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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
Agreement dated as of March 13, 1998 among EDUCATIONAL MEDICAL, INC., a
Delaware corporation ("EMI"), NEW HAMPSHIRE ACQUISITION CORP., a Delaware
corporation wholly owned by EMI (the "Buyer"), XXXXXX, INC., a New Hampshire
corporation (the "Corporation"), THE XXXXXXX X. XXXXXXXX TRUST OF 1997, a
revocable trust organized under the laws of the State of New Hampshire, XXXXXXX
X. XXXXXXXX, an individual residing within the State of New Hampshire
(collectively, the "Shareholders") and HARDWOOD PROPERTIES LIMITED PARTNERSHIP,
a New Hampshire limited partnership (the "Partnership").
PRELIMINARY STATEMENT
The Corporation is the owner of a post secondary educational
institution with locations in Manchester, Nashua, Salem and Portsmouth New
Hampshire (collectively, the "Schools"). The Shareholders own all of the
outstanding and issued capital stock (the "Stock") of the Corporation. Subject
to the terms and conditions contained in this Agreement, the Buyer wants to buy
the Stock, and the Shareholders want to sell the Stock to the Buyer.
The Partnership is the owner of the land and building located at 0
Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxxxxx as more particularly described in
EXHIBIT 1 attached hereto together with all easements, permits, development
rights, leases and appurtenances thereto and improvements thereon (the
"Property"). Subject to the terms and conditions contained in this Agreement,
the Buyer wants to buy the Property, and the Partnership wants to sell the
Property to the Buyer.
This Agreement contains the terms pursuant to which (i) the
Shareholders have agreed to sell to Buyer all of the Stock and (ii) the
Partnership has agreed to sell to Buyer all of the Property. In addition, the
Shareholders have agreed not to compete with EMI and its schools pursuant to the
terms of this Agreement. EMI has entered into this Agreement to reflect that it
is jointly and severally liable with the Buyer with regard to the obligations of
the Buyer provided for in it.
IN CONSIDERATION OF THE COVENANTS CONTAINED IN THIS AGREEMENT, AND THE
OTHER CONSIDERATION PROVIDED FOR IN IT, THE PARTIES, EACH INTENDING TO BE
LEGALLY BOUND, AGREE AS FOLLOWS:
1. THE PURCHASE PRICE; CONVEYANCE OF THE STOCK AND THE PROPERTY;
CERTAIN DEFINITIONS; EFFECTIVE DATE OF TRANSACTION.
(a) The Purchase Price. The aggregate purchase price for the
Stock and the Property is $15,000,000 (the "Purchase Price"). The Purchase Price
shall be allocated $ 11,500,000 to the Shareholders (the "Stock Purchase Price")
and $3,500,000 to the Partnership (the "Property Purchase Price").
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(b) Conveyance of the Stock and the Property; Exclusive Right
to Purchase the Stock and the Property. On March 15, 1998 (the "Closing Date"),
or such other date as the parties may specify prior to April 15, 1998 (the
"Termination Date"), the Shareholders shall convey to Buyer all of their Stock
and the Partnership shall convey to Buyer all of the Property (the "Closing").
The Parties to this Agreement agree that EMI and the Buyer shall have the
exclusive right to consummate the transactions contemplated herein prior to the
Termination Date and that the Corporation and/or Shareholders and the
Partnership shall not negotiate with any other potential buyer during such
exclusivity period.
(c) Cash Payments by the Buyer. On the Closing Date the Buyer
shall pay to the Shareholders an aggregate sum equal to $2,000,000 (the "Initial
Payment"), by wire transfer or otherwise in immediately available funds which
amount shall be allocated to the Stock Purchase Price.
(d) Delivery of Second Payment Note. On the Closing Date the
Buyer shall deliver to the Shareholders and the Partnership:
(1) its Promissory Note for $11,000,000 (the "Second
Payment Note") in the form attached to this Agreement as EXHIBIT 2, payable with
interest payable at the rate of 2% per annum, all such principal and interest
becoming payable on the last business day within the first 30 calendar days
following the date on which the Prerequisite Student Aid Approvals are obtained.
Payment of the Second Payment Note shall first be allocated to the Property
Purchase Price and paid to the Partnership and the remaining allocated to the
Stock Purchase Price and paid to the Shareholders. The Second Payment Note shall
be secured by a letter of credit (the "Letter of Credit") in the same face
amount as such note. The Letter of Credit shall be issued by Bank of America,
N.A. "Prerequisite Student Aid Approvals" mean approvals by the United States
Department of Education and all other applicable private and governmental
agencies and organizations of the change in control resulting from the change in
ownership of the Schools resulting from the sale of the Schools pursuant to this
Stock Purchase Agreement which are a prerequisite to receipt of federal and
state aid by the Schools' students, and
(2) $2,000,000 of Common Stock of EMI (the "EMI Purchase
Stock") based upon the closing price (the "Closing Price") of EMI common stock
on the trading day immediately prior to the Closing Date as reported in the Wall
Street Journal. The specific number of shares of the EMI Purchase Stock shall be
calculated by dividing $2,000,000 by the Closing Price (which was 9 7/8 as March
12, 1998). All of the EMI Purchase Stock shall be allocated to the Stock
Purchase Price and issued to the Shareholders.
2. REPRESENTATIONS OF THE SHAREHOLDERS AND THE PARTNERSHIP.
Each of the Shareholders and, with respect to the representations contained in
subsection 2(x), the Partnership, jointly and severally represent and warrant
to Buyer as follows.
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(a) No Misstatements. The representations of the Shareholders and
information supplied by the Shareholders and/or the Corporation and the
Partnership contained in this Agreement, the Exhibits attached to it and the
documents incorporated into it by reference do not contain any untrue
statement of a material fact or omit to state any fact necessary to make such
representations or information not materially misleading.
(b) Validity of Actions. The Corporation (i) is duly organized, validly
existing and in good standing under the laws of its organization, (ii) has all
requisite corporate and other appropriate authorization to operate the Schools
in the manner in which it is currently operated, (iii) is qualified to do
business in all jurisdictions in which such qualification is necessary for the
operation of the Schools, other than those jurisdictions where the failure to
so qualify would not have a material adverse effect upon the Schools' assets
or operations, and (iv) has full power and authority to enter into this
Agreement and to carry out all acts contemplated by it. This Agreement has
been duly executed and delivered on behalf of the Shareholders and/or the
Corporation and the Partnership, has received all necessary corporate
authorization and is a legal, valid and binding obligation of the Corporation,
the Shareholders and the Partnership, enforceable against each of them in
accordance with its terms. The Partnership is duly organized, validly existing
and in good standing under the laws of its organization and has all requisite
corporate and other appropriate authorization to own and operate the Property
in the manner in which it is currently operated. Entering into this Stock
Purchase Agreement and the consummation of the transactions contemplated by it
will not (i) violate any provision of the Articles of Incorporation or Bylaws
of the Corporation or the Partnership Agreement of the Partnership or, (ii)
conflict with or result in any breach of in any material respect of any of the
provisions of any material agreement to which the Corporation, the
Shareholders or the Partnership are a party or by which any of them or any of
their respective assets are bound, or (iii) cause a breach of any applicable
law, governmental regulation, order, or other decree of any court or
governmental agency. The Articles of Incorporation and Bylaws of the
Corporation and the Partnership Agreement of the Partnership, as presently in
effect, are attached to the Disclosure Memorandum delivered to EMI and the
Buyer simultaneously with the execution and delivery of this Stock Purchase
Agreement (the "Disclosure Memorandum") as SCHEDULE 2(B).
(c) Corporation's Financial Statements
(1) Attached as SCHEDULE 2(C)(1)(I) to the Disclosure
Memorandum are the Corporation's audited balance sheets at December 31, 1997,
1996 and 1995, and statements of income and expense and cash flows for the years
then ending (the "Corporation's Financial Statements"). The balance sheet
included in the Corporation's 1997 Financial Statements is called the
"Corporations Most Recent Balance Sheet." Attached as Schedule 2(C)(1)(II) to
the Disclosure Memorandum are the Corporation's corporate tax returns for the
years of 1996 and 1995.
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(2) The Corporation's Financial Statements: (i) accurately
represent the transactions appearing on the books and records of the
Corporation, and (ii) fairly present in all material respects the Corporation's
financial condition and its results of operations at the times and for the
periods presented, including normal adjustments consistent with year end
adjustments to reflect properly accruals through the end of the period. The
Corporation's Audited Financial Statements have been prepared on the accrual
basis in accordance with generally accepted accounting principles consistently
applied ("GAAP"), except as otherwise disclosed in the reports accompanying them
or in the notes attached to them.
(3) To the best of the Shareholders knowledge, there have
been no material adverse changes in the financial condition or in the
operations, properties or assets of the Corporation since the date of the
Corporation's Most Recent Balance Sheets.
