EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
Among
SOFTWARE SYSTEMS CORP.
SYLVAN LEARNING SYSTEMS, INC.
PYRAMID VENTURES, INC.
GE CAPITAL EQUITY INVESTMENTS, INC.
JLC LEARNING CORPORATION
and
EAC I INC.
Dated as of June 7, 1999
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
PURCHASE AND SALE OF SHARES; CLOSING
1.01. PURCHASE AND SALE OF THE SHARES.................. 1
1.02. CLOSING DATE..................................... 3
1.03. TRANSACTIONS TO BE EFFECTED AT THE CLOSING....... 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PREFERRED SELLERS
2.01. ORGANIZATION, STANDING AND POWER................. 4
2.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORSEABILITY................................... 5
2.03. NO CONFLICTS; SHARES............................. 5
2.04. THE PREFERRED SHARES............................. 6
2.05. PRIVATE OFFERING................................. 6
2.06. NO CLAIMS........................................ 7
2.07. TAXES............................................ 7
ARTICLE III
REPRESENTATION AND WARRANTIES OF SSC
3.01. ORGANIZATION, STANDING AND POWER................. 7
3.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY................................... 7
3.03. NO CONFLICTS; CONSENTS........................... 8
3.04. THE COMMON SHARES................................ 8
3.05. BUSINESS OF SSC.................................. 8
3.06. FINANCIAL STATEMENTS............................. 8
3.07. NO CLAIMS........................................ 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SSC AND THE COMPANY RELATING TO THE COMPANY
4.01. ORGANIZATION AND STANDING; BOOKS;
AND RECORDS..................................... 9
4.02. CAPITAL STOCK OF THE COMPANY.................... 10
4.03. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY.................................. 11
4.04. NO CONFLICTS; CONSENTS.......................... 11
4.05. FINANCIAL STATEMENTS............................ 12
4.06. ASSETS OTHER THAN REAL PROPERTY INTERESTS....... 13
4.07. REAL PROPERTY................................... 13
4.08. INTELLECTUAL PROPERTY........................... 14
4.09. CONTRACTS....................................... 18
4.10. INVENTORY....................................... 21
4.11. PERSONAL PROPERTY............................... 21
4.12. RECEIVABLES..................................... 21
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SECTION PAGE
4.13. PERMITS......................................... 21
4.14. INSURANCE....................................... 22
4.15. TAXES........................................... 22
4.16. PROCEEDINGS..................................... 27
4.17. EMPLOYEE BENEFIT PLANS.......................... 27
4.18. ABSENCE OF CHANGES OR EVENTS.................... 29
4.19. COMPLIANCE WITH APPLICABLE LAWS................. 29
4.20. EMPLOYEE AND LABOR MATTERS...................... 31
4.21. TRANSACTIONS WITH AFFILIATES.................... 31
4.22. EFFECT OF TRANSACTION........................... 32
4.23. DISCLOSURE...................................... 32
4.24. SUPPLIERS....................................... 32
4.25. CUSTOMERS....................................... 32
4.26. PRIVATE OFFERING................................ 33
4.27. SUBSIDIARIES.................................... 33
4.28. YEAR 2000....................................... 33
ARTICLE V
REPRESENTATION AND WARRANTIES OF PURCHASER
5.01. ORGANIZATION, STANDING AND POWER................ 34
5.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY.................................. 34
5.03. NO CONFLICTS; CONSENTS.......................... 34
5.04. FINANCING....................................... 35
5.05. SECURITIES ACT.................................. 35
ARTICLE VI
COVENANTS
6.01. COVENANTS RELATING TO CONDUCT OF BUSINESS....... 35
6.02. NO SOLICITATION................................. 38
6.03. ACCESS TO INFORMATION........................... 39
6.04. CONFIDENTIALITY................................. 39
6.05. REASONABLE EFORTS............................... 40
6.06. EXPENSES; TRANSFER TAXES........................ 40
6.07. BROKERS OR FINDERS.............................. 41
6.08. RESIGNATIONS.................................... 41
6.09. TAX MATTERS..................................... 41
6.10. SUPPLEMENTAL DISCLOSURES........................ 49
6.11. POST-CLOSING COOPERATION........................ 50
6.12. PUBLICITY....................................... 51
6.13. RECORDS......................................... 51
6.14. AGGREEMENT NOT TO SOLICIT EMPLOYEES............. 51
6.15. CERTAIN LICENSES AND PERMITS.................... 52
6.16. FURTHER ASSURANCES.............................. 52
6.17. ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS........ 52
6.18. FINANCIAL STATEMENTS............................ 52
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SECTION PAGE
6.19. BENEFIT PLAN MATTERS........................... 53
6.20. STRATEGIC ALLIANCE AGREEMENT................... 53
ARTICLE VII
CONDITIONS PRECEDENT
7.01. CONDITIONS TO EACH PARTY'S OBLIGATION........... 53
7.02. CONDITIONS TO OBLIGATION OF PURCHASER........... 54
7.03. CONDITIONS TO OBLIGATIONS OF SELLERS............ 56
7.04. FRUSTRATION OF CLOSING CONDITIONS............... 57
ARTICLE VIII
INDEMNIFICATION
8.01. INDEMNIFICATION................................. 57
8.02. CALCULATION OF LOSSES........................... 61
8.03. TERMINATION OF INDEMNIFICATION.................. 62
8.04. PROCEDURES...................................... 62
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. TERMINATION..................................... 65
9.02. EFFECT OF TERMINATION........................... 66
9.03. AMENDMENTS AND WAIVERS.......................... 66
ARTICLE X
GENERAL PROVISIONS
10.01. SURVIVAL........................................ 67
10.02. ASSIGNMENT...................................... 67
10.03. NO THIRD-PARTY BENEFICIARIES.................... 67
10.04. NOTICES......................................... 68
10.05. INTERPRETAION; EXHIBITS AND SCHEDULES;
CERTAIN DEFINITIONS............................. 70
10.06. COUNTERPARTS.................................... 71
10.07. ENTIRE AGREEMENT................................ 71
10.08. SEVERABILITY.................................... 71
10.09. CONSENT TO JURISDICITON......................... 71
10.10. GOVERNING LAW................................... 72
10.11. WAIVER OF JURY TRIAL............................ 72
EXHIBITS
Exhibit A Term sheet for Escrow Agreement
iv
INDEX OF DEFINED TERMS
DEFINED TERM LOCATION OF DEFINITION
Acquisition Section 1.01
affiliate Section 10.05(b)
Applicable Law Section 2.03
Applicable Percentages Section 8.01(d)
Balance Sheet Section 4.05(a)
CERCLA Section 4.19(b)
Class A Preferred Shares Recitals
Class B Preferred Shares Recitals
Closing Section 1.02
Closing Date Section 1.02
Code Section 4.15(a)
Common Shares Recitals
Common Purchase Price Section 1.01
Commonly Controlled Entity Section 4.17(a)
Company Preamble
Company Contracts Section 4.09(b)
Company Indebtedness Section 1.01
Company Material Adverse Effect Section 4.01(a)
Company Plans Section 4.17(a)
Confidentiality Agreement Section 6.04(a)
Consent Section 2.03
Contract Section 2.03
Copyrights Section 4.08(a)
Customer Agreements Section 4.08(a)
DOJ Section 6.05(b)
EBITDA Section 7.02(h)
Environmental Law Section 4.19(b)
ERISA Section 4.17(a)
Escrow Section 1.03(e)
Escrow Agent Section 1.03(e)
Escrow Agreement Section 1.03(e)
Financial Statements Section 4.05(a)
Fixed Sales Bonuses Section 4.02
Foothill Facility Section 1.01
Form 8023 Section 6.09(e)
FTC Section 6.05(b)
GAAP Section 3.06(a)
GE Cap-Eq Preamble
GE Purchase Price Section 1.01
Governmental Entity Section 2.03
Hazardous Substance Section 4.19(b)
HSR Act Section 2.03
including Section 10.05(b)
indemnified party Section 8.04(a)
Intellectual Property Section 4.08(a)
Jostens Agreement Section 8.02(b)
Judgment Section 2.03
Leased Property Section 4.07
Liens Section 4.06(a)
Limited Covenants Section 8.01(b)
Losses Section 8.01(a)
March Balance Sheet Section 6.18
Material Inbound License Agreements Section 4.08(a)
Material Outbound License Agreements Section 4.08(a)
Original Purchase Date Section 4.08(b)
other bid Section 6.02
Patents Section 4.08(a)
Pension Plan Section 4.17(a)
Per Share Price Section 1.01
Permits Section 4.13
Permitted Liens Section 4.06(a)
person Section 10.05(b)
Post-Closing Tax Period Section 4.15(a)
Pre-Closing Tax Period Section 4.15(a)
Preferred Shares Recitals
Preferred Sellers Preamble
Preferred Seller Indemnitees Section 8.01(e)
Proceeding Section 4.13
Projected Disclosure Section 4.23
Purchaser Preamble
Purchaser Indemnitees Section 8.01(a)
Pyramid Preamble
Pyramid Purchase Price Section 1.01
RCRA Section 4.19(b)
Records Section 6.13
Rights Plan Section 1.01
Section 338(h)(10) Election Section 6.09(e)
Securities Act Section 2.05
Sellers Preamble
Shares Recitals
Software Section 4.08(a)
Specific Preferred Seller Obligation Section 8.01(d)
SSC Preamble
SSC Balance Sheet Section 3.06(a)
Statement of Operations Section 6.18
Straddle Period Section 6.09(a)
Strategic Alliance Agreemnt Section 6.20
subsidiary Section 10.05(b)
Sylvan Preamble
Sylvan Purchase Price Section 1.01
Systems Section 4.28
Tax/Taxes Section 4.15(a)
Tax Return/Tax Returns Section 4.15(a)
Taxing Authority Section 4.15(a)
Third Party Claim Section 8.04(a)
Trade Secrets Section 4.08(a)
Trademarks Section 4.08(a)
Transfer Tax Section 4.15(a)
Triggering Event Section 6.09(e)
TSCA Section 4.19(b)
Voting Company Debt Section 4.02
Welfare Plan Section 4.17(a)
Year 2000 Problems Section 4.28
1
STOCK PURCHASE AGREEMENT dated as of June 7,
1999, among SOFTWARE SYSTEMS CORP., a Delaware
corporation ("SSC"), SYLVAN LEARNING SYSTEMS, INC., a
Maryland corporation ("Sylvan"), PYRAMID VENTURES,
INC., a Delaware corporation ("Pyramid"), GE CAPITAL
EQUITY INVESTMENTS, INC., a Delaware corporation ("GE
Cap-Eq" and, together with Sylvan and Pyramid, the
"Preferred Sellers"; the Preferred Sellers and SSC,
collectively the "Sellers"), JLC LEARNING
CORPORATION, an Illinois corporation (the "Company"),
and EAC I Inc., a Delaware corporation ("Purchaser").
WHEREAS Purchaser desires to purchase from Sylvan and Pyramid,
and Sylvan and Pyramid desire to sell to Purchaser, all the issued and
outstanding shares of Class A Preferred Stock, par value $0.01 per share (the
"Class A Preferred Shares"), of the Company;
WHEREAS Purchaser desires to purchase from GE Cap-Eq and
Pyramid, and GE Cap-Eq and Pyramid desire to sell to Purchaser, all the issued
and outstanding shares of Class B Preferred Stock, par value $0.01 per share
(the "Class B Preferred Shares" and, together with the Class A Preferred Shares,
the "Preferred Shares");
WHEREAS Purchaser desires to purchase from SSC, and SSC
desires to sell to Purchaser, all the issued and outstanding shares of Class A
Common Stock, par value $0.001 per share (the "Common Shares" and, together with
the Preferred Shares, the "Shares"), of the Company; and
WHEREAS, as a result of such purchases and sales, Purchaser
will own all the issued and outstanding capital stock of the Company.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES; CLOSING
SECTION 1.01. PURCHASE AND SALE OF THE SHARES. On the terms
and subject to the conditions of this Agreement, at the Closing (as defined in
Section 1.02), Sylvan shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase from Sylvan, the Class A Preferred
2
Shares owned by Sylvan, including any and all rights to the payment of any
accrued and unpaid dividends thereon, for an aggregate purchase price (the
"Sylvan Purchase Price") equal to the product of 15,000 and the Per Share Price
(as defined below), payable as set forth below in Section 1.02. On the terms and
subject to the conditions of this Agreement, at the Closing, Pyramid shall sell,
transfer and deliver to Purchaser, and Purchaser shall purchase from Pyramid the
Class A Preferred Shares and the Class B Preferred Shares owned by Pyramid,
including any and all rights to the payment of any accrued and unpaid dividends
thereon, for an aggregate purchase price (the "Pyramid Purchase Price") equal to
the product of 7,500 and the Per Share Price, payable as set forth below in
Section 1.02. On the terms and subject to the conditions of this Agreement, at
the Closing, GE Cap-Eq shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase from GE Cap-Eq, the Class B Preferred Shares owned by
GE Cap-Eq, including any and all rights to the payment of any accrued and unpaid
dividends thereon, for an aggregate purchase price (the "GE Purchase Price")
equal to the product of 7,500 and the Per Share Price, payable as set forth
below in Section 1.02. On the terms and subject to the conditions of this
Agreement, at the Closing, SSC shall sell, transfer and deliver to Purchaser,
and Purchaser shall purchase from SSC, the Common Shares for an aggregate
purchase price of $1,500,000 (the "Common Purchase Price"). The purchase and
sale of the Common Shares, the Class A Preferred Shares and the Class B
Preferred Shares is referred to in this Agreement as the "Acquisition". The term
"Per Share Price" means the result of (x) the excess of (1) $53,700,000 over (2)
the sum of (i) the aggregate principal amount of the Company Indebtedness (as
defined below) as of the Closing Date (as defined in Section 1.02), plus (ii)
the amount of all accrued and unpaid interest thereon as of the Closing Date and
all prepayment penalties and other amounts payable in connection with, or as a
result of, a payment of the Company Indebtedness as of the Closing Date plus
(iii) the aggregate amount payable under the JLC Learning Corporation 1998 Stock
Appreciation Rights Plan (the "Rights Plan") as a result of the Acquisition
(which includes the $400,000 to be deposited with the Escrow Agent (as defined
in Section 1.03(e)) pursuant to Section 1.03(e)) and the maximum aggregate
amount payable under the Fixed Sales Bonuses (as defined in Section 4.02)
divided by (y) 30,000. Schedule 1.01 sets forth a sample calculation of the Per
Share Price, assuming (x) that the Closing Date is June 30, 1999, (y) other than
the aggregate principal amount of the Company Indebtedness as of the Closing
Date, all accrued and unpaid interest thereon as of the Closing Date and all
prepayment penalties, there are no other amounts payable in connection with, or
as
3
a result of, a payment of the Company Indebtedness as of the Closing Date and
(z) there are no changes with respect to the components of the Per Share Price.
The term "Company Indebtedness" means the indebtedness of the Company under (i)
the Loan and Security Agreement by and between the Company and Foothill Capital
Corporation dated as of March 30, 1998 (the "Foothill Facility"); PROVIDED that,
if the aggregate principal amount of the indebtedness outstanding thereunder as
of the Closing Date (other than the Special Advance as defined therein) is
greater than $7,250,000, then the principal amount of such indebtedness as of
the Closing Date shall be deemed to be $7,250,000; (ii) the series of Senior
Subordinated 12.25% Notes of the Company issued to The Chase Manhattan Bank,
N.A., Pyramid, GE Cap-Eq and Sylvan dated June 29, 1995, October 1, 1997,
October 1, 1997 and October 1, 1997, respectively, in an aggregate principal
amount as of the date of this Agreement equal to $17,000,000; and (iii) the
Subordinated Promissory Note of the Company issued to Sylvan dated June 30,
1998.
SECTION 1.02. CLOSING DATE. The closing of the Acquisition
(the "Closing") shall take place at the offices of Cravath, Swaine & Xxxxx, 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on the second business
day following the satisfaction (or, to the extent permitted, the waiver) of the
conditions set forth in Section 7.01, or, if on such day any condition set forth
in Section 7.02 or 7.03 has not been satisfied (or, to the extent permitted,
waived by the parties entitled to the benefit thereof), as soon as practicable
after all the conditions set forth in Article VII have been satisfied (or, to
the extent permitted, waived by the parties entitled to the benefits thereof),
or at such other place, time or date as shall be agreed between SSC and
Purchaser. The date on which the Closing occurs is referred to in this Agreement
as the "Closing Date".
SECTION 1.03. TRANSACTIONS TO BE EFFECTED AT THE
CLOSING. At the Closing:
(a) each Seller shall deliver to Purchaser (i) certificates
representing the Shares owned by such Seller, duly endorsed in blank or
accompanied by stock powers duly endorsed in blank in proper form for
transfer, with appropriate transfer tax stamps, if any, affixed and
(ii) such other documents as Purchaser or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance
with the covenants set forth in this Agreement;
4
(b) Purchaser shall deliver to each Seller, (i) payment, by
wire transfer to a bank account designated in writing by such Seller
(such designation to be made at least two business days prior to the
Closing Date), of immediately available funds in an amount equal to, in
the case of Sylvan, the Sylvan Purchase Price, in the case of Pyramid,
the Pyramid Purchase Price, in the case of GE Cap-Eq, the GE Purchase
Price and, in the case of SSC, the Common Purchase Price and (ii) such
other documents as any of the Sellers or their respective counsel may
reasonably request to demonstrate satisfaction of the conditions and
compliance with the covenants set forth in this Agreement;
(c) Purchaser shall cause the Company to prepay the Company
Indebtedness so long as the applicable Lenders deliver appropriate
documents releasing all Liens on the Shares or on assets of the Company
that collateralize the Company Indebtedness;
(d) Purchaser shall cause the Company to release JLC Holdings,
Inc. and SSC from their payment obligations in respect of any accounts
receivable of the Company from JLC Holdings, Inc. or SSC; and
(e) Purchaser shall cause the Company to deposit the amount of
$400,000 (the "Escrow") with Bankers Trust Company, as escrow agent
(the "Escrow Agent"), pursuant to Section 8.01(g) and to be held in
accordance with the terms of an escrow agreement having the terms set
forth in Exhibit A hereto (the "Escrow Agreement").
The Company hereby waives any obligation of any Preferred Seller to deliver an
opinion of counsel in connection with the transfer of Preferred Shares held by
it pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PREFERRED SELLERS
Each Preferred Seller hereby severally (and not jointly)
represents and warrants as to itself to Purchaser, as of the date of this
Agreement and as of the Closing Date, as follows:
SECTION 2.01. ORGANIZATION, STANDING AND POWER.
Such Preferred Seller is duly organized, validly existing
5
and in good standing under the laws of the jurisdiction in which it is organized
and has full corporate power and authority to own and sell the Preferred Shares
owned by it.
SECTION 2.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Such Preferred Seller has full power and authority to execute
this Agreement and to consummate the sale of the Preferred Shares owned by it
and the other transactions contemplated to be consummated by it hereby. The
execution and delivery by such Preferred Seller of this Agreement and the
consummation by such Preferred Seller of the Acquisition and the other
transactions contemplated to be consummated by it hereby have been duly
authorized by all necessary corporate action. Such Preferred Seller has duly
executed and delivered this Agreement and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
SECTION 2.03. NO CONFLICTS; CONSENTS. The execution and
delivery by such Preferred Seller of this Agreement do not, and the consummation
of the Acquisition and the other transactions contemplated to be consummated by
it hereby and compliance by such Preferred Seller with the terms hereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or to increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any Lien (as
defined in Section 4.06) upon any of the properties or assets of such Preferred
Seller under, any provision of (i) the certificate of incorporation or by-laws
or other organizational documents of such Preferred Seller, (ii) any contract,
lease, license, indenture, agreement, commitment or other legally binding
arrangement (a "Contract") to which such Preferred Seller is a party or by which
it or any of its properties or assets is bound or (iii) any judgment, order or
decree ("Judgment") or statute, law (including common law), ordinance, rule or
regulation ("Applicable Law") applicable to such Preferred Seller or any of its
properties or assets. No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or filing with, any
Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity"), is
required to be obtained or made by or with respect to such Preferred Seller or
any of its affiliates in connection with the execution, delivery and performance
of this Agreement or the
6
consummation of the Acquisition or the other transactions contemplated to be
consummated by it hereby other than compliance with and filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if required.
SECTION 2.04. THE PREFERRED SHARES. Such Preferred Seller is
the record and beneficial owner of, and has good and valid title to, in the case
of Sylvan, 15,000 shares of the Class A Preferred Shares, in the case of
Pyramid, 5,000 shares of the Class A Preferred Shares and 2,500 shares of the
Class B Preferred Shares and, in the case of GE Cap-Eq, 7,500 shares of the
Class B Preferred Shares, in each case, free and clear of all Liens. Assuming
Purchaser has the requisite power and authority to be the lawful owner of the
Preferred Shares, upon delivery to Purchaser at the Closing of certificates
representing, in the case of Sylvan, the Class A Preferred Shares owned by it,
in the case of Pyramid, the Class A Preferred Shares and the Class B Preferred
Shares owned by it and, in the case of GE Cap-Eq, the Class B Preferred Shares
owned by it, duly endorsed by such Preferred Seller for transfer to Purchaser,
and upon receipt of, in the case of Sylvan, the Sylvan Purchase Price, in the
case of Pyramid, the Pyramid Purchase Price, and in the case of GE Cap-Eq, the
GE Purchase Price, good and valid title to the Preferred Shares will pass to
Purchaser, free and clear of any Liens, other than those arising from acts of
Purchaser or its affiliates. Other than this Agreement and the agreements set
forth in Schedule 2.04, the Preferred Shares owned by such Preferred Seller are
not subject to any voting trust agreement or other Contract, including any
Contract restricting or otherwise relating to the voting, dividend rights or
disposition of such Preferred Shares. Other than the Preferred Shares owned by
such Preferred Seller, such Preferred Seller does not own of record or
beneficially any shares of capital stock of the Company.
SECTION 2.05. PRIVATE OFFERING. None of such Preferred Seller,
its affiliates and its representatives has sold or offered any of the Preferred
Shares or any other security of the Company to any person under circumstances
that would cause the sales of the Shares, as contemplated by this Agreement, to
be subject to the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Assuming the representations of SSC and the
Company contained in Section 4.26 and those of Purchaser contained in Section
5.05 are true and correct, the sale and delivery of the Preferred Shares owned
by such Preferred Seller hereunder are exempt from the registration and
prospectus delivery requirements of the Securities Act.
7
SECTION 2.06. NO CLAIMS. None of such Preferred Seller or any
of its affiliates is a party to any Contract with the Company, except as
disclosed in Schedule 2.06. Other than its rights as the owner of the Preferred
Shares owned by it, all of which rights will be sold and transferred to
Purchaser at the Closing, none of such Preferred Seller or any of its affiliates
has, and from and after the Closing none of them will have, any rights or claims
against or in respect of the Company, except as disclosed in Schedule 2.06.
SECTION 2.07. TAXES. Such Preferred Seller is
not a "foreign person" within the meaning of Section 1445 of
the Code (as defined in Section 4.15).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SSC
SSC hereby represents and warrants to Purchaser, as of the
date of this Agreement and as of the Closing Date, as follows:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. SSC is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its business as presently conducted. SSC has delivered to
Purchaser true and complete copies of its certificate of incorporation and
by-laws, in each case as amended through the date of this Agreement.
SECTION 3.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. SSC has full power and authority to execute this Agreement and
to consummate the sale of the Common Shares and the other transactions
contemplated to be consummated by it hereby. The execution and delivery by SSC
of this Agreement and the consummation by SSC of the Acquisition and the other
transactions contemplated to be consummated by it hereby have been duly
authorized by all necessary corporate action on the part of SSC and its sole
stockholder. SSC has duly executed and delivered this Agreement, and this
Agreement constitutes, its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
8
SECTION 3.03. NO CONFLICTS; CONSENTS. The execution and
delivery by SSC of this Agreement do not, and the consummation of the
Acquisition and the other transactions contemplated hereby and compliance by SSC
with the terms hereof will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of SSC under, any provision of
(i) the certificate of incorporation or by-laws of SSC, (ii) except as disclosed
in Schedule 3.03, any Contract to which SSC is a party or by which it or any of
its properties or assets is bound or (iii) any Judgment or Applicable Law
applicable to SSC or any of its properties or assets. No Consent of, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to SSC or any of its affiliates in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby,
other than compliance with and filings under the HSR Act, if required.
SECTION 3.04. THE COMMON SHARES. SSC is the record and
beneficial owner of, and has good and valid title to, the Common Shares, free
and clear of all Liens. Assuming Purchaser has the requisite power and authority
to be the lawful owner of the Common Shares, upon delivery to Purchaser at the
Closing of certificates representing the Common Shares, duly endorsed by SSC for
transfer to Purchaser, and upon SSC's receipt of the Common Purchase Price, good
and valid title to the Common Shares will pass to Purchaser, free and clear of
any Liens, other than those arising from acts of Purchaser or its affiliates.
Other than this Agreement and the agreements set forth in Schedule 2.04, the
Common Shares are not subject to any voting trust agreement or other Contract,
including any Contract restricting or otherwise relating to the voting, dividend
rights or disposition of the Common Shares.
SECTION 3.05. BUSINESS OF SSC. SSC is a holding company, the
sole asset of which consists of the Common Shares. SSC is not engaged in any
business other than holding the Common Shares.
SECTION 3.06. FINANCIAL STATEMENTS.
(a) Schedule 3.06 sets forth SSC's unconsolidated balance sheet as of December
31, 1998 (the "SSC Balance Sheet").
9
The SSC Balance Sheet has been prepared in conformity with generally accepted
accounting principles ("GAAP"), subject to the absence of footnotes, and on that
basis fairly presents the financial condition of SSC as of December 31, 1998.
(b) Except as set forth in Schedule 3.06, SSC does not have
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except (i) as disclosed, reflected or reserved against
in the SSC Balance Sheet, (ii) for liabilities incurred in the ordinary course
of business consistent with past practice since the date of the SSC Balance
Sheet and (iii) for Taxes (as defined in Section 4.15).
SECTION 3.07. NO CLAIMS. None of SSC or any of its affiliates
is a party to any Contract with the Company, except as disclosed in Schedule
2.06 or 3.07. Other than its rights as the owner of the Common Shares, all of
which rights will be sold and transferred to Purchaser at the Closing, none of
SSC or any of its affiliates has, and from and after the Closing none of them
will have, any rights or claims against or in respect of the Company, except as
disclosed in Schedule 2.06 or Schedule 3.07.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SSC AND THE COMPANY RELATING TO THE COMPANY
SSC and the Company hereby jointly and severally represent and
warrant to Purchaser, as of the date hereof and as of the Closing Date, as
follows:
SECTION 4.01. ORGANIZATION AND STANDING; BOOKS AND RECORDS.
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. The Company has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals, the lack of which, individually or in the
aggregate, would not have a material adverse effect (i) on the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company, (ii) on the ability of the Company to perform its obligations under
this Agreement or (iii) on the ability of the parties to consummate the
Acquisition and the
10
other transactions contemplated hereby (a "Company Material Adverse Effect").
The Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the conduct or nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not have a Company
Material Adverse Effect. A list of the jurisdictions in which the Company is so
qualified is set forth in Schedule 4.01. Except as set forth in Schedule 4.01
and except for non-compete agreements set forth in Schedule 4.09, the Company is
not subject to, bound by or a party to any Contract, or subject to any charter
or other corporate restriction which is reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) The Company has delivered to Purchaser prior to the
execution of this Agreement true and complete copies of (i) the articles of
incorporation and by-laws, each as amended to date, of the Company. Except as
and to the extent disclosed in Schedule 4.01, the stock certificate and transfer
books and the minute books of the Company (which have been made available for
inspection by Purchaser prior to the date hereof) are true and complete.
SECTION 4.02. CAPITAL STOCK OF THE COMPANY. The authorized
capital stock of the Company consists of 120,565,000 shares of Class A Common
Stock, par value $0.001 per share, of which 1,000 shares, constituting the
Common Shares, are issued and outstanding, 20,000 shares of Class A Preferred
Stock, par value $0.01 per share, of which 20,000 shares, constituting the Class
A Preferred Shares, are issued and outstanding, and 10,000 shares of Class B
Preferred Stock, par value $0.01 per share, of which 10,000 shares, constituting
the Class B Preferred Shares, are issued and outstanding. Except for the
Shares, there are no shares of capital stock or other equity securities of the
Company issued, reserved for issuance or outstanding. The Shares are duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the Illinois Business Corporation Act of 1983, the articles of incorporation or
by-laws of the Company or any Contract to which the Company is a party or by
which the Company is otherwise bound. There are not any bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
11
any matters on which holders of Shares may vote ("Voting Company Debt"). Except
as set forth above and under the Rights Plan and the arrangements for payment of
certain fixed sales bonuses ("Fixed Sales Bonuses") pursuant to letter
agreements dated January 11, 1999 which provide for a maximum aggregate amount
payable by the Company of $912,500, there are not any options, warrants, rights,
convertible or exchangeable securities, "phantom" stock rights or other
commitments to which the Company is a party or by which it is bound (i)
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
in, or any security convertible or exercisable for or exchangeable into any
capital stock of or other equity interest in, the Company or any Voting Company
Debt, (ii) obligating the Company to issue, grant, extend or enter into any such
option, warrant, right, security or other commitment, or (iii) that give any
person the right to receive any economic benefit or right similar to or derived
from the economic benefits and rights accruing to holders of Shares. Except as
provided in the Articles of Incorporation of the Company, as amended, there are
not any outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company.
SECTION 4.03. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. The Company has full power and authority to execute this
Agreement and to consummate the transactions contemplated to be consummated by
it hereby. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated to be consummated
by it hereby have been duly authorized by all necessary corporate action. The
Company has duly executed and delivered this Agreement and this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 4.04. NO CONFLICTS; CONSENTS. The execution and
delivery by the Sellers and the Company of this Agreement do not, and the
consummation of the Acquisition and the other transactions contemplated hereby
and compliance by the Sellers and the Company with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or to material increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any Lien upon any
of the properties or assets of the Company under,
12
any provision of (i) the articles of incorporation or by-laws of the Company,
(ii) except as disclosed in Schedule 4.04, any Contract to which the Company is
a party or by which it or any of its properties or assets is bound or (iii) any
Judgment or Applicable Law applicable to the Company or any of its affiliates or
any of its properties or assets. No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to the Company or any of its affiliates in connection with the
execution, delivery and performance of this Agreement or the consummation of the
Acquisition or the other transactions contemplated hereby, other than compliance
with and filings under the HSR Act. Except as set forth in Schedule 4.04, no
additional Consents from third parties are necessary or appropriate in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Acquisition or the other transactions contemplated hereby.
SECTION 4.05. FINANCIAL STATEMENTS. (a) Schedule 4.05 sets
forth the Company's audited balance sheet as of December 31, 1996, and its draft
audited balance sheets as of December 31, 1997, and December 31, 1998 (the
"Balance Sheet"), and the related statements of operations, stockholders'
deficit and cash flows of the Company for the fiscal years then ended, together
with the notes to such financial statements and, in the case of the audited
financial statements, the report thereon of PricewaterhouseCoopers LLP and, in
the case of the draft audited financial statements as of and for the fiscal
years ended December 31, 1997 and December 31, 1998, a draft of the report
thereon of PricewaterhouseCoopers LLP (collectively and including the financial
statements delivered pursuant to Section 6.18, the "Financial Statements"), and
drafts of the Company's financial statements as of and for the three months
ended March 31, 1999 compared with the three months ended March 31, 1998. The
Financial Statements have been prepared in conformity with GAAP consistently
applied (except in each case as described in the notes thereto) and on that
basis fairly present the financial condition and results of operations and cash
flows of the Company as of the respective dates thereof and for the respective
periods indicated.
(b) The Company does not have any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except (i) as disclosed, reflected or reserved against in the Balance Sheet and
the notes thereto, (ii) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the Balance
Sheet (or disclosed
13
in the Schedules hereto) and not in violation of this Agreement, (iii) for
matters disclosed on Schedule 4.16 or matters that would be required to be
disclosed on Schedule 4.16 if such matters related to or involved more than
$100,000, (iv) liabilities and obligations under any Contract disclosed in the
Schedules hereto or that is not required to be disclosed in the Schedules hereto
and (v) for Taxes.
SECTION 4.06. ASSETS OTHER THAN REAL PROPERTY INTERESTS. (a)
The Company has good and marketable title to all the assets reflected on the
Balance Sheet or thereafter acquired, other than those disposed of since the
date of the Balance Sheet in the ordinary course of business consistent with
past practice, in each case free and clear of all mortgages, liens, security
interests, charges, easements, leases, subleases, covenants, rights of way,
options, claims, restrictions or encumbrances of any kind (collectively,
"Liens"), except (i) such Liens as are set forth in Schedule 4.06 (all of which
shall be discharged at or prior to the Closing), (ii) mechanics', carriers',
workmen's, repairmen's or other like Liens arising or incurred in the ordinary
course of business, Liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business and liens for Taxes that are not due and payable or
that may thereafter be paid without penalty, (iii) Liens that secure Company
Indebtedness that are reflected as liabilities on the Balance Sheet or Liens the
existence of which is referred to in the notes to the Balance Sheet and (iv)
other imperfections of title or encumbrances, if any, that, individually or in
the aggregate, do not materially impair, and could not reasonably be expected
materially to impair, the continued use and operation of the assets to which
they relate in the conduct of the business of the Company as presently conducted
(the Liens described in clauses (ii) and (iv) above, together with the Liens
referred to in clauses (iii) and (iv) of Section 4.07, are referred to
collectively as "Permitted Liens").
(b) This Section 4.06 does not relate to real property or
interests in real property, such items being the subject of Section 4.07, or to
Intellectual Property, such items being the subject of Section 4.08.
SECTION 4.07. REAL PROPERTY. The Company does not own any real
property. Schedule 4.07 sets forth a complete list of all real property and
interests in real property leased by the Company (individually, a "Leased
Property"). Except as set forth in Schedule 4.07, the
14
Company has good and valid title to the leasehold estates in all Leased
Property, in each case free and clear of all Liens, except (i) Liens described
in clause (ii), (iii) or (iv) of Section 4.06(a), (ii) such Liens as are set
forth in Schedule 4.08, (iii) subleases and similar agreements set forth in
Schedule 4.09 and (iv) Liens that have been placed by any landlord or other
third party on any Leased Property. None of the items set forth in clause (iv)
above, individually or in the aggregate, materially impairs, or could reasonably
be expected materially to impair, the continued use and operation of the Leased
Property to which they relate in the conduct of the business of the Company as
presently conducted.
SECTION 4.08. INTELLECTUAL PROPERTY.
(a) DEFINITIONS. For purposes of this Agreement:
(i) "Intellectual Property" means trademarks and service marks
(whether registered or unregistered) and trade names (collectively,
"Trademarks"); patents (including any continuations, continuations in
part, renewals and applications for any of the foregoing)
(collectively, "Patents"); copyrights (including any registrations and
applications therefor and whether registered or unregistered)
(collectively, "Copyrights"); Software (as defined below); works of
authorship; mask works; technology; trade secrets, know-how,
proprietary processes, formulae, algorithms, models, user interfaces,
inventions, discoveries, concepts, ideas, techniques, methods, source
codes, object codes, methodologies and, with respect to all of the
foregoing, related confidential data or information (collectively,
"Trade Secrets"); but excluding any limited copyright license or
permission from authors, publishers or other parties to use material in
the Company's products that have no future payment obligations.
(ii) "Material Inbound License Agreements" means all license
agreements granting to the Company any material right to use
Intellectual Property, but does not include (w) development tools
software under pre-paid license agreements, (x) office automation
software used generally in the Company's operations and (y) other
software not used in the design, development, maintenance and support,
testing, assembly and manufacture of the Company's products, that, in
the case of clause (w), (x) or (y), is commercially available for a
license fee of less than $100,000 per annum.
15
(iii) "Material Outbound License Agreements" means all license
agreements under which the Company grants material rights to others to
use Intellectual Property owned by the Company, but does not include
agreements with customers for the use of Company products on customary
terms granted by the Company to its customers generally ("Customer
Agreements").
(iv) "Software" means any and all (i) computer programs,
including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, (ii)
databases and compilations, including any and all data and collections
of data, whether machine readable or otherwise, (iii) descriptions,
flowcharts and other work product used to design, plan, organize and
develop any of the foregoing, and (iv) all documentation, including
user manuals and training materials, relating to any of the foregoing.
(b) TRADEMARKS, PATENTS AND COPYRIGHTS. (i) Schedule 4.08 sets
forth a true and complete list of all United States and foreign (x)
Trademark registrations and applications by the Company and material
unregistered Trademarks of the Company and (y) copyright registrations
and applications by the Company, indicating for each, the applicable
jurisdiction, registration number (or application number), and date
issued (or date filed). The Company does not own any Patents.
(ii) All Trademark registrations in the United States are
currently in compliance in all material respects with all legal
requirements (including the timely post registration filing of
affidavits of use and incontestability and renewal applications) other
than any requirement that, if not satisfied, would not result in a
cancellation of any such registration or otherwise materially affect
the priority and enforceability of the Trademark in question.
(iii) Except as set forth in Schedule 4.08, no registered
Trademark has been since June 29, 1995 (the "Original Purchase Date"),
or is now involved in any material opposition or cancellation
proceeding in the United States Patent and Trademark Office. To the
knowledge of SSC and the Company, no such action has been threatened in
writing since the Original Purchase Date.
16
(iv) Except as set forth in Schedule 4.08, to the knowledge of
SSC and the Company, there has been no prior use of any material
Trademark by any third party which would confer upon such third party
superior rights in any such Trademark.
(v) All material Trademarks registered in the United States
have been in continuous use by the Company.
(c) LICENSE AGREEMENTS. (i) Schedule 4.08 sets forth a true
and complete list of Material Inbound License Agreements and Material Outbound
License Agreements, indicating for each the title and the parties thereto and
the amount of any future royalty or license fee payable thereunder. The Company
has made available to the Purchaser true and complete copies of all Material
Inbound License Agreements and Material Outbound License Agreements. There is no
material outstanding or, to the knowledge of either SSC or the Company,
threatened dispute or disagreement with respect to any Material Inbound License
Agreement or any Material Outbound License Agreement. Except as set forth in
Schedule 4.08, no Material Outbound License Agreement contains noncompete or
other material restrictions on the sale or distribution of the Company's
products or services.
(ii) Except pursuant to the Material Outbound License
Agreements and as set forth in Schedule 4.08, (x) the Company has not
granted any third party the right to sublicense, distribute, sell or
acquire title to any Intellectual Property of the Company, including
the Software comprising the Company's products, and (y) the Company has
not granted any third party a license (contingent or otherwise) with
respect to the source code for such Software.
(d) SOFTWARE. The Software owned by the Company was either:
(i) developed by employees of Company within the
scope of their employment;
(ii) developed by independent contractors who have
assigned their rights to the Company pursuant to
written agreements; or
(iii) otherwise acquired by the Company from a third
party on an arm's-length commercially reasonable basis;
17
in each case, except to the extent that it would not materially impair the
Company's right to use or sublicense the Software.
The Company's currently marketed and material Software
products listed in Schedule 4.08 operate substantially in accordance with the
written specifications and end-user documentation approved by the Company,
provided such Software is utilized in accordance with the Company's recommended
hardware configurations.
(e) OWNERSHIP; SUFFICIENCY OF INTELLECTUAL PROPERTY ASSETS.
The Intellectual Property owned by the Company is free and clear of all Liens
other than Permitted Liens. The Intellectual Property owned by the Company,
together with the Company's rights to Intellectual Property under licenses
granted to the Company, are all the Intellectual Property rights necessary to
operate the Company's business after the Closing in substantially the same
manner as such business has been operated by the Company prior thereto. The
consummation of the transactions contemplated by this Agreement will not impair
the Company's rights to use or sublicense Intellectual Property rights used in
the Company's business.
(f)PROTECTION OF INTELLECTUAL PROPERTY. The Company enforces a
policy of requiring each relevant employee, consultant and contractor to execute
confidentiality and work-for-hire agreements substantially in the forms made
available to Purchaser that reserve to the Company all rights to any
Intellectual Property rights relating to the Company's business and that
otherwise appropriately protect the Intellectual Property of the Company, and,
to the knowledge of SSC and the Company, except under confidentiality
agreements, there has been no disclosure by the Company of material confidential
information. Except as set forth in Schedule 4.08, the Company has not provided
any third party access to, or the right to modify, any source code of the
Software comprising the Company's products.
(g) NO INFRINGEMENT BY THE COMPANY. To the knowledge of SSC
and the Company, the products used, marketed, sold or licensed by the Company,
and the Company's use of the Intellectual Property used in the conduct of the
Company's business as currently conducted, do not infringe upon, violate or
constitute the unauthorized use of any rights owned or controlled by any third
party, including any Intellectual Property of any third party. Except as set
forth in Schedule 4.08, (i) no claims are pending or, to the knowledge of SSC
and the Company, threatened against the
18
Company by any person with respect to the ownership, validity, enforceability,
effectiveness or use in the business of the Company of any Intellectual Property
that would materially impair the Company's right to use or sublicense such
Intellectual Property and (ii) since the Original Purchase Date, neither SSC nor
the Company has received any written communication alleging that the Company
violated any rights relating to Intellectual Property of any person.
(h) NO INFRINGEMENT BY THIRD PARTIES. Except as set forth in
Schedule 4.08, to the knowledge of SSC and the Company, no third party is
currently misappropriating, infringing, diluting, or violating any Intellectual
Property owned or exclusively licensed to the Company, and since May 1, 1996, no
such claims have been brought against any third party by the Company.
SECTION 4.09. CONTRACTS. (a) Except as set forth in Schedule
4.09, the Company is not a party to or bound by any:
(i) employment agreement with any current employee or officer
of the Company whose salary is in excess of $100,000, Contract with any
current or former director, consultant or independent contractor of the
Company that has an aggregate future liability in excess of $75,000 or
employment agreement or Contract providing for severance obligation in
excess of $50,000;
(ii) covenant not to compete or other covenant restricting the
development, manufacture, marketing or distribution of the products and
services of the Company (it being understood that this does not relate
to the scope of licenses granted to the Company);
(iii) Contract (other than this Agreement and those agreements
set forth in Schedule 2.06) with (A) any Seller or any affiliate of any
Seller or (B) any current or former officer or employee of the Company,
SSC or any affiliate of SSC (other than employment agreements covered
by clause (i) above and other than, in the case of clause (B), any
employment agreement or Contract the only obligations under which are
severance obligations fully accrued on the Company's balance sheet as
of March 31, 1999) that has an aggregate future liability in excess of
$75,000;
(iv) sublease or similar Contract with any person under which
the Company is a sublessor of, or makes available for use to any
person, any Leased Property;
19
(v) lease, sublease or similar Contract with any person under
which (A) the Company is lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by any
person or (B) the Company is a lessor or sublessor of, or makes
available for use by any person, any tangible personal property owned
or leased by the Company, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of
$100,000;
(vi) (A) continuing Contract for the future purchase of
materials, supplies or equipment (other than hardware pass-through
contracts in the ordinary course of business consistent with past
practice), (B) management, service, consulting or other similar
Contract or (C) advertising agreement or arrangement; in any such case
which has an aggregate future liability to any person in excess of
$150,000;
(vii) Contract under which the Company has borrowed any money
from, or issued any note, bond, debenture or other evidence of
indebtedness to, any person or any other note, bond, debenture or other
evidence of indebtedness of the Company;
(viii) Contract (including any so-called take-or-pay or
keepwell agreements) under which (A) any person has directly or
indirectly guaranteed indebtedness, liabilities or obligations of the
Company or (B) the Company has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any person, (in each case
other than endorsements for the purpose of collection in the ordinary
course of business);
(ix) Contract under which the Company has, directly or
indirectly, made any advance or loan to, or other investment in, any
person, other than employee travel and relocation loans and allowances
that individually are not in excess of $10,000;
(x) Contract granting a Lien upon any asset of the
Company;
(xi) Contract providing for indemnification of any person with
respect to liabilities relating to any former business of the Company
or any predecessor person;
(xii) a power of attorney (other than a power of attorney
given in the ordinary course of business with respect to routine tax
matters);
20
(xiii) a Contract (including a sales order) involving the (x)
future obligation of the Company to deliver products or services for
payment of more than $150,000 or (y) obligation of the Company
extending for a term more than 365 days from the date of this Agreement
and involving a future obligation of more than $100,000 (in the case of
either clause (x) or clause (y), unless terminable without payment or
penalty upon no more than 60 days' notice);
(xiv) a Contract for the sale of any asset of the Company
(other than inventory sales in the ordinary course of business) or the
grant of any preferential rights to purchase any such asset or
requiring the consent of any party to the transfer thereof;
(xv) a Contract with any Governmental Entity (other than any
school or school district);
(xvi) a currency exchange, interest rate exchange, commodity
exchange or similar Contract;
(xvii) a Contract for any joint venture, partnership or
similar arrangement;
(xviii) a Contract providing for the services of any dealer,
distributor, sales representative, franchisee or similar representative
involving the payment or receipt over the past year in excess of
$100,000 by the Company;
(xix) other Contract that has an aggregate future liability to
any person in excess of $150,000 and is not terminable by the Company
by notice of not more than 60 days for a cost of less than $25,000
(other than purchase orders and sales orders); or
(xx) a Contract other than as set forth above to which the
Company is a party or by which it or any of its assets or properties is
bound or subject that is material to the business of the Company or the
use or operation of its assets, properties or businesses.
