EXHIBIT 4.3
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AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated
as of the 1st day of December, 1997, by and among SYLVAN LEARNING SYSTEMS, INC.,
a Maryland corporation ("Sylvan"), NAI MERGER CORP., a Delaware corporation and
wholly owned subsidiary of Sylvan ("Sub"), BLOCK TESTING SERVICES L.P., a
Delaware limited partnership ("Block") and NATIONAL ASSESSMENT INSTITUTE, INC.,
a Florida corporation and wholly owned subsidiary of Block ("NAI"; and, together
with Block, the "Companies").
R E C I T A L S:
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WHEREAS, the Companies are engaged in the business of designing,
marketing, selling, distributing and administering paper and pencil tests and
the licensing of individuals thereto (the "Business"); and
WHEREAS, the parties deem it desirable, upon the terms and conditions
contained herein, that Sub be merged with and into NAI, with NAI being the
surviving corporation (the "Merger"); and
WHEREAS, for Federal Income taxes it is intended that the Merger
qualify as a "reorganization" within the meaning of Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the parties shall do
all things necessary or appropriate to cause the merger to so qualify.
NOW, THEREFORE, and in consideration of the mutual premises and
representations, warranties and covenants and other good and valuable
consideration, the receipt and sufficiency of which being acknowledged, the
parties agree as follows:
1. MERGER. On the Closing Date (as defined in Section 4 hereof), in
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reliance on the representations, warranties, and agreements of the parties, and
on the terms and subject to the conditions set forth herein, Sub will be merged
with and into NAI pursuant to the provisions and with the effect provided in the
General Corporation Laws of Delaware and Florida. The parties shall execute and
deliver appropriate merger documents under the corporate laws of Delaware and
Florida, containing the terms provided in this Agreement, including Certificates
of Merger which shall be filed with the Secretaries of State of Delaware and
Florida on the Closing Date. The Merger shall become effective when properly
executed Certificates of Merger are so filed.
As a result of the Merger, each share of common stock of Sylvan, $0.01 par
value theretofore authorized (whether issued or unissued) shall remain unchanged
and shall be deemed to be shares of the common stock of Sylvan. Accordingly,
each such share on the Closing Date shall continue to be and remain issued and
outstanding shares of common stock of Sylvan without any action on the part of
the holders of any such shares of stock. As a result of the Merger, each share
of the common stock of NAI, $0.01 par value theretofore authorized (whether
issued or unissued) shall remain unchanged and shall be deemed to be shares of
the common stock of NAI. Accordingly, each such share on the Closing Date shall
continue to be and remain issued and outstanding shares of common stock of NAI
without any action on the part of the holders of any such shares of stock. As a
result of the Merger, each share of the common stock of Sub, $0.01 par value
theretofore authorized (whether issued or unissued) shall be canceled, and the
separate existence of Sub shall cease.
2. MERGER CONSIDERATION. As a result of the Merger and without any action
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on the part of any Person (as defined below), Block, as holder of all of the
issued and outstanding shares of stock of NAI (collectively, the "Shares"),
shall receive One Hundred Fifty Thousand Nine Hundred Fifty-three (155,953)
shares of Sylvan's common stock, $0.01 par value (collectively, the "SLS
Stock").
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No fractional shares of SLS Stock, and no cash in lieu thereof, shall be
issued or delivered in connection with the transactions contemplated by this
Agreement. When issued, the SLS Stock will be fully paid and non-assessable.
Notwithstanding anything herein to the contrary, Sylvan shall use its best
efforts to file, by March 31, 1998, a registration statement on Form S-3
covering the sale from time to time of the SLS Stock, and shall use its best
efforts to cause the Registration Statement to become effective and to maintain
its effectiveness until the earlier of (i) such time as all of the SLS Stock has
been sold pursuant thereto and (ii) such time as the SLS Stock is eligible for
transfer without restriction pursuant to Rule 144(k) under the Securities Act of
1933, as amended (the "1933 Act") as if not held by an affiliate of Sylvan.
Sylvan will also furnish to Block with respect to the SLS Stock so registered
under the Registration Statement such number of copies of prospectuses and
preliminary prospectuses in conformity with the requirements of the 1933 Act and
such other documents as Block may reasonably request in order to facilitate the
public sale or other disposition of all or any of the SLS Stock by Block,
provided, however, that the obligation of Sylvan to deliver copies of
prospectuses or preliminary prospectuses to Block shall be subject to the
receipt by Sylvan of reasonable assurances from Block that Block will comply
with the applicable provisions of the 1933 Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
prospectuses or preliminary prospectuses. Sylvan will file documents required
of Sylvan to register or qualify under the securities or blue sky laws for Block
to offer and sell the SLS Stock in all states reasonably requested, provided,
however, that Sylvan shall not be required to qualify to do business or consent
to service of process in any jurisdiction in which it is not now so qualified or
has not so consented. Sylvan shall promptly notify Block of the happening of
any event of which Sylvan has knowledge which results in the prospectus included
in the registration statement, if any, containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and Sylvan will use its best efforts
to prepare a supplement or amendment to the registration statement to correct
such untrue statement or omission, and deliver a number of copies of such
supplement or amendment to Block as may be reasonably requested. Sylvan will
notify Block of the issuance by the Securities and Exchange Commission ("SEC")
of any stop order or other suspension of effectiveness of the registration
statement at the earliest possible time. Sylvan will permit Block's counsel to
review the registration statement and all amendments and supplements thereto, at
Block's cost, for a reasonable period time prior to Sylvan's filing with the
SEC. Sylvan shall bear all expenses in connection with the obligations
described in this Section and the registration of the SLS Stock pursuant to a
registration statement, including registration, listing and filing fees and
expenses of complying with the securities and blue sky laws, brokerage
commissions, placement agent fees, underwriting discounts and fees and expenses,
if any, of counsel or other advisers to Sylvan and Block only as the same
applies to the registration contemplated by this Section; provided, however,
that such fees and expenses shall not include brokerage commissions incurred by
Block upon the sale of any of the SLS Stock. Other than as described in this
Section, Sylvan is under no other obligations to (i) register any of the SLS
Stock on behalf of Block under the 1933 Act (ii) conduct, arrange or coordinate
any distribution of the SLS Stock, (iii) retain any underwriters in connection
with the negotiation and/or distribution of the SLS Stock or (iv) assist Block
in complying with any exemption from registration of the SLS Stock under the
1933 Act.
At all times that any of the SLS Stock remains outstanding, Sylvan shall
comply with the requirements of Rule 144 under the 1933 Act regarding the
availability of current public information to the extent required to enable any
holder of SLS Stock to sell such shares without registration under the 1933 Act
pursuant to Rule 144.
3. DELIVERY OF SLS STOCK. All of the SLS Stock shall be deemed issued as
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of the Merger, and certificate(s) representing the SLS Stock shall be delivered
to Block within five (5) business days following the Merger.