(d) Liabilities of the Corporation. The Corporation has no
liabilities, contingent or otherwise, including, without limitation, liabilities
for state or Federal income, withholding, sales, or other taxes, except to the
extent reflected, reserved against, or provided for, in the Corporation's Most
Recent Balance Sheet, except for taxes, trade payables and other obligations
incurred after the date of the Corporation's Most Recent Balance Sheet in
amounts consistent in all material respects, with those incurred in prior
periods in the ordinary course of business, including without limitation
liabilities for unearned tuition.
(e) Assets of the Corporation. The Corporation has good title
to all of its assets (the "Assets"). Except as otherwise disclosed in the
Corporation's Financial Statements or the related notes accompanying them or in
the Exhibits to this Agreement or the Disclosure Memorandum, all of the Assets
are owned free and clear of any adverse claims, security interests, or other
encumbrances or restrictions, except liens for current taxes not yet due and
payable, landlords' liens as provided for in the relevant leases or by
applicable law, or liens or similar security interests granted as part of
personal property financing agreements made in the ordinary course of business
and which in the aggregate are not material. The Assets constitute all of the
assets necessary for the operation of the Schools as currently conducted.
(f) Facility and Facility Operations.
(1) Included as SCHEDULE 2(F)(1) to the Disclosure
Memorandum are copies of the leases (the "Schools Facility Leases") pursuant to
which the Schools' Facilities (the "School Facilities") are leased. The Schools'
operations are conducted solely at the School Facilities and all of the tangible
Assets used in connection with such operations are located at the School
Facilities. All of the improvements located at the School Facilities are in good
operating condition and repair, subject only to ordinary wear and tear. There is
no pending or, to the knowledge of Shareholders, threatened condemnation
proceeding with respect to the School Facilities.
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(2) Attached as SCHEDULE 2(F)(2) to the Disclosure
Memorandum is a schedule of all of the furnishings, fixtures and equipment with
values in excess of the baseline used in determining such inventory, located on,
or used in connection with, the operation of the School Facilities as of the
date indicated on such inventory, subject to immaterial omissions occurring in
the ordinary course of compiling such inventory.
(3) Except for (i) environmental law compliance
(which is addressed in Section 2(f)(4) below) and (ii) accreditation,
recruitment, admissions, student loan and funding matters compliance (which are
addressed in Sections 2(h) and 2(i) below) as to which no representation or
warranty is made in this Section 2(f), all activities at, and the physical
condition of, the School Facilities are in compliance with all legal and
regulatory requirements applicable to the Corporation, the conduct of its
business, and the use of each Schools Facility, and the Corporation has not
received any actual notice to the contrary. The Corporation has paid for and
obtained all licenses, permits, and other authorizations material to the conduct
of its business at the School Facilities (the "Permits"). All Permits currently
in effect and pertaining to the School Facilities or the Corporation's
activities at the School Facilities are listed on SCHEDULE 2(F)(3) of the
Disclosure Memorandum. The representations contained in this subsection 3 shall
not apply to incidental instances of non-compliance occurring in the ordinary
course of business without the actual knowledge of the Corporation, which are
immaterial to the operation of the Schools and capable of being cured without
significantly disrupting the Schools' operations.
(4) To the best of the knowledge of Shareholders or
the Partnership, as the case may be, there are no Hazardous Substances (1) in,
on or under
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(1) The term "Hazardous Substance" shall include without limitation:
(i) Those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or
"solid waste" in CERCLA, RCRA, and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and in the
regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in any
applicable state statute and in the regulations promulgated pursuant to
any applicable state statute;
(iii) Those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(iv) Such other substances, materials and wastes which are or
become regulated under applicable local, state or federal law, or which
are classified as hazardous or toxic under federal, state, or local
laws or regulations; and
(v) Any material, waste or substance which is (A) petroleum,
(B) asbestos, (C) polychlorinated biphenyl, (D) designated as a
"hazardous substance" pursuant to Section 311
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the School Facilities except for those which are used by the Corporation in
compliance, in all material respects, with applicable law, and the Corporation
is not now engaged in any litigation, proceedings or investigations, nor knows
of any pending or threatened litigation, proceedings or investigations regarding
the presence of Hazardous Substances in, on or under the School Facilities.
(g) Equipment Leases and Financing Agreements. All of the
leases and financing agreements to which the Corporation is a party and which
relate to the operations of the Schools are described in SCHEDULE 2(G) of the
Disclosure Memorandum (the "Financing and Related Agreements"). Copies of the
Financing and Related Agreements are attached to such Schedule or have been
provided to the Buyer. Except as reflected in such Disclosure Memorandum, there
have been no modifications to any of the Financing and Related Agreements; the
Corporation is not in default in any material respect with respect to them; and
none of the interests of the Corporation in any of them is subject to any
restriction except as stated in the applicable document or as provided by
applicable law.
(h) Accreditation and Compliance with Title IV Requirements.
Attached as SCHEDULE 2(H) to the Disclosure Memorandum is a list of all Federal,
state or other licenses and approvals, including without limitation all
accreditations and certifications, granted to the Corporation with respect to
the conduct of its educational or training business at the Schools (the
"Accreditations and Certifications"), and the governmental body or agency or
other entity granting such Accreditation or Certification. Included in such
Disclosure Memorandum are copies of all such Accreditations and Certifications.
The Corporations Physical Therapy Assistant and Occupational Therapy Assistant
Programs are in candidate status and not accredited.
(1) Except for the Permits and the Accreditations and
Certifications, no license or approval is material to the conduct of the
Corporation's operation of the Schools as they are now being conducted, and the
Corporation has received no notice that any other license or approval is
necessary for the continued operation of the Schools or that any such license or
approval will not be renewed.
(2) The Corporation's operation of the Schools is and has
been conducted in all material respects in accordance with all relevant
standards imposed by applicable accrediting agencies, or agencies administering
state government student aid programs in which the Corporation, or any students
attending any of the Schools, participate, or other applicable laws or
regulations.
(3) Each of the Schools is an institution certified by the
United States Department of Education (the "Department of Education"). The
Corporation is a party to, and is and at all times has been in general
compliance with, a valid program participation agreement with the Department of
Education with respect to the
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of the Clean Water Act, 33 U.S.C. ss.ss.1251 et seq. or listed pursuant
to Section 307 of the Clean Water Act, (E) flammable explosive, or (F)
radioactive materials.
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operations being conducted by the Schools, and no instance of non-compliance has
occurred which will materially and adversely affect the financial condition of
the Corporation. Except as disclosed IN SCHEDULE 2(H)(3), the Corporation has
not received any notice, not previously complied with, with respect to any
alleged material violation of the rules or regulations of the Department of
Education or any applicable accrediting agency in respect of the Schools or the
terms of any program participation agreement to which it is or was a party. If
any such notices have been received and generally complied with, the Corporation
has disclosed its receipt and disposition to Buyer in Schedule 2(h)(3). The
Corporation is and at all times has been, in general compliance with all of the
provisions of the Higher Education Act of 1965 ("HEA") and the regulations
promulgated by the Department of Education thereunder (the "DOE Regulations")
necessary to establish and maintain its eligibility to participate in the Title
IV funding programs provided for therein ("Title IV Funding Programs"),
including without limitation, the demonstration of financial and administrative
responsibility as provided for in the DOE Regulations, and no instance of
non-compliance has occurred which will materially and adversely affect the
financial condition of the Corporation. The Corporation has submitted audited
financial statements to the Department of Education for the fiscal years ended
December 1996 and December 1995 relating to its financial responsibility to
participate in Title IV Funding Programs as provided for in the DOE Regulations
(the "DOE Financial Statements") and was in general compliance with all DOE
Regulations relating to financial and administrative responsibility as of the
date of this Agreement, and no instance of non-compliance has occurred which
will materially and adversely affect the financial condition of the Corporation.
The Corporation has submitted audits of the Title IV Financial Aid Programs to
the DOE for purposes of demonstrating compliance with the DOE Regulations
regarding the administration of funds received pursuant to Title IV Funding
Programs for the applicable years ended June 30, 1996 and June 30, 1995 (the
"Title IV Financial Aid Audits"). Except as set forth in SCHEDULE 2(H)(3) to the
Disclosure Memorandum, the DOE Financial Statements and Title IV Financial Aid
Audits are true and correct in all material respects.
(4) To the best of the Shareholders knowledge, there is no
investigation or review of student financial aid programs (including without
limitation Title IV Programs) in which the Schools or its students participate,
or any review of any of the Schools' Accreditations or Certifications whether by
a party to any relevant agreement, the issuer of such Accreditation or
Certification or otherwise.
(i) Recruitment; Admissions Procedures; Attendance; Reports.
