EXHIBIT 10.40
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "'Agreement") is made and entered
into this 15th day of October, 1996, by and between ▇▇▇▇▇▇▇ Education Group,
Inc., a New Jersey corporation ("▇▇▇▇▇▇▇"), and The Travelers Indemnity Company,
a Connecticut corporation ("Travelers").
W I T N E S S E T H:
WHEREAS, Travelers desires to purchase, and ▇▇▇▇▇▇▇ desires to sell to
Travelers, an equity interest in ▇▇▇▇▇▇▇;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, ▇▇▇▇▇▇▇ and Travelers agree as follows:
1. Certain Definitions. The following terms shall have the following
meanings unless the context otherwise requires:
(i) "AMEX" shall mean the American Stock Exchange.
(ii) "Commission" shall mean the Securities and Exchange Commission.
(iii)"Common Stock" shall mean the common stock, no par value, of ▇▇▇▇▇▇▇.
(iv) "1933 Act" shall mean the Securities Act of 1933, as amended.
(v) "1934 Act" shall mean the Securities Exchange Act of 1934.
(vi) "Rule 144" shall mean Rule 144 of the Commission's General Rules and
Regulations under the 1933 Act, or any similar or substitute rule permitting the
sale of restricted securities that may hereafter be adopted by the Commission.
2. Purchase and Sale of the Common Stock. Subject to the terms and upon the
conditions of this Agreement, at the Closing (as defined below), ▇▇▇▇▇▇▇ will
sell and deliver to Travelers, and Travelers will purchase from ▇▇▇▇▇▇▇,
1,000,000 shares (the "Shares") of ▇▇▇▇▇▇▇'▇ authorized but unissued Common
Stock for an aggregate purchase price of $6,500,000 (the "Purchase Price"). At
the Closing, ▇▇▇▇▇▇▇ will deliver to Travelers a certificate evidencing the
Shares, registered in the name of "TRAL & CO. ", and Travelers will make payment
of the Purchase Price by wire transfer to an account designated by ▇▇▇▇▇▇▇. The
closing of the transactions contemplated by this Agreement (the "Closing") will
occur at the offices of ▇▇▇▇▇▇▇ in Miami, Florida at 10:00 a.m. on October 16,
1996, or such other time and date to be determined by the parties (the "Closing
Date"), which in no event shall be later than October 18, 1996. The Closing may,
by mutual agreement, also be conducted in escrow.
3. Representations and Warranties of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ represents and
warrants to Travelers as follows:
(a) Corporate Organization. ▇▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
(b) Capitalization. The authorized capital stock of ▇▇▇▇▇▇▇ consists of
100,000,000 shares of Common Stock, of which 11,896,676 shares are validly
issued and outstanding, fully-paid and nonassessable on the date hereof. In
addition, on the date hereof, 4,173,000 shares of Common Stock are subject to
issuance pursuant to presently existing options and warrants. There are no other
outstanding options, warrants, rights, convertible securities or exchange offers
providing for the issuance of Common Stock.
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(c) Authorization. ▇▇▇▇▇▇▇ has full legal right, power and authority to
enter into perform this Agreement and the execution and delivery thereof by
▇▇▇▇▇▇▇ and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action of ▇▇▇▇▇▇▇. This Agreement has
been duly executed and delivered on behalf of ▇▇▇▇▇▇▇ and constitutes a valid
and binding agreement of ▇▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇▇ in accordance with
its terms.
(d) Shares Duly Issued. Upon the issuance of the Shares at the Closing and
upon receipt by ▇▇▇▇▇▇▇ of the Purchase Price from Travelers, the Shares will be
duly and validly issued, fully paid and nonassessable, and shall not be subject
to any restrictions on transfer other than those arising under applicable
federal and state securities laws.
(e) Approvals No governmental or other authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
or filing by ▇▇▇▇▇▇▇ with any governmental authority (except as may be required
by AMEX and any reports required to be filed in the future under the 1934 Act)
is required in connection with the execution, delivery and performance of this
Agreement by ▇▇▇▇▇▇▇.
