Exhibit 4.7
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated and
effective as of March 31, 1998, by and among SYLVAN LEARNING SYSTEMS, INC., a
Maryland corporation (the "Purchaser"), Xxxxxxx Xxxxxxx, (the "Owner") a
resident of Galveston County, Texas.
W I T N E S S E T H:
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Xxxxxxx Xxxxxxx is the sole owner of two (2) Sylvan Learning Centers
operated as a sole proprietorship (the "Business"). The Purchaser and the Owner
wish to enter into an agreement for the acquisition of the Business by the
Purchaser. The parties agree and acknowledge that for accounting purposes, the
transaction is to be treated as a pooling-of-interests. The Purchaser and the
Owner wish to enter into a definitive agreement setting forth the terms and
conditions of the acquisition of Owner's Business.
Accordingly, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, the Purchaser
and the Owner hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Owner as follows:
1.1 Organization and Standing. The Purchaser is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Maryland and has the corporate power to carry on its business as it is now being
conducted and to own or hold under lease the properties and assets it now owns
or holds under lease. Copies of the Charter and By-Laws of the Purchaser have
been delivered to the Owner, and such copies are complete and correct and in
full force and effect on the date of this Agreement. The Purchaser has at all
times in the past operated and used its assets in material compliance with, and
currently is not in violation of, and has obtained all material licenses and
permits required by, any law, rule or regulation.
1.2 Financial Statements. The Purchaser has delivered to the Owner
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copies of the Purchaser's audited consolidated financial statements for the
fiscal year ended December 31, 1996. These financial statements are true and
complete in all material respects, have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently followed
throughout the periods covered by such statements (except as may be stated in
the explanatory notes to such statements), and present fairly the consolidated
financial position and results of operations of the Purchaser at the dates of
such statements and for the periods covered thereby. The Purchaser also has
delivered to the Business copies of its Quarterly Report on Form 10-Q third
quarter ended September 30, 1997, and all other reports or documents required to
be filed with the Securities and Exchange Commission pursuant to Sections 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the filing of such Quarterly Report on Form 10-Q and prior to the
date of this Agreement.
1.3 No Conflict With Other Documents. Neither the execution and
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delivery of this Agreement nor the carrying out of the transactions contemplated
hereby will result in any violation, termination or modification of, or be in
conflict with, the Purchaser's Charter or By-Laws, or, any terms of any
contract, instrument or other agreement to which the Purchaser is a party or by
which it or any of its properties is bound or affected, or any law, rule,
regulation, license, permit, judgment, decree or order applicable to the
Purchaser or by which any of its properties or assets are bound or affected, or
result in any breach of or constitute a default (or with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination,
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amendment, acceleration or cancellation, or result in the creation of any lien,
charge or encumbrance upon any of its properties or assets, except where such
event or occurrence would not, singly or in the aggregate, have a material
adverse on the Purchaser.
1.4 Brokers and Advisors. The Purchaser has taken no action which
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would give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment.
1.5 Authority. The execution, delivery and performance of this
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Agreement by the Purchaser have been duly authorized by its Board of Directors,
and this Agreement is a valid, legally binding and enforceable obligation of the
Purchaser.
1.6 Validity of Common Stock. The shares of Purchaser's Common Stock
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to be issued and delivered by the Purchaser in connection with the acquisition
of Owner's Business have been duly authorized for issuance and will, when issued
and delivered as provided in this Agreement, be duly and validly issued, fully
paid and non-assessable.
1.7 Registration Statement on Form S-3. As of the date hereof, the
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Purchaser is aware of no events, actions or conditions which would prevent the
Purchaser from being able to comply with the provisions of Section 11.1(a) of
this Agreement, and will use its best efforts to continue to be eligible to
comply with the provisions of Section 11.1(a).
2. REPRESENTATIONS AND WARRANTIES OF THE OWNER. The Owner hereby
represents and warrants to the Purchaser as follows:
2.1 Financial Statements. The Owner has provided to the Purchaser
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the audited financial statements of the Business for the fiscal year ended on
December 31, 1997, (collectively, the "Business Financial Statements"). The
Business Financial Statements are complete and correct, have been prepared on a
consistent basis throughout the periods covered thereby and present fairly and
accurately the financial position and results of operations of the Business as
of and for the periods indicated. There are no material liabilities or
obligations of the Business, whether contingent or absolute, as of the dates of
such statements, including liability for taxes of any type, which in accordance
with GAAP consistently applied should have been shown or provided for in the
Business Financial Statements and are not so shown or provided for. Since
December 31, 1997, there has been no material adverse change in the condition
(financial or otherwise), assets, liabilities, earnings, net worth, financial
position, business, operations, properties or prospects of the Business except
as shown on Schedule 2.1 of the Disclosure Schedule. The Business's accounts
receivable arose, and all accounts receivable that will be outstanding as of the
Closing Date shall have arisen, from bona fide transactions in the ordinary
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course of business and will be collectible by the Business in full, less
applicable reserves shown in the Business Financial Statements, in the ordinary
course of business within ninety days of the Closing Date, and there are no
offsets or claims related to such accounts receivable.
