thereafter amortize the remaining principal in equal quarterly
principal payments along with all accrued interest over the remaining four (4)
years with interest at 8% per annum.
(g) a pledge agreement in the form attached to this Agreement as
EXHIBIT 3 (the "Pledge Agreement") pursuant to which EMI secures the payment of
the Second Payment Notes and the Purchase Money Promissory Notes, and the
related interest by a pledge of all of the outstanding and issued capital stock
(the "Buyer's Stock") of the Buyer.
(h) a Security Agreement in the form attached to this Agreement as
EXHIBIT 4 (the "Security Agreement") pursuant to which the Buyer secures the
payment of the Second Payment Notes and the Purchase Money Promissory Notes by
granting to the Shareholders a security interest in the Assets (as defined in
Section 2(d) hereof) subordinate only to EMI's senior lender.
(i) $1,500,000 of Common Stock of EMI (the "EMI Purchase Stock")
based upon the last sale (the "Last Sale") of EMI Stock as of the business day
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immediately prior to the Closing Date. The specific number of shares of the EMI
Purchase Stock shall be calculated by dividing $1,500,000 by the price per share
of the Last Sale.
2. REPRESENTATIONS OF THE CERTAIN SHAREHOLDERS. Messrs. Xxxxxx and
Xxxxxx, jointly and severally, represent and warrant to Buyer as follows,
provided, however, that except with respect to subsections (c), (d), (e), (h),
the second and third paragraphs of subsection (i) and subsection (x) of this
Section 2, such representations are made to the best of the knowledge of such
Shareholder or to facts or circumstances of which they reasonably should have
had knowledge:
(a) No Misstatements. The representations of the Shareholders and
information supplied by the Shareholders and/or the Corporation contained in
this Agreement, the Exhibits attached to it and the documents incorporated into
it by reference do not contain any untrue statement of a material fact or omit
to state any fact necessary to make such representations or information not
materially misleading.
(b) Validity of Actions. The Corporation (i) is duly organized,
validly existing and in good standing under the laws of its organization, (ii)
has all requisite corporate and other appropriate authorization to operate the
Schools in the manner in which they are currently operated, (iii) is qualified
to do business in all jurisdictions in which such qualification is necessary for
the operation of the Schools, other than those jurisdictions where the failure
to so qualify would not have a material adverse effect upon the Schools' assets
or operations, and (iv) has full power and authority to enter into this
Agreement and to carry out all acts contemplated by it. This Agreement has been
duly executed and delivered on behalf of the Shareholders and/or the
Corporation, has received all necessary corporate authorization and is a legal,
valid and binding obligation of the Corporation and the Shareholders,
enforceable against each of them in accordance with its terms. Entering into
this Stock Purchase Agreement and the consummation of the transactions
contemplated by it will not (i) violate any provision of the Articles of
Incorporation or Bylaws of the Corporation or, (ii) conflict with or result in
any breach of in any material respect of any of the provisions of any material
agreement to which the Corporation or the Shareholders are a party or by which
any of them or any of their respective assets are bound, or (iii) cause a breach
of any applicable law, governmental regulation, order, or other decree of any
court or governmental agency. The Articles of Incorporation and Bylaws of the
Corporation, as presently in effect, are attached to the Disclosure Memorandum
delivered to EMI and the Buyer simultaneously with the execution and delivery of
this Stock Purchase Agreement (the "Disclosure Memorandum") as SCHEDULE 2(B).
(c) Corporation's Financial Statements
(1) Attached as SCHEDULE 2(C)(1)(I) to the Disclosure
Memorandum are the Corporation's audited balance sheets at September 30, 1997,
1996 and 1995, and statements of income and expense and cash flows for the
years then ending (the "Corporation's Audited Financial Statements"). Attached
as SCHEDULE
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2(C)(1)(II) to the Disclosure Memorandum is the Corporation's unaudited balance
sheet as of January 31, 1997, modified to give effect to adjustments through
the date of Closing (February 14, 1998) based on the Corporation's divestiture
of assets used in lines of business unrelated to the operations of its Schools
and/or limited partnership interests in real estate to be leased to the
Corporation as a closing condition to the sale of the Stock and with Profit
and Loss Statements for the same period reflecting the same adjustments. No
cash flow statements for this period are included (the "Corporation's Most
Recent Balance Sheet") (collectively, the Corporation's Unaudited Financial
Statement"). The Corporation's Audited and Unaudited Financial Statements are
collectively called the "Corporation's Financial Statements." Attached as
SCHEDULE 2(C)(1)(III) to the Disclosure Memorandum are the Corporation's
corporate tax returns for the years of 1996 and 1995. [Definition of Schedule
2(c)(1)(ii) modified pursuant to stipulation by the parties' counsel dated
February 16, 1998.]
(2) The Corporation's Financial Statements: (i) accurately
represent the transactions appearing on the books and records of the
Corporation, and (ii) fairly present in all material respects the Corporation's
financial condition and its results of operations at the times and for the
periods presented, including normal adjustments consistent with year end
adjustments to properly reflect accruals through the end of the period;
provided, however, that the Corporation's Unaudited Financial Statements do not
contain footnotes and the related disclosures. The Corporation's Audited
Financial Statements have been prepared on the accrual basis in accordance with
generally accepted accounting principles consistently applied ("GAAP"), except
as otherwise disclosed in the reports accompanying them or in the notes attached
to them.
(3) There have been no material adverse changes in the
financial condition or in the operations, properties or assets of the
Corporation since the date of the Corporation's Most Recent Balance Sheets.
(d) Liabilities of the Corporation. The Corporation has no liabilities,
contingent or otherwise, including, without limitation, liabilities for state or
Federal income, withholding, sales, or other taxes, except to the extent
reflected, reserved against, or provided for, in the Corporation's Most Recent
Balance Sheet, except for taxes, trade payables and other obligations incurred
after the date of the Corporation's Most Recent Balance Sheet in amounts
consistent in all material respects, with those incurred in prior periods in the
ordinary course of business, including without limitation liabilities for
unearned tuition.
(e) Assets of the Corporation. The Corporation has good title to all of
its assets (the "Assets"). Except as otherwise disclosed in the Corporation's
Financial Statements or the related notes accompanying them or in the Exhibits
to this Agreement or the Disclosure Memorandum, all of the Assets are owned free
and clear of any adverse claims, security interests, or other encumbrances or
restrictions, except liens for current taxes not yet due and payable, landlords'
liens as provided for in the relevant leases or by applicable law, or liens or
similar security interests granted as part of personal property financing
agreements made in the ordinary course of business and which in the aggregate
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are not material. The Assets constitute all of the assets necessary for the
operation of the Schools as currently conducted.
(f) Facility and Facility Operations.
(1) Included as SCHEDULE 2(F)(1) to the Disclosure Memorandum
are copies of the leases (the "Schools Facility Leases") pursuant to which the
Schools' Facilities (the "School Facilities") are leased. The Schools'
operations are conducted solely at the School Facilities and all of the tangible
Assets used in connection with such operations are located at the School
Facilities. All of the improvements located at the School Facilities are in good
operating condition and repair, subject only to ordinary wear and tear. There is
no pending or, to the knowledge of the Shareholders, threatened condemnation
proceeding with respect to the School Facilities.
(2) Attached as SCHEDULE 2(F)(2) to the Disclosure Memorandum
is a schedule of all of the furnishings, fixtures and equipment with values in
excess of the baseline used in determining such inventory, located on, or used
in connection with, the operation of the School Facilities as of the date
indicated on such inventory, subject to immaterial omissions occurring in the
ordinary course of compiling such inventory.