(b) Except as set forth in Schedule 4.09, all Contracts listed
in the Schedules (the "Company Contracts") are valid, binding and in full force
and effect and are enforceable by the Company in accordance with their terms
except as to the availability of equitable remedies. Except as set forth in
Schedule 4.09, the Company has performed all material obligations required to be
performed by it to date under the Company Contracts, and it is not (with or
without
21
the lapse of time or the giving of notice, or both), and it is not alleged in
writing to be, in breach or default in any material respect thereunder and, to
the knowledge of SSC and the Company, no other party to any Company Contract is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. Neither SSC nor the Company has,
except as disclosed in the applicable Schedule, received any notice of the
intention of any party to terminate any Company Contract. Complete and correct
copies of all Company Contracts, together with all modifications and amendments
thereto, have been made available to Purchaser.
SECTION 4.10. INVENTORY. Each item of inventory of the
Company, whether reflected on the Balance Sheet or subsequently acquired, (a)
net of any applicable reserves, is free of any material defect or deficiency,
(b) net of any applicable reserves, is in good, usable and currently marketable
condition in the ordinary course of the business of the Company and (c) is
properly reflected in the books and records of the Company at the lesser of cost
and fair market value, with adequate obsolescence reserves, all as determined in
accordance with GAAP.
SECTION 4.11. PERSONAL PROPERTY. Each material item of
personal property of the Company is in good working order (ordinary wear and
tear excepted), is free from any material defect and has been maintained in all
material respects in accordance with the past practice of the Company, and no
repair, replacement or regularly scheduled maintenance relating to any such item
has been deferred. All leased personal property of the Company is in all
material respects in the condition required of such property by the terms of the
lease applicable thereto.
SECTION 4.12. RECEIVABLES. All the accounts receivable of the
Company (a) represent actual indebtedness incurred by the applicable account
debtors, (b) have arisen from bona fide transactions and (c) are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserves for doubtful accounts reflected on the Balance Sheet. Since the date of
the Balance Sheet, there have not been any write-offs as uncollectible of any
customer accounts receivable of the Company, except for write-offs in the
ordinary course of the business of the Company and consistent with past
practice.
SECTION 4.13. PERMITS. Schedule 4.13 sets forth
all material certificates, licenses, permits, authorizations
and approvals ("Permits") issued or granted to the Company.
Except as set forth in Schedule 4.13, (i) all such Permits
22
are validly held by the Company, and the Company has complied in all material
respects with all terms and conditions thereof, (ii) since May 1, 1996, neither
SSC nor the Company has received written notice of any suit, action or
proceeding (a "Proceeding") relating to the revocation or modification of any
such Permits, the loss of which, individually or in the aggregate, has had or
could reasonably be expected to have a Company Material Adverse Effect, and
(iii) none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. All
Permits that are held in the name of any employee, officer, director,
stockholder, agent or otherwise on behalf of the Company shall be deemed
included under this warranty.
SECTION 4.14. INSURANCE. The Company maintains policies of
fire and casualty, liability and other forms of insurance in such amounts, with
such deductibles and against such risks and losses as are, in SSC's and the
Company's judgment, reasonable for the business and assets of the Company. The
insurance policies maintained with respect to the Company and its assets and
properties are set forth on Schedule 4.14. All such policies are in full force
and effect, all premiums due and payable thereon have been paid (other than
retroactive or retrospective premium adjustments that are not yet, but may be,
required to be paid with respect to any period ending prior to the Closing
Date), and no notice of cancellation or termination has been received with
respect to any such policy which has not been replaced on substantially similar
terms prior to the date of such cancellation. Except as set forth in Schedule
4.14, to the knowledge of SSC and the Company, the activities and operations of
the Company have been conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies.
SECTION 4.15. TAXES. (a) For purposes of this
Agreement:
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Post-Closing Tax Period" shall mean any taxable period (or
portion thereof) that begins after the Closing Date.
"Pre-Closing Tax Period" shall mean all taxable periods (or
portions thereof) ending on or before the Closing Date.
23
"Tax" or "Taxes" shall mean all Federal, state, county, local,
municipal, foreign and other taxes, assessments, duties or similar charges of
any kind whatsoever, including all corporate franchise, income, sales, use, ad
valorem, receipts, value added, profits, license, withholding, payroll,
employment, excise, premium, property, customs, net worth, capital gains,
transfer, stamp, documentary, social security, environmental, alternative
minimum, occupation, recapture and other taxes, and including all interest,
penalties and additions imposed with respect to such amounts, and all amounts
payable pursuant to any agreement or arrangement with respect to Taxes.
"Taxing Authority" shall mean any domestic, foreign, Federal,
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.
"Tax Return" or "Tax Returns" shall mean all returns,
declarations of estimated tax payments, reports, estimates, information returns
and statements, including any related or supporting information with respect to
any of the foregoing, filed or to be filed with any Taxing Authority in
connection with the determination, assessment, collection or administration of
any Taxes.
"Transfer Tax" means any transfer, documentary, recording,
stamp, sales, intangibles, ad valorem or other similar transactional tax.
(b) Except as set forth in Schedule 4.15, (i) the Company and
any affiliated group, within the meaning of Section 1504 of the Code, of which
the Company is or has been a member, has filed or caused to be filed in a timely
manner (within any applicable extension periods) all material Tax Returns
required to be filed by the Code or by applicable state, local or foreign tax
laws, (ii) all material Taxes with respect to taxable periods covered by such
Tax Returns, and all other material Taxes for which the Company or any such
group is or might otherwise be liable have been timely paid in full or will be
timely paid in full by the due date thereof and the most recent Financial
Statements reflect an adequate reserve (in accordance with GAAP) for all Taxes
payable by the Company for all taxable periods and portions thereof through the
date of such Financial Statements, and (iii) no Liens exist for Taxes (other
than Liens for Taxes not yet due and payable) with respect to any of the assets
or properties of the Company or any such group.
24
(c) No Tax Returns of the Company or any affiliated group of
which the Company is or has ever been a member have ever been examined by the
Internal Revenue Service. No Tax Returns of the Company or any such group are
under audit or examination by any Taxing Authority, and no written notice of any
such audit or examination has been received by the Company or any such group.
(d) Any deficiency resulting from any audit or examination
relating to Taxes by any Taxing Authority has been timely paid. No issues
relating to Taxes were raised in writing by the relevant Taxing Authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. The Tax Returns of the Company, SSC and JLC Holdings, Inc.
with respect to Federal income Taxes have been examined by the Internal Revenue
Service, or the statute of limitations with respect to the assessment or
collection of the relevant Tax liability has expired, for all taxable periods
through and including the year ended December 31, 1994. The Company has made
available to Purchaser documents setting forth the dates of the most recent
audits or examinations of the Company or any affiliated group of which the
Company is or has ever been a member by any Taxing Authority in respect of
Federal, foreign and state and local Taxes for all taxable periods for which the
statute of limitations has not yet expired.
(e) Except as set forth in Schedule 4.15, neither the Company
nor the affiliated group that includes the Company, SSC and JLC Holdings, Inc.
is party to or bound by any tax-sharing agreement, tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes (including any
advance pricing agreement, closing agreement or other agreement relating to
Taxes with any Taxing Authority).
(f) Other than deferred revenue of $22,976,000 as of December
31, 1998, neither the Company nor the affiliated group that includes the
Company, SSC and JLC Holdings, Inc. shall be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the long-term
contract method of accounting, the cash method of accounting or Section 481 of
the Code or any comparable provision of state, local, or foreign Tax law, or for
any other reason.
(g) None of SSC, JLC Holdings, Inc. or any of its affiliates
has made with respect to the Company or the affiliated group that includes the
Company, SSC and JLC
25
Holdings, Inc., or any property held by the Company or such group, any consent
under Section 341 of the Code, no property of the Company or such group is "tax
exempt use property" within the meaning of Section 168(h) of the Code, neither
the Company nor such group is a party to any lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, and none of the assets of the
Company or such group is subject to a lease under Section 7701(h) of the Code or
under any predecessor section thereof.
(h) Except as set forth in Schedule 4.15, (i) neither the
Company nor any affiliated group of which the Company is or has ever been a
member has outstanding any agreements or waivers extending, or having the effect
of extending, the statute of limitations with respect to the assessment or
collection of any Tax, (ii) other than extensions to file for the year ended
December 31, 1998, neither the Company nor any affiliated group, within the
meaning of Section 1504 of the Code, of which the Company is or has been a
member, has requested any extension of time within which to file any Tax Return,
which return has not yet been filed, and (iii) no power of attorney with respect
to any Taxes has been executed or filed with any Taxing Authority by or on
behalf of the Company or any affiliated group of which the Company is or has
ever been a member.
(i) The Company and any affiliated group of which the Company
is or has ever been a member have complied in all material respects with all
Applicable Laws relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code
or any comparable provision of any state, local or foreign laws) and have,
within the time and in the manner prescribed by Applicable Law, withheld from
and paid over to the proper Taxing Authorities all amounts required to be so
withheld and paid over under Applicable Laws.
(j) The Company has delivered to Purchaser for inspection (i)
complete and correct copies of all Federal and other material Tax Returns of the
Company and any affiliated groups of which the Company is or has ever been a
member relating to Taxes for all taxable periods beginning on or after June 29,
1995 and (ii) complete and correct copies of all private letter rulings, revenue
agent reports, information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements, settlement
agreements, pending ruling requests, and any similar documents, submitted by,
received by or agreed to by or on behalf of the Company or any such group, or,
to the extent related to the income, business, assets, operations, activities or
status of the Company or
26
any such group, submitted by, received by or agreed to by or on behalf of any
affiliated group of which the Company is or has ever been a member, and relating
to Taxes for all taxable periods for which the statute of limitations has not
yet expired.
(k) Schedule 4.15 sets forth (i) each jurisdiction in which
the Company or the affiliated group that includes the Company, SSC and JLC
Holdings, Inc. joins or has joined for any taxable period ending after 1995 in
the filing of any consolidated, combined or unitary Tax Return, and (ii) the
common parent corporation and the other individual members of the consolidated,
combined or unitary group filing such Tax Return.
(l) Schedule 4.15 sets forth each state, county, local,
municipal or foreign jurisdiction in which the Company or any affiliated group
of which the Company is or has ever been a member files, is required to file or
has been required to file a Tax Return relating to state and local income,
franchise, license, excise, net worth, property or sales and use taxes or is or
has been liable for any Taxes on a "nexus" basis at any time for taxable periods
ending after 1995.
(m) There is no accrual for deferred Taxes (whether on a gross
or net basis) reflected on the Company's most recent balance sheet included in
the Financial Statements.
(n) The Company is not a "United States real property holding
corporation" within the meaning of Section 897 of the Code.
(o) SSC is not a "foreign person" within the meaning of
Section 1445 of the Code.
(p) On the Closing Date and immediately prior to the Closing,
the Company will be a member of the consolidated group, within the meaning of
Treasury Regulation Section 1.1502-1(h), of which JLC Holdings, Inc. is the
common parent and which includes SSC, and such consolidated group will actually
file a consolidated Federal income Tax Return for the taxable year including the
Closing Date.
(q) Schedule 4.15 sets forth the following information with
respect to the Company as of December 31, 1997: (i) the amount of any net
operating loss carryforwards of the Company, (ii) the amount of any deferred
gain or loss allocable to the Company or such group arising out of any deferred
intercompany transaction, and
27
(iii) the aggregate Tax basis in the Company's assets, in each case determined
after giving effect to the amended Tax Returns described in Section 6.09(g) but
without regard to any Tax attribute reduction after the date hereof pursuant to
Section 108(b) of the Code.
SECTION 4.16. PROCEEDINGS. Schedule 4.16 sets forth a list of
each pending or, since May 1, 1996, threatened Proceeding or claim with respect
to which SSC or the Company has been contacted in writing by counsel for the
plaintiff or claimant, against or affecting the Company or its properties,
assets, operations or business and that (a) relates to or involves more than
$100,000 or (b) may give rise to any legal restraint on or prohibition against
the transactions contemplated by this Agreement. Except as set forth in Schedule
4.16, none of the Proceedings or claims listed in Schedule 4.16 as to which
there is at least a reasonable possibility of adverse determination would have,
if so determined, individually or in the aggregate, a Company Material Adverse
Effect. Except as set forth in Schedule 4.16, to the knowledge of SSC and the
Company, there are no unasserted claims of the type that would be required to be
disclosed in Schedule 4.16 if counsel for the claimant had contacted the Company
that are considered probable of assertion and that if asserted would have at
least a reasonable possibility of an adverse determination. To the knowledge of
SSC and the Company, except as set forth in Schedule 4.16, the Company is not a
party or subject to or in default under any Judgment. Except as set forth in
Schedule 4.16, as of the date of this Agreement there is not any Proceeding or
claim by the Company pending, or which the Company intends to initiate, against
any other person. Except as set forth in Schedule 4.16, to the knowledge of SSC
and the Company, there is no pending or threatened investigation of the Company.
SECTION 4.17. EMPLOYEE BENEFIT PLANS. (a) Schedule 4.17
contains a list of each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan"), and each other written plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance, fringe benefits or other employee benefits, in
each case maintained or contributed to, or required to be maintained or
contributed to, by the Company or any other person or entity that, together with
the Company, is or was treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code (each, together
28
with the Company, a "Commonly Controlled Entity") for the benefit of any present
or former officers, employees, agents, directors or independent contractors of
the Company (all the foregoing being herein called "Company Plans"). The Company
has made available to Purchaser true, complete and correct copies of (i) each
Company Plan, (ii) the most recent annual reports on Form 5500 (including all
schedules and attachments thereto) filed with the Internal Revenue Service with
respect to each Company Plan (if any such report was required by Applicable
Law), (iii) the most recent summary plan description (or similar document) for
each Company Plan for which such a summary plan description is required by
Applicable Law or was otherwise provided to plan participants or beneficiaries
and (iv) each trust agreement and insurance or annuity contract or other funding
or financing arrangement relating to any Company Plan.
(b) Each Company Plan has been administered in all material
respects in accordance with its terms. The Company and all the Company Plans are
in compliance in all material respects with the applicable provisions of ERISA,
the Code, all other Applicable Laws and the terms of any applicable collective
bargaining agreements. There are no investigations by any Governmental Entity,
termination proceedings or other claims (except routine claims for benefits
payable under the Company Plans) or proceedings against or involving any Company
Plan or asserting any rights to or claims for benefits under any Company Plan
that could give rise to any liability that could reasonably be expected to have
a Company Material Adverse Effect.
(c) Each Company Pension Plan that is intended to be a
tax-qualified plan has been the subject of a determination letter from the
Internal Revenue Service to the effect that such Company Pension Plan and
related trust is qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code and no such determination letter
has been revoked, and, to the knowledge of SSC and the Company, the Internal
Revenue Service has not threatened to revoke any such determination letter. The
Company has made available to Purchaser a copy of the most recent determination
letter received with respect to each Company Pension Plan for which such a
letter has been issued.
(d) Neither the Company, nor any of the Company Plans or any
trusts created thereunder, nor any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA) which would cause the Company or the Company Plans (or related
trusts) to become subject to any
29
penalty under such applicable ERISA or Code provisions that could reasonably be
expected to have a Company Material Adverse Effect.
(e) No Company Plan is subject to Part 3 of Subtitle B of
Title I of ERISA or Title IV of ERISA or Section 412 of the Code and neither the
Company nor any Commonly Controlled Entity contributes to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any such
multiemployer plan where such withdrawal has resulted or would result in any
"withdrawal liability" (within the meaning of Section 4201 of ERISA) that has
not been fully paid.
(f) Schedule 4.17 discloses each Welfare Plan which is funded
through a "welfare benefit fund", as such term is defined in Section 419(e) of
the Code, or other funding mechanism. Except as disclosed on Schedule 4.17, the
Company does not have any obligations for retiree welfare benefits (other than
COBRA payments) under any Company Plan. Each Welfare Plan may be amended or
terminated prospectively, within a period of 90 days without the imposition of
any material liability to the Company for additional benefits not accrued as of
such amendment or termination.
(g) Except as set forth in Schedule 4.17, as a result of the
transactions contemplated by this Agreement, no employee of the Company will be
entitled to any additional benefits or any acceleration of the time of payment
or vesting of any benefits under any Company Plan or Contract and no amount
payable to any employee would be characterized as an "excess parachute payment"
(as such term is defined in Section 280G of the Code).
SECTION 4.18. ABSENCE OF CHANGES OR EVENTS. Except as set
forth in Schedule 4.18, since December 31, 1998, there has not been any material
adverse change in the business, assets, condition (financial or otherwise),
results of operations or prospects of the Company. Except as set forth in
Schedule 4.18, since December 31, 1998, the business of the Company has been
conducted in the ordinary course and in substantially the same manner as
previously conducted. Except as set forth in Schedule 4.18, since December 31,
1998, to the date of this Agreement, neither the SSC nor the Company has taken
any action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 6.01.
SECTION 4.19. COMPLIANCE WITH APPLICABLE LAWS.
(a) Except as set forth in Schedule 4.19, the Company is in
30
compliance with all Applicable Laws, except for instances of noncompliance that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect. Except as set forth in
Schedule 4.19, neither SSC nor the Company has received any written
communication since May 1, 1996, from any Governmental Entity that alleges that
the Company is not in compliance with any Applicable Law. This Section 4.19(a)
does not relate to matters with respect to Taxes, which are the subject of
Section 4.15, or to environmental matters, which are the subject of Section
4.19(b).
(b) (i) The Company is in compliance in all material respects
with all Environmental Laws (as defined below), and the Company holds all
material permits, licenses, orders, approvals and other authorizations required
under Environmental Laws for the Company to conduct its business as currently
conducted; (ii) neither SSC nor the Company has received any written notice of a
pending or threatened action, demand, investigation or inquiry by any
Governmental Entity or other person relating to any actual or alleged violations
of Environmental Law or any actual or potential obligation to investigate or
take any other action relative to the release or threatened release of any
Hazardous Substances (as defined below); (iii) to the knowledge of SSC and the
Company, the Company has not released or disposed of, or otherwise handled or
permitted the release or disposal of, any Hazardous Substances that could
reasonably be expected to result in any liability under any Environmental Law;
(iv) there are no underground storage tanks on or under any property operated or
leased by SSC or the Company; and (v) all information, data, studies,
assessments, audits or other evaluations related to compliance and or liability
of SSC or the Company under Environmental Laws of which SSC or the Company is
aware have been made available to the Purchaser.
The term "Environmental Law" means the common law and all
Federal, state or local statutes, regulations, ordinances, permits and permit
conditions, administrative and judicial orders, consent decrees, notice letters,
demands or any other governmental requirement relating to health, safety, the
environment (including without limitation ambient air, indoor air, surface and
groundwater, surface and subsurface soils and other natural resources), or to
the manufacture, generation, processing, distribution, use, treatment, storage,
handling, transportation or disposal of Hazardous Substances. Such laws
specifically include but are not limited to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Resource Conservation and
31
Recovery Act ("RCRA"), 42 U.S.C. 6901 ET SEQ., as amended; the Toxic Substances
Control Act ("TSCA"), 15 U.S.C. 2601 ET SEQ., as amended; and the Clean Water
Act, 33 U.S.C. 1251 ET SEQ., as amended; the Clean Air Act, 42 U.S.C. 7401 ET
SEQ., as amended.
The term "Hazardous Substances" means hazardous substances,
pollutants, hazardous constituents, contaminants, toxic substances or any other
chemicals, waste or materials of any kind whatsoever including, without
limitation, crude oil, petroleum, or any fraction thereof.
SECTION 4.20. EMPLOYEE AND LABOR MATTERS. (a) None of the
Company's employees are covered by a collective bargaining agreement, no union
organizational efforts with respect to any employees of the Company are pending
or, to the knowledge of SSC and the Company, are threatened and, to the
knowledge of SSC and the Company, there is no labor dispute, strike, work
stoppage or slowdown pending or threatened that may in any material respect
interfere with the business of the Company or any material liability relating to
any unfair labor or employment practices or any charge or complaint by the
National Labor Relations Board or by any other comparable agency pending or
threatened against the Company.
(b) No employee of the Company is, to the knowledge of SSC and
the Company, a party to or bound by any Contract, or subject to any Judgment
that may interfere with the use of such person's best efforts to promote the
interests of the Company, may conflict with the transactions contemplated hereby
or that has had or could reasonably be expected to have a Company Material
Adverse Effect. To the knowledge of SSC and the Company, no activity of any
employee of the Company as or while an employee of the Company caused a material
violation of any employment contract, confidentiality agreement, or other
Contract to which such employee was a party. To the knowledge of SSC and the
Company, neither the execution and delivery of this Agreement nor the
consummation of the Acquisition will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any Contract
under which any such employee is now obligated.
SECTION 4.21. TRANSACTIONS WITH AFFILIATES. Except as set
forth in Schedule 4.21, none of the Contracts set forth in Schedule 2.06 or 4.09
between the Company, on the one hand, and any Seller or any of its affiliates,
on the other hand, will continue in effect subsequent to the Closing.
32
SECTION 4.22. EFFECT OF TRANSACTION. To the knowledge of SSC
and the Company, no creditor, employee, client, customer or other person having
a material business relationship with the Company has materially changed, or
informed SSC or the Company that such person intends to materially change, such
relationship because of the purchase and sale of the Company or the consummation
of any other transaction contemplated hereby.
SECTION 4.23. DISCLOSURE. No representation or warranty of SSC
or the Company contained in this Agreement, and no written statement directly or
indirectly made to or for the benefit of Purchaser contained in any document,
certificate or Schedule furnished or to be furnished by or on behalf of SSC or
the Company to Purchaser pursuant to this Agreement, contains or will contain on
the Closing Date any untrue statement of a material fact, or omits or will omit
on the Closing Date to state any material fact necessary, in light of the
circumstances under which it was or will on the Closing Date be made, in order
to make the statements herein or therein not misleading; PROVIDED, HOWEVER, that
no such representation or warranty is made as to any Projected Disclosures (as
defined in the next sentence). To the extent that any document, certificate or
Schedule referenced above relates to projections or predictions as to future
performance (in any case, a "Projected Disclosure"), such Projected Disclosure,
when made, was based upon assumptions reasonably believed in good faith to be
reasonable by the person making such Projected Disclosure.
SECTION 4.24. SUPPLIERS. Except as set forth in Schedule 4.24,
between December 31, 1998 and the date of this Agreement, the Company has not
entered into or made any Contract or commitment for the purchase of merchandise
other than in the ordinary course of business consistent with past practice.
Except for the suppliers named in Schedule 4.24, the Company does not have any
supplier from whom it purchased more than 5% of the total amount of goods and
services which it purchased during its most recent full fiscal year. Except as
set forth in Schedule 4.24, since December 31, 1998, there has not been (i) any
material adverse change in the business relationship of the Company with any
supplier of merchandise named in Schedule 4.24 or (ii) any change in any
material term (including credit terms) of the supply agreements or related
arrangements with any such supplier.
SECTION 4.25. CUSTOMERS. Schedule 4.25 sets
forth the top 10 customers of the Company on the basis of
total sales during its most recent full fiscal year. Except
33
as set forth in Schedule 4.25, since December 31, 1998, there has not been (i)
any material adverse change in the business relationship of the Company with any
significant customer of the Company or (ii) any change in any material term
(including credit terms) of the sales agreements or related agreements with any
such customer. During the past year, the Company has not received any customer
complaint concerning its products and services, nor has it had any of its
products returned by a purchaser thereof, other than (x) complaints and (y)
returns in the ordinary course of business, in the case of either clause (x) or
clause (y), that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.26. PRIVATE OFFERING. None of SSC, the Company,
their affiliates and their representatives has issued, sold or offered any
security of the Company to any person under circumstances that would cause the
sales of the Shares, as contemplated by this Agreement to be subject to the
registration requirements of the Securities Act. Assuming the representations of
Purchaser contained in Section 5.05 are true and correct, the sale and delivery
of the Shares hereunder are exempt from the registration and prospectus delivery
requirements of the Securities Act.
SECTION 4.27. SUBSIDIARIES. The Company does not have any
subsidiaries and, except as set forth in Schedule 4.27, does not own, directly
or indirectly, any capital stock or other ownership interest in any person.
SECTION 4.28. YEAR 2000. The Company has engaged in a
reasonably appropriate process of assessment of the existence of limitations in
the capacity of its hardware and software systems associated with information
processing and delivery, billing, payables, management, operations or services
operated by or otherwise reasonably necessary to the business operations of the
Company (collectively, the "Systems") to handle date information and avoid date
processing errors arising from the advent of the year 2000 ("Year 2000
Problems"). Additionally, the Software currently and previously licensed and
sold by the Company to its customers has been analyzed for Year 2000 Problems.
Except with respect to the Systems and the Software identified on Schedule 4.28,
the Company has adopted or is implementing a plan of correction that the Company
reasonably believes will result in a substantial elimination of Year 2000
Problems. SSC and the Company believe that the assessment and correction of Year
2000 Problems, which if not corrected, individually or in the aggregate would
have a
34
Company Material Adverse Effect, will be completed on or prior to October 31,
1999.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers and the
Company, as of the date of this Agreement and as of the Closing Date, as
follows:
SECTION 5.01. ORGANIZATION, STANDING AND POWER. Purchaser is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to acquire and own
the Shares.
SECTION 5.02. AUTHORITY; EXECUTION AND DELIVERY;
ENFORCEABILITY. Purchaser has full power and authority to execute this Agreement
and to consummate the Acquisition and the other transactions contemplated to be
consummated by it hereby. The execution and delivery by Purchaser of this
Agreement and the other transactions contemplated to be consummated by it hereby
have been duly authorized by all necessary corporate action. Purchaser has duly
executed and delivered this Agreement and this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
SECTION 5.03. NO CONFLICTS; CONSENTS. The execution and
delivery by Purchaser of this Agreement do not, and the consummation of the
Acquisition and the other transactions contemplated hereby and compliance by
Purchaser with the terms hereof will not conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of Purchaser under, any provision of (i) the certificate of incorporation
or by-laws of Purchaser, (ii) any Contract to which Purchaser is a party or by
which it or any of its properties or assets is bound or (iii) any Judgment or
Applicable Law applicable to Purchaser or any of its properties or assets. No
Consent of, or registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to Purchaser or its
affiliates in connection with the execution, delivery and performance of this
35
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby, other than compliance with and filings under the HSR Act.
SECTION 5.04. FINANCING. Purchaser has received commitment
letters dated May 6, 1999, May 12, 1999 and May 3, 1999, respectively, from The
Northwestern Mutual Life Insurance Company, NationsBanc Xxxxxxxxxx Securities
LLC and SG Capital Partners LLC and has delivered copies of same to the Company
and each of the Sellers. If all applicable conditions of such commitment letters
are satisfied, the funds to be provided to Purchaser thereunder will provide
Purchaser with sufficient financial resources, together with the equity
investment contemplated by Purchaser, to consummate the Acquisition. To the
knowledge of Purchaser, as of the date of this Agreement none of such commitment
letters has been modified or terminated.
SECTION 5.05. SECURITIES ACT. The Shares to be purchased by
Purchaser pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof, and Purchaser will not offer
to sell or otherwise dispose of the Shares so acquired by it in violation of any
of the registration requirements of the Securities Act.
ARTICLE VI
COVENANTS
SECTION 6.01. COVENANTS RELATING TO CONDUCT OF BUSINESS. (a)
Except for matters set forth in Schedule 6.01 or otherwise expressly permitted
by the terms of this Agreement, from the date of this Agreement to the Closing,
SSC shall cause the business of the Company to be conducted, and the Company
shall conduct its business, in the usual, regular and ordinary course in
substantially the same manner as previously conducted and SSC shall cause the
Company to, and the Company shall, use all reasonable efforts to keep intact its
business, keep available the services of its current employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others with whom it deals. SSC shall not, and shall not permit the Company to,
and the Company shall not, take any action that would, or that could reasonably
be expected to, result in any of the conditions to the purchase and sale of the
Shares set forth in Article VII not being satisfied. In addition (and without
limiting the generality of the foregoing), except as set forth in Schedule 6.01
or otherwise expressly permitted or
36
required by the terms of this Agreement, from the date of this Agreement to the
Closing, SSC shall not permit the Company to, and the Company shall not, do any
of the following without the prior written consent of Purchaser:
(i) amend its articles of incorporation or
by-laws;
(ii) declare or pay any dividend or make any other
distribution to SSC, Sylvan, Pyramid or GE Cap-Eq or any of their
affiliates;
(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for
any shares of capital stock;
(iv) adopt or amend any Company Plan (or any plan
that would be a Company Plan if adopted);
(v) grant to any officer or employee any increase in
compensation or benefits, except to nonmanagement employees in the
ordinary course of business and consistent with past practice or as may
be required under existing agreements and except for any increases for
which SSC shall be solely obligated;
(vi) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness, other than in the ordinary course of
business and consistent with past practice; PROVIDED, HOWEVER, that in
no event shall the Company incur or assume any long-term indebtedness
for borrowed money other than additional borrowings under the Foothill
Facility in the ordinary course of business;
(vii) permit, allow or suffer any of its assets to become
subjected to any Lien of any nature whatsoever that would have been
required to be set forth in Schedule 4.05 or 4.06 if existing on the
date of this Agreement;
(viii) cancel any material indebtedness (individually or in
the aggregate) or waive any claims or rights of substantial value;
(ix) pay, loan or advance any amount to, or sell, transfer or
lease any of its assets to, or enter into any agreement or arrangement
with, SSC, Sylvan, Pyramid
37
or GE Cap-Eq or any of their affiliates, except, in the
case of Sylvan, as set forth in Schedule 6.01;
(x) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP;
(xi) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire
any assets (other than inventory) that are material;
(xii) make or incur any capital expenditure that is not
currently approved in writing or budgeted and that, individually, is in
excess of $25,000 or make or incur any such expenditures which, in the
aggregate, are in excess of $100,000;
(xiii) sell, lease, license or otherwise dispose of any of its
assets, except inventory sold in the ordinary course of business and
consistent with past practice;
(xiv) enter into any lease of real property, except any
renewals of existing leases in the ordinary course of business and
consistent with past practice, with respect to which Purchaser shall
have the right to participate;
(xv) modify, amend, terminate or permit the lapse of any lease
of, or reciprocal easement agreement, operating agreement or other
material agreement relating to, real property (except modifications or
amendments associated with renewals of existing leases in the ordinary
course of business and consistent with past practice, with respect to
which Purchaser shall have the right to participate); or
(xvi) authorize any of, or commit or agree to take, whether in
writing or otherwise, to do any of, the foregoing actions.
(b) ADVISE OF CHANGES. From the date of this Agreement to the
Closing, SSC and the Company shall promptly advise Purchaser in writing of the
occurrence of any matter or event that is material to the business, assets,
condition (financial or otherwise) or results of operations of the Company.
38
(c) AFFIRMATIVE COVENANTS. Until the Closing, SSC shall cause
the Company to, and the Company shall:
(i) maintain its assets in the ordinary course of
business in good operating order and condition,
reasonable wear and tear excepted;
(ii) upon any damage, destruction or loss to any asset, apply
any and all insurance proceeds received with respect thereto to the
prompt repair, replacement and restoration thereof to the condition of
such asset before such event or, if required, to such other (better)
condition as may be required by Applicable Law; and
(iii) maintain its level and quality of inventory and supplies
in the ordinary course of business in a manner consistent with its
practices in place as of December 31, 1998.
(d) CONSULTATION. In connection with the continuing operation
of the business of the Company between the date of this Agreement and the
Closing, SSC and the Company shall use reasonable efforts to consult in good
faith on a regular and frequent basis with the representatives of Purchaser to
report material operational developments and the general status of ongoing
operations pursuant to procedures reasonably requested by Purchaser or such
representatives. SSC and the Company acknowledge that any such consultation in
and of itself shall not constitute a waiver by Purchaser of any rights it may
have under this Agreement, and that Purchaser shall not have any liability or
responsibility for any actions of SSC or the Company or any of its officers or
directors with respect to matters that are the subject of such consultations;
PROVIDED, HOWEVER, that any written consents or approvals given pursuant to
Section 9.03 in connection with the consultation contemplated by this Section
6.01(d) shall be binding in accordance with their terms.
(e) INSURANCE. SSC shall use all commercially reasonable
efforts to cause the Company to, and the Company shall use all commercially
reasonable efforts to, keep all insurance policies set forth in Schedule 4.14 or
suitable replacements therefor in full force and effect through the close of
business on the Closing Date.
SECTION 6.02. NO SOLICITATION. From the date of
this Agreement to the earlier to occur of the Closing or
termination hereof in accordance with Article IX, none of
Sellers, any of their affiliates and the Company shall, nor
39
shall they permit any of their respective officers, directors or stockholders or
other representatives to, directly or indirectly, (i) solicit, initiate or
encourage any "other bid", (ii) enter into any agreement with respect to any
other bid or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any other bid. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director, stockholder or other
representative of any Seller, the Company or any affiliate of any Seller,
whether or not such person is purporting to act on behalf of any Seller, the
Company or any other affiliate of any Seller or otherwise, shall be deemed to be
a breach of this Section 6.02. In the event that any Seller, the Company or any
affiliate of any Seller receives a proposal relating to any such transaction,
such Seller or the Company shall promptly advise Purchaser of such proposal. As
used in this Section 6.02, "other bid" shall mean any proposal for a merger,
consolidation, sale of securities, sale of substantial assets or similar
transaction involving the Company, other than (A) the transactions contemplated
by this Agreement and (B) the sale of inventory in the ordinary course of
business.
SECTION 6.03. ACCESS TO INFORMATION. SSC shall, and shall
cause the Company to, and the Company shall, afford to Purchaser and its lenders
and their accountants, counsel and other representatives reasonable access, upon
reasonable notice during normal business hours during the period prior to the
Closing, to all the personnel, properties, books, Contracts, commitments, Tax
Returns and records of SSC and the Company, and, during such period shall
furnish promptly to Purchaser any information concerning SSC or the Company as
Purchaser may reasonably request.
SECTION 6.04. CONFIDENTIALITY. (a) Purchaser acknowledges that
the information being provided to it in connection with the Acquisition and the
consummation of the other transactions contemplated hereby is subject to the
terms of a confidentiality agreement between Purchaser and the Company (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference. Effective upon, and only upon, the Closing, the Confidentiality
Agreement shall terminate.
(b) Each Seller shall keep confidential, and
cause its affiliates and its and their officers, directors,
40
employees and advisors to keep confidential, all information relating to the
Company, except as required by law or administrative process and except for
information that is not confidential or proprietary to the Company or that is
available to the public on the Closing Date, or thereafter becomes available to
the public other than as a result of a breach of this Section 6.04(b). The
covenant set forth in this Section 6.04(b) shall terminate two years after the
Closing Date.
SECTION 6.05. REASONABLE EFFORTS. (a) On the terms and subject
to the conditions of this Agreement, each of Purchaser, SSC and the Company
shall use commercially reasonable efforts to cause the Closing to occur,
including taking all reasonable actions necessary to comply promptly with all
legal requirements that may be imposed on it or any of its affiliates with
respect to the Closing. Without limiting the foregoing or the provisions set
forth in Section 6.05(b), each of Purchaser, SSC and the Company shall use its
commercially reasonable efforts to cause the Closing to occur on or prior to
June 29, 1999 or as soon as practicable thereafter.
(b) Each of SSC and Purchaser shall as promptly as
practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file or cause to be filed with the
United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form, if any,
required for the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information shall be in
substantial compliance with the requirements of the HSR Act. Each of SSC and
Purchaser shall furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of any
filing or submission that is necessary under the HSR Act. SSC and Purchaser
shall keep each other apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC and the DOJ and
shall comply promptly with any such inquiry or request. Any such supplemental
information shall be in substantial compliance with the requirements of the HSR
Act.
SECTION 6.06. EXPENSES; TRANSFER TAXES. (a) Whether or not the
Closing takes place, all fees, costs and expenses incurred in connection with,
or in anticipation of, this Agreement and to consummate the transactions
contemplated hereby shall be paid by the party incurring
41
such expense, including all such fees, costs and expenses incurred pursuant to
Section 6.05, except as provided in Article VIII and Section 6.09 and except
that all such fees, costs and expenses of third party professionals, including
BT Alex.Xxxxx Incorporated and Xxxxxxxx, Xxxxxx & Xxxxxxx incurred by the
Company, shall be paid by SSC, except that after the Closing Purchaser shall
cause the Company to pay any remaining unpaid fees, costs and expenses incurred
by the Company pursuant to the written retainer agreement with Xxxx X. Xxxxxx
dated November 14, 1996, and any fees, costs and expenses of
PricewaterhouseCoopers LLP incurred by the Company.
(b) All Transfer Taxes applicable to the transfer of the
Shares shall be paid by SSC. Each party shall use reasonable efforts to avail
itself of any available exemptions from any such Taxes or fees, and to cooperate
with the other parties in providing any information and documentation that may
be necessary to obtain such exemptions.
SECTION 6.07. BROKERS OR FINDERS. Each of Purchaser, the
Company and each Seller represents and warrants, as to itself and its
affiliates, that no agent, broker, investment banker or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except, as to the Company, BT Alex.Xxxxx Incorporated, whose fees and
expenses will be paid by SSC.
SECTION 6.08. RESIGNATIONS. On the Closing Date, the Company
shall cause to be delivered to Purchaser duly signed resignations from the board
of directors of the Company, effective immediately after the Closing, of all the
directors and shall take such other action as is necessary to accomplish the
foregoing.
SECTION 6.09. TAX MATTERS. (a) For any taxable period of the
Company as a separate taxpayer that includes (but does not end on) the Closing
Date (a "Straddle Period"), Purchaser shall timely prepare and file with the
appropriate authorities all Tax Returns required to be filed and shall pay all
Taxes due with respect to such Tax Returns.
For any taxable period that ends on or before the Closing Date, Purchaser shall
timely prepare and timely file with the appropriate authorities, all Tax Returns
required to be filed for such period other than the consolidated Federal income
Tax Return for the affiliated group that includes the
42
Company, SSC and JLC Holdings, Inc., and any other Tax Return for which the
Company is part of any consolidated, combined, unitary, affiliated or aggregate
group that includes SSC or JLC Holdings, Inc.; PROVIDED, HOWEVER, that (i) the
Preferred Sellers shall pay all Taxes due with respect to such Tax Returns and
reimburse Purchaser for all out-of-pocket costs and expenses incurred to prepare
such Tax Returns (except to the extent, if any, that such Taxes have been
expressly accrued as a separate liability on the 1998 Financial Statements of
the Company or that such fees and expenses are to be borne by the Company
pursuant to the last sentence of Section 6.09(g)(i)), and (ii) no such Tax
Return shall be filed without the written consent of JLC Holdings, Inc. (which
consent may not be unreasonably delayed or withheld).
For any taxable period that ends on or before the Closing Date or includes but
does not end on the Closing Date, Sellers and JLC Holdings, Inc. shall cause
PricewaterhouseCoopers LLP to timely prepare and timely file with the
appropriate authorities the consolidated Federal income Tax Return for the
affiliated group that includes the Company, SSC and JLC Holdings, Inc., and any
other Tax Return for which the Company is part of any consolidated, combined,
unitary, affiliated or aggregate group that includes SSC or JLC Holdings, Inc.,
and shall pay all Taxes due with respect to the Company pursuant to such Tax
Returns; PROVIDED, HOWEVER, that (i) each such Return shall be filed on a basis
consistent with the amended Tax Returns filed in accordance with Section
6.09(g)(i), (ii) at least 30 days prior to the due date for filing any such Tax
Return (taking into account any applicable extensions), JLC Holdings, Inc. shall
furnish Purchaser with a completed copy of each such Tax Return for Purchaser's
review and comment, (iii) no such Tax Return shall be filed with any Taxing
Authority without Purchaser's prior written consent (which consent shall not be
unreasonably delayed or withheld), and (iv) Purchaser shall reimburse Sellers
for the reasonable fees and expenses of PricewaterhouseCoopers LLP for the
preparation of such Tax Returns. Except as contemplated by clause (i) of the
proviso in the preceding sentence, any Tax Return described in this Section
6.09(a) shall be prepared on a basis consistent with the past practices of the
Company and the affiliated group that includes the Company, SSC and JLC
Holdings, Inc. and in a manner that does not distort taxable income (E.G., by
deferring income or accelerating deductions), except to the extent that any
inconsistency or distortion would not adversely affect the Company after the
Closing Date. All Tax Returns for any period including the Closing Date shall be
filed on the basis that the relevant taxable period ended as of the close of
business on the
43
Closing Date, unless the relevant Taxing Authority will not accept a Tax Return
filed on that basis.
(b) SSC, JLC Holdings, Inc., the Company and Purchaser shall
reasonably cooperate, and shall cause their respective affiliates, officers,
employees, agents, auditors and representatives reasonably to cooperate, in
preparing and filing all Tax Returns and any election referred to in Section
6.09(e) and with respect to the other Tax matters referred to in this Section
6.09, including without limitation providing copies of all correspondence to or
from any Taxing Authority promptly after sending or receiving such
correspondence and maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits with
respect to all taxable periods relating to Taxes; PROVIDED, HOWEVER, that in no
event shall Purchaser be required to provide any Tax Return to SSC or JLC
Holdings, Inc. (except as contemplated by the second sentence of Section
6.09(a)).
(c) With respect to any Company Tax Return relating to any
taxable period (other than the consolidated Federal income Tax Return for the
affiliated group that includes the Company, SSC and JLC Holdings, Inc., and any
other Tax Return for which the Company is part of any consolidated, combined,
unitary, affiliated or aggregate group that includes SSC or JLC Holdings, Inc.),
Purchaser shall have the right, at its sole cost and expense, to supervise,
control and coordinate any examination or audit process by any Taxing Authority,
and to negotiate, resolve, settle or contest any asserted Tax deficiencies or
assert and prosecute any claims for refunds; PROVIDED, HOWEVER, that without the
prior written consent of each of the Preferred Sellers (which consent may not be
unreasonably delayed or withheld), Purchaser shall not take any such action, or
amend any Tax Return, if such action could result in (i) any claim for
indemnification by any Purchaser Indemnitee (as defined in Section 8.01(a))
against any of the Preferred Sellers, or (ii) any liability or obligation of JLC
Holdings, Inc., SSC or any of the Preferred Sellers for Taxes; and PROVIDED
FURTHER, that in the case of any refund claim for any Tax paid by the Preferred
Sellers with respect to a Tax Return referred to in the second sentence of
Section 6.09(a), Purchaser shall prosecute any claim for refund that is
reasonably requested by the Preferred Sellers if the Preferred Sellers agree to
reimburse Purchaser for all out-of-pocket costs and expenses incurred to
prosecute such refund claim. Any such Tax refund (and the interest received
thereon) with respect to a Tax Return referred to in the second sentence of
Section 6.09(a) shall belong to (and shall be paid to) the Preferred Sellers.
