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EXHIBIT 10.28
ASSET PURCHASE AGREEMENT
Agreement dated as of June 23, 1993, among EDUCATIONAL MEDICAL, INC., a
Delaware corporation ("EMI"), OIOPT Acquisition Corp., a Delaware corporation
wholly owned by EMI ("Buyer"), OHIO INSTITUTE OF PHOTOGRAPHY AND TECHNOLOGY,
INC., an Ohio corporation (the "Seller"), Mr. K. ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (each such individual is separately called a "Shareholder" and such
Shareholders are collectively called the "Shareholders").
PRELIMINARY STATEMENT
The Seller is the owner of a post secondary educational school
located, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ (the "School"). The Buyer wants
to buy the School. The Seller and each Shareholder want to sell the School to
the Buyer.
This Agreement provides for the sale and purchase of the School. It
contains the terms pursuant to which Seller has agreed to sell substantially
all of its School Related Assets to Buyer and Buyer has agreed to assume
certain related Stated Liabilities of Seller. EMI has entered into this
Agreement to reflect that it is jointly and severally liable with the Buyer
with regard to the obligations of the Buyer provided for in it.
IN CONSIDERATION OF THE COVENANTS CONTAINED IN THIS AGREEMENT, AND THE
OTHER CONSIDERATION PROVIDED FOR IN IT, THE PARTIES, EACH INTENDING TO BE
LEGALLY BOUND, AGREE AS FOLLOWS:
1. THE PURCHASE PRICE; CONVEYANCE OF THE ASSETS; ASSUMPTION OF
STATED LIABILITIES; CERTAIN DEFINITIONS; INDIVIDUAL NON-COMPETITION AGREEMENTS;
CONSULTING AGREEMENTS; EFFECTIVE DATE OF TRANSACTION.
(a) The Purchase Price and Other Payments. The purchase
price for the "School Related Assets" (as defined in Section 1(h), below, is
(1) $370,000.00 (the "Cash Portion"), plus
(2) the amount of cash (the "Existing Mortgage
Payments") necessary to repay in full the Existing First Mortgage and Existing
Second Mortgage (as defined in Section 1(m) of the Addendum to this Agreement
secured by the Facility (as defined in Section 1(h)(1)(ii), below), plus
(3) the amount of cash (the "Wage Claims Payment")
necessary to pay Accrued Wage Claims (as defined in Section 1(h)(4), below),
plus
(4) the assumption of the Stated Liabilities (as
defined in Section 1(h)(2), below).
The payments provided for in clauses (i), (ii) and (iii) of the preceding
sentence are called the "Cash Portion of the Purchase Price"); the Cash Portion
of the Purchase Price plus the assumption provided for in clause (iv) of the
preceding sentence is called the ("Purchase Price"). The Purchase Price shall
be allocated between tangible and intangible assets and between real estate and
personal property as determined by Buyer and Seller prior to the Closing.
(b) Conveyance of Assets. On July 21, 1993, or such earlier
date as the parties may specify (the "Closing Date") the Seller shall convey to
Buyer all of its School Related Assets (the "Closing").
(c) Cash Payments. At the Closing, the Buyer shall deliver
to Seller or the holder of
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the Existing Mortgage, as the case may be:
(1) $170,000 in immediately available funds on
account of the Cash Portion (the "First Payment");
(2) The Existing Mortgage Payments, which shall be
delivered to the respective mortgagees in full satisfaction of the Existing
Mortgages; and
(3) The Wage Claims Payment, which shall be paid by
the Seller to the relevant employees or appropriately deposited on account of
withholding taxes or similar deposits in compliance with laws requiring similar
withholdings or deposits.
(d) Assumption of Stated Liabilities. On the Closing Date
the Buyer shall assume all of the "Stated Liabilities" (as defined in Section
1(h)(2), below.
(e) Delivery of Second Payment Note. On the Closing Date the
Buyer shall deliver to Seller its Promissory Not e for $200,000.00 (the "Second
Payment Note") in the form attached to this Agreement as EXHIBIT 172, payable
the earlier of the last business day within the first 30 calendar days
following the date on which the Prerequisite Student Aid Approvals are
obtained, but no later than twelve months from the date of Closing.
"Prerequisite Student Aid Approvals" mean approvals by the United States
Department of Education and all other applicable private and governmental
agencies and organizations of the change in control of the School resulting
from the sale of the School pursuant to this Asset Purchase Agreement which are
a prerequisite to receipt of federal and state aid by the School's students;
(f) Consulting Agreements and Individual Non-Competition
Agreements. In addition to the payments for the School Related Assets
described above, the Buyer shall:
(1) enter into consulting agreements (the "Consulting
Agreements") with each of the Shareholders in the form attached to this
agreement as EXHIBIT 273 providing for aggregate semi-annual payments (the
"Consulting Payments") in the following amounts:
AGGREGATE SEMI-ANNUAL
CONSULTING CONSULTING
SHAREHOLDER PAYMENT PAYMENT
----------- ------- -------
K. ▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 71,420.00 $11,903.33
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 60,960.00 10,160.00
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 43,800.00 7,300.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 17,140.00 2,856.67
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 6,680.00 1,113.33
----------- ----------
TOTAL $200,000.00 $33,333.33
The Consulting Payments shall be paid to each Shareholder in 10 equal
semiannual payments in the amounts set forth above. Such payments shall be due
on June 30, and December 31 of each year, commencing on December 31, 1993.
(2) pay to Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇,
respectively, the amounts of
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$175,00.00 and $150,000.00 (the "Individual Non-Competition Payments") on
account of the agreements contained in Section 7(f) of this Agreement
prohibiting them from Competing with the Buyer or EMI for a period of 5 years.
The Individual Non-Competition Payments shall be paid to Messrs. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ in 10 equal semiannual payments of $17,500.00 and $15,000.00,
respectively. Such payments shall be due on June 30, and December 31 of each
year, commencing on December 31, 1993.
(g) DELIVERY OF THE PLEDGE AGREEMENT. At the Closing EMI shall
deliver to the Seller a pledge agreement in the form attached to this Agreement
(the "Pledge Agreement") in the form attached to this Agreement as EXHIBIT
374pursuant to which EMI secures the payment of the Second Payment Note and the
Consulting Payments by a pledge of all of the outstanding capital stock (the
"Buyer's Stock") of the Buyer.
(h) Definitions of School Related Assets and Stated Liabilities.
(1) "School Related Assets" shall mean:
(i) All cash and cash equivalents owned by
the Seller at the Closing Date except for "Excess Cash," which shall mean cash
or cash equivalents on hand at the Closing Date less that amount, up to $
, distributed to the Shareholders subsequent to December 31, 1992,
("Permitted Pre-Closing Distributions") and (y) increased or decreased, as the
case may be, to the extent the Net Assets of the Seller as of March 31, 1993
are greater or less than $419,667.00, without giving effect to any Permitted
Pre-Closing Distributions (the "Closing Adjustment"). "Net Assets" means
assets minus liabilities, as calculated in accordance with generally accepted
accounting principals, as indicated on financial statements reviewed by [
] prior to the Closing for the purpose, among others, of making such
calculation (the "Reviewed March 31, 1993 Financials"). Any Closing Adjustment
shall first be made by reducing the First Payment and then the amount of the
Second Payment Note.
(ii) The Facility, which means the Real
Property described on EXHIBIT 475, along with all improvements to it.
(iii) The non-cash assets reflected in the
Seller's 1993 Balance Sheet and included in the Seller's Financial Statements,
together with the related goodwill and rights of Seller as a going concern,
tangible and intangible, used in connection with the operation of the School,
together with any other assets acquired by Seller subsequent to the date of
such balance sheet in connection with the operation of the School;
(iv) Seller's right to use the name "Ohio
Institute of Photography & Technology" either alone or in conjunction with
other words or names in the context of the operation of a school or other
learning institution.
(v) National student matching funds, if
any.