Attached as SCHEDULE 2(I) to the Disclosure Memorandum are all policy manuals
and other statements of procedures or instruction relating to recruitment of the
Schools' students, including procedures for assisting in the application by
prospective students for direct or indirect state or Federal financial
assistance; admissions procedures, including any descriptions of procedures for
insuring compliance with state or Federal or other appropriate standards or
tests of eligibility; procedures for encouraging and verifying attendance,
minimum required attendance policies, and other relevant criteria relating to
course completion and certification (collectively referred to as the "Policy
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Guidelines"), which have previously been delivered to the Buyer by the
Corporation. The Schools' operations have been conducted in all material
respects in accordance with the Policy Guidelines.
To the best of the Shareholder's knowledge, the Corporation has
submitted all reports, audits, and other information, whether periodic in nature
or pursuant to specific requests ("Compliance Reports"), to all agencies or
other entities with which such filings are required relating to the Schools'
compliance with (i) applicable accreditation standards governing its activities
or (ii) laws or regulations governing programs pursuant to which the Schools or
students attending the Schools receive funding, including, without limitation,
the Xxxxxxx Loan Program, the Federal Family Education Loan Programs, the Pell
Grant program and the Supplemental Educational Opportunity Grant Program, the
Federal Direct Student Loan Program or the Federal Work Study Program, all of
which are provided for pursuant to Title IV of the HEA, and no instance of
non-compliance has occurred which will materially and adversely affect the
financial condition of the Corporation.
Complete and accurate records in all material respects for all present
and past students attending the Schools have been maintained consistent with the
operations of a school business. All forms and records have been prepared,
completed, maintained and filed in all material respects in accordance with all
federal and state laws and regulations applicable to the operations of the
Schools, and are true and correct in all material respects. All financial aid
grants and loans, disbursements and record keeping relating to them have been
completed in compliance in all material respects with all federal and state
requirements, and there are no material deficiencies in respect thereto. To the
best of the Shareholder's knowledge, no student at the Schools has been funded
prior to the date for which such student was eligible for funding and such
student's records have been processed in all material respects in accordance
with all applicable federal, state and relevant third party funding source
requirements. All appropriate reports and surveys have been accurately prepared,
taken and filed prior to delinquency.
(j) Default. Attached as SCHEDULE 2(J) to the Disclosure
Memorandum is a list indicating the cohort default rate, as calculated by the
Department of Education, of all students attending the Schools receiving
assistance pursuant to the Xxxxxxxx Loan and Supplemental Loans for Students
programs (or their applicable predecessor programs) for the federal fiscal years
ended September 1993, 1994, 1995 and 1996. To the best of the knowledge of
Shareholders and the Corporation, such schedule is materially accurate in all
respects.
(k) Trademarks, etc. The Corporation does not use any
tradenames, trademarks, service marks, or copyrights. To the Shareholder's best
knowledge, the Corporation's operations of the Schools may be conducted without
license by others for the use of any tradename, trademark, service xxxx or
copyright.
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(l) Material Contracts. Attached as SCHEDULE 2(L) to the Disclosure
Memorandum is (I) a schedule identifying all material contracts relating to the
Schools' operations not otherwise specifically identified in the other Schedules
to the Disclosure Memorandum, including, without limitation, all agreements
relating to state or Federal funding of educational services provided by the
Corporation through grants, loans or direct payments either to the Corporation,
individual students or otherwise, and any agreements relating to the placement
of students following their completion of relevant educational programs provided
by the Schools other than agreements with students involving the teaching of
standard courses, for standard prices as set forth in the Schools' catalog or in
the enrollment agreement for such students (the "Contracts"); (ii) a summary of
all material provisions of the Contracts that are oral and not reduced to
written documents; and (iii) a copy of all written Contracts. Except as
disclosed in this SCHEDULE 2(L): (i) all of the Contracts remain unmodified and
in full force and effect, and (ii) the Corporation is not in default of any
material nature (nor, to the best knowledge of the Shareholders, does any state
of facts exist which, with the giving of notice, the passing of time, or
otherwise, would constitute a default of any material nature by the Corporation)
with respect to any of the Contracts. For purposes of this Subsection, a
contract or agreement shall not be regarded as material if it is inadvertently
omitted from the disclosure schedule and can be canceled by the Corporation on
no more than 30 days notice, or (x) has been entered into in the ordinary course
of business and is consistent with prior practices, (y) is an agreement entered
into on commercially reasonable terms between unrelated parties, and (z)
provides for annualized payments in an aggregate amount of less than $100,000.
(m) Maintenance and Employment Agreements. Attached to the
Disclosure Memorandum as SCHEDULE 2(M) is (i) a schedule of all written
agreements between the Corporation and independent contractors, employees and
agents who are employed or engaged in the management or operation of the Schools
or the School Facilities; (ii) the names of all parties entitled to payments
from the Corporation under any such agreements or arrangements; (iii) the
amounts payable by the Corporation under the terms of all such agreements and
arrangements, including without limitation, the terms of employment and
compensation, including vacation and other employee benefit provisions and the
cost of all employee benefits and payroll taxes; and (iv) a copy of all written
contracts for such services. There are no material oral agreements in effect for
any such services. Except as disclosed on such Schedule 2(l): (x) there are no
written agreements between any of such contractors, employees or agents and the
Corporation; (y) there is no party entitled to compensation or remuneration for
any such services arising from the operation of the Schools after the Closing;
and (z) the Corporation's agreements and arrangements providing for the services
described on such Schedule may be terminated by the Corporation at any time,
with or without cause, and without any obligation to pay any of said parties any
amounts whatsoever except as may be required by law (including, without
limitation, severance pay or accrued vacation pay or other benefits). For
purposes of this Subsection, a contract or agreement shall not be regarded as
material if it is inadvertently omitted from the disclosure schedule and can be
canceled by the Corporation on no more than 30 days notice, or (x) has been
entered into in the ordinary course of business and is consistent
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with prior practices, and (y) is an agreement entered into on commercially
reasonable terms between unrelated parties.
(n) Employee Benefit Plans. The Corporation maintains employee
benefit plans as listed on SCHEDULE 2(N) of the Disclosure Memorandum (the
"Employee Benefit Plans") with respect to employees involved in the operation of
the Schools. Copies of such plans have been previously delivered to the Buyer.
Except as listed on such Schedule, the Corporation does not maintain any profit
sharing, pension or other employee benefit plan related to the Schools'
operations. The Corporation has no unfunded obligations pursuant to any
insurance, retirement, pension, profit sharing or deferred compensation plan or
program relating to the Schools' operations.
(o) Labor. There is no existing labor dispute affecting the
operation of the Schools. None of the Corporation's employees involved in the
operations of the Schools are covered by any union or collective bargaining
agreement.
(p) Insurance. A schedule of all of the major policies of
insurance maintained by the Corporation in connection with the operation of the
Schools is attached as SCHEDULE 2(P) to the Disclosure Memorandum. The insurance
coverage provided by such policies complies in all material respects, with all
agreements to which the Corporation is a party, and applicable legal
requirements to which it is subject. All such policies are currently in effect.
(q) Taxes. The Corporation has filed all Federal, state and
local tax returns which it is required to file and has no outstanding liability
for any Federal, state or local taxes or interest or penalties thereon, whether
disputed or not, except taxes not yet payable which have been provided for in
accordance with GAAP and are disclosed in the Corporation's Effective Most
Recent Balance Sheet or have subsequently accrued in the normal course of
business or taxes potentially payable with respect to currently active audits
relating to its taxable years ended December 31, 1993, 1994 and 1995 (the
Potential Federal Tax Audit Liabilities")
(r) Actions Pending. Except for a claim of approximately
$100,000 by a provider of teaching services relating to services rendered to
certain of the Corporation's students in 1997 (i) there are no actions, suits,
proceedings or claims pending or (to Shareholders' knowledge) threatened against
the Corporation or Shareholders which, if determined adversely to the
Corporation or Shareholders, would (A) have a material adverse effect on the
Assets, or the operation of the Schools, or (B) prevent or delay the
consummation of any of the transactions contemplated by this Agreement; (ii) the
Corporation or Shareholders, is not (to Shareholders' knowledge) the subject of
any pending or threatened investigation relating to any aspect of the
Corporation's operation of the Schools, by any Federal, state or local
governmental agency or authority; (iii) the Corporation, is not and has not been
(to Shareholders' knowledge) the subject of any formal or informal complaint,
investigation or inspection under the Equal Employment Opportunity Act or the
Occupational Safety and Health Act (or their state or local counterparts) or by
any other Federal, state or local authority.
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(s) Accounts Receivable. Each of the accounts receivable of
the Corporation relating to the Schools' operations constitutes a valid claim in
its full amount against the debtor charged on the Corporation's books and has
arisen in the ordinary course of the Schools' operations. Except as provided in
this subsection 2(s), the Shareholders make no representations or warranty with
respect to such receivable, and Buyer and EMI accept such accounts receivable as
is.
(t) No Guaranties. None of the Corporation's obligations or
liabilities is guaranteed by any other person, firm or corporation, nor does the
Corporation guaranty the obligations or liabilities of any other person, firm or
corporation.