With respect
44
to the consolidated Federal income Tax Return for the affiliated group that
includes the Company, SSC and JLC Holdings, Inc. or any other Tax Return for
which the Company is part of any consolidated, combined, unitary, affiliated or
aggregate group that includes SSC or JLC Holdings, Inc. for any taxable period,
the Preferred Sellers shall have the right, at their sole cost and expense, to
supervise, control and coordinate any examination or audit process by any Taxing
Authority, and to negotiate, resolve, settle or contest any asserted Tax
deficiencies or assert and prosecute any claims for refunds; PROVIDED, HOWEVER,
that (I) any such action by the Preferred Sellers shall be consistent with
Sections 6.09(e), (f) and (g), (II) no such Preferred Seller shall take any such
action which may have a material adverse effect on the Company or Purchaser
without Purchaser's written consent (which consent may not be unreasonably
delayed or withheld) and (III) Purchaser shall have the right, at its sole cost
and expense, to take any of the actions described in this sentence with respect
to any examination, audit or proceeding that primarily involves Tax liabilities
and/or Tax attributes of the Company for which the Preferred Sellers would not
be responsible pursuant to Section 8.01 (taking into account the limitations in
Section 8.01(b)); PROVIDED, FURTHER, HOWEVER, that Purchaser may not enter into
any proposed settlement agreement pursuant to clause (III) above without the
consent of the Preferred Sellers (which consent may not be unreasonably delayed
or withheld) if such settlement agreement would result in a final determination
of Tax liabilities and/or Tax attributes as to which the Preferred Sellers would
bear more than half the cost pursuant to Section 8.01. The control rights set
forth in this Section 6.09(c) shall supersede those set forth in Section 8.04(b)
as applied to Tax proceedings.
(d) JLC Holdings, Inc. shall cause the provisions
of any Tax sharing agreement between JLC Holdings, Inc. or
any of its affiliates (other than the Company), and the
Company to be terminated on or before the Closing Date.
After the Closing Date, no party shall have any rights or
obligations under any such Tax sharing agreement.
(e) (i) In the event that all the Tax Returns described in the
first two sentences of Section 6.09(g)(i) have not been prepared and filed with
the applicable Taxing Authority in accordance with Section 6.09(g)(i) on or
before the Closing Date or the amended Tax Returns described therein for each
applicable Tax jurisdiction do not result in an aggregate net Tax basis increase
of at least $16,000,000 as of December 31, 1998, so as to result in an aggregate
Tax basis of at least $75,000,000 as of
45
December 31, 1998 in each such jurisdiction (the failure to satisfy such
condition being referred to herein as the "Triggering Event"), then, at
Purchaser's election in its sole discretion (the "Section 338(h)(10) Election"),
Sellers shall cause JLC Holdings, Inc. to (and JLC Holdings, Inc. shall) (x)
join Purchaser in timely making an election under Section 338(h)(10) of the Code
(and any comparable election available under applicable state or local Tax law)
with respect thereto and (y) cooperate with Purchaser in the completion and
timely filing of such elections in accordance with the provisions of Treasury
Regulation Section 1.338(h)(10)-1 (or any comparable provisions of state or
local Tax law). In the event Purchaser makes the Section 338(h)(10) Election,
Purchaser and JLC Holdings, Inc. shall endeavor in good faith to agree upon the
fair market value of the assets of the Company for purposes of Section
338(h)(10) of the Code (and any comparable provisions of state or local Tax law)
within 45 days after the date on which Purchaser notifies the Preferred Sellers
of its final decision to make the Section 338(h)(10) Election. To facilitate
such agreement, Purchaser shall initially prepare a completed set of Internal
Revenue Service Forms 8023 and all attachments required to be filed therewith
pursuant to applicable Treasury Regulations ("Form 8023") (and any comparable
forms required to be filed under state or local Tax law) and, no later than 15
days after making the Section 338(h)(10) Election, deliver said forms to JLC
Holdings, Inc. for approval and execution, which approval and execution shall
not be unreasonably delayed or withheld; PROVIDED, HOWEVER, that if Purchaser
and JLC Holdings, Inc. cannot agree upon the fair market value of the assets of
the Company within the 45 day period described in the preceding sentence, then
Purchaser may finalize and file said forms (and JLC Holdings, Inc. must execute
said forms) after good faith consideration of the views of JLC Holdings, Inc. as
to the fair market value of the assets of the Company. None of the parties (nor
any of their respective affiliates) shall take any position on any Tax Return or
with any Taxing Authority that is inconsistent with the fair market values set
forth in such Form 8023 (and any such comparable forms). In the event that the
Section 338(h)(10) Election is made, the Preferred Sellers shall be responsible
for paying the first $200,000 of any Taxes incurred by the Company as a result
of any election made under Section 338(h)(10) of the Code (and any comparable
elections available under applicable state or local law) pursuant to this
Section 6.09(e) and the first $200,000 of reasonable fees and expenses of
PricewaterhouseCoopers LLP with respect to the preparation of the amended Tax
Returns described in Section 6.09(g)(including without limitation the fees and
expenses of PricewaterhouseCoopers LLP incurred by the Company before
46
the Closing Date for work on matters relating to such amended Tax Returns); any
such Taxes in excess of $200,000 in the aggregate and/or any such fees and
expenses in excess of $200,000 in the aggregate shall be paid by Purchaser.
(ii) In the event that the Triggering Event does not occur, then
Purchaser may in its sole discretion nevertheless make the Section 338(h)(10)
Election and the parties hereto will be subject to the provisions of Section
6.09(e)(i); PROVIDED, HOWEVER, that the $200,000 limitations in the last
sentence of Section 6.09(e)(i) shall each be reduced to $100,000.
(iii) In the event that it is reasonably likely that the Taxes
described in the last sentence of Section 6.09(e)(i) will exceed $200,000 (or,
if Section 6.09(e)(ii) applies, $100,000), then, notwithstanding any provision
herein to the contrary, Purchaser may direct and control the filing of all
amended Tax Returns described in Section 6.09(g) (and any other similar amended
Tax Returns), including without limitation requiring that any such amended Tax
Returns that have not previously been prepared and filed be prepared and filed
at its direction and requiring that any such amended Tax Return that has
previously been prepared and filed be modified or superseded by a further
amended Tax Return in order to reduce such Taxes. Any expenses incurred in
connection with any such amended Tax Returns shall be borne by the Preferred
Sellers to the extent contemplated by Section 6.09(e)(i) (and, if applicable,
Section 6.09(e)(ii)) and otherwise by Purchaser.
(iv) Notwithstanding Section 6.09(g), in the event that Purchaser makes
a Section 338(h)(10) Election, and, based upon the amended Tax Returns described
in Section 6.09(g) that have been filed by the Closing Date, the Taxes and fees
and expenses described in the last sentence of Section 6.09(e)(i) would not
exceed the applicable thresholds, Sellers may elect to not file any other
amended Tax Returns described in Section 6.09(g); PROVIDED, HOWEVER, that, if
Sellers make such election, any such Taxes or fees and expenses in excess of
such threshold shall be the sole responsibility of Sellers.
(f) JLC Holdings, Inc. shall be responsible for filing any
amended consolidated, combined or unitary Tax Returns for taxable years ending
on or prior to the Closing Date which are required as a result of examination
adjustments made by the Internal Revenue Service or by the applicable state,
local or foreign Taxing Authority for such taxable years as finally determined;
PROVIDED, HOWEVER, that (i) any such Tax Return shall be consistent with the
amended
47
Tax Returns filed in accordance with Section 6.09(g) and (ii) no such Tax Return
shall be filed without the prior written consent of Purchaser (which consent may
not be unreasonably delayed or withheld). For those jurisdictions in which
separate Tax Returns are filed by the Company, any required amended returns
resulting from such examination adjustments, as finally determined, shall be
prepared by JLC Holdings, Inc. in a manner consistent with the amended Tax
Returns filed in accordance with Section 6.09(g) and furnished to the Company
for approval (which approval may not be unreasonably delayed or withheld),
signature and filing at least 30 days prior to the due date for filing such Tax
Returns.
(g) (i) As soon as practicable after June 3, 1999 and in all
events before the Closing Date, the Sellers shall cause the Federal income Tax
consolidated group of which JLC Holdings, Inc. is the common parent to (and JLC
Holdings, Inc. shall) (x) prepare and file amended Federal income Tax Returns
for 1995 and thereafter as necessary so as to increase, on a net basis, the Tax
basis of the Company's assets for Federal income Tax purposes as of December 31,
1998 by at least $16,000,000 (or such lower amount which is the maximum amount
of basis increase for which there is a reasonable basis in law and fact) from
what such Tax basis would have been if no such amended Tax Returns had been
filed so as to result in an aggregate Tax basis for the Company's assets as of
December 31, 1998 of at least $75,000,000 (or an amount corresponding to any
such lower basis increase amount) by correcting the prior Federal income Tax
Returns of such group in accordance with the principles set forth in Schedule
6.09(g) and (y) prepare and file the 1998 Federal income Tax Return for such
group on a basis consistent with such amended Tax Returns. Before the Closing
Date, the Sellers and JLC Holdings, Inc. also shall cause corresponding amended
Tax Returns to be prepared and filed by the Company or the consolidated,
combined, unitary, affiliated or aggregate group, as applicable, in each of the
ten state and local Tax jurisdictions listed in Schedule 6.09(g) and cause the
1998 Tax Return for the Company or such group, as applicable, to be filed in
each such jurisdiction. By June 21, 1999, Sellers and JLC Holdings, Inc. shall
cause to be prepared and filed all other state and local income, franchise or
similar Tax Returns that must be filed for 1998 by the Company or the
consolidated, combined, unitary, affiliated or aggregate group of which the
Company is a member, as applicable, on a basis that is consistent with the Tax
Returns described in the first two sentences of this Section 6.09(g)(i). Subject
to Section 6.09(e), (I) each amended Tax Return described in the first two
sentences of this Section 6.09(g)(i) shall be prepared
48
by PricewaterhouseCoopers LLP at the sole cost and expense of the Preferred
Sellers and each 1998 Tax Return shall be reviewed and signed as preparer (but
not actually prepared) by PricewaterhouseCoopers LLP at the sole cost and
expense of the Company and (II) each such amended Tax Return and each such 1998
Tax Return shall be submitted to Purchaser for review and comment at least ten
days prior to the Closing Date (or three days prior to the Closing Date in the
case of non-Federal Tax Returns) and shall not be filed without the prior
written consent of Purchaser (which consent may not be unreasonably delayed or
withheld, it being understood that, absent manifest error, Purchaser may not
withhold its consent to any such amended Tax Return that is based solely on the
principles set forth in Schedule 6.09(g)).
(ii) Other than as may be required by Sec tion 6.09(g)(i), after the
date this Agreement is signed, neither SSC, JLC Holdings, Inc. or the Company or
any consolidated, combined, unitary, affiliated or aggregate group of which the
Company is a member shall make or change any Tax election, change an annual Tax
Accounting period, adopt or change any Tax accounting method, file any amended
Tax Return, enter into any closing agreement, settle any Tax Claim or
assessment, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the statute of limitations period applicable to any Tax
Claim or assessment, take any other action or omit to take any action relating
to Taxes, if any such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission would have the effect
of increasing the Tax liability or reducing any net operating loss, net capital
loss, investment tax credit, foreign tax credit, charitable deduction or tax
basis or any other credit or tax attribute of the Company which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) without the prior written consent of Purchaser (which
consent may not be withheld if such action or omission is not expected to cause
a material adverse effect on the Company after the Closing Date).
(h) Purchaser agrees to cause the Company (i) to use its
reasonable best efforts to properly retain and maintain all Records (as defined
in Section 6.13) relating to Taxes of the Company for the Pre-Closing Tax Period
for the full period of the applicable statutes of limitations, including
extensions, for the period to which such Taxes relate, and (ii) to allow the
Preferred Sellers and their agents and representatives, at times and dates
mutually acceptable to the parties, to inspect, review and make
49
copies of such Records as the Preferred Sellers may reasonably deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the Preferred Sellers' expense.
(i) In the event any audit, amended Tax Return or other action
results in a refund of Taxes (i) relating to the consolidated Federal income Tax
Return for the affiliated group that includes the Company, SSC and JLC Holdings,
Inc. for any Pre-Closing Tax Period, or any other Tax Return for which the
Company is part of any consolidated, combined, unitary, affiliated or aggregate
group that includes SSC or JLC Holdings, Inc., the Preferred Sellers shall be
entitled to such refund (including any interest thereon) provided that Purchaser
shall be entitled to any such refund (including any interest thereon) that is
attributable to any Tax for which it is responsible pursuant to Section 6.09(e);
or (ii) relating to any other Tax Return, Purchaser shall be entitled to such
refund including any interest thereon (except to the extent, if any, that the
Preferred Sellers are expressly entitled to such refund pursuant to Section
6.09(c)). The recipient of any refund described in this Section 6.09(i) shall
promptly forward to the applicable party(ies) or reimburse such party(ies) for
all refunds due to such party(ies) pursuant to the preceding sentence.
(j) JLC Holdings, Inc. agrees that it shall not elect to
reattribute to itself pursuant to Treasury Regulation Section 1.1502-20(g) any
net operating loss carryovers or net capital loss carryovers of the Company.
(k) Sellers shall cause JLC Holdings, Inc. to (and JLC
Holdings, Inc. shall) (i) give Purchaser thirty days advance written notice of
the adoption by JLC Holdings, Inc. of any plan to liquidate and/or dissolve,
(ii) designate the Company to be the common agent of the Federal income tax
consolidated group of which JLC Holdings, Inc. was the common parent for all
periods during which the Company was a member thereof by providing notice to the
Internal Revenue Service in the manner prescribed by Treasury Regulation Section
1.1502-77 (or any successor provision) and (iii) take such actions as may be
necessary to cause the Company to be treated as the common agent of (or to have
any similar status with respect to) each consolidated, combined, unitary,
affiliated or aggregate group that included the Company for state and local Tax
purposes.
SECTION 6.10. SUPPLEMENTAL DISCLOSURE. (a) SSC and the Company
shall have the continuing obligation until the Closing promptly to supplement or
amend the Schedules
50
with respect to any matter hereafter arising or discovered that, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules; PROVIDED, HOWEVER, that for the purpose of the
rights and obligations of the parties under this Agreement, any such
supplemental or amended Schedule shall not be deemed to have been disclosed as
of the date of this Agreement. It is understood that a breach of this covenant
will not result in any obligation for indemnification pursuant to Section
8.01(a)(ii).
(b) SSC and the Company shall promptly notify Purchaser of,
and furnish Purchaser any information it may reasonably request with respect to,
the occurrence to the knowledge of SSC and the Company of any event or condition
or the existence to the knowledge of SSC and the Company of any fact that would
cause any of the conditions to Purchaser's obligations to consummate the
Acquisition not to be fulfilled.
(c) Purchaser shall promptly notify SSC and the Company of,
and furnish SSC and the Company any information they may reasonably request with
respect to, the occurrence to Purchaser's knowledge of any event or condition or
the existence to Purchaser's knowledge of any fact that would cause any of the
conditions to Sellers' obligations to consummate the Acquisition not to be
fulfilled.
SECTION 6.11. POST-CLOSING COOPERATION. (a) SSC and Purchaser
shall cooperate with each other, and shall cause their officers, agents,
auditors and representatives to cooperate with each other, for a period of 180
days after the Closing to ensure the orderly transition of the Company from
Sellers to Purchaser and to minimize any disruption to the Company that might
result from the transactions contemplated hereby (it being understood that a
breach of this covenant will not result in any obligation for indemnification
pursuant to Section 8.01(a)(ii)). After the Closing, upon reasonable written
notice, SSC and Purchaser shall furnish or cause to be furnished to each other
and their respective employees, counsel, auditors and representatives access,
during normal business hours, to such information and assistance relating to the
Company (to the extent within the control of such party) as is reasonably
necessary for financial reporting and accounting matters.
(b) Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant to
this Section 6.11. Neither party shall be required by this Section 6.11 to take
any
51
action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations (or, in the case of Purchaser, those
of the Company).
SECTION 6.12. PUBLICITY. From the date hereof through the
earlier to occur of the Closing or termination hereof in accordance with Article
IX, no public release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior consent of SSC and
Purchaser (which consent shall not be unreasonably withheld), except as such
release or announcement may be required by law or the rules or regulations of
any United States or foreign securities exchange, in which case the party
required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance.
SECTION 6.13. RECORDS. On the Closing Date, SSC shall deliver
or cause to be delivered to Purchaser all agreements, documents, books, records
and files, including records and files stored on computer disks or tapes or any
other storage medium (collectively, "Records"), if any, in the possession of SSC
or JLC Holdings, Inc. relating to the business and operations of the Company, to
the extent not then in the possession of the Company, subject to the following
exceptions:
(i) Purchaser recognizes that certain Records may contain
incidental information relating to the Company or may relate primarily
to SSC or JLC Holdings, Inc., and that SSC may retain such Records and
shall provide copies of the relevant portions thereof to Purchaser;
(ii) SSC may retain all Records prepared in connection with
the sale of the Shares, including bids received from other parties and
analyses relating to the Company; and
(iii) SSC may retain any personal tax returns, reports or
forms, and Purchaser shall be provided with copies of such returns,
reports or forms to the extent they relate to the Company's returns or
tax liability.
SECTION 6.14. AGREEMENT NOT TO SOLICIT EMPLOYEES. For a period
of three years from the Closing, SSC, JLC Holdings, Inc. and Sylvan shall not,
and shall cause each of their affiliates (in no event including GE Cap-Eq and
Pyramid) not to, directly or indirectly solicit, recruit or hire any employee of
the Company or person who has worked for the Company or solicit or encourage any
employee of the Company to leave the employment of the Company.
52
SECTION 6.15. CERTAIN LICENSES AND PERMITS. SSC agrees that all
permits, licenses and authorizations which are held in the name of any employee,
officer, director, stockholder, agent or otherwise on behalf of the Company
shall be duly and validly transferred to the Company without consideration prior
to the Closing and that the representations, warranties, covenants and
conditions contained in this Agreement shall apply to the same as if held by the
Company as of the date hereof.
SECTION 6.16. FURTHER ASSURANCES. From time to time, as and
when requested by any party, each party shall execute and deliver, or cause to
be executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions (subject to Section 6.05),
as such other party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement, including, in the case of Sellers,
executing and delivering to Purchaser such assignments, deeds, bills of sale,
consents and other instruments as Purchaser or its counsel may reasonably
request as necessary or desirable for such purpose.
SECTION 6.17. ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS. On the
Closing Date, SSC shall, and shall cause JLC Holdings, Inc. to, assign to
Purchaser its rights under all confidentiality agreements, if any, entered into
by it in connection with the proposed sale of the Company to the extent such
rights relate to the Company. Copies of such confidentiality agreements shall be
provided to Purchaser on the Closing Date.
SECTION 6.18. FINANCIAL STATEMENTS. Prior to or at the
Closing, SSC shall cause to be delivered to Purchaser (i) the Company's audited
balance sheets as of December 31, 1997 and December 31, 1998, and the related
audited statements of operations, stockholders' deficit and cash flows of the
Company for the fiscal years then ended, together with the notes to such
financial statements and the unqualified report thereon of
PricewaterhouseCoopers LLP which balance sheets and statements and notes shall
be identical (except that they will not include any going-concern qualifications
and related disclosure and except for changes directly relating to the
Acquisition and the other transactions contemplated hereby) to the financial
statements for the fiscal years ended December 31, 1997 and December 31, 1998,
and the related notes set forth in Schedule 4.05, and (ii) the Company's audited
balance sheet as of March 31, 1999 (the "March Balance Sheet") and the related
audited statements of operations (the "Statement of Operations"), stockholders'
deficit and cash flows of the
53
Company for the three months then ended, together with the notes thereto
prepared in accordance with GAAP applied on a basis consistent with the
practices and procedures followed in the preparation of the Company's Financial
Statements and the unqualified report thereon of Xxxxxx Xxxxxxxx.
SECTION 6.19. BENEFIT PLAN MATTERS. For a period of 12 months
after the Closing, Purchaser shall maintain, or cause to be maintained, benefits
for employees of the Company that, in the aggregate, are substantially similar
to those provided to such employees as of the date of this Agreement. Until
December 31, 1999, Purchaser shall maintain, or cause to be maintained, the same
severance plans and policies for employees of the Company as those provided to
such employees as of the date of this Agreement. Until December 31, 1999,
Purchaser shall maintain, or cause to be maintained, the Key Management Bonus
Program and Sales Force Compensation Plan.
SECTION 6.20. STRATEGIC ALLIANCE AGREEMENT. Each of Sylvan and
the Company agrees that it will not, and each Seller agrees that it will not
authorize or take any other action to permit the Company to, amend, terminate or
repudiate the Strategic Alliance Agreement dated as of the date hereof between
Sylvan and the Company (the "Strategic Alliance Agreement") or any of the terms
thereof between the date of this Agreement and the Closing.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION. The
obligation of Purchaser to purchase and pay for the Shares and the obligation of
Sellers to sell the Shares to Purchaser is subject to the satisfaction or waiver
by SSC and Purchaser on or prior to the Closing of the following conditions:
(a) GOVERNMENTAL APPROVALS. The waiting period under the HSR
Act, if applicable to the consummation of the Acquisition, shall have expired or
been terminated. All other authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.
(b) NO INJUNCTIONS OR RESTRAINTS. No Applicable
Law or Injunction enacted, entered, promulgated, enforced or
54
issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the Acquisition shall be in effect.
SECTION 7.02. CONDITIONS TO OBLIGATION OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Shares is subject to the
satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Seller and the Company in this Agreement shall be true and
correct as of the date hereof and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct on and as of such earlier date), and Purchaser shall
have received a certificate signed by an authorized officer of each Seller and
the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF SELLERS. Each Seller and the
Company shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by such Seller or the Company by the time of the Closing, and Purchaser
shall have received a certificate signed by an authorized officer of each Seller
and the Company to such effect.
(c) ESCROW AGREEMENT. The Company, the Preferred Sellers and
the Escrow Agent shall have executed and delivered the Escrow Agreement to
Purchaser.
(d) ABSENCE OF PROCEEDINGS. There shall not be pending or
threatened by any Governmental Entity (other than any school or school district)
any Proceeding (or by any other person, including any school or school district,
any Proceeding that has a reasonable likelihood of success) (i) challenging or
seeking to restrain or prohibit the Acquisition or any other transaction
contemplated by this Agreement or seeking to obtain from Purchaser in connection
with the Acquisition any damages that are material in relation to Purchaser,
(ii) seeking to prohibit or limit the ownership or operation by Purchaser of any
material portion of the business or assets of Purchaser or the Company, or to
compel Purchaser or the Company to dispose of or hold separate any material
portion of the business or assets of Purchaser or the Company, in each case as a
result of the Acquisition or any of the other transactions contemplated by this
Agreement, (iii) seeking to impose limitations on the
55
ability of Purchaser to acquire or hold, or exercise full rights of ownership
of, the Shares, including the right to vote the Shares on all matters properly
presented to the stockholders of the Company or (iv) seeking to prohibit
Purchaser from effectively controlling in any material respect the business or
operations of the Company.
(e) NAME. The Trademark License Agreement between Purchaser,
Jostens, Inc. and the Company dated as of the date hereof regarding use of the
marks and name and proprietary designations comprising the Jostens name shall be
in full force and effect and Jostens, Inc. shall not have repudiated such
Agreement or any of its terms.
(f) FINANCING. Purchaser shall have received the funds
described in, and on the terms and conditions set forth in, the commitment
letters previously delivered to Sellers or upon terms and conditions that are
substantially equivalent thereto, and to the extent that any of the terms and
conditions are more onerous or more costly than the terms and conditions set
forth in such commitment letters, on terms and conditions reasonably
satisfactory to Purchaser.
(g) OTHER DOCUMENTS. Sellers and the Company shall have
furnished to Purchaser such other documents (including legal opinions) relating
to corporate existence and authority, enforceability of this Agreement, title to
the Shares, absence of Liens, and such other matters as Purchaser or its counsel
may reasonably request.
(h) FINANCIAL PERFORMANCE. Earnings before interest, taxes,
depreciation, amortization and restruc turing charges of the Company ("EBITDA")
as derived from the Statement of Operations shall be no less than $(1,350,000)
and EBITDA for the 12 months ended March 31, 1999 shall be at least $6,900,000.
Stockholders' Equity as set forth in the March Balance Sheet shall be not less
than $(46,840,000).
(i) CERTAIN EMPLOYMENT AGREEMENTS. Purchaser shall have
negotiated employment agreements between the Company and Xxxxxxx X. Xxxxx, Xxxxx
X. Xxxxxxx, Xxxxx Xxxxxxxx and Xxxxx X. Xxxxxxx, on terms satisfactory to
Purchaser, which shall be in full force and effect as of the Closing and none of
the employees who have entered into such agreements shall have repudiated such
agreements or any of the terms therein. In connection with such negotiations,
Purchaser shall have caused any prior employment agreement between any such
individual and the Company to terminate and be without further force or effect
as of the Closing.
56
Except for claims or rights under the agreements as and to the extent set forth
in Schedule 7.02, Purchaser shall have obtained releases from such individuals
discharging any claims or rights under any prior employment agreements with the
Company, and taken any other action required to effect the foregoing as of the
Closing, without any liability or other adverse consequences to the Company or
Purchaser.
(j) AFFILIATE AGREEMENTS. The Strategic Alliance Agreement
shall not have been amended or terminated and shall be in full force and effect
as of the Closing and none of the parties thereto shall have repudiated such
agreement or any of the terms thereof. The Management and Advisory Agreement by
and between JLC Holdings, Inc., SSC, JLC Acquisition Corp. and Xxxx Capital
Partners IV, L.P. dated as of June 29, 1995, shall have been terminated without
any payments of amounts due thereunder, whether or not overdue, and otherwise
without any liability or adverse consequence to the Company.
(k) FIRPTA CERTIFICATE. Each Seller shall have delivered to
Purchaser at the Closing a certificate, in form and substance satisfactory to
Purchaser, certifying that the Acquisition is exempt from withholding pursuant
to the Foreign Investment in Real Property Tax Act.
(l) AMENDED TAX RETURNS. All the amended Tax Returns described
in the first two sentences of Section 6.09(g)(i) shall have been prepared and
filed with the applicable Taxing Authority in accordance with Section 6.09(g)(i)
unless Purchaser in its sole discretion chooses to exercise its option to make
the Section 338(h)(10) Election (in which event, subject to Sections
6.09(e)(iii) and (iv), Sellers shall be required to file any remaining amended
Tax Returns described in Section 6.09(g) as promptly as practicable after the
Closing Date).
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF SELLERS. The
obligations of Sellers to sell the Shares is subject to the satisfaction (or
waiver by SSC) on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser made in this Agreement shall be true and correct as of
the date hereof and as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct on and as of such earlier date), and Sellers shall
57
have received a certificate signed by an authorized
representative of Purchaser to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by
Purchaser by the time of the Closing, and Sellers and the Company shall have
received a certificate signed by an authorized representative of Purchaser to
such effect.
(c) ESCROW AGREEMENT. Purchaser and the Escrow Agent shall
have executed and delivered the Escrow Agreement to the Company and the
Preferred Sellers.
(d) STRATEGIC ALLIANCE AGREEMENT. The Strategic Alliance
Agreement shall be in full force and effect as of the Closing and the Company
shall not have repudiated such agreement or any of the terms thereof; PROVIDED,
HOWEVER, that the obligations of Sellers to sell the Shares shall not be subject
to satisfaction of this condition if any of the Preferred Sellers have breached
their covenants contained in Section 6.20.
SECTION 7.04. FRUSTRATION OF CLOSING CONDITIONS. Neither
Purchaser nor any Seller may rely on the failure of any condition set forth in
this Article VII to be satisfied if such failure was caused by such party's
failure to act in good faith or to use its commercially reasonable efforts to
cause the Closing to occur, as required by Section 6.05.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNIFICATION. (a) From and after the Closing,
the Preferred Sellers shall be liable for, and shall indemnify Purchaser, its
affiliates (including the Company), and each of their respective officers,
directors, employees, stockholders, agents and representatives (the "Purchaser
Indemnitees"), against and hold each Purchaser Indemnitee harmless from, any
loss, liability, claim, damage or expense including reasonable legal fees and
expenses (collectively, "Losses"), as incurred by such Purchaser Indemnitee to
the extent arising from, in connection with or otherwise with respect to:
(i) any breach of any representation or warranty
of any Seller (in the case of a Specific Preferred
Seller Obligation (as defined in Section 8.01(d)),
58
subject to the limitation set forth in the first
sentence of Section 8.01(d)) or the Company that
survives the Closing pursuant to this Agreement; or
(ii) any breach of any covenant of any Seller (in the case of
a Specific Preferred Seller Obligation, subject to the limitation set
forth in the first sentence of Section 8.01(d)) or the Company
contained in this Agreement.
Prior to pursuing any claim for indemnification for any Loss incurred by a
Purchaser Indemnitee arising from, in connection with or otherwise with respect
to any breach of the Limited Covenants (as defined below), Purchaser shall give
the Preferred Sellers written notice of such breach and an opportunity to cure
such breach within 15 days of receipt of such written notice.
(b) The Preferred Sellers shall not be required to indemnify
any Purchaser Indemnitee, and shall not have any liability:
(i) under clause (i) of Section 8.01(a) or, with respect to
the covenants contained in Article VI (other than the covenants
contained in Sections 6.04(b), 6.09(b), 6.09(c), 6.09(e), 6.09(g),
6.09(h), 6.09(i), 6.09(j), 6.14 and 6.16 to be performed by the
Preferred Sellers and other than the covenants contained in Sections
6.06, 6.07, 6.11(b) and 6.20 (collectively, the "Limited Covenants")),
under clause (ii) of Section 8.01(a) unless the aggregate of all Losses
for which the Preferred Sellers would, but for this clause (i), be
liable thereunder exceeds on a cumulative basis an amount equal to an
aggregate of $1,000,000 (and taking into account both such clauses for
purposes of calculating the aggregate of $1,000,000), and then only to
the extent of any such excess, subject to clause (iii) of this Section
8.01(b);
(ii) under clause (i) of Section 8.01(a) or, with respect to
the covenants contained in Article VI (other than the Limited
Covenants), under clause (ii) of Section 8.01(a) for any individual
items where the Loss relating thereto is less than $125,000 (only for
purposes of computing such amount, excluding any portion of such Loss
that consists of incidental, consequential, prospective or special
damages of any kind), and such items (including any portion of such
Loss that consists of incidental, consequential, prospective or special
damages of any kind) shall not
59
be aggregated for purposes of clause (i) of this Section 8.01(b); and
(iii) under clause (i) of Section 8.01(a) or, with respect to
the covenants contained in Article VI (other than the Limited
Covenants), under clause (ii) of Section 8.01(a) in excess of an
aggregate of $4,000,000 (and taking into account both such clauses for
purposes of calculating the aggregate of $4,000,000).
(c) Except as otherwise specifically provided in this
Agreement, Purchaser acknowledges that its sole and exclusive monetary remedy
after the Closing with respect to any and all claims against any Seller relating
to this Agreement, the Acquisition and the other transactions contemplated
hereby (other than claims of, or causes of action arising from, fraud or
intentional breach) shall be pursuant to the indemnification provisions set
forth in this Article VIII.
(d) Subject to the limitations set forth in Section 8.01(b),
each Preferred Seller shall be fully and solely responsible for any obligations
under Section 8.01(a) for any breach of any representation, warranty or covenant
of such Preferred Seller (a "Specific Preferred Seller Obligation"), and no
other Preferred Sellers shall be liable therefor. All other obligations of the
Preferred Sellers under Section 8.01(a) shall be several, but shall be borne in
part by the Escrow described in Section 8.01(g), in accordance with the
following percentages (the "Applicable Percentages") except as otherwise
provided in the immediately succeeding sentence:
Escrow = 10%
Sylvan = 45%
Pyramid = 22.50%
GE Cap-Eq = 22.50%
As to claims made either prior to July 1, 2000 (to the extent relating to Losses
arising out of a breach of the covenants contained in Section 6.09(e)(i)
regarding payment of the amount of $200,000 for Taxes and the amount of $200,000
for fees and expenses of PricewaterhouseCoopers LLP, Section 6.09(e)(ii)
regarding payment of the amount of $100,000 for Taxes and the amount of $100,000
for fees and expenses of PricewaterhouseCoopers LLP, and Section 6.09(g)(i)
regarding (subject to Section 6.09(e)) payments of fees and expenses of
PricewaterhouseCoopers LLP for preparation of the amended Tax Returns described
therein or to the extent the Escrow has been reduced to zero) or
60
after June 30, 2000, the Applicable Percentages shall be as follows:
Sylvan = 50%
Pyramid = 25%
GE Cap-Eq = 25%
(e) From and after the Closing, Purchaser shall be liable for,
and shall indemnify each Preferred Seller and its affiliates and each of their
respective officers, directors, employees, stockholders, agents and
representatives (the "Preferred Seller Indemnitees") against, and hold it
harmless from any Loss as incurred by such Preferred Seller Indemnitee to the
extent arising from, in connection with or otherwise with respect to:
(i) any breach of any representation or warranty of Purchaser
that survives the Closing pursuant to this Agreement; or
(ii) any breach of any covenant of Purchaser contained in this
Agreement;
(f) Purchaser shall not be required to indemnify any Preferred
Seller Indemnitee, and shall not have any liability:
(i) under clause (i) of Section 8.01(e) unless the aggregate
of all Losses for which the Purchaser would, but for this clause (i),
be liable thereunder exceeds on a cumulative basis an amount equal to
$1,000,000, and then only to the extent of any such excess, subject to
clause (iii) of this Section 8.01(f);
(ii) under clause (i) of Section 8.01(e) for any individual
items where the Loss relating thereto is less than $125,000 (only for
purposes of computing such amount, excluding any portion of such Loss
that consists of incidental, consequential, prospective or special
damages of any kind) and such items (including any portion of such Loss
that consists of incidental, consequential, prospective or special
damages of any kind) shall not be aggregated for purposes of clause (i)
of this Section 8.01(f); and
(iii) under clause (i) of Section 8.01(e) in excess of
$4,000,000.
(g) Purchaser and the Company have agreed to, and at the
Closing shall (as set out in Section 1.03(e)), cause to be deposited the amount
of $400,000 into an Escrow to be
61
held and administered in accordance with the terms of the Escrow Agreement. The
purpose of the Escrow is to pay obligations under Section 8.01(a), as set out in
Section 8.01(d).
SECTION 8.02. CALCULATION OF LOSSES. (a) The amount of any Loss
for which indemnification is provided under this Article VIII shall be (i)
increased to take account of the present value (determined by using a discount
rate equal to the "applicable Federal rate" (as defined in Section 1274 of the
Code), compounded semi-annually, for short-term debt instruments) of any net Tax
cost incurred (or expected to be incurred in other Tax periods) by the Purchaser
Indemnitees or the Preferred Seller Indemnitees arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit realized (or expected to be realized in
other Tax periods) by the Purchaser Indemnitees or the Preferred Seller
Indemnitees arising from the incurrence or payment of any such Loss. Any such
increase (or any such decrease) in Loss shall be treated as a Loss (or reduction
in Loss) under Section 8.01(a) or 8.01(e), as the case may be, for all purposes
of this Agreement (including, without limitation, the $4,000,000 limitation set
forth in Section 8.01(b)(iii) or 8.01(f)(iii), as the case may be, if
applicable). In computing the amount of any such Tax cost or Tax benefit, the
Purchaser Indemnitees or the Preferred Seller Indemnitees shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Loss. Any indemnity payment
under this Agreement shall be treated as an adjustment to the purchase price for
Tax purposes, unless otherwise required by law.
(b) Any Loss for which indemnification is provided shall be
net of all amounts recovered under the Company's insurance policies, it being
understood that the Company shall use commercially reasonable efforts to pursue
claims under such insurance policies except to the extent that the Company
determines that it will be materially adversely affected by pursuing any such
claim. Any out-of-pocket expenses (in no event including charges for time
expended by Company personnel) incurred in pursuing such claim shall be
considered part of the Loss for which indemnification is provided.
Any Loss relating to Taxes for which indemnifi cation is
available to the Company under the Stock Purchase Agreement dated June 29, 1995,
by and between JLC Holdings,
62
Inc., SSC, and JLC Acquisitions, Inc., as purchasers, and Jostens, Inc., as
seller (the "Jostens Agreement"), shall be net of any actual recovery by the
Company under the Jostens Agreement (as reduced by any out-of-pocket expenses
(in no event including charges for time expended by Company personnel) incurred
in pursuing such claim), it being understood and agreed that the Company shall
use commercially reasonable efforts to pursue any applicable claims under the
Jostens Agreement (except to the extent that the Company determines that it
would be materially adversely affected by pursuing any such claim), that the
Company shall pursue such claims prior to pursuing a claim for indemnification
under this Agreement and that any otherwise applicable survival period for
indemnification by the Preferred Sellers pursuant to Section 10.01 shall be
extended for so long as any such claim is being pursued by the Company. The
Company shall give written notice to the Preferred Sellers of its pursuit of any
such claim.
SECTION 8.03. TERMINATION OF INDEMNIFICATION. The obligations
to indemnify and hold harmless any party, pursuant to Section 8.01(a) or
8.01(e), shall terminate when the applicable representation or warranty or
covenant terminates pursuant to Section 10.01; PROVIDED, HOWEVER, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim pursuant to Section 8.04 to the party to be providing the
indemnification.
SECTION 8.04. PROCEDURES. (a) In order for a person (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim made by any
person against the indemnified party (a "Third Party Claim"), such indemnified
party must notify the indemnifying party in writing (and in reasonable detail)
of the Third Party Claim promptly following receipt by such indemnified party of
written notice of the Third Party Claim; PROVIDED, HOWEVER, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually prejudiced as a
result of such failure. Thereafter, the indemnified party shall deliver to the
indemnifying party, promptly following the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim other than those notices and
documents separately addressed to the indemnifying party.
63
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party shall not be liable to the
indemnified party for any legal expenses subsequently incurred by the
indemnified party in connection with the defense and the resolution thereof. If
the indemnifying party assumes such defense, the indemnified party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the indemnifying party, it
being understood that the indemnifying party shall control such defense and the
resolution thereof. The indemnifying party shall be liable for the reasonable
fees and expenses of counsel employed by the indemnified party for any period
during which the indemnifying party has not assumed the defense thereof (other
than during any period in which the indemnified party shall have failed to give
notice of the Third Party Claim as provided above) and during any such period
(not to exceed four weeks), the indemnified party shall not admit any liability
with respect to, or settle, compromise or discharge a Third Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld).
If the indemnifying party chooses to defend or prosecute a
Third Party Claim, all the indemnified parties shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
indemnifying party's reasonable request) the timely provision to the
indemnifying party of records and information that are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. If the indemnifying party assumes the defense of a Third Party Claim,
no settlement or compromise thereof may be effected by the indemnifying party
without the indemnified party's prior written consent (which consent shall not
be unreasonably withheld). If the indemnifying party assumes the defense of a
Third Party Claim, the indemnified party shall agree to any settlement,
compromise or discharge of a Third Party Claim that the indemnifying party may
recommend and that by its terms obligates the indemnifying party to pay the full
amount of the liability in connection with such Third Party Claim, that releases
the indemnified party completely in connection with such Third Party Claim and
64
that would not otherwise adversely affect the indemnified party.
Notwithstanding the foregoing two paragraphs, the indemnifying
party shall not be entitled to assume the defense of any Third Party Claim (and
shall be liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks (i) monetary damages in excess of the maximum amount set forth in Section
8.01(b)(iii) or 8.01(e)(iii), as the case may be, or (ii) an order, injunction
or other equitable relief or relief for other than money damages against the
indemnified party that the indemnified party reasonably determines, after
conferring with its outside counsel, cannot be separated from any related claim
for money damages; PROVIDED, HOWEVER, that, in such case, the indemnified party
shall not admit any liability with respect to, or settle, compromise or
discharge such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld). If such equitable
relief or other relief portion of the Third Party Claim can be so separated from
that for money damages, the indemnifying party shall be entitled to assume the
defense of the portion relating to money damages.
(c) In the event any indemnified party should have a claim
against any indemnifying party under Section 8.01 that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to such indemnified party under
Section 8.01, except to the extent that the indemnifying party demonstrates that
it has been actually prejudiced by such failure. If the indemnifying party does
not notify the indemnified party within 30 calendar days following its receipt
of such notice that the indemnifying party disputes its liability to the
indemnified party under Section 8.01, such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 8.01 and the indemnifying party shall pay the
amount of such liability to the indemnified party on demand or, in the case of
any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as
65
provided above, the indemnifying party and the indemnified party shall proceed
in good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
(d) For purposes of this Section 8.04 (except with respect to
Section 8.01(e)) and except with respect to the payment obligations of the
Preferred Sellers, Sylvan shall be considered the indemnifying party; PROVIDED,
HOWEVER, that in the event Sylvan fails to notify Purchaser (within 15 days
after Sylvan's receipt of notice of a Third Party Claim pursuant to Section
8.04(a) above) that either (i) Sylvan is assuming the defense of such Third
Party Claim or (ii) Sylvan disputes the indemnified party's right to indemnity
hereunder, GE Cap-Eq and Pyramid, collectively, shall be considered the
indemnifying party and the exercise of any rights of the indemnifying party
shall require the mutual agreement of GE Cap-Eq and Pyramid; PROVIDED FURTHER
that in all events the notice and delivery required to be made by the
indemnified party to the indemnifying party pursuant to Section 8.04(a) shall be
provided by the indemnified party to each of the Preferred Sellers; PROVIDED
FURTHER that in the event of a Specific Preferred Seller Obligation, the
applicable Preferred Seller shall be considered the indemnifying party
hereunder.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. (a) Notwithstanding anything to the
contrary in this Agreement, this Agreement may be terminated and the Acquisition
and the other transactions contemplated by this Agreement abandoned at any time
prior to the Closing:
(i) by mutual written consent of SSC and Purchaser;
(ii) by SSC if any of the conditions set forth in Section 7.01
or 7.03 shall have become incapable of fulfillment, and shall not have
been waived by SSC;
(iii) by Purchaser if any of the conditions set forth in
Section 7.01 or 7.02 shall have become incapable of fulfillment, and
shall not have been waived by Purchaser; or
66
(iv) by SSC or Purchaser, if the Closing does not occur on or
prior to June 30, 1999;
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (ii),
(iii) or (iv) is not then in breach in any material respect (unless such breach
did not directly or indirectly result in or contribute to the state of facts
giving rise to the right of termination under clause (ii), (iii) or (iv)) of any
of its representations, warranties, covenants or agreements contained in this
Agreement.
(b) In the event of termination by SSC or Purchaser pursuant
to this Section 9.01, written notice thereof shall forthwith be given to the
other parties and the transactions contemplated by this Agreement shall be
terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) Purchaser shall return all documents and other material
received from the Company or SSC relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the Company; and
(ii) all confidential information received by Purchaser with
respect to the business of the Company shall be treated in accordance
with the Confidentiality Agreement, which shall remain in full force
and effect notwithstanding the termination of this Agreement.
SECTION 9.02. EFFECT OF TERMINATION. If this Agreement is
terminated and the transactions contemplated hereby are abandoned as described
in Section 9.01, this Agreement shall become null and void and of no further
force and effect, except for the provisions of (i) Section 6.04 relating to the
obligation of Purchaser to keep confidential certain information and data
obtained by it, (ii) Section 6.06 relating to certain expenses, (iii) Section
6.07 relating to finder's fees and broker's fees, (iv) Section 9.01 and this
Section 9.02 and (v) Section 6.12 relating to publicity. Nothing in this Section
9.02 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or to impair the right
of any party to compel specific performance by any other party of its
obligations under this Agreement.
