EXHIBIT 4.5
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"),
effective as of April 30, 1999 but dated this 12th day of May, 1999, by and
among SYLVAN LEARNING SYSTEMS, INC., a Maryland corporation (the "Purchaser"),
Alabama Education Systems, Inc. an Alabama corporation (the "Company"),which has
elected to be treated as an S Corporation pursuant to Subchapter S of the
Internal Revenue Code of 1986, as amended (the "Code") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the only stockholders of the Company (the "Stockholder,"
whether one or more).
W I T N E S S E T H:
The Stockholder owns all the issued and outstanding capital
stock of the Company. The Purchaser and the Stockholder wish to enter into an
agreement for the acquisition of the Company by the Purchaser through a merger
of the Company into the Purchaser in a transaction qualifying as a tax-free
reorganization under Section 368(a)(1)(A) of the Code (the "Merger"). The
parties agree and acknowledge that for accounting purposes, the Merger is to be
treated as a pooling-of-interests. The Purchaser, the Company and the
Stockholder wish to enter into a definitive agreement setting forth the terms
and conditions of the Merger.
Accordingly, in consideration of the foregoing and of the
covenants, agreements, representations and warranties hereinafter contained, the
Purchaser, the Company and the Stockholder hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to the Company and the Stockholder as
follows:
1.1 Organization and Standing. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland and has the corporate power to carry on its
business as it is now being conducted and to own or hold under lease the
properties and assets it now owns or holds under lease. Copies of the Charter
and By-Laws of the Purchaser have been delivered to the Company, and such copies
are complete and correct and in full force and effect on the date of this
Agreement. The Purchaser has at all times in the past operated and used its
assets in material compliance with, and currently is not in violation of, and
has obtained all material licenses and permits required by, any law, rule or
regulation.
1.2 Financial Statements. The Purchaser has delivered
to the Company copies of the Purchaser's audited consolidated financial
statement for the fiscal
year ended December 31, 1998. These financial statements are true and complete
in all material respects, have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently followed throughout the
periods covered by such statements (except as may be stated in the explanatory
notes to such statements), and present fairly the consolidated financial
position and results of operations of the Purchaser at the dates of such
statements and for the periods covered thereby. The Purchaser also has delivered
to the Company copies of its Annual Report on Form 10-K for the year ended
December 31, 1998, and all other reports or documents required to be filed with
the Securities and Exchange Commission pursuant to Sections 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the
filing of such Annual Report on Form 10-K and prior to the date of this
Agreement.
1.3 No Conflict With Other Documents. Neither the
execution and delivery of this Agreement nor the carrying out of the
transactions contemplated hereby will result in any violation, termination or
modification of, or be in conflict with, the Purchaser's Charter or By-Laws, or,
any terms of any contract, instrument or other agreement to which the Purchaser
is a party or by which it or any of its properties is bound or affected, or any
law, rule, regulation, license, permit, judgment, decree or order applicable to
the Purchaser or by which any of its properties or assets are bound or affected,
or result in any breach of or constitute a default (or with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of any lien, charge or encumbrance upon any of its properties or assets, except
where such event or occurrence would not, singly or in the aggregate, have a
material adverse on the Purchaser.
1.4 Brokers and Advisors. The Purchaser has taken no
action which would give rise to a valid claim against any party hereto for a
brokerage commission, finder's fee, counseling or advisory fee, or like
payment.
1.5 Authority. The execution, delivery and
performance of this Agreement by the Purchaser have been duly authorized by
its Board of Directors, and this Agreement is a valid, legally binding and
enforceable obligation of the Purchaser. Upon the satisfaction of all conditions
contained herein and the filing of Articles of Merger with the Maryland State
Department of Assessments and Taxation and the Alabama Secretary of State, this
Agreement will result in the valid, legally binding and enforceable statutory
merger of the Company and the Purchaser. The Purchaser warrants and represents
that the approval of this Agreement by its shareholders is not required.
1.6 Validity of Common Stock. The shares of
Purchaser's Common Stock to be issued and delivered by the Purchaser in
connection with the Merger have been duly authorized for issuance and will,
when issued and delivered as provided in this Agreement, be duly and validly
issued, fully paid and non-assessable.
1.9 Tax-Free Reorganization. The Purchaser is not
aware of any
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events or conditions relating to the Purchaser which would preclude the Company
or the Stockholder from treating the Merger as a tax-free reorganization under
Section 368(a)(1)(A) of the Code.
1.8 Registration Statement on Form S-3. As of the
date hereof, the Purchaser is aware of no events, actions or conditions
which would prevent the Purchaser from being able to comply with the provisions
of Section 11.1 of this Agreement, and will use its best efforts to comply, and
to continue to be eligible to comply, with the provisions of Section 11.1.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SOLE STOCKHOLDER. The Company and the Stockholder hereby jointly and severally
represent and warrant to the Purchaser as follows:
2.1 Authorized and Issued Shares. The Company's
entire authorized capital stock consists of 10,000 shares of Common Stock,
$0.10 par value per share (the "Company Common Stock"), of which 594 shares are
issued and outstanding. 1,098 shares of Company Common Stock are held in the
Company's treasury; no shares are reserved for issuance. All outstanding shares
of Company Common Stock have been duly authorized and are validly issued and are
fully paid and non-assessable and are owned by the Stockholder. The Company is
not a party to or bound by any options, calls, contracts, preemptive rights or
commitments of any character relating to any issued or unissued capital stock,
or any other equity security issued or to be issued by the Company.
2.2 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Alabama and has the corporate power and authority to carry on its business
as it is now being conducted and to own or hold under lease the properties or
assets it now owns or holds under lease and to perform the actions contemplated
hereby. Complete and accurate copies of the current Charter, By-Laws, minute
books and stock transfer books of the Company have been provided to the
Purchaser, and such copies are complete and correct and in full force and
effect. The Company does not own or have any direct or indirect interest in any
other corporation, firm, partnership, joint venture enterprise or other business
entity. The Company has duly and effectively elected to be treated as a S
Corporation under and is presently operating in accordance with the provisions
of Subchapter S of the Code.
2.3 Transactions with Affiliates. Except as set forth
in Section 2.3 of the disclosure schedule delivered to the Purchaser pursuant
to this Agreement (the "Disclosure Schedule") or in the Company Financial
Statements (as hereinafter defined), the Company is not a party to any contract,
agreement or other arrangement with any current or former officer, director or
stockholder or any affiliate of any such persons. Each transaction required to
be listed on the Disclosure Schedule is on terms no less favorable than terms
available from unrelated parties.