(3) Except for (i) environmental law compliance (which is
addressed in Section 2(f)(4) below) and (ii) accreditation, recruitment,
admissions, student loan and funding matters compliance (which are addressed in
Sections 2(h) and 2(i) below) as to which no representation or warranty is made
in this Section 2(f), all activities at, and the physical condition of, the
School Facilities are in compliance with all legal and regulatory requirements
applicable to the Corporation, the conduct of its business, and the use of each
School's Facility, and the Corporation has not received any actual notice to the
contrary. The Corporation has paid for and obtained all licenses, permits, and
other authorizations material to the conduct of its business at the School
Facilities (the "Permits"). All Permits currently in effect and pertaining to
the School Facilities or the Corporation's activities at the School Facilities
are listed on SCHEDULE 2(F)(3) of the Disclosure Memorandum. The representations
contained in this subsection 3 shall not apply to incidental instances of
non-compliance occurring in the ordinary course of business without the actual
knowledge of the Corporation, which are immaterial to the operation of the
Schools and capable of being cured without significantly disrupting the Schools'
operations.
(4) There are no Hazardous Substances(1) in, on or under the
School Facilities except for those which are used by the Corporation in
compliance, in all
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(1) The term "Hazardous Substance" shall include without limitation:
(l) Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances," or "solid
waste" in CERCLA, RCRA, and the Hazardous Materials Transportation
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material respects, with applicable law, and the Corporation is not now engaged
in any litigation, proceedings or investigations, nor knows of any pending or
threatened litigation, proceedings or investigations regarding the presence of
Hazardous Substances in, on or under the School Facilities.
(g) Equipment Leases and Financing Agreements. All of the leases and
financing agreements to which the Corporation is a party and which relate to the
operations of the Schools are described in SCHEDULE 2(G) of the Disclosure
Memorandum (the "Financing and Related Agreements"). Copies of the Financing and
Related Agreements are attached to such Schedule or have been provided to the
Buyer. Except as reflected in such Disclosure Memorandum, there have been no
modifications to any of the Financing and Related Agreements; the Corporation is
not in default in any material respect with respect to them; and none of the
interests of the Corporation in any of them is subject to any restriction except
as stated in the applicable document or as provided by applicable law.
(h) Accreditation and Compliance with Title IV Requirements. Attached
as SCHEDULE 2(H) to the Disclosure Memorandum is a list of all Federal, state or
other licenses and approvals, including without limitation all accreditations
and certifications, granted to the Corporation with respect to the conduct of
its educational or training business at the Schools (the "Accreditations and
Certifications"), and the governmental
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Act, 49 U.S.C. Sections 1801 et seq., and in the regulations
promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in any applicable
state statute and in the regulations promulgated pursuant to any
applicable state statute;
(iii) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(iv) Such other substances, materials and wastes which are or become
regulated under applicable local, state or federal law, or which are
classified as hazardous or toxic under federal, state, or local laws or
regulations; and
(v) Any material, waste or substance which is (A) petroleum, (B)
asbestos, (C) polychlorinated biphenyl, (D) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
SS1251 et seq. or listed pursuant to Section 307 of the Clean Water
Act, (E) flammable explosive, or (F) radioactive materials.
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body or agency or other entity granting such Accreditation or Certification.
Included in such Disclosure Memorandum are copies of all such Accreditations and
Certifications.
(1) Except for the Permits and the Accreditations and
Certifications, no license or approval is material to the conduct of the
Corporation's operation of the Schools as they are now being conducted, and the
Corporation has received no notice that any other license or approval is
necessary for the continued operation of the Schools or that any such license or
approval will not be renewed.
(2) The Schools are accredited by the Accrediting Commission
of Career Schools and Colleges of Technology. The Corporation's operation of the
Schools are and have been conducted in all material respects in accordance with
all relevant standards imposed by applicable accrediting agencies, or agencies
administering state government student aid programs in which the Corporation, or
any students attending any of the Schools, participate, or other applicable laws
or regulations.
(3) Each of the Schools is an institution certified by the
United States Department of Education (the "Department of Education"). The
Corporation is a party to, and is and at all times has been in compliance with,
a valid program participation agreement with the Department of Education with
respect to the operations being conducted by the Schools. The Corporation has
not received any notice, not previously complied with, with respect to any
alleged violation of the rules or regulations of the Department of Education or
any applicable accrediting agency in respect of the Schools or the terms of any
program participation agreement to which it is or was a party. If any such
notices have been received and complied with, the Corporation has disclosed its
receipt and disposition to Buyer prior to the execution of this Agreement in
writing by a letter making specific reference to this Section of this Agreement.
The Corporation is and at all times has been, in compliance with all of the
provisions of the Higher Education Act of 1965 ("HEA") and the regulations
promulgated by the Department of Education thereunder (the "DOE Regulations")
necessary to establish and maintain its eligibility to participate in the Title
IV funding programs provided for therein ("Title IV Funding Programs"),
including without limitation, the demonstration of financial and administrative
responsibility as provided for in the DOE Regulations. The Corporation has
submitted audited financial statements to the Department of Education for the
fiscal years ended September 30, 1996 and September 30, 1995 relating to its
financial responsibility to participate in Title IV Funding Programs as provided
for in the DOE Regulations (the "DOE Financial Statements") and was in
compliance with all DOE Regulations relating to financial and administrative
responsibility as of September 30, 1997. The Corporation has submitted audits of
the Title IV Financial Aid Programs to the DOE for purposes of demonstrating
compliance with the DOE Regulations regarding the administration of funds
received pursuant to Title IV Funding Programs for the applicable federal fiscal
years June 30, 1996 and June 30, 1995 (the "Title IV Financial Aid Audits").
Except as set forth in SCHEDULE 2(H)(3) to the Disclosure Memorandum, the DOE
Financial Statements and Title IV Financial Aid Audits are true and correct in
all material respects.
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(4) The Corporation is not aware of any investigation or
review of student financial aid programs (including without limitation Title IV
Programs) in which the Schools or its students participate, or any review of any
of the Schools' Accreditations or Certifications whether by a party to any
relevant agreement, the issuer of such Accreditation or Certification or
otherwise.
(i) Recruitment; Admissions Procedures; Attendance; Reports. Attached
as SCHEDULE 2(H)(I) to the Disclosure Memorandum are all policy manuals and
other statements of procedures or instruction relating to recruitment of the
Schools' students, including procedures for assisting in the application by
prospective students for direct or indirect state or Federal financial
assistance; admissions procedures, including any descriptions of procedures for
insuring compliance with state or Federal or other appropriate standards or
tests of eligibility; procedures for encouraging and verifying attendance,
minimum required attendance policies, and other relevant criteria relating to
course completion and certification (collectively referred to as the "Policy
Guidelines") which have previously been delivered to the Buyer by the
Corporation. The Schools' operations have been conducted in all material
respects in accordance with the Policy Guidelines.
The Corporation has submitted all reports, audits, and other
information, whether periodic in nature or pursuant to specific requests
("Compliance Reports"), to all agencies or other entities with which such
filings are required relating to the Schools' compliance with (I) applicable
accreditation standards governing its activities or (ii) laws or regulations
governing programs pursuant to which the Schools or students attending the
Schools receive funding, including, without limitation, the Xxxxxxx Loan
Program, the Federal Family Education Loan Programs, the Pell Grant program and
the Supplemental Educational Opportunity Grant Program, the Federal Direct
Student Loan Program or the Federal Work Study Program, all of which are
provided for pursuant to Title IV of the HEA.
Complete and accurate records in all material respects for all present
and past students attending the Schools have been maintained consistent with the
operations of a school business. All forms and records have been prepared,
completed, maintained and filed in all material respects in accordance with all
federal and state laws and regulations applicable to the operations of the
Schools, and are true and correct in all material respects. All financial aid
grants and loans, disbursements and record keeping relating to them have been
completed in compliance in all material respects with all federal and state
requirements, and there are no material deficiencies in respect thereto. No
student at the Schools has been funded prior to the date for which such student
was eligible for funding and such student's records have been processed in all
material respects in accordance with all applicable federal, state and relevant
third party funding source requirements. All appropriate reports and surveys
have been accurately prepared, taken and filed prior to delinquency.