SECTION 9.03. AMENDMENTS AND WAIVERS. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. By
67
an instrument in writing, Purchaser may waive compliance by any Seller or the
Company, or SSC may waive compliance by Purchaser, with any term or provision of
this Agreement that such other party was or is obligated to comply with or
perform; PROVIDED, HOWEVER, that none of such waivers by Purchaser or SSC shall
be effective without the prior written consent of the Preferred Sellers.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. SURVIVAL. The representations and warranties
contained in this Agreement shall survive the Closing solely for purposes of
Article VIII and shall terminate at the close of business on June 30, 2000,
except for the representations and warranties contained in Sections 2.04, 3.04
and 4.02. Subject to Section 8.02(b), the other covenants contained in Article
VI shall terminate at the close of business on June 30, 2000, except for the
covenants contained in Sections 6.04(b) and 6.14, which shall terminate on the
dates set forth therein, and the covenants contained in Section 6.09, which
shall not terminate (except for the covenants in Section 6.09 to pay Taxes,
which covenants shall expire with respect to any particular Tax upon the
expiration of the applicable statute of limitations for the assessment of such
Tax).
SECTION 10.02. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
without the prior written consent of the other parties hereto. Notwithstanding
the foregoing, (a) Purchaser may assign its right to purchase the Shares to an
affiliate of Purchaser without the prior written consent of any other party (but
Purchaser shall give written notice of same to each other party), and (b)
Purchaser may assign its rights hereunder by way of security and such secured
party may assign such rights by way of exercise of remedies (but Purchaser shall
give written notice of same to each other party); PROVIDED, HOWEVER, that no
assignment shall limit or affect the assignor's obligations hereunder. Any
attempted assignment in violation of this Section 10.02 shall be void.
SECTION 10.03. NO THIRD-PARTY BENEFICIARIES.
Except as provided in Article IX, this Agreement is for the
sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the
68
parties hereto and such assigns, any legal or equitable rights hereunder.
SECTION 10.04. NOTICES. All notices or other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered by hand or sent by facsimile or sent, postage prepaid, by registered,
certified or express mail or reputable overnight courier service and shall be
deemed given when so delivered by hand or facsimile, or if mailed, five days
after mailing (one business day in the case of overnight courier service), as
follows:
(i) if to Purchaser or, after the Closing, the
Company,
EAC I Inc.
c/o Ripplewood Holdings L.L.C.
Xxx Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to SSC or, prior to the Closing, the
Company,
Software Systems Corp.
0000 Xxxxxxx Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
and
69
Xxxxxxxx, Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(iii) if to Sylvan,
Sylvan Learning Systems, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx, Baetjer and Xxxxxx, LLP
1800 Mercantile Bank & Trust Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, III, Esq.
Facsimile: (000) 000-0000
(iv) if to Pyramid,
Pyramid Ventures, Inc.
0 XX Xxxxx, 00xx Xxxxx
M/S 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Emmet Xxxxxx Xxxxxx LLP
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
(v) if to GE Cap-Eq,
GE Capital Equity Investments, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
70
with a copy to:
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 10.05. INTERPRETATION; EXHIBITS AND SCHEDULES; CERTAIN
DEFINITIONS. (a) The headings contained in this Agreement, in any Exhibit or
Schedule hereto and in the table of contents to this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All Exhibits and Schedules annexed hereto or referred to herein
are hereby incorporated in and made a part of this Agreement as if set forth in
full herein. Any capitalized terms used in any Schedule or Exhibit, but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section, Exhibit or Schedule,
such reference shall be to a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.
(b) For all purposes hereof:
"affiliate" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
"including" means including, without limitation.
"person" means any individual, firm, corporation, partnership,
limited liability company, trust, joint venture, Governmental Entity or other
entity.
"subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person or by another subsidiary of such first person.
"to Purchaser's knowledge" means to the actual
knowledge after reasonable inquiry of Xxxxxxx X. Xxxxxxx or
Xxxxxxx X. Xxxxxx.
71
"to the knowledge of SSC and the Company" means to the actual
knowledge of Xxxxx X. Xxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxxx, Xxxxxx Xxxxxx,
Xxxxx Xxxxxxxx, Xxxxx X. Xxxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxx and Xxxxxxx
XxXxxxxxxx.
SECTION 10.06. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party.
SECTION 10.07. ENTIRE AGREEMENT. This Agreement, and the
Confidentiality Agreement, along with the Schedules and Exhibits hereto, contain
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter. None of the parties shall be
liable or bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as specifically
set forth herein or in the Confidentiality Agreement.
SECTION 10.08. SEVERABILITY. If any provision of this
Agreement (or any portion thereof) or the application of any such provision (or
any portion thereof) to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of such
provision to any other persons or circumstances.
SECTION 10.09. CONSENT TO JURISDICTION. Each party irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the State of
New York, New York County, and (b) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each party further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction in this Section 10.09. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (i) the
Supreme Court of the State of New York, New York County, or (ii) the United
States District Court for the Southern
72
District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 10.10. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
SECTION 10.11. WAIVER OF JURY TRIAL. Each party hereby waives,
to the fullest extent permitted by Applicable Law, any right it may have to a
trial by jury in respect to any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any transaction contemplated
hereby. Each party (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter
into this Agreement and, as applicable, by, among other things, the mutual
waivers and certifications in this Section 10.11.
IN WITNESS WHEREOF, SSC, the Preferred Sellers, Purchaser and
the Company have duly executed this Agreement as of the date first written
above.
SOFTWARE SYSTEMS CORP.,
by /s/ XXXXX X. XXXXXXX
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: CEO & Secretary
SYLVAN LEARNING SYSTEMS, INC.,
by /s/ B. XXX XXXXX
---------------------------
Name: B. Xxx XxXxx
Title: Exec VP & CFO
73
PYRAMID VENTURES, INC.,
by /s/ XXXXX XXXXXX
----------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director
GE CAPITAL EQUITY INVESTMENTS, INC.,
by /s/ XXXXXX XXXXXX
-----------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
JLC LEARNING CORPORATION,
by /s/ XXXXX X. XXXX
------------------------------
Name: Xxxxx X. Xxxx
Title: CEO
EAC I Inc.,
by /s/ XXXXXXX X. XXXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Secretary
JLC Holdings, Inc. hereby agrees to
comply with all its obligations
under Section 6.09.
JLC HOLDINGS, INC.,
by /s/ XXXXX X. XXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO & Secretary
EXHIBIT A
1. AMOUNT: $400,000
2. ESCROW TO BE ESTABLISHED BY: Company
3. ESCROW AGENT: Bankers Trust Company
4. INVESTMENT: Only in highly liquid short-term
investments
5. DISBURSEMENT:
WHEN: Whenever payment on account of Loss to
be indemnified pursuant to Section 8.01
is required to be made by the three
Preferred Sellers (in no case in respect
of a Specific Preferred Seller
Obligation)
AMOUNT: 10% of the total amount to be paid on
account of Loss to be indemnified except
as provided in Section 8.01(d)
(PROVIDED, that escrow not to cover
attorney's fees/expenses incurred by the
Preferred Sellers in handling the
defense of any indemnified claim)
6. FEES: All expenses of Escrow (including preparation
of agreement, escrow agent fees and expenses, etc.)
paid out of escrow amount (and interest thereon).
7. DURATION: June 30, 2000, except as to claims made
(and unresolved) before July 1, 2000.
Funds that are subject of a disputed
claim are held until resolution of such
claim.
8. TERMINATION: Upon termination, Escrow Agent pays all
remaining funds (and interest earned thereon) to
Company, which in turn pays (via payroll) all
recipients in accordance with pre-arranged
percentages.
SCHEDULE 1.01
SAMPLE CALCULATION OF PER SHARE PRICE
Per Share Price:
Per share price = x/y x/y = $421.06
=======
Where:
x = (1) - (2) x = $12,631,941
y = 30,000 y = 30,000
and:
(1) = $53,700,000 (1) = $53,700,000
(2) = (i) + (ii) + (iii) (2) = 41,068,059
-----------
x = $12,631,941
-----------
where:
(i) = Aggregate Principal of Company Indebtedness $33,892,901
(See pg. 2 of 4)
(ii) = Accrued and Unpaid Interest thereon 4,382,408 (As of: 6/30/99)
(See pg. 2 of 4)
Prepayment Penalties (Foothill Capital) 360,000 (As of: 6/30/99)
(iii) = Aggregate amount payable under JLC 1998 1,520,250
Stock Appreciation Rights Plan and
the maximum aggregate amount payable under 912,500
the Fixed Sales Bonuses
-----------
(2) = $41,068,059
-----------
Note: Amounts are estimated based upon assumptions of remaining obligations as
of 6/30/99 and will change based upon actual obligations outstanding and actual
closing date.
SCHEDULE 1.01
SCHEDULE OF OUTSTANDING DEBT
AND ACCRUED INTEREST
Payee Date Principal Interest Description
------ ---- --------- -------- -----------
1a Foothill Capital Corp.-(Revolver) 3/30/98 $7,250,000 9.25% Prime plus 1.5%; 18% on overadvance;
Interest paid monthly though 5/31/99;
Plus $7,500/mo. servicing fee; $600/mo.
other handling fees.
1b Foothill Capital Corp.-(Special Advance) 3/30/98 7,500,000 15.00% Interest paid monthly through 5/30/99
2 Chase Manhattan Bank 6/29/95 8,500,000 12.25% Senior Subordinated Note (No interest
paid since 10/1/97)
3 Pyramid Ventures, Inc. 3/31/99 1,000,000 12.25% Senior Subordinated Note (No interest
paid since 10/1/97)
4 GE Capital Equity Investments 3/31/99 2,500,000 12.25% Senior Subordinated Note (No interest
paid since 10/1/97)
5 Sylvan Learning Systems, Inc 3/31/99 5,000,000 12.25% Senior Subordinated Note (No interest
paid since 10/1/97)
6 Sylvan Learning Systems, Inc 6/30/98 2,142,901 10.00% Subordinated Promissory Note
-----------
$33,892,901
===========
-----------------------------------------------------------------------------------------
ACCRUED INTEREST
-----------------------------------------------------------------------------------------
FCC-Revolver FCC-X.X. Xxxxx Pyramid GE Cap Eq Xxxxxx Xxxxxx
------------------------------------------------------------------------------ Total
Debt Holder 7,250,000 7.500,000 8,500,000 1,000,000 2,500,000 5,000,000 2,142,901
Principal Amount -----------------------------------------------------------------------------------------
Interest Amount:
As of 6/30/98 - Regular Interest - - $780,938 $91,875 $229,688 $459,375 - $1,561,875
- Penalty Interest - - 27,821 3,273 8,183 16,365 - 55,642
9/30/98 - Regular Interest - - 260,313 30,625 76,563 153,125 53,573 574,198
- Penalty Interest - - 27,821 3,273 8,183 16,365 - 55,642
12/31/98 - Regular Interest - - 260,313 30,625 76,563 153,125 53,573 574,198
- Penalty Interest - - 37,095 4,364 10,910 21,820 - 74,189
3/31/99 - Regular Interest - - 260,313 30,625 76,563 153,125 53,573 574,198
- Penalty Interest - - 46,368 5,455 13,638 27,275 - 92,736
4/30/99 - Regular Interest - - 86,771 10,208 25,521 51,042 17,858 191,399
- Penalty Interest - - 18,547 2,182 5,455 10,910 - 37,095
6/30/99 - Regular Interest 90,500 93,750 173,542 20,417 51,042 102,083 35,715 567,048
- Penalty Interest - - 37,095 4,364 10,910 21,820 - 74,189
-----------------------------------------------------------------------------------------
Total Interest 90,500 93,750 2,016,934 237,286 593,216 1,186,432 214,290 4,432,408
-----------------------------------------------------------------------------------------
Reduction of Penalty Interest (50,000) (50,000)
-----------------------------------------------------------------------------------------
Net Interest 90,500 93,750 1,966,934 237,286 593,216 1,186,432 214,290 4,382,408
-----------------------------------------------------------------------------------------
Total Obligation $7,340,500 $7,593,750 $10,466,934 $1,237,286 $3,093,216 $6,186,432 $2,357,191 $38,275,309
=========================================================================================
Note: Amounts are estimated based upon a 6/30/99 closing date and will change
based upon actual closing date.
SCHEDULE 1.01
CALCULATION OF PENALTY INTEREST ON $17 MILLION
12.25% SENIOR SUBORDINATED NOTES
Interest Rate: 14.25%
Interest Due Total Penalty Total Penalty
and Payable Interest Due Interest Interest
------------ ------------ -------- -------------
12/31/97 520,625 520,625 - -
1/31/98 520,625 6,182 6,182
2/28/98 520,625 6,182 12,365
3/31/98 520,625 1,041,250 6,182 18,547
4/30/98 1,041,250 12,365 30,912
5/31/98 1,041,250 12,365 43,277
6/30/98 520,625 1,561,875 12,365 55,642
7/31/98 1,561,875 18,547 74,189
8/31/98 1,561,875 18,547 92,736
9/30/98 520,625 2,082,500 18,547 111,284
10/31/98 2,082,500 24,730 136,013
11/30/98 2,082,500 24,730 160,743
12/31/98 520,625 2,603,125 24,730 185,473
1/31/99 2,603,125 30,912 216,385
2/28/99 2,603,125 30,912 247,297
3/31/99 520,625 3,123,750 30,912 278,209
4/30/99 3,123,750 37,095 315,304
5/31/99 3,123,750 37,095 352,398
6/30/99 520,625 3,644,375 37,095 389,493
========== ==========
Penalty Interest begins to accrue on the first day after interest becomes due
and payable.
Note: Amounts are estimated based upon a 6/30/99 closing date and will change
based upon actual closing date.
SCHEDULE 1.01
CALCULATION/ALLOCATION OF SHARE PROCEEDS
Assumed Closing Date: 6/30/99
--------------------------------------------------------------------
Per Total Share
Asset Sold # Shares Share Price Proceeds
--------------------------------------------------------------------
Sylvan Learning Systems, Inc. - "Sylvan" Class A Preferred; par $0.01 15,000 $421.06 $ 6,315,970
Pyramid Ventures Inc. - "Pyramid" Class A Preferred; par $0.01
Class B Preferred; par $0.01 7,500 421.06 3,157,985
GE Capital Equity Inv. - "GE Cap-Eq" Class B Preferred; par $0.01 7,500 421.06 3,157,985
------- ------------
30,000 $12,631,941
======= ============
Note: Amounts are estimated based upon assumptions of remaining obligations as
of 6/30/99 and will change based upon actual obligations outstanding and actual
closing date.
SCHEDULE 2.04
1. Sylvan:
a. Securities Purchase Agreement dated as of November 1, 1996 by and
among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation and Sylvan Learning Systems, Inc., amended as
follows:(1)
First Amendment to Securities Purchase Agreement dated as of
December 5, 1996 by and among JLC Holdings, Inc., Software
Systems Corp., JLC Learning Corporation and Sylvan Learning
Systems, Inc.
Consent and Termination Agreement, dated as of June 30, 1998,
among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation and Sylvan Learning Systems, Inc.
b. Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
pursuant thereto.
c. Restatement Agreement dated as of December 19, 1996, amending the
Second Restated Stockholders Agreement dated November 1, 1996, by
and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund IV-B,
L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
Chase Manhattan Investment Holdings, Inc., HAL International
Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
Inc. and General Electric Capital Corporation.
d. Third Restated Stockholders Agreement, dated as of December 19,
1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
Learning Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund
IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
Partners, Chase Manhattan Investment Holdings, Inc., HAL
International Investments N.V., Lifetouch Learning, Inc., Sylvan
Learning Systems, Inc. and General Electric Capital Corporation.
----------
(1) All references to this document throughout the Schedules shall include
both the First Amendment and Consent and Termination Agreement set forth
below.
JLC - CONFIDENTIAL
SCHEDULE 2.04 (CONT'D)
e. Indemnification Agreement dated as of November 1, 1996, by and
between JLC Learning Corporation and Sylvan Learning Systems, Inc.
f. Consent and Termination Agreement, dated as of June 30, 1998, among
JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation
and Sylvan Learning Systems, Inc.
2. GE Capital Equity Investments:
a. Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., General Electric Capital Corporation, G.E. Capital Equity
Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
dated as of March 31, 1999, and the notes issued pursuant thereto.
b. Restatement Agreement dated as of December 19, 1996, amending the
Second Restated Stockholders Agreement dated November 1, 1996, by
and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund IV-B,
L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
Chase Manhattan Investment Holdings, Inc., HAL International
Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
Inc. and General Electric Capital Corporation.
c. Third Restated Stockholders Agreement, dated as of December 19,
1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
Learning Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund
IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
Partners, Chase Manhattan Investment Holdings, Inc., HAL
International Investments N.V., Lifetouch Learning, Inc., Sylvan
Learning Systems, Inc. and General Electric Capital Corporation.
d. Securities Purchase Agreement dated as of December 19, 1996 by and
among Software Systems Corp., JLC Learning Corporation and General
Electric Capital Corporation.
JLC - CONFIDENTIAL
SCHEDULE 2.04 (CONT'D)
3. Pyramid Ventures:
a. Securities Purchase Agreement dated as of November 1, 1996 by and
among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation and Sylvan Learning Systems, Inc.
b. Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
pursuant thereto.
c. Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., General Electric Capital Corporation, G.E. Capital Equity
Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
dated as of March 31, 1999, and the notes issued pursuant thereto.
d. Restatement Agreement dated as of December 19, 1996, amending the
Second Restated Stockholders Agreement dated November 1, 1996, by
and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund IV-B,
L.P., BCIP Associates, BCIP Trust Associates, L.P., Information
Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC Partners,
Chase Manhattan Investment Holdings, Inc., HAL International
Investments N.V., Lifetouch Learning, Inc., Sylvan Learning Systems,
Inc. and General Electric Capital Corporation.
e. Third Restated Stockholders Agreement, dated as of December 19,
1996, by and among JLC Holdings, Inc., Software Systems Corp., JLC
Learning Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund
IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
Information Partners Capital Fund, L.P., Jostens, Inc., Indosuez JLC
Partners, Chase Manhattan Investment Holdings, Inc., HAL
International Investments N.V., Lifetouch Learning, Inc., Sylvan
Learning Systems, Inc. and General Electric Capital Corporation.
f. Securities Purchase Agreement dated as of December 19, 1996 by and
among Software Systems Corp., JLC Learning Corporation and General
Electric Capital Corporation.
JLC - CONFIDENTIAL
SCHEDULE 2.06
1. Product Supply and License Agreement entered into by and between JLC
Learning Corporation and Sylvan Learning Systems, Inc. dated as of
November 1, 1996.
2. Securities Purchase Agreement dated as of November 1, 1996 by and among
JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc.
3. Texas Caretaker Project Pilot entered into by and between JLC Learning
Corporation and Sylvan Learning Systems, Inc. on July 23, 1997.
4. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
The Agreement contains a provision providing for limited distribution
rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
entered into on May 28, 1999.
5. International Development and Distribution Agreement entered into by and
between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
20, 1998. Amendment One to this Agreement was entered into on February 28,
1998. A Letter of Amendment and Subdistribution Agreement are currently
under negotiation. The Agreement contains a clause for the provision of
localized products to Sylvan Learning Systems, Inc.
6. Engagement Letter entered into by and between BT Alex. Xxxxx and JLC
Learning Corporation on January 5, 1998.
7. Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
Learning Corporation issued on June 30, 1998 in the principal amount of
$2,142,901.36.
8. Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
Sylvan Learning Systems, Inc., JLC Learning Corporation and JLC Holdings,
Inc., dated as of March 31, 1999, and the notes issued pursuant thereto.
9. Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
General Electric Capital Corporation, G.E. Capital Equity Investments,
Inc., JLC Learning Corporation, and JLC Holdings, Inc., dated as of March
31, 1999, and the notes issued pursuant thereto.
JLC - CONFIDENTIAL
SCHEDULE 2.06 (CONT'D)
10. In March of 1999, JLC Learning Corporation's receivable under the Product
Supply and License Agreement of November 1, 1996, was applied against JLC
Learning Corporation's obligations to Sylvan under the Securities Purchase
Agreement dated as of November 1, 1996.
11. Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
1995, amended as follows: (1)
(a) Amendment No. 1 and Waiver dated as of December 15, 1995.
(b) Amendment No. 2 and Waiver dated as of July 17, 1996.
(c) Waiver and Ratification dated as of September 30, 1996.
(d) Amendment No. 3 and Waiver dated as of November 1, 1996.
(e) Amendment No. 4 and Waiver dated as of December 6, 1996.
(f) Amendment No. 5 and Waiver dated as of December 19, 1996.
(g) Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., Sylvan Learning Systems, Inc., JLC Learning Corporation and
JLC Holdings, Inc., dated as of March 31, 1999, and the notes issued
pursuant thereto.
(h) Assignment and Exchange Agreement by and among Pyramid Ventures,
Inc., General Electric Capital Corporation, G.E. Capital Equity
Investments, Inc., JLC Learning Corporation, and JLC Holdings, Inc.,
dated as of March 31, 1999, and the notes issued pursuant thereto.
(i) Assignment and Agreement of September 15, 1998 by and among HAL
International Investments N.V., formerly known as Maximum
Investments N.V., Pyramid Ventures, Inc., JLC Learning Corp. and JLC
Holdings, Inc.
12. Stock Purchase Agreement by and between JLC Holdings, Inc., Software
Systems Corp., JLC Acquisition and Jostens, Inc. dated as of June 29,
1995.
----------
(1) All references to this document throughout the Schedules shall include
nine (9) documents set forth below.
JLC - CONFIDENTIAL
SCHEDULE 2.06 (CONT'D)
13. Restatement Agreement dated as of December 19, 1996, amending the Second
Restated Stockholders Agreement dated November 1, 1996, by and among JLC
Holdings, Inc., Software Systems Corp., JLC Learning Corporation, Xxxx
Capital Funds IV, L.P., Xxxx Capital Fund IV-B, L.P., BCIP Associates,
BCIP Trust Associates, L.P., Information Partners Capital Fund, L.P.,
Jostens, Inc., Indosuez JLC Partners, Chase Manhattan Investment Holdings,
Inc., HAL International Investments N.V., Lifetouch Learning, Inc., Sylvan
Learning Systems, Inc. and General Electric Capital Corporation.
14. Third Restated Stockholders Agreement, dated as of December 19, 1996, by
and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund IV-B, L.P.,
BCIP Associates, BCIP Trust Associates, L.P., Information Partners Capital
Fund, L.P., Jostens, Inc., Indosuez JLC Partners, Chase Manhattan
Investment Holdings, Inc., HAL International Investments N.V., Lifetouch
Learning, Inc., Sylvan Learning Systems, Inc. and General Electric Capital
Corporation.
15. Indemnification Agreement dated as of November 1, 1996, by and between JLC
Learning Corporation and Sylvan Learning Systems, Inc.
16. Securities Purchase Agreement dated as of December 19, 1996 by and among
Software Systems Corp., JLC Learning Corporation and General Electric
Capital Corporation.
17. Letter Agreement modifying and terminating certain licensing rights
granted by Academic Systems to JLC Learning Corporation, dated as of June
17, 1998.
18. Subordination Agreement, dated June 30, 1998 among Foothill Capital
Corporation, JLC Learning Corporation and Sylvan Learning Systems, Inc.
19. Management and Advisory Agreement by and between JLC Holdings, Inc.,
Software Systems Corp., JLC Acquisition Corp. and Xxxx Capital Partners
IV, L.P. dated as of June 29, 1995.
20. Consent and Termination Agreement, dated as of June 30, 1998, among JLC
Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc.
21. Strategic Alliance Agreement dated the date hereof between Sylvan Learning
Systems, Inc. and JLC Learning Corporation.
JLC - CONFIDENTIAL
SCHEDULE 3.03
1. Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
1995.
2. Software Systems Corp.'s $57,150,000 Subordinated Note due 2003, dated
November 8, 1996 between Software Systems Corp. and Jostens, Inc.
3. Software Systems Corp.'s $4,000,115 Exchangeable Subordinated Note due
2003, between Software Systems Corp. and Jostens, Inc. dated June 29,
1995.
JLC - CONFIDENTIAL
SCHEDULE 3.06
SOFTWARE SYSTEMS CORP. UNCONSOLIDATED BALANCE SHEET,
DECEMBER 31, 1998
Assets
Investments in JLC Learning Corporation $40,000,000
-------------------------
Total Assets: $40,000,000
=========================
Liabilities $48,628,000(1)
Paid in kind notes - Jostens, Inc. 9,058,000
-------------------------
Total Liabilities $57,686,000
=========================
Shareholder's equity
Retained earnings ($11,953,000)
Current year profit (loss) ($ 5,733,000)
-------------------------
Shareholder's equity ($17,686,000)
=========================
Total liabilities and equity $40,000,000
-------------------------
(1) This figure represents the present value of Software Systems Corp.'s
$57,150,000 Subordinated Note due 2003, dated November 8, 1996 between
Software Systems Corp. and Jostens, Inc.
JLC - CONFIDENTIAL
SCHEDULE 3.06 (CONT'D)
SOFTWARE SYSTEMS CORP. LIABILITIES
1. Securities Purchase Agreement dated as of November 1, 1996 by and among
JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc.
2. Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
Manhattan Bank, N.A. and Maximum Investments, N.V.
3. Stock Purchase Agreement by and between JLC Holdings, Inc., Software
Systems Corp., JLC Acquisition, Inc. and Jostens, Inc. dated as of June
29, 1995.
4. Restatement Agreement dated as of December 19, 1996, amending the Second
Restated Stockholders Agreement dated November 1, 1996, by and among JLC
Holdings, Inc., Software Systems Corp., JLC Learning Corporation, Xxxx
Capital Funds IV, L.P., Xxxx Capital Fund IV-B, L.P., BCIP Associates,
BCIP Trust Associates, L.P., Information Partners Capital Fund, L.P.,
Jostens, Inc., Indosuez JLC Partners, Chase Manhattan Investment Holdings,
Inc., HAL International Investments N.V., Lifetouch Learning, Inc., Sylvan
Learning Systems, Inc. and General Electric Capital Corporation.
5. Third Restated Stockholders Agreement, dated as of December 19, 1996, by
and among JLC Holdings, Inc., Software Systems Corp., JLC Learning
Corporation, Xxxx Capital Funds IV, L.P., Xxxx Capital Fund IV-B, L.P.,
BCIP Associates, BCIP Trust Associates, L.P., Information Partners Capital
Fund, L.P., Jostens, Inc., Indosuez JLC Partners, Chase Manhattan
Investment Holdings, Inc., HAL International Investments N.V., Lifetouch
Learning, Inc., Sylvan Learning Systems, Inc. and General Electric Capital
Corporation.
6. Securities Purchase Agreement dated as of December 19, 1996 by and among
Software Systems Corp., JLC Learning Corporation and General Electric
Capital Corporation.
7. Management and Advisory Agreement by and between JLC Holdings, Inc.,
Software Systems Corp., JLC Acquisition Corp. and Xxxx Capital Partners
IV, L.P. dated as of June 29, 1995.
8. Consent and Termination Agreement, dated as of June 30, 1998, among JLC
Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc.
JLC - CONFIDENTIAL
SCHEDULE 3.07
1. See Schedule 2.06.
JLC - CONFIDENTIAL
SCHEDULE 4.01
JURISDICTIONS IN WHICH THE COMPANY IS QUALIFIED TO DO
BUSINESS
STATE FINE/FEE STATE FINE/FEE
----- -------- ----- --------
Alabama(1) To be determined/$10.00 Montana(2) $120.00/To be determined
Alaska(2) $350.00/To be determined Nebraska(2) $145.00/To be determined
Arizona Nevada(2) $325.00/To be determined
Arkansas New Hampshire(2) To be determined
California New Jersey
Colorado(1) To be determined New Mexico(2) $200.00/To be determined
Connecticut(2) $20.00/$20.00 New York(2) $225.00/To be determined
Delaware(2) $150.00/To be determined North Carolina
District of(2) To be determined North Dakota(1) To be determined/$20.00
Columbia
Florida Ohio(2) $100.00/$5.00
Georgia Oklahoma(2) To be determined/$20.00
Guam Oregon
Hawaii(1) To be determined/$25.00 Pennsylvania
Idaho(2) $100.00/To be determined Puerto Rico(1) To be determined
Illinois Rhode Island(2) To be determined
Indiana South Carolina
Iowa(2) $100.00/To be determined South Dakota(2) $130.00/To be determined
Kansas(1) $170.00/$7.50 Tennessee(1) To be determined/$20.00
Kentucky(1) To be determined/$10.00 Texas(1) To be determined
Louisiana Utah
Maine(2) $180.00/To be determined Vermont(2) $100.00/To be determined
Maryland Virginia(1) $3755.00/To be determined
Massachusetts(2) $300.00/$12.00 Washington(2) $175.00/To be determined
Michigan(2) $60.00/To be determined West Virginia
Minnesota(1) To be determined/$5.00 Wisconsin(2) $250.00/To be determined
Mississippi(1) To be determined/$25.00 Wyoming(2) $100.00/To be determined
Missouri(1) To be determined/$10.00
----------
(1) The company is required to either pay a fine or file an annual report or
both as a condition to receiving a current Certificate of Good Standing.
The Company is currently in the process of either paying a fine or filing
a report or both.
(2) The Company is in the process of applying for a Certificate of Authority
and will pay any fees that may he required.
JLC - CONFIDENTIAL
SCHEDULE 4.01 (CONT'D)
CORPORATE RECORDS
1. Some certificates representing shares of Class A Common Stock of JLC
Learning Corp. are not presently held in books and records of JLC Learning
Corporation. However, at the time JLC Learning was purchased from Jostens,
Inc., JLC Holdings Inc., Software Systems Corp. and JLC Acquisition, Inc.
purchased all issued and outstanding shares of Class A Common Stock.
JLC - CONFIDENTIAL
SCHEDULE 4.01 (CONT'D)
COMPANY CONTRACTS
1. Discontinued the marketing of Vital Tools. A settlement agreement has been
reached with APTEX/HNC.
JLC - CONFIDENTIAL
SCHEDULE 4.04
1. Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
Acquisition, Inc., JLC Holdings, Inc., Software Systems Corp., Chase
Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
1995.
2. Loan and Security Agreement entered into by and between JLC Learning
Corporation, the Financial Institutions named therein as the Lenders and
Foothill Capital Corporation on March 30, 1998.(1)
(a) Amendment No. One to the Loan and Security and Agreement dated as of
July 28, 1998.
(b) Amendment No. Two to the Loan and Security and Agreement dated as of
May 1, 1999.
3. Software Systems Corp.'s $57,150,000 Subordinated Note due 2003, dated
November 8, 1996 between Software Systems Corp. and Jostens, Inc.
4. Software Systems Corporation's $4,000,115 Exchangeable Subordinated Note
due 2003, between Software Systems Corp. and Jostens, Inc. dated as of
June 29, 1995.
5. License Agreement between Lernout and Hauspie Speech Products N.V.
assignee of INSO Corp., assignee of Houghton Mifflin Co. and JLC Learning
Corp., Assignee of Ideal Learning Inc., September 30, 1993, amendment I
dated September 30, 1998.
6. Lease with Xxxxxxx Properties for 0000 Xxxxxxx Xxxxxxx Xxxx., with
termination date of March 21, 2001.
7. Compaq Authorized Reseller Sales Agreement dated as of January 7, 1998.
8. Trademark License Agreement among Jostens, Inc., JLC Holdings, Inc.,
Software Systems Corp. and Jostens Learning Corp., dated June 29, 1995.
9. Directors and Officers insurance coverage.
----------
(1) All references to this document throughout the Schedules shall include
both Amendment No. One and Amendment No. Two to the Loan and Security
Agreement as set forth below.
JLC - CONFIDENTIAL
SCHEDULE 4.05
1. Audited Balance Sheet as of December 31, 1996.
2. Draft of Audited Balance Sheets as of December 31, 1997 and December 31,
1998 (form of opinion letter and footnotes to financial statements subject
to change as described in section 6.18).
3. Draft Financial Statements as of March 31, 1999.
JLC - CONFIDENTIAL
[GRAPHIC OMITTED]
JLC LEARNING
CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
[LETTERHEAD OF PRICE WATERHOUSE LLP]
Report of Independent Accountants
March 21, 1997
To the Board of Directors of
JLC Learning Corporation
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of JLC Learning Corporation, formerly
Jostens Learning Corporation, at December 31, 1996 and 1995, and the results of
its operations and its cash flows for the year ended December 31, 1996 and the
six-month period ended December 31, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of JLC
Learning Corporation's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
JLC LEARNING CORPORATION
--------------------------------------------------------------------------------
BALANCE SHEET
(In thousands)
Assets
December 31,
---------------------
1996 1995
-------- ----------
Current assets:
Cash and cash equivalents $ 11,453 $ 1,372
Accounts receivable, less allowance of
$2,896 and $2,367, respectively 33,441 53,678
Inventories 2,533 3,092
Prepaid expenses 4,110 3,795
Current portion of amounts due from related parties 1,347 7,000
-------- ---------
Total current assets 52,884 68,937
Amounts due from related parties, less current portion 350
Other assets:
Software development costs, net 26,505 30,865
Intangible assets, net 6,654 9,899
Deferred financing fees, net 1,322 1,687
Investments in equity securities 2,157 2,157
Fixed assets, net 5,541 9,777
-------- ---------
Total assets $ 95,063 $ 123,672
======== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,937 $ 8,087
Due to related parties 370 7,930
Salaries, wages and commissions payable 5,376 6,418
Deferred revenue 24,543 27,990
Other accrued liabilities 12,904 16,193
-------- ---------
Total current liabilities 47,135 66,618
-------- ---------
Noncurrent portion of deferred revenue 7,306 7,640
-------- ---------
Noncurrent other accrued liabilities 1,464 4,888
-------- ---------
Revolving line of credit - 10,700
-------- ---------
Long-term debt 16,020 15,750
-------- ---------
Stockholders' equity:
Mandatorily redeemable preferred stock 9,076 -
Redeemable preferred stock - -
Common stock - -
Paid-in capital 75,803 57,538
Accumulated deficit (43,760) (21,481)
Unallocated purchase consideration (17,981) (17,981)
-------- ---------
Total stockholders' equity 23,138 18,076
-------- ---------
Total liabilities and stockholders' equity $ 95,063 $ 123,672
======== =========
The accompanying notes are an integral part of these financial statements.
-2-
JLC LEARNING CORPORATION
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
(In thousands)
For the six-
For the year month period
ended ended
December 31, December 31,
1996 1995
------------ ------------
Net revenue:
Software $ 40,423 $ 15,812
Service 35,385 19,331
Hardware 10,924 13,295
-------- --------
86,732 48,438
-------- --------
Cost of products sold:
Software 12,937 4,754
Service 28,973 15,551
Hardware 8,251 11,744
-------- --------
50,161 32,049
-------- --------
Selling and administrative expenses:
Sales and marketing 28,019 14,204
Research and development 11,715 4,977
General and administrative 11,281 4,618
Amortization of intangible assets 3,245 1,853
-------- --------
54,260 25,652
-------- --------
Loss from operations (17,689) (9,263)
Interest expense (4,590) (1,819)
-------- --------
Loss before income taxes (22,279) (11,082)
Income tax expense - -
-------- --------
Net loss $(22,279) $(11,082)
======== ========
The accompanying notes are an integral part of these financial statements.
-3-
JLC LEARNING CORPORATION
--------------------------------------------------------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
Mandatorily
Redeemable Redeemable
Common Stock Preferred Stock Preferred Stock Additional Unallocated
-------------- ---------------- ----------------- Paid-in Accumulated Purchase
Shares $ Shares $ Shares $ Capital Deficit Consideration Total
------ ----- ------- ------- ------- ------- ---------- ----------- ------------- ------
Balance at July 3, 1995 1,000 $ - - $ - - $ - $57,538 $(10,399) $(17,981) $29,158
Net loss for the six-
month period ended
December 31, 1995 (11,082) (11,082)
------ ----- ------ ------ ------ ----- ------- -------- -------- --------
Balance at
December 31, 1995 1,000 - - - - - 57,538 (21,481) (17,981) 18,076
Issuance of
redeemable
preferred stock 20,000 18,165 18,165
Contribution from Holdings 100 100
Issuance of
mandatorily
redeemable
preferred stock 10,000 9,076 9,076
Net loss for the year ended
December 31, l996 (22,279) (22,279)
------ ----- ------ ------ ------ ----- ------- -------- -------- --------
1,000 $ - 10,000 $9,076 20,000 $ - $75,803 $(43,760) $(17,961) $ 23,130
====== ===== ====== ====== ====== ===== ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
-4-
JLC LEARNING CORPORATION
--------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
For the six-month
For the year period
ended ended
December 31, December 31,
1996 1995
------------ -----------------
Operating activities:
Net loss $ (22,279) $ (11,082)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 15,746 8,246
Amortization of deferred financing fees 365 180
Amortization of debt discount 270
Changes in assets and liabilities, net of effects
of purchase of Ideal:
Decrease in accounts and notes receivable 26,240 28,085
Decrease in inventories 396 1,553
Increase in prepaid expenses (315) (1,319)
Increase (decease) in accounts payable (4,150) 528
Increase (decease) in due to related parties (7,560) 6,810
Decrease in salaries, wages and commissions payable (1,042) (6,845)
Decrease is deferred revenue (3,776) (12,803)
Increase (decrease) in current and noncurrent
other accrued liabilities (6,494) 777
--------- ---------
Net cash provided by (used in) operating activities (2,599) 14,130
--------- ---------
Investing activities:
Payment in connection with purchase of
Ideal, net of cash acquired (4,089)
Capital expenditures, net (901) (1,323)
Software development costs (2,841) (3,547)
--------- ---------
Net cash used in investing activities (3,742) (8,959)
--------- ---------
Financing activities:
Decrease in due to former parent (219) (150)
Repayments of borrowings on revolving line of credit (34,700) (28,000)
Borrowings on revolving line of credit 24,000 19,200
Proceeds from sale of preferred stock, net 27,241
Contribution from Holdings 100
--------- ---------
Net cash provided by (used in) financing activities 16,422 (8,950)
--------- ---------
Increase (decrease) in cash and cash equivalents 10,081 (3,779)
Cash and cash equivalents, beginning of period 1,372 5,151
--------- ---------
Cash and cash equivalents, end of period $ 11,453 $ 1,372
========= =========
The accompanying notes are an integral part of these financial statements.
-5-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 1- NATURE OF THE BUSINESS:
JLC Learning Corporation (JLC or the Company), formerly Jostens Learning
Corporation, is a leading provider of technology-based educational programs to
school districts for kindergarten through twelfth grade. JLC is a wholly-owned
subsidiary of Software Systems Corporation (SSC), a wholly-owned subsidiary of
JLC Holdings, Inc. (Holdings).
JLC operates in the educational software industry and has maintained a
leadership position among a multitude of providers. JLC's products and services
include fully integrated software systems, standalone CD ROM delivery,
connection to the Internet and a full service offering including installation,
teacher training, onsite and remote diagnostics and maintenance.
JLC focuses its market efforts in the educational channel, with sales and
service coverage in the United States and several U.S. territories and is
exploring opportunities in international markets. The Company's selling and
distribution efforts include a direct sales force, telemarketing and catalog
sales, The Company also has a small presence in the retail market.
On June 29, 1995, Holdings acquired all of the outstanding stock of JLC from
Jostens, Inc. (Jostens). The acquisition was accounted for under the purchase
method (see Note 16).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year
The Company changed its fiscal year to a calendar year effective December 31,
1995. Through July 3, 1995, the Company operated on a fifty-two or fifty-three
week fiscal year for financial reporting purposes. Unless otherwise noted,
reference to the six-month period ended December 31, 1995 relates to the period
from July 4, 1995 to December 31, 1995.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with maturities at
date of purchase of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
-6-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Capitalized Computer Software Development Costs
The Company, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed," capitalizes software development costs by
project commencing when technological feasibility is established and concluding
when the product is ready for release. Software development costs are amortized
on a straight-line basis over five years or the expected life of the product,
whichever is less. Research and development costs are charged to expense as
incurred.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the
assets acquired. Goodwill resulting from the acquisition of JLC by Holdings on
June 29, 1995 and the acquisition of Ideal Learning, Inc. (Ideal) discussed in
Note 3 is being amortized on a straight-line basis over 7 years.
In addition to goodwill, intangible assets include the Company's tradename and
workforce in place. The tradename and workforce in place, valued at June 29,
1995 at $5,804 and $3,835, respectively, are being amortized on a straight-line
basis over 3 and 4 years, respectively.
Investments in Equity Securities
The Company has investments in certain equity securities. At December 31, 1996
and 1995, the Company holds investments with a value totaling $2,157. The
Company's investments in equity securities are classified as available-for-sale
and recorded at fair value with unrealized gains or losses reported on a net
basis as a separate component of stockholders' equity until realized. No
unrealized gains or losses are included in stockholders' equity at December 31,
1996 or 1995 as there was no change in the fair market value of these
investments. During 1996, the Company sold one of its investments with a book
value of $0 for $500. In conjunction with the sale, the Company entered into a
royalty agreement with the former investee. The gain on sale of this investment
was deferred and will be recognized over the life of the royalty agreement on a
units-of-production basis.
Deferred Financing Fees
Deferred financing fees relate to the revolving credit agreement (see Note 8)
and the senior subordinated notes (see Note 9) and are being amortized over the
term of the related debt. Amortization for the year ended December 31, 1996 and
the six-month period ended December 31, 1995 approximated $365 and $180,
respectively.
-7-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Fixed Assets
Fixed assets are recorded at cost and depreciated over the estimated useful
lives of the related assets. Depreciation is provided principally on the
straight-line method for financial reporting purposes and on accelerated methods
for income tax purposes. Leasehold improvements are depreciated over the shorter
of their useful life or the lease term.
Revenue Recognition
Revenue is recognized for hardware and software upon shipment of the product,
provided that no significant vendor or post contract support obligations remain
outstanding and collection of the resulting receivable is deemed probable.
Revenue from service contracts, instruction and user training and post-contract
customer support is recognized ratably over the period of the related contract.
The Company accrues all vendor and post-contract obligations remaining at the
time of shipment. Deferred revenue represents the Company's obligation to
perform under signed contracts.
Advertising
Advertising costs are expensed as incurred. Advertising expense totaled $2,279
and $1,865 for the year ended December 31, 1996 and the six-month period ended
December 31, 1995, respectively.
Income Taxes
The Company accounts for income taxes in accordance with SFAS 109, "Accounting
for Income Taxes," which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
-8-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 3 - BUSINESS ACQUISITION:
Effective December 19, 1995, Holdings acquired all of the outstanding stock of
Ideal for $4,100 in cash, a $900 note payable and a warrant to purchase a
specified number of shares of Holdings Common Stock. The acquisition was
accounted for under the purchase method. Goodwill in the amount of $1,713 was
recorded in conjunction with the acquisition of Ideal. Effective July 1, 1996,
the assets and liabilities of Ideal were transferred to JLC. Because the
transfer of assets occurred among entities under common control, the Company has
accounted for the transfer in a manner similar to a pooling of interests and,
accordingly, the Company's financial statements include the historical results
of Ideal from the date of acquisition by Holdings.
NOTE 4 - INVENTORIES:
Inventories are as follows:
December 31,
---------------------
1996 1995
------- -------
Finished products $ 2,380 $ 2,889
Materials and supplies 153 203
------- -------
$ 2,533 $ 3,092
======= =======
NOTE 5 - CAPITALIZED COMPUTER SOFTWARE DEVELOPMENT COSTS:
Capitalized computer software development costs are as follows:
December 31,
--------------------
1996 1995
------- -------
Capitalized software costs $ 36,588 $33,747
Less accumulated amortization (10,083) (2,882)
-------- -------
$ 26,505 $30,865
======== =======
Amortization of capitalized computer software development costs aggregated
$7,201 and $2,839 for the year ended December 31, 1996 and for the six-month
period ended December 31, 1995, respectively. No charges were recorded during
the year ended December 31, 1996 or the six-month period ended December 31, 1995
due to impairment of net realizable value.