(u) Bank Accounts and Deposit Boxes. Attached to the
Disclosure Memorandum as SCHEDULE 2(U) are the names and addresses of all banks
or financial institutions in which the Corporation has an account, deposit or
safety deposit box with the names of all persons authorized to draw on these
accounts or deposits or to have access to the boxes, and an indication of which
accounts or deposits or boxes contain financial aid funds, in each case to the
extent such accounts are used in connection with the Schools' operations.
(v) Records. The books of account of the Corporation relating
to the Schools' operations are complete and correct in all material respects,
and there have been no transactions involving the Schools' operations which
properly should have been set forth therein and which have not been accurately
so set forth.
(w) Capital Stock and Subsidiaries. The Corporation's
authorized capital stock consists solely of 200 shares of common stock with no
par value of which 100 shares (previously defined in the Preliminary Statement
set forth above as the "Stock") are outstanding, validly issued and are
presently held beneficially and of record by the Shareholders as set forth on
EXHIBIT 3 attached to this Agreement, 200 shares of non-voting common stock, no
par value, none of which are outstanding, and 1000 shares of non-voting
preferred stock, no par value, none of which are outstanding. The Stock is fully
paid and non-assessable. All of the Stock is owned absolutely by the
Shareholders, free and clear of all liens, encumbrances and adverse claims.
There are no voting trusts, proxies, Shareholders agreements or similar
contracts or understandings in effect relating to the Stock. Except for this
Agreement, there are no outstanding rights, options, warrants, convertible
securities or agreements of any kind entitling any person to purchase or acquire
any shares of capital stock or any other securities or agreements of any kind
entitling any person or purchase or acquire any shares of capital stock or any
other securities of the Corporation, including, without limitation, rights to
acquire capital stock contingent upon the payment of money, passage of time or
other contingency. The Corporation is not a partner or a joint venturer in any
enterprise, and has no subsidiaries.
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(x) Representations and Warranties in Connection with the
Property.
(i) The Partnership has good and marketable title to the
Property, free and clear of all mortgages, liens, encumbrances, security
interests, covenants, conditions, restrictions, rights-of-way, easements,
judgments or other matters except for the Declaration of Condominium or as shown
in the title policy delivered to the Buyer at the Closing. No agreement
concerning or restricting the sale of the Property is in effect and no person or
entity has any right or option to acquire the Property other than Buyer.
(ii) With the exception of the Corporation's rights of
use and occupancy now in effect, there are no rights of use or occupancy now in
effect or hereafter to come into effect with respect to the Property.
(iii) There are no impact fees or any other fees, costs or
assessments (other than current real estate taxes) due or which will in the
future become due to any governmental entity with respect to the Property. The
Partnership has no knowledge of any violation of any laws, zoning ordinances,
regulations, licenses or permits affecting the Property or its current use;
further, no notice from any governmental authority has been issued requiring or
calling attention to the need for any work, repairs, construction or alterations
or installations on or in connection with the Property because of violations of
housing, zoning, building, safety, environmental or fire laws or ordinances, or
otherwise, which have not been complied with.
(iv) No commitments have been made to any governmental
authority, utility company, school board, church or other religious body, or any
homeowners or homeowners' association, or to any other organization, group or
individual relating to the Property which would impose an obligation upon Buyer
or its successors or assigns to make any contributions or dedications or money
or land or to construct, install or maintain any improvements of a public or
private nature on or off the Property. No governmental authority has imposed any
requirement that any developer of the Property pay directly or indirectly any
special fees or contributions or incur any expenses or obligations in connection
with the development of the Property.
(v) The Property has full, free, direct and adequate
access to and from public highways and streets and the Partnership has no
knowledge of any facts or conditions which would result in the interruption or
termination of such access.
(vi) The Partnership has no knowledge of any patent or
latent defects or adverse facts that exist with respect to the physical
condition of the Property which has not been specifically disclosed in writing
to the Buyer including, without limitation, adverse soil conditions and there is
no threatened earth movement, termite infestation, termite damage or structural
defects affecting the Property.
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(vii) The Property is presently zoned to a classification
(or has received a proper variance) which permits its current use as a
post-secondary educational institution facility.
(viii) To the best of the knowledge of the Shareholders
and the Partnership, the Property and all appurtenances thereto, including, but
not limited to, the heating, air conditioning, plumbing, sanitary sewer, roof,
fire prevention system, mechanical and electrical systems, are in good working
order.
(ix) The Partnership has not received any notice, nor
does it have any knowledge, of any special assessments affecting the Property
and no federal, state or local taxing authority has asserted any tax deficiency,
lien or assessment against the Property which has not been paid or for the
payment of which, adequate provision has not been made. The Partnership has no
knowledge of any pending or threatened litigation, claim, cause of action or
administrative proceeding concerning the Property.
(x) All taxes and assessments related to the Property,
other than those not due and payable until subsequent to the Closing Date have
been paid in full.
(xi) All assessments of the Condominium Association have
been paid in full through the Closing Date and to the best knowledge of the
Shareholders and the Partnership, no special assessments are being considered.
3. REPRESENTATIONS AND WARRANTIES OF EMI AND BUYER. Each of EMI
and Buyer represents to the Corporation, Shareholders and the Partnership as
follows:
(a) No Misstatements. The representations and the information
supplied by it contained in this Agreement, the Exhibits attached to it, and the
documents incorporated by reference into it, including, without limitation the
Addendum do not contain any untrue statement of a material fact or omit to state
any fact necessary to make such representations or information not materially
misleading.
(b) Validity of Actions. It is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the authority to carry on its business as currently conducted, and is qualified
to do business in all jurisdictions in which such qualification is necessary. It
has full power and authority to enter into this Agreement and to carry out all
acts contemplated by it. This Agreement and each of the documents provided for
in it to be delivered as part of this transaction, have been duly executed and
have or will be delivered pursuant to all appropriate corporate authorization on
its behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms. The execution and delivery
of this Agreement, and each of the documents to be executed and delivered by EMI
and the
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Buyer pursuant to its terms, and the consummation of the transactions
contemplated by them will not violate any provision of their respective
Certificates of Incorporation or Bylaws or, violate, conflict with or result in
any breach of any of the terms, provisions of or conditions of, or constitute a
default or cause acceleration of any indebtedness under, any indenture,
agreement or instrument to which it is a party or by which it or its assets may
be bound, or, cause a breach of any applicable law or governmental regulation,
or any applicable order, judgment, writ, award, injunction or decree of any
court or governmental instrumentality.
(c) Capitalization.
(1) EMI. The authorized capital stock of EMI consists
of: (i) 15,000,000 shares of EMI Common Stock, par value $0.01 per share, of
which as of the date of this Agreement, there were 7,524,332 shares issued and
outstanding; and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per
share ("EMI Preferred Stock") of which as of the date of this Agreement there
were no shares issued and outstanding. All outstanding shares of EMI Common
Stock have been validly issued by EMI and are fully paid, non-assessable and
free of preemptive rights. There are no subscriptions, options, warrants, calls,
rights, contracts, commitments, understandings or arrangements relating to the
issuance, sale or transfer by EMI of any shares of its Capital Stock, including
any right of conversion or exchange under any outstanding security or other
instrument, except as disclosed in EMI's Registration Statement on Form S-1 (No.
333-09777), or in its Quarterly Reports on Form 10-Q or its current reports on
Form 8-K, (all as may have been amended from time to time) filed pursuant to the
provisions of the Securities Act of 1933 and/or the Securities Exchange Act of
1934 with the Securities and Exchange Commission.
(2) The Buyer. As of the date of this Agreement, the
authorized capital stock of the Buyer consists of 1000 shares of Common Stock
all of which are issued and outstanding. All outstanding shares of the Buyer
have been validly issued and are fully paid, non-assessable and free of
preemptive rights, and all of such shares are owned, beneficially and of record,
by EMI.
(d) Actions Pending. There are no actions, suits, proceedings
or claims pending or to the knowledge of EMI or the Buyer, threatened against
either of them which, if determined adversely to either of them would (A) have a
material adverse effect on their operations, or (B) prevent or delay the
consummation of any of the transactions contemplated by this Agreement. Neither
EMI nor Buyer is the subject of any pending or (to its knowledge) threatened
investigation relating to any aspect of its operations.
(e) EMI's Financial Statements
(1) Attached as SCHEDULE 3(D) to the Disclosure
Memorandum are (A) EMI's audited balance sheets at March 31, 1995, 1996, and
1997, and statements of income and expense and cash flows for the years then
ending (EMI's
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Audited Financial Statements") and (B) EMI's unaudited balance sheets at
September 30, 1997, and statements of income and expense and cash flows for the
periods then ending ("EMI's Interim Financial Statements" collectively with
EMI's Audited Financial Statements, "EMI's Financial Statements").