(j) Default. Attached as SCHEDULE 2(J) to the Disclosure Memorandum is
a list indicating the cohort default rate, as calculated by the Department of
Education, of all students attending the Schools receiving assistance pursuant
to the Xxxxxxxx Loan and
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Supplemental Loans for Students programs (or their applicable predecessor
programs) for the federal fiscal years ended September 30, 1993, 1994, 1995 and
1996. To the best of the knowledge of Shareholders and the Corporation, such
schedule is materially accurate in all respects.
(k) Trademarks, etc. Attached to the Disclosure Memorandum as Schedule
15 is a list of all tradenames, trademarks, service marks, copyrights and the
registrations for them owned or used by the Corporation in connection with the
operation of the Schools. To the best knowledge of the Corporation, it has not
infringed and is not now infringing, any trademark, tradename, service xxxx, or
copyright belonging to any other person in connection with the operation of the
Schools. Except as set forth on such Schedule, the Corporation is not a party to
any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademark, tradename, service xxxx, or copyright
used by the Corporation in connection with the operation of the Schools. The
Corporation's operation of the School's may be conducted without license by
others for the use of any tradename, trademark, service xxxx, or copyright.
(l) Material Contracts. Attached as SCHEDULE 2(L) to the Disclosure
Memorandum is (i) a schedule identifying all material contracts relating to the
Schools' operations not otherwise specifically identified in the other Schedules
to the Disclosure Memorandum, including, without limitation, all agreements
relating to state or Federal funding of educational services provided by the
Corporation through grants, loans or direct payments either to the Corporation,
individual students or otherwise, and any agreements relating to the placement
of students following their completion of relevant educational programs provided
by the Schools other than agreements with students involving the teaching of
standard courses, for standard prices as set forth in the Schools' catalog or in
the enrollment agreement for such students (the "Contracts"); (ii) a summary of
all material provisions of the Contracts that are oral and not reduced to
written documents; and (iii) a copy of all written Contracts. Except as
disclosed in this Schedule 16: (i) all of the Contracts remain unmodified and in
full force and effect, and (ii) the Corporation is not in default of any
material nature (nor, to the best knowledge of the Shareholders, does any state
of facts exist which, with the giving of notice, the passing of time, or
otherwise, would constitute a default of any material nature by the Corporation)
with respect to any of the Contracts.
(m) Maintenance and Employment Agreements. Attached to the Disclosure
Memorandum as SCHEDULE 2(M) is (i) a schedule of all written agreements between
the Corporation and independent contractors, employees and agents who are
employed or engaged in the management or operation of the Schools or the School
Facilities; (ii) the names of all parties entitled to payments from the
Corporation under any such agreements or arrangements; (iii) the amounts payable
by the Corporation under the terms of all such agreements and arrangements,
including without limitation, the terms of employment and compensation,
including vacation and other employee benefit provisions and the cost of all
employee benefits and payroll taxes; and (iv) a copy of all written contracts
for such services. There are no material oral agreements in effect for any such
services. Except as disclosed on such Schedule 2(l): (x) there are no written
agreements between any of
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such contractors, employees or agents and the Corporation; (y) there is no party
entitled to compensation or remuneration for any such services arising from the
operation of the Schools after the Closing; and (z) the Corporation's agreements
and arrangements providing for the services described on such Schedule may be
terminated by the Corporation at any time, with or without cause, and without
any obligation to pay any of said parties any amounts whatsoever except as may
be required by law (including, without limitation, severance pay or accrued
vacation pay or other benefits).
(n) Employee Benefit Plans. The Corporation maintains employee benefit
plans as listed on SCHEDULE 2(N) of the Disclosure Memorandum (the "Employee
Benefit Plans") with respect to employees involved in the operation of the
Schools. Copies of such plans have been previously delivered to the Buyer.
Except as listed on such Schedule, the Corporation does not maintain any profit
sharing, pension or other employee benefit plan related to the Schools'
operations. The Corporation has no unfunded obligations pursuant to any
insurance, retirement, pension, profit sharing or deferred compensation plan or
program relating to the Schools' operations.
(o) Labor. There is no existing labor dispute affecting the operation
of the Schools. None of the Corporation's employees involved in the operations
of the Schools are covered by any union or collective bargaining agreement.
(p) Insurance. A schedule of all of the policies of insurance
maintained by the Corporation in connection with the operation of the Schools is
attached as SCHEDULE 2(P) to the Disclosure Memorandum. The insurance coverage
provided by such policies complies in all material respects, with all agreements
to which the Corporation is a party, and applicable legal requirements to which
it is subject. All such policies are currently in effect.
(q) Taxes. The Corporation has filed all Federal, state and local tax
returns which it is required to file and has no outstanding liability for any
Federal, state or local taxes or interest or penalties thereon, whether disputed
or not, except taxes not yet payable which have been provided for in accordance
with GAAP and are disclosed in the Corporation's Effective Most Recent Balance
Sheet or have subsequently accrued in the normal course of business.
(r) Actions Pending. Except as disclosed in SCHEDULE 2(R) to the
Disclosure Memorandum: (i) there are no actions, suits, proceedings or claims
pending or threatened against the Corporation or Shareholders which, if
determined adversely to the Corporation or Shareholders, would (A) have a
material adverse effect on the Assets, or the operation of the Schools, or (B)
prevent or delay the consummation of any of the transactions contemplated by
this Agreement; (ii) the Corporation or Shareholders, is not the subject of any
pending or threatened investigation relating to any aspect of the Corporation's
operation of the Schools, by any Federal, state or local governmental agency or
authority; (iii) the Corporation, is not and has not been the subject of any
formal or informal complaint, investigation or inspection under the Equal
Employment Opportunity
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Act or the Occupational Safety and Health Act (or their state or local
counterparts) or by any other Federal, state or local authority.
(s) Accounts Receivable. Each of the accounts receivable of the
Corporation relating to the Schools' operations, constitutes a valid claim in
its full amount against the debtor charged on the Corporation's books and has
arisen in the ordinary course of the Schools' operations. The Shareholders have
no knowledge that each such account receivable is not fully collectible to the
extent of the face value thereof, except to the extent of the normal allowance
for doubtful accounts with respect to accounts receivable computed as a
percentage of sales consistent with the Corporation's prior practices as
reflected on the Effective Date Balance Sheet. No account debtor has asserted
any right to any setoff, deduction or defense with respect thereto.
(t) No Guaranties. None of the Corporation's obligations or liabilities
is guaranteed by any other person, firm or corporation, except the Shareholders
have guaranteed the Corporation's obligation which was originally incurred to
First Fidelity, N.A., in connection with its acquisitions of the Schools nor has
the Corporation guaranteed the obligations or liabilities of any other person,
firm or corporation.
(u) Bank Accounts and Deposit Boxes. Attached to the Disclosure
Memorandum as SCHEDULE 2(U) are the names and addresses of all banks or
financial institutions in which the Corporation has an account, deposit or
safety deposit box with the names of all persons authorized to draw on these
accounts or deposits or to have access to the boxes, and an indication of which
accounts or deposits or boxes contain financial aid funds, in each case to the
extent such accounts are used in connection with the Schools' operations.
(v) Records. The books of account of the Corporation relating to the
Schools' operations are complete and correct in all material respects, and there
have been no transactions involving the Schools' operations which properly
should have been set forth therein and which have not been accurately so set
forth.
(w) Transactions With Certain Persons. The Schools, on the one hand,
and the Corporation, on the other, when considered on a consolidating basis, do
not owe any amount to, the other or have any contract with or commitment to the
other except as reflected on the Schools' Financial Statements. The Corporation
has made no distributions or other intra company transfers from or to the
Schools subsequent to the date of the Corporation's Most Recent Balance Sheet.