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2.4 Financial Statements. The Company has provided to
the Purchaser the unaudited financial statements of the Company for the twelve
months ended on December 31, 1998, which have been prepared on an accrual basis,
but excluding accrual related income tax adjustments (collectively, the "Company
Financial Statements"). The Company Financial Statements are complete and
correct, have been prepared on a consistent basis throughout the periods covered
thereby and present fairly and accurately the financial position and results of
operations of the Company as of and for the periods indicated. There are no
material liabilities or obligations of the Company, whether contingent or
absolute, as of the dates of such statements, including liability for taxes of
any type, which in accordance with GAAP consistently applied should have been
shown or provided for in the Company Financial Statements and are not so shown
or provided for. Since December 31, 1998, there has been no material adverse
change in the condition (financial or otherwise), assets, liabilities, earnings,
net worth, financial position, business, operations, properties or prospects of
the Company except as shown on Schedule 2.4 of Disclosure Schedule. The
Company's accounts receivable arose, and all accounts receivable that will be
outstanding as of the Closing Date shall have arisen, from bona fide
transactions in the ordinary course of business and will be collectible by the
Company in full, less applicable reserves shown in the Company Financial
Statements, in the ordinary course of business within ninety days of the Closing
Date, and there are no offsets or claims related to such accounts receivable.
2.5 Taxes. The Company and the Stockholder have
properly prepared and filed all federal, state and other tax returns required
to be filed in connection with the operations of the Company. True and complete
copies of all federal and state income tax returns for the Company and the
Stockholder for each of the years ended December 31, 1997 through December 31,
1998 have been delivered or made available to the Purchaser on or prior to the
date hereof and copies of other returns will be made available upon request.
Except as set forth on Section 2.5 of the Disclosure Schedule or in the Company
Financial Statements, neither the Company nor the Stockholder, to the best
knowledge of the Stockholder, has any liability for any federal, state, county,
local or other taxes whatsoever that arose or otherwise was incurred on or
before the date of the balance sheet for 1998 included in the Company Financial
Statements. To the best knowledge of the Stockholder, no proposed taxes,
additions to tax, interest or penalties have been asserted or are pending
against the Company or the Stockholder with respect to periods ending on or
before Closing, and no such matters are under discussion with the applicable
authorities. There are no agreements, waivers, or other arrangements providing
for extensions of time with respect to the assessment or collection of any
unpaid tax against the Company or the Stockholder. The Company and the
Stockholder have withheld or otherwise collected all taxes or amounts it or she
was required to withhold or collect under any applicable federal, state or local
law, including, without limitation, any amounts required to be withheld or
collected with respect to employee state and federal income tax withholding,
social security, unemployment compensation, sales or use taxes or workmen's
compensation, and all such amounts have been timely remitted to the proper
authorities.
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2.6 Agreements. Section 2.6 of the Disclosure
Schedule identifies each of the following agreements, contracts, documents and
other items (whether written or oral) as to which the Company is a party or
otherwise is bound (and all such contracts, or summaries thereof, have been made
available to the Purchaser): (i) all documents relating to indebtedness for
money borrowed or collateral therefor, including guarantees; (ii) all agreements
or plans relating to employment, compensation of or benefits for officers or
employees of the Company; (iii) all contracts for the purchase of materials,
supplies, services, merchandise or equipment involving consideration of more
than $2,000 or involving purchases in excess of normal operating requirements;
(iv) any contract, agreement, or instrument not entered into in the ordinary
course of the business of the Company on a basis consistent with past practice;
(v) any contract containing restrictions on the Company's operations or its
ability to compete in any geographic region or in any line of business; (vi) any
lease of real property and all personal property leases calling for annual lease
payments in excess of $2,000; and (vii) each and every other contract which is
material to the financial condition, earnings, operation or business of the
Company. Each of the contracts and agreements so listed (collectively, the
"Contracts") is a valid and existing contract or agreement in full force and
effect and there exists no default by the Company thereunder. None of the
Contracts will be violated or breached and no default or right of termination or
modification shall arise thereunder as a result of the consummation of the
transactions contemplated by this Agreement.
2.7 Property. Section 2.7 of the Disclosure
Schedule sets forth a schedule (the "Property Schedule") of (i) all real
property owned or leased by the Company (the "Real Property"), (ii) all
individual items of tangible personal property and assets (other than inventory)
of the Company having a fair market value in excess of $2,000, and (iii) all
patents, trademarks, trade names, service marks, trade secrets, copyrights,
franchise rights or applications therefor which are held, used, prepared in
connection with or otherwise related to the conduct of the business of the
Company. Except as set forth in the Disclosure Schedule, the Company has good
and marketable title to all of such property and assets owned by it, free of any
pledge, mortgage, lien, lease, security agreement, encumbrance, charge or claim
of any nature whatsoever. The machinery and equipment of the Company are, in all
material respects, in good operating condition and repair, ordinary wear and
tear excepted. To the Company's knowledge, the Company is not infringing on any
patent, trademark, trade name, service ▇▇▇▇, trade secret or copyright of
another entity and has received no notice or claim of any such infringement.
2.8 Legal Proceedings, Etc. Except as set forth in
Section 2.8 of the Disclosure Schedule, there are no legal, administrative,
arbitration, or other proceedings or governmental investigations pending or, to
the best of the Company's and the Stockholder's knowledge, threatened against
the Company, the Stockholder or the respective properties or assets of the
Company and the Stockholder.
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2.9 Compliance; Licenses. The Company has at all
times in the past operated and used its assets in material compliance with,
and currently is not in violation of, and has obtained all material licenses
and permits required by, any law, rule or regulation. Section 2.9 of the
Disclosure Schedule contains a true and complete list of all material
licenses, permits, approvals, franchises and other authorizations as are
necessary in order to enable the Company to own and conduct its business.
2.10 Bank Accounts, etc. Section 2.10 of the
Disclosure Schedule sets forth a true and complete list of all bank
accounts, safe deposit boxes and lock boxes of the Company including, with
respect to each such account and lock box identification of all authorized
signatories.
2.11 Insurance. Section 2.11 of the Disclosure
Schedule sets forth a summary of all general liability, product liability,
fire, casualty, motor vehicle and other insurance currently maintained by or
on behalf of the Company. All requirements and provisions thereof are being
complied with. True and correct copies of all insurance policies relating to
such coverage have been provided by the Company to the Purchaser. No notice of
cancellation has been given to or received by the Company with respect to any of
its insurance policies, and no such policies are subject to any retroactive rate
or audit adjustments or coinsurance arrangements.
2.12 Employee Plans. Except as set forth in Section
2.12 of the Disclosure Schedule, the Company does not maintain, sponsor or
contribute to any plans in effect for pension, profit-sharing, deferred
compensation, severance pay, bonuses, stock options, stock purchases, or any
other retirement or deferred benefit, or for any health, accident or other
welfare plan, or any other employee or retired employee benefits or incentive
plan, program, contract, understanding or arrangement in which any employee,
former employee, retired employee, or beneficiary of any of these, of the
Company is entitled to participate. The plans, programs, contracts,
understandings and arrangements listed on the Disclosure Schedule pursuant to
this Section 2.12 are hereinafter referred to as the "Employee Plans." The
Company has supplied the Purchaser with complete and accurate copies of each
such Employee Plan. Each Employee Plan has been operated according to its terms
in compliance with all applicable laws.