-9-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill and other intangible assets are as follows:
December 31,
--------------------
1996 1995
------- -------
Tradename $ 5,804 $ 5,804
Workforce in place 3,835 3,835
Goodwill 2,138 2,138
------- -------
11,777 11,777
Less accumulated amortization (5,123) (1,878)
------- -------
$ 6,654 $ 9,899
======= =======
Amortization of goodwill and other intangible assets aggregated $3,245 and
$1,853 for the year ended December 31, 1996 and for the six-month period ended
December 31, 1995, respectively. Amortization charges of approximately $47 and
$356 were recorded for the year ended December 31, 1996 and for the six-month
period ended December 31, 1995, respectively, due to accelerated amortization of
the workforce in place as a result of higher than estimated employee turnover.
NOTE 7 - FIXED ASSETS:
Fixed assets are comprised of the following:
December 31,
Depreciable --------------------
Life 1996 1995
------------ ------- --------
Computer equipment 1 to 3 years $ 8,609 $ 7,963
Warehouse 2 years 261 397
Leasehold improvements 3 to 5 years 559 231
Other furniture and fixtures 2 to 7 years 3,607 3,552
------- -------
13,036 12,143
Less accumulated depreciation (7,495) (2,366)
------- -------
$ 5,541 $ 9,777
======= =======
Depreciation expense aggregated $5,129 and $2,320 for the year ended December
31, 1996 and for the six-month period ended December 31, 1995, respectively.
-10-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 8 - REVOLVING CREDIT AGREEMENT:
On June 29, 1995, the Company entered into a revolving credit agreement with a
maximum loan availability of $40,000 including up to $3,000 of letters of credit
(the Loan Facility). Loans under this agreement are secured by 100% of all
capital or other equity interests of SSC and JLC, as well as accounts
receivable, inventory, fixed assets, intangibles and contract rights of JLC. The
revolving credit agreement is also guaranteed by Holdings and SSC. Interest on
borrowings under the agreement during fiscal 1996 was computed at 1.5% plus the
prime lending rate of the bank acting as agent for the revolving credit
agreement or LIBOR plus 3.0%. The Company is subject to a commitment fee
computed at a rate equal to 1/2% of the daily average unutilized commitment
under the Loan Facility. Interest and the commitment fee are due quarterly. The
Company may prepay the Loan Facility at any time, subject to prepayment fees as
defined in the agreement. The termination date for the revolving line of credit
is the last business day of June 2000. At December 31, 1996, no amounts were
outstanding under this agreement. At December 31, 1995, $10,700 was outstanding
under this agreement.
The revolving credit agreement requires JLC to meet certain operating ratios and
limits, among other things, the Company's indebtedness, dividend payments and
capital expenditures. The Company failed to meet certain covenants during the
year ended December 31, 1996, but obtained waivers from the lenders. As of
December 31, 1996, the Company believes it is in compliance with all applicable
covenants.
NOTE 9 - LONG-TERM DEBT:
Senior Subordinated Notes
On June 29, 1995, the Company entered into a senior subordinated note purchase
agreement whereby the Company borrowed a total of $17,000 from two lending
institutions under note agreements which bear interest at 12.25% and mature on
the last business day of June 2002. Interest is payable quarterly. The notes are
secured by the same collateral as the $40,000 revolving credit agreement (see
Note 8) and are guaranteed by Holdings.
The agreement requires the Company to meet certain operating ratios and limits,
among other things, the Company's indebtedness and dividend payments. The
Company failed to meet certain covenants during the year ended December 31,
1996, but obtained waivers from the lenders. As of December 31, 1996, the
Company believes it is in compliance with all applicable covenants.
In connection with the issuance of the note agreements, the lending institutions
each received warrants to acquire a specified number of shares of Holdings
Common Stock. The value ascribed to the warrants of $1,260 was recorded as a
discount from the face value of the debt and is being amortized over the term of
the Senior Subordinated Notes. The unamortized discount on the Senior
Subordinated Notes totaled $980 and $1,250 at December 31, 1996 and 1995,
respectively.
-11-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 10 - LEASE OBLIGATIONS, COMMITMENTS AND CONTINGENCIES:
The Company has operating leases for office and warehouse space that include
remaining noncancelable minimum rental commitments as follows:
Year ending December 31: Amount
----------
1997 $ 3,926
1998 3,273
1999 2,226
2000 2,271
2001 1,267
Thereafter 453
-------
Total minimum lease payments 13,416
Total minimum noncancelable sublease rentals (1,004)
-------
$12,412
=======
Rent expense for all operating leases aggregated $3,843, net of sublease rentals
of $611, for the year ended December 31, 1996 and $1,924, net of sublease
rentals of $201, for the six-month period ended December 31, 1995, respectively.
The Company is a party to litigation arising in the normal course of business.
Management regularly analyzes current information and, as necessary, provides
accruals for probable liabilities on the eventual disposition of these matters.
Management believes that the effect on the Company's results of operations and
financial position, if any, for the disposition of these matters, will not be
material.
NOTE 11 - ROYALTY AGREEMENTS:
The Company has commitments for minimum guaranteed royalties under various
software license agreements which are payable over periods ranging from three to
five years. The software under license has been or will be integrated with the
Company's existing software. Minimum future obligations under these royalty
agreements are as follows:
Year ending December 31: Amount
-----------
1997 $ 400
1998 3,030
1999 1,050
2000 450
---------
Total minimum royalty payments $ 4,930
=========
-12-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 11 - ROYALTY AGREEMENTS: (Continued)
The Company has prepaid royalties associated with these license agreements
totaling $1,150 at December 31, 1996. The prepaid royalties will be amortized on
a units-of-products basis.
NOTE 12 - INCOME TAXES:
Due to losses incurred from operations, the Company has no provision for income
tax for the year ended December 31, 1996 or for the six-month period ended
December 31, 1995.
Significant components of the deferred tax balances are:
December 31, 1996 December 31, 1995
---------------------- ---------------------
Current Non-Current Current Non-Current
Assets Assets Assets Assets
--------- ------------ ------- -----------
Depreciation and amortization $ -- $ 6,153 $ -- $ 2,670
Net operating loss carryovers 9,074 3,274
Accrued expenses 1,416 200 1,383 400
Other 325 6 114 6
Valuation allowance (1,741) (15,433) (1,497) (6,350)
------- -------- ------- --------
$ -- $ -- $ -- $ --
======= ======== ======= ========
Management has determined, based on the Company's history of prior operating
losses and its expectations for the future, that a full valuation allowance for
deferred tax assets should be provided at December 31, 1996 and 1995.
NOTE 13 - RELATED PARTY TRANSACTIONS:
Xxxx Capital Partners IV, L.P. (Xxxx), an affiliate of certain shareholders,
provides management and advisory services to the Company and Holdings.
Approximately $427 of fees paid to Xxxx for the year ended December 31, 1996
were included as issuance costs of the Class A and Class B Preferred Stock (see
Notes 14 and 15). Additionally, $46 of fees for out-of-pocket expenses were paid
to Xxxx during the year ended December 31, 1996.
-13-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousand,, except per share data)
--------------------------------------------------------------------------------
NOTE 13 - RELATED PARTY TRANSACTIONS: (Continued)
At December 31, 1996 and 1995, the Company had outstanding a note receivable
from Jostens in the amount of $350 and $7,350, respectively, related to certain
liabilities which existed at the date of acquisition. Also included in amounts
due from related parties at December 31, 1996 is $120 due from an investor in
conjunction with the issuance of the Class A Preferred Stock and $877 of
intercompany amounts due from Holdings.
In conjunction with the issuance of the Class A Preferred Stock, the Company
entered into a consulting arrangement with an investor. The arrangement provides
for $500 per year to be paid to the investor for consulting services through
November 1, 1999. At December 31, 1996, $416 was included in prepaid expenses
and the statement of operations reflects $84 in consulting expenses for the year
ended December 31, 1996 related to this arrangement. In addition to the
consulting arrangement, the Company entered into a sales and marketing agreement
whereby the Company would sell product to the investor at a discount.
Approximately $192 in sales were made to this investor during the year ended
December 31, 1996.
Included in other noncurrent accrued liabilities at December 31, 1996 and 1995
is $341 and $560, respectively, representing the noncurrent portion of a note
payable to Jostens related to settlement of intercompany transactions. Also
included in other noncurrent accrued liabilities at December 31, 1996 is $350
related to the consulting arrangement described above.
Included in due to related parties at December 31, 1996 is the current portion
of the note payable to Jostens of $220 as well as $150 related to the consulting
arrangement described above. Included in due to related parties at December 31,
1995 are payroll amounts paid on behalf of JLC by Jostens, totaling
approximately $7,430, the current portion of the note payable to Jostens of $220
and $280 of intercompany amounts due to Holdings.
NOTE 14 - MANDATORILY REDEEMABLE PREFERRED STOCK:
On December 19, 1996, the Company issued 10,000 shares of $.01 par value Class B
Preferred Stock and recorded the stock at $10,000 less issuance costs of
approximately $900, its fair value on date of issuance. These shares represent
all of the authorized shares of Class B Preferred Stock. JLC is required to
redeem all outstanding shares of Class B Preferred Stock, at a redemption price
of $1,000 per share plus any accrued and unpaid dividends, by December 19, 2008.
Holders of Class B Preferred Stock have no voting rights, are entitled to a
preferential distribution of $1,000 per share plus accrued and unpaid dividends
in the event of a liquidation, and are entitled to annual dividends of $100 per
share until the Company redeems the stock. The stock will be accreted to its
redemption value through charges to paid-in-capital.
-14-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 15 - STOCKHOLDERS' EQUITY:
On November 1, 1996, the Company issued 20,000 shares of $.01 par value Class A
Preferred Stock for $20,000 less issuance costs of $1,835. In conjunction with
the issuance of the Class A Preferred Stock, $100 was paid to Holdings for a
warrant to purchase a specified number of shares of Holdings Common Stock.
Concurrent with the sale of the warrant, Holdings contributed the proceeds
received to JLC.
The authorized redeemable preferred stock and common stock of the Company
consists of 20,000 shares of $.01 par value Class A Preferred Stock and 120,565
shares of $.001 par value Class A Common Stock. At December 31, 1996 and 1995,
1,000 shares of the Class A Common Stock were issued and outstanding. All
outstanding shares of Class A Common Stock are held by SSC. At December 31,
1996, all 20,000 shares of the Class A Preferred Stock were issued and
outstanding. No preferred shares were authorized, issued or outstanding at
December 31, 1995. Holders of Class A Common stock are entitled to one vote per
share. Holders of Class A Preferred Stock have no voting rights. In the event of
a liquidation of the Company, holders of Class A Preferred Stock are entitled to
a preferential distribution of $1,000 per share plus accrued and unpaid
dividends. Distribution amounts in excess of the Class A and Class B preferred
stock distribution preference are to be distributed ratably to all of the Class
A common shareholders. The Company, at its option, may redeem all the shares of
Class A Preferred Stock at a redemption price of $1,000 per share plus any
accrued and unpaid dividends. Holders of Class A Preferred Stock are entitled to
annual dividends of $100 per share.
Included in paid-in capital of JLC is $40,000 in debt payable by SSC to the
Company's former parent, Jostens, as part of the purchase consideration. Such
debt is not payable by JLC, guaranteed by JLC nor subject to repayment from the
proceeds of any future equity transactions of JLC.
NOTE 16 - UNALLOCATED PURCHASE CONSIDERATION:
In conjunction with the acquisition of JLC by Holdings on June 29, 1995,
warrants and an exchangeable note issued to Jostens allowed the former parent to
acquire up to a 30.7% interest in Holdings. Accordingly, 69.3% of the purchase
consideration was allocated to the assets acquired and liabilities assumed at
their respective fair values, with the remainder allocated at Jostens' book
value as of the date of acquisition. The application of the purchase method
resulted in an allocation of the excess purchase consideration over historical
carryover basis of Jostens ("unallocated purchase consideration") of
approximately $17,981.
-15-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 17 - EMPLOYEE BENEFIT PLANS:
Stock Option Plan
Certain JLC employees, consultants or advisors are eligible to participate in
the Stock Option Plan (the Plan) adopted by the Board of Directors of Holdings
in August 1996. The Board of Directors of Holdings determines the award date,
the number of shares subject to each award and the exercise price of each
option. Awards are categorized as either basic options or performance options,
as defined in the Plan. Options issued in 1996 vest over a five-year period.
Basic options and performance options expire 10 years and 7 years, respectively,
from the date of grant.
Holdings has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation"
at December 31, 1996. Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the Holdings' Stock Option
Plan been determined based on the fair value at the grant date for awards
consistent with the provisions of SFAS No. 123, the financial impact to JLC
would have been immaterial.
401(k) Retirement Plan
The Company has a retirement savings plan covering substantially all eligible
employees. The plan provides for discretionary matching contributions by the
Company, limited to eligible contributions by employees. The Company's
contribution to the plan for the period ended December 31, 1996 was $350.
-16-
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except per share data)
--------------------------------------------------------------------------------
NOTE 18 - SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental disclosures of cash flow information:
For the six-
For the year month period
ended ended
December 31, December 31,
1996 1995
------------ -------------
Cash paid during the period for interest $ 4,686 $ 1,113
======= =======
Cash paid during the period for income taxes $ 127 $ --
======= =======
Supplemental schedule of noncash investing and remaining activities:
Holdings purchased certain assets of Ideal for a total purchase price of $5,000.
In conjunction with the acquisition, liabilities were assumed as follows (in
thousands):
Fair value of assets acquired $ 5,746
Less cash paid for stock of Ideal (4,100)
-------
Liabilities assumed $ 1,646
=======
-17-
DRAFT
JLC LEARNING
CORPORATION
Financial Statements
December 31, 1998 and 1997
DRAFT
Report of Independent Accountants
February __, 1999
To the Board of Directors and Shareholders of
JLC Learning Corporation
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of JLC Learning Corporation at December 31,
1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of JLC Learning Corporation's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern As discussed in Note 1 to the financial
statements, the Company is not in compliance with certain covenants required by
the subordinated notes. In the event that the holders demand payment of the
notes and the Company is not able to obtain suitable alternative financing,
there is substantial doubt about the Company's ability to continue as a going
concern Management's plans in regard to this matter are also described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
JLC LEARNING CORPORATION DRAFT
Balance Sheet - (in thousands except share and per share data)
December 31, 1998 and 1997
--------------------------------------------------------------------------------
1998 1997
Assets
Current assets
Cash and cash equivalents $ -- $ 860
Accounts receivable, less allowance of $1,327 and $2,393, respectively 21,877 29,440
Inventories 1,011 1,050
Prepaid expenses 2,629 1,238
Investment in equity securities 314 --
--------- ---------
Total current assets 25,831 32,588
Other assets
Software development costs, net 2,690 4,879
Intangible assets, net 959 1,204
Deferred financing fees, net 859 --
Fixed assets, net 2,090 3,145
--------- ---------
Total assets $ 32,429 $ 41,816
========= =========
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 2,678 $ 2,817
Due to related parties 955 1,070
Salaries and related items 6,005 5,388
Other accrued liabilities 10,112 8,976
--------- ---------
19,750 18,251
Deferred revenue 21,253 25,648
Revolving line of credit 2,238 8,500
Senior subordinated debt 17,000 17,000
--------- ---------
Total current liabilities 60,241 69,399
Non-current portion of deferred revenue 1,723 3,873
Non-current portion of due to related parties 2,901 712
Non-current other accrued liabilities 293 898
Term note payable to bank 7,500 --
--------- ---------
Total liabilities 72,658 74,882
--------- ---------
Stockholder's' deficit
Mandatorily redeemable preferred stock, $0.01 par value, 10,000 shares
authorized, issued and outstanding ($11,230 and
$10,153 liquidation preference, respectively) 11,230 10,153
Redeemable preferred stock, $.01 par value, 20,000 shares authorized,
issued and outstanding -- --
Common stock, $.001 par value, 120,565,000 shares authorized,
1,000 shares issued and outstanding -- --
Additional paid-in capital 75,803 75,803
Accumulated deficit (109,595) (101,041)
Unallocated purchase consideration (17,981) (17,981)
Accumulated other comprehensive income 314 --
--------- ---------
Total stockholders' deficit (40,229) (33,066)
--------- ---------
Total liabilities and stockholders' deficit $ 32,429 $ 41,816
========= =========
The accompanying notes are an integral part of these financial statements.
- 2 -
JLC LEARNING CORPORATION DRAFT
Statement of Operations - (in thousands)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------
1998 1997
Net revenue
Software $ 31,422 $ 29,159
Service 33,935 36,029
Hardware 4,014 6,624
-------- --------
69,371 71,812
-------- --------
Cost of products sold
Software 7,050 30,435
Service 19,235 23,399
Hardware 3,229 5,550
-------- --------
29,514 59,384
-------- --------
Gross profit 39,857 12,428
-------- --------
Selling and administrative expenses
Sales and marketing 24,097 31,357
Research and development 8,022 11,177
General and administrative 7,705 13,508
Amortization of intangibles 245 5,449
Restructuring 2,012 --
-------- --------
43,081 61,491
-------- --------
Loss from operations (3,224) (49,063)
Interest expense (4,286) (5,013)
Other income (expense) 33 (2,128)
-------- --------
Loss before income taxes (7,477) (56,204)
Income tax expense -- --
-------- --------
Net loss $ (7,477) $(56,204)
======== ========
The accompanying notes are an integral part of these financial statements.
- 3 -
JLC LEARNING CORPORATION DRAFT
Statement of Stockholders' Deficit - (in thousands except share data)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------
Mandatorily Redeemable
Preferred Stock Preferred Stock Common Stock Additional
--------------- ---------------- ----------------- Paid-in Accumulated
Shares $ Shares $ Shares $ Capital Deficit
------ ------- ------ -------- ------- -------- ---------- -----------
Balance at December 31, 1996 10,000 $ 9,076 20,000 $ -- $ 1,000 $ -- $75,803 $ (43,760)
Accrued dividends on
mandatorily redeemable
preferred stock 1,000 (1,000)
Accretion of stock issuance
costs and related
discount 77 (77)
Net loss for the year ended
December 31, 1997 (56,204)
------ ------- ------ -------- ------- -------- ------- ---------
Balance at December 31, 1997 10,000 10,153 20,000 -- 1,000 -- $75,803 (101,041)
Accrued dividends on
mandatorily redeemable
preferred stock 1,000 (1,000)
Accretion of stock issuance
costs and related
discount 77 (77)
Comprehensive income (loss)
Net loss for the year ended
December 31, 1998 (7,477)
Unrealized gain on
available for sale
securities
Total Comprehensive
income (loss)
------ ------- ------ -------- ------- -------- ------- ---------
Balance at December 31, 1998 10,000 $11,230 20,000 $ -- $ 1,000 $ -- $75,803 $(109,595)
====== ======= ====== ======== ======= ======== ======= =========
Accumulated
Unallocated Other
Purchase Comprehensive
Consideration Income Total
------------- ------------- -----
Balance at December 31, 1996 $(17,981) $ -- $ 23,138
Accrued dividends on
mandatorily redeemable
preferred stock
Accretion of stock issuance
costs and related
discount
Net loss for the year ended
December 31, 1997 (56,204)
-------- --------- --------
Balance at December 31, 1997 (17,981) (33,066)
Accrued dividends on
mandatorily redeemable
preferred stock
Accretion of stock issuance
costs and related
discount
Comprehensive income (loss)
Net loss for the year ended
December 31, 1998 (7,477)
Unrealized gain on
available for sale
securities 314 314
--------- --------
Total Comprehensive
income (loss) 314 (7,163)
-------- --------- --------
Balance at December 31, 1998 $(17,981) $ 314 $(40,229)
======== ========= ========
The accompanying notes are an integral part of these financial statements.
- 4 -
JLC LEARNING CORPORATION DRAFT
Statement of Cash Flows - (in thousands)
Years Ended December 31, 1998 and 1997
--------------------------------------------------------------------------------
1998 1997
Cash flows used in operating activities
Net loss $ (7,477) $(56,204)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 4,025 33,733
Impairment of investments in equity securities -- 2,157
Amortization of deferred financing fees 286 1,322
Amortization of debt discount -- 980
Changes in assets and liabilities
Decrease in accounts receivable 7,563 5,348
Decrease in inventories 39 1,483
Decrease in prepaid expenses 220 2,872
Decrease in accounts payable (139) (1,120)
Increase (decrease) in due to related parties (15) 700
Increase in salaries and related items 617 12
Decrease in current and noncurrent deferred revenue (6,545) (2,333)
Increase (decrease) in current and noncurrent
accrued liabilities 1,171 (3,603)
-------- --------
Net cash used in operating activities (255) (14,653)
-------- --------
Cash flows used in investing activities:
Capital expenditures (536) (1,136)
Software development costs capitalized -- (3,125)
-------- --------
Net cash used in investing activities (536) (4,261)
-------- --------
Cash flows provided by (used in) financing activities:
Decrease in due to former parent (162) (179)
Repayments of borrowings on revolving line of credit (65,552) (14,300)
Proceeds from revolving line of credit, net of
financing fees of $1,145 in 1998 66,645 22,800
Retirement of previous line of credit, net (8,500) --
Borrowings on long-term note payable to bank 7,500 --
-------- --------
Net cash provided by (used in)
financing activities (69) 8,321
-------- --------
Decreases in cash and cash equivalents (860) (10,593)
Cash and cash equivalents, beginning of period 860 11,453
-------- --------
Cash and cash equivalents, end of period $ -- $ 860
======== ========
The accompanying notes are an integral part of these financial statements.
- 5 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
1. Nature of the Business
JLC Learning Corporation (JLC or the Company), doing business as Jostens
Learning, is a leading provider of technology-based educational programs
to school districts for kindergarten through twelfth grade JLC is a
wholly-owned subsidiary of Software Systems Corporation (SSC), a
wholly-owned subsidiary of JLC Holdings, Inc. (Holdings).
JLC operates in the education software industry and has maintained a
leadership position among a multitude of providers. JLC's products and
services include full integrated software systems, standalone CD ROM
delivery, connection to the Internet and a full service offering,
including installation, teacher training, onsite and remote diagnostics
and maintenance.
JLC focuses its market efforts in the educational channel, with sales and
service coverage in the United Stares and several U.S. territories and is
exploring opportunities in international markets. The Company's selling
and distribution efforts include a direct sales force, telemarketing and
catalog sales.
For the years ended December 31, 1998 and 1997, the Company reported a
$7,477 and a $56,204 net loss, respectively. In addition, the Company is
in violation of certain financial covenants in connection with its Senior
Subordinated Debt, and has failed to make quarterly interest payments due
on December 31, 1997 and for each of the four quarters in 1998 on this
debt. Accordingly, the entire amount outstanding under the Senior
Subordinated Debt has been classified as a current liability. The Company
has retained outside consultants to render advice regarding various
alternatives available to the Company. These efforts have resulted in the
Company restructuring its operations in July 1998 (see Note 19) and the
development by the Company of a strategy to address the Company's current
financial situation. This strategy involves restructuring current debt,
evaluating raising funds through new investors and improving operating
performance. There can be no assurance that the Company will obtain the
financing, or achieve the cost reductions required for the Company to
continue its operations. These financial statements do not include any
adjustments that might result form the outcome of this uncertainty.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with
maturities of three months or less at date of purchase to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) basis.
- 6 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Software Development Costs
The Company, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to
Be Sold, Leased, or Otherwise Marketed," capitalizes software development
costs by project commencing when technological feasibility is established
and concluding when the product is ready for release. Software development
costs are amortized on a straight-line basis over five years or the
expected life of the product, whichever is less. The Company periodically
evaluates the net realizable value of capitalized software development
costs based on factors such as budgeted sales, product development cycles
and management's market emphasis. Research and development costs are
charged to expense when incurred.
Intangible Assets
Intangible assets include goodwill. Goodwill represents the excess of the
purchase price over the fair value of assets acquired and is being
amortized over seven years. Impairment of intangible assets, if any, is
measured periodically on the basis of whether anticipated undiscounted
operating cash flows generated by the acquired businesses will recover the
recorded net goodwill balances over the remaining amortization period.
Investments in Equity Securities
The Company classifies its investments in marketable securities as
available-for-sale. Accordingly, investments are recorded at fair value
with unrealized gains or losses, net of the related tax effect, excluded
form income and reported as a separate component of stockholders' equity
(deficit) until realized. A loss included in other expense of $2,157 was
realized on investments in 1997 due to what was considered a nontemporary
decline in fair value. During 1998, pursuant to a business combination
involving the Company's investee, the investment which was written down to
zero in 1997 was exchanged for shares of a publicly traded company. The
unrealized gain of $314 at December 31, 1998 and 1997 unrealized gain of
$314 at December 31, 1998 reflects the market value of this investment.
There were no realized gains or losses in 1998.
Deferred Financing Fees
Deferred financing fees are direct costs paid by the Company in connection
with their revolving credit agreement (see Note 7). These costs are being
amortized over the term of the related debt Amortization for the years
ended December 31, 1998 and 1997 approximated $286 and $1,322,
respectively. Included in amortization for the year ended December 31,
1997 were accelerated amortization charges of $1,047.
Fixed Assets
Fixed assets are recorded at cost and depreciated over the estimated
useful lives of the related assets. Depreciation is provided principally
on the straight-line method for financial reporting purposes and on
accelerated methods for income tax purposes. Leasehold improvements are
depreciated over the shorter of their useful life or the lease term.
- 7 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Revenue Recognition
The Company adopted the provisions of Statement of Position 97-2 (SOP
97-2) "Software Revenue Recognition," as amended by Statement of Position
98-4. Deferral of the Effective Date of Certain Provisions of SOP 97-2,"
effective January 1, 1998 SOP 97-2 supersedes Statement of Position 91-1,
"Software Revenue Recognition," and delineates the accounting for software
product and maintenance revenue. Under SOP 97-2, the Company recognizes
revenue for hardware and software sales upon shipment of the product
provided collection of the resulting receivable is deemed probable.
Revenue from service contracts, instruction and user training and
post-contract customer support is recognized ratably over the period of
the related contract. Deferred revenue represents the Company's
obligation to perform under signed contracts.
For contracts with multiple obligations (e.g. deliverable and
undeliverable products, maintenance and other services,) the Company
allocates revenue to each component of the contract based on objective
evidence of its fair value, which is specific to the Company, or for
products not being sold separately, the price established by management.
The Company recognizes revenue allocated to undelivered products when the
criteria for product revenue set forth above are met.
Advertising
Advertising costs are expensed as incurred. Advertising expense totaled
$705 and 1,832 for the years ended December 31, 1998 and 1997,
respectively.
Income Taxes
The Company accounts for income taxes in accordance with SFAS 109,
"Accounting for Income Taxes," which requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of
assets and liabilities. A valuation allowance is required to offset any
net deferred tax assets if, based upon the available evidence, it is more
likely than not that some or all of the deferred tax asset will not be
realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Comprehensive Income
The Company adopted SFAS No 130, "Reporting Comprehensive Income" for the
year ended December 31, 1998. SFAS 130 requires the Company to measure and
disclose all elements of comprehensive income that result from recognized
transactions and other events in the financial statements. Accordingly,
the Company has reported unrealized gains on marketable securities as a
separate component of stockholders' deficit.
- 8 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
3. Inventories
Inventories are as follows
----------------------
December 31,
----------------------
1998 1997
------ -------
Finished products $ 836 $ 862
Materials and supplies 175 188
------ -------
$1,011 1,050
------ -------
4. Software Development Costs
Software development costs are as follows
----------------------
December 31,
----------------------
1998 1997
-------- --------
Capitalized software costs $ 39,713 $ 39,713
Less accumulated amortization (37,023) (34,834)
-------- --------
$ 2,690 $ 4,879
-------- --------
Amortization of capitalized computer software development costs are
included in cost of products sold and aggregated $2,189 and $24,751 for
the years ended December 31, 1993 and 1997, respectively. Included in
amortization of capitalized computer software development costs for the
year ended December 31, 1997 were accelerated amortization charges of
$17,269 for the reduction of certain capitalized costs to their net
realizable value due to a change in the Company" product focus.
Accelerated amortization charges in 1998 were not material.
5. Intangible Assets
Intangible assets are as follows:
----------------------
December 31,
----------------------
1998 1997
------ ------
Goodwill, Ideal $1,178 $1,178
Less accumulated amortization (759) (514)
------ ------
$ 959 $1,204
------ ------
Goodwill amounts at December 31, 1998 and 1997 are a result of the
Company's acquisition of Ideal Learning, Inc. (Ideal) which took place in
1995.
Amortization expense related to intangible assets was $245 and $3,035 for
the years ended December 31, 1998 and 1997, respectively. Included in
amortization for the year ended December 31, 1997 were accelerated
amortization charges of approximately $2,415. These charges were a result
of an impairment of the trade name, workforce in place, and goodwill
assets, which had been established as a result of the original acquisition
of the Company by Holdings, due to a change in the Company's product
focus.
- 9 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
6. Fixed Assets
Fixed assets are comprised of the following
December 31,
Depreciable --------------------
Life 1998 1997
----------- ------- -------
Computer equipment 1 to 3 years $ 2,914 $ 8,644
Warehouse equipment 1 to 3 years 60 181
Leasehold improvements 3 to 5 years 252 349
Other furniture and fixtures 2 to 7 years 2,012 3,298
------- -------
5,238 12,472
Less accumulated depreciation (3,148) (9,327)
------- -------
$ 2,090 $ 3,145
------- -------
Depreciation expense aggregated $1,591 and $3,532 for the years ended
December 31, 1998 and 1997, respectively. In 1998 the Company wrote off
$7,852 of fully depreciated fixed assets which are no longer in use.
7. Revolving Credit Agreement
On June 29, 1995, the Company entered into a revolving credit agreement
with a maximum loan availability of $40,000, including up to $3,000 of
letters of credit (the Loan Facility). Borrowings outstanding under this
agreement at December 31, 1997 were $8,500. The original termination date
for the revolving line of credit was the last business day of June 2000,
however in March 1998, the Company paid all outstanding amounts under this
agreement and terminated the Loan Facility.
In March 1998, the Company entered into a new loan facility which includes
a new revolving line of credit agreement with a maximum loan availability
of $20,000, including up to $2,000 of letters of credit and a term loan of
$7,500 (see Note 9). Advances on the line of credit are limited to the
lesser of 75% of eligible billed accounts plus 40% of eligible unbilled
accounts or $2,000, whichever is less, and the amount collected on
accounts by the Company for a defined period immediately preceding the
advance. Loans under this agreement are secured by 100% of all capital or
other equity interests, as well as accounts receivable, inventory, fixed
assets, intangibles and contract rights. Interest is computed at 0.0875%
to 2.75%, depending on the amount outstanding, plus the prime lending rate
as most recently announced by Norwest Bank Minnesota, NA and at a minimum,
a rate of 9%. At December 31, 1998 the minimum rate was being used. The
agreement described above contains certain restrictive covenants, which
includes requiring the Company to meet certain profitability levels and to
maintain a certain tangible net worth. The new line of credit agreement
matures in March 2001. Borrowings outstanding under this line of credit
agreement at December 31, 1998 were $2,238. The fair value of the line of
credit obligation at December 31, 1998 approximates book value.
- 10 -
JLC LEARNING CORPORATION DRAFT
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
8. Senior Subordinated Notes
On June 29, 1995, the Company entered into a senior subordinated note
purchase agreement whereby the Company borrowed a total of $17,000 from
two lending institutions under note agreements which bear interest at
12.25% and mature on the last business day of June 2002 Interest is
payable quarterly. The notes are secured by the same collateral as the
$20,000 revolving credit agreement (see Note 7) and are guaranteed by
Holdings.
The agreements require the Company to meet certain operating ratios and
limits. The Company failed to meet certain covenants during the years
ended December 31, 1998 and 1997. In addition, the Company failed to make
quarterly interest payments due on December 31, 1997 and for each of the
four quarters in 1998. Accordingly, amounts outstanding under the senior
subordinated notes have been classified as current liabilities at December
31, 1998 and 1997. The fair value of the Senior Subordinated notes at
December 31, 1998 is not estimable.
In connection with the issuance of the note agreements, the lending
institutions each received warrants to acquire a specified number of
shares of Holdings Common Stock. The value ascribed to the warrants of
approximately $1,260 was recorded as a discount from the face value of the
debt and was being amortized over the term of the Senior Subordinated
Notes. During 1997, the Company accelerated the amortization on the
warrants due to an impairment in the value.
During 1998, a holder of a portion of the Company's Senior Subordinated
notes transferred all of its interest in the notes to a third party. All
terms and conditions of the original note agreement remained the same. The
new note holder is an affiliate of the outside consultant that is
assisting in exploring and obtaining additional funding for the Company
(see Note 13).
9. Term Note Payable to Bank
In March 1998, in connection with a new loan facility (see Note 7) the
Company obtained a term loan in the amount of $7,500, which matures in
March 2000. The term loan is secured by 100% of all capital or other
equity interests, as well as accounts receivable, inventory, fixed assets,
intangibles and contract rights. The term loan bears interest at 13.0% up
to February 1, 1999 and at 15% thereafter. The loan agreement contains
certain restrictive covenants which are consistent with those described in
Note 7. The fair value of the term loan at December 31, 1998 approximates
book value.
10. Lease Obligations, Commitments and Contingencies
The Company has operating leases for office and warehouse space that
include remaining noncancelable minimum rental commitments as follows:
- 11 -
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
10. Lease Obligations, Commitments and Contingencies (Continued)
Year ending December 31 Amount
--------
1999 $ 3,485
2000 3,159
2001 2,098
2002 1,370
2003 600
--------
Total minimum lease payments 10,712
Total minimum noncancelable sublease rentals (330)
--------
$ 10,382
========
Of the $10,382 minimum rental commitments net of sublease rentals, $1,005
has been accrued in the accompanying balance sheet at December 31, 1998 as
they represent excess space liabilities a portion of which are a result of
the Company's restructuring activities (see Note 19).
Rent expense for all operating leases aggregated $2,136 and $3,506, net
of sublease rentals of $447 and $647, for the years ended December 31,
1998 and 1997, respectively.
The Company is a party to litigation arising in the normal course of
business. Management regularly analyzes current information and, as
necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. Management believes that the effect on the
Company's results of operations and financial position, if any, for the
disposition of these matters, will not be material.
11. Royalty Agreements
At December 31, 1998 the Company had a minimum guaranteed royalty
commitment under a software license agreement of $900 and $450 for the
years ended December 31, 1999 and 2000, respectively, which have been
accrued in the accompanying balance sheet at December 31, 1998
In June 1998, JLC restructured a significant software license agreement
with a third party JLC returned investment securities valued at $2,285 by
the third party and also accepted reduced rights under the license
agreement in order to settle $5,500 in minimum future royalty obligations
which JLC owed. JLC retained the right to sell product from this third
party through 2001. JLC has remaining prepaid royalties with respect to
this license agreement of $2,700 with a net carrying value of $1,420 as of
December 31, 1998 to be amortized on a units-of-production basis.
12. Income Taxes
Due to losses incurred from operations, the Company has no provision for
income tax for the years ended December 31, 1998 and 1997
- 12 -
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
12. Income Taxes (Continued)
Significant components of the deferred tax balances are
December 31, 1998 December 31, 1997
-------------------- --------------------
Non- Non-
Current current Current current
Assets Assets Assets Assets
-------- -------- -------- --------
Depreciation and amortization $ -- $ 14,478 $ -- $ 15,080
Net operating loss carryovers -- 21,730 -- 18,940
Accrued expenses 689 -- 273 102
Other 53 16 130 16
Valuation allowance (741) (36,223) (403) (34,138)
-------- -------- -------- --------
$ -- $ -- $ -- $ --
======== ======== ======== ========
In assessing the realizability of its deferred tax assets, the Company
considers whether it is more likely than not that some or all of such
assets will be realized. As a result of historical operating losses, the
Company has fully reserved its net deferred tax assets as of December 31,
1998 and 1997. The Company will consider release of the valuation
allowance once profitable operations have been sustained.
As of December 31, 1998, the Company had net operating loss carryforwards
of approximately $63,900, which will begin to expire in 2010. Past and
future transactions in the Company's stock could result in restrictions on
the Company's ability to utilize its net operating loss carryforwards
pursuant to Section 382 (g) of the Internal Revenue Code.
13. Related Party Transactions
The Company benefited from a management and advisory services agreement
between Holdings and an affiliate of Holdings' shareholders. Out-of-pocket
expenses were paid to this affiliate of $25 and $50 during the years ended
December 31, 1998 and 1997, respectively.
In conjunction with the issuance of the Class A Preferred Stock, the
Company entered into a consulting arrangement with an investor. The
arrangement provided for $500 per year to be paid to the investor for
consulting services through November 1999. At December 31, 1998 and 1997,
prepaid consulting fees of $417 and $458, respectively, were included in
prepaid expenses and the Company incurred consulting expenses of $499 and
$459 for the years ended December 31, 1998 and 1997, respectively,
relating to this arrangement. Amounts due to this investor for consulting
fees at December 31, 1998 and 1997 are $1,400. The current portion of
these amounts at December 31, 1998 and 1997 are $750 and $850,
respectively, and are included in due to related parties.
- 13 -
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
13. Related Party Transactions (Continued)
In addition to the consulting arrangement, the Company entered into a
sales and marketing agreement with this investor whereby the Company would
sell product to the investor at a discount. Approximately $354 and $736 in
sales were made to the investor during the years ended December 31, 1998
and 1997, respectively. Included in accounts receivable at December 31,
1998 and 1997, was $314 and $349, respectively, from sales to this
investor.
In June 1998, the Company delivered a promissory note to this investor to
repurchase securities sold to the investor in December 1996. The note
accrues interest at 10% with principal and accrued interest payable on
April 15, 2001. The balance as of December 31, 1998 was $2,251 which is
included in the non current portion of due to related party on the
accompanying balance sheet. As of December 31, 1997, $500 was accrued and
included in due to related parties relating to this same agreement.
At December 31, 1998 and 1997 the Company had amounts due to its former
parent relating to the settlement of intercompany transactions of $205 and
$382, respectively. Of the amounts due to Jostens at December 31, 1998 and
1997, $205 and $220, respectively, were included in due to related
parties.
During 1998, the Company re-engaged a third party consultant to explore
additional investment alternatives. Later during 1998, an affiliate of
this consultant replaced a Senior Subordinated Note holder. Fees paid to
this affiliate for the year ended December 31,1998 were $647 (see Note 8).
14. Mandatorily Redeemable Preferred Stock
On December 19, 1996, the Company issued 10,000 shares of $.01 par value
Class B Preferred Stock and recorded the stock at $10,000 less issuance
costs of approximately $900, its fair value on date of issuance. These
shares represent all of the authorized shares of the Class B Preferred
Stock. The Company is required to redeem all outstanding shares of the
Class B Preferred Stock, at a redemption price of $1,000 per share plus
any accrued and unpaid dividends, by December 19, 2008. Holders of Class B
Preferred Stock have no voting rights, are entitled to a preferential
distribution of $1000 per share plus accrued and unpaid dividends in the
event of a liquidation, and are entitled to annual dividends of $100 per
share until the Company redeems the stock. At December 31, 1998 and 1997
accrued dividends of $2,000 and $1,000 are included in stockholders'
equity, respectively. The stock will be accreted to its redemption value
through charges to accumulated deficit.
15. Stockholders' Deficit
On November 1, 1996, the Company issued 20,000 shares of $.01 par value
Class A Preferred Stock for $20,000 less issuance costs of $1,835. In
conjunction with the Class A Preferred Stock, $100 was paid to Holdings
for a warrant to purchase a specified number of shares of Holdings Common
Stock. Concurrent with the sale of the warrant, Holdings contributed the
proceeds received to the Company.
15. Stockholders' Equity (Continued)
- 14 -
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
The authorized redeemable preferred stock and common stock of the Company
consists of 20,000 shares of $.01 par value Class A Preferred Stock and
120,565,000 shares of $.001 par value Class A Common Stock. At December
31, 1998 and 1997, 1,000 shares of the Class A Common Stock were issued
and outstanding. All outstanding shares of Class A Common Stock are held
by SSC. At December 31, 1998 and 1997, all 20,000 shares of the Class A
Preferred Stock were issued and outstanding. Holders of Class A Common
stock are entitled to one vote per share. Holders of Class A Preferred
Stock have no voting rights. In the event of a liquidation of the Company,
holders of Class A Preferred Stock are entitled to a preferential
distribution of $1,000 per shares plus accrued and unpaid dividends.
Distribution amounts in excess of the Class A and Class B preferred stock
distribution preference are to be distributed ratably to all of the Class
A common stockholders. The Company, at its option, may redeem all the
shares of Class A Preferred Stock at a redemption price of $1,000 per
share plus any accrued and unpaid dividends. Holders of Class A Preferred
Stock are entitled to annual dividends of $100 per share.
Included in the paid-in capital of the Company is $40,000 in debt payable
by SSC to the Company's former parent, as part of the purchase
consideration. Such debt is not payable by the Company, guaranteed by the
Company, nor subject to repayment from the proceeds of any future equity
transactions of the Company.
16. Unallocated Purchase Consideration
In conjunction with the acquisition of the Company by Holdings on June
29,1995, warrants and an exchangeable note issued to the Company's former
parent allowed the former parent to acquire up to a 30.7% interest in
Holdings. Accordingly, 69.3% of the purchase consideration was allocated
to the assets acquired and liabilities assumed at their respective fair
values, with the remainder allocated at Jostens' book value as of the date
of acquisition. The application of the purchase method resulted in an
allocation of the excess purchase consideration over historical carryover
basis of Jostens ("unallocated purchase consideration) of approximately
$17,981).
17. Employee Benefit Plans
Stock Appreciation Rights Plan
In February 1999, the Board of Directors adopted the 1998 Stock
Appreciation Rights Plan (the Plan). Stock Appreciation Rights (SARs) in
the aggregate of 1,500,000 were created and approximately 1,000,000 SARs,
at a base value, as determined by the Board of Directors, of $4.00, were
initially granted to select employees in 1999. These SARs shall vest
according to the following schedule: 50% on the second anniversary of
October 1, 1998 and an additional 25% shall vest on each of the third and
fourth anniversaries of October 1, 1998. The SAR represents the right to
receive additional compensation equal to the redemption price of the SAR
based on an enterprise value determined at the sole discretion of the
Board of Directors. SARs shall be redeemed out of available funds upon
certain liquidity events, as defined, or at the discretion of the Board of
Directors.
- 15 -
JLC LEARNING CORPORATION
Notes to Financial Statements
(Dollars in thousands, except share and per share data)
--------------------------------------------------------------------------------
17. Employee Benefit Plans (Continued)
Additionally. in connection with signing the Stock Appreciation Rights
Agreement, employees waive and surrender any rights and interest in
options previously granted to them under the JLC Holdings, Inc Stock
Option Plan.
401(k) Retirement Plan (401(k) Plan)
The Company has a retirement savings plan covering substantially all
eligible employees. The 401(k) Plan provides for a 33% matching
contribution by the Company, limited to eligible contributions by
employees. The Company's matching contribution to the 401(k) Plan for the
years ended December 31, 1998 and 1997 were $360 and $442, respectively.
18. Supplemental Cash Flow Information
Supplemental disclosures of cash flow information
For the year ended
December 31,
----------------
1998 1997
------ -------
Cash paid during the year for interest $1,561 $ 2,208
Cash paid during the year for income taxes -- --
Non-cash financing activity:
Note payable issued for equity securities
(see Note 13) 2,251 --
Equity Securities exchanged for Prepaid Royalty
(see Note 11) 2,285 --
19. Restructuring
During July 1998 the Company recorded a restructuring charge of $3,012
related to the adoption by the Company of a formal action plan for
restructuring its operations. This restructuring was adopted in an effort
to establish a more competitive cost structure in response to current
sales levels.
In connection with the plan in 1998 the Company paid employee severance
and benefit costs of approximately $1,400 when it decreased its workforce
by approximately 90 employees.