(x) Capital Stock and Subsidiaries. The Corporation's authorized
capital stock consists solely of 100,000 shares of common stock with no par
value of which 33,890 shares (previously defined in the Preliminary Statement
set forth above as the "Stock") are outstanding, validly issued and are
presently held beneficially and of record by the Shareholders. The Stock are
fully paid and non-assessable. All of the Stock are owned absolutely by the
Shareholders, free and clear of all liens, encumbrances and adverse claims.
There are no voting trusts, proxies, Shareholders agreements or similar
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contracts or understandings in effect relating to the Stock. Except for this
Agreement, there are no outstanding rights, options, warrants, convertible
securities or agreements of any kind entitling any person to purchase or acquire
any shares of capital stock or any other securities or agreements of any kind
entitling any person or purchase or acquire any shares of capital stock or any
other securities of the Corporation, including, without limitation, rights to
acquire capital stock contingent upon the payment of money, passage of time or
other contingency. The Corporation is not a partner or a joint venturer in any
enterprise, and has no subsidiaries.
3. REPRESENTATIONS AND WARRANTIES OF EMI AND BUYER. Each of EMI and
Buyer represents to the Corporation and Shareholders as follows:
(a) No Misstatements. The representations and the information supplied
by it contained in this Agreement, the Exhibits attached to it, and the
documents incorporated by reference into it do not contain any untrue statement
of a material fact or omit to state any fact necessary to make such
representations or information not materially misleading.
(b) Validity of Actions. It is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the authority to
carry on its business as currently conducted, and is qualified to do business in
all jurisdictions in which such qualification is necessary. It has full power
and authority to enter into this Agreement and to carry out all acts
contemplated by it. This Agreement and each of the documents provided for in it
to be delivered as part of this transaction, have been duly executed and have or
will be delivered pursuant to all appropriate corporate authorization on its
behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms. The execution and delivery
of this Agreement, and each of the documents to be executed and delivered by EMI
and the Buyer pursuant to its terms, and the consummation of the transactions
contemplated by them will not violate any provision of their respective
Certificates of Incorporation or Bylaws or, violate, conflict with or result in
any breach of any of the terms, provisions of or conditions of, or constitute a
default or cause acceleration of any indebtedness under, any indenture,
agreement or instrument to which it is a party or by which it or its assets may
be bound, or, cause a breach of any applicable law or governmental regulation,
or any applicable order, judgment, writ, award, injunction or decree of any
court or governmental instrumentality.
(c) Capitalization.
(1) EMI. As of the date hereof, the authorized capital stock
of EMI consists of: (i) 15,000,000 shares of EMI Common Stock, par value $0.01
per share, of which as of the date of this Agreement, there were 7,369,100
shares issued and outstanding as of December 31, 1997; and (ii) 5,000,000 shares
of Preferred Stock, par value $.01 per share ("EMI Preferred Stock") of which as
of the date of this Agreement there were no shares issued and outstanding. All
outstanding shares of EMI Common Stock have been validly issued by EMI and are
fully paid, non-assessable and free of preemptive rights. There are no
subscriptions, options, warrants, calls, rights, contracts,
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commitments, understandings or arrangements relating to the issuance, sale or
transfer by EMI of any shares of its Capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument,
except as disclosed in EMI's Registration Statement on Form S-1 (No. 333-09777),
or in its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q or its
current reports on Form 8-K, (all as may have been amended from time to time)
filed pursuant to the provisions of the Securities Act of 1933 and/or the
Securities Exchange Act of 1934 with the Securities and Exchange Commission.
(2) The Buyer. As of the date of this Agreement, the authorized
capital stock of the Buyer consists of 1,000 shares of Common Stock of which all
are issued and outstanding. All outstanding shares of the Buyer have been
validly issued and are fully paid, non-assessable and free of preemptive rights,
and all of such shares are owned, beneficially and of record, by EMI.
(d) Actions Pending. There are no actions, suits, proceedings or claims
pending or to the knowledge of EMI or the Buyer, threatened against either of
them which, if determined adversely to either of them would (A) have a material
adverse effect on their operations, or (B) prevent or delay the consummation of
any of the transactions contemplated by this Agreement. Neither EMI nor Buyer is
the subject of any pending or (to its knowledge) threatened investigation
relating to any aspect of its operations.
(e) EMI's Financial Statements
(1) Attached as SCHEDULE 3(D) to the Disclosure Memorandum are
(A) EMI's audited balance sheets at March 31, 1995, 1996, and 1997, and
statements of income and expense and cash flows for the years then ending (EMI's
Audited Financial Statements") and (B) EMI's unaudited balance sheets at
September 30, 1997, and statements of income and expense and cash flows for the
periods then ending ("EMI's Interim Financial Statements" collectively with
EMI's Audited Financial Statements, "EMI's Financial Statements").
(2) EMI's Financial Statements: (i) have been prepared on the
accrual basis in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as otherwise disclosed in the reports
accompanying them or in the notes attached to them, and (ii) fairly present
EMI's financial condition and its results of operations at the times and for the
periods presented.
(3) There have been no material adverse changes in the financial
condition or in the operations, business, prospects, properties of assets of EMI
since the date of EMI's Interim Financial Statements.
(f) Buyer's Financial Condition. The Buyer is a newly formed
Corporation. It has no material liabilities except as provided for in this
Agreement, and no assets except the joint and several agreements of EMI to
perform in accordance with the terms of this Agreement.
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(g) EMI Purchase Stock. Upon issuance, the EMI Purchase Stock shall be
validly issued, fully paid and non-assessable to the Shareholders free and clear
of all liens, encumbrances and adverse claims.
4. COVENANTS OF THE PARTIES.
(a) Conduct of the Business Prior to the Closing. Pending consummation
of the transactions contemplated in this Agreement or prior to termination of
this Agreement, the Corporation and Shareholders agree, without prior written
consent of Buyer, given in a letter which specifically refers to this Section of
the Agreement:
(1) not to (i) perform any act or omit to take any act that
would make any of the Shareholders' representations made in Section 2 above,
inaccurate in any material respect or materially misleading as of the Closing
Date, or (ii) allow the Corporation to make any payment or distribution with
respect to the Schools or their operations except for the payment of liabilities
provided for in the Corporation's Financial Statements or incurred in the
ordinary course of business;
(2) to conduct the business of the Schools in the ordinary and
regular course, maintain the School Facilities, protect the Schools'
Accreditation Certifications and Permits, and keep their books of account,
records and files in substantially the same manner as at present.
(3) to make all tuition refunds with respect to the Schools'
operations within the time frames provided for in the Regulations and any
applicable state or accrediting agency regulations, and to pay all accounts
payable as they become due.
(b) Notice. Pending the consummation of the transactions contemplated
in this Agreement or prior to termination of this Agreement, each party agrees
that it will promptly advise the others of the occurrence of any condition or
event which would make any of its representations contained in this Agreement
inaccurate, incorrect, or materially misleading.
(c) Access. Prior to the Closing, the Corporation shall afford to the
Buyer (and its officers, attorneys, accountants and other authorized
representatives), upon reasonable notice, free and full access during usual
business hours to its relevant offices, personnel, books and records and other
data, financial or otherwise, so that Buyer may have full opportunity to make
such investigation as it shall desire of the Assets and the business and
operations of the Schools by the Corporation, provided that such investigation
shall not unreasonably interfere with the Corporation's operations. The scope of
the investigation will include, but not be limited to, a verification of the
Corporation's Financial Statements and a review of the Corporation's control
procedures, regulatory compliance relating to the Schools, the Schools Facility,
and material contracts and litigation relating to the Schools. Duly authorized
representatives of the Buyer shall also be entitled to discuss with officers of
the Corporation, its counsel, employees and
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independent public accountants, all of its books, records and other corporate
documents, contracts, pricing and service policies, commitments and future
prospects to the extent such materials and matters relate to the operation of
the Schools. Representatives of the Corporation will furnish to Buyer and such
other persons, copies of all materials relating to the business affairs,
operations, Facility, Assets and liabilities of the Corporation relating to the
Schools which may be reasonably requested from time to time and will cause
representatives and employees of the Corporation to assist Buyer in its
investigation of the matters relative to the Schools. All information obtained
by Buyer, EMI or any of their officers, directors, employees, lender, investors,
agents and other representatives (the "Buyer's Representatives") in connection
with the transactions contemplated by this Agreement or in the course of their
investigations of the Schools, whether obtained before or after the date of this
Agreement (the "Evaluation Material") shall be used only in connection with this
Agreement and the subsequent operation of the Schools, and each of Buyer and EMI
shall assure that all Evaluation Material will be otherwise kept strictly
confidential by each of them and the Buyer's Representatives.
