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STOCK PURCHASE AGREEMENT
Dated as of March 24, 1998
among
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
and
DATA PROCESSING TRAINERS, INC.
and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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TABLE OF CONTENTS
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Section Page
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ARTICLE I.
Sale and Purchase of Stock
1.01. Sale of Stock 2
1.02. Closing 2
a. Shareholder Deliveries 2
b. Buyer Deliveries 4
1.03. The Purchase Price 4
a. Determination of Purchase Price 4
b. Payment of Purchase Price 4
1.04. Other Payments 6
1.05. Further Cooperation 7
ARTICLE II.
Representations and Warranties
2.01. Representations and Warranties of Shareholder 8
a. Authority 8
b. Power to Transfer 8
c. No Breach, etc. 8
2.02. Representations and Warranties of the Company 10
a. Organization 10
b. Authority To Do Business 10
c. Binding Obligation 10
d. Capitalization 11
e. Properties, Leases, etc. 11
f. Contracts 12
g. Litigation 13
h. Licenses 13
i. Employee and Related Matters 13
j. Ordinary Course 14
k. No Broker's or Finder's Fees 14
l. Employee Benefit Plans 14
m. Environmental Matters 14
n. Financial Statements 15
o. Absence of Undisclosed Liabilities 16
p. Taxes 16
q. Compliance with Laws 16
Section Page
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r. Labor Disputes 16
s. Subsidiaries 17
t. Department of Education 17
u. Disclaimer 17
2.03. Representations and Warranties of Buyer 17
a. Organization 18
b. Binding Obligation 18
c. Financial Ability to Perform 19
d. Litigation 19
e. Securities Laws 19
f. No Broker's or Finder's Fee 20
g. Financial Statements 20
h. Disclaimer 20
ARTICLE III.
Additional Agreements
3.01. Press Releases 21
ARTICLE IV.
Conditions Precedent
4.01. Conditions to Each Party's Obligation 21
a. Compliance 21
b. Approvals 23
c. Legal Action 23
d. Statutes 24
4.02. Conditions of Obligations of Buyer 24
a. Representations and Warranties 24
b. Performance of Obligations of Shareholder
and the Company 24
c. No Material Adverse Change 25
d. Consents and Actions 25
e. Noncompetition Agreement 25
4.03. Conditions of Obligation of Shareholder 25
a. Representations and Warranties 25
b. Performance of Obligations of Buyer 25
c. Consents and Actions 26
d. Release of Personal Guarantees 26
e. Consulting Agreement 26
Section Page
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ARTICLE V.
Indemnification
5.01. Buyer Claims 26
5.02. Shareholder Claims 29
5.03. Notice of Claim 30
5.04. Defense of Third Party Claims 30
ARTICLE VI.
General Provisions
6.01. Survival of Representations and Warranties
and Agreements 31
6.02. Transfer Taxes 31
6.03. Notices 32
6.04. Counterparts 33
6.05. Amendment 33
6.06. Miscellaneous 33
6.07. Governing Law 34
6.08. Alternative Dispute Resolution 34
EXHIBIT A LETTER OF INTENT
EXHIBIT B LETTER AGREEMENT
EXHIBIT C PROMISSORY NOTE
EXHIBIT D SECURITY AGREEMENT-STOCK PLEDGE
EXHIBIT E GUARANTY AND SECURITY AGREEMENT
EXHIBIT F FINANCIAL STATEMENTS
EXHIBIT G NONCOMPETITION AGREEMENT
EXHIBIT H CONSULTING AGREEMENT
SCHEDULES
Schedule 2.01(c) Consents
Schedule 2.02(c) Consents
Schedule 2.02(d) Stock Options
Schedule 2.02(e) Company Property
Schedule 2.02(f) Certain Contracts
Schedule 2.02(g) Litigation
Schedule 2.02(h) Licenses
Section Page
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Schedule 2.02(l) Employee Benefit Plans
Schedule 2.02(o) Certain Liabilities
Schedule 2.02(t) Department of Education
Schedule 4.01(a) Draft Closing Balance Sheet
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March 24, 1998
(the "Closing Date"), is by and among ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC., a
Colorado corporation ("Buyer"), DATA PROCESSING TRAINERS CO., a Pennsylvania
corporation (the "Company"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, individually and as sole
shareholder of the Company ("Shareholder").
WHEREAS, Shareholder owns all of the issued and outstanding stock (the
"Stock") of the Company. WHEREAS, Shareholder, the Company and Buyer executed a
letter of intent dated August 21, 1997 (the "Letter of Intent") regarding
Buyer's intent to purchase the Stock, a copy of which is attached hereto as
Exhibit A.
WHEREAS Shareholder, the Company and Buyer executed a letter agreement
dated December 19, 1997 (the "Letter Agreement") setting forth additional terms
regarding Buyer's intent to purchase the Stock, a copy of which is attached
hereto as Exhibit B.
WHEREAS, Shareholder desires to sell to Buyer, and Buyer desires to
purchase from Shareholder all of the Stock on the terms and conditions
hereinafter set forth.
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WHEREAS, the Board of Directors of Buyer has approved the acquisition of
the Stock by Buyer on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I.
Sale and Purchase of Stock
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SECTION 1.01. Sale of Stock. Subject to the terms and conditions set forth
herein, Shareholder hereby sells, assigns and transfers to Buyer and Buyer
hereby purchases from Shareholder the Stock, consisting of one hundred (100)
shares of the common stock of the Company, and constituting all of the issued
and outstanding capital stock of the Company.
SECTION 1.02. Closing.
a. Shareholder Deliveries. Shareholder shall deliver to Buyer at the
Closing:
i. Stock certificates representing all of the Stock, together with
duly endorsed in blank stock powers.
ii. Certified copies of the Articles of Incorporation and Bylaws of
the Company, Certificate of Good Standing issued by the Pennsylvania Secretary
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of State, Resolution of the Shareholders and Directors of the Company, and such
other resolutions, certificates, consents or other documents of authority as
provided for herein, or as may be otherwise necessary to convey and transfer the
Stock, and all other instruments or documents that counsel for Buyer may
reasonably request in order to assure compliance with the terms and conditions
of this Agreement.
iii. Updated financial information through the Closing Date as
contemplated by Section 2.02.n below.
iv. Noncompetition Agreement as contemplated by Section 4.02.e below.
v. Consulting Agreement as contemplated by Section 4.03.e below.
vi. Stock Certificates previously issued to Shareholder by Buyer and
referred to in Section 1.03.b.i(3) and Section 1.04 below, together with a
Medallion Guaranteed stock powers therefor.
vii. Resignations of the current officers and directors of the
Company.
viii. Any documents reasonably required or necessary in connection
with the Company's pension and/or profit sharing plans.
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b. Buyer Deliveries. Buyer shall deliver at the Closing:
i. The Purchase Price to Shareholder, including the Note and the
Security Agreement-Stock Pledge Agreement described in Section 1.03.b below,
except for that portion of the Purchase Price to be satisfied after the Closing
Date in accordance with Section 1.03.b.iv below.
ii. Such instruments or documents that counsel for the Company may
reasonably request in order to assure compliance with the terms and conditions
of this Agreement.
SECTION 1.03. The Purchase Price.
a. Determination of Purchase Price. For purposes hereof the Purchase Price
shall be equal to Eight Million Eight Hundred Ninety Thousand Dollars
($8,890,000) (the "Purchase Price").
b. Payment of Purchase Price. The Purchase Price shall be paid as follows:
i. The ▇▇▇▇▇▇▇ Money Deposit previously paid to Shareholder in
accordance with the Letter of Intent and the Letter Agreement, shall be applied
to the Purchase Price, as follows:
(1) One Hundred Thousand Dollars ($100,000) which was paid to
Shareholder pursuant to the Letter of Intent as a deposit on the Purchase Price;
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(2) Fifty Thousand Dollars ($50,000) which was paid to
Shareholder pursuant to the Letter Agreement as an additional deposit on the
Purchase Price;
(3) Twenty-Five Thousand (25,000) shares of the corporate stock
of Buyer which was delivered to Shareholder pursuant to the Letter Agreement
shall be redeemed at Closing for Two Dollars ($2.00) per share, or the sum of
Fifty Thousand Dollars ($50,000);
ii. Three Million Six Hundred Thousand Dollars ($3,600,000) shall be
paid in cash at the Closing;
iii. Four Million Two Hundred Thousand Dollars ($4,340,000) shall be
represented by a promissory note (the "Note") delivered by Buyer at the Closing
in the form of Exhibit C attached hereto. The Note shall be secured by the Stock
and other assets of the Company pursuant to a Security Agreement-Stock Pledge in
the form of Exhibit D attached hereto, and a Guaranty and Security Agreement in
the form of Exhibit E attached hereto;
iv. The balance of Seven Hundred Fifty Thousand Dollars ($750,000)
shall be satisfied by ▇▇▇▇▇▇▇ issuing to Shareholder one (1) year after the
Closing Date, a number of shares of non-registered common stock of ▇▇▇▇▇▇▇
equivalent to a value of $750,000 based on the ten (10) day trailing average
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market price at the time of the transfer. The shares shall be duly authorized
and validly issued, fully paid and nonassessable, and be entitled to the same
piggyback registration rights, if any (as determined at the option of the
underwriter), as are afforded to Buyer's other shareholders (pro rata based upon
the amount of stock owned by the other shareholders).
SECTION 1.04. Other Payments. Pursuant to the Letter Agreement, Buyer
agreed to pay to Shareholder an additional sum determined by multiplying the
number of days from December 16, 1997 to the Closing Date by One Thousand Four
Hundred Ninety-Six and no/100 Dollars (99 days x $1,496.00 = $148,104) (the
"Additional Payment"). To date, Buyer has paid to Shareholder the sum of
Sixty-Nine Thousand Five Hundred Sixty-Four no/100 Dollars ($69,564.00) and
delivered 34,782 shares of the corporate stock of Buyer with respect to the
Additional Payment. At Closing, such shares shall be redeemed for Two Dollars
($2.00) per share, or Sixty-Nine Thousand Five Hundred Sixty-Four and no/100
Dollars ($69,564.00). The balance of Eight Thousand Nine Hundred Seventy- Six
and no/100 Dollars ($8,976.00) shall be paid in cash at Closing.
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SECTION 1.05. Further Cooperation. From time to time after the Closing, the
parties agree to execute and deliver or to cause to be executed and delivered
such other instruments of transfer or assumption as may reasonably be necessary
or appropriate in order to effectuate the transactions contemplated by this
Agreement. In particular, the Company's status as an S corporation will
terminate as of the Closing Date, and Shareholder agrees to file, or cause to be
filed, the Company's final federal tax return as an S corporation when due. The
Company's books and records required to prepare the final tax return shall be
made available to Shareholder. Buyer covenants and agrees that it shall not make
any tax elections or effect any change in accounting methodologies for the
Company as of or at any time following the Closing Date which has the effect of
increasing the tax liability incurred by Shareholder arising on account of the
consummation of the transactions contemplated hereby (such as, without
limitation, any election under Section 338(h)(10) of the Internal Revenue Code).
Buyer acknowledges that any taxes incurred by Company as of the Closing Date
arising on account of tax elections or change in accounting methodologies
adopted by Buyer after the Closing Date shall be the Buyer's and not the
Shareholder's responsibility hereunder.
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ARTICLE II.
