ASSET ACQUISITION AGREEMENT
AND
PLAN OF REORGANIZATION
by and among
Loudoun Children's Center, Inc.,
and
Xxxxx Xxxx and Xxxxxxx Xxxx,
and
Nobel Education Dynamics, Inc.,
dated as of
February 2, 1996
TABLE OF CONTENTS
Page
1. THE TRANSACTION.......................................................... 1
1.1 Transfer of Acquired Assets..................................... 1
1.2 Responsibility for Liabilities.................................. 3
1.3 Proration....................................................... 4
1.4 Liquidation of the Company...................................... 4
2. TIME AND PLACE OF CLOSING................................................ 4
3. DELIVERIES AT CLOSING.................................................... 5
3.1 Company Deliveries.............................................. 5
3.2 Nobel Deliveries................................................ 6
4. EARN-OUT................................................................. 6
4.1 Earn-Out Payment................................................ 6
4.2 Calculation of Adjusted EBITDA.................................. 7
4.3 Audit Rights; Arbitration....................................... 8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 8
5.1 Organization; Authority......................................... 8
5.2 Power and Authority............................................. 8
5.3 Due Authorization; Binding Agreement............................ 9
5.4 Capitalization.................................................. 9
5.5 Absence of Conflicting Agreements............................... 9
5.6 Consents and Approvals.......................................... 9
5.7 Investments and Subsidiaries................................... 10
5.8 Compliance with Laws........................................... 10
5.9 Permits........................................................ 10
5.10 Encumbrances Created by this Agreement......................... 10
5.11 Judgments and Litigation....................................... 10
5.12 Financial Statements........................................... 11
5.13 Tax Matters.................................................... 11
5.14 Absence of Certain Changes..................................... 12
5.15 Title to and Condition of Assets, Properties, etc.............. 14
5.16 Real Property.................................................. 14
5.17 List of Properties, Contracts, etc............................. 14
5.18 Contract Validity, Defaults, Notice/Consent.................... 15
5.19 Employees...................................................... 16
5.20 Labor Matters.................................................. 16
5.21 Relationships.................................................. 16
5.22 Transactions with Related Parties.............................. 16
5.23 Non-Foreign Persons............................................ 17
5.24 Employee Benefit Plans......................................... 17
5.25 Environmental Protection....................................... 17
5.26 Books and Records.............................................. 18
5.27 Intellectual Property.......................................... 19
5.28 No Child Abuse or Sexual Abuse................................. 19
5.29 No Other Agreements............................................ 19
5.30 Operation of Other Centers and Schools......................... 19
5.31 Special Arrangements........................................... 19
5.32 Brokers........................................................ 19
5.33 Disclosure..................................................... 20
6. REPRESENTATIONS AND WARRANTIES OF ALL SHAREHOLDERS...................... 20
6.1 Power and Authority............................................ 20
6.2 Due Authorization; Binding Agreement........................... 20
6.3 Absence of Conflicting Agreements.............................. 20
7. REPRESENTATIONS AND WARRANTIES OF BUYER................................. 21
7.1 Organization and Standing...................................... 21
7.2 POWER AND AUTHORITY............................................ 21
7.3 Due Authorization; Binding Agreement........................... 21
7.4 Absence of Conflicting Agreements.............................. 21
7.5 Consents....................................................... 22
7.6 Capitalization................................................. 22
7.7 Financial Condition............................................ 22
7.8 Absence of Change.............................................. 22
7.9 Brokers........................................................ 22
7.10 Disclosure..................................................... 23
8. EMPLOYEES OF THE BUSINESS; EMPLOYEE BENEFITS............................ 23
8.1 Employees of the Company....................................... 23
8.2 Employee Benefit and Bonus Claims.............................. 23
9. CERTAIN OBLIGATIONS AND AGREEMENTS OF PARTIES AFTER CLOSING............. 24
9.1 Remittance of Payments......................................... 24
9.2 Collection of Receivables...................................... 24
9.3 Discharge of Liabilities....................................... 24
9.4 Nondisclosure; Covenant Not To Compete......................... 24
9.5 Access to Records.............................................. 25
9.6 Representation Letters......................................... 25
9.7 Post-Closing Covenants of Nobel................................ 26
9.8 Permits and Licenses........................................... 26
9.9 INCOME TAX STATUS OF TRANSACTION............................... 26
ii
10. INDEMNIFICATION......................................................... 27
10.1 Survival of Representations and Warranties..................... 27
10.2 Indemnification by the Company and Shareholders................ 27
10.3 Indemnification by Nobel....................................... 28
10.4 Procedures Relating to Indemnification......................... 28
10.5 Limitation..................................................... 29
10.6 Remedies Not Exclusive......................................... 30
10.7 Costs and Expenses............................................. 30
10.8 Right of Offset................................................ 31
11. SECURITIES MATTERS...................................................... 31
11.1 Investment Representations and Covenants....................... 31
11.2 Registration of Nobel Shares................................... 33
11.3 Put Rights..................................................... 40
12. REPRESENTATION OF SHAREHOLDERS BY COMPANY'S AGENT....................... 41
12.1 Appointment of Company's Agent................................. 41
12.2 Successor Agent................................................ 41
12.3 Shareholders' Actions.......................................... 42
13. MISCELLANEOUS........................................................... 42
13.1 Costs and Expenses............................................. 42
13.2 Litigation..................................................... 42
13.3 Assignment and Benefit......................................... 42
13.4 Schedules...................................................... 42
13.5 Effect and Construction of this Agreement...................... 42
13.6 Counterparts................................................... 43
13.7 Cooperation.................................................... 43
13.8 Notices........................................................ 43
13.9 Amendment, Waiver, Discharge, etc.............................. 44
13.10 SEVERABILITY................................................... 44
13.11 NUMBER OF DAYS................................................. 44
13.12 No Third Party Beneficiaries................................... 44
13.13 Governing Law.................................................. 45
13.14 Forum Selection Clause......................................... 45
13.15 Definition of "Company's Knowledge"............................ 45
iii
ASSET ACQUISITION AGREEMENT AND
PLAN OF REORGANIZATION
THIS ASSET ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this
"AGREEMENT") is dated as of February 2, 1996 by and among LOUDOUN CHILDREN'S
CENTER, Inc., a Virginia corporation (the "COMPANY"); XXXXX XXXX AND XXXXXXX
XXXX (collectively, the "SHAREHOLDERS"), the sole shareholders of the Company,
and nOBEL EDUCATION DYNAMICS, Inc., a Delaware corporation ("NOBEL").