2.15 Recent Operations; Employee Matters. Since
December 31, 1998, (i) the Company has operated its business substantially as it
was operated immediately prior to said date and only in the ordinary course, and
the Company and the Stockholder have used their best efforts to preserve intact
the Company's business relationships, (ii) there have been no bonuses paid to or
increases in the compensation of officers or employees, except as set forth in
Section 2.13(ii) of the Disclosure Schedule, and (iii) except as set forth in
Section 2.13(iii) of the Disclosure Schedule, the Company
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has not declared or paid any dividend or made any other distribution with
respect to its capital stock.
2.14 Stockholder Distributions. No dividends or
distributions were declared and/or paid to the Stockholder (whether in cash or
other assets) after December 31, 1998 through the date hereof (the "1999
Period").
2.15 Environmental Matters. To the best of Company's
knowledge, no storage tanks, underground or otherwise, are now located on any
properties occupied by the Company, the Company has complied in all material
respects with all environmental laws relating to its operations or properties
occupied by it and there are no asbestos containing materials located on
properties occupied by the Company. The Company has not received any notice,
demand, suit or information request pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any comparable state law,
nor does it have knowledge of any other party's receipt of same relating to any
properties occupied by the Company.
2.16 Disclosure. The Company and the Stockholder
have to their best knowledge disclosed to the Purchaser all facts material
to the assets, business, operations, financial condition and prospects of the
Company. All agreements, schedules, exhibits, documents, certificates, reports
or statements furnished or to be furnished to the Purchaser by or on behalf of
the Company in connection with this Agreement or the transactions contemplated
hereby are true, complete and accurate in all material respects, and to the best
knowledge of the Stockholder, no such items contain any untrue statement of a
material fact or omit a material fact necessary in order to make the statements
contained herein and therein not misleading.
2.17 No Conflict With Other Documents. Neither the
execution and delivery of this Agreement, nor the carrying out of any of the
transactions contemplated hereby, will result in any violation, termination
or modification of, or be in conflict with, the Company's Articles of
Incorporation or By-Laws, any terms of any contract, instrument or other
agreement to which the Company is a party or by which it or any of its
properties is bound or affected, or any law, rule, regulation, license, permit,
judgment, decree or order applicable to the Company or by which any of its
properties or assets are bound or affected, or result in any breach of or
constitute a default (or with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation, or result in the creation of any lien, charge or
encumbrance upon any of its properties or assets, except where such event or
occurrence would not, singly or in the aggregate, have a material adverse effect
on the Company.
2.18 Brokers and Advisors. The Company has taken no
action which would give rise to a valid claim against any party hereto for a
brokerage commission, finder's fee, counseling or advisory fee, or like
payment.
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2.19 Authority. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
sole Director and the Stockholder, and this Agreement is a valid and legally
binding and enforceable obligation of the Company. Upon the satisfaction of all
conditions contained herein and the filing of the Articles of Merger with the
Maryland State Department of Assessments and Taxation and the Alabama Secretary
of State, this Agreement will result in the valid, legally binding and
enforceable statutory merger of the Company and the Purchaser.
2.22 Employees Holding Sylvan Certification. Section
2.20 of the Disclosure Schedule sets forth the names of all those employees of
the Company who have ever been trained or certified by Purchaser, and the
particular certification held by each and when issued.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder hereby represents and warrants to the Purchaser as follows:
3.1 Ownership of Company Common Stock. Such
Stockholder has good and marketable title to the number of issued and
outstanding shares of Company Common Stock set forth opposite his or her name
on Section 3.1 of the Disclosure Schedule, free and clear of any pledges,
liens, restrictions, claims or encumbrances of any kind. Such Stockholder is
not a party to or bound by any options, calls, contracts, or commitments of
any character relating to any issued or unissued stock or any other equity
security issued or to be issued by the Company.
3.2 No Conflicts. Neither the execution and delivery
of this Agreement nor the carrying out of the transactions contemplated
hereby, will result in any breach of or constitute a default (or with notice or
lapse of time or both would become a default), or give to others any rights,
under the terms of any contract, instrument or other agreement to which such
Stockholder is a party or is otherwise bound, or any judgment, decree or order
applicable to such Stockholder.
3.3 Binding Effect. This Agreement is a valid and
legally binding and enforceable obligation of the Stockholder.
3.4 Litigation. There is no litigation, proceeding
or governmental investigation pending as to which Stockholder has been
served with process or summons, or to the best of Stockholder's knowledge,
threatened or in prospect against or relating to such Stockholder or the shares
of Company Common Stock owned by him or her or the transactions contemplated by
this Agreement.
3.5 Brokers and Advisors. Such Stockholder has
taken no action which would give rise to a valid claim against any party
hereto for a brokerage
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commission, finder's fee, counseling or advisory fee, or like payment.
3.6 Investment Intent. It is understood that the
shares of Purchaser Common Stock to be delivered to the Stockholder pursuant
to this Agreement are not being registered, for purposes of the transactions
hereunder, under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws, and the shares are being delivered without
registration in reliance upon an exemption from the registration requirements of
the Securities Act or any state securities laws. The Stockholder is acquiring
the Purchaser Common Stock hereunder only for his own account and not with any
intention of making, or with a view to, or for sale in connection with, any
distribution thereof within the meaning of the Securities Act unless such shares
first are registered under the Securities Act.
In connection with the foregoing, each Stockholder hereby
represents and warrants that:
(a) such Stockholder has reviewed, discussed
and evaluated the information delivered under Section 1.2 and has had the
opportunity to ask questions of, and receive answers from, executive officers
of the Purchaser concerning the terms and conditions of this Agreement and to
obtain any additional information which such Stockholder considered
necessary to verify the accuracy of the information delivered under Section 1.2;
(b) such Stockholder understands that he or
she must bear the economic risks of the investment in Purchaser Common Stock to
be made hereunder for an indefinite period of time because such stock has not
been registered under the Securities Act and, therefore, may not be sold until
such stock subsequently is registered under the Securities Act or an exemption
from registration is available; and
(c) such Stockholder has sufficient knowledge
and experience in financial and business matters to enable such Stockholder to
be capable of evaluating the merits and the risks of the exchange of the Company
Common Stock for the Purchaser Common Stock contemplated by this Agreement and
such Stockholder's prospective investment in the Purchaser; and
(d) such Stockholder understands that
notwithstanding the registration for sale under the Securities Act of the
Purchaser Common Stock, such Stockholder cannot sell such stock until after the
date on which the Purchaser has reported financial statements in a quarterly
report on Form 10-Q that include at least 30 days of operating results
subsequent to the Effective Closing Date.