Representations and Warranties
------------------------------
SECTION 2.01. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Buyer, as follows:
a. Authority. Shareholder has the power and authority to execute and
deliver this Agreement and to perform his obligations hereunder. This Agreement
has been duly executed and delivered by Shareholder, or his duly appointed
agent, and this Agreement is a legal, valid and binding obligation of
Shareholder, enforceable against Shareholder in accordance with its terms.
b. Power to Transfer. Shareholder has full right, power and authority to
enter into this Agreement and to assign, transfer and deliver the Stock; and
Shareholder will deliver to Buyer good title thereto, free and clear of all
liens, charges, claims, pledges or encumbrances whatsoever.
c. No Breach, etc.
i. Except as set forth on Schedule 2.01(c) hereto, the execution,
delivery and performance of this Agreement by Shareholder and the consummation
by Shareholder of the transactions contemplated hereby will not result in (A)
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any conflict with or breach or violation of or default under any statute or
regulation, or any judgment, order, decree, mortgage, agreement, deed of trust,
indenture or any other instrument to which Shareholder is a party or by which
any of his properties or assets are bound, or (B) the creation or imposition of
any lien, charge, pledge or encumbrance thereon whatsoever; except, in each
case, for conflicts, breaches, violations, defaults, liens, charges, pledges or
encumbrances which, in the aggregate, would not materially hinder or impair the
consummation of the transactions contemplated hereby.
ii. Except as set forth on Schedule 2.01(c) hereto, to the best of
Shareholder's knowledge, no consent, approval or authorization of or declaration
or filing with any court, governmental authority or third party is required in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except from the U.S. Department of
Education ("DOE"), the Pennsylvania Department of Education ("Pennsylvania
DOE"), and the entities charged with accreditation of schools (the
"Accreditation Agencies"), and in each case, for consents, approvals,
authorizations, declarations or filings which have been obtained or made or
which, in the aggregate, would not materially hinder or impair the consummation
of the transactions contemplated hereby.
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SECTION 2.02. Representations and Warranties of the Company. The Company
represents and warrants to Buyer as follows:
a. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Pennsylvania.
b. Authority To Do Business. The Company has all requisite power and
authority to own or lease and operate its properties and to carry on its
business as now conducted.
c. Binding Obligation. This Agreement has been duly authorized by all
requisite corporate action on the part of the Company, has been duly executed
and delivered by the Company, and constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms. Except as set forth on
Schedule 2.02(c) hereto, to the best knowledge of the Company, the execution,
delivery and performance by the Company of this Agreement does not and will not
conflict with, or result in any violation of or default under, any provision of
the Articles of Incorporation or Bylaws of the Company or any law, ordinance,
rule, regulation, judgment, order, decree, agreement, instrument or license
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applicable to the Company or to any of its properties or assets. Except as set
forth on Schedule 2.02(c) hereto, no consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, is required by or with respect to the Company in connection
with its execution, delivery or performance of this Agreement.
d. Capitalization. The Company's authorized capital stock consists of 1,000
shares of common stock of which 100 shares (constituting the Stock) are
outstanding. No other equity securities of the Company other than the common
stock are authorized, issued or outstanding, and there are no outstanding
options, warrants, agreements, contracts calls, commitments, or demands of any
character, preemptive or otherwise, other than this Agreement, relating to any
of the common Stock.
e. Properties, Leases, etc.
i. Schedule 2.02(e) lists all real property owned or leased by the
Company, and all equipment leases material to the operation of the Company. The
Company has (A) valid and subsisting leasehold estates in the real property
listed on Schedule 2.02(e) as leased by it, (B) valid and subsisting leasehold
11
estates in all the equipment presently leased by it, including without
limitation all the Equipment leased under the leases listed on Schedule 2.02(e),
and (C) good and marketable title to all of its other tangible personal property
reflected in the Balance Sheet (as defined below), other than such property
disposed of since such date and such imperfections of title, if any, as are not,
in the aggregate, material to the Company's business taken as a whole.
ii. Each lease referred to in Schedule 2.02(e) is valid and
subsisting, with such exceptions as in the aggregate are not material with
respect to any Equipment subject to any of such leases, and there is not under
any of such leases any existing default by the Company, or by any other party to
the knowledge of the Company, that is material to the Company's business taken
as a whole, or any condition, event or act which with the passage of time or
notice or both would constitute such a default. The Company has made available
to the Buyer for its review at the offices of the Company complete and correct
copies of each lease referred to in Schedule 2.02(e).
f. Contracts. Except as described in Schedule 2.02(f), and excluding
enrollment agreements with students and the Company's agreements with its
12
faculty, the Company is not a party to or bound by any lease, agreement,
contract or other commitment which involves the payment or receipt of more than
$25,000 per year or is not cancelable by the Company on less than (30) days
notice (collectively, the "Contracts"). Each Contract is a valid and binding
obligation of the Company and is in full force and effect.
g. Litigation. Except as described in Schedule 2.02(g), there are no
lawsuits, claims, proceedings or investigations pending or, to the best
knowledge of the Company, threatened against the Company which could adversely
affect the transactions contemplated by this Agreement or Buyer's right to
utilize the Company's assets.
h. Licenses. Schedule 2.02(h) contains a true and correct listing of each
license, permit or other governmental authorization material to the operation of
the Company (collectively hereinafter referred to as "Licenses") held by the
Company which affects the Company's assets.
i. Employee and Related Matters. To the knowledge of the Company, there are
no employment related claims, actions, proceedings or investigations pending or
threatened against the Company before any court, governmental, regulatory or
administrative authority or body, or arbitrator or arbitration panel.
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j. Ordinary Course. Since December 31, 1997, the business of the Company
has been conducted in the ordinary course consistent with past practice.
k. No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated herein.
l. Employee Benefit Plans. Except as set forth on Schedule 2.02(l), there
are no plans of the Company in effect for pension, profit sharing, deferred
compensation, or any other form of retirement or deferred benefit plan.
m. Environmental Matters. There have been no private or governmental
claims, citations, complaints, notices of violation or letters made or issued to
or, to its knowledge, threatened against the Company by any governmental entity
or private or other party for the impairment or diminution of, or damage, injury
or other adverse effects to, the environment or public health resulting, in
whole or in part, from the ownership, use or operation of the Company's
facilities.
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To its knowledge, the Company is in substantial compliance with the
provisions of all federal, state and local environmental laws.
n. Financial Statements. Buyer has obtained an audited balance sheet of the
Company dated December 31, 1997, and the related audited statements of income
for the twelve months then ended, a copy of which is attached hereto as Exhibit
F. Such financial statements are in accordance with the books and records of the
Company and to the knowledge of the Company present fairly the financial
position and the results of operations and financial position of the Company as
of the dates and for the periods indicated. On or before the Closing, the
Company shall deliver to Buyer monthly financial statements in a form reasonably
satisfactory to Buyer for all monthly periods after December 31, 1997 for which
financial information is available, which financial statements shall be prepared
to the best of the Company's ability on a consistent basis with the audited
financial statements described above.
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o. Absence of Undisclosed Liabilities. Except as set forth in Schedule
2.02(o), to its knowledge the Company has no indebtedness or other liabilities
except: (i) those liabilities or obligations set forth in the Balance Sheet, and
(ii) liabilities and obligations of a similar nature arising in the ordinary
course of business since the date of the Balance Sheet.
p. Taxes. All federal, state and local tax returns and reports of the
Company required by law to be filed have been duly and timely filed, and all
taxes, fees or other governmental charges of any nature shown on such returns
and reports have been paid or are currently provided for on the books of the
Company. There is no asserted deficiency or additional tax or governmental
charge, and there is no tax proceeding pending, or to the best of the Company's
knowledge threatened, before any agency or court to which the Company is a
party.
q. Compliance with Laws. To the best of the Company's knowledge, the
Company is not in violation of any law, order, ordinance, rule or regulation of
any governmental authority having a material application to its business.
r. Labor Disputes. To the best of the Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent which could
reasonably be expected to have a material adverse effect on the Company.
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s. Subsidiaries. The Company has no subsidiaries.
t. Department of Education. All reports, financial statements, audits and
other forms required to be filed in order for the Company to maintain its status
with the DOE, Pennsylvania DOE and Accreditation Agencies, have been duly and
timely filed and, except as set forth in Schedule 2.02.t, accurately reflect the
information required or set forth therein. There is no asserted deficiency or
irregularity, or to the best of the Company's knowledge threatened, by the DOE,
Pennsylvania DOE or Accreditation Agencies.
u. Disclaimer. The representations and warranties of the Company contained
in this Section 2.02 constitute the sole and exclusive representations and
warranties of the Company in connection with the transactions contemplated
hereby.
SECTION 2.03. Representations and Warranties of Buyer. Buyer represents and
warrants to, and agrees with, the Company and Shareholder as follows:
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a. Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado.
b. Binding Obligation. Buyer has all requisite corporate power and
authority to enter into and perform its obligations under this Agreement. All
corporate acts and other proceedings required to be taken by Buyer to authorize
the execution and delivery and performance by Buyer of this Agreement and the
transactions contemplated hereby, have been duly and properly taken. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms. The execution, delivery and performance by Buyer of
this Agreement does not and will not conflict with, or result in any violation
of, any provision of the Articles of Incorporation or Bylaws of Buyer, or any
provision of any law, ordinance, rule, regulation, judgment, Order, decree,
agreement, instrument or license applicable to Buyer or to its property or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to Buyer in connection with its execution, delivery
or performance of this Agreement.
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c. Financial Ability to Perform. Buyer has sufficient funds and
arrangements for funds to deliver that portion of the Purchase Price to the
Shareholders payable on the Closing Date and to satisfy the payments under the
Note, and to take other actions as may be required by it to consummate the
transactions contemplated hereby. Buyer has made available to Shareholder a true
and correct copy of Buyer's Note and Security Agreement with the SBIC lender
extending credit to Buyer in connection with the consummation of the
transactions contemplated hereby.
d. Litigation. There are no judicial or administrative actions, proceedings
or investigations pending or, to the best knowledge of Buyer, threatened against
Buyer, which might reasonably be expected to question the validity of this
Agreement or its ability to perform its obligations hereunder, or any action
taken or to be taken by Buyer in connection herewith.
e. Securities Laws. Buyer is not purchasing the Stock in connection with
the offer or sale of the Stock to others on behalf of Shareholder, (ii) with a
view to the distribution of the Stock, (iii) with a view to underwriting any
such distribution, or (iv) with a view to engaging in conduct which may violate
19
any federal or state securities laws. Buyer acknowledges that it has received,
or has had access to, all information which it considers necessary or advisable
to enable it to make a decision concerning its purchase of the Stock.
f. No Broker's or Finder's Fees. No agent, broker, investment banker,
person or firm acting on behalf of Buyer is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated herein.
g. Financial Statements. Buyer has delivered to Shareholder and the Company
the balance sheet of Buyer dated December 31, 1997, and the most recent Form 8-K
filed with the Securities and Exchange Commission. Such financial statements are
in accordance with the books and records of Buyer and present fairly the
financial position and the results of operations and financial position of Buyer
as of the dates and for the periods indicated.
h. Disclaimer. The representations and warranties of Buyer contained in
this Section 2.03 constitute the sole and exclusive representations and
warranties of Buyer in connection with the transactions contemplated hereby.
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ARTICLE III.
Additional Agreements
---------------------
SECTION 3.01. Press Releases. None of the parties hereto shall issue a
press release or other publicity announcing the sale of the Stock or any other
aspect of the transactions contemplated hereby without the prior written
approval of the other party, unless such disclosure is required by applicable
law.
ARTICLE IV.