Background
----------
A. The Company owns and is engaged in the business of operating a child
care center located at 00000 Xxxxxxxx Xx., Xxxxxxxx, XX (the "ACQUIRED CENTER").
The business of the Acquired Center is referred to herein as the "BUSINESS".
B. The parties hereto desire to provide for the acquisition by Nobel of
substantially all of the assets and certain of the future obligations of the
Company, all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. THE TRANSACTION.
Subject to the terms and conditions of this Agreement and on the basis of
and in reliance upon the covenants, agreements and representations and
warranties set forth herein, at the Closing (as defined in Section 2):
1.1 TRANSFER OF ACQUIRED ASSETS.
(a) ACQUIRED ASSETS. The Company shall transfer and deliver to Nobel
all of its right, title and interest in and to all of the tangible and
intangible properties and assets owned or held by the Company on the Closing
Date other than the Excluded Assets (as defined in Section 1.1(b))
(collectively, the "ACQUIRED ASSETS"). The Acquired Assets shall include,
without limiting the generality of the foregoing (hereafter "WITHOUT
LIMITATION"), the following:
(i) all of the Company's furniture, fixtures, equipment,
machinery, teaching and educational supplies, inventories, supplies, and other
tangible personal property used or held at the Acquired Center, as well as any
business forms used or held exclusively at the Acquired Center, including those
items described on SCHEDULE 1.1(a)(i);
(ii) all intellectual property relating to the Business or the
Acquired Center, including, without limitation, all rights of the Company to all
registered and unregistered
trade names and fictitious names (including, without limitation, the name
"Loudoun Children's Center"), trademarks, service marks, copyrights, patents and
know-how used or useful in the Business and all related applications and
agreements with respect to the foregoing (the "INTELLECTUAL PROPERTY"); and all
telephone numbers; and
(iii) the leasehold interest of the Company pursuant to the
lease agreement of the Company referenced on SCHEDULE 1.1(A)(III) (such lease
being referred to herein as the "LEASE"; and all the leasehold interest subject
to the Lease being referred to herein as the "LEASEHOLD INTEREST");
(iv) the Company's rights, to the extent assignable, under
maintenance contracts, service contracts, equipment and other leases (including,
if leased, the telephone system), vehicle leases, computer software and other
rights, to the extent assignable, under contracts relating to the Business or
the Acquired Center that Nobel has elected to assume, each of which is described
on SCHEDULE 1.1(A)(IV) (collectively, the "ASSUMED CONTRACTS"; provided that, if
consent of the other party to any contract is required, such contract shall not
be included within the definition of Assumed Contracts (even if described on
SCHEDULE 1.1(A)(IV)) unless such other party either consents to such assignment
or provides services to Nobel thereunder);
(v) to the extent assignable, all permits, registrations,
franchises, licenses, approvals and other authorizations relating to the
Business or the Acquired Center (collectively, the "PERMITS"), including those
described on SCHEDULE 1.1(A)(V);
(vi) all goodwill of the Business as a going concern, including
all rights to deal with clients and customers;
(vii) all client and customer lists and records, enrollments and
other documents, correspondence and files of the Company relating to the
Business or the Acquired Center, including, to the extent assignable, all
software and computer files;
(viii) the motor vehicles identified on SCHEDULE 1.1(A)(VIII);
(ix) all secrecy and non-disclosure agreements with current or
former employees, consultants or contractors relating to the Business or the
Acquired Center, including, without limitation, those described and identified
on SCHEDULE 1.1(A)(IX); and
(x) all other tangible and intangible assets which are used in
or necessary to the operation of the Business or the Acquired Center, other than
those described below in Section 1.1(b).