4. CLOSING. The consummation of the transactions contemplated hereby (the
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"Closing") shall take place within five (5) days after all conditions precedent
have been satisfied, but not later than December 31, 1997, at 9:00 A.M. (the
"Closing Date") at Sylvan's offices, or otherwise, on such other date or place
as the parties hereto may mutually agree. The Closing shall be deemed to be
effective for financial accounting purposes at 8:00 a.m. on December 1, 1997.
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5. THE COMPANIES' REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
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Each of the Companies hereby jointly and severally, with each other, represents
and warrants to, covenants and agrees with, Sylvan, now and as of the Closing
Date, as follows:
a. Organization, Standing and Power. Block is a limited partnership
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duly organized, validly existing and in good standing under the laws of the
State of Delaware. NAI is a corporation duly organized, validly existing and in
good standing under the laws of Florida. The federal employer identification
numbers, state identification numbers for sales and tax purposes and all similar
identification numbers for each of the Companies have been delivered to Sylvan.
NAI has all requisite power and authority to own, lease and operate its assets
(collectively, "Assets")owned by it and to carry on the Business as now being
conducted in the manner that, and in the places in which, the Business is now
being conducted. Neither of the Companies conducts any business or owns or
leases any asset or property of any nature outside of the United States. Each of
the Companies has the full power and authority and legal capacity to enter into
and deliver this Agreement and perform all acts necessary or appropriate to
consummate all of the transactions contemplated hereby.
b. Capital Structure; Ownership of Assets and Related Matters.
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i. All of the issued and outstanding capital stock of NAI is
owned by Block, and there are no options or similar rights outstanding with
respect to such interests and stock. NAI has and will have, at Closing, good and
marketable title to, or a valid and transferable leasehold interest in, all of
the Assets, except for such Assets as may be sold or otherwise disposed of
between the date hereof and the Closing Date in the ordinary course of business.
No other "Person" (as defined in Section 15 hereof) has any fee, leasehold or
equitable interest in and to the Assets owned by NAI, except as disclosed to
Sylvan. Except for those Encumbrances arising in connection with the Companies'
loan from NationsBank, N.A. and capitalized leases disclosed to Sylvan, when
delivered to Sylvan, the Assets will be free and clear of all the following
(hereinafter collectively referred to as "Encumbrances"): security interests,
liens, pledges, claims, charges, escrows, encumbrances, options, rights of first
refusal, mortgages, indentures, security agreements or other agreements,
arrangements, contracts, commitments, understandings or obligations, whether
written or oral, encumbering title in any way, other than the Encumbrances
created hereby.
ii. Except for the rights of Sylvan under this Agreement,
there are no outstanding options, warrants or other rights, contracts,
commitments, agreements, understandings, arrangements or restrictions relating
to the purchase or acquisition of any shares of capital stock or other equity
securities or interests of NAI.
iii. Except as set forth above in Section 5B(i), Block's
ownership of National Assessment Institute, Inc., a Florida corporation ("NAI"),
and as fully disclosed to Sylvan, neither of the Companies has ever owned shares
of any class of capital stock of any other corporation and does not have any
interest in any other entity and there are no contracts, commitments,
agreements, understandings or arrangements relating to such.
iv. Neither of the Companies has ever assumed or succeeded to
the liabilities of any Person, whether by operation of law or otherwise, except
in connection with the acquisition of the stock of NAI and the business assets
of H.H. Block & Associates, Inc. ("HHB"). Neither of the Companies has ever been
known by any other name and neither has or does business under any other name,
except for NAI, which was named "ACSI", and Block does business under the name
"Block & Associates".
v. Except for sales of products and services in the ordinary
course of business, and the rights of Sylvan hereunder, there are no outstanding
options, warrants or rights to purchase or acquire any interest in any of the
Assets. Except for this Agreement, there are no contracts, commitments,
agreements, understandings, arrangements or restrictions relating to the
ownership or operation of any of the Assets.
vi. The Assets constitute all of the property necessary for
the conduct of NAI's Business in the manner in which and to the extent to which
it is currently being conducted.
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vii. The Assets do not include any interest of any nature in
any parcel of real property, except for the fixtures, leasehold improvements and
leases delivered to Sylvan (collectively, the "Real Estate").
c. Authorization. This Agreement and all writings relating hereto
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to be executed and delivered by each of the Companies have been duly authorized
by all necessary action and constitute the valid and binding obligations of
each, enforceable in accordance with their respective terms. The individuals
executing this Agreement and the other documents executed in connection herewith
individually and on behalf of each of the Companies have been duly authorized
and have the legal capacity to execute all of such documents in such capacities.
Neither the execution and delivery hereof nor any writing relating hereto nor
the consummation by either of the Companies of the transactions contemplated
hereby or thereby, nor compliance with any of the provisions hereof or thereof,
will: (i) conflict with or result in a material breach of either of the
Companies' charter or formation documents; (ii) violate in any material respect
any statute, law, rule or regulation or any order, writ, injunction or decree of
any court or governmental authority; or (iii) violate or conflict with or
constitute a default in any material respect under (or give rise to any right of
termination, modification, cancellation or acceleration under), any agreement or
writing of any nature to which either of the Companies is a party or by which
the Assets may be bound or affected, or result in the creation of any
Encumbrance against or upon any of the Assets under any agreement or writing to
which either of the Companies is a party or by which any of them or their
respective assets may be bound or affected, or (iv) impair or in any way limit
any governmental or official license, approval, permit or authorization of
either of the Companies; provided, however that the Companies hereby state, and
Sylvan acknowledges, that the "change in control" of NAI pursuant hereto may
subject NAI's contracts to immediate termination. Except as disclosed to Sylvan,
including the consent of the customers of the Companies which have a written
contract with either, no consent or approval of or notification to any Person is
necessary or required in connection with the execution and delivery by either of
the Companies of this Agreement or any writing relating hereto or the
consummation of the transactions contemplated hereby or thereby.
d. Financial Statements.
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i. The Companies have delivered to Sylvan the consolidated
balance sheets and the related statements of income, changes in shareholders'
equity and changes in financial position of NAI, and the notes thereto and the
auditor's report thereon, if applicable, as at and for the fiscal year ended
August 31, 1996 and the seven month period ended March 31, 1997 (collectively,
the "Historical Financials"). The Historical Financials are true, correct and
complete and present fairly the financial position of NAI and the results of its
operations, retained earnings and changes in financial positions as at the dates
thereof and for the periods covered thereby, do not include or omit to state any
material fact which renders them misleading, and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis, except as may be disclosed in the reports relating thereto. At the
Closing, the Companies shall deliver to Sylvan a consolidated balance sheet
dated as of November 30, 1997 (the "Closing Balance Sheet") based on the best
knowledge and good faith of the Companies, which shall be prepared on a basis
consistent with the Historical Financials and in accordance with the provisions
hereof.
ii. Except as indicated to Sylvan, the statements of income
included in the Historical Financials do not contain any items of special or
nonrecurring income, and the balance sheets included in the Historical
Financials do not, and the Closing Balance Sheet will not reflect any write-up
or revaluation increasing the book value of any asset.
e. Liabilities.