School Related Assets shall not include "Excluded Assets." Excluded Assets
are:
(i) assets disposed of in the ordinary
course of business subsequent to the date of the Seller's March Balance Sheet,
and
(ii) those assets listed on EXHIBIT
5 attached to this Agreement.
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(2) "Stated Liabilities" shall mean shall mean the
liabilities, duties, and obligations of the Seller related to the operations of
the School:
(i) which are reflected on the Seller's March
Balance Sheet in accounts numbered 20100, 23000, 20410, 20640, 20700 and 20800
which include liability for unearned tuition and similar liabilities incurred
by the Seller prior to the Closing in the ordinary course of business after
March 31, 1993 which are posted to such accounts consistently with the Seller's
prior practice,
(ii) provided for in agreements made or
entered into in the ordinary course of business after the date of the Seller's
March Balance Sheet, including accounts payable arising in the ordinary course
of business, from transaction with trade creditors and suppliers, regardless of
whether such agreement is in writing, (the "Closing Date Liabilities"), and
(iii) provided for in the agreements
disclosed on the Exhibits attached to this Agreement and specifically assumed
by the Buyer;
provided, in the case of liabilities, duties, and obligations described in
clauses (i), (ii) and (iii) of this sentence, Stated Liabilities shall only
include the liability, duty or obligation to (x) pay money if, and to the
extent, such obligation is provided for in such agreement and (y) perform any
service or take any other action if, and to the extent, such service or other
action is capable of being performed in the ordinary course of business.
Stated Liabilities shall exclude, without limitation (x) obligations of the
Seller to employees whether in the nature of wages, benefits or otherwise,
including, Accrued Wage Claims (the later of which will be paid by the Seller
from the Purchase Price) and (y) any contingent liabilities not specifically
assumed, whether arising prior to of after the Effective Date and regardless of
whether disclosed to Seller, including without limitation, any liabilities
arising from failure to comply with any law or regulation relating to the
administration of any kind of student aid or grant, or record keeping or
reporting required in connection with such administration.
(3) "Cohort Default Report" shall mean the relevant
Department of Education report from indicating the student default rate for the
applicable fiscal year computed in accordance with federally mandated
procedures for all students attending the School and receiving assistance
pursuant to the ▇▇▇▇▇▇▇▇ Loan and Supplemental Loans for Students programs.
(4) "Accrued Wage Claims" means the Seller's
obligation to pay Employee Wages, federal and state withholding and similar
taxes and deposits as reflected in accounts 20130, and 20500 through 20560,
inclusive, described in the Seller's March Balance Sheet and similar
liabilities incurred by the Seller prior to the Closing in the ordinary course
of business after March 31, 1993 which are posted to such accounts consistently
with the Seller's prior practice.
(i) Effective Date. The effective date of this
transaction for all accounting purposes shall be March 31, 1993, provided that
the selection of such effective date shall not be considered to impose on the
Buyer any liability of the Seller other than with respect to the assumption of
Stated Liabilities.
2. REPRESENTATIONS OF THE SELLER AND THE SHAREHOLDER.
Seller and each Shareholder, jointly and severally, represent and
warrant to Buyer:
(a) No Misstatements. The representations of the Seller
and each Shareholder and the information supplied by Seller or each Shareholder
contained in this Agreement, the Exhibits attached to it and the documents
incorporated into it by reference do not contain any untrue statement of a
material fact or omit to state any fact necessary to make such representations
or information not
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materially misleading.
(b) Validity of Actions. Seller (i) is duly organized,
validly existing and in good standing under the laws of its organization, (ii)
has all requisite corporate and other appropriate authorization to conduct its
business as currently conducted, (iii) is qualified to do business in all
jurisdictions in which such qualification is necessary, and (iv) has full power
and authority to enter into this Agreement and to carry out all acts
contemplated by it. This Agreement has been duly executed and delivered on
behalf of the Seller and each Shareholder, has received all necessary corporate
authorization and is a legal, valid and binding obligation of the Seller and
each Shareholder, enforceable against each of them in accordance with its
terms. Entering into this Asset Purchase Agreement and the consummation of the
transactions contemplated by it will not violate any provision of the Articles
of Incorporation or Code of Regulations of Seller or conflict with or result in
any breach of any of the provisions of any agreement to which the Seller or and
or any of the Shareholders is a party or by which any of them or any of their
respective assets are bound, or cause a breach of any applicable law,
governmental regulation, order, or other decree of any court or governmental
agency. The Articles of Incorporation and Code of Regulations of Seller, as
presently in effect, are attached to this Agreement as EXHIBIT 6(6).
(c) Seller's Financial Statements
(1) Attached as EXHIBIT 7(7) to this Agreement
are Seller's unaudited balance sheets at August 31, 1991, and 1992, and
statements of income and expense and cash flows for the years then ending
("Seller's Annual Financial Statements"), and Seller's unaudited balance sheet
at March 31, 1993 ("Seller's March Balance Sheet") and statements of income and
expense for the period then ending (the Seller's March Balance Sheet and such
statements of income and expense are collectively called "Seller's March
Financial Statements"). All of such financial statements are called the
"Seller's Financial Statements."
(2) The Seller's Financial Statements: (i) have
been prepared on the accrual basis in accordance with generally accepted
accounting principles consistently applied ("GAAP"), except the Seller's March
Financial Statements do not contain footnote disclosure and are subject to
normal year end adjustments of a nature consistent with adjustments made to
Seller's Annual Financial Statement, and (ii) fairly present Seller's financial
condition and its results of operations at the times and for the periods
presented.
(3) There have been no material adverse changes
in the financial condition or in the operations, business, prospects,
properties of assets of Seller since the date of the Seller's March Financial
Statements.
(d) Liabilities of Seller. Seller has no liabilities,
contingent or otherwise, including, without limitation, liabilities for state
or Federal income, withholding, sales, or other taxes, except to the extent
reflected, reserved against, or provided for, in the Seller's March Balance
Sheet, and trade payables and other obligations incurred after the date of the
Seller's March Balance Sheet in amounts consistent with those incurred in prior
periods in the ordinary course of business, including without limitation
liabilities for unearned tuition.
(e) Assets of Seller. Seller has good and marketable
title to all of its School Related Assets. Except as otherwise disclosed in
the Seller's March Balance Sheet, all of the School Related Assets are owned
free and clear of any adverse claims, security interests, or other encumbrances
or restrictions, except liens for current taxes not yet due and payable,
landlords' liens as provided for in the relevant leases or by applicable law,
or liens or similar security interests granted as part of personal property
financing agreements made in the ordinary course of business and which in the
aggregate are
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not material.
(f) Facility and Facility Operations.
(1) The School's operations are conducted solely
at the relevant Facility and all of the tangible School Related Assets used in
connection with such operations are located at the School Facility. All of the
improvements located at the School Facility are in good operating condition and
repair. There is no pending or threatened condemnation proceeding with respect
to the School Facility.
(2) Attached as EXHIBIT 8(8) to this Agreement is
a schedule of furnishings, fixtures and equipment located on, or used in
connection with, the operation of the School Facility as of [INSERT DATE OF
MOST RECENT INVENTORY].
(3) Except for environmental law compliance
(which is addressed in Section 2(f)(4) below) and accreditation, recruitment,
admissions, student loan and funding matters compliance (which are addressed in
Sections 2(h) and 2(i) below) as to which no representation or warranty is made
in this Section, all activities at, and the physical condition of, the Facility
are in compliance with all legal and regulatory requirements applicable to the
Seller, the operation of the School, and the use of the Facility, and the
Seller had not received any notice to the contrary. Seller has paid for and
obtained all licenses, permits, and other authorizations required for the
operation of the School and the use of the Facility (the "Permits"). All
Permits currently the in effect and pertaining to the Seller, the Facility or
the operation of the School are listed on EXHIBIT 980 to this Agreement. The
representations contained in this subsection 3 shall not apply to incidental
instances of non-compliance occurring in the ordinary course of business
without the knowledge of the Seller of any of the Shareholders, which are
immaterial to the operation of the School and capable of being cured without
significantly disrupting such School's operations.