Conditions Precedent
--------------------
SECTION 4.01. Conditions to Each Party's Obligation. The respective
obligation of each party hereunder shall be subject to the satisfaction as of
the Closing Date of the following conditions:
a. Compliance; Closing Distribution to Shareholder.
i. As of December 31, 1997, and as of the Closing Date, the Company
met and will meet and be in full compliance with the financial responsibility
requirements of the DOE.
ii. Attached hereto as Schedule 4.01(a) is a draft balance sheet
("Draft Closing Balance Sheet") of the Company as of the close of business on
the Closing Date, before taking into account Shareholder's Distribution (as
defined below), prepared by the Company and believed by the Company, Shareholder
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and Buyer to be accurate in all material respects. The parties acknowledge that
based upon the assumed accuracy of the net excess of $408,294 (the "Net
Difference") of the sum of the Company's cash, accounts receivable (tuition)
(less allowance for doubtful accounts), accounts receivable (salary and books)
over the sum of the Company's "current liabilities," as reflected on the Draft
Closing Balance Sheet, Buyer has consented to the Company's previous
distribution to Shareholder prior to the consummation of the Closing in the
amount of $408,294 ("Shareholder's Distribution"). Buyer and Company acknowledge
that prior to the Closing Date, the asset line item designated "Due from DPT
Consulting" reflected on the Company's previous balance sheets is deemed to have
been completely satisfied by DPT Consulting, and Company shall have no further
claim against DPT Consulting for the payment of such obligation.
iii. Within two (2) weeks following the Closing Date, Buyer shall use
its best efforts to cause West & Co. (Oklahoma City, OK) to audit the Draft
Closing Balance Sheet in a manner consistent with West & Co.'s audit of the
Company's December 31, 1997 financial statements (the "Audited Results") and
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deliver a copy of the Audited Results to each of Shareholder and Buyer. To the
extent the Audited Results reflect a Net Difference (calculated on the basis set
forth above) of more or less than the $408,294 Net Difference as set forth
above, Shareholder shall pay to the Company, or the Company shall pay to
Shareholder, as the case may be, the amount of such discrepancy.
iv. In the event the parties dispute and cannot agree upon the Audited
Results, arbitration to mutually resolve such issues shall be initiated by the
parties by agreeing upon an independent accounting firm chosen from one of the
"Big Six" accounting firms in Philadelphia, PA to act as arbitrator, the parties
agreeing to share equally in the cost of such arbitration.
b. Approvals. All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by any
other governmental entity necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained,
except the DOE, Pennsylvania DOE and Accreditation Agencies.
c. Legal Action. No action, suit or proceeding shall have been instituted
or threatened before any court or governmental body seeking to challenge or
restrain the transactions contemplated hereby.
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d. Statutes. No statute, rule or regulation shall have been enacted by
the government of the United States or any state or agency thereof which would
make the consummation of the transactions contemplated hereby illegal.
SECTION 4.02. Conditions of Obligations of Buyer. The obligations of Buyer
to effect the transactions contemplated hereby are subject to the satisfaction
of the following conditions unless waived by Buyer:
a. Representations and Warranties. The representations and warranties of
Shareholder and the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date, and Buyer shall have received a certificate signed by Shareholder
and the Company to such effect.
b. Performance of Obligations of Shareholder and the Company. Shareholder
and the Company shall have performed all obligations required to be performed by
them under this Agreement as of the Closing Date, and Buyer shall have received
a certificate signed by Shareholder and the Company to such effect.
24
c. No Material Adverse Change. Since December 31, 1997, there shall have
been no material adverse change in the financial condition or results of
operations of the Company.
d. Consents and Actions. All material consents of any third parties to the
transactions contemplated by this Agreement shall have been obtained.
e. Noncompetition Agreement. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall have
entered into a Noncompetition Agreement in substantially the form of Exhibit G
hereto.
SECTION 4.03. Conditions of Obligations of Shareholder. The obligations
of Shareholder to effect the transactions contemplated hereby are subject to the
satisfaction of the following conditions unless waived by Shareholder:
a. Representations and Warranties. The representations and warranties of
Buyer set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, and
Shareholder shall have received a certificate signed by the chief executive
officer of Buyer to such effect.
b. Performance of Obligations of Buyer. Buyer shall have performed all
obligations required to be performed by it under this Agreement prior to the
Closing Date, and Shareholder shall have received a certificate signed by the
chief executive officer of Buyer to such effect.
25
c. Consents and Actions. All material consents of any third parties or
governmental agencies to the transactions contemplated hereby shall have been
obtained.
d. Release of Personal Guarantees. Any and all personal guarantees of
Shareholder relating to obligations of the Company shall have been released.
e. Consulting Agreement. Buyer shall have entered into a Consulting
Agreement with ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in substantially the form of
Exhibit H hereto.
ARTICLE V.
Indemnification
---------------
SECTION 5.01. Buyer Claims.
a. Except as hereinafter set forth, Shareholder shall, for a period of six
(6) months after the date of this Agreement, or until the Company is recertified
by the DOE, whichever occurs last, indemnify and hold harmless Buyer and its
successors and assigns and its and their respective officers, directors,
shareholders, employees and agents, against, and in respect of, any and all
26
direct damages, claims, losses, liabilities and without limitation, reasonable
legal, expenses, including, accounting and other expenses, which may arise out
of any misrepresentation by the Company or Shareholder or other breach or
violation of this Agreement by Shareholder; provided, however, that the
aggregate of all claims subject to indemnification hereunder by Shareholder
shall not exceed $500,000. Such claims may be asserted by Buyer at any time its
losses, damages and expenses aggregate at least $50,000. The parties acknowledge
and agree that in making all calculations of Shareholder's indemnification
obligation hereunder, all losses, damages and expenses incurred by an
indemnified party shall be determined on a net after-tax basis and shall take
into account any insurance proceeds received by such indemnified party.
b. Notwithstanding the foregoing, Shareholder shall further indemnify Buyer
and its successors and assigns and its and their respective officers, directors,
shareholders, employees and agents, for a period of three (3) years after the
Closing Date, against, and in respect of, any and all direct damages, claims,
losses, liabilities and without limitation, reasonable legal, expenses,
including, accounting and other expenses, which may arise at any time out of the
existence or assertion of a claim by the DOE or any other regulatory agency for
27
any actual or contingent liability arising from acts committed by the Company or
Shareholder prior to the Closing Date ("DOE Claim"). In the event of such a
claim, Shareholder shall use his best efforts to resolve the claim in good
faith. Buyer agrees to make available to Shareholder any books and records of
the Company required to resolve the claim. If Shareholder is unable to resolve
the claim prior to the due date of any payment claimed by the DOE, Buyer may pay
the claim after notifying Shareholder of its intent to pay without impairing any
of its rights or remedies hereunder as long as the payment is made in good
faith, and the failure to pay the claim by the due date will, in Buyer's
reasonable judgment, adversely affect the Company. Buyer shall promptly notify
Shareholder of any payment made on any DOE Claim. Shareholder shall promptly
provide reimbursement for any such payment. If Shareholder fails to make such
reimbursement, Buyer shall have the right to set off the amount of the payment
against the installment next due under the Note, whether the payment was
actually made by Buyer or the Company, which right shall survive the Closing.
Buyer shall be under no obligation to file an appeal of any DOE Claim. However,
if Shareholder requests an appeal, Buyer agrees to cause the Company to
28
cooperate and pursue an appeal, provided Shareholder pays all costs and
expenses, including reasonable attorney's fees, in connection therewith. Any
payment refunded following an appeal, together with interest thereon, if any,
shall be paid first to Buyer up to the amount originally paid on the claim less
the amount reimbursed by Shareholder, or set off against the Note; and the
balance, if any, to Shareholder.
SECTION 5.02. Shareholder Claims.
a. Except as hereinafter set forth, Buyer shall indemnify and hold harmless
Shareholder and his heirs, legal representatives, successors and assigns, and in
respect of, any and all direct damages, claims, losses, liabilities and
expenses, including, without limitation, reasonable legal, accounting and other
expenses, which may arise out of any misrepresentation or other breach or
violation of this Agreement by Buyer for a period of six (6) months after the
date of this Agreement. The parties acknowledge and agree that in making all
calculations of Buyer's indemnification obligation hereunder, all losses,
damages and expenses incurred by an indemnified party shall be determined on a
net after-tax basis and shall take into account any insurance proceeds received
by such indemnified party.
29
b. Buyer further agrees to indemnify and hold harmless Shareholder from any
claims, demands, losses, liabilities and expenses resulting from any personal
guarantee of Seller that was not released in accordance with Section 4.03(d)
above.
SECTION 5.03. Notice of Claim. Upon obtaining knowledge thereof, the party
to be indemnified (the "Indemnified Party") shall promptly notify the party
which is required to provide indemnification (the "Indemnifying Party") in
writing of any damage, claim, loss, liability or expense which the Indemnified
Party has determined has given rise or could give rise to a claim under this
Article V (such written notice being hereinafter referred to as a "Notice of
Claim"). A Notice of Claim shall contain a brief description of the nature and
estimated amount of any such claim giving rise to a right of indemnification.
SECTION 5.04. Defense of Third Party Claims. With respect to any claim or
demand set forth in a Notice of Claim relating to a third party claim, the
Indemnifying Party may defend, in good faith and at its expense, any such claim
or demand, and the Indemnified Party, at its expense, shall have the right to
participate in the defense of any such third party claim. So long as the
Indemnifying Party is defending in good faith any such third party claim, the
30
Indemnified Party shall not settle or compromise such third party claim. If the
Indemnifying Party does not so elect to defend any such third party claim, the
Indemnified Party shall have no obligation to do so.
ARTICLE VI.
General Provisions
------------------
SECTION 6.01. Survival of Representations and Warranties and Agreements.
All representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing for a period of
six (6) months after the date of this Agreement, or until the Company is
recertified by the DOE, whichever occurs last, and thereafter to the extent a
claim is made prior to such expiration with respect to any breach of such
representation, warranty or agreement, until such claim is finally determined or
settled; provided, however, that the representations set forth in Section 2.01.p
(Taxes) and Section 2.01.t (Department of Education) hereof shall survive until
the expiration of the applicable statute of limitations.
SECTION 6.02. Transfer Taxes. All transfer taxes, if any, due under the
laws of any state, any local government authority, or the federal government of
the United States, in connection with the purchase and sale of the Stock shall
be paid by Seller.
31
SECTION 6.03. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Buyer:
▇▇▇▇▇▇▇ Educational Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇▇▇▇▇ Little & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇ ▇▇▇▇▇, III
(b) if to the Company or Shareholder:
Data Processing Trainers Co.
c/▇ ▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
32
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
All notices given thereunder shall be deemed given at the time of personal
delivery or, if mailed, on the earlier of actual receipt as shown on the
registry receipt or three business days after the date of such mailing.
SECTION 6.04. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
SECTION 6.05. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 6.06. Miscellaneous. This Agreement and the documents and
instruments and other agreements between the parties hereto (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
33
the parties with respect to the subject matter hereof; (b) is not intended to
confer upon any other person any rights or remedies hereunder; and (c) shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns.
SECTION 6.07. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of Pennsylvania.
SECTION 6.08. Alternative Dispute Resolution. Any dispute arising under
this Agreement shall be settled by mediation and/or arbitration in the State of
Pennsylvania.
IN WITNESS WHEREOF, Buyer, the Company and Shareholder have executed
this Agreement, all as of the date first written above.
BUYER:
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
----------------------------------------
Its
------------------------------------
SHAREHOLDER: COMPANY:
DATA PROCESSING TRAINERS CO.