3.7 Legends. It is understood and agreed that, to
implement the requirements of the Securities Act and state securities laws and
evidence the restrictions upon transfer contained in this Agreement, the
Purchaser will cause a legend to be
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conspicuously noted on the certificates representing the Purchaser Common Stock
deliverable hereunder, and that the Purchaser will issue stop transfer
instructions to its transfer agent, to the effect that such stock has not been
registered under the Securities Act and that no transfer may take place except
as permitted by Section 11 of this Agreement and after delivery of an opinion of
Purchaser's counsel to the effect that registration thereof for the purpose of
transfer is not required under the Securities Act or that the stock proposed to
be transferred has been effectively registered for that purpose under the
Securities Act.
3.12 No Agreements with Respect to Purchaser Common
Stock. Except for this Agreement, Stockholder has not entered into any
agreement or understanding with anyone for the sale, at Stockholder's option
or otherwise, of any of the Purchaser Common Stock to be delivered hereunder to
Stockholder at the Closing.
3.13 Preparation of Final Tax Returns. The Stockholder
will cause to be prepared, and timely filed with the appropriate authorities,
any and all tax returns for the Company for the tax period ending April 30,
1999, and pay any tax liability due thereunder that is not covered by any
credits or tax deposits to which the Company may be entitled as of April 30,
1999.
4. COVENANTS OF THE PURCHASER. The Purchaser covenants to
the Company and the Stockholder that, except as otherwise consented to in
writing by the Company after the date of this Agreement:
4.3 Stock Reservation. Between the date hereof and
the Closing Date, the Purchaser will keep available and reserve a sufficient
number of shares of Purchaser Common Stock for issuance and delivery to the
Stockholder as contemplated in this Agreement.
4.2 Cause Conditions to be Satisfied. The Purchaser
will use its best efforts to cause all of the conditions described in Sections
8 of this Agreement to be satisfied (to the extent such matters reasonably are
within its control).
4.3 Registration Statement on Form S-3. The Purchaser
will use its best efforts to meet the requirements for eligibility set forth in
paragraph A. of the General Instructions to Form S-3, as promulgated by the
U.S. Securities and Exchange Commission in fulfilling its obligations under
Section 11 hereof.
4.4 Consents. The Purchaser agrees to take all
necessary corporate or other action and to use best efforts to obtain all
consents and approvals required for consummation of the transactions
contemplated by this Agreement.
4.5 Tax-Free Reorganization. The Purchaser
recognizes that the Company and the Stockholder desire to treat the Merger as a
tax-free reorganization
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under Section 368(a)(1)(A) of the Code and will use its best efforts to
cooperate with the Company and the Stockholder in this regard. The Purchaser
will take no actions which would disqualify the transaction from being treated
as a pooling of interests under applicable accounting rules and the Code.
5. COVENANTS OF THE COMPANY AND THE STOCKHOLDER. The
Company and the Stockholder jointly and severally covenant to the Purchaser
that, except as otherwise consented to in writing by the Purchaser after the
date of this Agreement:
5.1 Conduct of Business. After the date hereof and
through the date of the Closing, with respect to the Company (a) its business
will be conducted only in the ordinary course; (b) it will terminate each of
its Employee Plans and will not enter into, adopt or amend any employee benefit
plan, agreement or arrangement, enter into or amend any employment contracts, or
increase the salaries or compensation of its officers or employees, other than
ordinary increases in salaries in accordance with past practices; (c) it shall
pay in full all liabilities outstanding on the date hereof except for (i) those
balances owed to the holders of the Company's notes and other liabilities as
shown in Section 5.1(c) of the Disclosure Schedule, and (ii) accrued employee
compensation, leave and benefits and the taxes thereon as shown in Section 5.1
(c) of the Disclosure Schedule (all of which liabilities and balances shown in
Section 5.1(c) shall, by virtue of the merger, become liabilities of the
Purchaser); and (d) it shall not incur any additional liability for borrowed
money, or encumber any of its assets; (e) all outstanding loans payable by the
Company to the Stockholder or receivable by the Company from the Stockholder or
any employee shall be repaid in full by the appropriate party; (f) its current
assets at all times will exceed all of its liabilities; (g) except as shown in
Sec 5.1(g) of the Disclosure Schedule, all trade payables and liabilities and
obligations payable in installments shall be current; (h) it will use its best
efforts to preserve its business organization intact, to keep available the
service of its officers and employees and to preserve the goodwill of suppliers,
customers and others doing business with it; (i) it will not enter into any
agreement for the purchase, sale or other disposition, or purchase, sell or
dispose of, any equipment, supplies, inventory, investments or other assets
(other than sales of inventory and purchases of materials and supplies in the
ordinary course of business and in accordance with past practices); (j) it will
not compromise or write off any material account receivable other than by
collection of the full recorded amount thereof; (k) no change shall be made in
its Charter or By-Laws; (l) no change shall be made in the number of shares or
terms of its authorized, issued or outstanding capital stock, nor shall it enter
into or grant any options, calls, contracts or commitments of any character
relating to any issued or unissued capital stock; (m) no dividend or other
distribution or payment shall be declared or paid in respect of its capital
stock; and (n) no bonus or additional compensation in excess of normal salary
shall be paid to or declared for the benefit of any Stockholder.
5.2 Consents. The Company and the Stockholder agree
to take all necessary corporate or other action and to use their best efforts
to obtain all consents and
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approvals required for consummation of the transactions contemplated by this
Agreement.
5.3 Restated Financial Statements. The Stockholder
will cause the Company to deliver to Purchaser the Company's financial
statements for the calendar year ended December 31, 1998 and for the four month
period ended April 30, 1999 as soon as practicable after the execution of this
Agreement, but in no event later than May 12, 1999. Said statements shall be
prepared to reflect the business operations of the Company on an accrual basis
in accordance with GAAP.
5.4 Cause Conditions to Be Satisfied. The Company and
the Stockholder will use their best efforts to cause all of the conditions
described in Sections 7 and 8 of this Agreement to be satisfied (to the extent
such matters reasonably are within their control).
5.5 Tax-Free Reorganization. The Company and the
Stockholder recognize that the Purchaser desires to treat the Merger as a
tax-free reorganization under Section 368(a)(1)(A) of the Code and will use
best efforts to cooperate with the Purchaser in this regard. The Company and
the Stockholder will take no actions which would disqualify the transaction
from being treated as a pooling of interests under applicable accounting rules
and the Code.
8. MERGER OF PURCHASER AND THE COMPANY. Subject to the
terms and conditions of this Agreement, the Purchaser and the Company agree to
effect the following transactions at the Closing:
6.1 Conditions. The Purchaser and the Company will
deliver to the other appropriate evidence of the satisfaction of the conditions
to their respective obligations hereunder.