(f) Absence of Conflicting Agreements, etc. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-laws
of ▇▇▇▇▇▇▇ or of any agreement or instrument to which ▇▇▇▇▇▇▇ is a party or by
which it is bound, or constitute a default under any of the foregoing or violate
any law, rule, regulation, judgment or decree by which ▇▇▇▇▇▇▇ is bound.
(g) Commission Reports. ▇▇▇▇▇▇▇ has heretofore furnished or made available
to Travelers true and complete copies of (i) each final prospectus and
definitive proxy statement filed by ▇▇▇▇▇▇▇ with the Commission since December
31, 1995, and (ii) each report filed by ▇▇▇▇▇▇▇ with the Commission pursuant to
the 1934 Act since December 31, 1995 (the "SEC Filings"). The financial
statements of ▇▇▇▇▇▇▇ and the related notes contained in ▇▇▇▇▇▇▇'▇ Annual Report
on Form 10-K for the fiscal year ended March 31, 1996 and its Quarterly Reports
on Form 10-Q for the quarter ended June 30, 1996 present fairly the financial
position of ▇▇▇▇▇▇▇ as of the dates indicated therein and the results of its
operations and cash flows for the periods therein specified. Such financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified and are true, correct and complete in
all respects. Except as set forth in the financial statements or the SEC
Filings, ▇▇▇▇▇▇▇ has no material liabilities, contingent or otherwise, other
than (1) liabilities incurred in the ordinary course of business subsequent to
June 30, 1996 and (2) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the financial statements. The SEC
Filings complied in all material respects with the requirements of the 1933 Act
or the 1934 Act, as the case may be, as of their respective filing or effective
dates, and the information contained therein was true and correct in all
material respects as of the date or effective date of such documents and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) Absence of Adverse Changes. Since March 31, 1996, ▇▇▇▇▇▇▇ has not
suffered any material adverse change in its financial condition, assets,
liabilities or business.
(i) Offering. Subject in part to the truth and accuracy of Travelers
representations set forth in Section 4 of this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the 1933 Act, and neither ▇▇▇▇▇▇▇ nor any
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authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
(j) Litigation. Except as disclosed in SEC Filings, there is no action,
suit, proceeding or investigation pending or, to the knowledge of ▇▇▇▇▇▇▇,
currently threatened against ▇▇▇▇▇▇▇ that questions the validity of this
Agreement or any other agreement contemplated by this Agreement, or the right of
▇▇▇▇▇▇▇ to enter into such agreements or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs
or prospects of ▇▇▇▇▇▇▇, financially or otherwise, or any change in the current
equity ownership of ▇▇▇▇▇▇▇. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or threatened involving
the prior employment of any of ▇▇▇▇▇▇▇'▇ employees, their use in connection with
▇▇▇▇▇▇▇'▇ business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreements with prior
employers. ▇▇▇▇▇▇▇ is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality, which might result either individually or in the aggregate, in
any material adverse change in the assets, condition, affairs or prospects of
▇▇▇▇▇▇▇, financially or otherwise.
(k) Related-Party Transactions. To the knowledge of ▇▇▇▇▇▇▇, no employee,
officer, director or stockholder of ▇▇▇▇▇▇▇ or member of his or her immediate
family (a "Related Party") is indebted to ▇▇▇▇▇▇▇, which indebtedness, if not
paid, would have a material adverse change in the financial condition of
▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ is not indebted (or committed to make loans or extend or
guarantee credit) to any Related Party. To the knowledge of ▇▇▇▇▇▇▇, except as
disclosed in SEC Filings, no Related Party has any direct or indirect ownership
interest in any firm or corporation with which ▇▇▇▇▇▇▇ is affiliated or with
which ▇▇▇▇▇▇▇ has a business relationship, or any firm or corporation that
competes with ▇▇▇▇▇▇▇, except that employees, officers, directors or
stockholders of ▇▇▇▇▇▇▇ and members of their immediate families may own stock in
publicly traded companies that may compete with ▇▇▇▇▇▇▇. To the knowledge of
▇▇▇▇▇▇▇, except as disclosed in SEC Filings, no Related Party is directly or
indirectly interested in any material contract with ▇▇▇▇▇▇▇.