(b) EXCLUDED ASSETS. Notwithstanding anything to the contrary in
Section 1.1(a), the following rights, properties and assets of the Company (the
"EXCLUDED ASSETS") shall not be included in the Acquired Assets:
2
(i) the corporate seal, articles of incorporation, minute
books and stock books of the Company;
(ii) all tax records, tax returns, payroll records, insurance
records and other corporate documents (collectively, the "RETAINED RECORDS");
and
(iii) all cash of the Company, all registration fees paid to the
Company prior to Closing in the ordinary course of business consistent with past
practices, and all right, title and interest of the Company in and to all
accounts receivable.
(c) ACQUISITION PRICE. In consideration of the delivery of the
Acquired Assets, Nobel shall (i) at the Closing, issue to the Shareholders (as
successor of the Company), but deliver to the Company, a number of shares of
common stock, par value $.001 per share, of Nobel ("NOBEL COMMON STOCK") equal
to $1,500,000 divided by the average closing price of Nobel Common Stock as
reported on the NASDAQ Small Cap Market for the 20 trading days preceding the
Closing Date (such number of shares of Nobel Common Stock being referred to as
the "NOBEL SHARES") and (ii) within 45 days of the date of delivery to Nobel by
Coopers & Xxxxxxx of audited financial statements of Nobel for 1996 (the "EARN-
OUT PAYMENT DATE"), deliver to the Shareholders (as successor to the Company)
the Earn-Out Payment (as defined in Section 4); provided, however, that the
Earn-Out Payment Date shall be extended by one day for each day that Closing
occurs past December 31, 1995.
1.2 RESPONSIBILITY FOR LIABILITIES.
(a) EXCLUDED LIABILITIES. Except as otherwise provided specifically
in Section 1.2(b), Nobel shall not assume, nor in any way be liable or
responsible for, any liabilities, obligations or debts of the Company or any
Shareholder of any type or nature ("EXCLUDED LIABILITIES"), including, without
limitation, tort claims asserted against the Company or the Business (including,
without limitation, claims of child abuse or sexual abuse asserted against the
Company, the Business or the employees and agents of the foregoing related to
matters occurring prior to Closing); claims asserted against the Company or the
Business for breach of contract; tax liabilities; liabilities relating to claims
for damages based upon the breach or violation by the Company of, or strict
liability arising under, any environmental or occupational health and safety
laws or regulations or any other Federal, state or local laws or regulations;
liabilities incurred for the costs and expenses of negotiating and consummating
the transactions contemplated by this Agreement; and liabilities incurred in
connection with any employee benefit plan of the Company.
(b) LIABILITIES TO BE ASSUMED BY NOBEL. Subject to the terms and
conditions of this Agreement, at the Closing, Nobel will enter into an
Assignment and Assumption Agreement, in form and substance satisfactory to the
parties (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), with the Company, pursuant
to which the Company will assign to Nobel all of its right, title and interest
under the Lease and the Assumed Contracts, and Nobel will accept such assignment
and assume all of the Company's obligations accruing from and after the Closing
Date
3
under the written terms and provisions of the Lease and Assumed Contracts
(collectively, together with up to $1,200 to the Company's accountant for fees
relating to this transaction, the "ASSUMED LIABILITIES"); provided that
liabilities and obligations under the Lease and Assumed Contracts which have
accrued, or the performance of which is due, on or prior to the Closing Date
shall be the sole responsibility of the Company.
1.3 PRORATION. At the Closing (defined below), or as soon as practicable
thereafter, the parties will prorate the following items, effective as of the
Closing, with appropriate payments being made between and among the parties:
(a) rent and real estate taxes under the Lease;
(b) common area maintenance fees under the Lease;
(c) personal property taxes with respect to the Purchased Assets;
(d) tuition payments and deposits;
(e) employee vacation pay and sick days earned but not paid as of
Closing;
(f) utility deposits; and
(g) maintenance and service contracts, yellow page advertisements and
other normal operating expenses covering the period before and after Closing
(which item does not include, without limitation, any item relating to tangible
property).
1.4 LIQUIDATION OF THE COMPANY. As promptly as practicable following
Closing, and in any event no later than December 31, 1996, the Company shall
liquidate, dissolve and terminate its corporate existence in accordance with
applicable law, paying or providing for the Excluded Liabilities and
distributing the Nobel Shares and any remaining assets of the Company to the
Shareholders.
2. TIME AND PLACE OF CLOSING.
The closing (the "CLOSING") of the purchase and sale of the Acquired Assets
pursuant to this Agreement is taking place simultaneously with the execution
hereof (the "CLOSING DATE") at the offices of Nobel, Rose Tree Corporate Center
II, 0000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 0000, Xxxxx, Xxxxxxxxxxxx.