(4) To the best of the knowledge of Seller and each
Shareholder, after investigation, there are no Hazardous Substances6 in, on or
under the Facility and Seller is not now
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(1) The term "Hazardous Substance" shall include without limitation:
(i) Those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or
"solid waste" in CERCLA, RCRA, and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and in the
regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in any
Ohio Statute and in the regulations promulgated pursuant to any Ohio
Statute;
(iii) Those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(iv) Such other substances, materials and wastes which are or
become regulated under applicable local, state or federal law, or
which are classified as hazardous or toxic under federal, state, or
local laws or regulations; and
(v) Any material, waste or substance which is (A) petroleum,
(B) asbestos, (C)
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engaged in any litigation, proceedings or investigations, nor knows of any
pending or threatened litigation, proceedings or investigations regarding the
presence of Hazardous Substances in, on or under the Facility.
(g) Equipment Leases and Financing Agreements. All of
the leases and financing agreements to which Seller is a party or any other
encumbrances which relate to each School Facility or any School Related Asset
are described in EXHIBIT 1081 to this Agreement (the "Financing and Related
Agreements"). Copies of the Financing and Related Agreements are attached to
such Exhibit. Except as reflected in such Exhibit, there have been no
modifications to any of the Financing and Related Agreements; all of them are
in good standing, and free from default; and none of the interests of Seller in
any of them is subject to any restriction except as stated in the applicable
document or as provided by applicable law.
(h) Accreditation. Attached as EXHIBIT 11(11) to this
Agreement is a list of all Federal, state or other licenses and approvals,
including without limitation all accreditation, granted to Seller with respect
to the conduct of its educational or training business (the "Accreditations"),
and the governmental body or agency or other entity granting such
Accreditation. Included in such Exhibit are copies of all such Accreditations.
Except for the Permits and the Accreditations, no license or approval is
necessary for the conduct of Seller's business as it is now being conducted,
and the Seller has received no notice that any other license or approval is
necessary for the continued conduct of such business or that any such license
or approval will not be renewed. Seller is accredited by the Accrediting
Commission of Trade and Technical Schools and is certified by the United States
Department of Education and is a party to, and in compliance with, valid
program participation agreements with that agency with respect to the
operations being conducted at each Facility. Seller has not received any
notice, not previously complied with, with respect to any alleged violation of
the rules or regulations of such agency or any applicable accrediting agency in
respect of any of the Facilities or the terms of any program participation
agreement to which it is or was a party. If any such notices have been
received and complied with, Seller has disclosed their receipt and disposition
to Buyer prior to the execution of this Agreement in writing by a letter making
specific reference to this Section of this Agreement. Seller is not aware of
any investigation or review of its student financial aid programs or any review
of any of its Accreditation whether by a party to any relevant agreement, the
issuer of such Accreditation or otherwise.
(i) Recruitment; Admissions Procedures; Attendance;
Reports. Attached as EXHIBIT 12(12) to this Agreement are copies of all policy
manuals and other statements of procedures or instruction relating to
recruitment of students, including procedures for assisting in the application
by prospective students for direct or indirect state or Federal financial
assistance; admissions procedures, including any descriptions of procedures for
insuring compliance with state or Federal or other appropriate standards or
tests of eligibility; procedures for encouraging and verifying attendance,
minimum required attendance policies, and other relevant criteria relating to
course completion and certification (collectively referred to as the "Policy
Guidelines").
To the best of its knowledge and the knowledge of each Shareholder,
Seller's operations have in all material respects been conducted in accordance
with the Policy Guidelines and all relevant standards imposed by applicable
accrediting agencies, agencies administering state or Federal government
programs in which the Seller participates, or applicable laws or regulations.
------------------------
polychlorinated biphenyl, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section
Section 1251 et seq. or listed pursuant to Section 307 of the Clean
Water Act, (E) flammable explosive, or (F) radioactive materials.
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Seller has submitted all reports, audits, and other information,
whether periodic in nature or pursuant to specific requests, ("Compliance
Reports") to all agencies or other entities with which such filings are
required relating to its compliance with (i) applicable accreditation standards
governing its activities or (ii) laws or regulations governing programs
pursuant to which the Seller or its students receive funding, including,
without limitation, the ▇▇▇▇▇▇▇ Loan Program, the ▇▇▇▇▇▇▇▇ Student Loan
Program, the Pell Grant program and the Supplemental Educational Opportunity
Grant Programs.
Complete and accurate records in all material respects for all present
and past students attending the School have been maintained consistent with the
operations of a school business. All forms and records have been prepared,
completed, maintained and filed in all material respects in accordance with all
applicable federal and state laws and regulations, and are true and correct in
all material respects. As of December 31, 1992 all financial aid grants and
loans, disbursements and record keeping relating to them have been completed in
compliance with all federal and state requirements, and there are no material
deficiencies in respect thereto. No student has been funded prior to the date
for which such student was eligible for funding and such student's records have
been processed in accordance with all applicable federal, state and relevant
third party funding source requirements. All appropriate reports and surveys
have been accurately prepared, taken and filed prior to delinquency.
(j) Default. Attached as EXHIBIT 13(13) is a schedule
indicating the cohort default rate, as calculated by the United States
Department of Education, of all students attending the School receiving
assistance pursuant to the ▇▇▇▇▇▇▇▇ Loan and Supplemental Loans for Students
programs (or their applicable predecessor programs) for the fiscal years ended
12/31/91, 12/31/90 and 12/31/89. To the best of the knowledge of the Seller and
each of the Shareholders, such schedule is materially accurate in all respects.
(k) Trademarks, etc. Attached to this Agreement as EXHIBIT
14(14) is a list of all tradenames, trademarks, service marks, copyrights and
the registrations for them owned or used by Seller. Seller has not infringed
and is not now infringing, any trademark, tradename, service ▇▇▇▇, or copyright
belonging to any other person. Except as set forth on such exhibit, Seller is
not a party to any license, agreement or arrangement, whether as licensor,
licensee or otherwise, with respect to any trademark, tradename, service ▇▇▇▇,
or copyright used by Seller. Seller's business may be conducted without
license by others for the use of any tradename, trademark, service ▇▇▇▇, or
copyright.
(l) Material Contracts. Attached as composite EXHIBIT
15(15) to this Agreement is (i) a schedule identifying all material contracts
relating to the School's operations or the Facility, including, without
limitation, all agreements relating to state or Federal funding of educational
services provided by the Seller through grants, loans or direct payments either
to the Seller, individual students or otherwise, and any agreements relating to
the placement of students following their completion of relevant educational
programs provided by the Seller other than agreements with students involving
the teaching of standard courses, for standard prices as set forth in the
Sellers catalog or in the enrollment agreement for such students (the
"Contracts"); (ii) a summary of all material provisions of the Contracts that
are not reduced to written documents, including but not limited to all
provisions of each Contract regarding amounts payable by and/or to the Seller
and termination of the Contract; and (iii) a copy of all written Contracts.
Except as disclosed in Exhibit 15: (i) all of the Contracts remain unmodified
and in full force and effect, and (ii) Seller is not in default of any material
nature (nor does any state of facts exist which, with the giving of notice, the
passing of time, or otherwise, would constitute a default of any material
nature by Seller) with respect to any of the Contracts.
(m) Maintenance and Employment Agreements. Attached to
this Agreement as composite EXHIBIT 16(16) is (i) a schedule of all written
agreements between the Company and
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independent contractors, employees and agents who are employed or engaged in
the management or operation of Seller's business, the Facilities or the
personal property used by Seller; (ii) the names of all parties entitled to
payments from Seller under any such agreements or arrangements; (iii) the
amounts payable by Seller under the terms of all such agreements and
arrangements, including without limitation, the terms of employment and
compensation, including vacation and other employee benefit provisions and the
cost of all employee benefits and payroll taxes; and (iv) a copy of all written
contracts for such services. There are no material oral agreements in effect
for any such services. Except as disclosed on such Exhibit: (x) there are no
written agreements between any of such contractors, employees or agents and
Seller; (y) there is no party entitled to compensation or remuneration for any
such services arising from Seller's operations after the Closing; and (z)
Seller's agreements and arrangements providing for such services may be
terminated by Seller at any time with or without cause, and without any
obligation to pay any of said parties any amounts whatsoever except as may be
required by law (including, without limitation, severance pay or accrued
vacation pay or other benefits).