(d) Additional Documents. At the request of any party, each party
will execute and deliver any additional documents and perform in good faith such
acts as reasonably may be required in order to consummate the transactions
contemplated by this Agreement and to perfect the conveyance and transfer of any
property or rights to be conveyed or transferred or perfect the assumption of
any liabilities assumed under the terms of this Agreement.
(e) Compliance with Conditions to Closing. Subsequent to the
execution and delivery of this Agreement and prior to the Closing, each of the
parties to this Agreement will execute such documents and take such other
actions as reasonably may be appropriate to fulfill the conditions to Closing
provided for in Section 5 of this Agreement.
5. CONDITIONS TO CLOSING BY THE RESPECTIVE PARTIES. The obligation of
EMI and Buyer, on the one hand, and the Corporation and Shareholders on the
other hand, to consummate the transactions contemplated by this Agreement shall
be subject to compliance with or satisfaction of the following conditions by the
other, to the extent applicable:
(a) Bring Down. The representations and warranties set forth in this
Agreement shall be true and correct in all material respects on and at the
Closing Date as if then made by the relevant party (except for those
representations and warranties made as of a given date, which shall continue to
be true and correct as of such given date).
(b) Compliance. Each party shall have complied with all of the
covenants and agreements in this Agreement on its or their part, respectively,
to be complied with as of or prior to the Closing Date.
(c) No Material Adverse Changes. Since the date of the Most Recent
Balance Sheet, there shall not have occurred any material adverse change in the
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condition or operations (financial or otherwise) of the Schools, the School
Facilities, or the Assets. Since September 30, 1997, there shall not have
occurred any material adverse change (financial or otherwise) of EMI.
(d) Buyer Certificates. There shall be delivered to the
Shareholders:
(1) a certificate executed by the President and Secretary of
each of Buyer and EMI, dated the Closing Date, certifying that the conditions to
be fulfilled by each of them set forth in this Section 5 have been fulfilled;
(2) a certificate of incumbency for each of the Buyer and EMI
executed by its President or any Vice President and by the Secretary or any
Assistant Secretary of such entity, listing the officers of such entity
authorized to execute (to the extent applicable) the Agreement and the other
documents, certificates, schedules and instruments to be delivered on behalf of
such entity, and their respective offices, and containing the genuine signature
of each such person set forth opposite his name; and
(3) good standing certificates and certified charter documents
of each of them of recent date, from the Secretary of the State of the
jurisdiction of incorporation of such entity and a copy of their respective
By-Laws certified by an officer thereof.
The certificates described in subsections (1), (2) and (3) above are
hereafter referred to collectively as the "Buyer's Certificates."
(e) Shareholders' Certificates. There shall be delivered to the
Buyer and EMI:
(1) a certificate executed by the President and Secretary of the
Corporation and the Shareholders, dated the Closing Date, certifying that the
conditions to be fulfilled by it as set forth in this Section 5 have been
fulfilled;
(2) a certificate of incumbency for the Corporation executed by
its President or any Vice President and by the Secretary or any Assistant
Secretary of the Corporation, listing the officers of such entity authorized to
execute (to the extent applicable) the Agreement and the other documents,
certificates, schedules and instruments to be delivered on behalf of such
entity, and their respective offices, and containing the genuine signature of
each such person set forth opposite his name; and
(3) good standing certificates and certified charter documents
of the Corporation of recent date, from the Secretary of the State of the
jurisdiction of incorporation of such entity and a copy of their respective
By-Laws certified by an officer thereof.
The certificates described in subsections (1), (2) and (3), above, are
hereafter referred to collectively as the "Corporation's Certificates."
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(f) No Suits. No action or proceeding shall have been instituted in any
court or before any Federal, state or local governmental agency against any
party seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or which could have a material adverse effect on
any of the parties, which shall not have been dismissed or withdrawn prior to
the Closing Date.
(g) Documents. All documents required to be delivered to Buyer or the
Corporation or the Shareholders pursuant to this Agreement at or prior to
Closing shall have been so delivered.
(h) Authority. There shall be in full force and effect on the Closing
Date resolutions of the Boards of Directors of the Buyer, EMI and the
Corporation approving this Agreement the other documents executed and delivered
by each of them in connection with this Agreement and the transactions
contemplated in it. At or prior to the Closing, each party will deliver to the
other a copy of the resolutions of its Board of Directors, and in the case of
the Corporation, the resolutions or consent of the Shareholders, together with
any and all required resolutions or consent of the Shareholders thereof,
approving the execution and delivery of this Agreement and the other documents
to be delivered pursuant to this Agreement and the consummation of all of the
transactions contemplated hereby, duly certified by an appropriate officer.
(i) Opinions of Counsel. Each party shall receive the opinion of
counsel to the other party reasonably satisfactory in form and content to the
party receiving such opinion.
(j) Current Insurance Coverage. Payments will have been made as of the
Closing Date with respect to all of the Corporation's insurance policies,
relating to the Schools, and all insurance coverage concerning the Assets and
the Schools' operations shall be continued in force through at least 10 days
subsequent to the Closing Date, unless canceled subsequent to the Closing Date
by Buyer.
(k) Bankruptcy, Dissolution, etc. No petition or other commencement of
proceedings in bankruptcy or proceedings for dissolution, termination,
liquidation or an arrangement, reorganization or readjustment of any party's
debts under any state or Federal law enacted for the relief of debtors or
otherwise, whether instituted by or against a party, has been effected or
commenced by or against any party.
(l) State Approvals. The transactions provided for in this Agreement
shall have been approved by all applicable state regulatory agencies or
authorities and such approvals shall have been delivered to Buyer.
(m) Leases. The parties shall have entered into a satisfactory lease
with respect to the premises located at 000 Xxxxxx Xxxx, Xxxxxxxxxxx Xxxx.
6. CLOSING AND POST CLOSING AGREEMENTS.
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(a) Closing Date and Place. The closing of the transactions provided
for in this Agreement shall take place at the time provided for in Section 1(b)
of this Agreement at such place as the parties may agree, and shall be effective
as provided therein.
(b) Deliveries by Buyer to the Shareholders. At the Closing, Buyer and
EMI shall deliver to the Shareholders:
(1) Initial Payment;
(2) The Second Payment Notes;
(3) The Purchase Money Promissory Notes;
(4) Certificates representing the EMI Purchase Stock;
(5) The Pledge Agreement;
(6) The Security Agreement and related UCC-1's;
(7) The Buyer's Certificates; and
(8) The Registration Rights Agreement in the form attached to
this Agreement as EXHIBIT 5.
(c) Deliveries by the Corporation to Buyer. At the Closing,
Shareholders shall deliver to Buyer:
(1) The original certificates representing the Stock;
(2) The Stock Power (the (Stock Power") in substantially the
form attached to this Agreement as EXHIBIT 6; and
(3) The Shareholders' Certificates;
(d) Filing of Tax Returns and Other Reports. The Corporation and
Shareholders shall timely file all federal and state income tax and other
returns or reports relating to the transactions provided for in this Agreement
and relating to all periods during which the Shareholders owned the Stock, and
to the extent required by law or regulation, all reports with the Department of
Education or any other applicable state of federal regulatory or accrediting
agency relating to such periods including without limitation the Financial Aid
Audits for the federal fiscal year ended June 30, 1996 to be filed by the
Schools with the Department of Education pursuant to applicable regulations.