2.2 Taxes. The Owner has properly prepared and filed all federal,
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state and other tax returns required to be filed in connection with the
operations of the Business. True and complete copies of Schedule C of Owner's
federal income tax returns for the year ended December 31, 1996 have been
delivered or made available to the Purchaser on or prior to the date hereof and
copies of other returns will be made available upon request. Except as set
forth on Section 2.2 of the Disclosure Schedule or in the Business Financial
Statements, neither the Business nor the Owner has any liability for any
federal, state, county, local or other taxes whatsoever that arose or otherwise
was incurred on or before the date of the balance sheet for 1997 included in the
Business Financial Statements. No proposed taxes, additions to tax, interest or
penalties have been asserted or are pending against the Business or the Owner
with respect to periods ending on or before Closing, and no
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such matters are under discussion with the applicable authorities. There are no
agreements, waivers, or other arrangements providing for extensions of time with
respect to the assessment or collection of any unpaid tax against the Business
or the Owner. The Business and the Owner have withheld or otherwise collected
all taxes or amounts it or he was required to withhold or collect under any
applicable federal, state or local law, including, without limitation, any
amounts required to be withheld or collected with respect to employee state and
federal income tax withholding, social security, unemployment compensation,
sales or use taxes or workmen's compensation, and all such amounts have been
timely remitted to the proper authorities.
2.3 Agreements. Section 2.3 of the Disclosure Schedule identifies
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each of the following agreements, contracts, documents and other items (whether
written or oral) as to which the Owner is a party or otherwise is bound (and all
such contracts, or summaries thereof, have been made available to the
Purchaser): (i) all documents relating to indebtedness for money borrowed or
collateral therefor, including guarantees; (ii) all agreements or plans relating
to employment, compensation of or benefits for the Owner and employees of the
Business; (iii) all contracts for the purchase of materials, supplies, services,
merchandise or equipment involving consideration of more than $2,000 or
involving purchases in excess of normal operating requirements; (iv) any
contract, agreement, or instrument not entered into in the ordinary course of
the business of the Business on a basis consistent with past practice; (v) any
contract containing restrictions on the Business's operations or its ability to
compete in any geographic region or in any line of business; (vi) any lease of
real property and all personal property leases calling for annual lease payments
in excess of $2,000; and (vii) each and every other contract which is material
to the financial condition, earnings, operation or business of the Business.
Each of the contracts and agreements so listed (collectively, the "Contracts")
is a valid and existing contract or agreement in full force and effect and there
exists no default by the Business thereunder. None of the Contracts will be
violated or breached and no default or right of termination or modification
shall arise thereunder as a result of the consummation of the transactions
contemplated by this Agreement.
2.4 Property. Section 2.4 of the Disclosure Schedule sets forth a
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schedule (the "Property Schedule") of (i) all real property owned or leased by
the Business (the "Real Property"), (ii) all individual items of tangible
personal property and assets (other than inventory) of the Business having a
fair market value in excess of $2,000, and (iii) all patents, trademarks, trade
names, service marks, trade secrets, copyrights, franchise rights or
applications therefor which are held, used, prepared in connection with or
otherwise related to the conduct of the business of the Business. Except as set
forth in the Property Schedule, the Business has good and marketable title to
all of such property and assets owned by it, free of any pledge, mortgage, lien,
lease, security agreement, encumbrance, charge or claim of any nature
whatsoever. The machinery and equipment of the Business are, in all material
respects, in good operating condition and repair, ordinary wear and tear
excepted. To the Business's knowledge, the Business is not infringing on any
patent, trademark, trade name, service xxxx, trade secret or copyright of
another entity and has received no notice or claim of any such infringement.
2.5 Legal Proceedings, Etc. Except as set forth in Section 2.5 of
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the Disclosure Schedule, there are no legal, administrative, arbitration, or
other proceedings or governmental investigations pending or, to the best of the
Business's and the Owner's knowledge, threatened against the Business, the Owner
or the respective properties or assets of the Business and the Owner.
2.6 Compliance; Licenses. The Business has at all times in the past
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operated and used its assets in material compliance with, and currently is not
in violation of, and has obtained all material licenses and permits required by,
any law, rule or regulation. Section 2.6 of the Disclosure Schedule contains a
true and complete list of all material licenses, permits, approvals, franchises
and other authorizations as are necessary in order to enable the Business to own
and conduct its business.
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2.7 Bank Accounts, etc. Section 2.7 of the Disclosure Schedule sets
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forth a true and complete list of all bank accounts, safe deposit boxes and lock
boxes of the Business including, with respect to each such account and lock box
identification of all authorized signatories.
2.8 Insurance. Section 2.8 of the Disclosure Schedule sets forth a
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summary of all general liability, product liability, fire, casualty, motor
vehicle and other insurance currently maintained by or on behalf of the
Business. All requirements and provisions thereof are being complied with.