(l) Permits. ▇▇▇▇▇▇▇ has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ believes it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. ▇▇▇▇▇▇▇ is not in default in
any material respect under any of such franchises, permits, licenses, or other
similar authority, except for such defaults which would not materially and
adversely affect the business, properties, prospects or financial condition of
▇▇▇▇▇▇▇, either individually or in the aggregate.
(m) Disclosure. ▇▇▇▇▇▇▇ has fully provided Travelers with all the
information that Travelers has requested for deciding whether to purchase the
Shares and all information that ▇▇▇▇▇▇▇ believes is reasonably necessary to
enable Travelers to make such decision. Neither this Agreement, any other
agreement contemplated by this Agreement nor any other statements or
certificates made or delivered in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
(n) Tax Returns, Payments and Elections. ▇▇▇▇▇▇▇ has filed all tax returns
and reports as required by law. These returns are true and correct in all
material respects. ▇▇▇▇▇▇▇ has paid all taxes and other assessments due. The
provision for taxes of ▇▇▇▇▇▇▇ as shown in its financial statements is adequate
for taxes due or accrued as of the date thereof. ▇▇▇▇▇▇▇ has not elected,
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
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methods of accounting, depreciation or amortization) that would have a material
effect on ▇▇▇▇▇▇▇, its financial condition, its business as presently conducted
or proposed to be conducted or any of its properties or material assets. Since
January 1, 1993, ▇▇▇▇▇▇▇ has not had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge. Since January 1,
1993, none of ▇▇▇▇▇▇▇'▇ federal income tax returns and none of its state income
or franchise tax or sales or use tax returns has been audited by governmental
authorities. Since the date of the financial statements, ▇▇▇▇▇▇▇ has made
adequate provisions on its books of account for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. ▇▇▇▇▇▇▇ has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax- receiving officers or authorized depositories.
4. Representations and Warranties of Travelers. Travelers represents and
warrants to ▇▇▇▇▇▇▇ as follows:
(a) Corporate Organization. Travelers is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut, with the corporate power to own its properties and to conduct its
business as now conducted.
(b) Authorization. Travelers has full legal right, power and authority to
enter into and perform this Agreement, and the execution and delivery thereof by
Travelers and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action. This Agreement has been duly
executed on behalf of Travelers and constitutes a valid and binding agreement of
Travelers, enforceable against Travelers in accordance with its terms.
(c) Approvals. No governmental or other authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
of filing by Travelers with any governmental authority (except for reports
required to be filed in the future under the 1934 Act) is required in connection
with the execution, delivery and performance of this Agreement.
(d) Accredited Investor Status. Travelers is an "accredited investor" as
such term is defined in Rule 501 of Regulation D of the Commission.
(e) Purchase for Investment. Travelers represents that:
(i) the Shares to be issued hereunder will be acquired by Travelers
(through TRAL & CO. as its nominee) for Travelers own account for investment and
not with a view toward subdivision, resale, or redistribution thereof in a
manner prohibited under the 1933 Act and it does not presently have any reason
to anticipate any change in its circumstances or other particular occasion or
event which would cause it to sell the Shares; and further, it has no contract,
undertaking, agreement, understanding, or arrangements with any person to sell,
transfer, or pledge to any person any part or all of the Shares it will acquire
hereunder, or any interest therein, and has no present plans to enter into the
same;
(ii) it has adequate means of providing for its current business needs and
contingencies, it has no need now, and anticipates no need in the foreseeable
future, to sell the Shares it will acquire hereunder, and it currently has
sufficient financial liquidity to afford a complete loss of its investment in
▇▇▇▇▇▇▇;
(iii) it has received and carefully reviewed the SEC Filings and any other
materials of ▇▇▇▇▇▇▇ relating to the terms and conditions of this investment
that it has requested or with which it has been provided by ▇▇▇▇▇▇▇;
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(iv) it has had an opportunity to ask questions of and receive answers from
the authorized representatives of ▇▇▇▇▇▇▇, and any such questions have been
answered to its full satisfaction;
(v) it has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in
▇▇▇▇▇▇▇;
(vi) it is relying exclusively on its review of the SEC Filings and
representations and warranties set forth in this Agreement in connection with
the purchase of the Shares.