-------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By
----------------------------------------
Its
------------------------------------
34
EXHIBIT A
LETTER OF INTENT
Attached
EXHIBIT B
LETTER AGREEMENT
Attached
EXHIBIT C
PROMISSORY NOTE
Attached
EXHIBIT D
SECURITY AGREEMENT-STOCK PLEDGE
Attached
EXHIBIT E
GUARANTY AND SECURITY AGREEMENT
Attached
EXHIBIT F
FINANCIAL STATEMENTS
Attached
EXHIBIT G
NONCOMPETITION AGREEMENT
Attached
EXHIBIT H
CONSULTING AGREEMENT
Attached
Schedule 2.01(c)
Consents
Attached
Schedule 2.02(c)
Consents
Attached
Schedule 2.02(d)
Stock Options
Attached
Schedule 2.02(e)
Company Property
Attaached
Schedule 2.02(f)
Certain Contracts
Attached
Schedule 2.02(g)
Litigation
Attached
Schedule 2.02(h)
Licenses
Attached
Schedule 2.02(l)
Employee Benefit Plans
Attached
Schedule 2.02(o)
Certain Liabilities
Attached
Schedule 2.02(t)
Department of Education
Attached
Schedule 4.01(a)
Draft Closing Balance Sheet
Attached
PROMISSORY NOTE
$4,340,000.00 Denver, Colorado
March 24, 1998
FOR VALUE RECEIVED, the undersigned ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC., a
Colorado corporation (hereinafter referred to as "SES"), promises to pay to the
order ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (hereinafter referred to as "Holder"), c/▇ ▇▇▇▇▇▇▇▇▇▇ &
Associates, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at
such other place as Holder may designate, in lawful money of the United States
of America, the principal sum of Four Million Three Hundred Forty Thousand and
no/100 Dollars ($4,340,000.00), with interest thereon (accrued on the basis of a
360 day year, actual days elapsed) at a fixed rate of seven percent (7%) per
annum (the "Interest Rate"). From and after a default hereunder, this Note shall
bear interest at a rate equal to four percent (4%) above the Interest Rate (the
"Default Rate").
Principal and interest accrued on this Note shall be payable as follows:
Date Interest Principal Balance
---- -------- --------- -------
June 24, 1998 $ 75,950.00 $542,500.00 $3,797,500.00
September 24, 1998 66,456.25 542,500.00 3,255,000.00
December 24, 1999 56,962.50 542,500.00 2,712,500.00
March 24, 1999 47,468.75 542,500.00 2,170,000.00
June 24, 1999 37,975.00 542,500.00 1,627,500.00
September 24, 1999 28,481.25 542,500.00 1,085,000.00
December 24, 2000 18,987.50 542,500.00 542,500.00
March 24, 2000 9,493.75 542,500.00 -0-
All principal and interest remaining unpaid on March 24, 2000 ("Maturity
Date"), shall be immediately due and payable.
This Note is executed pursuant to that certain Stock Purchase Agreement
(the "Stock Purchase Agreement") of even date herewith between SES, Data
Processing Trainers Co. ("DPT"), and Holder. Notwithstanding the foregoing, in
the event that SES has not received notification from the Department of
Education (the "DOE") of its right to award Title IV Funds to DPT's students by
June 24, 1998, the due date of the first payment unde this Note shall be
extended to the earlier of (i) two (2) weeks following receipt of written notice
from the DOE to SES of Title IV approval, or (ii) five (5) months after the date
of this Note, at which time the principal payment together with all interest
accrued to the date of payment shall be due and payable.
This Note will be in default should any of the following occur: (i) the
failure of SES to make any payment of principal and interest within 10 days of
the due date under the terms of this Note; (ii) a breach of or default under any
of the terms, covenants, agreements, conditions or provisions of the Security
Agreement-Stock Pledge, Guaranty and Security Agreement, or the Consulting
Agreement secured thereby, or any other security agreement securing this Note;
(iii) a default under the Note and Security Agreement dated as of March 24, 1998
between SES and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Mezzanine Fund, L.P. which has not been cured, if
a cure period is provided therefor; (iv) the occurrence of any of the following
events: (a) SES becomes insolvent or makes an assignment for the benefit of
creditors, or if any petition is filed by or against SES under any provision of
any law or statute alleging that SES is insolvent or unable to pay its debts as
they mature which is not dismissed within 60 days; (b) the entry of any judgment
against SES in excess of $50,000, or the issuing of any attachment or
garnishment against any property of SES, or the occurrence of any change in the
financial condition of SES which in the reasonable judgment of Holder is
materially adverse and materially affects the ability of SES to make the
payments required under this Note; (c) the dissolution, merger, consolidation or
reorganization of SES without the prior written consent of Holder; (d) if any
information heretofor or hereafter furnished to Holder by SES in connection with
the indebtedness evidenced hereby should be materially false; (e) the failure of
SES to furnish such financial and other information as required under the
Security Agreement-Stock Pledge, Guaranty and Security Agreement, the Consulting
Agreement secured thereby, or any other document securing this Note. If any of
the foregoing events shall occur, and SES fails to cure any monetary default
within 3 business days, or any non-monetary default within 15 days (unless the
default by its nature cannot be cured within 15 days and SES is diligently
pursuing a cure, in which event SES shall have 30 days to cure the default), of
Holder's written notice declaring SES in default, then at Holder's option,
Holder may declare all sums of principal and interest outstanding hereunder to
be immediately due and payable. SES hereby waives presentment, demand for
payment, notice of dishonor, protest and notice of protest.
2
SES shall pay all reasonable attorneys fees incurred by Holder in
connection with any default hereunder by SES and in any proceeding brought to
enforce any of the provisions of this Note. This Note is secured by a Security
Agreement-Stock Pledge and a Guaranty and Security Agreement of even date
herewith.
This Note is subject to a limited right of set off in favor of SES pursuant
to the provisions of the Stock Purchase Agreement.
This Note shall be construed in accordance with the laws of the State of
Pennsylvania.
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
------------------------------------
Its
--------------------------------
3
SECURITY AGREEMENT-STOCK PLEDGE
THIS SECURITY AGREEMENT-STOCK PLEDGE (this "Agreement") is made and entered
into as of the 24th day of March, 1998 between ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS,
INC., a Colorado corporation ("Pledgor"), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("Shareholder"), and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("Consultant").
WHEREAS, pursuant to a Stock Purchase Agreement (the "Stock Purchase
Agreement") of even date herewith, Pledgor has acquired 100 shares of common
stock (the "Pledged Shares") of Data Processing Trainers Co. (the
"Corporation"), constituting all of the issued and outstanding shares of the
Corporation;
WHEREAS, Pledgor has issued a promissory note to Shareholder in the
original principal amount of $4,340,000 (the "Note") in satisfaction of a
portion of the purchase price under the Stock Pledge Agreement;
WHEREAS, Pledgor has agreed to issue a number of shares of non-registered
common stock of ▇▇▇▇▇▇▇ (the "SES Shares") equivalent to a value of $750,000, as
more fully set forth in the Stock Purchase Agreement;
WHEREAS, pursuant to the Stock Pledge Agreement, Pledgor has entered into a
Consulting Agreement (the "Consulting Agreement") with Pledgee and Consultant
(collectively, "Pledgee") to provide consulting services;
WHEREAS, Pledgor has agreed the payment of the Note, Pledgor's obligations
to issue the SES Shares, and Pledgor's obligations under the Consulting
Agreement shall be secured by the Pledged Shares;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations and warranties set forth herein and for other good
and valuable consideration, the parties agree as follows:
1. Obligations Secured. The obligations secured hereby are (i) the due and
punctual payment of all amounts due or to become due under the Note; (ii) the
obligations of Pledgor to issue the SES Shares pursuant to the Stock Purchase
Agreement; (iii) the obligations of Pledgor under the Consulting Agreement; (iv)
the performance of all obligations of Pledgor under this Agreement; (v) all
costs and expenses incurred by Pledgee in collecting the Note and/or enforcing
the Consulting Agreement; (vi) all other expenses incurred by Pledgee for the
account of Pledgor hereunder; and (vii) interest on all of the foregoing
(ii)-(vi) at the rate set forth in the Note accrued from the date incurred to
the date of reimbursement (the "Obligations").
2. Pledge. As security for the Obligations, Pledgor hereby delivers,
pledges and grants to Pledgee a security interest in the Pledged Shares, and all
proceeds thereof, including without limitation, any and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any of the Pledged Shares
(the "Proceeds") (the Pledged Shares and the Proceeds shall be collectively
referred to as the "Collateral"). Pledgor agrees that it will cooperate with
Pledgee and will execute and deliver, or cause to be executed and delivered, to
Pledgee all stock powers, proxies, assignments, financing statements,
instruments, and other documents, and shall take all further action from time to
time reasonably requested by Pledgee in order to maintain a continuing, first
priority, perfected security interest in the Collateral in favor of Pledgee. All
certificates or instruments representing or evidencing the Collateral shall be
delivered to and held by Pledgee pursuant hereto, or at Pledgor's option, an
escrow agent acceptable to the parties, in which event Pledgor shall execute and
deliver to such escrow agent (the "Holder") a written notification/instruction
pursuant to Sections 8-313 and 8-321 of the Pennsylvania Uniform Commercial
Code, substantially in the form of Exhibit A attached hereto.
3. Pledgee's Duties. Pledgee shall have the duty to use reasonable care if
the Collateral is in Pledgee's possession.
4. Voting Rights; Dividends. During the term of this Agreement, and as long
as no event of default has occurred under this Agreement, the Note or the
Consulting Agreement, and as long as the indebtedness under the Note has not
become immediately due and payable ("Event of Default"):
a. Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Shares or any part thereof for any
purpose not inconsistent with the terms of this Agreement.
2
b. Pledgor shall be entitled to receive and retain any and all
dividends and distributions paid in respect of the Pledged Shares.
c. Pledgee shall execute and deliver (or cause to be executed and
delivered) to Pledgor all such proxies and other instruments and Pledgor may
reasonably request for the purpose of enabling Pledgor to exercise those voting
and other rights that Pledgor is entitled to exercise, and to receive those
dividends or distributions that Pledgor is authorized to receive and retain as
provided herein.
d. If an Event of Default shall have occurred, which has not been
cured if a right to cure is granted therefor, and any amounts shall be due and
payable (whether by acceleration, maturity or otherwise) under any of the
Obligations, all rights of Pledgor to exercise the voting and other consensual
rights that it would otherwise be entitled to exercise, and to receive the
dividends and distributions that it would otherwise be authorized to receive and
retain pursuant to this Agreement shall, at Pledgee's option, cease, and all
such rights shall, at Pledgee's option, thereupon become vested in Pledgee, and
Pledgee shall, at its option, thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Collateral such
dividends and distributions.