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i. Except as disclosed thereon, the liabilities on the
Historical Financials consisted, and the liabilities on the Closing Balance
Sheet will consist, solely of obligations and liabilities incurred by NAI either
(A) in the ordinary and regular course of Business to Persons which are not
affiliated with the Companies, or (B) in connection with the purchase by the
business of NAI and HHB.
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ii. As of November 30, 1997 in connection with the Business,
neither of the Companies will have, any liability or obligation of any nature
whatsoever, including, without limitation, known or unknown, fixed or
contingent, accrued, absolute, matured or unmatured, or any "loss contingencies"
considered "probable" or "reasonably possible" within the meaning of the
Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standards No. 5, which were not or will not be recorded on the
Historical Financials or the Closing Balance Sheet, as the case may be, or (in
the case of liabilities not required to be recorded on such financial statements
in accordance with generally accepted accounting principles applied on a
consistent basis) specifically disclosed in the footnotes to the Closing Balance
Sheet or otherwise disclosed to Sylvan.
iii. All reserves and allowances included or to be included in
the Historical Financials and the Closing Balance Sheet are, and will be,
adequate, appropriate and reasonable (in accordance with generally accepted
accounting principles), as has been required by the Companies' outside auditors.
f. Absence of Changes. Except as otherwise indicated to Sylvan on
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Schedule ▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the Business has been operated only in the
ordinary and regular course and there has not been, since June 30, 1997 and
through the Closing Date there will not be, with respect to each of the
Companies and with respect to the Business: (i) any material and adverse change
in its condition, financial or otherwise; (ii) any material and adverse damage,
destruction or loss, whether or not covered by insurance; (iii) other than for
purchases of inventory in the ordinary course of business, the incurring of any
obligation or liability of any nature (whether absolute, accrued, contingent or
otherwise and whether due or to become due) in excess of $100,000.00; (iv) any
transfer or application of any assets of either the Companies to the payment of
any amount payable to or for the benefit of either or any of the following
Persons ("Companies' Affiliates"): any member of the family of any owner of the
Companies or any Person which is controlled, directly or indirectly, by any
owner or by any member of the family of any owner; (v) any declaration, setting
aside or payment of any dividend or other distribution in respect of any shares
of capital stock of the Companies, or any direct or indirect redemption,
purchase or other acquisition of any such stock; (vi) any organized labor
negotiations, strike or work stoppage affecting the Business or any threat of
the foregoing; (vii) any sale, transfer or other disposition of any tangible or
intangible asset of either the Companies to any Person (except for (a) payments
of third party obligations incurred in the ordinary and regular course of
business, in accordance with the regular payment practice of the Companies, and
(b) sales of products and services in the ordinary and regular course of
business); (viii) any termination or waiver of any rights of material value to
the Business; (ix) to the Companies' knowledge, the adoption of any statute,
rule, regulation or order which materially and adversely affects the Business;
(x) any increase in the compensation of, or benefits for, officers, employees,
independent contractors or other Persons performing services for either of the
Companies (including, without limitation, any increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment), having annual remuneration
in excess of $75,000, except for increases in accordance with the Companies'
normal salary administration policies; (xi) any capital expenditure or
commitment in excess of $75,000.00 for property, plant or equipment of the
Companies; (xii) any forward purchase commitments not completed by the Closing
Date involving more than $75,000.00; (xiii) any material change in the
accounting methods or practices followed by either of the Companies or any
change in depreciation or amortization policies or rates theretofore adopted;
(xiv) any payment made (or withheld) by either of the Companies not in
accordance with their usual or customary practices; (xv) any sale of goods or
services to any customer where the payment for such goods or services allows for
the payment therefor more than thirty (30) days after the goods or services have
been provided to such customer; or (xvi) any commitment, obligation or
understanding to do any of the foregoing.
g. Tax Matters. Each of the Companies has filed, and will file, all
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tax returns and reports required to be filed and, in respect of any period
ending prior to or which includes the Closing Date, has paid, or has set up an
adequate reserve for the payment of, all taxes required to be paid or
anticipated to be payable, which reserve either is reflected in the Historical
Financials or will be reflected in the Closing Balance Sheet, as the case may
be. Neither of the Companies have any liability for any such taxes in excess of
the amounts so paid or reserves so established. Each of the Companies has
properly withheld and paid, and will properly withhold and pay, all payroll or
similar taxes. Neither of the Companies is delinquent in the payment of any tax,
assessment, penalties or interest and neither has requested any extension of
time within which to file any tax returns in respect of any fiscal year which
have not since
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been filed. All tax returns filed or to be filed are, or will be, true and
correct. No deficiencies for any tax, assessment, penalties or interest have
been proposed, asserted, assessed or, to the knowledge of the Companies,
threatened against the Companies. Other than the NAI Federal tax returns for the
years ended August 31, 1993 (audit closed) and August 31, 1995 (audit currently
pending), no tax returns of the Companies have been audited by the appropriate
governmental authority since June, 1993, and, to the knowledge of the Companies,
none is threatened or contemplated. As of the date hereof, neither of the
Companies has given or been requested to give waivers of any statute of
limitations relating to the assessment or payment of any taxes for any taxable
period. For purposes hereof, the term "tax" shall include all Federal, state,
local and foreign taxes, assessments, and all franchise, sales, use, occupation,
property, excise or other taxes, and governmental charges, including penalties
and interest relating to the foregoing.
h. Property Owned, Leased or Licensed.
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i. The Companies have delivered to Sylvan as Schedule
5H(i)(a), attached hereto, a list of all real estate leased by either of the
Companies (collectively, the "Real Estate"). Neither of the Companies owns any
fee interest in any real property and neither has any understandings or
commitments to purchase any.
ii. True and complete copies of all leases relating to the
Real Estate have been delivered to Sylvan.
iii. With respect to such leases, such leases are in full force
and effect, are valid and binding obligations of the parties thereto and are
enforceable against its parties in accordance with the terms thereof. There are
no defaults (alleged or actual) by either party to such leases and no event has
occurred which with due notice or lapse of time or both would constitute a
default.
iv. The Companies have delivered depreciation schedules to
Sylvan, which contain lists of each item of machinery, equipment, tooling,
office furniture, automobiles, trucks and other fixed assets (collectively, the
"Fixed Assets") owned or leased by either of the Companies included on the
Historical Financials or to be included on the Closing Balance Sheet. The
Companies have also delivered to Sylvan a true and correct copy of each lease or
other agreement under which either of the Companies pays in excess of $25,000
annually to lease, license, hold or operate any Fixed Asset.
v. The Companies have delivered Schedule 5H(iii), attached
hereto, a list of all unexpired non-governmental licenses, franchises,
distribution rights and the like held by either of the Companies and all
unexpired trademarks, trade names, service marks, copyrights, know-how, patents
or any other proprietary rights and applications for any of the foregoing owned
by or registered in the name of either of the Companies (collectively, the
"Intangibles"). The term "Intangibles" does not include any contract rights.