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(e) Access to Records. Following the effective Closing Date, Buyer and
EMI shall give to the Shareholders reasonable access to (and the right to make
copies at the expense of the Corporation) all financial and other records of the
Schools which reflect or relate to the business, operations, income, expenses
and assets of the Schools existing on, accruing or prior to the Closing Date,
and to preserve such records for a period of time reasonably necessary to insure
their availability for purposes of state and federal regulatory compliance or
production or review in the case of an audit, investigation or inquiry. Access
to such records shall be conducted by the Shareholders in such manner as not to
interfere unreasonably with the operations of the business following the Closing
Date.
(f) Filing for Prerequisite Student Aid Approvals. Prior to 30 days
after the Closing Date, the Buyer shall file all necessary applications for the
Prerequisite Student Aid Approvals.
(g) Acid Test; Minimum Stockholders' Equity. Within thirty (30) days
after the Closing Date, the Shareholders shall provide the Buyer with audited
balance sheets of each school and a combined balance sheet (the "Closing Balance
Sheets") (which shall be subject to the same representations and warranties
provided for in Section 2(c) of this Agreement), which indicates stockholders'
equity as of the Closing Date and the ratio (the "Ratio") of the Corporation's
(i) total cash, cash equivalents and current accounts receivable ("Eligible
Assets") to (ii) current liabilities. In the event that the Ratio on the Closing
Balance Sheets exceeds one (1) to (1) (without giving effect to recording any
liability with respect to the judgment entered against the Corporation in
Xxxxxxxxxx v. CHI Institute (the "Judgment") in the aggregate principal amount
of approximately $230,000), the Buyer shall pay to the Shareholders within
fifteen (15) business days an amount equal to the excess Eligible Assets over
current liabilities, provided that such payment shall be limited to an amount
which, after giving effect to such pament, shall not reduce Shareholders' equity
as shown on such Closing Balance Sheet to less than $1,000,000 (without giving
effect to the recording of any liability with respect to the Judgment) and
further provided that $250,000 of such payment shall be deferred and paid on
March 15, 1999 as part of the Purchase Money Promissory Notes. In the event that
the Ratio is less than one (1) to one (1), then the Shareholders shall pay to
the Buyer within fifteen (15) business days an amount equal to the difference
between current liabilities and Eligible Assets The audit fees incurred in
connection with the preparation of the Closing Balance Sheet shall be shared
equally by the Shareholders and the Buyer.
(h) Payments With Respect to Judgments. The Shareholders shall pay to
the Buyer as provided herein up to $50,000 upon receipt of evidence of payment
to the plaintiffs and/or their attorneys with respect to the Judgment. Such
payments shall be made by deduction from the next applicable payment of
principal from the second payment Note or the Purchase Money Promissory Note, as
the case may be.
(i) Further Documents or Acts. The parties will execute, deliver,
record (where appropriate) and/or perform at Closing and from time to time
thereafter, at the
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request of Buyer, EMI, or the Shareholders, all other documents or acts required
to consummate any of the transactions contemplated by this Agreement or
otherwise carry out the purposes of this Agreement, including without
limitation, any and all instruments or other documents of transfer, conveyance,
assignment and assumption as may be reasonably necessary to effect evidence of
the transactions contemplated by this Agreement.
(j) Retention of Certain Key Employees. The Buyer intends to continue
the employment of (i) Xxxxx Xxxxxx through to September 4, 1998, and (ii) Xxxxx
Xxxxx prior to February 14, 1999, upon their present terms of employments,
subject to applicable regulations, provided that such employees' complete
interviews reasonably acceptable to the Buyer's management and perform their
employment tasks in a manner consistent with the reasonable expectations of the
Buyer's management.
(k) Guarantee. Within 180 days from the date of the Closing, Buyer will
(i) secure the release of any guaranty of any shareholder of the indebtedness of
the corporation to First Fidelity Bank, N.A. outstanding as of the date hereof
(the "Acquisition Debt") or (ii) satisfy such indebtedness in full.
7. CONFIDENTIALITY AND JOINT NON-COMPETITION AGREEMENT.
(a) Shareholders acknowledges that, as a result of his ownership of the
Schools he had access to and knowledge of confidential or proprietary
information developed by the Corporation and Shareholders with respect to the
Schools and its operations and of a special and unique nature and value to the
Buyer, including, but not limited to, the methods and systems used in connection
with the Schools' operations, the names and addresses of their students and
sources of referral, tuition charged and paid by with respect to the Schools or
their customers, curricula, related memoranda, research reports, designs,
records, student files, services, and operating procedures, and other
information, data, and documents now existing or later acquired by the
Corporation or Shareholders in connection with the Schools' operations,
regardless of whether any such information, data, or documents, qualify as a
"trade secret" under applicable Federal or state law (collectively "Confidential
Information"). Confidential Information does not include information that (i)
becomes generally available to the public other than as a result of disclosures
by the Corporation or Shareholders in violation of the terms of this Agreement,
or (ii) becomes available to the Corporation or Shareholders on a
non-confidential basis from a source that is not bound by a confidentiality
agreement with Buyer or EMI or each of their respective directors, officers,
employees, agents or representatives. As a material inducement to Buyer to enter
into this Agreement, the Shareholders covenants and agrees not at any time
following the Closing Date directly or indirectly, to divulge or disclose for
any purpose whatsoever, any Confidential Information which is in the possession
of the Corporation or Shareholders as a result of their ownership of the
Schools, or otherwise as a result of the relationship between the Corporation,
Shareholders and the Schools' operations. In accordance with the foregoing, the
Shareholders agrees at no time retain or remove from the School Facilities
records of any kind or description whatsoever for any
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purpose whatsoever unless authorized by Buyer. Notwithstanding the foregoing
provisions of this Section 7(a), Shareholders may disclose Confidential
Information (i) to his counsel, accountants and agents on a need-to-know basis
(provided that any such person shall be informed of the confidential nature of
such information and directed not to disclose or make public such Confidential
Information), (ii) to the extent required by applicable law, rules and
regulation, and (iii) in any action, suit or proceeding between the parties,
provided that in connection with disclosures permitted by clauses (ii) and (iii)
above, Shareholders shall provide Buyer with at least three (3) days notice of
such intent so that an appropriate protective order may be sought by Buyer if
desired.
(b) As a material inducement to Buyer to enter into this Agreement, the
Shareholders covenants and agrees for a period of ten (10) years after the
Closing of the transactions provided for in this Agreement not to (i) engage in
the operation of a post secondary school facility (the "Prohibited Activities")
anywhere within the State of Pennsylvania or within 50 miles (the "Area") of the
location of any school owned or operated by EMI or any postsecondary educational
school which EMI subsequently operates during such period with respect to which
EMI either gives written notice to the Buyer or includes on its Internet
Homepage or any successor generally available information service prior to the
Shareholders' commencement of such activities; (ii) become associated as
manager, consultant, advisor, or stockholder owning more that 5% of the
outstanding stock of a company or participate in the management or direction of
a company or otherwise with any person, the Corporation or entity engaging in
Prohibited Activities anywhere within the Area; (iii) call upon any of Buyer's,
EMI's or any of EMI's subsidiary schools' students, teachers or referral sources
for the purpose of promoting any Prohibited Activities for any person, person,
the Corporation or entity within the Area; or (iv) divert, solicit or take away
any of Buyer's, EMI's or any of EMI's subsidiary school's teachers or other
personnel for the purpose of engaging in any Prohibited Activities regardless of
the location of such activities.