(2) EMI's Financial Statements: (i) have been prepared
on the accrual basis in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as otherwise disclosed in the reports
accompanying them or in the notes attached to them, and (ii) fairly present
EMI's financial condition and its results of operations at the times and for the
periods presented.
(3) There have been no material adverse changes in the
financial conditions or in the operations, business, prospects, properties or
assets of EMI sincce the date of EMI's Interim Financial Statements.
(f) Buyer's financial Condition. The Buyer is a newly formed
Corporation. It has no material liabilities except as provided for in this
Agreement, and no assets except the joint and several agreements of EMI to
perform in accordance with the terms of this Agreement.
4. COVENANTS OF THE PARTIES.
(a) Conduct of the Business Prior to the Closing. Pending
consummation of the transactions contemplated in this Agreement or prior to
termination of this Agreement, the Corporation, Shareholders and the Partnership
agree, without prior written consent of Buyer, given in a letter which
specifically refers to this Section of the Agreement:
(1) not to (i) perform any act or omit to take any act
that would make any of representations made in Section 2 above, inaccurate in
any material respect or materially misleading as of the Closing Date, or (ii)
allow the Corporation to make any payment or distribution with respect to the
Schools or their operations except for the payment of liabilities provided for
in the Corporation's Financial Statements or incurred in the ordinary course of
business;
(2) to conduct the business of the Schools in the
ordinary and regular course, maintain the School Facilities, protect the
Schools' Accreditation Certifications and Permits, and keep their books of
account, records and files in substantially the same manner as at present.
(3) to make all tuition refunds with respect to the
Schools' operations within the time frames provided for in the Regulations and
any applicable state or accrediting agency regulations, and to pay all accounts
payable as they become due.
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(4) not transfer the Property or create any easements,
liens, mortgages, encumbrances or other interest that would affect the Property
or the Partnership's ability to comply with the terms of this Stock Purchase
Agreement.
(5) continue to maintain an repair the Property in at
least the manner in which the Property has heretofore been maintained and
repaired.
(6) promptly disclose in writing to the Buyer any change
in any facts or circumstances which would make any of the representations made
in Section 2 above, inaccurate, incomplete, or misleading to the detriment of
Buyer.
(b) Notice. Pending the consummation of the transactions
contemplated in this Agreement or prior to termination of this Agreement, each
party agrees that it will promptly advise the others of the occurrence of any
condition or event which would make any of its representations contained in this
Agreement inaccurate, incorrect, or materially misleading.
(c) Access. Prior to the Closing, the Corporation shall
afford to the Buyer (and its officers, attorneys, accountants and other
authorized representatives), upon reasonable notice, free and full access during
usual business hours to its relevant offices, personnel, books and records and
other data, financial or otherwise, so that Buyer may have full opportunity to
make such investigation as it shall desire of the Assets and the business and
operations of the Schools by the Corporation, provided that such investigation
shall not unreasonably interfere with the Corporation's operations. The scope of
the investigation will include, but not be limited to, a verification of the
Corporation's Financial Statements and a review of the Corporation's control
procedures, regulatory compliance relating to the Schools, the Schools Facility,
and material contracts and litigation relating to the Schools. Duly authorized
representatives of the Buyer shall also be entitled to discuss with officers of
the Corporation, its counsel, employees and independent public accountants, all
of its books, records and other corporate documents, contracts, pricing and
service policies, commitments and future prospects to the extent such materials
and matters relate to the operation of the Schools. Representatives of the
Corporation will furnish to Buyer and such other persons, copies of all
materials relating to the business affairs, operations, Facility, Assets and
liabilities of the Corporation relating to the Schools which may be reasonably
requested from time to time and will cause representatives and employees of the
Corporation to assist Buyer in its investigation of the matters relative to the
Schools. All information obtained by Buyer, EMI or any of their officers,
directors, employees, lender, investors, agents and other representatives (the
"Buyer's Representatives") in connection with the transactions contemplated by
this Agreement or in the course of their investigations of the Schools, whether
obtained before or after the date of this Agreement (the "Evaluation Material")
shall be used only in connection with this Agreement and the subsequent
operation of the Schools, and each of Buyer and EMI shall assure that all
Evaluation Material will be otherwise kept strictly confidential by each of them
and the Buyer's Representatives.
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(d) Additional Documents. At the request of any party, each
party will execute and deliver any additional documents and perform in good
faith such acts as reasonably may be required in order to consummate the
transactions contemplated by this Agreement and to perfect the conveyance and
transfer of any property or rights to be conveyed or transferred or perfect the
assumption of any liabilities assumed under the terms of this Agreement.
(e) Compliance with Conditions to Closing. Subsequent to the
execution and delivery of this Agreement and prior to the Closing, each of the
parties to this Agreement will execute such documents and take such other
actions as reasonably may be appropriate to fulfill the conditions to Closing
provided for in Section 5 of this Agreement.
5. CONDITIONS TO CLOSING BY THE RESPECTIVE PARTIES. The obligation
of EMI and Buyer, on the one hand, and the Corporation and Shareholders on the
other hand, to consummate the transactions contemplated by this Agreement shall
be subject to compliance with or satisfaction of the following conditions by
the other, to the extent applicable:
(a) Bring Down. The representations and warranties set forth
in this Agreement shall be true and correct in all material respects on and at
the Closing Date as if then made by the relevant party (except for those
representations and warranties made as of a given date, which shall continue to
be true and correct as of such given date).
(b) Compliance. Each party shall have complied with all of the
covenants and agreements in this Agreement on its or their part, respectively,
to be complied with as of or prior to the Closing Date.
(c) No Material Adverse Changes. Since the date of the Most
Recent Balance Sheet, there shall not have occurred any material adverse change
in the condition or operations (financial or otherwise) of the Schools, the
School Facilities, or the Assets. Since December 31, 1997 there shall not have
occurred any material adverse change (financial or otherwise) of EMI.
(d) Buyer Certificates. There shall be delivered to the
Shareholders and the Partnership:
(1) a certificate executed by the President and Secretary
of each of Buyer and EMI, dated the Closing Date, certifying that the conditions
to be fulfilled by each of them set forth in this Section 5 have been fulfilled;
(2) a certificate of incumbency for each of the Buyer and
EMI executed by its President or any Vice President and by the Secretary or any
Assistant Secretary of such entity, listing the officers of such entity
authorized to execute (to the extent applicable) the Agreement and the other
documents, certificates, schedules and
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instruments to be delivered on behalf of such entity, and their respective
offices, and containing the genuine signature of each such person set forth
opposite his name; and
(3) good standing certificates and certified charter
documents of each of them of recent date, from the Secretary of the State of the
jurisdiction of incorporation of such entity and a copy of their respective
By-Laws certified by an officer thereof.
The certificates described in subsections (1), (2) and (3) above are hereafter
referred to collectively as the "Buyer's Certificates."
(e) Corporation Certificates. There shall be delivered to the
Buyer and EMI:
(1) certificates executed by the President and Secretary of
the Corporation, the Shareholders and the Partnership, dated the Closing Date,
certifying that the conditions to be fulfilled by it as set forth in this
Section 5 have been fulfilled;
(2) a certificate of incumbency for the Corporation executed
by its President or any Vice President and by the Secretary or any Assistant
Secretary of the Corporation, listing the officers of such entity authorized to
execute (to the extent applicable) the Agreement and the other documents,
certificates, schedules and instruments to be delivered on behalf of such
entity, and their respective offices, and containing the genuine signature of
each such person set forth opposite his name; and
(3) good standing certificates and certified charter
documents of the Corporation and organizational documentation of the Partnership
dated of recent date, from the Secretary of the State of the jurisdiction of
incorporation of such entity and a copy of their respective By-Laws certified by
an officer thereof.
The certificates described in subsections (1), (2) and (3), above, are hereafter
referred to collectively as the "Stockholder, Partnership and Corporate
Certificates."
(f) No Suits. No action or proceeding shall have been instituted
in any court or before any Federal, state or local governmental agency against
any party seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or which could have a material adverse effect on
any of the parties, which shall not have been dismissed or withdrawn prior to
the Closing Date.
(g) Documents. All documents required to be delivered to Buyer
or the Corporation or the Shareholders pursuant to this Agreement at or prior to
Closing shall have been so delivered.
(h) Authority. There shall be in full force and effect on the
Closing Date resolutions (or in the case of the Partnership other appropriate
authorization) of the Boards of Directors of the Buyer, EMI, the Corporation and
the general partner(s) of
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the Partnership approving this Agreement, the other documents executed and
delivered by each of them in connection with this Agreement and the transactions
contemplated in it. At or prior to the Closing, each party will deliver to the
other a copy of the resolutions of its Board of Directors, and in the case of
the Corporation, the resolutions or consent of the Shareholders, together with
any and all required resolutions or consent of the Shareholders thereof and in
the case of the Partnership appropriate authorization by the general partner(s),
and, if applicable, the limited partner(s), approving the execution and delivery
of this Agreement and the other documents to be delivered pursuant to this
Agreement and the consummation of all of the transactions contemplated hereby,
duly certified by an appropriate officer.