5. Representations, Warranties and Covenants. Pledgor warrants, represents
and covenants that:
a. Pledgor has the right to pledge and grant a security interest in or
otherwise transfer such Collateral to Pledgee free of any encumbrances or rights
of third parties.
b. The Collateral is and shall remain free from all liens, claims,
encumbrances and purchase money or other security interests, excepting only (i)
the liens and encumbrances created under that certain Note and Security
Agreement ($2,900,000) dated as of March 24, 1998 between Pledgor and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Mezzanine Fund, L.P. ("Hanifen"), which shall be junior and inferior to
the security interest of Pledgee pursuant to a written agreement between Hanifen
and Pledgee in form and substance satisfactory to Pledgee, and (ii) those liens
and [continued on following page]
3
encumbrances created in the ordinary course of business, provided the lienholder
executes and delivers to Pledgee a subordination agreement ("Subordination
Agreement") substantially in the form of Exhibit B attached hereto.
c. No authorization or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for (i) the
grant by Pledgor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by Pledgor; (ii) for the perfection of
or exercise by Pledgee of its right and remedies hereunder (except as may have
been taken by or at the direction of Pledgor or as may be required in connection
with a disposition of the Collateral by laws affecting the offering and sale of
securities generally); or (iii) for the exercise by Pledgee of the voting or
other rights, or the remedies in respect of the Collateral pursuant to this
Agreement (except as may be required in connection with a disposition of the
Collateral by laws affecting the offering and sale of securities generally).
d. The Pledged Shares have been duly and validly issued by the
Corporation, and they are fully paid and nonassessable.
e. Until the Obligations are fully satisfied, Pledgor will not permit
the Corporation to issue additional capital stock or other rights to acquire
capital stock without the prior written consent of Pledgee.
f. Until the Obligations are paid in full, Pledgor agrees to cause the
Corporation (i) to conduct all business efficiently in the ordinary course, and
without voluntary interruption; (ii) to conduct all business in the name of the
Corporation and not by or through any other person or entity, except for the
involvement of Pledgor in the ordinary course; (iii) to keep in its employ
management personnel experienced in the business of the Corporation, and
reasonably acceptable to Pledgee; (iv) to preserve all rights, privileges and
franchises held and used in its business; (v) to keep its business properties in
good repair; (vi) to pay when due all taxes and other indebtedness and
obligations of the Corporation to whomever owing; (vii) to keep its business
properties insured and maintain insurance coverage in types and amounts
appropriate for the operations of the Corporation, which names Pledgee as an a
loss payee; (viii) to furnish to Pledgee within thirty (30) days following the
end of each month, forty-five (45) days following the end of each calendar
4
quarter and within ninety (90) days following the end of each fiscal year, all
financial statements prepared by or on behalf of the Corporation (including
annual, audited financial statements certified to the Corporation by a certified
public accounting firm); (ix) to permit Pledgee to inspect the books, records
and premises of the Corporation one time during each calendar quarter at a time
mutually agreeable to Pledgor and Pledgee, or at any time during normal business
hours if Pledgor is in Default, for the purpose of confirming that Pledgor and
the Corporation are in compliance with their respective obligations to Pledgee;
(x) not to permit liens on its properties, excepting only liens for taxes not
delinquent; (xi) not to permit liens or encumbrances for borrowed money on its
properties, excepting only those liens and encumbrances currently in existence
or contemplated, specifically including those securing the SBIC financing being
obtained by Pledgor, and those created in the ordinary course of business,
provided the lienholder in any such instance executes and delivers to Pledgee
the Subordination Agreement substantially in the form of Exhibit B hereto; (xii)
not to sell or transfer the assets of the Corporation other than in the ordinary
course of business of the Corporation; (xiii) not to merge with or purchase any
other person or entity, except as contemplated by the Consulting Agreement.
6. Share Adjustments. In the event that during the term of this Agreement
any reclassification, readjustment or other change is declared or made in the
capital structure of the Corporation, all new substituted shares issued or
issuable to Pledgor with respect to the Pledged Shares by reason of any such
change shall be delivered to and held by Pledgee or Holder under the terms of
this Agreement in the same manner as the Collateral originally pledged
hereunder.
7. Remedies Upon Default. Upon the occurrence of an Event of Default,
Pledgee shall have, in addition to any other rights given by law or in this
Agreement, all of the rights and remedies with respect to the Collateral of a
secured party under the Pennsylvania Uniform Commercial Code.
a. In addition, upon reasonable notice to Pledgor, Pledgee may sell or
cause to be sold at any public or private sale, the Collateral, or any part
thereof, in a reasonably commercial manner. It is agreed that ten (10) days
prior written notice shall be deemed to be commercially reasonable to effect a
sale of the Collateral hereunder.
5
b. Pledgee may, in its own name, or in the name of a designee or
nominee, buy at any public or private sale of the Collateral. Pledgee shall have
the right to execute any document or form, in its name or in the name of the
Pledgor, that may be necessary or desirable in connection with such sale of
Collateral.
c. In view of the fact that securities laws may impose certain
restrictions on the method by which a sale of the Collateral may be effected
after an Event of Default, Pledgor agrees that upon the occurrence of an Event
of Default, Pledgee may from time to time attempt to sell all or any part of the
Collateral by a private placement, restricting the bidders and prospective
purchasers to those who will represent and agree that they are purchasing for
investment only and not for distribution. Notwithstanding the foregoing, should
Pledgee determine that, prior to any public offering of the Collateral, such
securities should be registered under the Securities Act of 1933 and/or
registered or qualified under any other federal or state law, and that such
registration and/or qualification is not practical, Pledgor agrees that it will
be commercially reasonable if a private sale is arranged.
d. If Pledgee shall determine to exercise its right to sell any or all
of the Collateral, and if Pledgee determines it is necessary or advisable to
have the Collateral registered under the provisions of the Securities Act of
1933, the Pledgor agrees to execute and deliver all such instruments and
documents as may be necessary to register the Collateral under the provisions of
the Securities Act of 1933 and to cause the registration statement relating
thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make or cause to be
made all amendments and supplements thereto and to the related prospectus that,
in the opinion of Pledgee, are necessary or advisable, all in conformity with
the requirements of the Securities Act of 1933 and the rules and regulations of
the Securities and Exchange Commission applicable thereto.
8. Pledgee and Pledgor's Attorney-in-Fact. Pledgor hereby irrevocably
appoints Pledgee as its attorney-in-fact to arrange for the transfer, at any
time after the existence of an Event of Default, of the Collateral on the books
of the Corporation to the name of Pledgee or the name of Pledgee's nominee.
6
9. Further Assurances. Pledgor agrees that it will cooperate with Pledgee
and will execute and deliver, or cause to be executed and delivered, all such
other stock assignments, proxies, instruments and documents and will take all
such other action, as Pledgee may reasonably request from time to time in order
to carry out the provisions and purposes hereof.
10. Attorneys Fees and Costs. Pledgor hereby agrees to pay all reasonable
attorneys fees and costs that may be incurred by Pledgee in the enforcement of
this Agreement. In the event any party hereto initiates an action to enforce the
terms and conditions of this Agreement, the prevailing party in such action
shall recover its costs of suit, including reasonable attorneys fees.
11. Notices. All notices or demands under this Agreement shall be made in
writing and shall be deemed duly sent when hand delivered, or when mailed by
certified mail, return receipt requested, or when delivered by courier or when
transmitted by telecopy or similar electronic medium to the following:
If to Pledgor:
▇▇▇▇▇▇▇ Educational Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ Little & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
7
If to Pledgee:
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party may change such address by sending notice of the change to the
other party; such change of address shall be effective only upon actual receipt
of the notice by the other party.
12. Termination Date. Notwithstanding anything to the contrary set forth
herein, this Agreement shall terminate upon payment in full of the Note, and
Pledgee shall execute and deliver to Pledgor a termination of all of the
security interests granted by Pledgor hereunder together with all certificates
representing the Pledged Shares, or instructions to the Holder to release to
Pledgor the certificates representing the Pledged Shares.
13. General Provisions.
a. This Agreement shall be binding and deemed effective when executed
by Pledgor and accepted and executed by Pledgee.
b. This Agreement shall bind and inure to the benefit of the
respective heirs, representatives, administrators, successors and assigns of
Pledgor and Pledgee; otherwise, this Agreement or any rights hereunder shall not
be assigned by either party without the prior written consent of the other
party.
c. Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Pledgor or Pledgee, whether under any
rule of construction or otherwise. This Agreement has been reviewed by each of
the parties and their counsel and shall be construed and interpreted according
8
to the ordinary meaning of the words used so as to fairly accomplish the
purposes and intentions of the parties hereto.
d. Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
e. This Agreement cannot be changed or terminated orally. All prior
agreements, understandings, representations, warranties and negotiations, if
any, are merged into this Agreement.
f. All acts and transactions hereunder and the rights and Obligations
of the parties hereto shall be governed, construed and interpreted in accordance
with the laws of the State of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PLEDGOR:
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
-----------------------------------
Its
-----------------------------------
PLEDGEE:
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
ACKNOWLEDGMENT OF DATA PROCESSING TRAINERS CO.
Data Processing Trainers Co. hereby acknowledges the terms of the foregoing
Security Agreement-Stock Pledge, and agrees to be bound by the provisions of
Paragraph 5.f. and comply with the terms thereof.
9
DATA PROCESSING TRAINERS CO.
By
-------------------------------
Its
-------------------------------
AGREEMENT OF ESCROW AGENT
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A. ("Escrow Agent"), hereby
agrees to act as Escrow Agent for the sole purpose of holding physical
possession of the certificates representing the Pledged Shares on behalf of
Pledgee in order to perfect a security interest in the Pledged Shares. Upon
termination of this Agreement, Escrow Agent agrees to promptly redeliver the
certificates to Pledgor.
Escrow Agent's duties hereunder shall be limited to the safekeeping of the
certificates deposited with Escrow Agent and the disposition of the same in
accordance with the terms hereof. Pledgor and Pledgee, jointly and severally,
hereby agree to indemnify Escrow Agent and hold it harmless from any and all
claims, liabilities, losses, actions, suits or proceedings at law or in equity,
or any other expense, fees or charges of any character or nature, including
reasonable attorneys fees, which it may incur by reason of its acting as Escrow
Agent under this Agreement. Pledgor and Pledgee shall have the right, but not
the obligation, at its cost, to defend such proceeding on behalf of Escrow
Agent.
If any disagreement or dispute arises between Pledgor and Pledgee
concerning the meaning or validity of any provision under this Agreement or
concerning any other matter relating to this Agreement, the Escrow Agent (a)
shall be under no obligation to act, except under process or order of court, and
shall sustain no liability for its failure to act pending such process or court
order or indemnification; and (b) may deposit, in its sole and absolute
discretion, the escrowed property it then holds with a court of competent
10
jurisdiction in Pennsylvania, and interplead Pledgor and Pledgee. Upon such
deposit and filing of interpleader, the Escrow Agent shall be relieved of all
liability as to the escrowed property and shall be entitled to recover from
Pledgor and Pledgee its reasonable attorneys' fees and other costs allowed by
the court in commencing and maintaining such action. By signing this Agreement,
Pledgor and Pledgee submit themselves to the jurisdiction of such court over
such interpleader action.
Pledgor acknowledges that Escrow Agent serves as legal counsel to Pledgee,
and agrees that in any dispute arising between Pledgor and Pledgee in connection
with this Agreement, or the Stock Purchase Agreement pursuant to which this
Agreement was executed, Pledgor shall not seek the disqualification of Escrow
Agent from representing Pledgee based on the services provided by Escrow Agent
hereunder.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇, P.A.
By
---------------------------------------
Its
---------------------------------------
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
---------------------------------------
Its
---------------------------------------
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
11
EXHIBIT A
---------
LETTER TO HOLDER OF SECURITIES
TO:
Re: ▇▇▇▇▇▇▇ Educational Systems, Inc. ("Pledgor"),
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("Pledgee")
Dear
Reference is hereby made to that certain Security Agreement- Stock Pledge
dated as of March 24, 1998 (the "Pledge Agreement") between Pledgor and Pledgee,
pursuant to which Pledgor pledged a security interest to Pledgee in 100 shares
of common stock (the "Securities") of Data Processing Trainers Co., a
Pennsylvania corporation (the "Corporation"). Any and all initially capitalized
terms used herein shall have the meanings ascribed to them in the Pledge
Agreement, unless specifically defined herein. A copy of the Pledge Agreement
has been attached hereto as Exhibit A for your reference.
Reference is also hereby made to the fact that you are currently the holder
of the Securities, as escrow agent.
This letter will serve:
1. To notify you, pursuant to Article 8 of the Colorado Uniform
Commercial Code, that Pledgee has a security interest in the Securities;
2. To instruct you that you are to identify (and to continue to
identify) the Securities as subject to Pledgee's security interest;
3. To instruct you to hold the Securities as Pledgee's agent;
4. To instruct you not to dispose of the Securities or take any
direction from any person other than Pledgee;
5. To authorize you to rely upon written notice and/or instruction
given to you by Pledgee until you receive written notice that the Pledge
Agreement has terminated.