As of December 31, 1998, the remaining accrual associated with this
restructuring was approximately $1,400. This accrual consists of estimated
future severance and related obligations of $600, estimated future rent
obligations associated with excess lease space of $600, and an accrual for
other related costs of $200.
- 16 -
[LOGO]
JLC LEARNING
CORPORATION
FINANCIAL STATEMENTS
MARCH 31, 1999
LEARNING CORPORATION
STATEMENT OF OPERATIONS
(In thousands)
Three months ended Three mths ended
March 31, 1999 Mar. 31, 1998
-------------------- ----------------
Actual Plan Actual
Contract:
New Sales 6,980 5,550 4,768
Renew Sales 1,274 1,600 1,342
Net Revenue:
Software $ 4,729 $ 4,947 $ 4,167
Professional Development 2,162 2,416 2,998
S/W-H/W Support 5,171 5,268 5,564
Hardware 1,238 1,346 1,297
-------- -------- --------
13,300 13,977 14,026
-------- -------- --------
Cost of products sold:
Software 1,134 1,345 1,290
Professional Development 1,717 1,952 2,284
S/W-H/W Support 2,504 2,499 3,433
Hardware 871 1,241 1,125
-------- -------- --------
6,286 7,037 8,132
-------- -------- --------
Gross profit: 7,014 6,940 5,894
-------- -------- --------
Operating expenses:
Sales and marketing 4,895 4,906 7,013
Research & development 1,739 2,229 2,291
General & administrative 1,935 1,875 2,207
Restructuring -- -- --
8,569 9,010 11,511
-------- -------- --------
Profit(loss) from operations (1,555) (2,070) (5,617)
Other income (expense) 404 -- --
Amortization of intangibles (61) (60) (61)
Interest expense (1,309) (1,058) (843)
Profit(loss) before inc tax (2,521) (3,188) (6,521)
Income tax expense -- -- --
Net proflt(loss) (2,521) (3,188) (6,521)
Less:
Depreciation and net amortization 826 887 996
Gain/Loss on investment (392) --
Interest 1,309 1,058 843
Restructuring -- -- --
Income tax expense -- -- --
EBITDA $ (778) $ (1,243) $ (4,682)
======== ======== ========
JLC Learning Confidential
JLC LEARNING CORPORATION
BALANCE SHEETS
(In thousands)
March 31, 1999 March 31, 1998
---------------------- ----------------
Actual Plan Actual
------ ---- ------
Assets
Currents Assets:
Cash & cash equivalents $ -- $ 500 $ --
Account receivable, less allowance ($1,293 and $2,407) 18,195 15,559 2,2,876
Inventories 672 480 491
Prepaid expenses 2,189 3,210 1,634
Due from related party -- -- --
Total current assets 21,056 19,749 25,002
Other Assets:
Software development costs 39,713 39,713 39,713
Less accumulated amortization (37,456) (37,445) (35,341)
Software development, net 2,257 2,268 4,372
Intangible assets 1,718 1,718 1,718
Less accumulated amortization (820) (819) (575)
--------- --------- ---------
Intangible assets, net 898 899 1,143
Deferred financing fees 763 763 784
Fixed assets 5,290 12,892 12,678
Less accumulated depreciation (3,480) (11,106) (9,755)
--------- --------- ---------
Fixed assets, net 1,810 1,786 2,923
--------- --------- ---------
$ 26,784 $ 25,465 $ 34,224
========= ========= =========
Liabilities and Stockholders Equity
Current Liabilities:
Accounts payab4e $ 2,829 $ 2,053 $ 5,445
Due to related party 1,137 1,405 1,070
Salaries and related items 4,182 4,174 5,251
Deferred revenue 16,629 17,144 19,060
Purchase and restructuring liabilities 915 1,137 323
Other accrued liabilities 8,569 9,452 8,449
--------- --------- ---------
Total current liabilities 34,261 35,395 39,610
Noncurrent portions of deferred revenue 1314 1,724 3,328
Noncurrent other accrued liabilities 2,747 2,748 1,629
Revolving line of credit 7,026 4,830 4,740
Term note 7,500 7,500 7,503
Senior subordinated note 17,000 17,000 17,000
--------- --------- ---------
Total liabilities 69,848 69,197 73,810
Stockholders' equity:
Paid-in capital 87,302 87,302 86,225
Unallocated purchase consideration (17,981) (17,981) (17,981)
Accumulated deficit (112,385) (113,053) (107,830)
--------- --------- ---------
Total stockholders equity (43,064) (43,732) (39,586)
--------- --------- ---------
Total liabilities & stockholders' equity $ 26,784 $ 25,465 $ 34,224
========= ========= =========
JLC Learning Confidential
JLC LEARNING CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
(In thousands)
Three months ended Three mths ended
March 31, 1999 Mar. 31, 1998
------------------ ----------------
Actual Plan Actual
------ ---- ------
Operating activities:
Net profit (loss) $(2,521) $(3,188) $(6,521)
Depreciation and amortization 826 887 995
Amortization of deferred financing fees 96 96 --
Change in assets & liabilities:
(Increase) decrease in accounts and notes receivable 3,682 6,318 6,563
(Increase) decrease in due from related party -- -- (1)
(Increase) decrease in inventories 339 531 559
(Increase) decrease in prepaid expense 440 61 (395)
Increase (decrease) in accounts payable 151 (625) 2,628
Increase (decrease) in due to related party (318) (50) --
Increase (decrease) in salaries and related items (1,8Z3) (1,831) (136)
Increase (decrease) in deferred revenue (5,034) (4,109) (7,133)
Increase (decrease) in purchase/restructuring liabilities (582) (330) (113)
Increase (decrease) in other assets/accrued liabilities (45) 194 (78)
------- ------- -------
(4,789) (2,046) (3,632)
------- ------- -------
Investment activities:
Capital expenditures, net (52) (100) (206)
Software development costs -- -- --
(52) (100) (206)
------- ------- -------
Financing activities:
Increase (decrease) in due to former parent -- -- 19
Increase (decrease) in notes payable to related party 53 54 --
Increase (decrease) in notes payable -- -- 7,503
Increase (decrease) in revolving line of credit 4,788 2,592 (3,760)
(Increase) decrease in financing fees -- -- (784)
4,841 2,646 2,978
------- ------- -------
Change in cash and cash equivalents 500 (860)
Cash and cash equivalents, beginning of period -- -- 860
Cash and cash equivalents, end of period $ -- $ 500 $ --
======= ======= =======
JLC LEARNING CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
Paid-in Additional Unallocated
Common Capital Paid-in Accumulated Purchase
Stock Class B Capital Deficit Consideration Total
--------- --------- --------- --------- ------------- ---------
Balance at December 31, 1998 $ -- $ 11,230 $ 75,803 $(109,595) $ (17,981) $ (40,543)
Adjustment to carrying value -- 19 -- (19) -- --
of preferred stock
Net loss for the three months -- -- -- (2,521) -- (2,521)
ended March 31, 1999
Dividends on preferred stock -- 250 -- (250) -- --
--------- --------- --------- --------- --------- ---------
Balance at March 31, 1999 $ -- $ 11,499 $ 75,803 $(112,385) $ (17,981) $ (43,064)
========= ========= ========= ========= ========= =========
JLC Learning Confidential
SCHEDULE 4.06
-------------------------------------------------------------------------------------------------------
Active Debtor Lienholder Status
-------------------------------------------------------------------------------------------------------
JLC Learning Corp. Foothill Capital Corp., as Active
0000 Xxxxxxx Xxxxxxx Xxxx. Xxxxxxxxxxxxxx
Xxx Xxxxx, XX 00000 00000 Xxxxx Xxxxxx Xxxx., Xxxxx
0000
Xxx Xxxxxxx, XX 00000
JLC - CONFIDENTIAL
SCHEDULE 4.07
=================================================================================================================
Facility Address Lease Termination Landlord
-----------------------------------------------------------------------------------------------------------------
1. 0000 X. 00xx Xxxxxx December 31, 2002 CarrAmerica Realty Corp.
Suite 100 0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000 Xxxxx 000
Xxxxxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
2. 0000 Xxxxxxx Xxxxxxx Xxxx. March 21, 2001 Xxxxxxx Properties
Suite 500 0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000 Xxxxx 000
Xxx Xxxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
3. 000 Xxxxxxxx Xxxxxx November 30, 1999 Foram Group, Inc.
Xxxxx 000X 000 Xxxxxxxx Xxxxxx
Xxxxx, XX 00000 Xxxxx 000
Xxxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
4. 0000 Xxxxxxx Xxxx Xxxxx September 30, 2003 AP SE Portfolio Partners L.P c/o
Suite 110 Xxxxxxx Realty Mgmt. 000 Xxxxx
Xxxxx, XX 00000 Real, Xxxxx 000 Xxxx Xxxxx, XX
00000
-----------------------------------------------------------------------------------------------------------------
5. 000 Xxxxxxxxxx Xxxxxx Xxxxxxx October 31, 2002 SPP Real Estate, Inc.
Xxxxx 000 00 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
6. 0000 Xxx Xxxxxxxxx Xxxx July 31, 0000 Xxxxxx X. Xxxxxx
Xxxxxxxxxxx, XX 00000 000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
7. 000 Xxxx Xxxx Xxxx November 30, 0000 XX Xxx Xxxx
Xxxxx 00 000 Xxxx Xxxx Xxxx
Xxx Xxxx, XX 00000 Xxxxx 000
Xxx Xxxx, XX 00000
-----------------------------------------------------------------------------------------------------------------
8. 000 Xxx Xxxxx December 31, 0000 Xxxxxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000 Xxx Xxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
=================================================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.08
TRADEMARKS
==================================================================================================
AUSTRALIA
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
----------------------------------------------------------------------------------------------------=============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 710447 6/12/96 Opposed JLC
--objected
-----------------------------------------------------------------------------------------------------------------
Compass 761158 5/4/98 Opposed JLC
Worldware(TM) --objected
-----------------------------------------------------------------------------------------------------------------
Design of 761668 5/8/98 761668 1/25/99 5/8/08 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
JCAT(R) 761159 5/4/98 761159 12/18/98 5/4/08 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 752687 1/14/98 752687 8/31/98 1/14/08 Registered JLC
Promise
-----------------------------------------------------------------------------------------------------------------
Worldware 775431 10/13/98 Published JLC
11/26/98
-----------------------------------------------------------------------------------------------------------------
==================================================================================================
BRUNEI
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
----------------------------------------------------------------------------------------------------=============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 24,314 2/24/98 24,314 JLC
Registered
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 29,032 2/24/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Compass 29,203 4/2/98 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Design of 29,201 4/21/98 Pending JLC
Tree(TM)
-----------------------------------------------------------------------------------------------------------------
Design of 29,202 4/21/98 Pending JLC
Tree(TM)
-----------------------------------------------------------------------------------------------------------------
JCAT(TM) 29,206 4/21/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 29,031 2/24/98 Published JLC
Promise 1/15/99
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) 29,894 11/24/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Writing 29,203 4/21/98 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
Writing 29,204 4/21/98 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
==================================================================================================
CANADA
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
----------------------------------------------------------------------------------------------------=============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 877,358 5/6/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Compass 877,187 5/6/98 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Design of 877,186 5/6/98 Published JLC
Tree(TM) 12/16/98
-----------------------------------------------------------------------------------------------------------------
JCAT(TM) 877,359 5/6/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Microsystem 462,173 11/26/80 291,816 6/8/84 6/8/99 Registered JLC
80(R)
-----------------------------------------------------------------------------------------------------------------
System 80(R) 379,418 10/1/74 209,956 10/10/75 10/10/05 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 877,185 5/6/98 Pending JLC
Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware 894,386 10/23/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Writing 877,357 5/6/98 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
==================================================================================================
FRANCE
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
----------------------------------------------------------------------------------------------------=============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Conter 94- 6/7/94 94-523,527 6/7/94 6/7/99 Registered Jostens
Software(R) 532,527 Learning
Corporation
-----------------------------------------------------------------------------------------------------------------
==================================================================================================
HONG
KONG
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
----------------------------------------------------------------------------------------------------=============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A+dvantage 9510668 8/23/95 B6072/1998 3/2/95 3/2/02 Pending Jostens
Worldware(TM) Learning
Corporation
-----------------------------------------------------------------------------------------------------------------
Design of 9510667 8/23/95 01298/1997 8/23/95 8/23/02 Registered Jostens
Tree(R) 12/16/98 Learning
Corporation
-----------------------------------------------------------------------------------------------------------------
Learning 9311502 9/13/95 Pending Jostens
First(TM) Learning
Corporation
-----------------------------------------------------------------------------------------------------------------
SCHEDULE 4.08 (CONT'D)
TRADEMARKS (CONT'D)
==================================================================================================
INDONESIA
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A+dvanage D95 9/4/95 364704 9/4/95 9/4/05 Registered JLC
Worldware(R) 15772
-----------------------------------------------------------------------------------------------------------------
Compass(TM) X00 0000 2/17/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Compass D98 4/29/98 Opposed JLC
Worldware(TM) 07733
-----------------------------------------------------------------------------------------------------------------
Design of J95 16035 9/7/95 361336 6/5/96 9/7/05 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
JCAT(TM) D98 4/29/98 Pending JLC
07734
-----------------------------------------------------------------------------------------------------------------
Learning D95 9/4/95 360510 9/4/95 3/4/05 Registered JLC
First(R) 15771
-----------------------------------------------------------------------------------------------------------------
Xxxxxxxx'x X00 0000 2/17/98 Pending JLC
Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) D98 11/6/98 Pending JLC
18917
-----------------------------------------------------------------------------------------------------------------
Writing D98 4/29/98 Pending JLC
Expedition(TM) 07732
=================================================================================================================
==================================================================================================
IRELAND
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Compass(R) 96/3861 6/12/96 173124 6/12/96 6/12/03 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Compass 96/2924 7/16/98 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Design of 98/2925 7/16/98 Pending JLC
Tree(TM)
-----------------------------------------------------------------------------------------------------------------
Learning 7/12/96 202178 JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
Learning 96/4375 7/12/96 Published JLC
Expedition(TM) 4/8/98
-----------------------------------------------------------------------------------------------------------------
NCAT(TM) 98/1437 4/15/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 97/4604 12/19/97 Published JLC
Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) Requested JLC
filing
10/7/98
-----------------------------------------------------------------------------------------------------------------
Writing 96/4376 7/12/96 202179 7/12/96 7/12/06 Registered JLC
Expedition(R)
=================================================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRADEMARKS (CONT'D)
==================================================================================================
MALAYSIA
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A+dvantage 9175/95 9/5/95 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 96/08076 7/18/96 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 98/05613 5/8/98 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Design of 95/09668 9/14/95 95/09668 9/14/95 9/14/02 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
JCAT(TM) 98/05611 5/8/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Learning N97/16819 11/21/97 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 98/00802 1/20/98 Pending JLC
Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) 98/13772 11/28/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Writing 97/16816 11/21/97 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
Writing 98/05612 5/8/98 Pending JLC
Expedition(TM)
=================================================================================================================
==================================================================================================
SINGAPORE
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A+dvantage 8443/95 9/4/95 Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Compass(TM) 7454/96 7/19/96 Pending; JLC
responded
to office
action
-----------------------------------------------------------------------------------------------------------------
Compass 3302/98 4/9/98 Pending JLC
Worldware(TM)
=================================================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRADEMARKS (CONT'D)
SINGAPORE (Cont'd)
==================================================================================================
SINGAPORE
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Design of 8407/95 9/2/95 8407/95 9/2/95 9/2/08 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
JCAT(TM) 3305/98 4/9/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 15161/97 12/13/97 Pending JLC
Promise(TM)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) 12024/98 12/1/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Writing 3303/98 4/9/98 Pending JLC
Expedition(TM)
-----------------------------------------------------------------------------------------------------------------
Writing 3304/98 4/9/98 Pending JLC
Expedition(TM)
=================================================================================================================
==================================================================================================
TAIWAN
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Learning 84-44009 8/30/95 739835 12/16/96 12/16/06 Registered Jostens
First(R) Learning
Corporation
=================================================================================================================
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXXX
XXXXXXX
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A+dvantage 2032388 9/1/95 2032388 9/1/95 9/1/05 Registered JLC
Worldware(R)
-----------------------------------------------------------------------------------------------------------------
Compass(R) 2103167 6/12/96 2103167 6/12/96 6/12/06 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Compass 2117672 12/5/96 2117672 12/5/96 12/4/06 Registered JLC
Management
System(R)
-----------------------------------------------------------------------------------------------------------------
Compass 2172297 7/16/98 Pending JLC
Wor1dware(TM)
-----------------------------------------------------------------------------------------------------------------
Compass(R) 2103167 6/12/96 2103167 6/12/96 6/12/06 Registered JLC
=================================================================================================================
JLC -CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRADEMARKS (CONT'D)
UNITED KINGDOM (Cont'd)
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
Design of 2031173 8/21/95 2031173 8/21/95 8/21/05 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
Learning 2106235 7/26/96 2106235 7/26/96 7/26/06 Registered JLC
Expedition(R)
-----------------------------------------------------------------------------------------------------------------
Learning First 2033468 9/14/95 Abandoned
-----------------------------------------------------------------------------------------------------------------
NCAT(R) 63913 4/9/98 2163913 4/9/98 4/9/98 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 2152272 11/28/97 2152272 11/28/97 11/28/07 Registered JLC
Promise(R)
-----------------------------------------------------------------------------------------------------------------
Worldware(TM) 2179233 10/9/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Writing 2106237 7/26/96 2106237 7/26/96 9/26/01 Registered JLC
Expedition(R)
=================================================================================================================
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXXX
XXXXXX
--------------------------------------------------------------------------------------------------
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
A Renaissance 74/255,759 3/16/92 1,743,676 12/29/92 12/29/98 Registered JLC
in Learning(R)
-----------------------------------------------------------------------------------------------------------------
A+dvantage 74/641,327 3/2/95 2,084,423 7/29/97 7/29/03 Registered JLC
Worldware(R)
-----------------------------------------------------------------------------------------------------------------
ActionMATH 74/641,332 3/2/95 2,014,451 11/5/96 11/5/02 Registered JLC
(R)
-----------------------------------------------------------------------------------------------------------------
Brick by Brick 73/567,330 11/7/85 1,411,116 9/30/86 9/30/06 Registered JLC
(R)
-----------------------------------------------------------------------------------------------------------------
Classroom 75/459,879 3/31/98 Published JLC
Essentials
-----------------------------------------------------------------------------------------------------------------
Compass(R) 74/439,993 9/24/93 2,053,034 4/15/97 4/15/03 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Compass Filing JLC
Virtual Pending
Classroom
-----------------------------------------------------------------------------------------------------------------
Compass 75/173,299 9/27/96 Soon Pending JLC
Worldware(TM)
-----------------------------------------------------------------------------------------------------------------
Cuentos de 74/592,365 10/31/94 1,923,500 10/3/95 10/3/01 Registered JLC
Coqui(R)
-----------------------------------------------------------------------------------------------------------------
Design of Boy, 73/563,285 10/15/85 1,396,585 6/10/86 6/10/06 Registered JLC
Dog, Wagon(R)
-----------------------------------------------------------------------------------------------------------------
Design of 73/819,707 8/17/98 1,712,302 9/1/92 9/1/02 Registered JLC
Tree(R)
-----------------------------------------------------------------------------------------------------------------
Dragon Tales(R) 74/709,330 7/31/95 2,054,029 4/22/97 4/22/03 Registered JLC
-----------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRADEMARKS (CONT'D)
UNITED STATES (Cont'd)
==================================================================================================
XXXX APPLICATION REGISTRATION OTHER STATUS
--------------------------------------------------------------------------------------------------===============
SERIAL DATE (R) DATE RENEW CURRENT OWNER
NO. NUMBER
-----------------------------------------------------------------------------------------------------------------
First 74/396,268 6/1/93 1,860,732 11/1/94 11/1/00 Registered JLC
Connections(R)
-----------------------------------------------------------------------------------------------------------------
Xxxxxxx & 74/257,129 3/19/92 1,765,662 4/20/93 4/20/99 Registered JLC
Design(R) renewal
pending
-----------------------------------------------------------------------------------------------------------------
Idea Shaper(R) 74/707,944 7/31/95 2,106,204 10/21/97 10/21/03 Registered JLC
-----------------------------------------------------------------------------------------------------------------
IL Design(R) 73/528,796 3/25/85 1,368,933 11/5/85 11/5/05 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Interpretools(R) 75/180,100 10/11/96 2,198,904 10/20/98 10/20/04 Registered JLC
-----------------------------------------------------------------------------------------------------------------
JCAT(R) 74/708,041 7/31/95 2,050,313 4/8/97 4/8/03 Registered JLC
-----------------------------------------------------------------------------------------------------------------
JLC 74/042,225 3/26/90 1,636,458 2/26/91 2/26/01 Registered JLC
Financial(R)
-----------------------------------------------------------------------------------------------------------------
Jostens 73/819,706 8/17/89 1,627,668 12/11/90 12/11/00 Registered JLC
Learning
Corporation(R)
-----------------------------------------------------------------------------------------------------------------
Jostens 74/592,366 10/31/94 2,029,506 1/14/97 1/14/03 Registered JLC
Learning
Litenet(R)
-----------------------------------------------------------------------------------------------------------------
Number 74/709,293 9/1/95 2,029,755 1/14/97 1/14/03 Registered JLC
Workshop(R)
-----------------------------------------------------------------------------------------------------------------
Onenet(R) 74/653,702 3/30/95 1,956,376 2/13/96 2/13/02 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Shape 74/709,276 8/1/95 1,987,165 7/16/96 7/16/02 Registered JLC
Studio(R)
-----------------------------------------------------------------------------------------------------------------
Storybook 74/709,283 8/1/95 2,108,138 10/28/97 10/28/03 Registered JLC
Maker(R)
-----------------------------------------------------------------------------------------------------------------
System 80(R) 72/350,212 2/2/70 918,463 8/17/71 8/17/01 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Take Home Filing JLC
Connection Pending
-----------------------------------------------------------------------------------------------------------------
T.E.A.C.H. Pending Florida
Dept. of
Educ.
-----------------------------------------------------------------------------------------------------------------
T.E.A.C.H. Pending Florida
logo Dept. of
Educ.
-----------------------------------------------------------------------------------------------------------------
Teacher to 74/644,326 3/10/95 1,990,919 8/6/96 8/6/02 Registered JLC
Teacher
Connection(R)
-----------------------------------------------------------------------------------------------------------------
TeachNet 75/169,818 9/23/96 Opposed JLC
-----------------------------------------------------------------------------------------------------------------
THC(R) 74/028,845 2/14/90 1,633,030 1/29/91 1/29/97 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Tomorrow's 75/236,856 2/5/97 2,219,515 1/19/99 1/19/09 Registered JLC
Promise(R)
-----------------------------------------------------------------------------------------------------------------
Ufonic(R) 73/463,455 1/31/84 1,332,979 4/30/85 4/30/05 Registered JLC
-----------------------------------------------------------------------------------------------------------------
Words on 74/709,329 7/31/95 2,042,802 3/11/97 3/11/03 Registered JLC
Wings(R)
-----------------------------------------------------------------------------------------------------------------
Worldware 75/526,634 7/28/98 Pending JLC
-----------------------------------------------------------------------------------------------------------------
Write Time(R) 74/709,331 7/31/95 2,042,803 3/11/97 3/11/03 Registered JLC
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
All copyrights for JLC Learning Corporation are filed in the United States.
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Product Name Date Filed/Issued Copyright Number
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Advantage Mgmt Sys. 1.1 March 23, 1998 TX-4-620-089
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Advantage Mgmt. Sys. 1.2 March 23, 1998 TX-4-620-087
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Advantage Mgmt. Sys. 2.0 March 20, 1998 TX-4-613-682
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Advantage Mgmt. Sys. 2.1 March 20, 1998 TX-4-613-679
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AIMS 2.2.4 Adv. Instruc. Mgmt. Sys. March 20, 1998 TX-4-613-680
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Compass 2.2 for March 23, 1998 TX-4-620-090
Windows/MacIntosh
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Compass 2.2 for XXX April 7, 1998 TX-4-634-221
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Compass 2.3 for March 23, 1998 TX-620-094
Windows / MacIntosh
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Compass 3.0 for March 20, 1998 TX-4-613-681
Windows / MacIntosh
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LMS 3.15 April 7, 1998 TX-4-634-220
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Peer to Peer Install September 30, 1998 TX-4-626-266
Compass/Tomorrow's Promise 3.1
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Personal Compass 1.0 for Windows/ March 23, 1998 TX-4-620-099
MacIntosh
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Worldware 2.0 March 27, 1998 TX-4-623-250
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Worldware 2.01 March 20, 1998 TX 0-000-000
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RIMS I April 7, 1998 TX-4-634-224
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RIMS II 1.72 for MAC March 27, 1998 TX-4-623-266
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Jostens Comprehensive Assessment March 23, 1998 TX-4-620-091
Tests/Compass
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Jostens Comprehensive Assessment March 23, 1998 TX-4-620-088
Tests/Advantage
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Learning Expedition Language Arts March 27, 1998 TX-4-623-253
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Learning Expedition Mathematics March 27, 1998 TX-4-623-256
Level 1-3
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Learning Expedition Mathematics March 27, 1998 TX-4-623-248
Leval 4-8
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Learning Expedition Math Higher March 27, 1998 TX-4-623-252
Level Activities
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Learning Expedition Reading Levels March 27, 1998 TX-4-623-255
1-3
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
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Learning Expedition Reading Levels March 27, 1998 TX-4-623-247
4-8
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Learning Expedition Written March 27, 1998 TX-4-623-251
Expression
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Learning First Elementary March 23, 1998 TX-4-620-095
Mathematics
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Learning First Skills and March 23, 1998 TX-4-620-102
Employability Skills
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Learning First Foundations in March 27, 1998 TX-4-623-259
Mathematics
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Learning First Middle School March 27, 1998 TX-4-623-258
Mathematics
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Learning First Foundations in Reading March 27, 1998 TX-4-623-260
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Learning First New Edition: March 23, 1998 TX-4-620-103
Elementary Mathematics
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Learning First New Edition: March 23, 1998 TX-4-623-106
Elementary Reading
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Integrated Language Arts - Primary March 25, 1998 TX-4-623-208
Level
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Tomorrow's Promise Biology March 23, 1998 TX-4-620-092
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Tomorrow's Promise Chemistry March 23, 1998 TX-4-620-096
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Tomorrow's Promise Earth Science March 23, 1998 TX-4-620-097
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-670
Level 3
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-672
Level 4
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-676
Level 5
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-674
Level 6
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-671
Level 7
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Tomorrow's Promise Language Arts March 20, 1998 TX-4-613-677
Level 8
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JLC -CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
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Tomorrow's Promise Language Arts March 27, 1998 TX-4-623-246
Essay Levels 6-8
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-675
Level K
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-687
Level 1
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-690
Level 2
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-685
Level 3
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-688
Level 4
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-686
Level 5
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-683
Level 6
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-693
Level 7
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Tomorrow's Promise Mathematics March 20, 1998 TX-4-613-689
Level 8
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Tomorrow's Promise Physical Science March 23, 1998 TX-4-620-093
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Tomorrow's Promise Problem Solving March 27, 1998 TX-4-623-245
Strategies 6-8
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Tomorrow's Promise Reading Level K March 20, 1998 TX-4-613-697
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Tomorrow's Promise Reading Level 1 March 20, 1998 TX-4-613-684
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Tomorrow's Promise Reading Level 2 March 20, 1998 TX-4-613-673
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Tomorrow's Promise Reading Level 3 March 20, 1998 TX-4-613-696
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Tomorrow's Promise Reading Level 4 March 20, 1998 TX-4-613-691
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Tomorrow's Promise Reading Level 5 March 20, 1998 TX-4-613-695
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Tomorrow's Promise Reading Level 6 March 20, 1998 TX-4-613-692
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Tomorrow's Promise Reading Level 7 March 20, 1998 TX-4-613-698
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Tomorrow's Promise Reading Level 8 March 20, 1998 TX-4-613-694
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Tomorrow's Promise Spelling Level 1 March 23, 1998 TX-4-620-098
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Tomorrow's Promise Spelling Level 2 March 20, 1998 TX-4-613-678
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Action Math March 27, 1998 TX-4-623-265
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Community Exploration April 7, 1998 TX-4-634-223
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English Language Development - March 25, 1998 TX-4-623-213
Primary
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
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Steps to English Language March 25, 1998 TX-4-623-215
Development - Beginner Level
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Steps to English Language March 25, 1998 TX-4-623-214
Development -
Intermediate/Advanced
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Explorations in Science, Earth, March 27, 1998 TX-4-623-267
Physical, Biology
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Friday Afternoon April 7, 1998 TX-4-634-222
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Learning With Literature March 23, 1998 TX-4-620-101
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Literature Based Mathematics March 27, 1998 TX-4-623-257
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Middle School Mathematics March 23, 1998 TX-4-620-100
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Reading Skills Collection Reading All April 7, 1998 TX-4-634-226
Around You
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Reading Skills Collection Read to April 7, 1998 TX-4-634-227
Imagine
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Reading Skills Collection Reading for April 7, 1998 TX-4-634-228
Meaning
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Reading Skills Collection Read to April 7, 1998 TX-4-634-229
Think
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Spanish Language Arts March 27, 1998 TX-4-623-264
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Stems April 7, 1998 TX-4-634-225
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Tapestry March 27, 1998 TX-4-623-244
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Writing Expedition 1.1 for March 20, 1998 TX-4-613-669
Mac / Windows
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8th Grade Math Course Outline March 27, 1998 TX-1-912-790
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Grade 8 Math Support Materials March 27, 1998 TX-1-920-115
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8th Grade Math Teaching Aide March 27, 1998 TX-1-920-450
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Integrated Classroom Learning
System
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Mathematics Documentation March 27, 1998 TX-1-922-225
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Spanish I Teachers' Guide March 27, 1998 TX-2-680-774
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Spanish I: Course Outline, Answer March 27, 1998 TX-2-686-570
Keys, Worksheets, Tests
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ICLS: Spanish Courseware Sample March 27, 1998 TX-2-723-547
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Language Arts 3: Teachers' Guide March 27, 1998 TX-2-671-312
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JLC -CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
------------ ----------------- ----------------
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Language Arts 3 Course Outline, March 27, 1998 TX-2-671-313
Answer Keys, Worksheets, Tests
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Calculus: Teachers' Guide March 27, 1998 TX-2-125-878
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Calculus: Course Outline, Answers March 27, 1998 TX-2-125-879
Keys, Worksheets, Tests
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Calculus: I C L S courseware sample March 27, 1998 TX-2-172-445
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Algebra I: Teachers' Guide March 27, 1998 TX-2-178-697
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Algebra I: Support materials sample March 27, 1998 TX-2-178-698
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Algebra I: Integrated classroom March 27, 1998 TX-2-179-056
learning system: course outline,
answer keys, worksheets, tests
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Integrated Classroom Learning March 27, 1998 TX-2-289-047
System: Mathematics: Grade 7:
Support materials sample
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Integrated Classroom Learning March 27, 1998 TX-2-289-047
System: Trig/Analysis: Teachers'
Guide
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Integrated Classroom Learning March 27, 1998 TX-2-289-049
System: Trig/Analysis: Course
outline, answer keys, worksheets, tests
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Integrated Classroom Learning March 27, 1998 TX-2-289-050
System: Mathematics: Grade 7: course
outline, answers keys, worksheets,
tests
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Integrated Classroom Learning March 27, 1998 TX-2-289-051
System: Mathematics: Grade 7:
Teachers' Guide
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Geometry: course outline, answer keys March 27, 1998 TX-2-311-453
worksheets, tests
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Geometry: Teachers' Guide March 27, 1998 TX-2-311-454
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Integrated Classroom Learning March 27, 1998 TX-2-326-534
System: Algebra II, Teachers' Guide
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Trigonometry/math analysis: support March 27, 1998 TX-2-326-535
material's sample
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Algebra II: support material sample March 27, 1998 TX-2-345-457
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Algebra II: course outline, answer March 27, 1998 TX-2-351-931
keys, worksheets, tests
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Geometry: support material sample March 27, 1998 TX-2-400-824
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JLC -CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
------------ ----------------- ----------------
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ICLS courseware sample: Language March 27, 1998 TX-2-582-332
Arts 6
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Integrated Classroom Learning March 27, 1998 TX-2-582-333
System, Language Arts 6: course
outline, answer keys, worksheets, tests
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ICLS courseware sample: Language March 27, 1998 TX-2-582-334
Arts
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Integrated Classroom Learning March 27, 1998 TX-2-582-335
Systemk Language Arts 5: course
outline, answer keys, worksheets, test
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Integrated Classroom Learning March 27, 1998 TX-2-582-336
System: Language Arts 5: Teachers'
Guide
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Integrated Classroom Learning March 27, 1998 TX-2-582-337
System: Language Arts 6: Teachers'
Guide
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Language Arts 4: Teachers' Guide March 27, 1998 TX-2-582-936
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Language Arts 4: course outline, March 27, 1998 TX-2-582-937
answer keys, worksheets tests
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ICLS courseware sample March 27, 1998 TX-2-584-925
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ICLS courseware sample March 27, 1998 TX-2-584-928
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Secondary Language Arts: course March 27, 1998 TX-2-593-770
outline, answer keys, worksheets, tests
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Math - Level 5: Teachers' Guide March 27, 1998 TX-2-671-309
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German 1: Teachers' Guide March 27, 1998 TX-2-671-310
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Physics: course outline, answer keys, March 27, 1998 TX 0-000-000
worksheets, tests
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ICLS courseware sample: 6th Grade March 27, 1998 TX-2-672-548
Math
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Physics: Teachers' Guide March 27, 1998 TX-2-672-549
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German March 27, 1998 TX-2-672-555
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Physics March 27, 1998 TX-2-672-556
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Math, Level 5 March 27, 1998 TX-2-672-557
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ICLS courseware sample: 4th Grade March 27, 1998 TX-2-678-479
Math
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Math - Level 6: Teachers' Guide March 27, 1998 TX-2-680-775
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
COPYRIGHTS
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Product Name Date Filed/Issued Copyright Number
------------ ----------------- ----------------
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German 1: course outline, answer March 27, 1998 TX-2-686-566
keys, worksheets, tests
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ICLS courseware sample: 5th Grade March 27, 1998 TX-2-686-567
Math
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Math - Level 6: course outline, answer March 27, 1998 TX-2-686-568
keys, worksheets, tests
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Xxxx - Xxxxx 0: course outline, answer March 27, 1998 TX-2-686-569
keys, worksheets, tests
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Mathematics: Grade 4: Teachers' March 27, 1998 TX-2-686-571
Guide
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ICLS Spanish 1: courseware sample March 27, 1998 TX-2-723-547
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ICLS courseware sample: Language March 27, 1998 TX-2-455-456
Arts 3 Ideal Learning: a preschool
curriculum for home use/created by
Xxxxx X. Xxxxxx
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TRANSFER FROM XXXXXXX
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Product Name Date Filed/Issued Copyright Number
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Homonyms September 14, 1998 TX-1-919-673
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Antonyms/Synonyms September 14, 1998 TX-1-923-273
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Consonants September 14, 1998 TX-1-923-274
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Vowels Tutorial September 14, 1998 TX-1-923-582
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Number Words Level 2 September 14, 1998 TX-1-925-907
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Create Your Own - Vocabulary September 14, 1998 TX-1-926-180
French
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Adjectives September 14, 1998 TX-1-926-189
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Student Word Study September 14, 1998 TX-1-926-372
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Super Wordfind September 14, 1998 TX-1-926-444
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Create Intermediate September 14, 1998 TX-1-926-933
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Create Vocabulary September 14, 1998 TX-1-926-934
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JLC -CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM XXXXXXX (CONT'D)
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Product Name Date Filed/Issued Copyright Number
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Create Your Own - Vocabulary September 14, 1998 TX-1-927-484
Spanish
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Print Your Own - Bingo September 14, 1998 TX-1-928-566
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Vocabulary Controlled September 14, 1998 TX-1-928-661
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Presidents Physical Fitness September 14, 1998 TX-1-928-664
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Letter Recognition September 14, 1998 TX-1-928-811
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Create Your Own - Elementary September 14, 1998 TX-1-929-475
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Parent Reporting September 14, 1998 TX-1-929-605
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Fact Sheets September 14, 1998 TX-1-931-540
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Word - a - Tech September 14, 1998 TX-1-940-789
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Create Your Own - CCD Lessons September 14, 1998 TX-1-956-151
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Metric Skills I & II September 14, 1998 TX-1-951-715
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Adverbs September 14, 1998 TX-1-965-834
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Wordsearch September 14, 1998 TX-1-965-935
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The Medalist Series: Continents September 14, 1998 TX-2-012-225
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Vowels September 14, 1998 TX-2-013-525
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Prescriptive Math Drill September 14, 1998 TX-2-023-375
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Analogies Tutorial I and II September 14, 1998 TX-2-025-231
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Chariots, Cougars, and Kings September 14, 1998 TX-2-025-232
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Kittens, Kids and a Frog September 14, 1998 TX-2-025-233
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Scuffy and Friends September 14, 1998 TX-2-025-234
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The Medalist Series: Presidents September 14, 1998 TX-2-025-245
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Analogies Advanced I and II September 14, 1998 TX-2-026-237
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The Medalist Series: Women in September 14, 1998 TX-2-026-763
History
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Famous Scientists September 14, 1998 TX-2-026-764
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Number Words Level 1 September 14, 1998 TX-2-026-823
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Create You Own - Spell It September 14, 1998 TX-2-027-287
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Perplexing Puzzles September 14, 1998 TX-2-027-420
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Temperature Experiments September 14, 1998 TX-2-029-315
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Create Your Own - Medalists September 14, 1998 TX-2-029-641
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Chemical Elements September 14, 1998 TX-2-029-797
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The Medalist Series: States September 14, 1998 TX-2-029-798
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Integers/Equations I & II September 14, 1998 TX-2-030-245
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Match Espanol September 14, 1998 TX-2-030-375
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Reading For Meaning Level 1 Fairy September 14, 1998 TX-2-030-397
Tales and Rhymes
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM XXXXXXX (CONT'D)
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Product Name Date Filed/Issued Copyright Number
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Compound Words and Contractions September 14, 1998 TX-2-030-398
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Early Skills September 14, 1998 TX-2-030-399
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Expanded Notation September 14, 1998 TX-2-031-150
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Expanded Notation September 14, 1998 TX-2-031-151
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Fact or Opinion September 14, 1998 TX-2-031-425
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Cause and Effect September 14, 1998 TX-2-031-444
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Match Francais September 14, 1998 TX-2-031-613
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Figurative Language I and II September 14, 1998 TX-2-031-654
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The Medalist Series: Black Americans September 14, 1998 TX-2-033-164
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Binary Math September 14, 1998 TX-2-038-700
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Create Your Own -- Lessons September 14, 1998 TX-2-038-794
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What's First? What's Next? September 14, 1998 TX-2-057-107
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Sense or Nonsense September 14, 1998 TX-2-057-108
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Little Riddles September 14, 1998 TX-2-057-109
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Word Families II September 14, 1998 TX-2-057-11O
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U.S. History September 14, 1998 TX-2-057-111
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Xxxxxx and Sellers -- A Guide to the September 14, 1998 TX-2-080-883
Classics: Macbeth
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Xxxxxx and Sellers -- A Guide to the September 14, 1998 TX-2-081-007
Classics: The Adventures of Huckleberry Xxxx
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Reading For Meaning Level 2: Fairy September 14, 1998 TX-2-159-771
Tales and Rhymes
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Double 'N' Trouble September 14, 1998 TX-2-180-698
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Word Ladders September 14, 1998 TX-2-212-911
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Capitalization Practice and Test September 14, 1998 TX-2-219-871
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Print Your Own Bingo Plus September 14, 1998 TX-2-240-339
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Create Your Own Lessons Advanced September 14, 1998 TX-2-242-832
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Shakespeare September 14, 1998 TX-2-243-374
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Opposites September 14, 1998 TX-2-247-992
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Milt's Math Drills September 14, 1998 TX-2-249-310
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Drawing Conclusions and Problem September 14, 1998 TX-2-258-394
Solving
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Verb Usage III September 14, 1998 TX-2-279-559
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Verb Usage I September 14, 1998 TX-2-315-676
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Brick by Brick Level I Building Usage September 14, 1998 TX-2-369-842
Skills
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JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM XXXXXXX (CONT'D)
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Product Name Date Filed/Issued Copyright Number
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Brick by Brick Level 2 Building Usage September 14, 1998 TX-2-370-451
Skills
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Brick by Brick Level I Building September 14, 1998 TX-2-373-860
Comprehension
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Brick by Brick Level 4 Building Usage September 14, 1998 TX-2-375-505
Skills
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Brick by Brick Level 2 Building September 14, 1998 TX-2-378-720
Vocabulary
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Brick by Brick Level 4 Building September 14, 1998 TX-2-384-016
Comprehension
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Vocabulary Dolch September 14, 1998 TX-2-398-411
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Brick by Brick Level 5 Building September 14, 1998 TX-2-400-368
Comprehension
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TRANSFER FROM IDEAL
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Product Name Date Filed/Issued Copyright Number
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Calculus: Teacher's Guide Transfer Application TX-2-125-878
Pending as of June 18, 1998
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Calculus: Outline, Answer Keys, Transfer Application TX-2-125-879
Worksheets, Tests Pending as of June 18, 1998
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Calculus: Support Materials Sample Transfer Application TX-2-172-445
Pending as of June 18, 1998
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Algebra I: Teacher's Guide Transfer Application TX-2-178-697
Pending as of June 18, 1998
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Algebra I: Support Materials Sample Transfer Application TX-2-178-698
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra I: Outline, Answer Keys, Transfer Application TX-2-179-056
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM IDEAL (CONT'D)
----------------------------------------------------------------------------------------------------
Product Name Date Filed/Issued Copyright Number
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Mathematics Grade 7: Support Transfer Application TX-2-289-047
Materials Sample Pending as of June 18, 1998
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Trigonometry/Math Analysis: Transfer Application TX-2-289-048
Teacher's Guide Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Trigonometry/Math Analysis: Transfer Application Pending TX-2-289-049
Outline, Answer Keys, Worksheets, Tests as of June 18, 1998
----------------------------------------------------------------------------------------------------
Mathematics Grade 7: Outline, Transfer Application TX-2-289-05O
Answer Keys, Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Mathematics Grade 7: Teacher's Transfer Application TX-2-289-051
Guide Pending as of June 18, 1998
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Geometry: Course Outline, Answer Transfer Application TX-2-311-453
Keys, Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Geometry: Teacher's Guide Transfer Application TX-2-311-454
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra II: Teacher's Guide Transfer Application TX-2-326-534
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Trigonometry / Math Analysis: Transfer Application TX-2-326-535
Support Materials Sample Pending as of June 18, 1998
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Algebra II: Support Materials Sample Transfer Application TX-2-345-457
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Algebra II: Outline, Answer Keys, Transfer Application TX-2-351-931
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Geometry: Support Materials Sample Transfer Application TX-2-400-824
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM IDEAL (CONT'D)
----------------------------------------------------------------------------------------------------
Product Name Date Filed/Issued Copyright Number
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample Language Arts 6 Transfer Application TX-2-582-332
Pending as of June 18, 1998
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Language Arts 0 Xxxxxx Xxxxxxx, Xxxxxx Keys, Transfer Application TX-2-582-333
Worksheets, Tests Pending as of June 18, 1998
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ICLS Courseware Sample: Language Arts 5 Transfer Application TX-2-582-334
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 5 Transfer Application TX-2-582-334
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 5: Course Outline, Answer Keys, Transfer Application TX-2-582-335
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 5: Teacher's Guide Transfer Application TX-2-582-336
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 6: Teacher's Guide Transfer Application TX-2-582-337
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 4: Teacher's Guide Transfer Application TX-2-582-936
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Language Arts 4: Course Outline, Answer Keys, Transfer Application TX-2-582-937
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Secondary Language Arts Transfer Application TX-2-584-925
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 4 Transfer Application TX-2-593-770
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Secondary Language Arts: Course Outline, Answer Transfer Application TX-2-686-566
Keys, Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 5: Teacher's Guide Transfer Application TX-2-671-309
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM IDEAL (CONT'D)
----------------------------------------------------------------------------------------------------
Product Name Date Filed/Issued Copyright Number
----------------------------------------------------------------------------------------------------
German I: Teacher's Guide Transfer Application TX-2-671-310
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Physics: Course Outlines, Answer Keys, Transfer Application TX-2-671-315
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 6th Grade Math Transfer Application TX-2-672-548
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Physics: Teacher's Guide Transfer Application TX-2-672-549
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: German Transfer Application TX-2-672-555
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Physics Transfer Application TX-2-672-556
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 5: Course Outline, Answer Keys, Transfer Application TX-2-672-557
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 4th Grade Math Transfer Application TX-2-678-479
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 6: Teacher's Guide Transfer Application TX-2-680-775
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
German 1: Course Outline, Answer Keys, Transfer Application TX-2-686-566
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: 5th Grade Math Transfer Application TX-2-686-567
Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 6: Course Outline, Answer Keys, Transfer Application TX-2-686-568
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
Math -- Level 4: Course Outline, Answer Keys, Transfer Application TX-2-686-569
Worksheets, Tests Pending as of June 18, 1998
----------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
TRANSFER FROM IDEAL (CONT'D)
----------------------------------------------------------------------------------------------------
Product Name Date Filed/Issued Copyright Number
----------------------------------------------------------------------------------------------------
Mathematics Grade 4: Teacher's Guide Transfer Application
Pending as of June 18, 1998 TX-2-686-571
----------------------------------------------------------------------------------------------------
ICLS Courseware Sample: Language Arts 3 Transfer Application
Pending as of June 18, 1998 TX-2-739-191
----------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
1. CLASSROOM United 16-catalogs 3/31/98 1/26/99
ESSENTIALS States featuring JLC: Opposer
75/459,879 educational
products, Cease and Desist letter sent to It's
namely, Academic of Illinois, Inc. on
software, 6/29/98 for its xxxx SCHOOL
instruction ESSENTIALS
manuals,
activity Request for Extension of Time to
guides; file a Notice of Opposition filed
educational on 6/18/99 (granted until 7/25/98).
hooks,
booklets and It's Academic demonstrates prior
workbooks rights in its xxxx on 7/16/98, and
opposition matter is concluded.