True and correct copies of all insurance policies relating to such coverage have
been provided by the Owner to the Purchaser. No notice of cancellation has been
given to or received by the Owner with respect to any of its insurance policies,
and no such policies are subject to any retroactive rate or audit adjustments or
coinsurance arrangements.
2.9 Employee Plans. Except as set forth in Section 2.9 of the
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Disclosure Schedule, the Business does not maintain, sponsor or contribute to
any plans in effect for pension, profit-sharing, deferred compensation,
severance pay, bonuses, stock options, stock purchases, or any other retirement
or deferred benefit, or for any health, accident or other welfare plan, or any
other employee or retired employee benefits or incentive plan, program,
contract, understanding or arrangement in which any employee, former employee,
retired employee, or beneficiary of any of these, of the Business is entitled to
participate. The plans, programs, contracts, understandings and arrangements
listed on the Disclosure Schedule pursuant to this Section 2.9 are hereinafter
referred to as the "Employee Plans." The Business has supplied the Purchaser
with complete and accurate copies of each such Employee Plan. Each Employee
Plan has been operated according to its terms in compliance with all applicable
laws.
2.10 Recent Operations; Employee Matters. Since December 31, 1997,
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(i) the Owner has operated the Business substantially as it was operated
immediately prior to said date and only in the ordinary course, and the
Business' Owner has used best efforts to preserve intact the Business's business
relationships, (ii) there have been no bonuses paid to or increases in the
compensation of Owner or the Business' employees, except as set forth in Section
2.10 (ii) of the Disclosure Schedule, and (iii) except as set forth in Section
2.10 (iii) of the Disclosure Schedule, the Business has not declared or paid any
dividend or made any other distribution with respect to its capital stock.
2.11 Environmental Matters. To the best of the Owner's knowledge, no
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storage tanks, underground or otherwise, are now located on any properties
occupied by the Business, the Business has complied in all material respects
with all environmental laws relating to its operations or properties occupied by
it and there are no asbestos containing materials located on properties occupied
by the Business. The Owner has not received any notice, demand, suit or
information request pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any comparable state law, nor does
it have knowledge of any other party's receipt of same relating to any
properties occupied by the Business.
2.12 Disclosure. The Owner has disclosed to the Purchaser all facts
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material to the assets, business, operations, financial condition and prospects
of the Business. All agreements, schedules, exhibits, documents, certificates,
reports or statements furnished or to be furnished to the Purchaser by or on
behalf of the Owner in connection with this Agreement or the transactions
contemplated hereby are true, complete and accurate in all material respects,
and no such items contain any untrue statement of a material fact or omit a
material fact necessary in order to make the statements contained herein and
therein not misleading.
2.13 No Conflict With Other Documents. Neither the execution and
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delivery of this Agreement, nor the carrying out of any of the transactions
contemplated hereby, will result in any violation, termination or modification
of, or be in conflict with the terms of any contract, instrument or other
agreement to which the Owner is a party or by which it or any of its properties
is bound or affected, or any law, rule, regulation, license, permit, judgment,
decree or order applicable to the Owner or by which any of its properties or
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assets are bound or affected, or result in any breach of or constitute a default
(or with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation, or
result in the creation of any lien, charge or encumbrance upon any of its
properties or assets, except where such event or occurrence would not, singly or
in the aggregate, have a material adverse effect on the Business.
2.14 Brokers and Advisors. The Owner has taken no action which would
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give rise to a valid claim against any party hereto for a brokerage commission,
finder's fee, counseling or advisory fee, or like payment.
2.15 Investment Intent. It is understood that the shares of
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Purchaser Common Stock to be delivered to the Owner pursuant to this Agreement
are not being registered, for purposes of the transactions hereunder, under the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities laws, and the shares are being delivered without registration in
reliance upon an exemption from the registration requirements of the Securities
Act or any state securities laws. The Owner is acquiring the Purchaser Common
Stock hereunder only for his own account and not with any intention of making,
or with a view to, or for sale in connection with, any distribution thereof
within the meaning of the Securities Act unless such shares first are registered
under the Securities Act.
In connection with the foregoing, the Owner hereby represents and
warrants that:
(a) such Owner has reviewed, discussed and evaluated the
information delivered under Section 1.2 and has had the opportunity to ask
questions of, and receive answers from, executive officers of the Purchaser
concerning the terms and conditions of this Agreement and to obtain any
additional information which such Owner considered necessary to verify the
accuracy of the information delivered under Section 1.2;
(b) such Owner understands that he or she must bear the economic
risks of the investment in Purchaser Common Stock to be made hereunder for an
indefinite period of time because such stock has not been registered under the
Securities Act and, therefore, may not be sold until such stock subsequently is
registered under the Securities Act or an exemption from registration is
available; and
(c) such Owner has sufficient knowledge and experience in
financial and business matters to enable such Owner to be capable of evaluating
the merits and the risks of the exchange of the Business Common Stock for the
Purchaser Common Stock contemplated by this Agreement and such Owner's
prospective investment in the Purchaser.