Sincerely,
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
-------------------------------
Its
-------------------------------
ACKNOWLEDGED AND AGREED TO:
---------------------------
By
------------------------
Title
---------------------
EXHIBIT B
SUBORDINATION AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Undersigned _________________________ hereby
postpones and subordinates to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (hereinafter called "Secured
Party"), any and all security interest in the capital stock of Data Processing
Trainers Co. (the "Collateral"), together with the indebtedness secured thereby
(the "Subordinated Indebtedness"), and agrees not to demand, receive or accept
any proceeds of Collateral, or any payment on account of the Subordinated
Indebtedness in excess of the regularly scheduled payments, unless or until all
indebtedness of ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC., a Colorado corporation
(hereinafter called "Debtor"), to Secured Party under Debtor's Promissory Note
to Secured Party dated March 24, 1998 in the original principal amount of
$4,340,000 (the "Senior Indebtedness") has been paid in full.
Should the Undersigned receive any proceeds of Collateral, or any
payment on the Subordinated Indebtedness in excess of the regularly scheduled
payments, prior to the satisfaction of the Senior Indebtedness, the Undersigned
shall forthwith deliver the same to Secured Party in the form received (except
for endorsement or assignment by the Undersigned where required by Secured
Party), for application on the Senior Indebtedness, and, until so delivered, the
same shall be held in trust by the Undersigned as the property of Secured Party.
In the event of any receivership, insolvency, bankruptcy, assignment
for benefit of creditors, readjustment of indebtedness, composition,
reorganization, whether or not pursuant to bankruptcy laws, sale of all or
substantially all of the assets, dissolution, winding up, liquidation, or any
other marshalling of the assets and liabilities of Debtor, any payment or
distribution of the assets and liabilities of Debtor, any payment or
distribution of assets of Debtor of any kind or character, whether in cash,
securities, or other property, which would otherwise be payable to or
deliverable upon or with respect to the Subordinated Indebtedness shall be paid
or delivered directly to Secured Party for application on the Senior
Indebtedness until such indebtedness shall have been fully paid and satisfied.
Secured Party shall have the right to enforce, collect and receive every such
payment or distribution and give acquittance therefor, and Secured Party is
hereby authorized, as attorney-in-fact for the Undersigned, to vote and prove
the indebtedness of Debtor to the Undersigned in any of the above described
proceedings or in any meeting of creditors of Debtor relating thereto. The
undersigned further agrees that, to the extent that Secured Party receives any
proceeds of Collateral, or Debtor makes a payment to Secured Party, which
payment or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to
Debtor, Debtor's estate, trustee, receiver or any other party, including,
without limitation, the Undersigned, under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such payment or
repayment, the indebtedness or part thereof which has been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect subject to this agreement as of the date of such initial payment,
reduction or satisfaction occurred.
Secured Party, at any time and from time to time, may enter into
agreements with Debtor extending the time of payment or renewing or otherwise
altering the terms of all or any of the indebtedness of Debtor to Secured Party
or affecting any security underlying any or all of such indebtedness, or may
exchange, sell or surrender or otherwise deal with any security, or may release
any balance of funds of Debtor with Secured Party, without notice to the
Undersigned and without in any way impairing or affecting this agreement.
Secured Party's delay in or failure to exercise any right or remedy
shall not be deemed a waiver of any obligation of the Undersigned or right of
Secured Party. This agreement may be modified, and any of Secured Party's rights
hereunder waived, only by agreement in writing signed by Secured Party.
This agreement shall inure to the benefit of Secured Party's heirs,
representatives, administrators, successors and assigns, and bind the heirs,
representatives, administrators, successors and assigns of the Undersigned.
Notice of acceptance by Secured Party of this agreement is hereby
waived by the Undersigned, and this agreement and all of the terms and
provisions hereof shall immediately be binding upon the Undersigned from the
date of execution hereof.
This agreement shall be construed and governed by the laws of the
State of Pennsylvania.
IN WITNESS WHEREOF, this agreement is executed the ____ day of
__________, 19__.
----------------------------------
By:
--------------------------------
Its:
--------------------------------
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Debtor hereby consents to the foregoing agreement and agrees to be
bound by the terms and conditions thereof.
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By:
--------------------------------
Its:
--------------------------------
GUARANTY AND SECURITY AGREEMENT
For value received, the undersigned DATA PROCESSING TRAINERS CO., a
Pennsylvania corporation ("DPT") hereby unconditionally guarantees the following
obligations of ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC., a Colorado corporation ("SES")
to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (collectively, "Secured Party") created
pursuant to the Stock Purchase Agreement between SES, DPT and Secured Party of
even date herewith: (i) the due and punctual payment of all amounts due or to
become due under a promissory note to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in the original principal
amount of $4,340,000 (the "Note"); (ii) the obligation to issue a number of
shares of non-registered common stock of SES equivalent to a value of $750,000;
(iii) the obligations under a Consulting Agreement with Secured Party; (iv) the
performance of all obligations of Pledgor under this Agreement; (v) all costs
and expenses incurred by Secured Party in collecting the Note and/or enforcing
the Consulting Agreement; (vi) all other expenses incurred by Secured Party for
the account of SES hereunder; and (vii) interest on all of the foregoing
(ii)-(vi) at the rate set forth in the Note accrued from the date incurred to
the date of reimbursement (the "Obligations").
To secure payment and performance of the Obligations and the undersigned's
obligations under this Guaranty, the undersigned hereby grants to Secured Party
a security interest in and to the following property and interests in property
of the undersigned, whether now owned and existing or hereafter acquired or
arising, and wheresoever located: all of DPT's assets and properties of every
nature whatsoever, whether now owned or hereafter acquired, including without
limitation, all of Debtor's cash, accounts, accounts receivable, general
intangibles, instruments, inventory, machinery, equipment, furniture, fixtures
and general intangibles of every nature, all proceeds (whether in the form of
cash in deposit accounts, instruments, chattel paper, general intangibles,
accounts, insurance proceeds or otherwise), and all products of the property
described above and all books and records related to the properties and assets
described above, together with all "Collateral," as that term is defined in that
certain Note and Security Agreement dated as of March 24, 1998 between SES and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Mezzanine Fund, L.P. (the "SBIC Loan") (the "Collateral"). The
security interests and liens of Secured Party hereunder shall at all times be
prior and superior to the security interests and liens securing the SBIC Loan.
The undersigned will execute and deliver to Secured Party such financing
statements as Secured Party may from time to time require (and will pay all
costs and expenses of recording the same) in order to perfect, preserve, protect
and maintain the security interests hereby granted. The undersigned will also
cause to be delivered to Secured Party any documents reasonably requested by
Secured Party affirming that the security interests and liens securing the SBIC
Loan are junior and inferior to the security interests and liens of Secured
Party.
The undersigned hereby waives any requirement of diligence, presentment,
demand of payment (and shall not demand that the same be made upon SES as a
condition precedent to the undersigned's obligations under this Guaranty),
filing of claims with a court in the event of receivership or bankruptcy of SES,
protest or notice with respect to the Obligations and all demands whatsoever
(and shall not demand that such protest, notice or demand be made or served on
SES), and covenants that this Guaranty will not be discharged, except by
complete performance of the obligations contained herein.
Upon any default by SES, as provided in any instrument or document
evidencing all or any part of the Obligations, the undersigned shall be deemed
to be in default hereunder and Secured Party shall have the rights and remedies
of a secured party under the Uniform Commercial Code of Pennsylvania ("Code")
with respect to the Collateral, which rights and remedies shall be cumulative
and not exclusive to the extent permitted by law.
The undersigned hereby assumes responsibility for keeping itself informed
of the financial condition of SES, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations and of all other circumstances bearing upon the risk of nonpayment
of the Obligations or any part thereof that diligent inquiry would reveal, and
the undersigned hereby agrees that Secured Party shall have no duty to advise
the undersigned of information known to Secured Party regarding such condition
or any such circumstances.
Until the Obligations shall have been paid in full, the undersigned shall
have no right of subrogation and hereby waives any right to enforce any remedy
which Secured Party now has or may hereafter have against SES, any endorser or
- 2 -
any other guarantor of all or any part of the Obligations, and the undersigned
hereby waives any benefit of, and any right to participate in, any security or
collateral given to Secured Party to secure payment of the Obligations or any
other liability of SES to Secured Party. The undersigned also waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty.
No delay on the part of Secured Party in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Secured Party of any right or remedy shall preclude any further exercise
thereof; nor shall any modification or waiver of any of the provisions of this
Guaranty be binding upon Secured Party, except as expressly set forth in a
writing duly signed and delivered on Secured Party's behalf by an authorized
officer or agent of Secured Party. Secured Party's failure at any time or times
hereafter to require strict performance by SES or the undersigned of any of the
provisions, warranties, terms and conditions contained in any promissory note,
security agreement, agreement, guaranty, instrument or document now or at any
time or times hereafter executed by SES or the undersigned and delivered to
Secured Party shall not waive, affect or diminish any right of Secured Party at
any time or times hereafter to demand strict performance thereof, and such right
shall not be deemed to have been waived by any act or knowledge of Secured
Party, Secured Party's agents, officers or employees, unless such waiver is
contained in an instrument in writing signed by an officer or agent of Secured
Party and directed to SES specifying such waiver. No waiver by Secured Party of
any default shall operate as a waiver of any other default or the same default
on a future occasion, and no action by Secured Party permitted hereunder shall
in any way affect or impair Secured Party's rights or the obligations of the
undersigned under this Guaranty.
Notwithstanding anything to the contrary set forth herein, this Agreement
shall terminate upon payment in full of the Note, and Secured Party shall
execute and deliver to DPT a termination of all of the security interests
granted by DPT.
This Guaranty shall be binding upon the undersigned and upon the successors
and assigns of the undersigned and shall inure to the benefit of Secured Party's
successors and assigns. All references herein to SES and to the undersigned
shall be deemed to include their respective successors and assigns.
- 3 -
Wherever possible each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
this 24th day of March, 1998.
DATA PROCESSING TRAINERS CO.
By:
-------------------------------
Its:
-----------------------------
- 4 -
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is entered into as of the
24th day of March, 1998 between ▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC., a Colorado
corporation ("SES"), DATA PROCESSING TRAINERS CO., a Pennsylvania corporation
(the "Company"), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "Shareholder") and LUCY SCHNIEBERG (the
"Consultant").
PRELIMINARY STATEMENTS:
WHEREAS, the Shareholder is a principal executive officer and
shareholder of the Company, has been actively involved in the management of the
Company's business for many years and has acquired considerable experience and
skill.
WHEREAS, simultaneous with the execution of this Agreement, SES, the
Company and the Shareholder are entering into a Stock Purchase Agreement (the
"Stock Purchase Agreement") pursuant to which, among other things, SES will
acquire all of the stock of the Company (the "Acquisition").
WHEREAS, simultaneous with the execution of this Agreement, the Shareholder
and the Consultant (collectively, the "Consultants") and SES are entering into a
Consulting Agreement pursuant to which, among other things, the Consultants will
assist with the operations of the Company.
WHEREAS, SES wishes to protect its investment in the Company by restricting
the activities of the Consultants which might compete with or otherwise harm the
Company.
WHEREAS, the Consultants are entering into this Agreement to provide SES
with a significant inducement to consummate the Acquisition.