6.2 Merger. At the Closing, the Company will be
merged with and into the Purchaser pursuant to the provisions and with the
effect provided in the general corporation laws of the States of Maryland and
Alabama. The parties shall prepare and execute appropriate merger documents
under the corporate laws of Maryland and Alabama, containing the terms provided
in this Agreement, including a Certificate and Articles of Merger which shall be
filed with the Maryland State Department of Assessments and Taxation and with
the Alabama Secretary of State on the Effective Closing Date, or immediately
thereafter. The Purchaser shall be the surviving corporation in the Merger. Each
of Purchaser, the Company and the Stockholder do acknowledge that in executing
this Agreement, they do respectively adopt same as the plan of merger and
reorganization for Purchaser and the Company.
6.3 Conversion Amount; Conversion of the Company
Shares. As a result of the Merger and without any action by the holders thereof,
all of the shares of
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Company Common Stock issued and outstanding immediately prior to the Merger and
all rights in respect thereof, shall be converted into that number shares of
Purchaser Common Stock having a market value of $970,000.00, or such other
amount as the Purchaser and Stockholder shall mutually agree to in writing at or
prior to the Closing (the "Conversion Amount"). As a result of such conversion,
the Stockholder will receive the number of shares of Purchaser Common Stock to
be issued pursuant to the Merger, rounded to the nearest whole share. In order
to effect such conversion, (i) the Stockholder will deliver to the Purchaser at
the Closing certificates in due and proper form representing the shares of
Company Common Stock owned by such Stockholder, duly endorsed or accompanied by
duly executed stock powers, and (ii) the Purchaser shall deliver to the
Stockholder a certificate, in due and proper form, representing the number of
shares of Purchaser Common Stock to which such Stockholder is entitled. Each
share of Purchaser Common Stock issued pursuant to the Merger shall be fully
paid and non-assessable. For purposes of the foregoing, the market value of the
Purchaser Common Stock shall equal the average of the closing prices reported by
Commodity Systems, Inc. in Yahoo! Finance/Historical Quotes for each of the
fifteen (15) consecutive trading days ended and including Tuesday, May 11, 1999.
6.4. Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
the stockholder's attorneys in Birmingham, Alabama, beginning at 9 a.m. on May
12, 1999, or at such other time and place as may be agreed upon in writing by
the Purchaser and the Stockholder (the "Closing Date"). The closing shall be
effective as of the close of business on April 30, 1999 (the "Effective Closing
Date").
7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. Unless
waived by the Purchaser in writing in its sole discretion, all obligations of
the Purchaser under this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
7.1. Approvals of Governmental Authorities. All
governmental approvals necessary or advisable in the reasonable opinion of the
Purchaser's counsel to consummate the transactions contemplated by this
Agreement shall have been received and shall not contain any provision which, in
the reasonable judgment of the Purchaser, is unduly burdensome.
7.2 No Adverse Proceedings or Events. No suit,
action or other proceeding against the Company or the Purchaser, or their
respective officers or directors, or either of the Stockholder, shall be
threatened or pending before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit any of the transactions
contemplated by this Agreement or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby.
7.3. Consents and Actions; Contracts. All requisite
consents of any
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third parties and other actions which the Company has covenanted to use its
best efforts to obtain and take under Section 5.2 hereof shall have been
obtained and completed. All material contracts and agreements of the Company,
including, without limitation, all contracts and agreements listed on Section
2.6 of the Disclosure Schedule, shall be in full force and effect and shall not
be affected by the consummation of the transactions contemplated hereby.
7.4 Other Evidence. The Purchaser shall have received
from the Company and the Stockholder such further certificates and documents
evidencing due action in accordance with this Agreement, including certified
copies of proceedings of the Board of Directors and stockholders of the Company,
as the Purchaser reasonably shall request.
7.5 Current Financial Statements and Projections. The
Stockholder shall have provided, or caused the Company to have provided to
Purchaser the financial statements of the Company for calendar year 1998 showing
a recurring EBIT of at least $200,000.00 for such year, and the financial
statements of the Company for the four (4) month period ended April 30, 1999
showing a recurring EBIT of at least $66,000 for such period. Such financial
statements shall be prepared on an accrual basis, in accordance with GAAP.
"EBIT" means the Company's net recurring revenues minus all of its recurring
expense items (excluding any extraordinary and non-recurring items) and
depreciation and amortization, but excluding interest and taxes.
7.6 Resignation of Officers and Directors. Each and
every officer and director of the Company shall have resigned from any and all
positions with the Company as director, officer or employee effective as of
immediately prior to the Effective Closing Date.
7.7 Non-compete Agreement. The Purchaser and
Stockholders shall have entered into a Non-compete Agreement in substantially
the form of Exhibit A attached hereto.
7.8 Secretary's Certificate. The Company and the
Stockholder shall have delivered to Purchaser such proper and duly executed
Consents, Resolutions and Secretary's Certificates, as appropriate, evidencing
the approval of this Agreement and the Merger by the Company's directors and
stockholders, as required by law.
7.9 Termination of Sylvan License Agreements #2600
and 2605. The Purchaser and the Company and the Stockholder shall have entered
into a Mutual Termination and Release, in substantially the same form shown in
Exhibit B attached hereto, covering Sylvan License Agreements #2600 and 2605.
7.10 Consulting Agreement. The Purchaser and each of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have entered into a Consulting
Agreement in
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substantially the same form of Exhibit C attached hereto.
7.11 Call Center Agreement. The Purchaser and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall have entered into a Call Center Agreement in substantially the
same form shown in Exhibit D attached hereto, covering Sylvan Learning Centers
#614, 615, 3012, and 3013.
7.12 Assignment and Release of Consulting Agreement.
The Company and ▇▇▇▇▇ ▇▇▇▇▇ shall have entered into an agreement, in form
acceptable to Purchaser, pursuant to which the right and obligations of the
Company under the Company's consulting agreement with ▇▇▇▇▇ ▇▇▇▇▇ shall be
assigned to Southeast Learning Systems, Inc., and the obligations of the company
under such agreement shall be released and cancelled by ▇▇▇▇▇ ▇▇▇▇▇.
8. CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDER'S
OBLIGATIONS. Unless waived by the Company and the Stockholder, all obligations
of the Company and the Stockholder under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
8.1. No Adverse Proceedings or Events. No suit,
action or other proceeding against the Company or the Purchaser, or their
respective officers or directors, or the Stockholder, shall be threatened or
pending before any court or governmental agency in which it will be, or it
is, sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby.
8.2. Consents and Actions. All requisite consents of
any third parties and other actions which the Purchaser has covenanted to
use its best efforts to obtain and take under Section 4.4 of this Agreement
shall have been obtained and completed.
8.5. Other Evidence. The Company and the Stockholder
shall have received from the Purchaser such further certificates and documents
evidencing due action in accordance with this Agreement, including certified
copies of proceedings of the Board of Directors of the Purchaser, as the Company
and the Stockholder reasonably shall request.