Matter Closed
------------------------------------------------------------------------------------------------------------------------------------
2. COMPASS Australia 9-computer 06/12/96 Pending
software;
710447 management Cited Marks
system
software JLC's application under
which deferment since 1/5/98 pending
delivers the disposition of two cited
curriculum applications owned by
and Streamline Pty Ltd. for the marks
instructions CORPORATE COMPASS for use
to students in connection with computer
and teachers software.
Matter Pending
------------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
3. COMPASS Indonesia 9-computer 2/17/98 Pending
X00 0000 software for
managing JLC: Opposed
instruction
programs for Opposition filed by Kompass
educational International Xxxxxxxxxxxxxx X.X.
courseware (a French Corporation) on 8/28/98
and curriculum for its xxxx KOMPASS in several
classes, including International
Class 9.
Kompass International
Xxxxxxxxxxxxxx denies consent to
register xxxx on 9/16/98.
Rebuttal to Kompass International
Xxxxxxxxxxxxxx'x Opposition filed
on 11/3/98.
Per foreign associate, application
is now under substantive review;
foreign associate confirms on
4/7/99 that the rebuttal to Kompass
International Xxxxxxxxxxxxxx'x
opposition will be considered
during the substantive review
process. If the rebuttal is
successful and the application is
approved after examination, the
application will proceed to
registration.
Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
4. COMPASS Singapore 9-computer 07/19/96 Pending
7454/96 software;
management Cited Marks
system
software Kompass International
which Xxxxxxxxxxxxxx X.X.'s marks
delivers cited against JLC's application.
curriculum Arguments to overcome citations
and filed on 1/12/99.
instructions
to students Matter Pending
and teacher
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
5. COMPASS United 9-computer 12/05/96 10/01/97 12/5/96 12/4/03 12/5/06 Registered
MANAGEMENT Kingdom software; 2117672 (compulsory)
SYSTEM computer JLC: Opposer
software for
2117672 program Opposition filed by Xxxx
management Business Information Systems on
12/24/97 for its marks KOMPASS
in Classes 9, 16 and 35; and
REEDBASE COMPASS in Class 42.
Xxxx Business Information Systems
withdraws opposition on 11/98 per
successfully completed coexistence
agreement (condition: restriction of
identification of goods).
Matter Closed
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
6. COMPASS Australia 9-computer Pending
WORLDWARE software
directed to Cited Marks
761158 teachers and
students for JLC's application under deferment
accessing a since 9/98 pending the
global disposition of two cited applications
computer owned by Streamline Pty Ltd. For the
network marks CORPORATE COMPASS for use in
connection with computer software.
Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
7. IDEA SHAPER United 9-computer 07/31/95 10/21/97 Registered
74/707,944 States software that 2,106,204
teaches and JLC: Opposer
facilitates
the Cease and Desist letter sent to
processing of Xxx Xxxxxxx Incorporated on
learning 9/22/97 for its xxxx IDEA
BUILDER.
Opposition filed 10/22/97 - no answer
to opposition filed by Xxx Xxxxxxx
Incorporated.
Judgment by Default entered, and
registration of IDEA BUILDER refused.
Matter Closed
------------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
8. JCAT United 9-computer 07/31/95 1/14/97 04/08/97 4/8/03 4/8/07 Registered
74/708,041 States programs 2,050,313
that Cease and Desist Matter
administer (initiated by JLC).
diagnostic
and Cease and Desist letter sent to
prescriptive Sensenet, Inc. on 9/14/98.
tests,
primarily in Sensenet, Inc. responds by
language asserting dissimilarity of goods,
arts and and reports that Digital
mathematics Equipment Corp. is using the
for exact xxxx JCAT for Java-based
educational Collaborative Active Textbooks.
purposes Provide JLC with a referral
attorney because GCW[ILLEGIBLE]
represents Digital Equipment
Corp. No recent report from
client.
Matter Pending
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
9. TEACHNET United 9-computer 09/23/96 Due Pending
(stylized) States software for 07/22/98
use in Cited Marks
75/169,818 connection
with JLC's application suspended on
curriculum 1/29/98 pending disposition of
management cited application TEACHERNET
for teaching owned by Highlights for
English and Children, Inc. for magazines,
Spanish pamphlets and newsletters
Language concerning the field of education.
Arts to
students and Matter Pending
user
manuals
sold as a unit
therewith.
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OPPOSITION TO COMPANY TRADEMARKS (CONT'D)
-----------------------------------------------------------------------------------------------------------------------------------
Xxxx Reg. Date Sections
Serial No. App. Pub. and 8 & 15 Decl. Reg.
Country Class Filed Date Number Due Renewal Remarks
-----------------------------------------------------------------------------------------------------------------------------------
10. WRITE TIME United 9-computer 07/31/95 12/17/96 03/11/97 03/11/03 3/11/07 Registered
States software for 2,042,803
74/709,331 use in JLC: Opposer
improving
the writing Request for Extension of Time to
skills of file a Notice of Opposition filed
primary on 9/20/96 for the xxxx
school WRITING TIME owned by
students Xxxxxxx Xxxx Xxxxxxx.
Cease and Desist letter sent to
Xxxxxxx Xxxx Xxxxxxx on 10/18/96.
Coexistence agreement proposed
11/21/96.
No further record of outcome in
file, but JLC's xxxx WRITE TIME was
registered on 3/11/97.
Matter Closed
-----------------------------------------------------------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL INBOUND LICENSE AGREEMENTS
=================================================================================================================================
Company Contract Type Product Licensed JLC Product IP owned Royalty
by
Company
=================================================================================================================================
Academic Systems Distribution Algebra - intro, intermed, Interactive Yes 40% of gross sales
coll Xxxxxxxxxxx Xxxx Xxxxxxxxxxx
XxxXxxxxxx 0&0
Xxxxxxx 1&2
---------------------------------------------------------------------------------------------------------------------------------
Academic Systems Distribution RIMS, JLC notebook in Notebook Yes N/A
ASC Mediated Learning
System
---------------------------------------------------------------------------------------------------------------------------------
Aptex Distribution Vital Tools Vital Tools Yes 65% of net $178.75
minimum
---------------------------------------------------------------------------------------------------------------------------------
Bank Street College of License Wordbench Wordbench
Ed. Secondary Learner Yes .05% per product
---------------------------------------------------------------------------------------------------------------------------------
BBN Development Algebra product Algebra Wordbench JLC 15% of net
---------------------------------------------------------------------------------------------------------------------------------
CA DOE License Phys.Sci Mid Scl Sci JLC 10% per product
---------------------------------------------------------------------------------------------------------------------------------
Comptons Development Multi-media encyclopedia Xxx.'s Promise Yes Version 1-3 20%
Elementary Learner Version 4.25%
---------------------------------------------------------------------------------------------------------------------------------
Dade County Development ELD JLC 8% to state of FL 2%
Dade
---------------------------------------------------------------------------------------------------------------------------------
Edunetics License Rediscover Science Mid Sch Sci Yes 40% of gross
---------------------------------------------------------------------------------------------------------------------------------
First Byte License Voice or speech property Assorted Project Yes $60/network
$25/la[ILLEGIBLE]
---------------------------------------------------------------------------------------------------------------------------------
FL DOE ESOL curriculum for teacher T.E.A.C.H. Yes 15% of net
training
---------------------------------------------------------------------------------------------------------------------------------
Learning Company License CWP Center, Writing Tomorrow's Standalone $45/copy
Center, Student Writing Promise Yes networked $899/copy
Center
---------------------------------------------------------------------------------------------------------------------------------
Lernout & Haupsie License Spell checker grammar Writing Expedition Yes Writing Exped. 3.5%
Checker Steps to ELD copy ($3.35/copy
Thesaurus Elem/Mid Learner min.) 2.5%/copy
Grammar checker Elem/Mid Learner ($10/copy min.)
thesaurus
---------------------------------------------------------------------------------------------------------------------------------
Proximity Tool license Linguistic technology Elem Lrnr Steps Yes Qty/Spell/Dictionary
1-8: $25/$30.00
9-12: $33/$39.60
13-16: $41/$49.20
17-20: $49/$58.80
21-24: $57/$68.40
25-32: $73/$87.60
33-40: $81/$97.00
41+: $89/106.80
=================================================================================================================================
JLC - CONFIDENTIAL
MATERIAL INBOUND LICENSE AGREEMENTS (CONT'D)
==================================================================================================================================
Company Contract Type Product Licensed JLC Product IP owned Royalty
by
Company
==================================================================================================================================
Sensei License Algebra, intro to Algebra Secondary Learner Yes 15% of sales receipts
Software
----------------------------------------------------------------------------------------------------------------------------------
Sensei License Geometry, intro to Geometry Secondary Learner Yes 15% of sales receipts
Software
----------------------------------------------------------------------------------------------------------------------------------
Western/GBFE License GBE, stories, dictionary GBE, XXX Story Yes greater of 12.25% of
Books, Story Book net xxxxxxxx or 70%
Maker, Story Book of JLC price for GBE
Maker Deluxe- (SBD) 4% of net for SBD
==================================================================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OUTBOUND LICENSE AGREEMENTS
Distribution Agreements:
1. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
In connection with the work contemplated under Amendment Two, JLC and AWL
entered into a confidentiality Agreement with Biobras, an independent
contractor. Amendments Three and Four were entered into on May 28, 1999.
The Publication and Distribution Agreement grants rights to the products
listed below.
Current Release Past Releases
--------------- -------------
Compass Advantage
Worldware Algebra 1
JCAT Children's Writing and
Tomorrow's Promise Math Publishing
Tomorrow's Promise Reading Comptons Encyclopedia
Tomorrow's Promise Language Arts Early Learning Program
Tomorrow's Promise Science ELD
Earth Science Elementary New Edition Math
Biology Elementary New Edition
Chemistry Reading
Physics Elementary School Program
Writing Expedition Geometry
Spelling Idea Shaper (included w/ELD)
XXX
JCAT
Learning Expedition
Learning First
Middle School Expansion
Middle School Program
New Edition Math
Secondary Expansion Program
Secondary School Program
Spanish Language Arts
Spanish Language Expansion
The Writing Center
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OUTBOUND LICENSE AGREEMENTS
2. International Development and Distribution Agreement entered into by and
between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
20, 1998. Amendment One to this Agreement was entered into on February 28,
1998. A Letter of Amendment and Subdistribution Agreement are currently
under negotiation. The International Development and Distribution
Agreement grants rights to the products listed below.
Current Release Past Releases
--------------- -------------
Compass Action Math
Worldware Algebra I
JCAT Comptons Encyclopedia
Tomorrow's Promise Math Early Learning Program
Tomorrow's Promise Reading ELD
Tomorrow's Promise Language Arts Elementary New Edition Math
Tomorrow's Promise Science Elementary New Edition
Earth Science Reading
Biology Elementary School Program
Chemistry Geometry
Physics Idea Shaper (included w/ELD)
Writing Expedition XXX
Spelling JCAT
Learning Expedition
Learning First
Life and Employability Skills
Middle School Expansion
Middle School Program
New Edition Math One Net
Secondary Expansion Program
Secondary School Program
The Writing Center
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
MATERIAL OUTBOUND LICENSE AGREEMENTS
Customer Agreements:
Note: Not listed in this Schedule are Customer Agreements, which use the
form of agreement customary at the time those agreements were executed;
however, those agreements may differ in regard to price discounts, service
commitments and other miscellaneous terms. The agreements with customers
that are listed below do not use the standard form of agreement and
contain terms which may be deemed material or unusual.
1. West Virginia Department of Education
2. The School Board of Dade County, Florida
3. Center Grove Community School Corporation, Indiana
4. Duneland School Corporation, Indiana
5. School City of East Chicago, Indiana
6. Grand Rapids Public Schools, Michigan
7. Xxxxxx Heights Public Schools, Michigan
8. Goshen Community School District, Indiana
9. Lockhardt Independent School District, Texas
10. La Porte Community School District, Indiana
11. Loogootee Community School District, Indiana
12. Michigan City Area Schools, Indiana
13. New Albany-Xxxxx Consolidated School Corporation, Indiana
14. West Allegheny School District, Pennsylvania
15. Zion Elementary School District #6, Illinois
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
JLC SOFTWARE LICENSE
Catalog Resellers of Standalone Products
The attached lists provide the names and addressees of catalog resellers and
preview centers of JLC Learning Corporation standalone products.
------------------------------------------------------------------------
Xxx Xxxxx Xxxxx Xxxxxxx
Augmentative Communication Basic Computer Learning
0000 Xxxx Xxxxxxx Xxxx 00000 Xxxxxx Xxxxx Xxxx
Xxxx Xxxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
------------------------------------------------------------------------
Xxx Xxxxx Xxxxxxxxxx Xxx Xxxxx
Basic Computer Learning Bound To Stay Bound Books, Inc.
00000 Xxxxxx Xxxxx Xxxx 0000 Xxxx Xxxxxx
Xxxxx Xxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000
------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx Rose Stairs
Cerberus Association Inc. Computer Centerline (CCL)
00 Xxxxxxxx Xxxx Xxxx 0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000 Xxxxxxxxxx, XX 00000
------------------------------------------------------------------------
Xxxx Xxxxxxxxxxx Xxxxxx Xxxxx
Computer Inventory Control/School Xxx Subscriptions
World Soft 000 Xxxxxx Xxxxx
0000 Xxxxxx Xxxxxx Xxxxxxxxx, XX 00000
Xxxxxxxxxx, XX 00000
------------------------------------------------------------------------
Xxxxxxxx Xxxxx Xxx Xxxxx C.P.R. Software
Custom Computer Specialist 00 Xxxxxxx Xxxxxx
00 Xxxx Xxxxx X.X. Xxx 000
Xxxxxxx, XX 00000 Xxxxxxxxx, Xxxxxxx X0X0X0
------------------------------------------------------------------------
Xxxx Xxxxxx Xxxxxxx Xxxxxx
Xxxx Computers Inc. DISC Educational Technology
0000 Xxxxxxxx Xxxxxx Xxxx 0000-X Xxx-Xxx Xxxx
Xxxxxxxxx, XX 00000 Xxxx, XX 00000
------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxx Xxxx Xxxx Xxxxxx
Educational Record Center Elcom Services Group
0000 Xxxxx Xxxx Xxxxx, Xxxxx 000 000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx
Hach & Associates, Computers for Kids Xxxxx Xxxxx
X.X. Xxx 00000 Xxxx, Inc.
4994 B Indiana 000 Xxx Xxxxx Xxxx
Xxxxxxx Xxxxx, XX 00000-0000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxx North
Interactive Educational Software & Video Xxxxxxx'x Education Resource
00 Xxx Xxxx 0 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000-0000 X'Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx Xxxxx Sellback
Kidsource Ismart
0000 X. Xxxx Xxxxxx 0000-X Xxxxx Xxxxxxx Xxxx
Xxxx Xxxxx, XX 00000-0000 X.X. Xxx 0000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx Xx Xxxxxx
Learning Center Xxxx Inc.
0000 X. Xxxxx Xxxxxx 0000 Xxxxxxx Xxxxxx xxxx
Xxx Xxxxx, XX 00000 Xxxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxx Xxxxx Xxxx Xxxxxxx
Learning Technology Group Inc. Learning Edge
000 X. Xxxxxxxxxx Xxxxxx 000 Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx X. Xxxx Xxxxx Xxxx
Logisoft Computer Products Library Video Company
0000 Xxxxxxxxx-Xxxxxxx Xxxx W-2 0 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Xxxxxxx Xxxxx
New Media Schoolhouse, Inc. New Media Schoolhouse, Inc.
X.X. Xxx 000, 00 Xxxxxxxxxxx Xxxxxx X.X. Xxx 000
Xxxxx Xxxxx, XX 00000 00 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxx Xxxxxxxx Xxx XxXxxxxxx
PC Micro Dealers Co-op, Inc. Omega Films Limited
0000 Xxxxxxxxx Xxxxxx 0000 XxXxxxxx Xxxxxx, Xxxx #0
Xxxxxxxxx, XX 00000 Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X0X0
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx Xxxx Xxxxxxx
School Specialty Supply Plymouth Rock Associates
0000 Xxxxxxxxx Xxxxx 00 Xxxxxxx Xxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxxx Xxxx Xxxxxx
Softchoice Softchoice
0000 Xxxxxxxx Xxxxxx, Xxxxx 000 173 Dufferin Street
Toronto, ON CANADA M6K 1Y9 Xxxxx 000
Xxxxxxx, XX XXXXXX X0X 0X0
--------------------------------------------------------------------------------
Xxxxx Ring Xxx Xxxxxx
Software In a Week Software Express
00-00 X. Xxxx Xxxx Drive, #000 0000-X Xxxxx Xxxxxxxxx
Xxxxxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxx Xxxx Xxxxx
Teacher's Pet Spectrum Educational Supplies
000 Xxxxx Xxxxxx Xxxx XX 000 Xxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxx, XXX X0X 0X0
--------------------------------------------------------------------------------
Xxxxxx Pelstrom Xxxxx Xxxxxxx
Acorn Media Tiger Corp. Direct
00000 Xxxxxxxx Xxxxx 0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Xxxxx Xxxxx
Binet International Amarillo Computers
000 Xxxxxxxxx Xxxxxx, #000 000 X Xxxxxxxx Xxxxxxx
Xxxxx, XX 00000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxxxx Xxxx Temoin
Xxxxxxx XxXxxxxxx Academy CES Inc.
0000 X. Xxxxxxxxxx Xxxxxx 0000 Xxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx Xxxxxx Xxxx
CompUSA CompUSA
000 X. 0xx Xxxxxx, Xxxxx 0000 0000 X. Xxxxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000 Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxx Xxxx Xxxxx
Core Curriculum Technologies Compuware
000-0000 Xxxxx Xxxxxx Xxx 00-000 Xxxxxxxx Xxxxx
Xxxxxxx, X.X., XXXXXX X0X 0X0 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Tigo Xxxxx Xxxxxx
Edmark Corporation Dynamic Computer Solutions
0000 000xx Xxxxxx XX 0000 XX 00xx
Xxxxxxx, XX 00000-0000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxx Xxxxxx Xxxxxxx
Educational Techniques & Technologies EdTech
0000 00xx Xxxxxx, Xxxxx 0 0000 0xx Xxxxxx Xxxxx
Xxxxxxx, XX 00000 Xx. Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxx Xxxxx Xxxxxx
ETC Educational Technology Group
0000 00xx Xxxxxx, Xxxxx 0 00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxx Xxxxxxx Xxxx
ET&T ETI
1214 C Stonehollow 0000 Xxxxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000-0000 Xxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxxx Xxxx Xxxxxxxx Xxxxxx
Hampton Xxxxx For The Love of Learning
26385 Carmel Rancho Boulevard 9090-51 Avenue
Carmel, CA 93923 Xxxxxxxx, XX X0X 0X0
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxx Xxxxxx
Image Media Inc. ICP Educational Resources
Xxxx 0, 0000 Xxx Xxxxxx 0000 X. Xxxxx Xxxxx
Xxxxxxxxx, XX X0X 0X0 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxx Xxxxxxxx
Xxxxxx Management Systems Xxxx X. Xxxxxxxx & Associates
000 X. X'Xxxxxx, Xxxxx 0 901 Fairway Road
Irving, TX 75061 Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxx Xxxxxxx Xxxxx
Multiple Zones International Microsync
000 Xxxxx Xxxxx Xxx 000 XX Xxxxxxxxxx Xxxxx, Xxxxx X0
Xxxxxx, XX 00000-0000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx Xxxxx Xxxxxxxx
Page Xxx Xxxxx Xxxx
00000 Xxxxxxxxxx XX 0000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Happy Xxxxxxxxx
Projected Learning Programs Inc. PCI Educational Publishing
0000 X. Xxxxxxxx Extension, Suite 505 P.O. Box 34270
Oklahoma City,OK 00000 Xxx Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx Xxxxxxx X. Xxxx
Software Spectrum SchoolVision, Inc.
0000 Xxxxxxx Xxxxx X.X. Xxx 00
Xxxxxxx, XX 00000 0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxxx Xxxx
Technology For Education, Inc. Teachware
0000 Xxxxxxxxx Xxxxxx Xxxxx, #000 X.X. Xxx 000000
Xx. Xxxx, XX 00000 Xxxxxxxx Xxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxx Xxxxxxx
The Reading and Computer Place Texas Courseware
00000 Xxxxx Xxxxxxxxx, #000 26730 1-45 N
La Mirada, CA 90638 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Weniee Xxxxx Xxxxxx Xxxxx
US Tech Tierra Del Oro
1236 San Jacinto Mall 0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxx Xxxxxxx Xxxx Xxxxx
Ventura Educational Systems Ventura Educational Systems
000 Xxxxxx Xxxxxx, Xxxxx X 0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxx Xxxxx, XX 00000 Xxxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxx Xxxxxx
Academic Advantage Virtual Softnet Canada Inc.
000 Xxxxxx Xxxxxx 000-0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxx, X.X. Xxxxxx X0X 0X0
--------------------------------------------------------------------------------
Xxxx Xxxxxxx Xx Xxxxx
Alasoft, Inc. Academic Software
0000 Xxxxxx Xxxxxxx, Xxxxx 0 000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxxx Xxxxx Xxxxxxx
Xxxx Industries, Xxxxxx Division Alboes Computers And Supplies
0000 Xxxxxxx Xx. South, Suites G-N 6298 Veterans Parkway, Suite 3F
K - 12 Sales Xxxxxxxx, XX 00000
Xxxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxx Xxxx Xxxxxxx
Classroom Technology Xxxx Industries, Xxxxxx Division
000 Xxxxxxxxxx Xxxxxxx, Xxx. 000 0000 Xxxxxxx Xxxxxx Xxxxx, Xxx. X-X
Xxxxxxxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx
Computer Services & Consulting Clearvue
0000 X. Xxxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxxxx
Delta Systems Co., Inc. Crimson Multimedia Distribution, Inc.
0000 Xxxxxx Xxxxxxx 0000 00xx Xxxxxx XX
XxXxxxx, XX 00000 Xxxxx Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx Xxx Xxxxxxxx
DP Solutions Discovery
000 Xxxxx Xxxxxxxxxx Xxxxx 0000 Xxx Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000 Xxxx Xxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx Xxxx Xxxxxxx
Educational Materials Specialists, Inc. Educational Computer Workshop
000 Xxx 00 Xxxxx, Xxxxx X 0000 Xxxxxxx Xxxx
X.X. Xxx 0000 Xxxxx Xxxxx, XX 00000
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Xxxx XxXxxxxxx
Lab Resources K-12 Micromedia Publishing
W275 X0000 Xxx Xxxxxx 00 XxXxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxx Xxxx Xxxxx
Logical Choice, Inc. Learning Supplements
0000 Xxxxxxxxxxxx Xxxxxxxxx, #000 00 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxxxx Xxxxxx
Magg Software Mac Center
0000 Xxxxxx Xxxx Xxxxxx 0000 X. Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 Ft. Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxx Xxxxx
NASCO Micro Age
000 Xxxxxxxxxx Xxxxxx 0000 X. Xxxxxxx Xxxxxx
Xxxx Xxxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxx Xxxxx Xxxxxx
Net One Consulting National School Products
000 X. Xxxxxxxxx Xxxxx, Xxxxx 000 000 X. Xxxxxxxx
Xxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx Xxxxx Xxxxxxxxx
S&P Enterprises New SVE Inc.
0 Xxxxxxxxxxx Xxxx 0000 Xxxxx Xxxxxxxx Avenue
Branford, CT 06405 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxx Xxxxx Xxxxx
Speech Bin, The School Media Associates
0000 00xx Xxxxxx 0000 X.X. Xxxxxxxxxx, X-000
Xxxx Xxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxxx Xxxxxx
World Class Learning Materials, Inc. Valpar International Corp.
000 Xxxx Xxxxxx 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx Xxxx Xxxxx
Yesl Learning Center Wyse Connecting Point
0000 Xxxxx Xxxx 0000 X. Xxxxxxxx Xxxxxx
Xxxx, XX 00000 X.X. Xxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxxxxxxx Dominika Spetsmann
Cambridge Development Lab Cambridge Development Lab
00 Xxxx Xxxxxx 00 Xxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxx Xxxxx Xxxxx
CCV-Soft Warehouse Educational Resources
0000 00xx Xxxxxx Xxxxx 0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx Xxxxx, XX 00000-0000
Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxxx Xxx Sunderlaage
ESI (Educational Software Institute) Forest Technologies
0000 Xxxxx 00xx Xxxxxx 000 Xxxxxxxxxx Xxxxx
Xxxxx, XX 00000 Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxx Xxxxx Xxxxxxx
Melzner Inc. Learning Services
0000 Xxxxxx Xxxx Xxxx 0000 X. 00xx Xxxxxx
Xxxxxx, XX 00000 X.X. Xxx 00000
Xxxxxx, Xxxxxx 00000-0000
--------------------------------------------------------------------------------
Xxxx Xxxxxx Xxxx Xxxxxxxx
Scantron Quality Computers Scantron Quality Computers
00000 Xxxx Xxxx Xxxx 00000 Xxxx Xxxx Xxxx
Xx. Xxxxxx Xxxxxx, XX 00000 Xx. Xxxxx Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxxxxx Annat Xxxxxx
SmartSource LLC Westwood Computers & Networking
00 X Xxxx Xxxx Xxxxxx 0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxxxxxx Xxxxxxxx Xx. Xxxxxxx Crehn
Assistive Technology Project Bucks County Intermediate, Unite 22
00 Xxxx Xxxx, Xxxxx 000 000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxx Xxxxx Xxxxxx Xxxx
Carolina Computer Access Center Center for Technology In Education
Metro School - 000 X. 0xx Xxxxxx 0000 X. Xxxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxx Xxxxxx Xxxxx Xxxxxxxx
Clinton County ISD Eastern Panhandle Tech Access Ct., Inc.
0000 Xxxxx X.X. 00 X.X. Xxx 000
Xx. Xxxxx, XX 00000 Xxxxxxx xxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxxx Xxxxxxxx Xx. Xxxxx Xxxxxxx
Educational Computer Consortium of Information Technology Evaluation
Ohio Services
0000 Xxxxxx Xxxx 000 X. Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000 Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xx. Xxxxx Xxxxxx Xx.Xxxxxx Xxxxxx
IU9IMS Technology Education Center Learning Ind. Through Computers, Inc.
000 Xxxxxxxx Xxxxxx 00 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxxx Xxxxxxx Xxxx Xxxxx
Xxxxxx College Instructional Computing Mass. Special Tech Access Center
00 Xxxxxx Xxxxxx 00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000 Xxxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Ms. Xxxxxxxx Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxxx County Intermediate Unit Northeast Educational Television of Ohio
0000 X. Xxxx Xxxx Xxxxxx 0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000 Xxxx, XX 00000
--------------------------------------------------------------------------------
Mr. Xxxxx Gretcher Xx. Xxxx Xxxxxx
Physically Impaired Assoc. of Michigan Resource Center for Independent Living
0000 Xxxxx X.X. 00, Xxxxx X00 401 - 000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, XX 00000 X.X. Xxx 000
Xxxxx, XX 00000-0000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxx Xxxxx Mr. Xxxxx Xxxxxx
Solta Learning Center Summit Co. School Instr. Tech. Center
000 Xxxx Xxxxx Xxxxxx 000 Xxxxxxxxxx Xxxxxx, Xxx. 000
Xxxxxxxx, XX 00000 Xxxxxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxxx Xxxxxxxxx Xx. Xxxxx XxXxxxxx
SYSU College of Education Technology Resources for Education
000 Xxxxx Xxxx - SVSU 0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Ms. Gail Xxxx XxXxxxx Board of Jewish Education
The Education Cooperative 000 Xxxx 00 Xxxxxx
000 Xxxxx Xxxxxx Xxx Xxxx, XX 00000
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
BOCES Regional Information Center Carbon Lehigh Intermediate Xxxx #00
00 Xxxxxx Xxxxxx 0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Educational Resource Center Info Tech. Educ. for the Commonwealth
Norwich Univ. - Vermont College Penn State - 000 Xxxxx Xxxx. XX
Xxxxxxxxxx, XX 00000 000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Oswego County Teacher Center Xxxx Xxxxxxxxxx
Oswego Co. BOCES - Rt. 64 AEA 6, Div. of Media Services
Xxxxxx, XX 00000 000 Xxxx Xxxxxxxx
Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxxx Xxxxxxxx Xxxxx Xxxxx
Regional Computer Resource Center Alaska Services for Enabling Tech.
Xxxxxx Univ - 000 X. Xxxxxxxx Xxxxxx X.X. Xxx 0000
Xxxxxx-Xxxxx, XX 00000 Sltka, AK 99835
--------------------------------------------------------------------------------
Syracuse Teacher Center Xxx Xxxxx
000 Xxxx Xxxxxx Adaptive Tech Xxx/Xxxxxxxx XX Xxxxx
Xxxxxxxx, XX 00000 000 Xxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx Xx. Xxxx Xxx
Alpine School Dist - Xxxxxxxx School Bimingham XXX Xxxxxx
000 X. 0000 Xxxx 000 00xx Xxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxx Kenrs Xxxx Xxxx
Assistive Tech. Training & Info Center Center for Accessible Technology
0000 Xxxx Xxxx Xxxxx - P0 2441 0000 0xx Xxxxxx, 00-X
Xxxxxxxxx, XX 00000 Ship Address: 0000 0xx Xxxxxx
Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xx. Xxxx XxXxxxxx-Xxxxxxxx Xxxxxx Ram
Blue Grass Tech. Ctr. for People Computer Access Center
w/Disabilities 0000 Xxxxx Xxxxxx Xxxxxx #000
000 Xxxxx Xxxxxxxxx Xxxxxx Xxxxxx Xxxx, XX 00000
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xx. Xxxxxxx Xxxxxx Xxxxx Xxxxx
Center for Enabling Technology Computer CITE
622 Xx. 00 Xxxx, Xxxxx 00X 000 X. Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Star Xxxxx
Computer Center for Citizens Computing & Telecomputing Services
w/Disabilities 000 X. 0xx Xxxxxx
2056 South 0000 Xxxx Xxxxxxxxxx, XX 00000-0000
Xxxx Xxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxxx Xxxxxxxxx Xxxxxx
Alameda Co. Office of Ed. - Preview Aloha Special Technology Access Center
Center 000 Xxxxx Xxxxxx
000 Xxxx Xxxxxx Xxxxxx - Xxxx 000 Xxxxxxxx, XX 00000-0000
Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxx Xxxxxxx Xxx Xxxxxx
Alliance for Technology Access Xxxxxxxxx Atlantic State University
2175 E. Francisco Blvd., Suite L 00000 Xxxxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000 Xxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDLLE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
------------------------------------------------------------------------------
Xxx Xxxxx Xx. Xxx Xxxxxxxx
Computer Learning & Information Centre Education Resource Center
0000 Xxxxxx Xxxx XX 2832 E. Flamingo Road
Calgary, AB, CN T3E7B8 Xxx Xxxxx, XX 00000
------------------------------------------------------------------------------
Xxxxxx Xxxxxx Xxxx Xxxxxxxx
Cooperating School Districts/Ed. Tech Education Technology Alliance
0000 Xxxxx Xxxx 0000 Xxxxxxx Xxxxxxx Xxxx
Xx. Xxxxx, XX 00000 Xxxxxxx Xxxxxxx, XX 00000
------------------------------------------------------------------------------
Raylen Fenfrow Xxx Xxxxxxx
Educational Service Center, Region VI Educational Service Center #13
0000 Xxxxxxxxxx Xxxx 000 X. Xxxxxxxxx
Xxxxxxxxxx, XX 00000 Xxxxxx, XX 00000
------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Xxxxx Xxxxxxxxx
Education Technology Center E. Tennessee Special Tech. Access Center
000 Xxxxx Xxxxx - Xxxxx Xxxx. 123 0000 Xxxxx Xxxx XX
Xxxxxxxxxxxx, XX 00000-0000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxx Xxxxx
Ed. Tech Ctr & Ctr for Excellence in FDLRS
Special Ed. 0000 XX 00xx Xxxxxx
University of SC - Xxxxxxx Xxxx Xx 000 Xxxxx, XX 00000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxx Xxxx Xxxxxxx
FCIT Univ. S. FL/College of Education FDLRS - Xxxxxxx Co. Public Schools
0000 X. Xxxxxx, EDU 208B 0000 Xxxxx Xxxxxx
Xxxxx, XX 00000 Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxx Xxxx
FDLRS Great River Preview Center
0000 Xxxx Xxxxxx 1200 University, X.X. Xxx 0000
Xxxxxxx Xxxxx, XX 00000 Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx Xx. Xxxxx XxXxxxxxx
FL Diagnostic & Learning Resources IMPAC Learning Systems
Center 000 Xxxxxxxx Xxxxx, Xxxxx 000
0000 Xxxx Xxxxxxxxx Xxxxxx Xxxxxx Xxxx, XX 00000
Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxx Xxxxxxxx Xxxx Xxxxxxxxxx
Illinois Resource Center JDSB/PAEC Preview Center
0000 Xx. Xxxxxxxx Xxxx 0000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxx
Xxxxxxx ESD Center for Ed. Technology Kingwood Speech Pathology
000 X. Xxxxx Xxxxxx 0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxx Xxxx Xxxxx
Key Largo School Lakeland AEA 3 Media Center
104801 Overseas Highway Hwy 18 and 2nd Street
Xxx Xxxxx, XX 00000 Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx Xxxxx Xxxxxxx
Lake Co. Educational Service Center Living Independence Network Corp.
00000 Xxxx Xxxxxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000 Xxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxx Xx. Xxxxxx XxXxxxxx
Lane Education Service District Maine Parent Federation
0000 Xxx. 00 Xxxxx X.X. Xxx 0000
Xxxxxx, XX 00000 Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xx. Xxxxxx Xxxxxx Xxxx Xxxxxxx
Maine DOE Preview Center Natrona Co. School Dist. Software
00 Xxxxx Xxxxx Xxxxxxx Xxxxxxx Xxx
Xxxxxxx, XX 00000-0000 000 X. Xxxx Xxxx, Xxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxxxxx Xx. XxXxxx Xxxxxxxx
Missouri Tech. Center for Special Ed. Xxxxxxxx State University
UMKC School of Education, Xxxx 00 X.X. Xxx 0000
0000 Xxxxxxxx Xxxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xx. Xxx XxXxx Xxxxx Xxxxx
Neb. Dept. of Education Tech. Center Northwide ISD (Northside Instructional
000 Xxxxxxxxxx Xxxx Xxxxx - X0 00000 Xxxxxxxxxx)
Xxxxxxx, XX 00000-0000 0000 Xxxxxxx Xxxx, Xxxxxxxx X
Xxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Xxxx Xxxxxxxxx
Northern Trails Area Education Agency Orange Co. Public Schools - Educators
Northern Trails XXX Xxx X Xxxxxxxx Xxx.
Xxxxx Xxxx, XX 00000 000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxx Xxxx Mr. Xxxxx Xxxx
OASIS, School Group Parents, Let's Unite for Kids
000 Xxxxxxxx Xxxx - 0xx Xxxxx 0000 Xxxxx 00xx Xxxxxx
Xxxxxxxx, XX 00000 XXX-X/XXXX Xxxx. Xxxx 000
Xxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxx Xxxxxx Xxx Xxxx
PACER Center, Inc. Reion 18 ESC Preview Center
0000 Xxxxxxx Xxxxxx Xxxxx 0000 XXXXXXX X.X. Xxx 00000
Xxxxxxxxxxx, XX 00000-0000 Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxx Don Xxxxxx
Xxxxxxx Univ. Teaching Resources Ctr. Region VII ESC
X.X. Xxx 0000 - Xxxxx Xxxxxx 0000 Xxxxx Xxxxxxx - P0 0000
Xxxxxx Xxxx - 0xx Xxxxx Xx Xxxxxxxx, XX 00000
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxxx Xxxxxx Xx. Xxxx Xxxxxxx
Region VII Education Service Center Santa Xxxxxxx Co. Ed. Office
818 E. Main 0000 Xxxxxxxxx Xxx Xxxx
Xxxxxxx, XX 00000 Xxxxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Mr. Xxxx Xxxxxxxx
Region XIV Education Center XXXXX Center
0000 Xxxxxxx 000 000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
-------------------------------------------------------------------------------
Xxxx Xxxxx Xxxx Xxx Ambrase
South Xxxx Educational Service Center SW Cooperative Foundation Asst.
000 Xxxxxxxx'x Xxxxxxx Xxxxxxxxxx
Xxxxxxxxx, XX 00000 0000 Xxxx 000xx Xxxxxx
Xxx Xxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxx Xxxxx Xxxxxxx Xxxxxxxxx
Special Education Technology Center Team of Advocates for Special Kids
000 Xxxxx Xxxxxxx 000 X. Xxxxxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000-0000
-------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Xxxxxxx McGonegill
Tampa General Rehab Center R-214 Tech - Able
P.O. Box 1289 1112 - A Xxxx Drive
Tampa, FL 33601 Xxxxxxx, XX 00000-0000
-------------------------------------------------------------------------------
Xx. XxXxxx Xxxxxxxxxx Xxx Xxxxxx
Tech Connection Assistive Tech. Technology Access Center of Middle
Solutions Tennessee
00 Xxxxxx Xxxxxx 0000 Xxxxx Xxxxxx Xxxx., Xxxxxxxx Xx.,
Xxxxxxxxxx, XX 00000-0000 Xxxxx 000
Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx Xxxxx Xxxx-Wall
Technical Aids & Assistance for the Technology and Inclusion
Disabled Ctr. P.O. Box 150878
0000 X Xxxxxxxxx Xxxx Xxxxxx, XX 00000-00000
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xx. Xxxxxxx Xxxxxx Xx. Xxxx X. Xxxxxx
Technology Access Center Technology Learning & Research Lab
00000 Xxxxxxx Xxxx ASU Xxx 000000
Xx. Xxxxx, XX 00000-0000 Xxxxxx, XX 00000-0000
-------------------------------------------------------------------------------
Xxxxxx Xxxxxxxx Xxxxx Xxxx
Technology Assistance for Special Technology Resource Solutions
Consumers for People
X.X. Xxx 000 0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000 Xxxxxx, XX 00000
-------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Xxxxxxxxx Xxxxxx Xxxxxx Xxxx
Technology Resources for Special People Technology Resource Center
3023 Canterbury 0000 Xxxxxxxx Xxxxxxx Xxxx
Xxxxxx, XX 00000 Xxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Xxxxx Xxxx Xxxxx
The Star Center Tech. Access Ctr. of Tuscon, Inc.
00 Xxxxxx Xxxx 0000 X. 00xx Xxxxxx, X.X. 00000
Xxxxxxx, XX 00000 Xxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxxxx Xxxx Xxxx Quemeville
TIES Training Center Tidewater Center for Technology Access
0000 Xxxx Xxxx Xxxx, Xxxxx 000 Special Education Annex
Xx. Xxxx, XX 00000 000 Xxxxxxx Xxxx Xxxxxxxxx
Xxxxxxxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxxx Xxxx Xxx Xxxxxxxxx
UCF/DOE Institutional Tech. Resource T.E.A.C.H. Center
Univ. of Central FL - College of Ed. 10201 Xxxxxx
XX 000 Xxxxxxx Xxxxxxx, XX 00000
Xxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Xxxx Xxxxxx Xx. Xxx Xxxxxxxxx
United Cerebral Palsy of Idaho, Inc. UNF College of Ed. Learning Lab.
5530 West Emerald 0000 Xx. Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Xxxx Held Xx. Xxxxxx Xxxxxxxxx
Wisconsin Instructional Tech Resource Western KY. Center for
0000 Xxxxxxx Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000 0000-X Xxxxxxxx Xxxxxx, X.0. Xxx 000
Xxxxxx, XX 00000
--------------------------------------------------------------------------------
CESA #10 Xxxxx Xxxxxxxx
000 X. Xxxx Xxxxxx Xxxxxxx Dept. of Education
Xxxxxxxx Xxxxx, XX 00000 0000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
Computer Learning Resource Center CESA #3 SWICC Program
000 Xxxxx Xxxxxx Xxxxx 1300 Industrial Drive
Saskatoon, Sask, CN S7K 1M7 Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
Catalog Resellers of Standalone Products (CONT'D)
--------------------------------------------------------------------------------
Educational Service Center #11 Ctr. for Adaptive Tech. & Education
000 Xxxxx Xxxxxxxxx, X.X. Xxx 000 000 Xxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxxxxxx, XX 00000-0000
--------------------------------------------------------------------------------
Instructional Comp. Data Proc. Center EnTech
000 Xxxx Xxxxx 000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Lincoln Schools Technology Center Language, Speech & Hearing Center
59041 "O" Street 0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Northwest ESD 189 Manzanilla Assistive Technology Center
205 Xxxxxxx Road Univ. of Mexico RIATT
Xx. Xxxxxx, XX 00000 0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Oklahoma Assistive Technology Center Panhandle Assistive Technology Center
0000 X.X. 00xx Xxxxxx, WB400 000 Xxxxx Xxxxxx Xxxxxx, #000
Xxxxxxxx Xxxx, XX 00000 Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
SACC Assistive Technology SHIP Resource Center
0000 X. Xxxxxxxx Xxxxx 000 Xxxx Xxxxx Xxxxx
X.X. Xxx 0000 Xxx Xxxxxxx, XX 00000
Xxxx Xxxxxx, XX 00000
--------------------------------------------------------------------------------
San Diego Co. Tech. Consortium Technology Preview Center
0000 Xxxxx Xxxxx Xxxx, #000 0000 XxXxxxx Xxxxx, Xxxx 0
Xxx Xxxxx, XX 00000-0000 Xxxxx Xxxxxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
THIRD PARTY RIGHTS TO JLC SOURCE CODE
1. Settlement Agreement and Release entered into by and between Golden Books
Family Entertainment, Inc., formerly known as Western Publishing, Inc.,
and JLC Learning Corporation on October 28, 1998, modifying the Agreement
between Western Publishing Company, Inc. and JLC Learning Corporation
entered into on February 22, 1991.