2.16 Legends. It is understood and agreed that, to implement the
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requirements of the Securities Act and state securities laws and evidence the
restrictions upon transfer contained in this Agreement, the Purchaser will cause
a legend to be conspicuously noted on the certificates representing the
Purchaser Common Stock deliverable hereunder, and that the Purchaser will issue
stop transfer instructions to its transfer agent, to the effect that such stock
has not been registered under the Securities Act and that no transfer may take
place except as permitted by Section 11 of this Agreement and after delivery of
an opinion of Purchaser's counsel to the effect that registration thereof for
the purpose of transfer is not required under the Securities Act or that the
stock proposed to be transferred has been effectively registered for that
purpose under the Securities Act.
2.17 No Agreements with Respect to Purchaser Common Stock. Except
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for this Agreement, Owner has not entered into any agreement or understanding
with anyone for the sale, at Owner's option or otherwise, of any of the
Purchaser Common Stock to be delivered hereunder to Owner at the Closing.
3.0 (Reserved)
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4. COVENANTS OF THE PURCHASER. The Purchaser covenants to the Owner that,
except as otherwise consented to in writing by the Owner after the date of this
Agreement:
4.1 Stock Reservation. Between the date hereof and the Closing Date,
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the Purchaser will keep available and reserve a sufficient number of shares of
Purchaser Common Stock for issuance and delivery to the Owner as contemplated in
this Agreement.
4.2 Cause Conditions to be Satisfied. The Purchaser will use its
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best efforts to cause all of the conditions described in Section 8 of this
Agreement to be satisfied (to the extent such matters reasonably are within its
control).
4.3 Registration Statement on Form S-3. The Purchaser will use its
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best efforts to meet the requirements for eligibility set forth in paragraph A.
of the General Instructions to Form S-3, as promulgated by the U.S. Securities
and Exchange Commission in fulfilling its obligations under Section 11 hereof.
4.4 Consents. The Purchaser agrees to take all necessary corporate
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or other action and to use best efforts to obtain all consents and approvals
required for consummation of the transactions contemplated by this Agreement.
5. COVENANTS OF THE OWNER. The Owner covenants to the Purchaser that,
except as otherwise consented to in writing by the Purchaser after the date of
this Agreement:
5.1 Conduct of Business. After the date hereof and through the date
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of the Closing, with respect to the Business (a) its business will be conducted
only in the ordinary course; (b) it will terminate each of its Employee Plans
and will not enter into, adopt or amend any employee benefit plan, agreement or
arrangement, enter into or amend any employment contracts, or increase the
salaries or compensation of its officers or employees, other than ordinary
increases in salaries in accordance with past practices; (c) it shall pay in
full all liabilities outstanding on the date hereof except for (i) those
balances owed to the holders of the Business's notes and other liabilities as
shown in Section 5.1(c) of the Disclosure Schedule, and (ii) accrued employee
compensation, leave and benefits and the taxes thereon as shown in Section 5.1
(c) of the Disclosure Schedule; and (d) it shall not incur any additional
liability for borrowed money, or encumber any of its assets; (e) all outstanding
loans payable by the Business to the Owner or receivable by the Business from
the Owner or any employee shall be repaid in full by the appropriate party; (f)
its current assets at all times will exceed all of its liabilities; (g) except
as shown in Sec 5.1(g) of the Disclosure Schedule, all trade payables and
liabilities and obligations payable in installments shall be current; (h) it
will use its best efforts to preserve its business organization intact, to keep
available the service of its officers and employees and to preserve the goodwill
of suppliers, customers and others doing business with it; (i) it will not enter
into any agreement for the purchase, sale or other disposition, or purchase,
sell or dispose of, any equipment, supplies, inventory, investments or other
assets (other than sales of inventory and purchases of materials and supplies in
the ordinary course of business and in accordance with past practices); (j) it
will not compromise or write off any material account receivable other than by
collection of the full recorded amount thereof; and (k) no bonus or additional
compensation in excess of normal salary or draws shall be paid to or declared
for the benefit of any Owner.
5.2 Consents. The Owner agree to take all necessary action and to use
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best efforts to obtain all consents and approvals required for consummation of
the transactions contemplated by this Agreement.
5.3 Audited Financial Statements. The Owner will deliver to
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Purchaser the Business's audited financial statements for the year ended
December 31, 1997 as soon as practicable after the execution of
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this Agreement. Said statements shall be prepared to reflect the business
operations of the Business on an accrual basis in accordance with GAAP.
5.4 Cause Conditions to Be Satisfied. The Owner will use best
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efforts to cause all of the conditions described in Sections 7 and 8 of this
Agreement to be satisfied (to the extent such matters reasonably are within
their control).
6. ACQUISITION OF THE BUSINESS BY PURCHASER. Subject to
the terms and conditions of this Agreement, the Purchaser and the Owner agree to
effect the following transactions at the Closing:
6.1 Conditions. The Purchaser and the Owner will deliver to the
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other appropriate evidence of the satisfaction of the conditions to their
respective obligations hereunder.