(n) Employee Benefit Plans. Seller maintains employee
benefit plans as listed on EXHIBIT 17(17) to this Agreement (the "Employee
Benefit Plans"). Copies of such plans are attached to such Exhibit. Except as
listed on such Exhibit, Seller does not maintain any profit sharing, pension or
other employee benefit plan. Seller has no unfunded obligations pursuant to
any insurance, retirement, pension, profit sharing or deferred compensation
plan or program.
(o) Labor. There is no existing labor dispute affecting
Seller's business. None of Seller's employees are covered by any union or
collective bargaining agreement.
(p) Insurance. A schedule of all of the policies of
insurance maintained by Seller in connection with the operation of its business
or the ownership of the Facility is attached as EXHIBIT 18(18) to this
Agreement. The insurance coverage provided by such policies complies with all
agreements to which Seller is a party, and applicable legal requirements to
which it is subject. All such policies are currently in effect.
(q) Taxes. Complete and accurate copies of all of the
Seller's Federal, state and other income tax returns for the years ended
August 31, 1989, 1990, and 1991 are attached as composite EXHIBIT 19(19) to this
Agreement. The Company has filed timely all Federal, state and local tax
returns which it is required to file and has no outstanding liability for any
Federal, state or local taxes or interest or penalties thereon, whether
disputed or not, except taxes not yet payable which have been provided for in
accordance with GAAP and are disclosed in the Interim Financial Statements.
Seller's Federal income tax returns have been audited and accepted by the
Internal Revenue Service for all of its fiscal years through the year ended
, 19 ; there is not now in force any extension of time with respect to the
date on which any tax return was or is due to be filed by or with respect to
Seller, or any waiver or agreement by it for the extension of time for the
assessment of any tax.
(r) Actions Pending. Except as disclosed in EXHIBIT
20(20) to this Agreement: (i) there are no actions, suits, proceedings or
claims pending or threatened against Seller or any Shareholder which, if
determined adversely to Seller or each Shareholder, could (A) have a material
adverse effect on Seller, the Assets, or the businesses of Seller when taken
as a whole, or (B) prevent or delay the consummation of any of the transactions
contemplated by this Agreement; (ii) Seller, is not (to its knowledge or the
knowledge of each Shareholder) the subject of any pending or threatened
investigation relating to any aspect of Seller's operations, including the
operations of any of the Facilities, by any Federal, state or local
governmental agency or authority; (iii) Seller, is not and has not been (to its
knowledge or the knowledge of each Shareholder) the subject of any formal or
informal complaint, investigation or inspection under the Equal Employment
Opportunity Act or the Occupational Safety and Health Act (or their state or
local counterparts) or by any other Federal, state or local
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authority.
(s) Accounts Receivable. Each of the accounts receivable
of Seller constitutes a valid claim in its full amount against the debtor
charged on Seller's books and has arisen in the ordinary course of Seller's
business. Seller's management believes that each such account receivable is
fully collectible to the extent of the face value thereof, except to the extent
of the normal allowance for doubtful accounts with respect to accounts
receivable computed as a percentage of sales consistent with Seller's prior
practices as reflected on the Interim Balance Sheet. No account debtor has any
valid setoff, deduction or defense with respect thereto, and no account debtor
has asserted any such setoff, deduction or defense.
(t) No Guaranties. Except for the Existing First
Mortgage, none of Seller's obligations or liabilities is guaranteed by any
other person, firm or corporation, nor has Seller guaranteed the obligations or
liabilities of any other person, firm or corporation.
(u) Bank Accounts and Deposit Boxes. Attached to this
agreement as EXHIBIT 21(21) are the names and addresses of all banks or
financial institutions in which Seller has an account, deposit or safety
deposit box with the names of all persons authorized to draw on these accounts
or deposits or to have access to the boxes, and an indication of which accounts
or deposits or boxes contain financial aid funds.
(v) Records. The books of account of Seller are complete
and correct in all material respects, and there have been no transactions
involving the business of Seller which properly should have been set forth
therein and which have not been accurately so set forth.
(w) Transactions With Certain Persons. Seller does not
owe any amount to, or have any contract with or commitment to, any Shareholder,
other than compensation for current services not yet due and payable and
reimbursement of expenses arising in the ordinary course of business. No
Shareholder owes any amount to Seller except as reflected in the Seller's
Financial Statements. Seller has made no distributions or other payments to
the Shareholders subsequent to December 31, 1992 except for (i) the
reimbursement of expenses incurred in the ordinary course of business (ii)
salaries consistent with those paid in prior comparable periods, (iii) payments
on the Existing Second Mortgage, or (iv) Permitted Pre-Closing Distributions.
3. REPRESENTATIONS AND WARRANTIES OF EMI AND BUYER. EMI and
Buyer, jointly and severally, represents to Seller and each Shareholder as
follows:
(a) No Misstatements. The representations and the
information supplied by it contained in this Agreement and the documents
incorporated by reference into it do not contain any untrue statement of a
material fact or omit to state any fact necessary to make such representations
or information not materially misleading.
(b) Validity of Actions. It is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the authority to carry on its business as currently conducted, and is qualified
to do business in all jurisdictions in which such qualification is necessary.
It has full power and authority to enter into this Agreement and to carry out
all acts contemplated by it. This Agreement and each of the documents provided
for in it to be delivered as part of this transaction, have been duly executed
and will be delivered pursuant to all appropriate corporate authorization on
its behalf and is its legal, valid and binding obligation and is enforceable
against it in accordance with its terms. The execution and delivery of this
Agreement, the Second Payment Promissory Note, and the consummation of the
transactions contemplated by them will not violate any provision of its
Certificate of Incorporation or Bylaws nor violate, conflict with or result in
any breach
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of any of the terms, provisions of or conditions of, or constitute a default or
cause acceleration of any indebtedness under, any indenture agreement or
instrument to which it is a party or by which it or its assets may be bound, or
cause a breach of any applicable Federal or state governmental law or
regulation, or any applicable order, judgment, writ, award, injunction or
decree of any court or governmental instrumentality.
(c) EMI's Financial Statements
(1) Attached as EXHIBIT 22(22) to this Agreement
are (A) EMI's audited balance sheets at March 31, 1990, 1991, and 1992, and
statements of income and expense and cash flows for the years then ending (the
"Annual Statements"), and (B) EMI's unaudited balance sheet at December 31,
1992 (the "Interim Balance Sheet"), and statements of income and expenses and
cash flow for the period then ending (collectively the Interim Balance Sheet
and such statements are called the "Interim Financial Statements"). The Annual
Statements and the Interim Financial Statements are called the "EMI's Financial
Statements."
(2) EMI's Financial Statements: (i) have been
prepared on the accrual basis in accordance with generally accepted accounting
principles consistently applied ("GAAP"), except as otherwise disclosed in the
reports accompanying them or in the notes attached to them, and (ii) fairly
present EMI's financial condition and its results of operations at the times
and for the periods presented.
(3) There have been no material adverse changes
in the financial condition or in the operations, business, prospects,
properties of assets of Buyer since the date of the Interim Financial
Statements.
(d) Buyer's Financial Condition. The Buyer is a newly formed
corporation. It has no material liabilities except as provided for in this
Agreement, and no assets except the joint and several agreements of EMI to
perform in accordance with the terms of this Agreement.