8.7 Secretary's Certificate. The Purchaser shall have
delivered to the Stockholder such proper and duly executed Secretary's
Certificates, as appropriate, evidencing the approval of this Agreement and
the Merger by the Purchaser's directors, as required by law.
8.5 Termination of Sylvan License Agreements #2600
and 2605. The Purchaser and the Company and the Stockholder shall have entered
into a Mutual Termination and Release, in substantially the same form shown in
Exhibit B attached hereto, covering Sylvan License Agreements #2600 and 2605.
8.6 Consulting Agreement. The Purchaser and each
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have entered into a
Consulting Agreement in substantially the same form of Exhibit C attached
hereto.
8.7 Call Center Agreement. The Purchaser and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ shall have entered into a Call Center Agreement in substantially
the same form shown in Exhibit D
-15-
attached hereto, covering Sylvan Leaning Centers #614, 615, 3012, and 3013.
9. INDEMNIFICATION.
9.1. Indemnification by the Stockholder. The
Stockholder hereby covenants and agrees to indemnify and hold harmless the
Purchaser and its respective successors and assigns, at all times from and
after the date of Effective Closing Date against and in respect of the
following:
(i) any damage or loss resulting from any
misrepresentation, breach of representation or warranty or breach or
non-fulfillment of any agreement or covenant on the part of the Company or the
Stockholder under this Agreement, or from any inaccuracy or misrepresentation in
or omission from any certificate or other instrument or document furnished or to
be furnished by the Company or the Stockholder hereunder;
(ii) any liabilities or obligations of the
Company or the Stockholder for federal, state or local income tax or, to
the extent not accrued or reflected in the Financial Statements, any
personal property, FICA, withholding, excise, unemployment, sales or
franchise taxes arising from operations of the Company prior to the Effective
Closing Date except as shown in Schedule 5.1(c) and 5.1(g) of the Disclosure
Schedule.
(iii) all claims, actions, suits, proceedings,
demands, assessments, judgments, costs, reasonable attorneys' fees and expenses
of any nature incident to any of the matters indemnified against pursuant to
this Section 9.1, including, without limitation, all such costs and expenses
incurred in the defense thereof or in the enforcement of any rights of the
Purchaser hereunder.
9.2. Notice and Defense. The Purchaser shall notify
the Stockholder of any asserted liability, damage, loss or expense claimed to
give rise to indemnification hereunder and the Stockholder shall have an
initial right to defend, compromise and settle such matter provided that the
Purchaser is fully protected from any liability, loss damage, cost or expense in
connection therewith. Within ten (10) days of receipt of such notice,
Stockholder shall respond in writing as to whether Stockholder will engage
counsel at Stockholder's expense to defend the claim. If Stockholder does not
respond, or affirmatively declines to defend the claim or disputes its
obligation to indemnify, the Purchaser shall then have, at its election, the
right to compromise or defend any such matter at the Stockholder's sole cost and
expense through counsel chosen by the Purchaser and reasonably acceptable to the
Stockholder; provided, however, that any such compromise or defense shall be
conducted in a manner which is reasonable and the Stockholder shall in all
events have a right to veto any such compromise or defense which might increase
the potential liability of, or create a new liability for, the
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Stockholder (other than under Section 9.1). Each party agrees in all cases to
cooperate with the defending party and its or his counsel in the compromise of
or defending of any such liabilities or claims. In addition, the non-defending
party shall at all times be entitled to monitor such defense through the
appointment, at its or his own cost and expense, of advisory counsel of its own
choosing. As to any claim paid by the Purchaser for which the Stockholder has
indemnity liability under this Section 9, and which the Stockholder does not
reimburse Purchaser within five (5) days following demand for reimbursement by
Purchaser, Purchaser may, in addition to any other remedies, (if such
Stockholder is then an employee of Purchaser) offset the amount of the
Stockholder's liability on the claim paid against any compensation payable to
the Stockholder.
9.3. Indemnification by the Purchaser. From and after
the Closing Date, the Purchaser hereby covenants and agrees to indemnify and
hold harmless the Stockholder against and in respect of the following:
(i) any liability, loss, damage or expense
resulting from any misrepresentation, breach of warranty or non-fulfillment of
any agreement or covenant on the part of Purchaser under this Agreement, or from
any misrepresentation in or omission from any certificate or other instrument or
document furnished or to be furnished by the Purchaser hereunder; and
(ii) all claims, actions, suits, proceedings,
demands, assessments, judgments, costs, reasonable attorneys' fees and expenses
of any nature incident to any of the matters indemnified against pursuant to
this Section 9.3, including without limitation, all such costs and expenses
incurred in the defense thereof or in the enforcement of any rights of the
Stockholder hereunder.
The Stockholder shall notify the Purchaser of any asserted
liability, damage, loss or expense claimed to give rise to indemnification
hereunder and thereafter the Purchaser shall have the right to defend,
compromise and settle such matter provided that the Stockholder is fully
protected from any cost or expense in connection therewith. Within ten (10) days
of receipt of such notice, Purchaser shall respond in writing as to whether
Purchaser will engage counsel at Purchaser's expense to defend the claim. If
Purchaser does not respond, or affirmatively declines to defend the claim or
disputes its obligation to indemnify, the Shareholder shall then have, at its
election, the right to compromise or defend any such matter at the Purchaser's
sole cost and expense through counsel chosen by the Shareholder and reasonably
acceptable to the Purchaser; provided, however, that any such compromise or
defense shall be conducted in a manner which is reasonable and the Purchaser
shall in all events have a right to veto any such compromise or defense which
might increase the potential liability of, or create a new liability for, the
Purchaser (other than under Section 9.3). Each party agrees in all cases to
cooperate with the defending party and its or his counsel in the compromise of
or defending of any such
-17-
liabilities or claims. In addition, the non-defending party shall at all times
be entitled to monitor such defense through the appointment, at its or his own
cost and expense, of advisory counsel of its own choosing.
10. SURVIVAL; LIMITATIONS.
10.3 Survival. The representations, warranties and
agreements made by the parties in this Agreement and in any other certificates
and documents delivered in connection herewith, including the indemnification
obligations of the Stockholder and Purchaser set forth in Section 9 hereof,
shall survive the Closing under this Agreement regardless of any investigation
made by the party making claim hereunder, except that, subject to the provisions
of the next sentence, neither the Purchaser, on the one hand, nor the
Stockholder, on the other, shall have any liability with respect to any matter
if notice of a claim has not been provided on or prior to April 30, 2001.
Notwithstanding the foregoing, (i) any indemnification obligations of the
Stockholder relating to federal, state or local tax matters or environmental
matters of any sort shall continue in full force and effect without limitation
until expiration of the statute of limitations applicable to such tax or
environmental matters, (ii) the representation and warranty contained in
Sections 2.1, 2.2 or 3.1 and any indemnification obligations of the Stockholder
in connection therewith shall continue in full force and effect until expiration
of the statute of limitations applicable thereto, (iii) any claims, actions or
suits the Purchaser, on the one hand, or the Company or the Stockholder, on the
other hand, may have which arises from any fraud or willful misconduct on the
part of the Stockholder or the Company, or any representative of either, on the
one hand, and the Purchaser or any representative of it, on the other hand,
shall continue in full force and effect without limitation until expiration of
the statute of limitations applicable thereto.