(i) Opinions of Counsel. Each party shall receive the opinion
of counsel to the other party reasonably satisfactory in form and content to the
party receiving such opinion.
(j) Current Insurance Coverage. Payments will have been made
as of the Closing Date with respect to all of the Corporation's insurance
policies and all insurance coverage concerning the Assets and the Schools'
operations shall be continued in force through at least 10 days subsequent to
the Closing Date, unless canceled subsequent to the Closing Date by Buyer.
(k) Bankruptcy, Dissolution, etc. No petition or other
commencement of proceedings in bankruptcy or proceedings for dissolution,
termination, liquidation or an arrangement, reorganization or readjustment of
any party's debts under any state or Federal law enacted for the relief of
debtors or otherwise, whether instituted by or against a party, has been
effected or commenced by or against any party.
(l) Leases. The respective landlords of the leases under which
the School Facilities are leased shall have consented, if necessary, to the
assumption of such leases by the Buyer (or the change of control with respect to
the Corporation).
6. CLOSING AND POST CLOSING AGREEMENTS.
(a) Closing Date and Place. The closing of the transactions
provided for in this Agreement shall take place at the time provided for in
Section 1(b) of this Agreement at such place as the parties may agree, and shall
be effective as provided therein.
(b) Deliveries by Buyer to the Shareholders and the
Partnership. At the Closing, Buyer and EMI shall deliver to the Shareholders and
the Partnership:
(1) The Initial Payment;
(2) The Second Payment Note;
(3) Certificates Representing the EMI Purchase Stock;
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(4) The Buyer's Certificates;
(5) A registration rights agreement (the
"Registration Rights Agreement") in a form
satisfactory to the parties;
(6) Employment Agreements (the "Employment
Agreements) between the Corporation and Xxxxxxx X.
Xxxxxxxx and Xxxxxxx X. Xxxxxxxx, respectively, in
form satisfactory to the parties; and
(7) A non-competition agreement (the "Non-Competition
Agreement") between the Buyer and Xxxxxxxxx Galleucia
in form satisfactory to the parties.
(c) Deliveries by the Shareholders and the Partnership to
Buyer. At the Closing, Shareholders shall deliver to Buyer:
(1) The original certificates representing the Stock;
(2) Appropriate Stock Powers (the "Stock
Powers") to accomplish the transfer of the
Stock provided for in this Agreement;
(3) The Corporation's Certificates;
(4) A General Warranty Deed in recordable form.
(d) Filing of Tax Returns and Other Reports; Tax
Responsibility. The Shareholders shall timely file all federal and state income
tax and other tax returns or reports relating to the transactions provided for
in this Agreement and relating to all periods during which the Shareholders
owned the Stock, and shall be responsible for all unpaid federal tax liabilities
incurred by the Corporation and the related expenses for such period, including
without limitation the Federal Potential Federal Tax Audit Liabilities and any
refunds with respect thereto will be paid to the Shareholders upon receipt. To
the extent required by law or regulation the Shareholders shall file all reports
with the Department of Education or any other applicable state of federal
regulatory or accrediting agency relating to such periods including without
limitation the Financial Aid Audits for the federal fiscal year ended June 30,
1997 and March 31, 1998 to be filed by the Schools with the Department of
Education pursuant to applicable regulations.
(e) Access to Records. Following the effective Closing
Date, Buyer and EMI shall give to the Shareholders reasonable access to (and the
right to make copies at the expense of the Corporation) all financial and other
records of the Schools which reflect or relate to the business, operations,
income, expenses and assets of the Schools existing on, accruing or prior to the
Closing Date, and to preserve such records
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for a period of time reasonably necessary to insure their availability for
purposes of state and federal regulatory compliance or production or review in
the case of an audit, investigation or inquiry. Access to such records shall be
conducted by the Shareholders in such manner as not to interfere unreasonably
with the operations of the business following the Closing Date.
(f) Acid Test; Repayment of Uncollected Accounts Receivable.
Within 30 days of the Closing Date, the Shareholders shall provide the Buyer
with an audited balance sheet (the "Closing Balance Sheet") which shall be
subject to the same representations and warranties provided for in Section 2(c)
of this Agreement, which indicates as of the Closing Date the ratio (the
"Ratio") of the Corporation's (i) current assets ("Eligible Assets") to (ii)
current liabilities in accordance with the DOE Regulations governing financial
responsibility. In the event that the Ratio on the Closing Balance Sheet exceeds
one (1) to one (1), the Buyer shall pay to the Shareholders within fifteen (5)
business days an amount equal to the excess Eligible Assets over current
liabilities (the "Excess Payment") provided that such amount shall not exceed
the amount of cash held by the Corporation as of the close of business on the
date of such Closing Balance Sheet. The bad debt reserve for accounts receivable
provided for in the Closing Balance Sheet shall be $1,196,224 or adjusted to
such amount for purposes of determining an amount of Excess Payment, and no
further adjustments shall be made with respect to such reserve.
(g) Filing of Application for Prerequisite Student Aid
Approvals. As soon as practicable after the Closing, Buyer and EMI shall cause
the filing of applications for the Prerequisite Student Aid Approvals and shall
use their best efforts to secure the receipt of such approvals in the shortest
possible time.
(h) Further Documents or Acts. The parties will also execute,
deliver, record (where appropriate) and/or perform at Closing and from time to
time thereafter, at the request of Buyer, EMI, or the Shareholders, all other
documents or acts required to consummate any of the transactions contemplated by
this Agreement or otherwise carry out the purposes of this Agreement, including
without limitation, any and all instruments or other documents of transfer,
conveyance, assignment and assumption as may be reasonably necessary to effect
of evidence the transfer of the Assets and the assumption of the Stated
Liabilities.
7. CONFIDENTIALITY AND JOINT NON-COMPETITION AGREEMENT.
(a) Shareholders acknowledge that, as a result of their
ownership of the Schools they each had access to and knowledge of confidential
or proprietary information developed by the Corporation and Shareholders with
respect to the Schools and its operations and of a special and unique nature and
value to the Buyer, including, but not limited to, the methods and systems used
in connection with the Schools' operations, the names and addresses of their
students and sources of referral, tuition charged and paid by with respect to
the Schools or their customers, curricula, related memoranda, research reports,
designs, records, student files, services, and operating
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procedures, and other information, data, and documents now existing or later
acquired by the Corporation or Shareholders in connection with the Schools'
operations, regardless of whether any such information, data, or documents,
qualify as a "trade secret" under applicable Federal or state law (collectively
"Confidential Information"). Confidential Information does not include
information that (i) becomes generally available to the public other than as a
result of disclosures by the Corporation or Shareholders in violation of the
terms of this Agreement, or (ii) becomes available to the Corporation or
Shareholders on a non-confidential basis from a source that is not bound by a
confidentiality agreement with Buyer or EMI or each of their respective
directors, officers, employees, agents or representatives. As a material
inducement to Buyer to enter into this Agreement, the Shareholders covenant and
agree not at any time following the Closing Date directly or indirectly, to
divulge or disclose for any purpose whatsoever, any Confidential Information
which is in the possession of the Corporation or Shareholders as a result of
their ownership of the Schools, or otherwise as a result of the relationship
between the Corporation, Shareholders and the Schools' operations. In accordance
with the foregoing, the Shareholders agree at no time to retain or remove from
the School Facilities records of any kind or description whatsoever for any
purpose whatsoever unless authorized by Buyer. Notwithstanding the foregoing
provisions of this Section 7(a), Shareholders may disclose Confidential
Information (i) to their counsel, accountants and agents on a need-to-know basis
(provided that any such person shall be informed of the confidential nature of
such information and directed not to disclose or make public such Confidential
Information), (ii) to the extent required by applicable law, rules and
regulation, and (iii) in any action, suit or proceeding between the parties,
provided that in connection with disclosures permitted by clauses (ii) and (iii)
above, Shareholders shall provide Buyer with at least three (3) days notice of
such intent so that an appropriate protective order may be sought by Buyer if
desired.
(b) As a material inducement to Buyer to enter into this
Agreement, the Shareholders covenant and agree for a period of seven (7) years
after the Closing of the transactions provided for in this Agreement not to (i)
engage in the operation of a post secondary school facility (the "Prohibited
Activities") anywhere within the State of New Hampshire or within 50 miles (the
"Area") of the location of any school owned or operated by EMI or any
postsecondary educational school which EMI subsequently operates during such
period with respect to which EMI either gives written notice to the Buyer or
includes on its Internet Homepage or any successor generally available
information service prior to the Shareholders' commencement of such activities;
(ii) become associated as manager, consultant, advisor, or stockholder owning
more that 5% of the outstanding stock of a company or participate in the
management or direction of a company or otherwise with any person, the
Corporation or entity engaging in Prohibited Activities anywhere within the
Area; (iii) call upon any of Buyer's, EMI's or any of EMI's subsidiary schools'
students, teachers or referral sources for the purpose of promoting any
Prohibited Activities for any person, person, the Corporation or entity within
the Area; or (iv) divert, solicit or take away any of Buyer's, EMI's or any of
EMI's subsidiary school's teachers or other personnel for the purpose of
engaging in any Prohibited Activities regardless of the location of such
activities.