4. COVENANTS OF THE PARTIES.
(a) Prohibited Acts. Pending consummation of the
transactions contemplated in this Agreement or prior to termination of this
Agreement, Seller and each Shareholder agree that, without prior written
consent of Buyer, given in a letter which specifically refers to this Section
of the Agreement:
(1) not to (i) perform any act or omit to take
any act that would make any of their respective representations made in Section
2 above, inaccurate or materially misleading as of the Closing Date, or (ii)
allow Seller to make any payment or distribution except for the payment of
liabilities provided for in Seller's Financial Statements or incurred in the
ordinary course of business or the Permitted Pre-Closing Distributions;
(2) to cause Seller to conduct its businesses in
the ordinary and regular course, maintain each School Facility and carry on its
business practices, protect its Accreditation and Permits, and keep its books
of account, records and files in substantially the same manner as at present.
(b) Notice. Pending the consummation of the transactions
contemplated in this Agreement or prior to termination of this Agreement, each
party agrees that it will promptly advise the others of the occurrence of any
condition or event which would make any of its representations contained in
this Agreement inaccurate, incorrect, or materially misleading.
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(c) Access. Prior to the Closing, Seller shall afford to
the Buyer (and its officers, attorneys, accountants and other authorized
representatives), upon reasonable notice, free and full access during usual
business hours to its offices, personnel, Facilities, books and records and
other data, financial or otherwise, so that Buyer may have full opportunity to
make such investigation as it shall desire of the Real Property, Assets,
business and operations of Seller, provided that such investigation shall not
unreasonably interfere with Seller's operations. The scope of the investigation
will include, but not be limited to, a verification of Seller's Financial
Statements and a review of Seller's control procedures, regulatory compliance,
each School Facility, material contracts, litigation and tax returns for prior
years. Duly authorized representatives of the Buyer shall also be entitled to
discuss with officers of Seller, its counsel, employees and independent public
accountants, all of its books, records and other corporate documents,
contracts, pricing and service policies, commitments and future prospects.
Representatives of Seller will furnish to Buyer and such other persons, copies
of all materials relating to the business affairs, operations, School Related
Assets and liabilities of Seller which may be reasonably requested from time to
time and will cause representatives and employees of Seller to assist Buyer in
its investigation of the matters relative to Seller. All information obtained
by Buyer, EMI or any of their officers, directors, employees, lender,
investors, agents and other representatives (the "Buyer's Representatives") in
connection with the transactions contemplated by this Agreement or in the
course of their investigations of the Seller, whether obtained before or after
the date of this Agreement (the "Evaluation Material") shall be used only in
connection with this Agreement and, in the event the transactions provided for
in this Agreement are not consummated, each of Buyer and EMI and Buyer's
Representatives shall agree or be instructed, as the case may be, that all
Evaluation Material will be otherwise kept strictly confidential, and, to the
extent practicable, returned to Seller.
(d) Additional Documents. At the request of any party,
each party will execute and deliver any additional documents and perform in
good faith such acts as reasonably may be required in order to consummate the
transactions contemplated by this Agreement and to perfect the conveyance and
transfer of any property or rights to be conveyed or transferred under the
terms of this Agreement.
(e) Employee Notification, Termination of Employee
Benefit Plans, Etc. With respect to any employees employed by the Seller prior
to the Closing, Seller will comply with the terms of all applicable Federal and
state laws and regulations, including without limitation the provisions of the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. Section Section
2101 et. seq. or the Consolidated Omnibus Budged Reconciliation Act ("COBRA").
Seller will terminate all Employee Benefit Plans in accordance with all
applicable laws and regulations as of a date no later than the Closing Date.
(f) Filing of Returns; Additional Information. Seller
will file on a timely basis all tax returns, notices of sale and other
documentation required by law in connection with the transactions provided for
in this Agreement or otherwise required by law, regulation or pursuant to the
terms of any agreement to which it is a party. Seller will supplement any
previous filing made by it in accordance with legitimate requests made by
applicable agencies or parties to the extent required by the relevant law,
regulation or agreement.
(g) Compliance with Conditions to Closing. Subsequent to the
execution and delivery of this Agreement and prior to the Closing Date, each of
the parties to this Agreement will execute such documents and take such other
actions as reasonably may be appropriate to fulfill the conditions to Closing
provided for in Section 5 of this Agreement.
5. CONDITIONS TO CLOSING BY THE RESPECTIVE PARTIES.
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The obligation of EMI and Buyer, on the one hand, and Seller and
each Shareholder on the other hand, to consummate the transactions contemplated
by this Agreement shall be subject to compliance with or satisfaction of the
following conditions by the other, to the extent applicable:
(a) Bring Down. The representations and warranties
set forth in this Agreement shall be true and correct in all material respects
on and at the Closing Date as if then made by the relevant party (except for
those representations and warranties made as of a given date, which shall
continue to be true and correct as of such given date).
(b) Compliance. Each party shall have complied with all
of the covenants and agreements in this Agreement on its or their part,
respectively, to be complied with as of or prior to the Closing Date.
(c) No Material Adverse Changes. Since the date of the
Interim Balance Sheet, there shall not have occurred any material adverse
change in the condition (financial or otherwise) of the School Related Assets
or prospects of Seller.
(d) Certificates. There shall be delivered to the Buyer
and EMI and to the Seller, respectively:
(1) a certificate executed by the President and
Secretary of the other, dated the Closing Date, certifying that the conditions
to be fulfilled by such party set forth in this Section 5 have been fulfilled;
(2) a certificate of incumbency for such entity
executed by its President or any Vice President and by the Secretary of any
Assistant Secretary of such entity, listing the officers of such entity
authorized to execute (to the extent applicable) the Agreement and the other
documents, certificates, schedules and instruments to be delivered on behalf of
such entity, and their respective offices, and containing the genuine signature
of each such person set forth opposite his name; and
(3) good standing certificates and certified
charter documents of such entity of recent date, from the Secretary of the
State of the jurisdiction of incorporation of such entity.
(e) No Suits. No action or proceeding shall have been
instituted in any court or before any Federal, state or local governmental
agency against any party seeking to restrain or prohibit the consummation of
the transactions contemplated by this Agreement, or which could have a material
adverse effect on the School Related Assets or prospects of any of the parties,
which shall not have been dismissed or withdrawn prior to the Closing Date.
(f) Closing Financials.
(1) The Buyer shall have received a student aid
audit, prepared at the Buyer's expense, confirming the accuracy of the relevant
representations and warranties contained in Section 2(h) and 2(i) of this
Agreement in all material respects.
(2) Not more than 15 days prior to the Closing,
Seller shall prepare and deliver to Buyer unaudited interim financial
statements, including a balance sheet (the "Closing Interim Balance Sheet") and
a statement of income and expense (the "Closing Interim Income Statement") for
the period ending March 31, 1993 reviewed by a certified public accountant (the
"Closing Interim Financial Statements"). The Closing Interim Financial
Statements shall be (A) prepared in accordance with GAAP, except that it may
not contain footnote disclosure and will be subject to normal year end
adjustments consistent with those made in prior years, (B) fairly present
Seller's financial condition and
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its results of operations as of the date and for the period presented, and (C)
shall not disclose any materially adverse variation in the results of
operations or financial condition when compared to the Seller's March Financial
Statements. The Closing Interim Financial Statements shall be accompanied by a
letter from the reviewing accountant stating that such accountant has reviewed
the books and records of the Seller as of a date no earlier than 5 days prior
to the Closing Date, and on the basis of a review of such records and
conversations with the Seller's management, nothing has come to his attention
which causes him to believe that there has been any material adverse change in
the financial condition of the Seller.
(g) Change of Seller's Name. At least ten (10) days
prior to the Closing, Seller and Shareholder shall deliver to Buyer a duly
executed and acknowledged certificate of amendment to Seller's articles of
incorporation or other appropriate document required to change Seller's
corporate name to a new name bearing no resemblance to its present name so as
to make Seller's present name available to Buyer. Buyer is hereby authorized
to file such certificate or other documents, at Seller's expense, in order to
effectuate such change of name at or after the Closing.
(h) Documents. All documents required to be delivered to
Buyer at or prior to Closing shall have been so delivered.