(c) In the event of a breach or threatened breach by the Shareholders
of any of the provisions of this Section 7, Buyer, in addition to and not in
limitation of any other rights, remedies, or damages available to Buyer at law
or in equity, shall be entitled to a permanent injunction in order to prevent or
to restrain any such breach by Shareholders, or by Shareholders' partners,
agents, representatives, servants, employers, employees and/or any and all
persons directly or indirectly acting for or with them.
(d) Shareholders agrees that, if he shall violate any of his covenants
or agreements provided for in this Section 7, Buyer shall be entitled to an
accounting and repayment of all profits, compensation, commissions,
remuneration, or benefits which Shareholders directly, or indirectly, has
realized and/or may realize as a result of, growing out of, or in connection
with any such violation; such remedy shall be in addition to and not in
limitation of any injunctive relief or other rights or remedies to which Buyer
may be entitled to at law or in equity or under this Agreement.
(e) Shareholders have carefully read and considered the provisions of
this Section 7, and agrees that the restrictions set forth above (including
without limitation the
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time period and geographical areas of restriction) are fair and reasonable and
are reasonably required for the protection of the interest of the Buyer and EMI.
In the event that, notwithstanding the foregoing, any of the provisions of this
Section 7 are held invalid or unenforceable, the remaining provisions shall
continue to be valid and enforceable. In the event that any provision of this
Section 7 relating to time period and/or areas of restriction are declared by a
court of competent jurisdiction to exceed the maximum time period or areas such
court deems reasonable and enforceable, said time period or areas of restriction
shall be deemed to become, and thereafter be, the maximum time period and/or
area which such court deems reasonable and enforceable.
8. INDEMNIFICATION.
(a) Xxxxxx and Xxxxxx, jointly and severally agree to defend, indemnify
and hold harmless the Buyer and EMI and their directors, officers, employees and
agents from and against any loss, liability, damage, settlement or expense
(including, without limitation, attorneys' fees and disbursements) incurred by
Buyer or EMI arising from or related to the inaccuracy or breach of any of the
representations, warranties, covenants or agreements of Shareholders contained
in this Agreement or in any document incorporated by reference into this
Agreement.
(b) Buyer and EMI, jointly and severally, agree to defend, indemnify
and hold harmless Shareholders and their agents from and against any loss,
liability, damage, settlement or expense (including without limitation
attorneys' fees and disbursements) incurred by Shareholders arising from or
related to the inaccuracy or breach of any of the representations, warranties,
covenants or agreements of Buyer or EMI contained in this Agreement or in any
document incorporated by reference into this Agreement.
(c) The party seeking indemnification pursuant to this Section 8 (the
"Indemnified Party") shall give (or cause to be given) to the party or parties
from whom indemnification is sought hereunder (the "Indemnifying Party") written
notice of any claim or matter for which indemnity is (or will be) sought under
this Section 8. Such notice shall be given promptly after the Indemnified Party
receives actual notice or knowledge of the claim or matter that is subject to
indemnification. With respect to any claim asserted by a third party against an
Indemnified Party for which indemnity is sought hereunder, the relevant
Indemnifying Party shall have the right to employ counsel reasonably acceptable
to the relevant Indemnified Party to defend against such assertion and such
Indemnifying Party shall have the right to compromise or otherwise settle any
such action or claim only with the prior written consent of such relevant
Indemnified Party, which consent shall not be unreasonably withheld.
9. EVENTS OF DEFAULT. If any one or more of the following events occurs
then, subject to the expiration of any specified grace period and the giving of
any prior notice required under this Section 9, such event shall constitute an
Event of Default by the party responsible for such event or against whom it
should be charged.
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(a) Warranties or Representations. Any warranty or representation by or
on behalf of any party contained in this Agreement (or in any document between
the parties furnished in compliance with this Agreement at Closing) is false or
misleading in any material respect.
(b) Agreements. Any party fails to take any action required of it to
comply with its obligations contained in this Agreement, or takes any action
prohibited or inconsistent with its obligations under this Agreement, and such
failure to act or action is not cured prior to ten (10) days after written
notice thereof is given to the defaulting party or appropriate action is
commenced within such time, pursued diligently and completed within a reasonable
time.
(c) Refusal to Close. A party refuses to consummate the transactions
provided for (and subject to the terms and conditions specified) in this
Agreement by 5 p.m., Eastern Daylight Time on the Termination Date, except if
the failure to close is based upon the failure of the other party to meet a
condition to Closing provided for in Section 5 of this Agreement.
(d) Failure of Closing Condition. Any party is unable to comply with
the conditions of Closing provided for in Section 5 of this Agreement, other
than as a result of an Event of Default as described in Sections 9(a), (b), or
(c) above.
10. TERMINATION AND RIGHTS AND REMEDIES ON DEFAULT.
(a) Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned prior to the Closing: (i) by the
mutual consent of Buyer, EMI, the Corporation and Shareholders; (ii) by Buyer
and EMI, if any condition to their obligations to close set forth in Section 5
hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; (iii) by the Corporation and
Shareholders if any condition to their obligations to close set forth in Article
5 hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; or(iv) by any party (other than a
party that is in breach of its obligations under this Agreement) if the Closing
shall not have occurred on or before the Termination Date. If this Agreement is
terminated pursuant to clause (i) of this Article 10, all obligations of the
parties hereunder shall terminate without any further liability or obligation of
either party to the other, except that the provisions of Section 11, Section
13(b) and the confidentiality provisions of Section 4(c) of this Agreement shall
survive and continue in full force and effect notwithstanding such termination.
Except as limited by the preceding sentence, the exercise by any party of the
right to terminate this Agreement shall not terminate or limit any remedy that
such party may have in this Section 10 as a result of an Event of Default.
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(b) Rights and Remedies on Default. Upon and after an Event of Default
by any party, the other party shall have the following rights and remedies:
(1) Default by Buyer. In the event that Buyer is obligated to and
fails to close by the Termination Date, and the Corporation or Shareholders is
not in default of their obligations under this Agreement, this Agreement shall
terminate and the Corporation and Shareholders shall have the right to seek
money damages as their sole remedy. The Corporation and Shareholders hereby
agree that neither of them shall be entitled to seek or file suit for specific
performance of this Agreement.
(2) Default by the Corporation or Shareholders. If, on the
Termination Date, there exists an Event of Default as described in Section 9 of
this Agreement, chargeable against the Corporation or the Shareholders, Buyer
may either (i) waive such default and close, in which event Buyer shall have the
right to seek specific performance of this Agreement, including, without
limitation, the acquisition of the Shares and the performance by the Corporation
and Shareholders of the covenants provided for in this Agreement, or (ii) refuse
to close, and, except in the case of an Event of Default described in Section
9(d) above, seek money damages from the Corporation or Shareholders, including,
without limitation, indemnification pursuant to Section 8 of this Agreement. An
election by Buyer to proceed in accordance with subclause (i) of the preceding
sentence shall constitute the acknowledgment by Buyer and the Corporation or
Shareholders that Buyer cannot be adequately compensated by money damages for
the failure to perform by the Corporation or Shareholders, that such damages are
indeterminate, and that a court of competent jurisdiction may enter an order
pursuant to which the Corporation and Shareholders are obligated to specifically
perform their obligations to Buyer pursuant to the terms of this Agreement.
(3) Default Subsequent to Closing. If any party breaches this
Agreement subsequent to Closing, or if a default occurs pursuant to Sections
9(a) or 9(b) of this Agreement, and fails to cure such default as provided for
in such Sections the nondefaulting party(ies) shall have the right to seek money
damages from the defaulting party(ies), either pursuant to Section 8 of this
Agreement or otherwise. Alternatively, if, (i) as a result of any action taken
or not taken by the Corporation or Shareholders in violation of any applicable
law or regulation which (ii) has not been disclosed to the Buyer in this
Agreement, and which (iii) the occurrence or non occurrence of which was known
or reasonably should have been known to the Corporation or Shareholders, the
Prerequisite Student Aid Approvals are not received prior to 12 months from the
date of the Closing, or, if received or offered, can only be obtained on
conditions imposing substantial financial burdens on the Buyer in addition to
those which would otherwise be imposed in connection which such approval, the
Buyer may elect to rescind the transactions provided for in this Agreement and,
upon such election, the parties will take such action as may be reasonably
required to restore the other party to its respective positions as they existed
prior to the Closing provided for in this Agreement.