Each of the Companies owns, or has a valid licensee interest in, all
Intangibles, and pays no royalty with respect to any of them, has the exclusive
right to bring actions for the infringement thereof and has not granted any
rights of any nature in any of the Intangibles to any Person. To the Companies'
knowledge, no product made or sold by the Companies or for their benefit
violates any license, franchise or distribution agreement or infringes any
trademark, trade name, service ▇▇▇▇, copyright, know-how or patent of another
Person. All Intangibles are assignable to Sylvan without the consent of any
Person.
i. Insurance. Each of the Companies presently maintains in effect
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insurance covering the Assets and the Business from reasonably foreseeable
losses and any liabilities or risks relating thereto. The Companies have
delivered to Sylvan a list of all insurance policies or performance bonds held
or issued by or on behalf of Block or NAI and now in force (collectively, the
"Insurance Policies"). Such coverage fully complies with all contractual
requirements of the Business.
j. Agreements, Etc. The Companies have delivered to Sylvan Schedule
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5J, attached hereto, a list of all material written contracts, agreements,
leases, instruments and other obligations of the Companies (collectively, the
"Contracts"). With respect to the Contracts, except as disclosed to Sylvan: (i)
all are in full force and effect, have not
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been modified or amended, and constitute legal, valid and binding obligations of
the respective parties thereto; (ii) each of the Companies has, in all material
respects, performed all of the obligations required to be performed by it to
date and is not in default or, to the knowledge of the Companies, alleged, to be
in default in any respect thereunder, no party has been released from any
obligation thereto and there exists no event, condition or occurrence which,
with or without notice, lapse of time or the occurrence of any other event,
would constitute a material default thereunder by either, or to the Companies'
knowledge, would constitute a material default on the part of any other party
thereto, provided, however that the Companies hereby state, and Sylvan
acknowledges, that the "change in control" of NAI pursuant hereto may subject
NAI's contracts to immediate termination; and (iii) none require the payment or
performance of material considerations by either of Block or NAI on or after the
Closing Date without the receipt of consideration of commensurate value, within
the meaning of applicable fraudulent conveyance laws or decisions. Neither Block
nor NAI is restricted by any agreement to which it is a party from carrying on
the Business anywhere in the world. The Contracts confer on each of Block and
NAI all rights necessary to enable them to conduct the Business as now being
conducted.
k. Litigation and Claims, Etc. Except as disclosed to Sylvan on
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Schedule 5K, attached hereto, there are no personal injury, product liability or
other actions, suits, claims, investigations or legal or administrative or
arbitration proceedings of any nature pending or, to the knowledge of the
Companies, threatened, against or involving any of the Companies, whether at law
or in equity.
l. Compliance. Each of the Companies is in compliance, in all
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material respects, with all federal, state and local laws, ordinances,
regulations, permits, licenses, decrees, judgments and orders applicable to the
Business; and no proceeding is pending or, to the Companies' knowledge,
threatened, to revoke or limit any thereof.
i. Inventories. The inventories of each of the Companies included
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on the Historical Financials and to be included on the Closing Balance Sheet are
and will be valued at the lower of cost or market value. Such inventories are
all usable in the ordinary and regular course of the Business, and are fit and
sufficient for the purpose for which they were purchased. Each of the Companies
has exercised, and on the Closing Date will exercise, its best efforts to have,
the proper amount of inventories to conduct the Business consistent with past
practices.
j. Employee Matters. Each of Block and NAI has accrued on the
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Historical Financials, and will accrue adequate reserves on the Closing Balance
Sheet, all wages, salaries, contractual bonuses, vacation pay and other
compensation earned by, or accrued for the benefit of, all employees, if vested
or payable by such date. Neither of the Companies is a party to or bound by any
collective bargaining agreement or any other agreement. There is not pending or,
to the Companies' knowledge, threatened any labor dispute, strike or work
stoppage against the Companies which may affect the Business. There are no
activities or proceedings of any labor union to organize any employees of either
of the Companies.
k. Employee Benefit Plans.
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i. Except as disclosed to Sylvan on Schedule 5O(i), attached
hereto, neither of the Companies nor any current or former Plan Affiliate of the
Companies has at any time had any liability with respect to any of the following
(whether written, unwritten or terminated): (a) any "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, (b) any "employee pension benefit
plan," as defined in Section 3(2) of ERISA, or (c) any other plan, policy,
program, arrangement or agreement providing employee benefits (or other similar
benefits) to former employees, dependents, beneficiaries, directors or
independent contractors, including, but not limited to, any bonus or incentive
plan, stock option, restricted stock, stock bonus plan, salary reduction
agreement, change-of-control agreement, severance agreement, material fringe
benefit program, short-term disability plan or sick leave, personnel policy,
vacation time, holiday pay, moving expense reimbursement program, employment
agreement or consulting agreement which could result in Sylvan having any
liability, whether direct or indirect.
ii. As used herein, the following terms shall have the
following respective meanings: (a) the term "Employee Plan" shall mean any plan,
policy, program, arrangement or agreement described in Section
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5O(i), whether or not scheduled; and (b) the term "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended.
iii. With respect to any person or entity ("First Person"),
the term "Plan Affiliate" shall mean any other person or entity with whom the
First Person constitutes all or part of a controlled group, or which would be
treated with the First Person as under common control or whose employees would
be treated as employed by the First Person, under Section 414 of the Code and
any regulations, administrative rulings and case law interpreting the foregoing.
iv. No Employee Plan (a) is subject to Title IV of ERISA, (b)
is a "multi-employer plan" as defined in Section 4001 of ERISA, a "multi-
employer plan" within the meaning of Section 3(37) of ERISA, a "multiple
employer plan" within the meaning of Code Section 413(c) or a "multiple employer
welfare arrangement" within the meaning of Section 3(40) of ERISA, or (c)
provides any welfare-type benefits for retirees or former employees, or their
spouses or dependents (except for limited continued medical benefit coverage for
former employees, their spouses and other dependents as required to be provided
under Section 4980B of the Code.
v. A complete copy of each written Employee Plan as amended
to the Closing, together with Form 5500 Annual Reports for the three (3) most
recent plan years, if any; a copy of any funding vehicle with respect to each
such plan; a copy of the most recent determination letter with respect to such
plan (if any); have been delivered to Sylvan. No person has made any statement,
whether oral or in writing, regarding any Employee Plan which will result in any
liability to Sylvan in excess of any liability previously disclosed pursuant to
this paragraph.
vi. Each Employee Plan (a) has been and currently complies in
form and in operation in all respects with all applicable requirements of ERISA
and the Code and any other applicable Federal and state laws, (b) has been and
is operated and administered in compliance with its terms (except as otherwise
required by law); (c) has been and is operated in compliance with the applicable
requirements of the Code and ERISA in such a manner as to qualify, where
appropriate, for both Federal and state purposes, for income tax exclusions to
its participants, tax-exempt income for its funding vehicle, and the allowance
of deductions and credits with respect to contributions thereto; and (d) where
applicable, has received a favorable determination letter from the Internal
Revenue Service ("Service").