4
3. DELIVERIES AT CLOSING.
At the Closing, the parties shall make deliveries as follows:
3.1 COMPANY DELIVERIES.
(a) The Company shall deliver to Nobel:
(i) a xxxx of sale, in form and substance satisfactory to the
parties, transferring to Nobel title to all of the Acquired Assets of the
Company;
(ii) a counterpart of the Assignment and Assumption Agreement;
(iii) title documents, transferring title to all the vehicles
owned by the Company to Nobel, free and clear of any and all liens, charges,
claims, security interests, mortgages, deeds of trust, pledges, restrictions and
encumbrances of any nature whatsoever (collectively, "LIENS");
(iv) such other instruments of transfer as shall be reasonably
necessary or appropriate to vest in Nobel good title to the Business and the
Acquired Assets;
(v) a receipt executed by the Company, acknowledging receipt
by the Company of the Nobel Shares;
(vi) copies of the resolutions of the board of directors and
shareholders of the Company authorizing the execution, delivery and performance
by the Company of this Agreement and the other agreements and instruments
referred to herein, certified as of the Closing Date by the secretary or an
assistant secretary of the Company; and
(vii) an incumbency certificate relating to the officers of the
Company executing this Agreement and other documents or instruments delivered
pursuant hereto.
(viii) a copy of the Company's articles of incorporation and all
amendments thereof to date, certified as of a recent date by the Clerk of the
State Corporation Commission of Virginia, and a copy of the Company's bylaws and
all amendments thereof to date, certified as of the Closing Date by the
secretary or an assistant secretary of the Company;
(ix) certificates of good standing of a recent date for the
Company, certified by the Clerk of the State Corporation Commission of Virginia;
and
(x) to the extent obtainable by the Company, an estoppel
certificate from the landlord with respect to the Lease, in form and substance
satisfactory to Nobel;
5
(xi) the opinion of Cantor Arkema & Xxxxxxx, counsel to the
Company and Shareholders, dated the Closing Date, in form and substance
satisfactory to Nobel;
3.2 NOBEL DELIVERIES. Nobel shall deliver, or cause to be delivered the
items described below:
(a) to the Company:
(i) a certificate or certificates (for distribution to the
Shareholders) representing the Nobel Shares issued in the name of the
Shareholders; and
(ii) a duly executed counterpart of the Assignment and
Assumption Assignment;
(iii) a copy of Nobel's certificate of incorporation and all
amendments thereof to date, certified as of a recent date by the Secretary of
State of Delaware, and a copy of Nobel's bylaws and all amendments thereof to
date, certified as of the Closing Date by the secretary or an assistant
secretary of Nobel, and accompanied by a certificate of good standing as of a
recent date for Nobel, certified as of a recent date by the Secretary of State
of Delaware;
(iv) a copy of the resolutions of the board of directors of
Nobel authorizing the execution, delivery and performance by Nobel of this
Agreement and the other agreements and instruments referred to herein, certified
as of the Closing Date by the secretary or an assistant secretary of Nobel;
(v) an incumbency certificate relating to the officers of
Nobel executing this Agreement and other documents or instruments delivered
pursuant hereto; and
(vi) the opinion of Drinker Xxxxxx & Xxxxx, special counsel to
Nobel, dated the Closing Date, in form and substance satisfactory to the Company
and the Shareholders.
4. EARN-OUT.
4.1 EARN-OUT PAYMENT. On the Earn-Out Payment Date, Nobel will pay to the
Shareholders (as successor to Company) an amount (the "EARN-OUT PAYMENT") equal
to 2.22 multiplied by the amount, if any, by which Adjusted EBITDA (defined
below) of the Acquired Center during the period commencing on the Closing Date
and ending on the day preceding the first anniversary of the Closing Date (the
"EARN-OUT PERIOD") exceeds Two Hundred Seventy-Two Thousand Seventy-Five Dollars
($272,075). Nobel shall deliver to the Company's Agent, together with the Earn-
Out payment, a report indicating the basis for the calculation of the payment
made, which report shall be executed by the president or chief financial officer
of Nobel. The Earn-Out Payment will be made in cash (or check); provided that if
the Earn-Out Payment is greater than $_______, any excess over such amount shall
be paid by delivery of additional
6
shares of shares of Nobel Common Stock (such shares to be valued for such
purpose at the average closing price of Nobel Common Stock as reported on the
NASDAQ Small Cap Market for the 20 trading days preceding the Earn-Out Payment
Date); provided further that in no event shall the Earn-Out Payment exceed
$1,000,000 (in cash and shares). Any such additional shares of Nobel Common
Stock shall be deemed to be included in the definition of "Nobel Shares" for the
purposes of this Agreement. Notwithstanding the foregoing, Nobel shall not be
obligated to deliver such additional Nobel Shares unless and until the
Shareholders shall have delivered a representation letter as to the matters set
forth in Section 11.1.
4.2 CALCULATION OF ADJUSTED EBITDA.
(a) The "ADJUSTED EBITDA" of the Acquired Center shall equal (i) all
revenues attributable to the Acquired Center for the Earn-Out Period minus (ii)
all expenses of the Acquired Center for the Earn-Out Period. In calculating such
expenses, no allocation shall be made of general corporate expenses of Nobel
(except for expenses which are directly attributable to the Business relating to
the Acquired Center) and, specifically, no charges will be made for:
(i) administrative support from Nobel's corporate headquarters
for (i) payroll functions, (ii) accounts payable functions, (iii) banking and
financing functions, (iv) in-house legal support, (v) revenue recording, (vi)
analysis of accounts receivable (provided, however, that each Acquired Center
will be responsible for collections), (vii) preparation of monthly profit and
loss statements; (viii) xxxxx cash management, (ix) preparation of weekly
operating reports compiled on the basis of input from the Acquired Center, (x)
tracking of capital expenditures or (xi) any allocation of expenses not directly
associated with the operation of the Acquired Center; or
(ii) the consulting fees payable to Xxxxx Xxxx pursuant to the
consulting agreement between her and Nobel; or
(iii) charges for depreciation, amortization of good will,
interest expense and federal or state income taxes; or
(iv) travel expense related to trips to and from Nobel's
corporate headquarters or otherwise requested by Nobel.