(4) Nature of Remedies Cumulative. Except as otherwise provided in
this Agreement, all rights and remedies granted in this Agreement or available
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under applicable law shall be deemed concurrent and cumulative and not
alternative or exclusive remedies, to the full extent permitted by law and this
Agreement, and any party may proceed with any number of remedies at the same
time or in any order. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and any party, upon the
occurrence of an event of default by another party under this Agreement, may
proceed at any time, under any agreement, in any order and with any available
remedy.
11. FINDERS FEES. Each of the parties represents and warrants to the
other that such party has not employed any finder or broker in connection with
transactions contemplated by this Agreement. Each party agrees to indemnify and
hold harmless the others from and against any claim, damages, liabilities, and
expenses (including without limitation, attorneys' fees and disbursements)
arising from any claim or demand asserted by any person or entity on the basis
of its employment as a finder or broker by the respective party.
12. ARBITRATION. Any disputes between any of the parties to it with
respect to the agreements contained in it, or as modified in the future, are to
be settled by binding arbitration conducted pursuant to the commercial
arbitration rules of the Uniform Arbitration Act of Pennsylvania. In any such
arbitration the scope and timing of any discovery shall be determined by the
arbitrators. Such arbitration is to be the sole remedy for the settlement of
such disputes. All of the parties agree that money damages are inadequate to
compensate for a breach of the confidentiality and non-competition provisions of
this Agreement and contained in this Agreement. The Shareholders agree that upon
application by EMI and/or Acquisition, any court of competent jurisdiction, upon
a showing sufficient to justify the entry of a temporary injunction, may enjoin
any activity allegedly in breach of such agreement pending the outcome of
binding arbitration or enter a similar order of like force and effect, or may
enforce the final determination of such arbitrators by the issuance of such an
injunction or similar order.
With respect to the provisions of Section 7 (Confidentiality and
Non-Competition), the Corporation and Shareholders agree that damages, by
themselves, are an inadequate remedy at law, that a material breach of the
provisions of such Section would cause irreparable injury to the aggrieved
party, and that the provisions of Section 7 may be specifically enforced by
injunction or similar remedy in any court of competent jurisdiction without
affecting any claim for damages, provided that any such injunction shall either
be preliminary in nature, enjoining such activity pending the outcome of
arbitration as provided for in Section 12 of this Agreement, or be in assistance
of the final determination of the arbitrators as provided for in such Section.
The Corporation and Shareholders agree that such injunction may be issued
without the necessity of bond.
13. NOTICES. All notices or other communications required or permitted
under the terms of this Agreement shall be made in writing and shall be deemed
given (I) upon hand delivery, (ii) when sent by commercial overnight courier
with written verification of receipt, or (iii) three days after deposit of same
in the Certified Mail, Return Receipt
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Requested, first class postage and registration fees prepaid and correctly
addressed to the parties at the following addresses:
If to Buyer: CHI Acquisition Corp.
0000 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: President
With a copy to: Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000 - Xxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
If to EMI: Educational Medical, Inc.
0000 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: President
With a copy to: Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000 - Xxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
If to the Corporation: Computer Hardware Service Company, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxxxxxx Xxxx, Xxxxxxx, XX 00000
Attn: President
With a copy to: England & Young, P.C.
00 X. Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxx X. England, Esq.
If to Shareholders: Xxxxxx Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx, Xx.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxx Xxxxx
000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
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or to such other address as any of the parties hereto may designate by notice to
the others.
14. MISCELLANEOUS.
(a) Successors. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned prior to Closing without the prior
written consent of the other parties hereto.
(b) Expenses. Except as otherwise provided in this Agreement,
Buyer, the Corporation and Shareholders shall be responsible for any and all of
the respective fees, costs and expenses incurred by each, in connection with the
negotiation, preparation or performance of this Agreement.
(c) Entire Agreement. This Agreement incorporates by this reference
all Exhibits hereto and all documents executed and/or delivered at Closing. This
Agreement and the documents so incorporated into it contain the parties' entire
understanding and agreement with respect to the subject matter hereof; and any
and all conflicting or inconsistent discussions, agreements, promises,
representations and statements, if any, between the parties or their
representatives that are not incorporated in this Agreement shall be null and
void and are merged into this Agreement.
(d) Amendments Only in Writing. No amendment, modification, waiver
or discharge of this Agreement or any provision of this Agreement shall be
effective against any party, unles
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement.
(f) Cooperation. Each of the parties to this Agreement, when
requested by another party, shall give all reasonable and necessary cooperation
with respect to any reasonable matters relating to the transactions contemplated
by this Agreement.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania, exclusive of
its choice of law provisions.
(h) Headings. The various section headings are inserted for
purposes of reference only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(i) Gender; Number. All references to gender or number in this
Agreement shall be deemed interchangeably to have a masculine, feminine, neuter,
singular or plural meaning, as the sense of the context requires.
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(j) Severability. The provisions of this Agreement shall be
severable, and any invalidity, unenforceability or illegality of any provision
or provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
(k) Survival. Except as otherwise expressly provided in this
Agreement, the liabilities and obligations of each party with respect to any and
all of its representations, warranties, covenants and agreements set forth in
this Agreement and/or in any document incorporated into it shall not be merged
into, affected or impaired by the Closing under this Agreement. All of the
representations, warranties, covenants and agreements set forth in this
Agreement shall survive the Closing for the period of two years thereafter, so
that (except as otherwise provided below) any claim under this Agreement must be
asserted by notice given to the party claimed to be liable on or before the
second anniversary of the Closing Date. Notwithstanding the foregoing, the time
limitation shall not apply to: (i) the covenants related to confidentiality and
non-competition contained in Section 7 above; (ii) claims arising out of a
misrepresentation as to matters contained in Section 2 (h) and 2 (i) (which
shall survive for a period ending on the seventh anniversary of the Closing
Date), or (iii) fraud. All obligations and liabilities described in clauses (i)
and (iii) of the previous sentence shall survive the Closing for the period in
which a claim can be asserted with respect thereto under applicable law.
(l) No Third Party Beneficiaries. This Agreement has been entered
into solely for the benefit of the parties that have executed it, and not to
confer any benefit or enforceable right upon any other party or entity.
Accordingly, no party or entity that has not executed this Agreement shall have
any right to enforce any of the provisions of it.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by an officer duly authorized to do so, all as of the day and year
first above written.
CHI ACQUISITION CORP. ("BUYER") COMPUTER HARDWARE SERVICE
COMPANY, INC. ("CORPORATION")
By: /s/ XXXX X. XXXXXX By: /s/ XXXXXX XXXXXX
------------------------------ -----------------------------
Authorized Signatory Authorized Signatory
EDUCATIONAL MEDICAL, INC. ("EMI")
By: /s/ XXXX X. XXXXXX /s/ XXXXXX XXXXXX
------------------------------- ----------------------------
Authorized Signatory Xxxxxx Xxxxxx
/s/ XXXXXX X. XXXXXX
----------------------------
Xxxxxx X. Xxxxxx
/s/ XXXXX XXXXX
----------------------------
Xxxxx Xxxxx
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EXHIBITS
1. The Second Payment Note
2. The Purchase Money Promissory Note
3. The Pledge Agreement
4. The Security Agreement and related UCC-1's
5. The Registration Rights Agreement
6. The Stock Power
7. The Subordination Agreement