vii. With respect to each Employee Plan, no person has: (a)
has entered into any non-exempt "prohibited transaction," as such terms is
defined in ERISA or the Code; or (b) has breached a fiduciary obligation; which
could subject Sylvan to any liability.
viii. With respect to each Employee Plan all required or
recommended contributions, payments, premiums, contributions, reimbursements,
expenses, accruals or other liabilities for all periods ending prior to or as of
the Closing (including periods from the first day of the then current plan year
to the Closing) (a) have been fully satisfied, (b) will be accrued at Closing,
or (c) are subject to a funding arrangement separate from the assets of any of
the Companies or any of its Plan Affiliates.
l. Transactions with Related Parties. The Companies have delivered
---------------------------------
Schedule 5P, attached hereto, a list of all amounts directly or indirectly paid
(or deemed for accounting purposes to have been paid) or to be paid by either of
the Companies to, or received by either of the Companies from any Person which
is controlled by, controls, or under common control with, directly or
indirectly, either of the Companies during the current and the last fiscal year
for products or services.
m. Accounts and Notes Receivable. The Companies have delivered to
-----------------------------
Sylvan an aged list of unpaid accounts and notes receivable relating to the
Business and constituting an Asset (the "Receivables") owing to either as of
November 30, 1997. All of the Receivables reflected on the Historical Financials
and to be reflected on the Closing Balance Sheet constituted and will constitute
only valid claims against third parties. The Receivables arose or will arise
from bona fide transactions in the ordinary and regular course of Business and
all (subject to the reserve for bad
8
debt) are collectible within ninety (90) days after they arose or will arise,
and are not subject to any defenses, set-offs or counterclaims. The Historical
Financials do, and the Closing Balance Sheet will, include reserves for bad debt
reasonably based on past customer performance.
n. Customers and Suppliers. Except as disclosed to Sylvan, in
-----------------------
connection with the Business, neither Block nor NAI is required to provide any
bonding, guaranty or other financial security arrangements in connection with
any transactions with any of its customers or suppliers. The Companies have no
knowledge or reason to believe that as a result of the transactions contemplated
hereby or otherwise, any customer or supplier of either of the Companies intends
to cease or substantially reduce, the purchase or sale, respectively, of goods
or services from or to Sylvan on terms and conditions similar to those imposed
on purchases and sales from and to the Companies and NAI prior to the date
hereof, except that if appropriate consents to transfer due to NAI's "change in
control" are not obtained, certain contracts may be subject to cancellation.
o. Bank Accounts; Officers; Directors; Credit Cards. The Companies
------------------------------------------------
have delivered to Sylvan a list of all bank accounts, safe deposit boxes and the
like in the name of or controlled by them.
p. Illegal Payments. None of the Companies know of or have reason
----------------
to believe that (i) any shareholder, director or officer made any illegal
payments, gifts or the like in the procurement of any of the contracts being
assigned hereunder.
q. Material Disclosures. No representation, warranty, covenant or
--------------------
agreement by the Companies contained herein, and no statement contained in any
certificate, Schedule, Exhibit, list or other writing furnished to Sylvan in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. All
Schedules and Exhibits hereto and all writings furnished to Sylvan hereunder or
in connection with the transactions contemplated hereby are accurate, true and
complete in all material respects. All representations, warranties, covenants
and agreements made by the Companies herein and all other agreements and
instruments delivered in connection herewith or pursuant hereto and facts and
information contained in the Exhibits and Schedules shall be true and correct in
all material respects as of the Closing Date with the same effect as if they had
been made at and as of the Closing Date.
4. SYLVAN'S REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS. Sylvan
--------------------------------------------------------------
represents and warrants to, and agrees and covenants with, the Companies, now
and as of the Closing Date, as follows:
a. Organization, Standing and Power. Sylvan is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Maryland. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sylvan has all requisite
corporate power and authority to own, lease and operate the Business and to
carry on the Business after the transactions contemplated hereby. Each of Sylvan
and Sub has the full power and authority to enter into this Agreement and
perform all acts necessary or appropriate to consummate all of the transactions
contemplated hereby.
b. Authorization. This Agreement and all writings relating hereto
-------------
to be executed and delivered by Sylvan and Sub have been duly authorized by all
necessary action and constitute the valid and binding obligations of Sylvan and
Sub, enforceable in accordance with their respective terms. The individuals
executing this Agreement and the other documents executed in connection herewith
on behalf of Sylvan and Sub have been duly authorized to execute all of such
documents on behalf thereof. Neither the execution and delivery hereof nor any
writing relating hereto nor the consummation by Sylvan and Sub of the
transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof or thereof, will: (i) conflict with or result in a material
breach of the Articles of Organization of each of Sylvan and Sub; (ii) violate
any statute, law, rule or regulation or any order, writ, injunction or decree of
any court or governmental authority; or (iii) violate or conflict with or
constitute a default under (or give rise to any right of termination,
modification, cancellation or acceleration under), any agreement or writing of
any nature to which either is a party or by which the assets of either may be
bound or affected, or result in the creation of any
9
Encumbrance against or upon any of the assets of either under any agreement or
writing to which either is a party or by which either or the assets of either
may be bound or affected; or (iv) impair or in any way limit any governmental or
official license, approval, permit or authorization of Sylvan. No consent or
approval of or notification to any Person is necessary or required in connection
with the execution and delivery by Sylvan or Sub hereof or any writing relating
hereto or the consummation of the transactions contemplated hereby or thereby.
c. Material Disclosures. No representation, warranty, covenant or
--------------------
agreement by Sylvan contained herein, and no statement contained in any
certificate, Schedule, Exhibit, list or other writing furnished to any of the
Companies in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading. All
Schedules and Exhibits hereto and all copies of all writings furnished to the
Companies hereunder or in connection with the transactions contemplated hereby
are accurate, true and complete. All representations, warranties, covenants and
agreements made by Sylvan herein and facts and information contained in the
Exhibits and Schedules shall be true and correct as of the Closing Date with the
same effect as if they had been made at and as of the Closing Date.