(b) Salary and consulting fees paid to all persons in connection with
the operation of the Acquired Center other than Xxxxx Xxxx will be charged as
expenses in calculating the Earn-Out Amount; provided that if Nobel determines
to hire a person ("NEW MANAGER") to replace Xxxxx Xxxx after the Earn-Out Period
(which decision shall be made in cooperation with Xxxxx Xxxx and, unless Nobel
and Xxxxx Xxxx both consent, would not be implemented prior to the date eight
months following the date hereof), the costs associated with such hiring and
retaining will not be charged as expenses in calculating the Earn-Out, except
for compensation paid to the New Manager in the last three months of the Earn-
Out Period. The proviso in the
7
previous sentence does not apply if Xxx Xxxxxxx or Xxxxx Xxxxx is promoted to
such position. If a New Manager other than Xxx Xxxxxxx or Xxxxx Xxxxx is hired,
Nobel and Xxxxx Xxxx shall jointly determine whether also to continue their
employment; and if a decision is made to terminate the employment of either Xxx
Xxxxxxx or Xxxxx Xxxxx, the incremental cost, if any, of the New Manager over
the cost of Xxx Xxxxxxx and/or Xxxxx Xxxxx (whomsoever employment is terminated)
will not be charged as expenses in calculating the Earn-Out.
(c) All calculations shall be made in accordance with generally
accepted accounting principles consistently applied (except as specifically
provided in this Section 4); provided that Nobel shall be entitled to allocate
expenses in such manner as it desires in its sole and unfettered discretion.
(The proviso in the previous sentence relates only to the allocation of expenses
under Sections 4.1 and 4.2 and not to the calculation of the aggregate amount of
such expenses.)
4.3 AUDIT RIGHTS; ARBITRATION. The Company's Agent shall have the right
to audit all of Nobel's books and records related to the calculation of the
Earn-Out Payment, which right may be exercised upon reasonable notice to Nobel.
Any dispute regarding the Earn-Out payment that cannot be resolved shall be
submitted to formal arbitration by a mutually agreeable arbitrator upon such
terms as the arbitrator may decide. If no arbitrator can be selected by the
parties, then such arbitrator shall be selected by the American Arbitration
Association and such arbitration shall be pursuant to the rules for commercial
arbitration as promulgated by such Association. The arbitrator, regardless of
how selected, shall promptly obtain such information regarding the Earn-Out
payment he or she deems advisable and shall decide with dispatch the amount of
the Earn-Out payment and render a written decision which shall be delivered to
all parties. Any such decision will be a conclusive determination of the matter
and shall be binding upon each party, and shall not be contested by any party.
At the time of rendering the decision, the arbitrator shall establish his or her
fees and expenses in connection therewith. Such fees and expenses shall be
allocable by the arbitrator in his or her decision. Judgment upon any
arbitration decision may be entered and enforced in any court of competent
jurisdiction.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Nobel as follows:
5.1 ORGANIZATION; AUTHORITY. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia and has the corporate power and authority to own and lease the
properties now owned or leased by it and to conduct the businesses presently
being conducted by it. Neither the nature of the Company's properties nor the
conduct of the businesses of the Company require the Company to be qualified and
licensed to do business as a foreign corporation in any other jurisdiction.
5.2 POWER AND AUTHORITY. The Company has the full power, authority and
capacity to execute, deliver and perform this Agreement and the other
agreements, documents and
8
instruments required to be delivered by it to Nobel at the Closing
(collectively, the "SELLERS' TRANSACTION DOCUMENTS") and to perform its
obligations hereunder and thereunder.
5.3 DUE AUTHORIZATION; BINDING AGREEMENT. The execution and delivery by
the Company of this Agreement and each of the Sellers' Transaction Documents to
which it is a party, and the performance by the Company of its obligations
hereunder and thereunder, have been duly and validly authorized by all necessary
action of the Board of Directors and shareholders of the Company. This Agreement
has been duly executed and delivered by the Company. This Agreement constitutes,
and, when executed and delivered, each of the Sellers' Transaction Documents
will constitute, the legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, except as such may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding therefor may be brought.
5.4 CAPITALIZATION. All of the shares of capital stock of the Company are
owned, both beneficially and of record, by the Shareholders, in the amounts set
forth on SCHEDULE 5.4. All of the issued and outstanding shares of capital stock
of the Company have been duly authorized and are validly issued and outstanding.