6.2 Consideration for Transfer of Business Assets. At the Closing,
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the Owner will deliver to the Purchaser appropriate bills of sale and such other
documents evidencing transfer of the assets of Owner used in conjunction with
the Business, and the Purchaser will deliver to the Owner that number of shares
of Purchaser Common Stock having a market value of $709,593 (the"Purchase
Price"). For purposes of the foregoing, the market value of the Purchaser
Common Stock shall equal the average of the closing prices reported in the Wall
Street Journal for each of the fifteen (15) trading days ended and including
Friday, March 27, 1998.
6.3 Closing. The closing (the "Closing") of the transactions
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contemplated by this Agreement shall take place at the offices of the Business,
in Houston, Texas, beginning at 7:00 p.m. on March 31, 1998, or at such other
time and place as may be agreed upon in writing by the Purchaser and the Owner
(the "Closing Date"). The closing shall be effective as of the close of
business on March 31, 1998 (the "Effective Closing Date").
7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. Unless waived by the
Purchaser in writing in its sole discretion, all obligations of the Purchaser
under this Agreement are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
7.1 Approvals of Governmental Authorities. All governmental
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approvals necessary or advisable in the reasonable opinion of the Purchaser's
counsel to consummate the transactions contemplated by this Agreement shall have
been received and shall not contain any provision which, in the reasonable
judgment of the Purchaser, is unduly burdensome.
7.2 No Adverse Proceedings or Events. No suit, action or other
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proceeding against the Owner or the Purchaser, or their respective officers or
directors, shall be threatened or pending before any court or governmental
agency in which it will be, or it is, sought to restrain or prohibit any of the
transactions contemplated by this Agreement or to obtain damages or other relief
in connection with this Agreement or the transactions contemplated hereby.
7.3 Consents and Actions; Contracts. All requisite consents of any
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third parties and other actions which the Owner has covenanted to use its best
efforts to obtain and take under Section 5.2 hereof shall have been obtained and
completed. All material contracts and agreements of the Business, including,
without limitation, all contracts and agreements listed on Section 2.3 of the
Disclosure Schedule, shall be in full force and effect and shall not be affected
by the consummation of the transactions contemplated hereby.
7.4 Employment Agreement. The Purchaser and Xxxxxxx Xxxxxxx shall
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have entered into an Employment Agreement in substantially the form of Exhibit
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A attached hereto.
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7.5 Current Financial Statements and Projections. The Owner shall
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have provided to Purchaser the audited financial statements of the Business for
calendar year 1997 showing an EBIT of at least $ 175,000 for such year, as well
as a projection of revenues and expenses for calendar year 1998, which
projection reflects net income of at least $225,000 for such year. Such audited
financial statements shall be prepared on an accrual basis, in accordance with
GAAP. "EBIT" means the Business's net revenues minus all of its expense items
including any extraordinary and non-recurring items and depreciation and
amortization, but excluding interest and taxes. For the 1998 projection, EBIT
shall be calculated in the same manner as "profits subject to bonus" under
paragraph 2.02 of the Employment Agreement attached hereto as Exhibit A.
7.6 Purchase of Other Houston Centers. The obligation of Purchaser
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to close and deliver to Owner the Purchaser Common Stock is conditioned on
Purchaser closing on the purchase of at least seven (7) of the following nine
(9) Sylvan Learning Centers #311, 314, 315, 316, 323, 326, 327, 347 and 351 on
or before March 31, 1998. At the present time, Purchaser has non-binding
letters of agreement to purchase all of said centers by March 31, 1998. If the
closing of purchases on at least seven (7) of the centers listed above does not
occur, for whatever reason, by March 31, 1998, Purchaser reserves the right to
cancel this transaction by telephonic notice to Owner not later than 10:00 p.m.
March 31, 1998, in which case the Purchaser Common Stock shall not be delivered
to Owner, and Purchaser will promptly return all closing documents delivered by
Owner at the Closing.
8. CONDITIONS TO THE OWNER'S BUSINESS'S AND THE OWNER'S OBLIGATIONS.
Unless waived by the Owner, all obligations of the Owner under this Agreement
are subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
8.1 No Adverse Proceedings or Events. No suit, action or other
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proceeding against the Owner or the Purchaser, or their respective officers or
directors, shall be threatened or pending before any court or governmental
agency in which it will be, or it is, sought to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
transactions contemplated hereby.
8.2 Consents and Actions. All requisite consents of any third
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parties and other actions which the Purchaser has covenanted to use its best
efforts to obtain and take under Section 4.4 of this Agreement shall have been
obtained and completed.
8.3 Other Evidence. The Owner shall have received from the Purchaser
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such further certificates and documents evidencing due action in accordance with
this Agreement, including certified copies of proceedings of the Board of
Directors of the Purchaser, as the Owner reasonably shall request.