10.2 Limitations. No indemnified party shall be
entitled to indemnification hereunder until such time as a single loss or an
aggregate of several losses equals Nine Thousand Dollars ($9,000), at which
time such indemnified party shall be entitled to indemnification for all losses
sustained, incurred, paid or required to be paid by such indemnified party in
excess of the $9,000; and in no event shall any party to this Agreement be
entitled to indemnification for a single loss or an aggregate of several losses
which exceeds the Conversion Amount.
11. REGISTRATION RIGHTS.
11.1 Registration Procedures and Expenses. Purchaser
shall:
(a) as soon as practicable after the closing
date but in no event later than ninety (90) days after the closing date,
prepare and file with the Securities and Exchange Commission (the "Commission")
a registration statement on Form S-3 which meets the requirements of Rule 415
promulgated under the Securities Act (a "Shelf
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Registration Statement") covering the sale by the Stockholder from time to time
of all of the shares of the Purchaser Common Stock received by the Stockholder
in the Merger. The foregoing notwithstanding, Purchaser shall have no obligation
to file a Shelf Registration Statement or to maintain the effectiveness of any
previously filed Shelf Registration Statement if the sale of the Purchaser
Common Stock pursuant to exemption from registration under Rule 144 is available
to the Stockholder. Further, the Purchaser may extend its obligation to file a
registration statement if the Purchaser advises the Stockholder that there is a
pending, but unannounced transaction or development which Purchaser determines
is not then appropriate for disclosure, and that registration of the Purchaser
Common Stock would require such disclosure.
(b) use its best efforts, subject to receipt
of necessary information from the Stockholder, to cause each of the Shelf
Registration Statements to become effective;
(c) prepare and file with the Commission such
amendments and supplements to the Shelf Registration Statements and the
prospectus used in connection therewith as may be necessary to keep the Shelf
Registration Statements effective until the earlier of the date on which the
Purchaser Common Stock registered by such Shelf Registration Statement has
been sold, or one year from the date of the initial filing thereof;
(d) during the period referred to in (c) above,
prepare and promptly file with the Commission, and promptly notify the
Stockholder of the filing of, such amendment or supplement to each such Shelf
Registration Statement and the prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Purchaser Common Stock is required to be delivered under the Securities Act, any
event has occurred the result of which is that any such prospectus then in
effect would include or incorporate an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
(e) advise the Stockholder, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of any of such Shelf
Registration Statements or the initiation or threatening of any proceeding for
that purpose and promptly use its diligent best efforts to prevent the issuance
of any stop order and to obtain its withdrawal if such stop order should be
issued;
(f) furnish to the Stockholder with respect to
the Purchaser Common Stock registered under any of the Shelf Registration
Statements such number of copies of prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act and such other documents
as the Stockholder may reasonably
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request (but in no event more than 100 copies), in order to facilitate the
public sale or other disposition of all or any of the registered Purchaser
Common Stock by the Stockholder; provided, however, that the obligation of
Purchaser to deliver copies of prospectuses or preliminary prospectuses to the
Stockholder shall be subject to the receipt by Purchaser of reasonable
assurances from the Stockholder that the Stockholder will comply with the
applicable provisions of the Securities 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;
(g) file documents required of Purchaser for
normal blue sky clearance in states reasonably specified in writing by the
Stockholder, provided, however, that Purchaser 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; and
(h) bear all expenses in connection with the
procedures in paragraphs (a) through (g) of this Section 11.1 and the
registration of the Purchaser Common Stock pursuant to each of the Shelf
Registration Statements, other than fees and expenses, if any, of counsel or
other advisers to the Stockholder.
11.2 Engagement of Underwriters. The parties hereto
agree that the Purchaser shall have no obligation to (i) conduct, arrange or
coordinate any distribution or sales activities on behalf of the Stockholder
with respect to the Purchaser Common Stock other than as set forth in Section
11.1 above or (ii) retain any underwriter(s) in connection with the registration
and/or distribution of the Purchaser Common Stock pursuant to this Section 11.
The Stockholder agrees that any underwriter(s) or counsel engaged in connection
with the registration or distribution of the Purchaser Common Stock required to
be registered pursuant to this Section 11 will be retained by and at the sole
expense of the Stockholder and agrees further that any discounts or commissions
payable to such underwriter(s) shall also be an expense solely of the
Stockholder. In the event the Stockholder engages one or more underwriters
pursuant to this Section 11.2, the Stockholder shall enter into an underwriting
agreement with the managing or lead managing underwriter in the form customarily
used by such underwriter with such changes thereto as the parties thereto shall
agree; and, further, shall provide to such underwriter any documents or other
information as is necessary, in the underwriter's reasonable opinion, to
facilitate the effectiveness of the Shelf Registration Statement and the
completion of the distribution of the Purchaser Common Stock so registered.
11.3 Indemnification with respect to Shelf
Registration Statements. Purchaser hereby agrees to indemnify the Stockholder
against liability arising out of or based upon any untrue statement or alleged
untrue statement of material fact in any of the Shelf Registration Statements
filed by Purchaser pursuant hereto, or the omission or alleged omission to state
or incorporate by reference in such Shelf Registration Statements any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, other than any such statement included or
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incorporated by reference in, or omitted from, such Shelf Registration
Statements by Purchaser in reliance upon and in conformity with written
information furnished to Purchaser specifically for use therein by or on behalf
of the Stockholder. The Stockholder hereby agrees to indemnify Purchaser against
liability arising out of or based upon any untrue statement or alleged untrue
statement of a material fact included or incorporated by reference in the Shelf
Registration Statements or the omission or alleged omission to state or
incorporate by reference therein any material fact required to be stated therein
or necessary in order to make the statements therein not misleading, if such
statement or omission was made by Purchaser in reliance upon and in conformity
with written information furnished to Purchaser for use or incorporation by
reference in such Shelf Registration Statements.
12. CONFIDENTIALITY. After the date hereof, the Stockholder
will hold in confidence and not reveal to any third parties any knowledge or
information of a confidential nature with respect to the business, products,
know-how and methods of operation of the Company, and will not disclose, publish
or make use of the same, provided, however, that the foregoing shall not be
applicable to any disclosure or use of confidential information or knowledge
that can be demonstrated to have (i) been publicly known prior to the date of
this Agreement, (ii) become well known by publication or otherwise not due to
the unauthorized act or omission on the part of the Stockholder, or (iii) been
supplied to the Stockholder by a third party without violation of the rights of
the Company or the Purchaser or any other party. The parties agree that the
remedy at law for any breach by the Stockholder of this Section 12 shall be
inadequate and that the aggrieved party shall be entitled to injunctive relief
in addition to any other remedy.