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(c) In the event of a breach or threatened breach by the
Shareholders of any of the provisions of this Section 7, Buyer, in addition to
and not in limitation of any other rights, remedies, or damages available to
Buyer at law or in equity, shall be entitled to a permanent injunction in order
to prevent or to restrain any such breach by Shareholders, or by Shareholders'
partners, agents, representatives, servants, employers, employees and/or any and
all persons directly or indirectly acting for or with them.
(d) Shareholders jointly and severally agree that, if they
shall violate any of the covenants or agreements provided for in this Section 7,
Buyer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remuneration, or benefits which Shareholders
directly, or indirectly, have realized and/or may realize as a result of,
growing out of, or in connection with any such violation; such remedy shall be
in addition to and not in limitation of any injunctive relief or other rights or
remedies to which Buyer may be entitled to at law or in equity or under this
Agreement.
(e) Shareholders have carefully read and considered the
provisions of this Section 7, and agree that the restrictions set forth above
(including without limitation the time period and geographical areas of
restriction) are fair and reasonable and are reasonably required for the
protection of the interest of the Buyer and EMI. In the event that,
notwithstanding the foregoing, any of the provisions of this Section 7 are held
invalid or unenforceable, the remaining provisions shall continue to be valid
and enforceable. In the event that any provision of this Section 7 relating to
time period and/or areas of restriction are declared by a court of competent
jurisdiction to exceed the maximum time period or areas such court deems
reasonable and enforceable, said time period or areas of restriction shall be
deemed to become, and thereafter be, the maximum time period and/or area which
such court deems reasonable and enforceable.
8. INDEMNIFICATION.
(a) Except with respect to claims based on the Indemnity
Limitation Exception provided for in subsection (d) of this Section,
Shareholders, and, with respect to the representations contained in subsection
2(x) of this Agreement and the performance of all of its other obligations as
provided for in this Agreement, the Partnership, agree for a period of two (2)
years from the date of this Agreement to defend, indemnify and hold harmless the
Buyer and EMI and their directors, officers, employees and agents from and
against any loss, liability, damage, settlement or expense (including without
limitation, attorneys' fees and disbursements) incurred by Buyer or EMI arising
from or related to the inaccuracy or breach of any of the representations,
warranties, covenants or agreements of Shareholders and the Partnership
contained in this Agreement or in any document incorporated by reference into
this Agreement.
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(b) Buyer and EMI, jointly and severally, agree to defend,
indemnify and hold harmless Shareholders and the Partnership and their
respective agents from and against any loss, liability, damage, settlement or
expense (including without limitation attorneys' fees and disbursements)
incurred by Shareholders or the Partnership arising from or related to the
inaccuracy or breach of any of the representations, warranties, covenants or
agreements of Buyer or EMI contained in this Agreement or in any document
incorporated by reference into this Agreement.
(c) The party seeking indemnification pursuant to this Section
8 (the "Indemnified Party") shall give (or cause to be given) to the party or
parties from whom indemnification is sought hereunder (the "Indemnifying Party")
written notice of any claim or matter for which indemnity is (or will be) sought
under this Section 8. Such notice shall be given promptly after the Indemnified
Party receives actual notice or knowledge of the claim or matter that is subject
to indemnification. With respect to any claim asserted by a third party against
an Indemnified Party for which indemnity is sought hereunder, the relevant
Indemnifying Party shall have the right to employ counsel reasonably acceptable
to the relevant Indemnified Party to defend against such assertion and such
Indemnifying Party shall have the right to compromise or otherwise settle any
such action or claim only with the prior written consent of such relevant
Indemnified Party, which consent shall not be unreasonably withheld.
(d) Except in the case of a judicial determination of
intentional fraud by a New Hampshire Court of competent jurisdiction (the
"Indemnity Limitation Exception"), Shareholders and/or the Partnership shall not
in any instance have any liability, including without limitation instances of
non-compliance described in Sections 2(h) and/or 2( ) of this Agreement, with
respect to any claims of Buyer or EMI for money damages, whether pursuant to
this section or otherwise, until such time, if any, as the aggregate amount of
all such amounts otherwise subject to recovery by Buyer or EMI shall exceed, in
the aggregate, $25,000, and then only to the extent of such excess; and provided
further that the Shareholders and/or the Partnership shall not be obligated to
pay such damages (other than the Indemnity Limitation Exception) to the extent
the total amount otherwise subject to recovery by Buyer or EMI from the
Shareholder and/or the Partnership exceeds $2,500,000.
9. EVENTS OF DEFAULT. If any one or more of the following events
occurs then, subject to the expiration of any specified grace period and the
giving of any prior notice required under this Section 9, such event shall
constitute an Event of Default by the party responsible for such event or
against whom it should be charged.
(a) Warranties or Representations. Any warranty or
representation by or on behalf of any party contained in this Agreement (or in
any document between the parties furnished in compliance with this Agreement at
Closing) is false or misleading in any material respect.
(b) Agreements. Any party fails to take any action required of
it to comply with its obligations contained in this Agreement, or takes any
action prohibited
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or inconsistent with its obligations under this Agreement, and such failure to
act or action is not cured prior to ten (10) days after written notice thereof
is given to the defaulting party.
(c) Refusal to Close. A party refuses to consummate the
transactions provided for (and subject to the terms and conditions specified) in
this Agreement by 5 p.m., Eastern Daylight Time on the Termination Date, except
if the failure to close is based upon the failure of the other party to meet a
condition to Closing provided for in Section 5 of this Agreement.
(d) Failure of Closing Condition. Any party is unable to
comply with the conditions of Closing provided for in Section 5 of this
Agreement, other than as a result of an Event of Default as described in
Sections 9(a), (b), or (c) above.
10. TERMINATION AND RIGHTS AND REMEDIES ON DEFAULT.
(a) Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned prior to the Closing: (i) by the
mutual consent of Buyer, EMI, the Corporation and Shareholders; (ii) by Buyer
and EMI, if any condition to their obligations to close set forth in Section 5
hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; (iii) by the Corporation and
Shareholders if any condition to their obligations to close set forth in Section
5 hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; or (iv) by any party (other than a
party that is in breach of its obligations under this Agreement) if the Closing
shall not have occurred on or before the Termination Date. If this Agreement is
terminated pursuant to clause (i) of this Section 10, all obligations of the
parties hereunder shall terminate without any further liability or obligation of
either party to the other, except that the provisions of Section 11, and the
confidentiality provisions of Section 4(c) of this Agreement shall survive and
continue in full force and effect notwithstanding such termination. Except as
limited by the preceding sentence, the exercise by any party of the right to
terminate this Agreement shall not terminate or limit any remedy that such party
may have in this Section 10 as a result of an Event of Default.
(b) Rights and Remedies on Default. Upon and after an Event of
Default by any party, the other party shall have the following rights and
remedies:
(1) Default by Buyer. In the event that Buyer is
obligated to and fails to close by the Termination Date, and the Corporation or
Shareholders are not in default of their obligations under this Agreement, this
Agreement shall terminate and the Corporation and Shareholders shall have the
right to seek money damages as their
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sole remedy. The Corporation and Shareholders hereby agree that neither of them
shall be entitled to seek or file suit for specific performance of this
Agreement.
(2) Default by the Corporation or Shareholders. If,
on the Termination Date, there exists an Event of Default as described in
Section 9 of this Agreement, chargeable against the Corporation or the
Shareholders, Buyer may either (i) waive such default and close, in which event
Buyer shall have the right to seek specific performance of this Agreement,
including, without limitation, the acquisition of the Shares and the
performance by the Corporation and Shareholders of the covenants provided for
in this Agreement, or (ii) refuse to close, and, except in the case of an Event
of Default described in Section 9(d) above, seek money damages from the
Corporation or Shareholders, including, without limitation, indemnification
pursuant to Section 8 of this Agreement. An election by Buyer to proceed in
accordance with subclause (i) of the preceding sentence shall constitute the
acknowledgment by Buyer and the Corporation or Shareholders that Buyer cannot
be adequately compensated by money damages for the failure to perform by the
Corporation or Shareholders, that such damages are indeterminate, and that a
court of competent jurisdiction may enter an order pursuant to which the
Corporation and Shareholders are obligated to specifically perform their
obligations to Buyer pursuant to the terms of this Agreement.