5. CLOSING TRANSACTIONS. On the Closing Date (or on a date otherwise
--------------------
indicated herein):
a. The Companies shall deliver or cause to be delivered to Sylvan
and/or Sub:
i. Such keys, lock and safe combinations, and other similar
items as Sylvan shall require to obtain full occupation and control of the
Assets.
ii. As between the Companies and Sylvan, possession of the
Real Estate.
iii. All consents, waivers and releases necessary, required or
appropriate to consummate the transactions contemplated hereby, except consents
to transfers of NAI's contracts because of the "change of control" of NAI, which
Sylvan acknowledges will not be procured by the Companies and which are not a
condition to the consummation of the transactions contemplated hereby.
iv. The Closing Balance Sheet, and consolidated unaudited
financial statements for the Companies and Block State Testing Services, L.P. as
of November 30, 1997.
v. Certified copies of resolutions duly adopted by Block's
General Partner approving the transactions contemplated by, and authorizing the
execution, delivery and performance by each of the Companies of, this Agreement,
and a certificate as to the incumbency of officers of each executing any
instrument or other document delivered in connection with such transactions.
vi. Such other documents as the Sylvan may reasonably request.
b. Sylvan shall deliver or cause to be delivered to the Companies:
i. Within five (5) days after the Closing, certificates
representing the SLS Stock.
ii. Certified copies of resolutions duly adopted by Sylvan's
Board of Directors approving the transactions contemplated by, and authorizing
the execution, delivery and performance by Sylvan of, this Agreement, and a
certificate as to the incumbency of officers of each executing any instrument or
other document delivered in connection with such transactions.
iii. Such other documents as the Companies may reasonably
request.
6. INTENTIONALLY LEFT BLANK.
------------------------
10
7. CONDITIONS OF OBLIGATIONS OF Sylvan. The obligations of Sylvan to
-----------------------------------
perform this Agreement are subject to the satisfaction of the following
conditions on or prior to the Closing Date:
a. Representations and Warranties. The representations and
------------------------------
warranties of the Companies in this Agreement or in any Schedule, Exhibit,
certificate or document delivered in connection herewith shall be true and
correct in all material respects on the Closing Date.
b. Performance of Obligations of the Companies. The Companies shall
-------------------------------------------
have performed all agreements and obligations required to be performed by them
on or prior to the Closing Date.
c. Consents, Waivers and Releases. The Companies shall have
------------------------------
obtained, or to the reasonable satisfaction of Sylvan obviated the need to
obtain, all consents, waivers and releases from third parties necessary to
execute and deliver this Agreement and consummate the transactions contemplated
hereby. Also, Sylvan shall have obtained the consent the Board of Directors of
Sylvan Learning Systems, Inc. to execute and deliver this Agreement and
consummate the transactions contemplated hereby. Notwithstanding the foregoing,
Sylvan acknowledges and agrees that assignments of contracts due to NAI's
"change in control" will not be a condition precedent to the consummation of the
transactions contemplated hereby, nor will such consents be required at any time
after the Closing.
d. No Litigation. No action, suit or other proceeding shall be
-------------
pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated hereby, or seeking to obtain damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of any governmental authority having appropriate
jurisdiction.
e. Closing Documents. The Companies shall have delivered, or shall
-----------------
have caused the delivery of, all appropriate documents and instruments described
in Section 7 hereof.
f. Working Capital. On a consolidated basis, as of the Effective
---------------
Date, the sum of the Companies' and NAI's cash and all other current assets
(other than excluded assets) less all current liabilities to be assumed by
Sylvan (but not including deferred revenue items) shall be greater than $0.00.
8. CONDITIONS OF OBLIGATIONS OF THE COMPANIES. The obligations of the
------------------------------------------
Companies to perform this Agreement are subject to the satisfaction, on or prior
to the Closing Date, of the following conditions:
a. Representations and Warranties. The representations and
------------------------------
warranties of Sylvan herein or in any Schedule, Exhibit, certificate or document
delivered in connection herewith shall be true and correct in all material
respects on the Closing Date.
b. Performance of Obligations of Sylvan. Sylvan shall have
------------------------------------
performed all agreements and obligations required to be performed by it on or
prior to the Closing Date.
c. Consents, Waivers and Releases. Sylvan shall have obtained, or
------------------------------
to the reasonable satisfaction of the Companies obviated the need to obtain, all
consents, waivers and releases from third parties necessary to execute and
deliver this Agreement, buy the Assets and consummate the transactions
contemplated hereby.
d. No Litigation. No action, suit or other proceeding shall be
-------------
pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated hereby, or seeking to obtain damages in respect thereof, or
involving a claim that consummation thereof would result in the violation of any
law, decree or regulation of any governmental authority having appropriate
jurisdiction.
11
e. Closing Documents. Sylvan shall have delivered, or shall have
-----------------
caused the delivery of, all appropriate documents and instruments described in
Section 7 hereof.
9. CLOSING NOT A WAIVER. The fact that the parties have chosen to
--------------------
consummate the transactions contemplated hereby shall not act or be deemed or
construed as a waiver of either party or estop either party from pursuing their
respective rights to indemnification hereunder or other remedies for any reason
whatsoever.
10. POST-CLOSING COVENANTS.
----------------------
a. Restrictive Covenants.
---------------------
i. Non-disclosure. Each of the Companies acknowledges that
it has been and will be entrusted with trade secrets, marketing, operating and
strategic plans, customer and supplier lists, proprietary information and other
confidential or specialized data and/or information relative to the Business,
whether now existing or to be developed or created after the Closing Date
(collectively, "Trade Secrets"). Each of the Companies covenants and agrees that
each shall at all times after the date hereof hold in strictest confidence any
and all Trade Secrets that may have come or may come into its possession or
within its knowledge concerning or related to the products, services, processes,
businesses, suppliers, customers and clients of each of the Companies in
connection with the Business and the Assets. Each of the Companies covenants and
agrees that neither it nor any Person controlled by it will for any reason,
directly or indirectly, for itself or for the benefit of any other Person, use,
copy, divulge or otherwise disseminate or disclose any of the Trade Secrets
owned or used by, or licensed to, the Companies or any of their affiliates or
otherwise relating to the Companies or the Business, provided that each of the
Companies may disclose Trade Secrets pursuant to an order by a court of
competent jurisdiction, provided, further, that each of the Companies shall give
Sylvan notice of such order and any court pleading requesting such disclosure,
in order to provide Sylvan with an opportunity to prevent such disclosure or
procure an appropriate protective order.
ii. Customers. Each of the Companies acknowledges that
customers and customer accounts of the Companies comprising the Assets will,
after the Closing, at all times be the sole and separate property of Sylvan, in
which neither of the Companies have any rights whatsoever, and all activities of
or work performed by neither of the Companies for or on behalf of Sylvan in the
future will be performed solely for the benefit of Sylvan and the goodwill
resulting from such efforts by any of the Companies is and at all times will be
the sole and separate property of Sylvan, which goodwill is intended to be
protected, in part, by this Section.
iii. Non-Solicitation; Non-Hire. Each of the Companies agrees
that from the Closing Date and continuing for a period (the "Non-Compete
Period") of five (5) years from the Closing Date, neither they nor any person or
enterprise controlled by them will solicit or, without Sylvan's prior written
consent, hire, for employment or any other reason any person who, at any time
within one (1) year prior to the time of the act of solicitation, or hire, was
employed by Sylvan or either of the Companies.