(i) Authority. There shall be in full force and effect
on the Closing Date resolutions of the Boards of Directors of the Buyer and
Seller and any corporate Shareholder approving this Agreement and the
transactions contemplated in it. At or prior to the Closing, each party will
deliver to the other a copy of the resolutions of its Board of Directors and,
in the case of the Seller, the resolutions or consents of each Shareholder,
together with any and all required resolutions or consents of each Shareholder
thereof, approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly certified by
an appropriate officer.
(j) Opinions of Counsel. Each party shall receive the
opinion of counsel to the other party reasonably satisfactory in form and
content to the party receiving such opinion.
(k) Consents. Seller shall have obtained written
consents to the transfer or assignment to Buyer of all agreements, Licenses,
leases and other material contracts of Seller (other than immaterial purchase
and sales orders in the ordinary course of business) where the consent of any
other party to any such contract may, in the opinion of Buyer's counsel, be
required for such assignment or transfer.
(l) Estoppel. Seller shall have obtained and delivered
to Buyer written estoppel from the holders of any leases, and/or notes set
forth in Exhibits to this Agreement stating the amount due pursuant to such
agreements, and that each is in good standing and free from default.
(m) Current Insurance Coverage. Payments will have been
made as of the Closing Date with respect to all of Seller's insurance policies,
and all insurance coverage concerning Seller's assets and operations shall be
continued in force through at least 10 days subsequent to the Closing Date,
unless cancelled subsequent to the Closing Date by Buyer.
(n) Compliance with Bulk Sales Law. Seller shall have
either (i) duly complied with the provisions of the applicable state Uniform
Commercial Code sections dealing with bulk transfers which impose requirements
on a transferror, and shall have delivered to Buyer all documents and notices
required to be furnished thereunder by a transferror, and copies of any claims
made by creditors, or (ii) delivered to Buyer an opinion of counsel, which
opinion shall be reasonably satisfactory to Buyer and its counsel, indicating
that such compliance is not required in order to complete the transactions
provided for in this agreement in accordance with its terms.
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(o) Bankruptcy, Dissolution, etc. No petition or other
commencement of proceedings in bankruptcy or proceedings for dissolution,
termination, liquidation or an arrangement, reorganization or readjustment of
any party's debts under any state or Federal law enacted for the relief of
debtors or otherwise, whether instituted by or against a party, has been
effected or commenced by or against any party.
(p) Financing. The Buyer shall have received financing
in the amount of at least $720,000.00 (the "Buyer's Financing") to be secured
by a first mortgage on the Facility, on terms and conditions acceptable to
Buyer in its sole, absolute and uncontrolled discretion.
6. CLOSING AND POST CLOSING AGREEMENTS.
(a) Closing Date and Place; Effective Date. The closing
of the transactions provided for in this Agreement shall take place as provided
for in Section 1((b) of this Agreement at the offices of the Seller, or at such
other place or time as the parties shall mutually agree in writing.
(b) Deliveries by Buyer to Seller. At the Closing, Buyer
shall make the payments provided for in Section 1(c), and deliver to the
Seller:
(1) The Second Payment Promissory Note; and
(2) An assumption agreement (the "Assumption
Agreement" in substantially the form attached to this Agreement as EXHIBIT
23(23).
(c) Deliveries by Buyer to Shareholders. At the Closing,
the Buyer shall deliver the Consulting Agreements to the Shareholders, each of
whom shall execute and deliver counterparts of such Agreements to the Buyer.
(d) Deliveries by EMI to Escrow Agent. At the Closing,
EMI shall deliver to counsel for Seller, as Escrow Agent:
(1) The Pledge Agreement; and
(2) The Buyer Stock, accompanied by duly endorsed
stock powers.
(e) Deliveries by Seller to Buyer. At the Closing,
Seller shall deliver to Buyer:
(1) The ▇▇▇▇ of Sale (the "▇▇▇▇ of Sale") in the
form attached to this Agreement as EXHIBIT 24(24); and
(2) An Assignment of all of Seller's Bank Accounts;
(3) Such other instruments of conveyance in form
and substance reasonably
satisfactory to Buyer's counsel, as shall be effective to vest in Buyer good
and marketable title to the School Related Assets, including without limitation
the Facility Conveyance Document provided for in Appendix A to this Agreement.
(f) Further Documents or Acts. The parties will also
execute, deliver, and/or perform at Closing and thereafter all other documents
or acts required to consummate any of the transactions contemplated by this
Agreement.
7. CONFIDENTIALITY AND JOINT NON-COMPETITION AGREEMENT.
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(a) Each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ acknowledges
that, as a result of his ownership of the Seller and, if applicable, employment
by Seller, he has had access to and knowledge of confidential or proprietary
information developed by Seller and of a special and unique nature and value to
Seller, including, but not limited to, Seller's methods and systems, students'
records, student files, charts, ledgers, accounts receivable ledgers, price
lists, methods and systems, operating procedures, technical memoranda,
curricula, accounts payable ledgers, records of amounts received from students,
student lists, referral sources, teacher lists, sources of employment for
students, placement materials, research reports, and financial records of
Seller and of its students and operating procedures, and other information,
data, and documents now existing or later acquired by each of Messrs. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ or Seller, regardless of whether any such information, data, or
documents, qualify as a "trade secret" under applicable Federal or state law
(collectively "Confidential Information"). As a material inducement to Buyer
to enter into this Agreement, each Shareholder and the Seller, jointly and
severally, covenants and agrees not at any time directly or indirectly, to
divulge or disclose for any purpose whatsoever, any Confidential Information
which is in the possession of Seller or which has been obtained by or disclosed
to each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ as a result of employment by Seller,
ownership of Seller, or otherwise as a result of the relationship between each
of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and Seller. In accordance with the foregoing,
each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and the Seller agrees at no time retain or
remove from the Facility records of any kind or description whatsoever (other
than those which constitute Excluded Assets) for any purpose whatsoever unless
authorized by Buyer. Notwithstanding the foregoing provisions of this Section
7(a), Seller and each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ may disclose Confidential
Information (i) to its employees, counsel, accountants and agents on a
need-to-know basis (provided that any such person shall be informed of the
confidential nature of such information and directed not to disclose or make
public such Confidential Information), (ii) to the extent required by
applicable law, rules and regulation, and (iii) in any action, suit or
proceeding between the parties, provided that in connection with disclosures
permitted by clauses (ii) and (iii) above, Seller or each of Messrs. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ shall provide Buyer with at least three (3) days notice of such
intent so that an appropriate protective order may be sought by Buyer if
desired.
(b) As a material inducement to Buyer to enter into this
Agreement, each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and the Seller, jointly and
severally, covenants and agrees for a period of five (5) years after the date
of this Agreement not to (i) engage in any business in direct or indirect
competition with that currently conducted by the Seller which is being sold to
the Buyer pursuant to this Agreement or by EMI or any Affiliate(2) (the
"Prohibited Activities") anywhere within 50 miles of any school listed on
EXHIBIT 25(25) (the "Area"); (ii) become associated as manager, supervisor,
employee, consultant, advisor, stockholder owning more that 5% of the
outstanding stock of a company or participating in the management or direction
of a company or otherwise with any person, corporation or entity engaging in
any Prohibited Activities within the Area; (iii) call upon any of Buyer's
students, teachers or referral sources for the purpose of promoting any
Prohibited Activities for any person, person, corporation or entity within the
Area; or (iv) divert, solicit or take away any of Buyer's teachers or other
personnel for the purpose of engaging in any Prohibited Activities within the
Area.
(c) In the event of a breach or threatened breach by each
of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ or Seller of any of the provisions of this
Section 7, Buyer, in addition to and not in limitation of any other rights,
remedies, or damages available to Buyer at law or in equity, shall be entitled
to a permanent injunction in order to prevent or to restrain any such breach by
Seller or each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, or by such shareholder's
partners, agents, representatives, servants, employers, employees and/or any
and all persons directly or indirectly acting for or with him.
(d) Each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and the Seller
covenants and agrees that,
__________________________________
(2) An Affiliate is any person or entity controlling, controlled by or
under common control with EMI.