13. EXPENSES. Each party to this Agreement shall pay all of
its expenses relating hereto, including legal and accounting fees and
disbursements of its counsel, accountants and financial advisors, whether or not
the transactions hereunder are consummated. If said transactions are
consummated, it is expressly understood that the Stockholder will bear, and will
not cause the Company to pay, any legal fees or other expenses incurred by
Company in connection with the transactions contemplated by this agreement, as
well as the cost of furnishing the audited and reviewed Company Financial
Statements referred to in Section 2.4; provided, however, that in the event of
any litigation between the parties hereto relating to or arising from this
Agreement, the prevailing party in such litigation shall be entitled to payment
by the non-prevailing party of all reasonable attorney's fees and costs.
14. NOTICES. Except as otherwise provided herein, all
notices, requests, demands and other communications under or in connection
with this Agreement shall be in writing, and, (a) if to the Purchaser, shall be
addressed to:
General Counsel
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Sylvan Learning Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., Esquire
Piper & Marbury
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) if to the Company or the Stockholder, shall be addressed to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇
with a copy to:
H. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇/▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
All such notices, requests, demands or communications shall be
mailed postage prepaid, certified mail, return receipt requested, or by
overnight delivery or delivered personally, and shall be sufficient and
effective when delivered to or received at the address so specified. Any party
may change the address at which it is to receive notice by like written notice
to the other.
15. ENTIRE AGREEMENT. This Agreement (including the exhibits
hereto and the lists, schedules and documents delivered pursuant hereto, which
are a part hereof) is intended by the parties to and does constitute the entire
agreement of the parties with respect to the transactions contemplated by this
Agreement. This Agreement supersedes
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any and all prior understandings, written or oral, between the parties, and this
Agreement may be amended, modified, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the
amendment, modification, waiver, discharge or termination is sought.
16. GENERAL. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns, but nothing herein,
express or implied, is intended to or shall confer any rights, remedies or
benefits upon any person other than the parties hereto. This Agreement may not
be assigned by any party hereto. This Agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
IN WITNESS WHEREOF, the Purchaser, the Company and the
Stockholder have caused this Agreement to be duly executed and their respective
seals to be hereunto affixed as of the date first above written.
WITNESS: SYLVAN LEARNING SYSTEMS, INC.
__________________________ By:_____________________________
Name: O. ▇▇▇▇▇▇ ▇▇▇▇▇
___________________________
Title: Vice President
__________________________
WITNESS: ALABAMA EDUCATION SYSTEMS, INC.
__________________________ By:_____________________________
Name: __________________________
Title: ___________________________
[Corporate Seal]
WITNESS: STOCKHOLDER:
___________________________ ___________________________(Seal)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
WITNESS: STOCKHOLDER:
___________________________ ___________________________(Seal)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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SCHEDULE TO
AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
SYLVAN LEARNING SYSTEMS, INC.
Schedule 2.3 - Transactions with Affiliates - None
Schedules 2.4 - Material Adverse Changes - None
Schedule 2.5 - Taxes - None
Schedule 2.6 - Agreements
(i) indebtedness for money borrowed:
a. Promissory Note dated April 10, 1998 in the original
principal sum of $80,000 payable to ▇▇▇▇▇ ▇▇▇▇▇.
b. Promissory Note dated April 10, 1998 in the original
principal sum of $20,000 payable to ▇▇▇▇▇ ▇▇▇▇▇.
(ii) officer/employee compensation, plans, benefits:
a. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment Agreement dated July 14, 1997.
b. Vacation and sick leave policies benefits specified in
personnel manual.
(iii) contracts for purchase of materials, services, etc.:
a. Consulting Agreement with ▇▇▇▇▇ ▇▇▇▇▇ dated April 10,
1998.
b. Cooperative advertising agreement with Advertising
Accounts, Inc.
(iv) contracts not in ordinary course - None
(v) contracts containing restrictions on Company's operations - None
(vi) real property leases:
a. Premises leased: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Square Footage: 2,973
Landlord: Boardwalk Management Corporation
Lease Date: March 1, 1997
Expiration Date: February 28, 2002
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b. Premises leased: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Square Footage: ______
Landlord: Parkway Promenade Partners
Lease Date: August 21, 1997
Expiration Date: March 31, 2003
c. Premises leased: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Square Footage: 1,750
Landlord: ▇▇▇▇▇ ▇▇▇▇▇ Village, LLC
Lease Date: December 15, 1997
Expiration Date: November 30, 2002
(vii) other material contracts - None
Schedule 2.7 - Property
(i) real property owned or leased - see schedule 2.6(vi)
(ii) tangible personal property - None
(iii) intellectual property - None
Schedule 2.8 - Legal Proceedings - None
Schedule 2.9 - Licenses/Permits - None
Schedule 2.10 - Bank Accounts:
(i) Checking account #01407049602 at National Bank of Commerce
Schedule 2.11 - Insurance:
(i) American States Insurance Company:
Policy Number: 01-WC-304116-20 (Worker's Compensation)
Policy Number: 01-CC-121851-3 (Commercial
Property/Liability/Automobile)
Schedule 2.12 - Employee matters/Plans/Benefits:
(i) Health coverage through United Healthcare (HMO) provided for
employees:
-▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ -▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-▇▇▇▇▇▇ ▇▇▇▇▇▇▇ -▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-▇▇▇▇▇ ▇▇▇▇▇▇ -▇▇▇▇ ▇▇▇▇
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Schedule 2.13
(ii) - Bonuses paid/Compensation increases since 12/31/98 - None
other than regular monthly bonuses paid to staff
(iii) - Dividends declared or paid since 12/31/98 - None
Schedule 2.20 - Employees holding Sylvan certification:
(i) ▇▇▇▇▇ ▇▇▇▇▇ ▇▇/▇▇ ▇▇/▇▇ ▇▇▇▇
(▇▇) ▇▇▇▇ ▇▇▇▇ CD 1996 2604
(iii) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CD/DE 1999 2604
(iv) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ CD/DE 1999 2600
(v) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
(▇▇) ▇▇▇▇▇▇ ▇▇▇▇▇▇ Exec. Director 1999 2600
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Schedule 3.1
Stockholders # Shares owned Percentage of shares
------------ -------------- --------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 297 50%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 297 50%
Schedule 5.1 (c) - (i) the Company's notes and other liabilities not
being paid at or prior to Closing - see
schedule 2.6(i)
(ii) accrued employee compensation, etc. - None
Schedule 5.1 (g) - Trade payables and liabilities not paid current
through Closing - None
EXHIBITS
EXHIBIT A - NONCOMPETE AGREEMENT FORM
Exhibit B - Mutual Termination and Release Form
Exhibit C - Consulting Agreement Form
Exhibit D - Call Center Agreement Form
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