5.5 ABSENCE OF CONFLICTING AGREEMENTS. The execution and delivery of this
Agreement and the Sellers' Transaction Documents by the Company, and the
performance by it of the transactions contemplated hereby and thereby, will not,
with or without the giving of notice, lapse of time or both, conflict with, or
constitute a breach of or a default under, or violate or give to any third party
any rights under:
(a) any law, statute, rule, regulation, judgment, order, writ,
injunction, decree or ruling of any court or governmental authority
(collectively, "LAWS") applicable to the Company or by which the Company or any
properties of the Company is bound;
(b) the articles of incorporation or by-laws of the Company; or
(c) any Assumed Contract or any other material agreement, indenture,
instrument or contract to which the Company is now a party or by which the
Company or any properties of the Company is bound.
5.6 CONSENTS AND APPROVALS. Except for the consents and approvals listed
on SCHEDULE 5.6, no consent, waiver, approval, license or authorization of, or
filing, registration or qualification with, or notice to, any governmental
authority or any other person or entity is required to be made, obtained or
given by in connection with the execution, delivery and performance by the
Company of this Agreement or any of the Sellers' Transaction Documents.
9
5.7 INVESTMENTS AND SUBSIDIARIES. Except as disclosed on SCHEDULE 5.7,
the Business (including the Acquired Center) is and has been conducted solely by
and through the Company and no other person or entity, and the Company have not
agreed, contingently or otherwise, to share any profits, losses, costs or
liabilities, or to indemnify any person or entity, or to guaranty the
obligations of any person or entity, in each case, with respect or relating to
the Business. Except as disclosed on SCHEDULE 5.7, the Acquired Assets, the
Lease and the Contracts (defined below) are all of the material assets used in
or necessary for the conduct of the Business as currently conducted. No Acquired
Asset is owned or held by any person or entity (including any Shareholder) other
than a Company. The Company does not have any subsidiaries.
5.8 COMPLIANCE WITH LAWS. The Company has operated the Business in
compliance in all material respects with all Laws, and the Company has not
received any claim or notice that the Business is not in compliance with any
Law, except as shown on SCHEDULE 5.8.
5.9 PERMITS. Except as set forth on SCHEDULE 5.9, SCHEDULE 1.1(A)(V) is a
true, correct and complete list of all Permits which are necessary for the
Company to conduct the Business as now conducted. The Company owns, possesses or
has the legal right to use all of the Permits, free of any and all Liens. The
Company is not in default under, nor has the Company received any notice of any
claim or default or any other claim or proceeding relating to, any such Permit.
5.10 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and delivery of
this Agreement and the Sellers' Transaction Documents by the Company and each
Shareholder do not, and the performance of their respective terms will not,
create any Liens on any of the Acquired Assets in favor of third parties or give
rights to third parties other than Nobel.
5.11 JUDGMENTS AND LITIGATION.
(a) Except as described in SCHEDULE 5.11, there are no, and during
the last three years there have not been any, claims, actions, suits,
proceedings (arbitration or otherwise) or, to the Company's knowledge, inquiries
or investigations, pending or, to the Company's knowledge, threatened, involving
or affecting the Company or any of its properties or the Business, or the
Company's directors, officers or shareholders in their capacities as such,
before or by any court or governmental agency or instrumentality, or before an
arbitrator of any kind which, in the case of claims, inquires or investigations
not yet resulting in any action, suit or proceeding, if decided adversely
against the Company or its directors, officers or shareholders could have a
material adverse affect on the Company's financial condition or results of
operations. To the Company's knowledge, there is no state of facts or occurrence
of any event that could reasonably serve as a basis for any claim, action, suit
or proceeding against the Company, the Acquired Assets or the Business which, if
decided adversely against the Company or its directors, officers or
shareholders, could have a material adverse affect on the Company's financial
condition or results of operations. Except as described in SCHEDULE 5.11, to the
Company's knowledge, there is no claim, action, suit, proceeding, inquiry or
investigation presently
10
threatened or contemplated that questions the validity of this Agreement or any
of Sellers' Transaction Documents or the transactions contemplated hereby or
thereby.
(b) Except as described in SCHEDULE 5.11, there are no outstanding
orders, writs, injunctions, fines, citations, penalties, decrees or unsatisfied
judgments of any court, governmental agency or instrumentality or arbitrator
against the Company, the Acquired Assets or the Business.
5.12 FINANCIAL STATEMENTS.
(a) SCHEDULE 5.12 contains true, correct and complete copies for the
Company of (i) the Company's balance sheet (the "BALANCE SHEET") as of December
31, 1995 (the "BALANCE SHEET DATE") and the Company's related statements of
income prepared on a cash basis for the fiscal period then ended and (ii) the
Company's balance sheets as of December 31, 1993 and 1994 and the Company's
statements of income for each of the fiscal years then ended (collectively, the
"FINANCIAL STATEMENTS").
(b) The Financial Statements have been prepared on a cash basis and
present fairly the financial position of the Company and the results of its
operations and cash flows at the dates and for the periods covered thereby.