(3) Default Subsequent to Closing. If any party
breaches this Agreement subsequent to Closing, or if a default occurs pursuant
to Sections 9(a) or 9(b) of this Agreement, the nondefaulting party(ies) shall
have the right to seek money damages from the defaulting party(ies), pursuant to
Section 7 or 8 of this Agreement. In addition, if, (i) as a result of any action
taken or not taken by the Corporation or Shareholders in violation of any
applicable law or regulation which (ii) has not been disclosed to the Buyer in
this Agreement, and which (iii) the occurrence or non occurrence of which was
known or reasonably should have been known to the Corporation or Shareholders,
the Prerequisite Student Aid Approvals are not received prior to 12 months from
the date of the Closing, or, if received or offered, can only be obtained on
conditions imposing substantial financial burdens on the Buyer in addition to
those which would otherwise be imposed in connection which such approval, the
Buyer may elect to rescind the transactions provided for in this Agreement and,
upon such election, the parties will take such action as may be reasonably
required to restore the other party to its respective positions as they existed
prior to the Closing provided for in this Agreement.
(4) Nature of Remedies Cumulative. Except as otherwise
provided in this Agreement, all rights and remedies granted in this Agreement or
available under applicable law shall be deemed concurrent and cumulative and not
alternative or exclusive remedies, to the full extent permitted by law and this
Agreement, and any party may proceed with any number of remedies at the same
time or in any order. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and any party, upon the
occurrence of an event of default by another party under this Agreement, may
proceed at any time, under any agreement, in any order and with any available
remedy.
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11. FINDERS FEES. With the exception of The Xxxxxxx Company which will
receive an accomplishment fee paid by the Shareholders at the Closing, each of
the parties represents and warrants to the other that such party has not
employed any finder or broker in connection with transactions contemplated by
this Agreement. Each party agrees to indemnify and hold harmless the others from
and against any claim, damages, liabilities, and expenses (including without
limitation, attorneys' fees and disbursements) arising from any claim or demand
asserted by any person or entity other than the Xxxxxxx Company on the basis of
its employment as a finder or broker by the respective party.
12. ARBITRATION. Any disputes between any of the parties to it with
respect to the agreements contained in it, or as modified in the future, are to
be settled by binding arbitration conducted pursuant to the commercial
arbitration rules of the American Arbitration Association, except for instances
in which an Indemnity Limitation Exception is alleged as a bar to the
limitations provided for in Section 8(d). In any such arbitration the scope and
timing of any discovery shall be determined by the arbitrators. Such arbitration
is to be the sole remedy for the settlement of such disputes. All of the parties
agree that money damages are inadequate to compensate for a breach of the
confidentiality and non-competition provisions of this Agreement and contained
in this Agreement. The Shareholders agree that upon application by EMI and/or
Acquisition, any court of competent jurisdiction, upon a showing sufficient to
justify the entry of a temporary injunction, may enjoin any activity allegedly
in breach of such agreement pending the outcome of binding arbitration or enter
a similar order of like force and effect, or may enforce the final determination
of such arbitrators by the issuance of such an injunction or similar order.
With respect to the provisions of Section 7 (Confidentiality and
Non-Competition), the Corporation and Shareholders agree that damages, by
themselves, are an inadequate remedy at law, that a material breach of the
provisions of such Section would cause irreparable injury to the aggrieved
party, and that the provisions of Section 7 may be specifically enforced by
injunction or similar remedy in any court of competent jurisdiction without
affecting any claim for damages, provided that any such injunction shall either
be preliminary in nature, enjoining such activity pending the outcome of
arbitration as provided for in Section 12 of this Agreement, or be in assistance
of the final determination of the arbitrators as provided for in such Section.
The Corporation and Shareholders agree that such injunction may be issued
without the necessity of bond.
13. NOTICES. All notices or other communications required or permitted
under the terms of this Agreement shall be made in writing and shall be deemed
given (i) upon hand delivery, (ii) when sent by commercial overnight courier
with written verification of receipt, or (iii) three days after deposit of same
in the Certified Mail, Return Receipt Requested, first class postage and
registration fees prepaid and correctly addressed to the parties at the
following addresses:
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If to Buyer: New Hampshire Acquisition Corp.
0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
With a copy to: Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000 - Xxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
If to EMI: Educational Medical, Inc.
0000 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, 00000
Attn: President
With a copy to: Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000 - Xxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
If to the Corporation: Xxxxxx, Inc.
c/o Hesser College
0 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
If to Shareholders: The Xxxxxxx X. Xxxxxxxx Trust of 1997
c/o Xxxxxxx X. Xxxxxxxx
Xxxxxx College
0 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx
c/o Hesser College
0 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
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If to the Partnership: Hardwood Properties Limited Partnership
c/o Xxxxxxx X. Xxxxxxxx
Xxxxxx College
0 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
or to such other address as any of the parties hereto may designate by notice
to the others.
14. MISCELLANEOUS.
(a) Successors. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned prior to Closing without
the prior written consent of the other parties hereto.
(b) Expenses. Except as otherwise provided in this Agreement,
Buyer, the Corporation and Shareholders shall be responsible for any and all of
the respective fees, costs and expenses incurred by each, in connection with the
negotiation, preparation or performance of this Agreement.
(c) Entire Agreement. This Agreement incorporates by this
reference all Exhibits hereto and all documents executed and/or delivered at
Closing. This Agreement and the documents so incorporated into it contain the
parties' entire understanding and agreement with respect to the subject matter
hereof; and any and all conflicting or inconsistent discussions, agreements,
promises, representations and statements, if any, between the parties or their
representatives that are not incorporated in this Agreement shall be null and
void and are merged into this Agreement.
(d) Amendments Only in Writing. No amendment, modification,
waiver or discharge of this Agreement or any provision of this Agreement shall
be effective against any party, unless such party shall have consented thereto
in writing.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement.
(f) Cooperation. Each of the parties to this Agreement, when
requested by another party, shall give all reasonable and necessary cooperation
with respect to any reasonable matters relating to the transactions contemplated
by this Agreement.
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(g) Governing Law; Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Hampshire,
exclusive of its choice of law provisions, and the parties agree that any
dispute hereunder shall be resolved by reference to court or tribunal in
Hillsborough County, New Hampshire, in accordance with terms of the Agreement,
and each hereby irrevocably consents to such jurisdiction.
(h) Headings. The various section headings are inserted for
purposes of reference only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(i) Gender; Number. All references to gender or number in this
Agreement shall be deemed interchangeably to have a masculine, feminine, neuter,
singular or plural meaning, as the sense of the context requires.
(j) Severability. The provisions of this Agreement shall be
severable, and any invalidity, unenforceability or illegality of any provision
or provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
(k) Survival. Except as otherwise expressly provided in this
Agreement, the liabilities and obligations of each party with respect to any and
all of its representations, warranties, covenants and agreements set forth in
this Agreement and/or in any document incorporated into it shall not be merged
into, affected or impaired by the Closing under this Agreement. All of the
representations, warranties, covenants and agreements set forth in this
Agreement shall survive the Closing for the period of two years thereafter, so
that (except as otherwise provided below) any claim under this Agreement must be
asserted by notice given to the party claimed to be liable on or before the
second anniversary of the Closing Date. Notwithstanding the foregoing, the time
limitation shall not apply to: (i) the covenants related to confidentiality and
non-competition contained in Section 7 above or (ii) fraud, including without
limitation intentional fraud upon which a claim for an Indemnity Limitation
Exception is based. All obligations and liabilities described in clauses (i) and
(ii) of the previous sentence shall survive the Closing for the period in which
a claim can be asserted with respect thereto under applicable law.
(l) No Third Party Beneficiaries. This Agreement has been
entered into solely for the benefit of the parties that have executed it, and
not to confer any benefit or enforceable right upon any other party or entity.
Accordingly, no party or entity that has not executed this Agreement shall have
any right to enforce any of the provisions of it.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by an officer duly authorized to do so, all as of the day and year
first above written.
NEW HAMPSHIRE ACQUISITION XXXXXX, INC. ("CORPORATION")
CORP. ("BUYER")
By: By:
-------------------------------- ---------------------------------
Authorized Signatory Authorized Signatory
EDUCATIONAL MEDICAL, INC. ("EMI") SHAREHOLDERS
THE XXXXXXX X. XXXXXXXX
REVOCABLE TRUST OF 1997
By: By:
------------------------------ -------------------------------
Authorized Signatory ---------------, Trustee
------------------------------------
Xxxxxxx X. Xxxxxxxx,
HARDWOOD PROPERTIES LIMITED
PARTNERSHIP ("PARTNERSHIP")
By:
------------------------------
Authorized Signatory
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EXHIBITS
1. Legal Description of the Property
2. The Second Payment Note
3. List of Shareholders
4. Registration Rights Agreement
5. Form of Employment Agreement
6. Form of Non-Competition Agreement
7. The Stock Power
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