5. Offer, Sale or Transfer of Shares. None of the Shares shall be offered,
sold or transferred by Travelers unless either:
(a) Such offer, sale or transfer shall be made pursuant to an offering
registered under the 1933 Act; or
(b) Such offer, sale or transfer may be made pursuant to a transaction
which is exempt from the registration requirements of the 1933 Act; provided
that prior to any such transaction, Travelers shall have delivered to ▇▇▇▇▇▇▇ a
written legal opinion, in form and substance reasonably acceptable to ▇▇▇▇▇▇▇,
prepared by counsel reasonably acceptable to ▇▇▇▇▇▇▇, that such transaction is
exempt from the registration requirements of the 1933 Act.
6. Legends and Stop Transfer Orders. Travelers acknowledges and agrees:
(a) To the placement on each certificate representing the Shares of
substantially the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. These Shares
have been acquired for investment and may not be sold or
offered for sale and no transfer of them will be made by
▇▇▇▇▇▇▇ Education Group, Inc. or its transfer agent in the
absence of such registration or an opinion of counsel
satisfactory to ▇▇▇▇▇▇▇ Education Group, Inc. that such
registration is not required. "
(b) To the entry of stop transfer orders with the transfer agent (or
agents) and the registrar (or registrars) of ▇▇▇▇▇▇▇'▇ securities against the
transfer of legended securities held by Travelers except in compliance with the
requirements of this Agreement.
7. Registration Rights Agreement. At the Closing, ▇▇▇▇▇▇▇ and Travelers
shall enter into a Registration Rights Agreement in the form of Exhibit A to
this Agreement (the "Registration Rights Agreement").
8. Conditions to Closing.
(a) The obligation of Travelers to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every one of the following conditions on or prior to the Closing, any or all
which may be waived in whole or in part by Travelers:
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(i) the representations and warranties of ▇▇▇▇▇▇▇ contained in this
Agreement shall be true and correct in all material respects as of the date when
made and shall be deemed to be made again at and as of the Closing Date and
shall be true at and as of such time in all material respects.
(ii) ▇▇▇▇▇▇▇ shall have performed and complied, in all material respects,
with all agreements and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date.
(iii) No material adverse change in the financial condition, operations or
activities of ▇▇▇▇▇▇▇ shall have occurred.
(iv) ▇▇▇▇▇▇▇ shall have executed and delivered the Registration Rights
Agreement.
(v) ▇▇▇▇▇▇▇ shall have delivered a stock certificate in the name of TRAL &
CO. evidencing the Shares.
(vi) ▇▇▇▇▇▇▇ shall have delivered an opinion of its counsel with respect to
the transactions contemplated by this Agreement in such form as shall be
reasonably requested by Travelers.
(vii) Travelers shall have received such other opinions, certifications and
documents from ▇▇▇▇▇▇▇ as Travelers may reasonably request.
(b) The obligation of ▇▇▇▇▇▇▇ to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every one of the following conditions on or prior to the Closing, any or all of
which may be waived, in whole or in part by ▇▇▇▇▇▇▇:
(i) The representations and warranties of Travelers contained in this
Agreement shall be true and correct in all material respects when made and shall
be deemed to be made again at and as of the Closing Date and shall be true at
and as of such time in all material respects.
(ii) Travelers shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
Travelers prior to or on the Closing Date.