9. INDEMNIFICATION.
9.1. Indemnification by the Owner. The Owner hereby covenants and
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agrees to indemnify and hold harmless the Purchaser and its respective
successors and assigns, at all times from and after the date of Effective
Closing Date against and in respect of the following:
(i) any damage or loss resulting from any misrepresentation,
breach of representation or warranty or breach or non-fulfillment of any
agreement or covenant on the part of the Business or the Owner under this
Agreement, or from any inaccuracy or misrepresentation in or omission from
any certificate or other instrument or document furnished or to be
furnished by the Business or the Owner hereunder;
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(ii) any liabilities or obligations of the Business or the Owner
for federal, state or local income tax or, to the extent not accrued or
reflected in the Financial Statements, any personal property, FICA,
withholding, excise, unemployment, sales or franchise taxes arising from
operations of the Business prior to the Effective Closing Date except as
shown in Schedule 5.1(c) and 5.1(g) of the Disclosure Schedule.
(iii) all claims, actions, suits, proceedings, demands,
assessments, judgments, costs, reasonable attorneys' fees and expenses of
any nature incident to any of the matters indemnified against pursuant to
this Section 9.1, including, without limitation, all such costs and
expenses incurred in the defense thereof or in the enforcement of any
rights of the Purchaser hereunder.
9.2. Notice and Defense. The Purchaser shall notify the Owner of any
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asserted liability, damage, loss or expense claimed to give rise to
indemnification hereunder and the Owner shall have an initial right to defend,
compromise and settle such matter provided that the Purchaser is fully protected
from any liability, loss damage, cost or expense in connection therewith.
Within ten (10) days of receipt of such notice, Owner shall respond in writing
as to whether Owner will engage counsel at Owner's expense to defend the claim.
If Owner does not respond, or affirmatively declines to defend the claim or
disputes its obligation to indemnify, the Purchaser shall then have, at its
election, the right to compromise or defend any such matter at the Owner's sole
cost and expense through counsel chosen by the Purchaser and reasonably
acceptable to the Owner; provided, however, that any such compromise or defense
shall be conducted in a manner which is reasonable and the Owner shall in all
events have a right to veto any such compromise or defense which might increase
the potential liability of, or create a new liability for, the Owner (other than
under Section 9.1). Each party agrees in all cases to cooperate with the
defending party and its or his counsel in the compromise of or defending of any
such liabilities or claims. In addition, the non-defending party shall at all
times be entitled to monitor such defense through the appointment, at its or his
own cost and expense, of advisory counsel of its own choosing. As to any claim
paid by the Purchaser for which the Owner has indemnity liability under this
Section 9, and which the Owner does not reimburse Purchaser within five (5) days
following demand for reimbursement by Purchaser, Purchaser may, in addition to
any other remedies, (if such Owner is then an employee of Purchaser) offset the
amount of the Owner's liability on the claim paid against any compensation
payable to the Owner.
9.3. Indemnification by the Purchaser. From and after the Closing
--------------------------------
Date, the Purchaser hereby covenants and agrees to indemnify and hold harmless
the Owner against and in respect of the following:
(i) any liability, loss, damage or expense resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement or
covenant on the part of Purchaser under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument or
document furnished or to be furnished by the Purchaser hereunder; and
(ii) all claims, actions, suits, proceedings, demands,
assessments, judgments, costs, reasonable attorneys' fees and expenses of any
nature incident to any of the matters indemnified against pursuant to this
Section 9.3, including without limitation, all such costs and expenses incurred
in the defense thereof or in the enforcement of any rights of the Owner
hereunder.
The Owner shall notify the Purchaser of any asserted liability, damage,
loss or expense claimed to give rise to indemnification hereunder and thereafter
the Purchaser shall have the right to defend, compromise and settle such matter
provided that the Owner is fully protected from any cost or expense in
connection therewith.
10. SURVIVAL; LIMITATIONS.
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10.1 Survival. The representations, warranties and agreements made
--------
by the parties in this Agreement and in any other certificates and documents
delivered in connection herewith, including the indemnification obligations of
the Owner and Purchaser set forth in Section 9 hereof, shall survive the Closing
under this Agreement regardless of any investigation made by the party making
claim hereunder, except that, subject to the provisions of the next sentence,
neither the Purchaser, on the one hand, nor the Owner, on the other, shall have
any liability with respect to any matter if notice of a claim has not been
provided on or prior to March 31, 2000. Notwithstanding the foregoing, (i) any
indemnification obligations of the Owner relating to federal, state or local tax
matters or environmental matters of any sort shall continue in full force and
effect without limitation until expiration of the statute of limitations
applicable to such tax or environmental matters, (ii) the representation and
warranty contained in Section 2.4 and any indemnification obligations of the
Owner in connection therewith shall continue in full force and effect without
any limitation, (iii) any claims, actions or suits the Purchaser, on the one
hand, or the Business or the Owner, on the other hand, may have which arises
from any fraud or willful misconduct on the part of the Owner, or any
representative of Owner, on the one hand, and the Purchaser or any
representative of it, on the other hand, shall continue in full force and effect
without limitation until expiration of the statute of limitations applicable
thereto.