NOW, THEREFORE, in consideration of the covenants contained herein and in
consideration of SES consummating the Acquisition, the parties agree as follows:
1. The Consultants covenant and agree that for a period equal to five (5)
years after consummation of the Acquisition (the "Noncompetition Period"), the
Consultants will not, nor will they permit any entity or other person under the
Consultants' control to, within the Northeast quadrant of the United States
which is bordered on the South by the states of Maryland, Pennsylvania, Ohio,
and Indiana, and is bordered on the West by the States of Indiana and Michigan,
directly or indirectly, own, manage, operate or control, or participate in the
ownership, management, operation or control of, or be connection with, or have
any interest in, as a shareholder, director, officer, employee, agent,
consultant, partner, member, creditor or otherwise, any business or activity
which is competitive with the providing of vocational educational instruction in
the computer, business skills, remedial language, computer programming, office
administration of all types, accounting, engineering and equipment servicing, as
more fully described in the current Data Processing Trainers Catalog of courses
(the "DPT Catalog"), including any course of study which may reasonably be
expected to arise from the body of courses currently being taught by Data
Processing Trainers anywhere. However, none of the foregoing shall prevent the
Consultants from engaging in corporate training, including in connection
therewith, teaching courses of the type described in the DPT Catalog. Corporate
training shall be limited to unlicensed, non-degree, non- credit, non-diploma,
non-accredited short term (avocational) training, as defined by Pennsylvania and
the United States Department of Education regulations, provided that Buyer
agrees that two (2) years after the Acquisition, Consultants may further apply
for accreditation of such courses. None of the foregoing shall prevent the
Consultants from being the holder of up to 5.0% in the aggregate of any class of
securities of any corporation engaged in the activities described above,
provided that such securities are listed on a national securities exchange or
reported on NASDAQ.
2. The Consultants agree that for the duration of the Noncompetition Period
without the prior written consent of the Company, they will not, nor will they
permit any other entity or person under the Consultants' control to solicit for
employment any person then employed by the Company. It shall not be a violation
of this Agreement for any teacher employed by the Company who, at the time this
Agreement is executed is employed by Consultants, to continue to be retained by
Consultants' consulting business, provided the scope of such teacher's service
does not conflict with or compete with the teacher's duties to the Company.
2
3. The consideration for the agreements of the Consultants contained herein
is the agreement of SES to proceed with the Acquisition according to the Stock
Purchase Agreement.
4. In the event a court shall refuse to enforce the Consultants'
noncompetition covenant hereunder, either because of the scope of the
geographical area specified in the covenant or the duration of the restrictions,
the parties expressly confirm their intention that the geographical area covered
hereby and/or the time period of the restrictions be deemed automatically
reduced to the minimum extent necessary to permit enforcement.
5. Each of the parties hereto acknowledges and agrees that the extent of
damages to the Company in the event of a breach by the Consultants of this
Agreement would be impossible to ascertain and there is and will be available to
the Company no adequate remedy at law to compensate it in the event of such a
breach. Consequently, the Consultants agree that, in the event that the
Consultants breach any of such covenants, the Company shall be entitled, in
addition to any other relief to which it may be entitled, including without
limitation, money damages, to enforce any or all of such covenants by injunctive
or other equitable relief ordered by any court of competent jurisdiction.
6. This Agreement shall terminate, and the Consultants shall be relieved of
the noncompetition covenant, in the event of a default under the promissory note
(the "Note") issued by SES in connection with the Acquisition to satisfy a
portion of the Purchase Price, and the Holder exercises the option to accelerate
as a result of SES' failure to cure the default.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of Pennsylvania.
8. This Agreement may not be assigned by the Consultants. This Agreement
may be assigned by the Company or any affiliate of the Company without the
written concurrence of the Consultants provided that the assignee guarantees the
performance of its obligations assigned thereunder.
9. All notices or demands under this Agreement shall be made in writing and
shall be deemed duly sent when hand delivered , or when mailed by certified
mail, return receipt requested, or when delivered by courier or when transmitted
by telecopy or similar electronic medium to the following:
3
If to SES:
▇▇▇▇▇▇▇ Educational Systems, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ Little & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
If to Company or Consultants:
Data Processing Trainers Co.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ & Associates
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either party may change such address by sending notice of the
change to the other party; such change of address shall be
effective only upon actual receipt of the notice by the other
party.
10. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.
4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
SES:
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
-------------------------------------
Its
------------------------------------
COMPANY:
DATA PROCESSING TRAINERS CO.
By
-------------------------------------
Its
------------------------------------
CONSULTANTS:
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), is made and entered into as
of the 24th day of March, 1998, by and among ▇▇▇▇▇▇▇ Educational Systems, Inc. a
Colorado corporation, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (hereinafter referred to as "▇▇▇▇▇▇▇"), and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ (hereinafter referred to as "Consultants").
WHEREAS, ▇▇▇▇▇▇▇ desires to enter into a Consulting Agreement with the
Consultants on certain terms and conditions as set forth herein as contemplated
by the Stock Purchase Agreement (the "Stock Purchase Agreement") between
▇▇▇▇▇▇▇, Data Processing Trainers Co. ("DPT") and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as the sole
shareholder of DPT; and
WHEREAS, the Consultants are willing to accept such terms and conditions;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants and promises hereinafter contained, do hereby agree as follows:
1. Nature of Consultants' Position.
--------------------------------
(a) ▇▇▇▇▇▇▇ desires, upon the purchase of Data Processing Trainers Co.
("DPT"), to make use of Consultants' expertise.
(b) ▇▇▇▇▇▇▇ shall hire Consultants for a period of two (2) years from the
Closing of the Stock Purchase Agreement (the "Consulting Term").
(c) Consultants shall be independent contractors; subject only to the terms
of Paragraph 2 herein they shall determine their own method of operation in
accomplishing such tasks as are mutually agreed are necessary for them to
undertake.
2. Scope of Consulting Duties.
---------------------------
(a) During the first three to six months of the Consulting Term,
Consultants shall be available at times and places mutually agreed to by the
parties in good faith to perform the following tasks:
i Assist ▇▇▇▇▇▇▇ in the orderly transition of ownership of DPT from
Consultants to ▇▇▇▇▇▇▇;
ii Introduce ▇▇▇▇▇▇▇ to individuals and inform ▇▇▇▇▇▇▇ of the
cultural characteristics of the Russian community in
Philadelphia;
iii Remain accessible to ▇▇▇▇▇▇▇ in person or by telephone to answer
questions during regular business hours regarding operations in
Northeast and Center City Philadelphia.
(b) Following completion of the transition of ownership of DPT to ▇▇▇▇▇▇▇,
Consultants shall be available during the balance of the Consulting Term as
mutually agreed to by the parties in good faith to perform the following tasks
as are mutually acceptable to the parties:
i Assist ▇▇▇▇▇▇▇ to identify one or more sites to open new branch
campuses of DPT;
ii Assist ▇▇▇▇▇▇▇ to establish relationships within the Russian
community in the location(s) where branch campuses will open;
iii Assist ▇▇▇▇▇▇▇ in the evaluation of candidates to fill upper
management level positions to open and operate new branch
campuses;
iv Visit and evaluate new branch campuses;
v Answer questions in person or by telephone during regular
business hours.
3. Compensation.
-------------
(a) Each Consultant shall be compensated monthly at the rate of one-hundred
fifty dollars ($150.00) for each hour (or proportion thereof) the Consultant
performs, plus reimbursement of "reasonable and necessary expenses" as further
defined in 3(b) herein. Travel time shall also be paid at the rate of
one-hundred fifty dollars ($150.00) per hour.
2
(b) "Reasonable and necessary expenses" shall include those expenses
incident to completion of an assignment, including any travel expenses to and
from assignments, lodging and meal expenses, and all other expenses reasonably
related to completion of the task. Upon request, Consultant shall document
Consultant's consulting expenses to ▇▇▇▇▇▇▇, including receipts for travel,
lodging and meals.
(c) For a period of fifteen (15) years (the "Profits Period") from and
after the date of this Agreement, Consultants shall receive five percent (5%) of
the pre-tax profits for each branch campus opened, as determined in the audited
Financial Statement for each branch campus (which Financial Statement shall be
prepared in accordance with GAAP standards for each branch campus opened, with
no allocation of overhead from ▇▇▇▇▇▇▇, and no amortization of goodwill
associated with the Stock Purchase Agreement) as compensation for assisting
▇▇▇▇▇▇▇ to open one or more new branch campuses as described above. Such profits
interest shall be calculated annually, as of the last day of each calendar year,
with payment for any calendar year to be made within ten (10) days after receipt
by ▇▇▇▇▇▇▇ of the annual audited Financial Statement for each branch campus, but
not later than May 15 of any year, with the final payment to be made not later
than May 15, 2014 (for profits realized for the final calendar year 2013).
Profits payable for any partial calendar year (1998 and 2013) will be prorated.
Copies of the Financial Statements supporting any payment made according to this
subparagraph (c) will be provided with the payment. The underlying books and
records will be open to inspection, examination or audit by Consultants upon
giving ▇▇▇▇▇▇▇ five (5) days' prior notice of their intention to exercise such
rights. ▇▇▇▇▇▇▇ covenants and agrees that in the event any branch campus is sold
prior to the expiration of the Profits Period, the sale shall be subject to the
remaining payment obligations hereunder.
4. Liability.
----------
▇▇▇▇▇▇▇ shall indemnify Consultants against any loss, claim, damage, and/or
expense (including reasonable attorney's fees) resulting from, or arising,
directly or indirectly, out of acts or omissions of Consultants during the
Consulting Term brought against Consultants by a third party, with the exception
of acts of gross negligence or willful and wanton conduct. The provisions of
this paragraph shall survive the termination of this Agreement for one (1) year.
3
If this paragraph is in conflict with Section 5.01(b) of the Stock Purchase
Agreement, the language of the Stock Purchase Agreement shall prevail and be in
full force and effect.
5. Termination.
------------
This Agreement may be terminated by ▇▇▇▇▇▇▇ at any time or by written
mutual agreement of the parties. Upon termination, ▇▇▇▇▇▇▇ shall pay all amounts
due Consultants under Paragraph 3(a) and 3(b) above, and Consultants shall
deliver to ▇▇▇▇▇▇▇ all proprietary information of ▇▇▇▇▇▇▇, if any. All amounts
to become due Consultants under Paragraph 3(c) above, if any, shall survive
termination and shall be paid by ▇▇▇▇▇▇▇ in accordance with the provisions of
Paragraph 3(c). This Agreement may be terminated by the Consultants in the event
of default under the promissory note (the "Note") issued by ▇▇▇▇▇▇▇ under the
Stock Purchase Agreement, and ▇▇▇▇▇▇▇'▇ failure to cure the default as provided
in the Note.
6. Waiver.
-------
A party's failure to insist on compliance or enforcement of any provision
of this Agreement shall not affect the validity or enforceability or constitute
a waiver of future enforcement of that provision or of any other provision of
this Agreement by that party or any other party.
7. Governing Law.
--------------
This Agreement shall in all respects be subject to, and governed by, the
laws of the State of Pennsylvania.
8. Severability.
-------------
The invalidity or unenforceability of any provision in this Agreement shall
not in any way affect the validity or enforceability of any other provision and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in this Agreement.
9. Notice.
-------
Any and all notices required or permitted herein shall be deemed delivered
if delivered personally or if mailed by registered or certified mail to ▇▇▇▇▇▇▇
4
at its principal place of business and to the Consultants at the address
hereinafter set forth following the Consultant's signature, or at such other
address or addresses as either party may hereafter designate in writing to the
other.
10. Assignment.
-----------
This Agreement, together with any amendments hereto, shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives, except that the rights,
benefits and obligations of Consultants under this Agreement may not be assigned
without the prior written consent of ▇▇▇▇▇▇▇.