iv. Non-Competition by Companies. During the Non-Compete
Period, each of the Companies agree that none of them nor any person or
enterprise controlled by them will become a stockholder, director, officer,
agent, employee or representative of or consultant to a corporation or member of
a partnership, engage as a sole proprietor in any business, act as a consultant
to any of the foregoing or otherwise engage, directly or indirectly, in any
enterprise which competes with the Business anywhere in the continental United
States; provided, however, that the foregoing shall not prohibit (i) the
ownership of less than two percent (2%) of the outstanding shares of the stock
of any corporation engaged in any business, which shares are regularly traded on
a national securities exchange or in any over-the-counter market, and (ii) the
ownership and operation of Registry Services International, L.P.
v. Relief, Reformation; Severability. The parties agree that
the covenants contained in this Section 12A are separate and are reasonable in
their scope and duration and may be enforced by specific performance or
otherwise. The parties shall not raise any issue of reasonableness as a defense
in any proceeding to enforce any of
12
the covenants herein. Notwithstanding the foregoing, in the event that a
covenant included in this Section 12A shall be deemed by any court to be
unreasonably broad in any respect, the court which makes such finding shall
modify such covenant for the purpose of making such covenant reasonable in scope
and duration. The validity, legality or enforceability of the remaining
provisions of this Agreement shall not be affected by any such modification.
vi. Remedies. The parties acknowledge that any breach of the
restrictive covenants herein will cause irreparable harm to the other, and that
such harm will be difficult if not impossible to ascertain. Therefore, if any
action or proceeding is commenced by or on behalf of any party to enforce the
provisions hereof, such party shall be entitled to equitable relief, including
injunction, against any actual or threatened breach hereof, and any damages
arising therefrom including, without limitation, reasonable fees of its
attorneys and their support staff and all other costs and expenses incurred by
the other party in good faith in connection therewith without bond and without
liability should such relief be denied, modified or vacated. Neither the right
to obtain such relief nor the obtaining of such relief shall be exclusive of or
preclude any party from any other remedy. Each party hereby waives the claim or
defense to an action for equitable relief by the other that the other has an
adequate remedy at law or has not been or is not being irreparably injured by
such breach. FURTHERMORE, EACH PARTY HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE OF ANY NATURE ARISING OUT OF, CONNECTED
WITH, RELATED OR INCIDENTAL TO THE RESTRICTIVE COVENANTS CONTAINED IN SECTION
12A HEREOF. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
11. INDEMNIFICATION.
---------------
a. The Companies jointly and severally agree to indemnify and hold
harmless Sylvan against any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions, causes of action, suits, proceedings,
costs of investigations, demands, assessments, judgments, Encumbrances and costs
and expenses (including, without limitation, attorneys' fees, interest,
penalties and all costs associated therewith incurred by such party in good
faith) (collectively, "Losses") suffered, sustained, incurred or paid by any
indemnified party, to which such indemnified party may become subject under any
federal, state or local law, rule or regulation, at common law or otherwise
(including in settlement of any litigation), only to the extent that such Losses
(or actions in respect thereof) exceed in the aggregate $250,000 (net of
insurance proceeds paid with respect thereto and tax benefits derived therefrom)
and arise out of or are based upon (i) any untrue or inaccurate statement made
by either of the Companies herein, including the information included in any
Exhibit hereto; (ii) the claims of any broker or finder engaged by either of the
Companies; (iii) the nonfulfillment or breach or alleged nonfulfillment or
breach of any agreement or covenant of any of the Companies; (iv) the assertion
against any indemnified party or any of their assets of any liability or
obligation of any of the Companies which is not an Assumed Liability or related
to an Assumed Liability; and (v) all currently outstanding matters of
litigation, or claims currently threatened against either of the Companies; and
will reimburse each indemnified party for any legal or other cost or expense
incurred by such party in good faith in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything herein to the contrary, the Companies shall have no indemnity
obligation whatsoever to Sylvan based in whole or in part because of the failure
to procure consents to the assignments of any of the Contracts from the
Companies to Sylvan. The indemnity obligation described in this Section 13A
shall be the sole and exclusive remedy of Sylvan, and shall not survive the
Closing.
b. Sylvan will indemnify and hold harmless each of the Companies
against any and all Losses suffered, sustained, incurred or paid by any
indemnified party, to which such indemnified party may become subject under any
federal, state or local law, rule or regulation, at common law or otherwise
(including in settlement of any litigation), insofar as such Losses (or actions
in respect thereof) arise out of or are based upon (i) any untrue or inaccurate
statement or alleged untrue or inaccurate statement of any material fact made by
Sylvan herein, including the information included in any Exhibit hereto; (ii)
the claims of any broker or finder engaged by Sylvan; (iii) the nonfulfillment
or breach or alleged nonfulfillment or breach of any agreement or covenant of
Sylvan, and; (iv) the assertion against any indemnified party or any of their
assets of any liability or obligation of Sylvan, or relating to Sylvan's
operations or any of its assets, including the Assumed Liabilities; and will
reimburse each indemnified party
13
for any legal or other expenses reasonably incurred by such party in connection
with investigating or defending any such loss, claim, damage, liability or
action. The indemnity obligation described in this Section 13B shall be the sole
and exclusive remedy of the Companies.
12. INTENTIONALLY LEFT BLANK.
-------------------------
13. MISCELLANEOUS.
-------------
a. Manner of Closing. At the Closing, all transactions shall be
-----------------
conducted substantially concurrently and no transaction shall be deemed to be
completed until all are completed.
b. Access to Records. Sylvan shall afford to the Representative and
-----------------
its agents, the opportunity, upon reasonable advance notice, to examine and make
copies of the books and records of each of the Companies having an effect on all
periods through the Closing Date, in connection with tax and financial reporting
matters and other bona fide business purposes, and Sylvan shall use reasonable
efforts to retain such books and records for a period of four (4) years from the
date of such books and records.
c. Parties in Interest. This Agreement shall be binding upon, inure
-------------------
to the benefit of, and be enforceable by the parties and their respective
executors, successors and assigns. Notwithstanding the foregoing, the Companies
are prohibited from assigning their respective interests hereunder, by operation
of law or otherwise. The Companies hereby consent to a collateral assignment of
Sylvan's rights hereunder to a lender, understanding that such lender shall have
the ability to enforce the rights of Sylvan granted herein.
d. Entire Agreement; Amendments. This Agreement, the Exhibits and
----------------------------
Schedules attached hereto, and the other writings referred to herein or
delivered in connection herewith contain the entire understanding of the parties
with respect to its subject matter, and supersedes all prior understandings and
agreements. This Agreement may be amended only by a written instrument duly
executed by the parties. Any reference herein to this Agreement shall be deemed
to include the Exhibits and Schedules attached hereto. If any provision of this
Agreement is determined to be illegal or unenforceable, such provision will be
deemed amended to the extent necessary to conform to applicable law or, if it
cannot be so amended without materially altering the intention of the parties,
it will be deemed stricken and the remainder of the Agreement will remain in
full force and effect.