2. Product Supply and License Agreement entered into by and between JLC
Learning Corporation and Sylvan Learning Systems Inc., on November 1,
1996.
3. West Virginia Basic Skills Computer Education Contract #01-A entered into
by and between JLC Learning Corporation and the West Virginia Department
of Education on June 14, 1990.
4. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
Amendments Three and Four were entered into on May 28, 1999. The Agreement
contains a provision providing for limited distribution rights to Sylvan
Learning Systems Inc.
5. International Development and Distribution Agreement between JLC Learning
Corporation and Educational Trend Sdn. Bhd. on March 20, 1998. Amendment
One to this Agreement was entered into on February 28, 1998. A Letter of
Amendment and Subdistribution Agreement are currently under negotiation.
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
CURRENTLY MARKETED AND MATERIAL SOFTWARE
PRODUCTS
Management Systems
Advantage Management System 1.2, 2.1, 2.2
Compass 3.1, 4.0
LMS*
Personal Compass 1.0, 1.1
Assessment Product
Jostens Comprehensive Assessment Tests/Advantage
Jostens Comprehensive Assessment Tests 1.0, 2.0/Compass
Assessment Designer (Compass Tomorrow's Promise 4.0)
Curriculum
Basic Learning System*
Life Skills and Employability Skills
Foundations in Mathematics
Foundations in Reading
Learning First New Edition: Elementary Mathematics*
Learning First New Edition: Elementary Reading*
Tomorrow's Promise Reading with Spanish 1 and 2
Tomorrow's Promise: Biology
Tomorrow's Promise: Chemistry
Tomorrow's Promise: Earth Science
Tomorrow's Promise: Physics
Tomorrow's Promise: Lang. Arts Xxxxx 0-0
Xxxxxxxx'x Xxxxxxx: Xxxxxxxxxxx Xxxxx X-0
Tomorrow's Promise: Reading Level K-8
Tomorrow's Promise: Spelling Level 1
Tomorrow's Promise: Spelling Level 2
English Language Development
GED Expansions (social studies/science)
Integrated Language Arts
Secondary Literacy Expansions
Steps to English Lang. Development-Beginning Level
Steps to English Lang. Development-Intermediate/Advanced
Idea Shaper
Tomorrow's Promise Learning with Literature
JLC - CONFIDENTIAL
Curriculum (Cont'd)
Middle School Science
Spanish Language Arts
Writing Expedition
Project T.E.A.C.H.
Other
JLC Worldware Web site
Worldware Software
Standalone Catalog Reseller Product
Clock
Community Exploration
Friday Afternoon
Learning English Series: Primary
Learning English: Home and Family
Learning English: Neighborhood Life
Math Skills Collection: Complete Set
Math Skills Collection: Decimals and Percents
Math Skills Collection: Measurement
Math Skills Collection: Shapes and Figures
Math Skills Collection: Whole Numbers and Fractions
Reading Skills Collection: Complete Set
Reading Skills Collection: Reading All Around You
Reading Skills Collection: Read to Imagine
Reading Skills Collection: Reading for Meaning
Reading Skills Collection: Read to Think
Write This Way
Third Party Product
Xxxxxxx'x Interactive Encyclopedia
Golden Book Encyclopedia
Interactive Mathematics: Xxxxxxx 0 & 0, Xxx xxxxxxx 1
Storybook Maker
Microsoft Works
Microsoft Encarta
Sunburst Type to Learn
The Student Writing Center
Wordbench
JLC - CONFIDENTIAL
Third Party Standalone Catalog Reseller Product
Casualty Kid
DesignExpress
First Connections: The Golden Book Encyclopedia
Learning English Series
Lyric Language: French
Lyric Language: German
Lyric Language: Japanese
Lyric Language: Spanish
Rhyme Time
Storybook Maker Deluxe
WebExpress
* Sold, not actively marketed.
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
THIRD PARTY ACCESS OR MODIFICATION RIGHTS TO SOURCE
CODE AND RIGHTS TO MODIFY
1. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
In connection with the work contemplated under Amendment Two, JLC and AWL
entered into a confidentiality agreement with Biobras, an independent
contractor. Amendments Three and Four were entered into on May 28, 1999.
2. International Development and Distribution Agreement entered into by and
between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
20, 1998. Amendment One to this Agreement was entered into on February 28,
1998. A Letter of Amendment and Subdistribution Agreement are currently
under negotiation.
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
CLAIMS AGAINST COMPANY'S INTELLECTUAL PROPERTY
1. See "Material Opposition to Company Trademarks" in this schedule.
JLC - CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
INFRINGEMENT CLAIMS
1. American Education Corporation v. JLC Learning Corporation, Case No. CIV
97-1127R USDC (Western District of Oklahoma). Settled.
2. Golden Books Publishing Co., Inc. v. Jostens Learning Corp., et al., USDC
Case No. 96-C-0491 (Eastern District of Wisconsin). Settled.
3. See also matters disclosed under "Material Opposition to Company
Trademarks" in this schedule.
JLC-CONFIDENTIAL
SCHEDULE 4.08 (CONT'D)
CURRENT INFRINGEMENT OF COMPANY'S INTELLECTUAL
PROPERTY
1. See "Material Opposition to Company Trademarks" in this schedule.
JLC - CONFIDENTIAL
SCHEDULE 4.09
Salaries In Excess of $100,000
--------------------------------------------------------------------------------
Employee Name Job Title
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Vice President MIS
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Vice President/Corporate Controller
--------------------------------------------------------------------------------
Xxxxx X. Xxxx Director Product Marketing.
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Director Product Marketing.
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx Director Product Marketing.
--------------------------------------------------------------------------------
Xxxx X. Xxxxxx Director Customer Support Services
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx President
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Vice President Senior Finance & Administration
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx Vice President Senior Product Development
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Vice President Senior Professional Development
--------------------------------------------------------------------------------
Xxxxxxx X. XxXxxxxxxx Vice President Senior Sales -- Northern Division
--------------------------------------------------------------------------------
Xxxxxxxxxxx X. Xxxxx Vice President Senior Sales -- Southern Division
--------------------------------------------------------------------------------
Consultant Contract In Excess of $75,000
--------------------------------------------------------------------------------
Employee Name Job Title
--------------------------------------------------------------------------------
Xxxx Xxxxxx Attorney
000 X. 00xx Xxxxxx,
Xxxxx 0000
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
Severance Obligations in Excess of $50,000
--------------------------------------------------------------------------------
Employee Name Severance Period
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 8 Months
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 10 Months
--------------------------------------------------------------------------------
Xxxxx X. Xxxx 6 Months
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx 6 Months
--------------------------------------------------------------------------------
R. Xxxxxx Xxxxxxx 8 Months
--------------------------------------------------------------------------------
Xxxxxxx Xxxx 8 Months
--------------------------------------------------------------------------------
Xxxxxxx X. Comet 8 Months
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 6 Months
--------------------------------------------------------------------------------
Xxxx X. Xxxxxx 9 Months
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 1 Year
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1 Year
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx 1 Year
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1 Year
--------------------------------------------------------------------------------
Xxxxxxx X. XxXxxxxxxx 1 Year
--------------------------------------------------------------------------------
Xxxxxxxxxxx X. Xxxxx 1 Year
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
SUB LEASES
--------------------------------------------------------------------------------
Sublease Location Term Sublessee
----------------- ---- ---------
--------------------------------------------------------------------------------
0000 Xxxxxxx Xxxxxxx Xxxx., September 1, 1994 - Xxxxxxx Education (formerly
Suite 100 May 31, 2000 Invest Learning, formerly
Xxx Xxxxx, XX 00000 Centec)
--------------------------------------------------------------------------------
0000 Xxxxxxx Xxxxxxx Xxxx., November 1, 1994 - Law Office of Xxxxxx Xxxxxxx
Suite 250 May 20, 2001
Xxx Xxxxx, XX 00000
--------------------------------------------------------------------------------
0000 Xxx Xxxxxxxxx Xxxx October 15, 1998 - Standard Mutual Insurance
Xxxxxxxxxxx, XX 00000 July 31, 1999
(month-to-month)
--------------------------------------------------------------------------------
0000 Xxx Xxxxxxxxx Xxxx March 1, 0000 - Xxxxx-Xxxxx
Xxxxxxxxxxx, XX 00000 month-to-month
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
LEASE CONTRACTS
1. Dell Financial Services Lease No. 004029124-001 by and between JLC
Learning Corporation and Dell Financial Services on September 28, 1998.
2. Dell Financial Services Lease No. 007061432-001 by and between JLC
Learning Corporation and Dell Financial Services LP on March 16, 1999.
3. Xerox Business Services Document Services Agreement Renewal C, entered
into by and between JLC Learning Corporation and Xerox Corporation acting
through Xerox Business Service executed on December 16, 1998 terminating
on December 31, 2003.
4. Standard Lease Agreement for Business Customers entered into by JLC
Learning Corporation and Lucent Technologies, Inc. on December 19, 1998.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACT FOR SERVICES
1. Service Agreement entered into by and between Jostens Learning Corporation
and General Electric Capital Technology Management Services on December
15, 1994.
2. Securities Purchase Agreement dated as of November 1, 1996 by and among
JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc.
3. Management and Advisory Agreement by and between JLC Holdings, Inc.,
Software Systems Corp., JLC Acquisition Corp. and Xxxx Capital Partners
IV, L.P. dated as of June 29, 1995.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
EVIDENCES OF INDEBTEDNESS
1. Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
Inc., JLC Holdings, Inc., Software Systems Corporation, Chase Manhattan
Bank, N.A. and Maximum Investments, N.V., dated as of June 29, 1995.
2. Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
Learning Corporation issued on June 30, 1998 in the principal amount of
$2,142,901.36.
3. Loan and Security Agreement entered into by and between JLC Learning
Corporation, the Financial Institutions named therein as the Lenders and
Foothill Capital Corporation on March 30, 1998.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
THIRD PARTY GUARANTEES OF COMPANY INDEBTEDNESS
1. Senior Subordinated 12.25% Note Purchase Agreement by and among JLC
Acquisition, Inc., JLC Holdings, Inc., Software Systems Corporation, Chase
Manhattan Bank, N.A. and Maximum Investments, N.V., dated as of June 29,
1995.
2. Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
Sylvan Learning Systems, Inc., JLC Learning Corporation and JLC Holdings,
Inc., dated as of March 31, 1999, and the notes issued pursuant thereto.
3. Assignment and Exchange Agreement by and among Pyramid Ventures, Inc.,
General Electric Capital Corporation, G.E. Capital Equity Investments,
Inc., JLC Learning Corporation, and JLC Holdings, Inc., dated as of March
31, 1999, and the notes issued pursuant thereto.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
INVESTMENTS
1. Jostens Learning Corporation is a shareholder of 640 preferred shares of
ESI Inc., d/b/a Elemental Software, a California corporation, with offices
at 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX, 00000.
2. Jostens Learning Corporation is a shareholder of 5619 shares of common
stock in PictureTel Corporation, a Delaware corporation with offices at
000 Xxxxxxxxx Xxxx, Xxxxxxx, XX, 00000. The shares are held in escrow as
a result of the sale of Starlight Network.
3. Basics Partnership, a Utah limited partnership formed November 30, 1982.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTUAL LIENS
1. Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
Inc., JLC Holdings, Inc., Software Systems Corporation, Chase Manhattan
Bank, N.A. and Maximum Investments, N.V., dated as of June 29, 1995.
2. Subordinated Promissory Note between Sylvan Learning Systems, Inc. and JLC
Learning Corporation issued on June 30, 1998 in the principal amount of
$2,142,901.36.
3. Loan and Security Agreement entered into by and between JLC Learning
Corporation, the Financial Institutions named therein and Foothill Capital
Corporation on March 30, 1998.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
POWER OF ATTORNEY
1. Loan and Security Agreement entered into by and between JLC Learning
Corporation, the Financial Institutions named therein as the Lenders and
Foothill Capital Corporation on March 30, 1998.
2. Each United States trademark registration application filed by or on
behalf of the Company includes a limited power of attorney granting
counsel to the Company authority to prosecute such trademark application,
including necessary related transactions with the United States Patent &
Trademark Office and to receive the certificate of registration.
Additionally, Brunei, Hong Kong, Indonesia, Ireland, Malaysia, Singapore,
and Taiwan require and the Company has granted limited powers of attorney
for prosecution of trademark applications.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTS WITH REMAINING FUTURE OBLIGATIONS
OF MORE THAN $150,000 AS OF MAY 31, 1999
--------------------------------------------------------------------------------
Customer State Remaining Obligation
--------------------------------------------------------------------------------
Dade County School District FL $351,056.08
--------------------------------------------------------------------------------
Polk County Schools FL $241,057.27
--------------------------------------------------------------------------------
Oklahoma City School District OK $299,845.43
--------------------------------------------------------------------------------
Chicago Public Schools IL $239,351.46
--------------------------------------------------------------------------------
Orange Township Board of Education NJ $248,221.28
--------------------------------------------------------------------------------
Halifax County School District VA $233,868.92
--------------------------------------------------------------------------------
Brighton School District 27J CO $494,723.46
--------------------------------------------------------------------------------
Xxxxxxxx School District #5 SC $149,787.30
--------------------------------------------------------------------------------
Erie City School District PA $212,270.07
--------------------------------------------------------------------------------
Robstown Independent School District TX $384,216.25
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTS EXTENDING MORE THAN 365 DAYS AND INVOLVING A
FUTURE OBLIGATION OVER $100,000 AS OF MAY 31,1999
1.
--------------------------------------------------------------------------------
Customer State Remaining
Obligation
--------------------------------------------------------------------------------
Xxxxxxxx School District #5 SC $ 149,787.30
--------------------------------------------------------------------------------
Brighton School District 27J DO $ 199,670.46
--------------------------------------------------------------------------------
Canon XxXxxxxx School District PA $ 118,603.92
--------------------------------------------------------------------------------
Chicago Public Schools IL $ 321,536.01
--------------------------------------------------------------------------------
Erie City School District PA $ 212,270.07
--------------------------------------------------------------------------------
Halifax County School District VA $ 233,858.92
--------------------------------------------------------------------------------
Orange Township Board of Education NJ $ 248,221.28
--------------------------------------------------------------------------------
Polk County Schools FL $ 241,057.27
--------------------------------------------------------------------------------
Rahway Public Schools NJ $ 105,995.22
--------------------------------------------------------------------------------
Robstown Independent School TX $ 384,216.26
District
--------------------------------------------------------------------------------
School Board of Broward County FL $ 129,283.32
--------------------------------------------------------------------------------
School City of East Chicago IN $ 107,200.60
--------------------------------------------------------------------------------
2. See also "Evidence of Indebtedness", "Lease Contracts" and "Employment
Agreements" as disclosed in this schedule.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACT WITH ANY GOVERNMENT ENTITY
1. Educational Technology Agreement between JLC Learning Corporation and
California State Department of Education on February 10, 1989.
2. Contractual Agreement between School Board of Dade County, Florida and JLC
Learning Corporation of San Diego entered into on December 20, 1990,
amended on April 1, 1992, June 29, 1993 and March 11, 1994.
3. ESOL Curriculum Development Contract between JLC Learning Corporation and
the Florida Department of Education dated June 22, 1993.
4. West Virginia Basic Skills Computer Education Contract #01-A between JLC
Learning Corporation and the West Virginia Department of Education on June
14, 1990.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTS FOR JOINT VENTURE, PARTNERSHIP OR
INVESTMENT
1. Basics Partnership, a Utah limited partnership formed November 30, 1982.
2. Securities Purchase Agreement dated as of November 1, 1996, among JLC
Holdings, Inc., Software Systems Corp. and Sylvan Learning Systems, Inc.,
referencing potential participation in At Home Learning Software project.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
DISTRIBUTORS OR SALES REPRESENTATIVES CONTRACTS
INVOLVING PAYMENT OR RECEIPT OVER $100,000 BY JLC LEARNING
CORPORATION IN THE PAST YEAR
1. Jostens Learning Corporation's Independent Sales Representative Agreement
dated as of January 1, 1999 with Alternate Solutions, Inc.
2. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
The Agreement contains a provision providing for limited distribution
rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
entered into on May 28, 1999.
3. International Development and Distribution Agreement entered into by and
between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
20, 1998. Amendment One to this Agreement was entered into on February 28,
1998. A Letter of Amendment and Subdistribution Agreement are currently
under negotiation. The Agreement contains a clause for the provision of
localized products to Sylvan Learning Systems, Inc.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTS WITH AGGREGATE FUTURE LIABILITY OVER
$150,000 NOT TERMINABLE BY JLC LEARNING CORPORATION
WITH NOTICE OF 60 DAYS OR LESS
1. Dell Financial Services Lease No. 004029124-001 by and between JLC
Learning Corporation and Dell Financial Services LP dated September 28,
1998.
2. Dell Financial Services Lease No. 007061432-001 by and between JLC
Learning Corporation and Dell Financial Services LP dated March 16, 1999.
3. Xerox Business Services Document Services Agreement, Renewal C, entered
into by and between JLC Learning Corporation and Xerox Corporation acting
through Xerox Business Service dated December 28, 1998, terminating on
December 31, 2003.
4. See also Schedule 4.07, items 1, 2, 5 and 6.
5. Settlement Agreement between APTEX/HNC and JLC dated May 24, 1999.
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
CONTRACTS CONCERNING MATERIAL ASSETS OR
OPERATIONS
1. See Schedule 4.08 "Material Inbound License Agreements".
JLC - CONFIDENTIAL
SCHEDULE 4.09 (CONT'D)
Breach or Default
1. Senior Subordinated 12.25% Note Purchase Agreement among JLC Acquisition,
Inc., JLC Holdings, Inc., Software Systems Corp., Chase Manhattan Bank,
N.A. and Maximum Investments, N.V., dated as of June 29, 1995.
2. Management and Advisory Agreement by and between JLC Holdings, Inc.,
Software Systems Corp., JLC Acquisition Corp. and Xxxx Capital Partners
IV, L.P. dated as of June 29, 1995.
3. Securities Purchase Agreement dated as of November 1, 1996 by and among
JLC Holdings, Inc., Software Systems Corp., JLC Learning Corporation and
Sylvan Learning Systems, Inc., amendments are set forth in schedule 2.04.
Notice of Intent to Terminate or Renegotiate
1. Service Agreement entered into by and between Jostens Learning Corporation
and General Electric Capital Technology Management Services on December
15, 1994. Service Agreement entered into by and between JLC Learning and
Technology Services Solutions on December 15, 1994.
JLC - CONFIDENTIAL
SCHEDULE 4.13
1. See Schedule 4.01.
JLC - CONFIDENTIAL
SCHEDULE 4.14
--------------------------------------------------------------------------------
Type of Coverage Insurance Company Limits
--------------------------------------------------------------------------------
General Liability Pkg. Chubb; Federal Insurance Aggregate $2,000,000
Co. Personal Property
$1,000,000
Business Income $2,500,000
Property $12,170,000
--------------------------------------------------------------------------------
Automobile Chubb; Federal Insurance $1,000,000
Co.
--------------------------------------------------------------------------------
Umbrella/Excess Chubb; Federal Insurance $20,000,000
Co.
--------------------------------------------------------------------------------
Crime Xxxxxx; American $1,000,000
Motorists
--------------------------------------------------------------------------------
Workers' Compensation CIGNA $1,000,000
--------------------------------------------------------------------------------
Fiduciary Liability Chubb; Federal Insurance $2,000,000
Co.
--------------------------------------------------------------------------------
Professional Liability Media Professional's Gulf $3,000,000
Underwriters
--------------------------------------------------------------------------------
Directors & Officers National Union Fire Aggregate $10,000,000
("D&O") Insurance Co. EPLI Limit $2,000,000
--------------------------------------------------------------------------------
All policies expire on September 1, 1999 except D&O which expires December 31,
2001.
Note: In connection with The Rio Grande City Consolidated School District v.
Jostens Learning Corporation case referred to in Schedule 4.16, the insurer has,
by letter dated June 4, 1997, advised the Company that it will provide a defense
of the matter, subject to a reservation of rights based on, inter alia, the fact
that claimant alleges that some of the wrongful acts occurred prior to the
inception date of the policy and the fact that the Company allegedly failed to
follow certain procedures set forth in the policy.
JLC - CONFIDENTIAL
SCHEDULE 4.15
1. JLC Holdings, Inc. has not paid Delaware franchise taxes for the years
subsequent to 1996.
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
TAX INDEMNIFICATION
1. Stock Purchase Agreement by and between JLC Holdings, Inc., Software
Systems Corp., JLC Acquisition, Inc. and Jostens, Inc., dated as of June
29, 1995.
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
TAX EXTENSIONS OR WAIVERS AND POWERS OF ATTORNEY
1. Since the Company's separation from Jostens, Inc., there have been no
extensions granted for periods after June 29, 1995 other than normal
filing extension from April 15th to September 15th of each year.
2. A Power of Attorney has been executed between the Company and its payroll
service provider (Systems Tax Service/CES) to file payroll tax returns.
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
COMPANY AND AFFILIATED GROUP
TAX FILING JURISDICTIONS
1. The jurisdiction where the Company or the affiliated group that includes
the Company, Software Systems Corp. and JLC Holdings, Inc. joins or has
joined for any taxable period ending after 1995 in the filing of any
consolidated, combined or unitary Tax Return are:
Federal
Alaska
Arizona
California
Colorado
Florida
Guam
Hawaii
Idaho
Illinois
Iowa
Kansas
Maine
Massachusetts
Minnesota
Montana
Nebraska
New Hampshire
New Mexico
North Dakota
Oregon
Utah
Virginia
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
COMMON PARENT CORPORATION AND OTHER MEMBERS OF
THE CONSOLIDATED, COMBINED OR UNITARY TAX GROUP
1. The affiliate group taxes have been filed under consolidated JLC Holdings,
Inc. and included JLC Holdings, Inc., Software Systems Corp. and JLC
Learning Corporation.
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
COMPANY AND AFFILIATED GROUP TAX FILING
JURISDICTIONS
The jurisdictions where the Company or any affiliated group of which the Company
is or has ever been a member files, is required to file or has been required to
file a Tax Return relating to state and local income, franchise, license,
excise, net worth, property or sales and use taxes or is or has been liable for
any taxes on a "nexus" basis at any time for taxable periods ending after 1995:
All 50 states
District of Columbia
Puerto Rico
Guam
Local Taxes in:
Alabama
City of Birmingham
City of Xxxxxx
Xxxxxxxxx County
Xxxxxx County
Arizona
Chandler
Flagstaff
Glendale
Mesa
Nogales
Peoria
Phoenix
Scottsdale
Tempe
Tucson
Maricopa County
California
Orange County
San Diego County
Colorado
City of Denver
Florida
Miami Dade County
Tampa
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
COMPANY AND AFFILIATED GROUP TAX FILING JURISDICTIONS (CONT'D)
Indiana
Xxxxxxx
Xxxxxx
St. Xxxxxx
Kentucky
Louisville
Louisiana
Acadia Parish
Calcasieu Parish
East Baton Rouge Parish
Iberia Parish
Xxxxxxxxx Xxxxxx
Orleans Parish
City of New Orleans
Ouachita Parish
City of Monroe
Red River Parish
Xxxxxx Xxxxxx
Tangipahoa Parish
Terrebone Parish
Maryland
Allegany County
Xxxx Arundel County
Baltimore County
City of Baltimore
City of Salisbury
Prince George's County
St. Mary's County
Upper Marlboro
Wicomico County
Michigan
Detroit
New York
New York City
Ohio
Columbus
Fairfield City
Independence
Strongsville City
Waterville Village
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
COMPANY AND AFFILIATED GROUP TAX FILING JURISDICTIONS (CONT'D)
Oklahoma
Oklahoma City
Pennsylvania
Boyertown Boro
Smethport Boro
Bellevue Boro
Hummelstown
Xxxxxxx Boro
Xxxxxxxx Township
Dunmore Boro
Xxxxxxxxx Boro
South Carolina
Richland County
Texas
Carrollton-Farmers
Branch ISD
City of Irving
Coppell ISD
Dallas
West Virginia
Charleston
Wyoming
Xxxxxxxx Township
JLC - CONFIDENTIAL
SCHEDULE 4.15 (CONT'D)
MINIMUM BALANCES AS OF DECEMBER 31, 1997 AFTER GIVING
EFFECT TO THE AMENDED TAX RETURNS
1. Net Operating Loss carryforward of the Company: $48,000,000.00
(any adjustment under Code Section 108 based on an entity approach).
2. Deferred gain or loss allocable to the Company or such group arising out
of any deferred intercompany transaction: $0.00
3. Aggregate Tax Basis in Company's assets: $98,000,000.00
JLC - CONFIDENTIAL
SCHEDULE 4.16
There is a reasonable possibility that any of the following matters could
be adversely determined. If adversely determined, then individually or in the
aggregate, they could materially adversely effect the Company.
1. Mayor and City of Baltimore v. Jostens Learning Corporation
Circuit Court for Baltimore City, Maryland
Case No. 98-288128
2. The Rio Grande City Consolidated Independent School District v. Jostens
Learning Corporation
US Bankruptcy Court for the Southern District of Texas(1)
Adversary No. 97-2226-B
3. Savant Inc. v. Jostens Learning Corporation
State of Washington Superior Court of King County
Case No. 98-2030160-KNT
4. Covenant Violations
JLC continues to be in breach of certain covenants under its Senior
Subordinated 12.25% Note Purchase Agreement.
5. See Schedule 4.08 "Material Opposition to Company Trademarks".
----------
(1) On May 25, 1999, the bankruptcy court remanded the case to the Texas state
court. The Company is assessing whether it will appeal the bankruptcy court's
ruling to the federal district court or, alternatively, ask the bankruptcy court
to reconsider its decision to remand.
JLC - CONFIDENTIAL
SCHEDULE 4.17
EMPLOYEE BENEFIT PLANS
--------------------------------------------------------------------------------------------
PLAN PROVIDER
---- --------
--------------------------------------------------------------------------------------------
1. 401(k) Retirement Savings Plan Fidelity Management Trust Co.
--------------------------------------------------------------------------------------------
2. Preferred Provider Organization - Medical(1) Self Funded (administered by United
Health Care)
--------------------------------------------------------------------------------------------
3. Exclusive Provider Organization - Medical(1) Self Funded (administered by United
Health Care)
--------------------------------------------------------------------------------------------
4. Managed Indemnity Plan A & B Self Funded (administered by United
Health Care)
--------------------------------------------------------------------------------------------
5. BlueAdvantage PPO(1) Blue Cross/Blue Shield Illinois
--------------------------------------------------------------------------------------------
6. Preferred Dental Plan(1) MetLife
--------------------------------------------------------------------------------------------
7. Vision Plan(1) Vision Service Plan of Arizona
--------------------------------------------------------------------------------------------
8. Health Care Reimbursement Account(1) Work/Life Benefits
--------------------------------------------------------------------------------------------
9. Business Travel Accident Insurance AIG
--------------------------------------------------------------------------------------------
10. Basic & Supplemental Life Insurance(1) Reliastar Employee Benefits
--------------------------------------------------------------------------------------------
11. Short Term Disability CNA
--------------------------------------------------------------------------------------------
12. Long Term Disability CNA
--------------------------------------------------------------------------------------------
13. Group Home/Auto Insurance MetLife
--------------------------------------------------------------------------------------------
14. Employee Assistance Program CNA
--------------------------------------------------------------------------------------------
15. Tuition Reimbursement Plan Jostens Learning Corporation
--------------------------------------------------------------------------------------------
16. Stock Appreciation Rights Plan Jostens Learning Corporation
--------------------------------------------------------------------------------------------
17. Key Management Severance Plan Jostens Learning Corporation
--------------------------------------------------------------------------------------------
18. Jostens Learning Severance Policy Jostens Learning Corporation
--------------------------------------------------------------------------------------------
19. Key Management Bonus Program (EBITDA) Jostens Learning Corporation
--------------------------------------------------------------------------------------------
20. Sales Compensation Plans: Jostens Learning Corporation
o Regional Marketing Manager (5 versions)
o Regional Marketing Executive (6 versions)
o Senior Regional Marketing Executive (4 versions)
--------------------------------------------------------------------------------------------
----------
(1) Extended benefits are offered to disabled employees for the twelve (12)
months prior to the effective date of COBRA benefits. Employee
contributions are waived during this twelve month period.
JLC CONFIDENTIAL
--------------------------------------------------------------------------------
PLAN PROVIDER
---- --------
--------------------------------------------------------------------------------
o V.P. Regional Marketing Executive (1 version)
o Area Vice President (2 versions)
o Senior Vice President (2 versions)
o Sales Associate (2 versions)
o Catalog Group
o Inside Sales
o Inside Telemarketers
o Field Marketing
--------------------------------------------------------------------------------
JLC-CONFIDENTIAL
SCHEDULE 4.17 (CONT'D)
FIXED SALES BONUS
Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx
Xxxx X. Xxxxxx
Xxxxxxx X. XxXxxxxxxx
C. Xxxxxxx Xxxxx
Xxxxxxx Xxxxxx
Xxxxxxx X. Comet
Xxx Xxxxxxx
Xxxxxxx Xxxx
R. Xxxxxx Xxxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxx
Xxxx Xxxxx
Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxx
TOTAL: $912,500
JLC - CONFIDENTIAL
SCHEDULE 4.17 (CONT'D)
STOCK APPRECIATION RIGHTS
================================================================================
NAME TITLE
--------------------------------------------------------------------------------
Xxxxx, Xxxxxxx President
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxx Senior Vice President Finance & Admin
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx Senior Vice President Product Development
--------------------------------------------------------------------------------
Xxxxxxx, Xxx Senior Vice President Professional Development
--------------------------------------------------------------------------------
Xxxxxx, Xxxx Director, Customer Support Services
--------------------------------------------------------------------------------
XxXxxxxxxx, Xxxx Xxxxxx Vice President Sales-- Northern Division
--------------------------------------------------------------------------------
Xxxxx, C. Michael Senior Vice President Sales-- Southern Division
--------------------------------------------------------------------------------
Xxxxxx, Xxxxxxx Director, Human Resources
--------------------------------------------------------------------------------
Xxxxxx, Xxxxxx Vice President Corporate Controller
--------------------------------------------------------------------------------
Xxxxxx, Xxxxx Vice President MIS
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx Vice President Software Engineering
--------------------------------------------------------------------------------
Xxxx, Xxxxxx Area Vice President
--------------------------------------------------------------------------------
Xxxxxxx, Xxx Area Vice President
--------------------------------------------------------------------------------
Xxxxxx, Xxxxx Area Vice President
--------------------------------------------------------------------------------
Comet, Xxxxxxx Area Vice President
--------------------------------------------------------------------------------
Xxxx, Xxxxxxx Area Vice President
--------------------------------------------------------------------------------
Xxxxxxx, R. Alfred Area Vice President
--------------------------------------------------------------------------------
Xxxxxx, Xxxxx Area Vice President
--------------------------------------------------------------------------------
Xxxxxx, Xxxxxx Director, Product Marketing
--------------------------------------------------------------------------------
Xxxxxx, Xxxx Director, Field Systems Support
--------------------------------------------------------------------------------
Xxxxx, Xxx Dirictor, Professional Development
--------------------------------------------------------------------------------
Xxxx, Xxx Director, Product Marketing
--------------------------------------------------------------------------------
Xxxxxxx, Xxx Xxxxxxxx, Quality Assurance
--------------------------------------------------------------------------------
Xxxxx, Xxxx Director, Marketing Programs/Promotions
--------------------------------------------------------------------------------
Xxxxxx, Xxx Vice President Strategic Sales Support
--------------------------------------------------------------------------------
Xxxxxx, Xxx Director, Sales Training
--------------------------------------------------------------------------------
Xxxx, Xxxx Director, Pricing/Business Admin.
--------------------------------------------------------------------------------
Xxxxxx, Xxx Director, Hardware Services
--------------------------------------------------------------------------------
Xxxxx, Xxxx Director, Software Engineering
--------------------------------------------------------------------------------
Good, Xxx Director, Production & Distribution
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Controller
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxxxx Director, Professional Development Alliances
================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.17 (CONT'D)
STOCK APPRECIATION RIGHTS (CONT'D)
================================================================================
NAME TITLE
--------------------------------------------------------------------------------
Xxxx, Xxxx Director, Professional Development Sales
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxx Director, Assessment Services
--------------------------------------------------------------------------------
Xxxxxx, Xxxxxx Director, Software Engineering II
--------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxx Manager, Product Support
--------------------------------------------------------------------------------
Major, Xxxxx Manager, Technical Support
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx Regional Marketing Vice President
--------------------------------------------------------------------------------
Xxxxxxxx, Xxx Regional Marketing Executive
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Senior Regional Marketing Executive
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxx Senior Regional Marketing Executive
--------------------------------------------------------------------------------
Xxxxx, Xxxxxxx Regional Marketing Executive
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxx Manager, Product Development Project
--------------------------------------------------------------------------------
Xxxxxx, Xxx Xxxxxx Software Engineer
--------------------------------------------------------------------------------
Xxxxxxx, Xxxx Director, Product Operations
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxxx Director, Documentation/Multimedia Development
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxx Assistant Treasurer
--------------------------------------------------------------------------------
Xxxxx, Xxxx Director, Education & Marketing Research
--------------------------------------------------------------------------------
Xxxxxxxx, Xxxxxx Regional Marketing Executive
--------------------------------------------------------------------------------
Xxxxxxxx, Xxx Director, West Virginia
--------------------------------------------------------------------------------
Total estimated payments of
$1,120,250.00 - $1,520,250.00
================================================================================
JLC - CONFIDENTIAL
SCHEDULE 4.18
1. In March of 1999, JLC Learning Corporation's receivable under the Product
Supply and License Agreement of November 1, 1996, was applied against JLC
Learning Corporation's obligations to Sylvan under the Securities Purchase
Agreement dated as of November 1, 1996.
2. Discontinued the marketing of Vital Tools. A settlement agreement has been
reached with APTEX/HNC.
3. Purchase of Cisco catalyst 5509 Router for $52,000.00 (budgeted capital
item in excess of $25,000 and with a possible total over $100,000).
4. Introduction of Stock Appreciation Rights Plan.
5. Approval of Fixed Sales Bonus.
6. Increases in Compensation for personnel at Director level and above:
--------------------------------------------------------------------------------
EMPLOYEE NAME JOB TITLE EFFECTIVE
DATE
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Vice President MIS 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Vice President Corporate 1/1/99
Controller
--------------------------------------------------------------------------------
Xxxxx Xxxx Director Pricing/Business 1/1/99
Analysis
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Director Hardware Services 1/1/99
--------------------------------------------------------------------------------
Xxxxx X. Good Director Prod & Distribution 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Director Field System 1/1/99
Support
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxx Director Professional 1/1/99
Development
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Director Professional 1/1/99
Development Alliances
--------------------------------------------------------------------------------
Xxxx Xxxx Director Professional 1/1/99
Development Sales
--------------------------------------------------------------------------------
C. Xxxxxxx Xxxxx Director Education & Market 1/1/99
Research
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.18 (CONT'D)
--------------------------------------------------------------------------------
EMPLOYEE NAME JOB TITLE EFFECTIVE
DATE
--------------------------------------------------------------------------------
Xxxx X. Xxxxx Director Marketing, 1/1/99
Programs/Promotions
--------------------------------------------------------------------------------
Xxxxx X. Xxxx Director Product Marketing 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Director Product Marketing 1/1/99
--------------------------------------------------------------------------------
Xxxxxx Xxxxxxx Director Documentation/Media 1/1/99
Development
--------------------------------------------------------------------------------
J. Xxxxxxx Xxxxx Director Product Development 1/1/99
Project
--------------------------------------------------------------------------------
Xxxx X. Xxxxxxx Director Product Operation 1/1/99
--------------------------------------------------------------------------------
Xxx Xxxxxxx Director Quality Assurance 1/1/99
--------------------------------------------------------------------------------
Xxxx Xxxxx Director Software Engineering 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Director Software Engineering II 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx Director Sales Training 1/1/99
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxxxx X. Xxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxxxxx X. Comet Vice President Area 1/1/99
--------------------------------------------------------------------------------
R. Xxxxxx Xxxxxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxx X. Xxxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxxxxxx Xxxx Vice President Area 1/1/99
--------------------------------------------------------------------------------
Xxx X. Xxxxxx Vice President Strategic Sales 1/1/99
Support
--------------------------------------------------------------------------------
Xxxx X. Xxxxxx Director Customer Support 1/1/99
Services
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx Director Human Resources 4/15/99
--------------------------------------------------------------------------------
JLC - CONFIDENTIAL
SCHEDULE 4.18 (CONT'D)
--------------------------------------------------------------------------------
EMPLOYEE NAME JOB TITLE EFFECTIVE
DATE
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx President 1/1/99
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Vice President Senior Finance & 1/1/99
Administration
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxx Vice President Senior Product 1/1/99
Development
--------------------------------------------------------------------------------
Xxxxx X. Xxxxxxx Vice President Senior 1/1/99
Professional Development
--------------------------------------------------------------------------------
7. Increases in 1999 EBITDA Opportunity for Personnel at Director level and
above:
--------------------------------------------------------------------------------
NAME TITLE
--------------------------------------------------------------------------------
Xxxx Xxxx Director, Pricing/Business Analysis
--------------------------------------------------------------------------------
Xxxxx Xxxxxxx Director, Assessment Services
--------------------------------------------------------------------------------
Xxx Xxxxxx Director, Technical Services & Training
--------------------------------------------------------------------------------
Xxx Xxxxxx Director, Sales Training
--------------------------------------------------------------------------------
Xxxx Xxxx Director, Customer Service
--------------------------------------------------------------------------------
Xxx Xxxxx Director, Customer Service
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Director, Customer Service
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxx Director, Human Resources
--------------------------------------------------------------------------------
8. An agreement modifying the Foothill Agreement to include an over-advance
facility of $1.5 million was entered into on May 1, 1999.
JLC - CONFIDENTIAL
SCHEDULE 4.19
NON-COMPLIANCE WITH APPLICABLE LAWS
1. See Schedule 4.01.
JLC - CONFIDENTIAL
SCHEDULE 4.21
1. Texas Caretaker Project Pilot dated July 23, 1997, entered into by JLC
Learning Corporation and Sylvan Learning Systems, Inc.
2. Publication and Distribution Agreement entered into by and between JLC
Learning Corporation and Addison Xxxxxx Xxxxxxx Limited on December 8,
1997. Amendment One to this Agreement was entered into on December 18,
1998. Amendment Two to this Agreement was entered into on March 12, 1999.
The Agreement contains a provision providing for limited distribution
rights to Sylvan Learning Systems, Inc. Amendments Three and Four were
entered into on May 28, 1999.
3. International Development and Distribution Agreement entered into by and
between JLC Learning Corporation and Educational Trend Sdn. Bhd. on March
20, 1998. Amendment One to this Agreement was entered into on February 28,
1998. A Letter of Amendment and Subdistribution Agreement are currently
under negotiation. The Agreement contains a clause for the provision of
localized products to Sylvan Learning Systems, Inc.
4. Stock Purchase Agreement by and between JLC Holdings, Inc., Software
Systems Corp., JLC Acquisition and Jostens, Inc. dated as of June 29,
1995.
5. Strategic Alliance Agreement dated the date hereof between Sylvan Learning
Systems, Inc. and JLC Learning Corporation.
6. See also schedule 2.06, items numbered 8, 9, 13, 14 and 17.
JLC - CONFIDENTIAL
SCHEDULE 4.24
1. Dell Marketing L.P.
2. General Electric Capital Corp. (Formerly Ameridata, Inc.)
3. Tech Data Corp.
4. Apple Computer, Inc.
5. Telex Communications, Inc.
6. Academic Systems Corporation (prepayment of licenses).
7. Discontinued the marketing of Vital Tools. A settlement agreement has been
reached with APTEX/HNC.
JLC - CONFIDENTIAL
SCHEDULE 4.25
1. Terrebonne Parish School District
2. Tangipahoa Parish School District
3. Chicago Public Schools
4. West Allegheny School District
5. Dade County School District
6. East Cleveland City School District
7. Halifax County School District
8. Galena Park I.S.C.
9. Polk County Schools
10. Xxxxxx County School District
JLC - CONFIDENTIAL
SCHEDULE 4.25 (CONT'D)
1. Dade County complained to JLC Learning Corporation during the summer of
1998 regarding performance issues. As a result, the guarantee under the
Operation Safety Net contract was renegotiated and upgraded software was
provided to the customer.
JLC -CONFIDENTIAL
SCHEDULE 4.27
1. Jostens Learning Corporation is a shareholder of 640 preferred shares of
ESI Inc., d/b/a Elemental Software, a California corporation, with offices
at 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX, 00000.
2. Jostens Learning Corporation is a shareholder of 5619 shares of common
stock in PictureTel Corporation a Delaware corporation with offices at 000
Xxxxxxxxx Xxxx, Xxxxxxx, XX , 00000. The shares are held in escrow as a
result of the sale of Starlight Network.
3. Basics Partnership, a Utah limited partnership formed November 30, 1982.
JLC - CONFIDENTIAL
SCHEDULE 4.28
JLC's Year 2000 compliance review is ongoing. The following information is
accurate as of April 1, 1999, and may be amended as a result of ongoing review.
--------------------------------------------------------------------------------
Software Product Certification Status
---------------- --------------------
--------------------------------------------------------------------------------
JLMS/LMS Non-compliant*
--------------------------------------------------------------------------------
AIMS 2 Y2K Ready**
--------------------------------------------------------------------------------
RIMS 1 Unknown***
--------------------------------------------------------------------------------
RIMS 2 Y2K Ready with issues****
--------------------------------------------------------------------------------
* Recommendation to users to set clocks back to 1972 during the summer of 1999
to avoid mid-year loss of data. Novell 2.2 which runs this software is
non-compliant. No further plan of correction has been adopted.
** No significant issues found, full test not performed due to age of product
and decrease in sales. No further plan of correction has been adopted.
*** Post release issues being addressed by Product Development. Version 3.4
introduces an error in the program. No further plan of correction has been
adopted except in the case of version 3.4.1
**** Cannot handle cross millennium data. Data must be closed out at the end of
1999. No further plan of correction has been adopted.
Products Not Year 2000 Tested - No plan of correction adopted
Teach Net
Learning Expedition Stand Alone CD
Standalone Software Products (will be tested)
One Net
Lab Net
Apple Hard Disk
JLC - CONFIDENTIAL
SCHEDULE 6.01
1. In March of 1999, JLC Learning Corporation's receivable under the Product
Supply and License Agreement of November 1, 1996, was applied against JLC
Learning Corporation's obligations to Sylvan under the Securities Purchase
Agreement dated as of November 1, 1996.
2. Product Supply and License Agreement entered into by and between JLC
Learning Corporation and Sylvan Learning Systems, Inc. dated as of
November 1, 1996.
JLC - CONFIDENTIAL
SCHEDULE 6.09
Principles used in amending Tax Returns:
1. Subsequent payment of contingent liabilities, existing at the Original
Purchase Date, increase the purchase price and corresponding assets of the
Company.
2. Inventory reserves expensed for book purposes are being reversed for tax
purposes since they were incorrectly expensed on the tax returns.
3. Asset purchases, incorrectly omitted on tax depreciation schedule, are
being included in the tax returns.
4. Software Systems Corp. reduced certain of its Net Operating Losses as a
result of 1996 prepayment discount related to its obligations under the
Jostens, Inc. Subordinated Note.
States where Amended Tax Returns for 1995, 1996 and 1997 will be filed:
California
Arizona
Illinois
Georgia
Pennsylvania
Texas
South Carolina
New Jersey
North Carolina
Indiana
JLC - CONFIDENTIAL
SCHEDULE 7.02
1. See "Fixed Sales Bonuses" and "Stock Appreciation Rights" as set forth in
Schedule 4.17.
JLC - CONFIDENTIAL