11. Amendments.
-----------
This Agreement may be amended at any time by mutual consent of the parties
hereto, with any such amendment to be invalid unless in writing, signed by
▇▇▇▇▇▇▇ and Consultants.
12. Entire Agreement.
-----------------
This Agreement contains the entire agreement and understanding by and
between Consultants and ▇▇▇▇▇▇▇ with respect to the engagement of Consultants,
and no representations, promises, agreements, or understandings, written or
oral, relating to the engagement of the Consultants by ▇▇▇▇▇▇▇ not contained
herein shall be of any force or effect.
13. References to Gender and Number Terms.
--------------------------------------
In construing this Agreement, feminine or number pronouns shall be
substituted for those masculine in form and vice versa, and plural terms shall
be substituted for singular and singular for plural in any place in which the
context so requires.
14. Headings.
---------
The various headings in this Agreement are inserted for convenience only
and are not part of the Agreement.
5
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ and Consultants have duly executed this
Agreement as of the day and year first above written.
-------------------------- ▇▇▇▇▇▇▇ EDUCATIONAL
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ SYSTEMS, INC.
-------------------------- -------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Address for Notice Purposes: Address for Notice Purposes:
c/▇ ▇▇▇▇▇▇▇▇▇▇ & Associates ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
6
MINUTES OF ACTION
BY
BOARD OF DIRECTORS
OF
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
a Colorado corporation
This meeting is held pursuant to the provisions of Colorado Revised
Statutes, 1997, Section ▇-▇▇▇-▇▇▇, which provides that any action required to be
taken at a meeting of the directors of a corporation, or any action which may be
taken at a meeting of the directors, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof. The
undersigned, representing all of the directors of ▇▇▇▇▇▇▇ Educational Systems,
Inc. ("Corporation"), do hereby waive any and all notice that may be required to
be given with respect to a meeting of the directors of the Corporation and do
hereby make, ratify, confirm and approve the following actions:
1. These Minutes of Action shall constitute the record of a special meeting
of the directors the Corporation, and the Secretary of this Corporation or any
other proper officer is hereby authorized to certify any of the actions
hereinafter taken as having been duly taken or ratified by the directors of this
Corporation in accordance with the requirements established by law.
2. The directors, believing it to be in the best interest of the
Corporation, hereby ratify, approve and confirm certain financing arrangements
between the Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Mezzanine Fund, L.P. (the
"Purchaser"). The President of the Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, be and hereby
is authorized and empowered to take, all or any part of the following action on
or in behalf of the Corporation (1) to execute and deliver to the Purchaser (i)
a Note and Security Agreement ("Note Agreement") providing for financing
arrangements for the Corporation in the amount of $2,900,000 and the grant to
the Purchaser of a security interest in the Corporation's accounts receivable,
contract rights, chattel paper, instruments, documents, inventory, equipment,
general intangibles, copyrights, patents, trademarks, trade names, accessions
to, substitutions for and replacements, products and proceeds of the foregoing,
and books and records pertaining to all of the foregoing, as more fully set
forth in the Note Agreement, to secure Corporation's payment and performance
under the terms of the Note Agreement; (ii) a Senior Subordinated Secured Note
("Note") evidencing the Corporation's indebtedness under the Note Agreement in
the principal amount of $2,900,000, (iii) a Warrant to purchase 1,268,486 common
shares of the Corporation; and (iv) all other agreements, documents and
instruments, including, but not limited to, financing statements, contemplated
by the Note Agreement; and (2) to carry out, modify, amend or terminate any
arrangements or agreements at any time existing between Corporation and the
Purchaser.
3. The following named persons are officers of Corporation, duly elected,
qualified and acting as such; that the signatures appearing opposite the names
of such officers are authentic and genuine and are, in fact, the signatures of
such officers
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President/Treasurer ________________________
▇▇▇ ▇▇▇▇▇▇▇, Vice President ________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary ________________________
These Minutes of Action may be executed in one or more counterparts, all of
which taken together shall constitute the same Minutes, and when signed by all
of the directors of the Corporation may be certified by any proper officer of
the Corporation as having been unanimously adopted by vote of the directors as
of the 24th day of March, 1998.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their
approval of the above proceedings as of the date last above mentioned.
DIRECTORS:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇ ▇▇▇▇▇▇▇
MINUTES OF ACTION
BY
BOARD OF DIRECTORS
OF
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
a Colorado corporation
This meeting is held pursuant to the provisions of Colorado Revised
Statutes, 1997, Section ▇-▇▇▇-▇▇▇, which provides that any action required to be
taken at a meeting of the directors of a corporation, or any action which may be
taken at a meeting of the directors, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter thereof. The
undersigned, representing all of the directors of ▇▇▇▇▇▇▇ Educational Systems,
Inc. ("Corporation"), do hereby waive any and all notice that may be required to
be given with respect to a meeting of the directors of the Corporation and do
hereby make, ratify, confirm and approve the following actions:
1. These Minutes of Action shall constitute the record of a special meeting
of the directors the Corporation, and the Secretary of this Corporation or any
other proper officer is hereby authorized to certify any of the actions
hereinafter taken as having been duly taken or ratified by the directors of this
Corporation in accordance with the requirements established by law.
2. The directors, believing it to be in the best interest of the
Corporation, hereby ratify, approve and confirm certain arrangements between the
Corporation and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("Seller") to acquire all of the issued and
outstanding shares (the "Purchased Shares") of Data Processing Trainers Co., a
Pennsylvania corporation ("DPT"). The President of the Corporation, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, be and hereby is authorized and empowered to take, all or any part of
the following action on or in behalf of the Corporation (1) to execute and/or
deliver to Seller (i) a Stock Purchase Agreement ("Stock Purchase Agreement")
providing for the acquisition of all of the issued and outstanding shares of DPT
by the Corporation; in the amount of $2,900,000; (ii) a Promissory Note ("Note")
evidencing a portion of the purchase price as more fully set forth in the Stock
Purchase Agreement in the principal amount of $4,340,000; (iii) a Security
Agreement-Stock Purchase to grant to Seller a security interest in the Purchased
Shares to secure the Note and the other obligations set forth therein; (iv) a
Guaranty and Security Agreement from DPT to grant to Seller a security interest
in DPT's accounts receivable, contract rights, chattel paper, instruments,
documents, inventory, equipment, general intangibles, copyrights, patents,
trademarks, trade names, accessions to, substitutions for and replacements,
products and proceeds of the foregoing, and books and records pertaining to all
of the foregoing, as more fully set forth therein, to secure the Note and the
other obligations set forth therein; and (v) all other agreements, documents and
instruments, including, but not limited to, financing statements, contemplated
by the Stock Purchase Agreement; and (2) to carry out, modify, amend or
terminate any arrangements or agreements at any time existing between the
Corporation and Seller.
These Minutes of Action may be executed in one or more counterparts, all of
which taken together shall constitute the same Minutes, and when signed by all
of the directors of the Corporation may be certified by any proper officer of
the Corporation as having been unanimously adopted by vote of the directors as
of the ____ day of March, 1998.
IN WITNESS WHEREOF, the undersigned Directors have evidenced their approval
of the above proceedings as of the date last above mentioned.
DIRECTORS:
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇ ▇▇▇▇▇▇▇
RESOLUTIONS
OF
SHAREHOLDERS AND DIRECTORS
OF
DATA PROCESSING TRAINERS CO.,
a Pennsylvania corporation
These resolutions are adopted pursuant to the provisions of Pennsylvania
Statues Annotated which provides that any action which may be taken at a meeting
of shareholders or directors may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders and directors entitled to vote with respect to the subject matter
thereof. The undersigned, constituting all of the shareholders and directors of
Data Processing Trainers Co. ("Corporation"), do hereby waive any and all notice
that may be required to be given with respect to a meeting of the shareholders
and directors of the Corporation and do hereby make, ratify, confirm and approve
the following actions:
1. The Corporation hereby ratifies and confirms the execution and delivery
of the Stock Purchase Agreement (the "Stock Purchase Agreement") between the
Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("Seller") and ▇▇▇▇▇▇▇ Educational Systems, Inc.
("SES") whereby SES acquired from Seller all of the issued and outstanding
shares of the Corporation.
2. The Corporation further ratifies the representations and warranties set
forth in Section 2.02 of the Stock Purchase Agreement and confirms that said
representations and warranties are true and correct as if made on the date of
the Stock Purchase Agreement.
3. The Corporation further ratifies and confirms the execution and delivery
of the Guaranty and Security Agreement for the benefit of Seller to secure
certain deferred obligations of SES to Seller pursuant to the Stock Purchase
Agreement.
These Resolutions, when signed by all of the shareholders and directors of
the Corporation, may be certified by any proper officer of the Corporation as
having been unanimously adopted by vote of the shareholders and directors as of
the 24th day of March, 1998.
IN WITNESS WHEREOF, the undersigned shareholders and directors have
evidenced their approval of the above proceedings as of the date last above
mentioned.
SHAREHOLDERS:
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
MINUTES OF MEETING
OF
SHAREHOLDERS AND DIRECTORS
OF
DATA PROCESSING TRAINERS CO.,
a Pennsylvania corporation
This meeting of the shareholders and directors of Data Processing Trainers
Co. ("Corporation") is held on March 24, 1997 pursuant to the provisions of
Pennsylvania Statutes Annotated, which provides that any action required to be
taken at a meeting of the shareholders or directors of a corporation may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders and directors entitled to vote
with respect to the subject matter thereof. The undersigned, representing all of
the shareholders and directors of ▇▇▇▇▇▇▇ Educational Systems, Inc.
("Corporation"), do hereby waive any and all notice that may be required to be
given with respect to a meeting of the shareholders of the Corporation and do
hereby make, ratify, confirm and approve the following actions:
1. These Minutes of Meeting shall constitute the record of a meeting of the
shareholders of the Corporation, and the President of the Corporation or any
other proper officer is hereby authorized to certify any of the actions
hereinafter taken as having been duly taken or ratified by the shareholders of
this Corporation in accordance with the requirements established by law.
2. RESOLVED, that the shareholders of the Corporation, pursuant to the
Pennsylvania Business Corporation Law and believing it to be in the best
interest of the Corporation, do approve, ratify and confirm the following:
a. The resignation of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ from all positions held as an
officer or director of the Corporation.
b. The resignation of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ from all positions held as an
officer or director of the Corporation.
c. The election and appointment of the following officers of the
Corporation for the ensuing corporate year and until their successors shall have
been duly elected or appointed and shall qualify:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ President/Chief Executive Officer/Treasurer
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Secretary
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Assistant Secretary
d. The election and appointment of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the sole
director of the Corporation for the ensuing corporate year and until their
successors shall have been duly qualified.
e. The change of the registered agent of the Corporation to reflect
the agent of the Corporation as CT Corporation Services.
f. The change of the authorized signatories on the Corporation's bank
accounts at Commerce Bank to remove the existing signatories and add those
signatories designated by the President of the Corporation.
The shareholders and directors of the Corporation further authorize the
President of the Corporation to perform all acts, execute such documents and
take all actions necessary to insure the effectuation of the foregoing.
These Minutes of Action, when signed by all of the shareholders and
directors of the Corporation may be certified by any proper officer of the
Corporation as having been unanimously adopted by vote of the shareholders and
directors on the 24th day of March, 1998.
IN WITNESS WHEREOF, the undersigned, being all of the shareholders and
directors of the Corporation, have evidenced their approval of the above
proceedings as of the date last above mentioned.
SHAREHOLDERS:
▇▇▇▇▇▇▇ EDUCATIONAL SYSTEMS, INC.
By
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
DIRECTORS:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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