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if he shall violate any of his covenants or agreements provided for in this
Section 7, Buyer shall be entitled to an accounting and repayment of all
profits, compensation, commissions, remuneration, or benefits which Seller or
Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, directly, or indirectly, has realized and/or may
realize as a result of, growing out of, or in connection with any such
violation; such remedy shall be in addition to and not in limitation of any
injunctive relief or other rights or remedies to which Buyer may be entitled to
at law or in equity or under this Agreement.
(e) Each of Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and the Seller
has carefully read and considered the provisions of this Section 7, and agrees
that the restrictions set forth above (including without limitation the time
period and geographical areas of restriction) are fair and reasonable and are
reasonably required for the protection of the interest of the Buyer. Each
acknowledge that it is the intention of the Buyer to solicit students on a
nationwide basis, that the market for the schools curricula is national and
limited, and that the Buyer is considering introducing all or parts of the
School's curricula in other locations as part of its national marketing
program. In the event that, notwithstanding the foregoing, any of the
provisions of this Section 7 are held invalid or unenforceable, the remaining
provisions shall continue to be valid and enforceable. In the event that any
provision of this Section 7 relating to time period and/or areas of restriction
are declared by a court of competent jurisdiction to exceed the maximum time
period or areas such court deems reasonable and enforceable, said time period
or areas of restriction shall be deemed to become, and thereafter be, the
maximum time period and/or area which such court deems reasonable and
enforceable.
8. INDEMNIFICATION. Seller and each Shareholder, jointly and
severally, on the one hand, and Buyer, on the other hand (respectively, the
"Indemnifying Party"), agree to defend, indemnify and hold harmless the other
party and its directors, officers, employees and agents (collectively, the
"Indemnified Parties") from and against any loss, damage, settlement, or
expense (including, without limitation, attorneys' fees and disbursements)
incurred by any Indemnified Party and arising from or related to the inaccuracy
or breach of any of the representations, warranties, covenants or agreements of
the respective Indemnifying Party contained in this Agreement or in any
document incorporated by reference into it. In addition, the Buyer agrees to
indemnify and hold harmless the Seller and the Shareholders from and against
any loss, damage, settlement, or expense (including, without limitation,
attorneys' fees and disbursements) incurred by them as a result of the
operation of the School by the Buyer subsequent to the Closing Date. The
relevant Indemnified Part(ies) shall give (or cause to be given) to the
relevant Indemnifying Party notice of any claim or matter for which indemnity
is (or will be) sought under this Section 8; such notice shall be given
promptly after the Indemnified Part(ies) receive actual notice or knowledge of
the claim or matter that is subject to indemnification. With respect to any
claim asserted by a third party against any Indemnified Part(ies) for which
indemnity is sought, the relevant Indemnifying Party shall have the right to
employ counsel reasonably acceptable to the relevant Indemnified Part(ies) to
defend against such assertion, and such Indemnifying Parties shall have the
right to compromise or otherwise settle any such action or claim only with the
prior written consent of the relevant Indemnified Party, which shall not be
unreasonably withheld.
9. EVENTS OF DEFAULT. If any one or more of the following events
occurs then, subject to the expiration of any specified grace period and the
giving of any prior notice required under this Section 9, such event shall
constitute an Event of Default by the party responsible for such event or
against whom it should be charged.
(a) Untrue Statements. Any statement, report, financial
statement, or certificate made or delivered by any party or any of its agents
to another party is not true, complete and correct in any material respect.
(b) Warranties or Representations. Any warranty,
representation or other statement by or on behalf of any party contained in
this Agreement (or in any document between the parties
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furnished in compliance with or in reference hereto) is false or misleading in
any material respect.
(c) Agreements. Any party fails to take any action
required of it to comply with its obligations contained in this Agreement, or
takes any action prohibited or inconsistent with its obligations under this
Agreement, and such failure to act or action is not cured prior to thirty (30)
days after written notice thereof is given to the defaulting party, except in
the case of Section 7 of this Agreement, with respect to with the period
referred to in this Section shall be ten (10) days.
(d) Refusal to Close. A party refuses to consummate the
transactions provided for (and subject to the terms and conditions specified)
in this Agreement on the Closing Date, except if the failure to close is based
upon the failure of another party to meet a condition to Closing provided for
in Section 5 of this Agreement.
(e) Failure of Closing Condition. Any party is unable to
comply with the conditions of Closing provided for in Section 5 of this
Agreement, other than as a result of an Event of Default as described in
Sections 9(a), (b), (c) or (d) above.
10. TERMINATION AND RIGHTS AND REMEDIES ON DEFAULT.
(a) Termination. This Agreement may be terminated and
the transactions contemplated hereby abandoned prior to the Closing: (i) by the
mutual consent of Buyer, EMI, and the Seller, in their sole and absolute
discretion without the consent of the Shareholders; (ii) by Buyer and EMI, if
any condition to their obligations to close set forth in Section 5 hereof
becomes impossible of performance or has not been satisfied in full (in each
case other than as a result of a breach of such party's obligations under this
Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; (iii) by Seller and Shareholder if
any condition to their obligations to close set forth in Article 5 hereof
becomes impossible of performance or has not been satisfied in full (in each
case other than as a result of a breach of such party's obligations under this
Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; or (iv) by any party (other than a
party that is in breach of its obligations under this Agreement) if the Closing
shall not have occurred on or before the Termination Date. If this Agreement
is terminated pursuant to clause (i) of this Article 10, all obligations of the
parties hereunder shall terminate without any further liability or obligation
of any party to the other, except that the provisions of Section 11, Section
13(b) and the confidentiality provisions of Section 4(c) of this Agreement
shall survive and continue in full force and effect notwithstanding such
termination. Except as limited by the preceding sentence, the exercise by any
party of the right to terminate this Agreement shall not terminate or limit any
remedy that such party may have in this Section 10 as a result of an Event of
Default.
(b) Rights and Remedies on Default; Limitation of Liability.
Upon and after an Event of Default by any party, the other party shall have the
following rights and remedies:
(1) Default by Buyer. In the event that Buyer is
obligated to and fails to close by the Termination Date, and Seller and
Shareholder are not in default of their obligations under this Agreement, this
Agreement shall terminate and Seller and Shareholder shall have the right to
seek money damages, including without limitation, attorneys's fees and other
expenses incurred by them relating to the preparation of this Agreement and
indemnification pursuant to Section 8 of this Agreement, as their sole remedy.
Seller and Shareholder hereby agree that they shall not be entitled to seek or
file suit for specific performance of this Agreement.
(2) Default by Seller or Shareholder. If, on the
Termination Date, there exists an Event of Default as described in Section 9 of
this Agreement, chargeable against the Seller
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or any Shareholder, Buyer may either (i) waive such default and close, in which
event Buyer shall have the right to seek specific performance of this
Agreement, including, without limitation, the acquisition of the School Related
Assets and the performance by the Seller and the Shareholder of the covenants
provided for in this Agreement, or (ii) refuse to close, and, except in the
case of an Event of Default described in Section 9(d) above, seek money damages
from Seller and Shareholder, including, without limitation, attorneys's fees
and other expenses incurred by them relating to the preparation of this
Agreement and indemnification pursuant to Section 8 of this Agreement. An
election by Buyer to proceed in accordance with subclause (i) of the preceding
sentence shall constitute the acknowledgment by Buyer, Seller and Shareholder
that Buyer cannot be adequately compensated by money damages for the failure to
perform by Seller and Shareholder, that such damages are indeterminate, and
that a court of competent jurisdiction may enter an order pursuant to which
Seller and Shareholder are obligated to specifically perform their obligations
to Buyer pursuant to the terms of this Agreement.