e. Headings. The section and subsection headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
f. Notices. All notices, claims, certificates, requests, demands
-------
and other communications ("communications") hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered, mailed (by
registered or certified mail, postage prepaid) or sent by overnight courier
service or facsimile addressed as follows:
If to either of the Companies, to: Block Testing Services, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
If to Sylvan: SYLVAN LEARNING SYSTEMS, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel's Office
Facsimile: (843)843-806
14
or to such other address as the person to whom a communication is to be
given may have furnished to the others in writing in accordance herewith. A
communication given by any other means shall be deemed duly given on the earlier
of when actually received by the addressee or three (3) days after sending such
communication. Notice hereunder to Representative shall be deemed to be notice
to each of the Companies.
g. Public Announcements. All public announcements relating to this
--------------------
Agreement or the transactions contemplated hereby, including announcements to
employees, will be made only as may be agreed upon jointly by the parties
hereto, or as Sylvan considers required or appropriate to comply with applicable
law. Any governmental, public or private inquiries or requests for information
shall be promptly referred to Sylvan.
h. Further Assurances. After the Closing Date, without further
------------------
consideration, the parties shall execute and deliver such further instruments
and documents as either party shall reasonably request to consummate the
transactions contemplated hereby and to perfect Sylvan's title to the Assets.
i. Waivers. Any party to this Agreement may, by written notice to
-------
the other party hereto, waive any provision of this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent, same or different breach.
j. Counterparts. The Agreement may be executed in one or more
------------
counterparts, but all such counterparts shall constitute one and the same
instrument.
k. Use of Certain Terms. The term "Person" shall mean an
--------------------
individual, a partnership, a joint venture, a joint stock company, a
corporation, a trust, an unincorporated organization, a limited liability
company, any other legal entity and a government, governmental body or quasi-
governmental body, or any department, agency or political subdivision thereof.
l. Applicable Law. The terms and conditions of this Agreement shall
--------------
be governed by and construed in accordance with the laws of the State of
Delaware.
m. Agreement to Arbitrate. In the event of any other dispute
----------------------
arising out of, connected with, related or incidental to this Agreement and the
documents or instruments delivered in connection herewith, such dispute shall be
submitted to arbitration in accordance with the terms of this Section. The party
who is alleging that a dispute exists shall send a notice of such dispute to all
other parties, which notice shall set forth in detail the dispute, the parties
involved and the position of such party with respect thereto. Within ten (10)
business days after the delivery of such a notice, counsel for the parties shall
mutually select as an arbitrator an attorney practicing in Baltimore, Maryland,
who is experienced in commercial arbitration. If counsel for the parties are
unable to agree upon the selection of the arbitrator, an arbitrator residing in
or about Baltimore, Maryland experienced in commercial arbitration shall be
selected by the Baltimore, Maryland office of the American Arbitration
Association. The arbitrator so selected shall schedule a hearing in Baltimore,
Maryland, on the disputed issues within forty-five (45) days after his
appointment, and the arbitrator shall render his decision after the hearing, in
writing, as expeditiously as is possible, and shall be delivered to the parties.
The arbitrator shall render his decision based on written materials supplied by
the parties to the arbitration in support of their respective oral presentations
at the hearing, and no party shall be entitled to discovery in such matter. Each
party shall supply a copy of any written materials to be submitted to the
arbitrator at least fifteen (15) days prior to the scheduled hearing. The
parties agree that the arbitrator shall not have any power or authority to award
punitive damages. A default judgment may be entered against any party who fails
to appear at the arbitration hearing. Such decision and determination shall be
final and unappealable and shall be filed as a judgment of record in any
jurisdiction designated by the successful party. The successful party shall be
entitled to recover all fees, costs and expenses incurred in connection with
such arbitration. The parties hereto agree that this paragraph has been included
to rapidly and inexpensively resolve any disputes between them with respect to
the matters described above, and that this paragraph shall be grounds for
dismissal of any court action commenced by any party with respect to a dispute
arising out of such matters.
15
THE PARTIES AGREE THAT ANY ARBITRATION SHALL BE GOVERNED BY AND PURSUANT TO
THE FEDERAL ARBITRATION ACT, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
n. Pronouns. All pronouns and any variations thereof shall be deemed to
--------
refer to the masculine, feminine, singular and plural as the identity of that
person referred to requires.
o. Joint and Several Obligations. The duties and obligations of each of
-----------------------------
the Companies are joint and several, and the Companies hereby acknowledge the
same, and each of the Companies hereby guarantees performance of all duties and
obligations of the other under and pursuant to this Agreement.
p. Effect of Disputes. Notwithstanding the fact that there may from time
------------------
to time be disputes among the parties concerning the terms and conditions
hereof, the parties agree not to under any circumstances, disparage, criticize
or denigrate the talents, skills, prospects, abilities, integrity or character
of the other parties hereto, or such parties' management, directors, employees,
agents or representatives (including those of Sylvan's affiliates). The
provisions of this Section shall survive the execution and termination hereof,
irrespective of the reason for such termination.
q. Non-Recourse Obligations. Sylvan specifically acknowledges and agrees
-------------------------
that, notwithstanding any provision to the contrary contained in this Agreement,
except as set forth in the last sentence of this Section, its only recourse for
enforcement of the covenants and agreements of the Companies contained herein,
shall be against the Assets of the Companies and that all of such covenants and
agreements of the Companies contained herein, including without limitation the
indemnity obligations of the Companies contained in Section 13 hereof, are and
shall be non-recourse to both the general and limited partners of the Block.
The foregoing shall in no way be deemed to be a limitation of Sylvan's rights to
seek indemnification as assignee of Block's rights under each of the (i) Stock
Purchase Agreement ("SPA") dated July, 1997, by and among NAI Acquisition Corp.,
a Delaware corporation ("Sub"), Block, NAI, Bax & Associates, Inc., a Florida
corporation ("BAI"), and AWM Associates, Inc., a Florida corporation ("AWM") and
▇▇. ▇▇▇▇▇ ▇. ▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D., and (ii) Asset Purchase
Agreement ("APA") dated as of February 1, 1996 among Block, H.H. Block &
Associates, Inc., NAI, ▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. Notwithstanding the
foregoing, NAI hereby agrees to indemnify and hold Sylvan harmless, pursuant to
the provisions of Section 13A hereof, from any breaches of the representations
set forth in the second sentence of Section 5B(i) and the representations in
Section 5B(v) hereof, provided, that the foregoing obligation of indemnity shall
survive only until June 30, 1998 and shall in no event exceed Losses of more
than $1 million.
r. Mutual Drafting. This Agreement is the joint product of the Companies
---------------
and Sylvan and their respective counsel, and each provision hereof has been
subject to the mutual consultation, negotiation and agreement of such parties
and counsel, and shall not be construed for or against any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
BLOCK TESTING SERVICES L.P.
By BLOCK TESTING SERVICES L.L.C.
By
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
NATIONAL ASSESSMENT INSTITUTE, INC.
By
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
SYLVAN LEARNING SYSTEMS, INC.
By
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B. ▇▇▇ ▇▇▇▇▇, Chief Financial Officer
NAI MERGER CORP.
By
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B. ▇▇▇ ▇▇▇▇▇, Chief Financial Officer
17