(iii) Travelers shall have executed and delivered the Registration Rights
Agreement.
(iv) Travelers shall have delivered the Purchase Price for the Shares.
(v) ▇▇▇▇▇▇▇ shall have received such other opinions, certificates and
documents from Travelers as ▇▇▇▇▇▇▇ may reasonably request.
9. Termination.
(a) This Agreement may be terminated at any time on or prior to the
Closing:
(i) by mutual consent of ▇▇▇▇▇▇▇ and Travelers; or
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(ii) at the election of Travelers if: (act) ▇▇▇▇▇▇▇ has breached or failed
to perform or comply with any of its representations, warranties, covenants or
obligations under this Agreement, or (bb) any of the conditions and proceedings
set forth in Section 8(a) is not satisfied as and when required by this
Agreement, or (cc) the Closing has not been consummated by October 18, 1996; or
(iii) at the election of ▇▇▇▇▇▇▇, if: (act) Travelers has breached or
failed to perform or comply with any of its representations, warranties,
covenants and obligations under this Agreement, or (bb) any of the conditions
and proceedings set forth in Section 8(b) is not satisfied as and when required
by this Agreement or (cc) if the Closing has not been consummated by October 18,
1996.
(b) Written notice of any termination pursuant to this Section 9 shall be
given by the party electing termination of this Agreement to the other party and
such notice shall state the reason for the termination. Upon the termination of
this Agreement prior to the consummation of the Closing in accordance with the
terms hereof, this Agreement shall become null and void and have no effect, and
none of the parties shall have any liability to the other except that:
(i) if ▇▇▇▇▇▇▇ refuses to close, or otherwise breaches any of its
representations, warranties and covenants hereunder, then Travelers shall have
the right to pursue any and all remedies available at law and equity and enforce
its rights under this Agreement, including the remedy of specific performance;
and
(ii) if Travelers refuses to close, or otherwise breaches any of its
representations, warranties or covenants under this Agreement, then ▇▇▇▇▇▇▇
shall have the right to pursue any and all remedies available at law and equity
and enforce its rights under this Agreement.
10. Miscellaneous.
(a) Expenses. Except as provided above, each party hereto shall pay its own
expenses incurred in connection with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by and against the successors and
assigns of the parties hereto, provided that, neither party may validly assign
its rights or obligations under this Agreement without the prior written consent
of the other party.
(c) Survival of Representations, Warranties and Agreements. All
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the issuance of the Shares pursuant hereto and
Travelers' payment therefor for a period of one (1) year. All covenants and
agreements made herein shall survive the execution and delivery of this
Agreement, the issuance of the Shares pursuant hereto and Travelers' payment
therefor without limitation.
(d) Brokers and Finders.
Neither Travelers nor ▇▇▇▇▇▇▇ has engaged or otherwise dealt with any
person or entity in any manner as might give rise to a claim against the other
party hereto for any commission, fee or payment of any kind to any broker,
finder or other agent and each party hereto shall indemnify the other against
any such claim or expenses associated therewith, including attorneys' fees.
(e) Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
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(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if given) by delivery, by mail (registered or
certified mail, postage prepaid, return receipt requested) to the respective
parties as follows:
If to ▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇ Education Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President -
Legal Affairs and General Counsel
If to Travelers: The Travelers Indemnity Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
(h) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
(i) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
(j) Interpretation. No provision of this Agreement shall be interpreted for
or against any party solely because that party or its legal representative
drafted such provision.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇ Education Group, Inc. and The Travelers
Indemnity Company have caused this Agreement to be duly executed as of the day
and year first above written.
▇▇▇▇▇▇▇ EDUCATION GROUP, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
=========================================
▇▇▇▇▇ ▇. ▇▇▇▇▇, PRESIDENT
THE TRAVELERS INDEMNITY COMPANY
By: /S/ JORDAN ▇. ▇▇▇▇▇▇▇
=========================================
JORDAN ▇. ▇▇▇▇▇▇▇, VICE PRESIDENT
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