(3) Default Subsequent to Closing. If any party
breaches this Agreement subsequent to Closing pursuant to Section 9(c), or if a
default occurs pursuant to Sections 9(a) or 9(b), the nondefaulting party(ies)
shall have the right to seek money damages from the defaulting party(ies),
either pursuant to Section 8 of this Agreement or otherwise. In addition, if,
(i) as a result of any action taken or not taken by the Seller in violation of
any applicable law or regulation which (ii) has not been disclosed to the Buyer
in this Agreement, and which (iii) the occurrence or non occurrence of which
was known or reasonably should have been known to the Seller, the Prerequisite
Student Aid Approvals are not received prior to 12 months from the date of the
Closing, or, if received or offered, can only be obtained on conditions
imposing substantial financial burdens on the Buyer in addition to those which
would otherwise be imposed in connection which such approval, the Buyer may
elect to rescind the transactions provided for in this Agreement and, upon such
election, the parties will take such action as may be reasonably required to
restore the other party to its respective positions as they existed prior to
the Closing provided for in this Agreement.
(4) Nature of Remedies Cumulative. All rights
and remedies granted in this Agreement or available under applicable law shall
be deemed concurrent and cumulative and not alternative or exclusive remedies,
to the full extent permitted by law and this Agreement, and any party may
proceed with any number of remedies at the same time or in any order. The
exercise of any one right or remedy shall not be deemed a waiver or release of
any other right or remedy, and any party, upon the occurrence of an event of
default by another party under this Agreement, may proceed at any time, under
any agreement, in any order and with any available remedy.
(5) Limitation on Liability of Seller and
Shareholder. Except in the case of a breach of the agreements contained in
Section 7 of this Agreement, neither Seller nor Shareholder shall have any
liability with respect to any claims of Buyer or EMI for money damages, whether
pursuant to this Section, Section 8 of this Agreement or otherwise, until such
time, if any, as the aggregate amount of all such amounts otherwise subject to
recovery by Buyer or EMI shall exceed, in the aggregate, $25,000, and then only
to the extent of such excess.
11. FINDERS FEES.
Seller and each Shareholder, jointly and severally, represents and
warrants that it has not employed any finder or broker in connection with
transactions contemplated by this Agreement except for ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of
Associated Business Investment Corp., or his affiliates, and shall be
responsible for any commissions or fees payable to ▇▇. ▇▇▇▇▇▇ and any other
such finder or broker for fees incurred by Seller and/or each Shareholder in
connection with this Agreement. Each party agrees to indemnify and hold
harmless the others from and against any claim, damages, liabilities, and
expenses (including without limitation, attorneys' fees and disbursements)
arising from any claim or
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demand asserted by any person or entity on the basis of its employment as a
finder or broker by the respective party.
12. NOTICES. All notices or other communications required or
permitted under the terms of this Agreement shall be made in writing and shall
be deemed given upon (i) hand delivery or (ii) three days after deposit of same
in the Certified Mail, Return Receipt Requested, first class postage and
registration fees prepaid and correctly addressed to the parties at the
following addresses:
If to Buyer: OIOPT Acquisition Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
Attn: President
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to EMI: Educational Medical, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
Attn: President
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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If to Seller: Ohio Institute of Photography and Technology
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇
With a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
If to Shareholder: Mr. K. ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
--------------------------
With a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
If to Shareholder: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
--------------------------
With a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
If to Shareholder: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
--------------------------
With a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
If to Shareholder: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
--------------------------
With a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
If to Shareholder: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
--------------------------
With a copy to:
--------------------------
--------------------------
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or to such other address as any of the parties hereto may designate by notice
to the others.
13. MISCELLANEOUS.
(a) Successors. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and permitted assigns. This Agreement may not be assigned prior to Closing
without the prior written consent of the other parties hereto.
(b) Expenses. Buyer and Seller shall be responsible for
any and all of the respective fees, costs and expenses incurred by each, in
connection with the negotiation, preparation or performance of this Agreement.
(c) Entire Agreement. This Agreement incorporates by
this reference all Exhibits hereto and all documents executed and/or delivered
at Closing. This Agreement and the documents so incorporated into it contain
the parties' entire understanding and agreement with respect to the subject
matter hereof; and any and all conflicting or inconsistent discussions,
agreements, promises, representations and statements, if any, between the
parties or their representatives that are not incorporated in this Agreement
shall be null and void and are merged into this Agreement.
(d) Amendments Only in Writing. No amendment,
modification, waiver or discharge of this Agreement or any provision of this
Agreement shall be effective against any party, unless such party shall have
consented thereto in writing.
(e) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall constitute an original, but all of
which together shall constitute a single agreement.
(f) Cooperation. Each of the parties to this Agreement,
when requested by another party, shall give all reasonable and necessary
cooperation with respect to any reasonable matters relating to the transactions
contemplated by this Agreement.
(g) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio, exclusive of
its choice of law provisions.
(h) Headings. The various section headings are inserted
for purposes of reference only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
(i) Gender; Number. All references to gender or number
in this Agreement shall be deemed interchangeably to have a masculine,
feminine, neuter, singular or plural meaning, as the sense of the context
requires.
(j) Severability. The provisions of this Agreement shall
be severable, and any invalidity, unenforceability or illegality of any
provision or provisions of this Agreement shall not affect any other provision
or provisions of this Agreement,and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
(k) Survival. Except as otherwise expressly provided in
this Agreement, the liabilities and obligations of each party with respect to
any and all of its representations, warranties, covenants and agreements set
forth in this Agreement and/or in any document incorporated into it shall
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not be merged into, affected or impaired by the Closing under this Agreement,
but rather shall survive such Closing for the period of three years thereafter,
so that (except as otherwise provided below) any claim under this Agreement
must be asserted by notice given to the party claimed to be liable on or before
the third anniversary of the Closing Date. Notwithstanding the foregoing, the
time limitation shall not apply to: (i) the covenants related to
confidentiality and non-competition contained in Section 7 above and the
Non-Competition Agreements; (ii) claims relating to liabilities of the Seller
that are not Stated Liabilities; (iii) claims for indemnification under Section
8, above, which seek indemnity for matters identified in (ii), above, or
arising out of a misrepresentation as to matters contained in section 2 (i) or
2 (j), or Paragraph 6(a) of the Addendum to this Agreement, or (iv) fraud. All
obligations and liabilities described in the previous sentence shall survive
the Closing for the period in which a claim can be asserted with respect
thereto under applicable law.
(l) No Third Party Beneficiaries. This Agreement has been
entered into solely for the benefit of the parties that have executed it, and
not to confer any benefit or enforceable right upon any other party or entity.
Accordingly, no party or entity that has not executed this Agreement shall have
any right to enforce any of the provisions of it. The Second Promissory Note
may be assigned by the Seller to the Shareholders in accordance with their
respective interests.
(m) Addendum. The Addendum attached to this Agreement is
incorporated into it and made a part of it as if set forth in full.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by an officer duly authorized to do so, all as of the day and year
first above written.
OIOPT ACQUISITION CORP. ("BUYER") OHIO INSTITUTE OF
PHOTOGRAPHY
AND TECHNOLOGY ("SELLER")
BY: By:
---------------------------- -----------------------
Authorized Signatory Authorized Signatory
SHAREHOLDERS:
----------------------
K. ▇▇▇▇▇ ▇▇▇▇▇▇▇
SHAREHOLDERS:
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By executing and delivering this Agreement, EMI agrees it is jointly and
severally liable for each of the obligations of the Buyer contained in it.
EDUCATIONAL MEDICAL, INC.
By:
------------------------------
Authorized Signatory
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EXHIBITS
1. Form of Second Payment Note
2. Form of Consulting Agreement
3. Form of Pledge Agreement
4. Description of the Property
5. List of Excluded Assets
6. Articles of Incorporation
and By-Laws of the Seller
7. Seller's Financial Statements
8. Inventory of FF & E
9. List of Permits
10. List of Leases, Financing
Agreements, and Other
Encumbrances relating to Real
and Personal Property
11. List of Accreditation
12. Policy Manuals and other
School Material.
13. Cohort Default Rate
Evaluation Material
14. Trademarks etc.
15. List of Material Contracts
16. Employment Agreements
17. Employee Benefit Plans
18. Insurance Policies
19. Federal Income Tax Returns
20. Actions Pending
21. List of Bank Accounts
22. EMI's Financial Statements
23. Form of Assumption Agreement
24. Form of ▇▇▇▇ of Sale
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25. List of Schools
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