(c) Except as identified in SCHEDULE 5.12, the Company has no
material liabilities or obligations of any nature (absolute or contingent) that
are not reflected on the Balance Sheets (including, without limitation,
reasonably anticipated liabilities, losses and expenses of the Company,
including, without limitation, those with respect to accrued income and other
taxes, depreciation and the costs of all pension, retirement, incentive, bonus,
profit-sharing, vacation, holiday or other plans or policies (if any) for the
benefit of the Company's employees), except for current liabilities which have
been incurred since the Balance Sheet Date in the ordinary course of business
consistent in nature and amount with past practice and which are not
inconsistent with any of the representations and warranties contained herein
(such current liabilities are herein referred to as "CURRENT LIABILITIES"). To
Seller's knowledge, there is no basis for the assertion against the Company of
any liability or obligation of any nature or in any amount (other than Current
Liabilities as aforesaid) not fully reflected or reserved against in the Balance
Sheet or identified on SCHEDULE 5.12.
(d) The Company is not insolvent and will not be rendered insolvent
by the transactions contemplated by this Agreement.
5.13 TAX MATTERS.
(a) SCHEDULE 5.13 contains true, correct and complete copies of the
federal income tax returns of the Company for the Company's fiscal years ended
December 31, 1991, 1992, 1993 and 1994.
11
(b) Except as disclosed on SCHEDULE 5.13:
(i) The Company has been qualified as an S Corporation, as
defined in Section 1361 of the Internal Revenue Code of 1986, as amended (the
"CODE"), for income federal tax purposes and for state income tax purposes in
the Commonwealth of Virginia in each fiscal year since its inception.
(ii) The Company has timely and properly filed all federal,
state, county and local returns and reports relating to Taxes (defined below)
and all such returns and reports were true, correct and complete in all material
respects when filed. All federal, state, county and local income, profits,
franchise, sales, use, payroll, premium, occupancy, property, severance, excise,
withholding, customs, unemployment, transfer and other taxes, including
interest, additions to tax and penalties (collectively, "TAXES") due or properly
shown to be due on any return referred to in the preceding sentence with respect
to taxable periods ending on or prior to, and the portion of any interim period
up to, the date hereof have been fully and timely paid or, in the case of Taxes
not yet due, fully provided for on the books of account of the Company. There
are no levies, Liens or other encumbrances (except any Lien for Taxes not yet
due and payable) relating to Taxes existing, pending or, to the Company's
knowledge, threatened with respect to any asset of the Company.
(iii) No waivers of statutes of limitation have been given or
requested with respect to any tax returns and reports referred to subsection (a)
above or with respect to any Taxes. SCHEDULE 5.13 lists all federal, state,
local and foreign income and franchise tax returns of the Company which have
been examined or which are currently under examination by the Internal Revenue
Service or by other appropriate taxing authorities and, except as and to the
extent set forth in SCHEDULE 5.13 or provided for on the financial statements,
any and all deficiencies assessed or assessments made as a result of such
examinations have been fully paid, and there are no other unpaid deficiencies
asserted or assessments made by any taxing authority against the Company. No
issues have been raised and are currently pending by the Internal Revenue
Service or any other taxing authority in connection with such tax return. The
Company has not made an election under Section 341(f) of the Code. The Company
uses the cash method of accounting for federal income tax purposes. The Company
is not required to make any adjustments under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. SCHEDULE 5.13 lists all
elections by or with respect to the Company for federal income tax purposes that
are currently applicable.
(iv) The books and records of the Company are sufficient to
prove in all material respects the correctness of all tax returns for open tax
years and to determine and to prove the adjusted tax basis for Federal income
tax purposes of each asset of the Company.
5.14 ABSENCE OF CERTAIN CHANGES. Since December 31, 1995, the Business has
been conducted only in the usual and ordinary course consistent with past
practice, there has not been any material adverse change in the condition
(financial or otherwise), assets, liabilities, properties,
12
operations or prospects of the Business or the Company or any event, condition
or contingency that is likely to result in any such material adverse change,
and, except as disclosed in SCHEDULE 5.14, the Company has not:
(a) sold, assigned, leased, transferred, mortgaged, pledged or
imposed any Lien on any of its assets or properties material to the operation of
the Business, except in the ordinary course of business consistent with past
practice;
(b) suffered any damage, destruction or loss, whether or not covered
by insurance, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of delivery of supplies or utility services used in or
required to conduct the Business, or suffered any material change in its
financial condition or in the nature of its business or operations which has had
or might have a material adverse effect on the operations, assets, properties or
prospects of the Business;
(c) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its shareholders, directors, officers or employees, or made any
increase in, or any additions to, other benefits to which any of its
shareholders, directors, officers or employees may be entitled, other than
salary increases to non-management level employees made in the ordinary course
of business;
(d) changed any of the accounting principles followed by it or the
methods of applying such principles;
(e) entered into any amendment or termination of any Lease, Assumed
Contract or any other material agreement or other document or commitment
affecting or relating to the Business (or received any notice thereof), or
entered into any material transaction (whether or not in writing), other than
this Agreement;
(f) accelerated the collection of tuition or registration fees or
otherwise collected such fees in a manner not consistent with the Company's
normal business practice;
(g) issued any capital stock or other securities of the Company, or
repurchased or redeemed any such shares of capital stock or other securities
(other than with cash other than proceeds of assets sold other than in the
ordinary course of business);
(h) declared or paid any dividend or other distribution or payment in
respect of the shares of capital stock of the Company, other than cash dividends
paid with cash other than proceeds of assets sold other than in the ordinary
course of business; or
(i) agreed to do any of the foregoing.