10.2 Limitations. No indemnified party shall be entitled to
-----------
indemnification hereunder until such time as a single loss or an aggregate of
several losses equals Ten Thousand Dollars ($10,000), at which time such
indemnified party shall be entitled to indemnification for all losses sustained,
incurred, paid or required to be paid by such indemnified party in excess of the
$10,000; and in no event shall any party to this Agreement be entitled to
indemnification for a single loss or an aggregate of several losses which
exceeds $709,593.
11. REGISTRATION RIGHTS.
11.1 Registration Procedures and Expenses. So long as the Owner has
------------------------------------
not initiated the termination of her employment with the Purchaser pursuant to
Section 4.01 of the Employment Agreement between the Owner and the Purchaser
dated as of the date hereof, Purchaser shall:
(a) as soon as practicable after the closing date but in no
event later than ninety (90) days after the closing date, prepare and file with
the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 which meets the requirements of Rule 415 promulgated under
the Securities Act (a "Shelf Registration Statement") covering the sale by the
Owner from time to time of one half of the shares of the Purchaser Common Stock
received by the Owner in the Merger, and as soon as practicable after the first
anniversary of the closing date, but in no event later than ninety (90) days
after the first anniversary of the closing date, a Shelf Registration Statement
covering the sale by the Owner from time to time of the remaining shares of
Purchaser Common Stock. The foregoing notwithstanding, Purchaser shall have no
obligation to file a Shelf Registration Statement or to maintain the
effectiveness of any previously filed Shelf Registration Statement if the sale
of the Purchaser Common Stock pursuant to exemption from registration under Rule
144 is available to the Owner. Further, the Purchaser may extend its obligation
to file a registration statement if the Purchaser advises the Owner that there
is a pending, but unannounced transaction or development which Purchaser
determines is not then appropriate for disclosure, and that registration of the
Purchaser Common Stock would require such disclosure.
(b) use its best efforts, subject to receipt of necessary
information from the Owner, to cause each of the Shelf Registration Statements
to become effective;
(c) prepare and file with the Commission such amendments and
supplements to the Shelf Registration Statements and the prospectus used in
connection therewith as may be necessary to keep the Shelf Registration
Statements effective until the earlier of the date on which the Purchaser Common
Stock
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registered by such Shelf Registration Statement has been sold, or one year from
the date of the initial filing thereof;
(d) during the period referred to in (c) above, prepare and promptly
file with the Commission, and promptly notify the Owner of the filing of, such
amendment or supplement to each such Shelf Registration Statement and the
prospectus as may be necessary to correct any statements or omissions if, at any
time when a prospectus relating to the Purchaser Common Stock is required to be
delivered under the Securities Act, any event has occurred the result of which
is that any such prospectus then in effect would include or incorporate an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the circumstances in
which they were made;
(e) advise the Owner, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of any of such Shelf Registration Statements or the
initiation or threatening of any proceeding for that purpose and promptly use
its diligent best efforts to prevent the issuance of any stop order and to
obtain its withdrawal if such stop order should be issued;
(f) furnish to the Owner with respect to the Purchaser Common Stock
registered under any of the Shelf Registration Statements such number of copies
of prospectuses and preliminary prospectuses in conformity with the requirements
of the Securities Act and such other documents as the Owner may reasonably
request (but in no event more than 100 copies), in order to facilitate the
public sale or other disposition of all or any of the registered Purchaser
Common Stock by the Owner; provided, however, that the obligation of Purchaser
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to deliver copies of prospectuses or preliminary prospectuses to the Owner shall
be subject to the receipt by Purchaser of reasonable assurances from the Owner
that the Owner will comply with the applicable provisions of the Securities Act
and of such other securities or blue sky laws as may be applicable in connection
with any use of such prospectuses or preliminary prospectuses;
(g) file documents required of Purchaser for normal blue sky clearance
in states reasonably specified in writing by the Owner, provided, however, that
Purchaser shall not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so qualified or has not so
consented; and
(h) bear all expenses in connection with the procedures in paragraphs
(a) through (g) of this Section 11.1 and the registration of the Purchaser
Common Stock pursuant to each of the Shelf Registration Statements, other than
fees and expenses, if any, of counsel or other advisers to the Owner.
11.2 Engagement of Underwriters. The parties hereto agree that the
--------------------------
Purchaser shall have no obligation to (i) conduct, arrange or coordinate any
distribution or sales activities on behalf of the Owner with respect to the
Purchaser Common Stock other than as set forth in Section 11.1 above or (ii)
retain any underwriter(s) in connection with the registration and/or
distribution of the Purchaser Common Stock pursuant to this Section 11. The
Owner agrees that any underwriter(s) or counsel engaged in connection with the
registration or distribution of the Purchaser Common Stock required to be
registered pursuant to this Section 11 will be retained by and at the sole
expense of the Owner and agrees further that any discounts or commissions
payable to such underwriter(s) shall also be an expense solely of the Owner. In
the event the Owner engages one or more underwriters pursuant to this Section
11.2, the Owner shall enter into an underwriting agreement with the managing or
lead managing underwriter in the form customarily used by such underwriter with
such changes thereto as the parties thereto shall agree; and, further, shall
provide to such underwriter any documents or other information as is necessary,
in the underwriter's reasonable opinion, to facilitate the effectiveness of the
Shelf Registration Statement and the completion of the distribution of the
Purchaser Common Stock so registered.
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11.3 Indemnification with respect to Shelf Registration Statements.
-------------------------------------------------------------
Purchaser hereby agrees to indemnify the Owner against liability arising out of
or based upon any untrue statement or alleged untrue statement of material fact
in any of the Shelf Registration Statements filed by Purchaser pursuant hereto,
or the omission or alleged omission to state or incorporate by reference in such
Shelf Registration Statements any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, other than any
such statement included or incorporated by reference in, or omitted from, such
Shelf Registration Statements by Purchaser in reliance upon and in conformity
with written information furnished to Purchaser specifically for use therein by
or on behalf of the Owner. The Owner hereby agrees to indemnify Purchaser
against liability arising out of or based upon any untrue statement or alleged
untrue statement of a material fact included or incorporated by reference in the
Shelf Registration Statements or the omission or alleged omission to state or
incorporate by reference therein any material fact required to be stated therein
or necessary in order to make the statements therein not misleading, if such
statement or omission was made by Purchaser in reliance upon and in conformity
with written information furnished to Purchaser for use or incorporation by
reference in such Shelf Registration Statements.
12. CONFIDENTIALITY. After the date hereof, the Owner will hold in
confidence and not reveal to any third parties any knowledge or information of a
confidential nature with respect to the business, products, know-how and methods
of operation of the Business, and will not disclose, publish or make use of the
same, provided, however, that the foregoing shall not be applicable to any
disclosure or use of confidential information or knowledge that can be
demonstrated to have (i) been publicly known prior to the date of this
Agreement, (ii) become well known by publication or otherwise not due to the
unauthorized act or omission on the part of the Owner, or (iii) been supplied to
the Owner by a third party without violation of the rights of the Business or
the Purchaser or any other party. The parties agree that the remedy at law for
any breach by the Owner of this Section 12 shall be inadequate and that the
aggrieved party shall be entitled to injunctive relief in addition to any other
remedy.
13. EXPENSES. Each party to this Agreement shall pay all of its expenses
relating hereto, including legal and accounting fees and disbursements of its
counsel, accountants and financial advisors, whether or not the transactions
hereunder are consummated. If said transactions are consummated, it is
expressly understood that the Owner will bear, and will not cause the Business
to pay, any legal fees or other expenses incurred by Owner or the Business in
connection with the transactions contemplated by this agreement, as well as the
cost of furnishing the audited and reviewed Business Financial Statements
referred to in Section 2.4; provided, however, that in the event of any
litigation between the parties hereto relating to or arising from this
Agreement, the prevailing party in such litigation shall be entitled to payment
by the non-prevailing party of all reasonable attorney's fees and costs.
14. NOTICES. Except as otherwise provided herein, all notices, requests,
demands and other communications under or in connection with this Agreement
shall be in writing, and, (a) if to the Purchaser, shall be addressed to:
O. Xxxxxx Xxxxx General Counsel
Sylvan Learning Systems, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxxx, Xx., Esquire
Piper & Marbury
00 Xxxxx Xxxxxxx Xxxxxx
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Xxxxxxxxx, Xxxxxxxx 00000
(b) if to the Owner, shall be addressed to:
Xxxxxxx Xxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxx, Xxxxx 00000
All such notices, requests, demands or communications shall be mailed
postage prepaid, certified mail, return receipt requested, or by overnight
delivery or delivered personally, and shall be sufficient and effective when
delivered to or received at the address so specified. Any party may change the
address at which it is to receive notice by like written notice to the other.
15. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and
the lists, schedules and documents delivered pursuant hereto, which are a part
hereof) is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transactions contemplated by this Agreement.
This Agreement supersedes any and all prior understandings, written or oral,
between the parties, and this Agreement may be amended, modified, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the amendment, modification, waiver, discharge or
termination is sought.
16. GENERAL. The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns, but nothing herein, express or implied, is
intended to or shall confer any rights, remedies or benefits upon any person
other than the parties hereto. This Agreement may not be assigned by any party
hereto. This Agreement shall be construed in accordance with and governed by
the laws of the State of Maryland.
IN WITNESS WHEREOF, the Purchaser, the Business and the Owner have
caused this Agreement to be duly executed and their respective seals to be
hereunto affixed as of the date first above written.
WITNESS: SYLVAN LEARNING SYSTEMS, INC.
__________________________ By:
Name:__________________________
Title:
WITNESS: OWNER:
__________________________ __________________________
Xxxxxxx Xxxxxxx
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