13
5.15 TITLE TO AND CONDITION OF ASSETS, PROPERTIES, ETC. Except as
described on SCHEDULE 5.15,
(a) the Company has good title to all of its tangible and intangible
properties and assets (including those reflected on the Balance Sheet (except to
the extent the same have since been sold or otherwise disposed of in the
ordinary course of business consistent with past practice) and including, all of
the Acquired Assets), free and clear of any and all Liens and, upon Closing,
such title will be transferred to Nobel;
(b) all of the Acquired Assets are in the possession or under the
control of the Company and are located at the Acquired Center and, to the
Company's knowledge, are in good condition and repair, ordinary wear and tear
excepted and are of a condition, nature and quantity sufficient for the conduct
of the Business as conducted during the past two years; and
(c) to the Company's knowledge, there is no material structural,
mechanical or other significant defect or deficiency in the Acquired Center, the
Acquired Assets or the real property at which the Acquired Center is located.
5.16 REAL PROPERTY. The Leasehold Interest is the only real property owned
(beneficially or of record) or leased by the Company. SCHEDULE 5.16 contains
true, correct and complete copy the Lease, including all amendments or
modifications to date. Neither the Company nor any Shareholder has received any
written or oral notice for assessments for public improvements against any of
such real properties which remains unpaid and, to the Company's knowledge, no
such assessment has been proposed. Except as shown on SCHEDULE 5.16, neither the
Company nor any Shareholder has received any written or oral notice or order by
any governmental or other public authority, any insurance company which has
issued a policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions which (i) relates to
violations of building, safety, fire or other ordinances or regulations, (ii)
claims any defect or deficiency with respect to any of such properties or (iii)
requests the performance of any repairs, alterations or other work to or in any
of such properties or in the streets bounding the same. To the Company's
knowledge, there is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of any of such properties and,
to the Company's knowledge, no such proceeding is contemplated.
5.17 LIST OF PROPERTIES, CONTRACTS, ETC.
(a) SCHEDULES 1.1(A)(I) AND 1.1(A)(VIII) contain true, correct and
complete lists, as of the date hereof, of each vehicle, item of machinery,
equipment and other tangible assets owned by the Company; and all items
identified on the lists are located at the Acquired Center specified in such
Schedule.
14
(b) SCHEDULE 5.17(B) contains a true, correct and complete list, as
of the date hereof, of all machinery, vehicles and equipment under lease to the
Company, together with the identity of the lessor, the annual rental and
unexpired lease term.
(c) SCHEDULE 5.17(C) contains a true, correct and complete list, as
of the date hereof, of each contract, agreement, purchase order or other
commitment (whether or not in writing) relating to the Business or to which the
Company is a party or by which the Company or any Acquired Asset is bound
(collectively, the "CONTRACTS").
(d) SCHEDULES 1.1(A)(ii) AND 5.17(D) contain, respectively, a true,
correct and complete list, as of the date of this Agreement, of all Intellectual
Property which are owned, possessed or used in the operation of the Business by
the Company.
(e) SCHEDULE 5.17(E) contains a true, correct and complete list, as
of the date of this Agreement, of each form of contract, agreement or commitment
used by the Company as a standard form in the Business.
(f) SCHEDULE 5.17(F) contains a true, correct and complete summary,
as of the date of this Agreement, of each policy and binder of insurance owned
by or maintained for the benefit of the Company, or respecting which any
premiums are paid directly or indirectly by Shareholders relating to the
Business, and each insurance claim made or loss incurred by the Company in the
preceding three years pursuant to any liability, workers' compensation or other
insurance policy.
5.18 CONTRACT VALIDITY, DEFAULTS, NOTICE/CONSENT. Except as described on
SCHEDULE 5.18:
(a) each Contract was made in the ordinary course of business, is in
full force and effect and is valid, binding and enforceable against the Company
and, to the Company's knowledge, the other parties thereto in accordance with
its terms, except as such may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws relating to or affecting the enforcement of
creditors' rights generally, and except that the availability of specific
performance, injunctive relief or other equitable remedies is subject to the
discretion of the court before which any such proceeding therefor may be
brought;
(b) all parties to the Contracts have complied with the provisions
thereof, no party is in default thereunder, and to the Company's knowledge, no
event has occurred which, but for the passage of time or the giving of notice or
both, would constitute a default thereunder; and
(c) none of the Contracts requires notice to or the consent of any
party thereto in connection with the consummation of the transactions
contemplated hereby (including, assignment to Nobel of the same).
15
5.19 EMPLOYEES.
(a) SCHEDULE 5.19(A) sets forth a true, correct and complete list of
the names of the center director of the Acquired Center and all other persons
with managerial level responsibilities in the Business.
(b) SCHEDULE 5.19(B) sets forth a true, correct and complete lists of
the name and current annual rate of compensation (including bonuses) paid or
payable by the Company to each of its center directors and employees. Except as
disclosed on SCHEDULE 5.19(B), there are no contracts, commitments or policies,
written or oral, relating to the employment or severance of any such center
directors or employee.
(c) No amount is owing to any employee of the Company with respect to
bonus or incentive awards, if any, for services rendered on or before the
Closing Date in accordance with the terms of applicable plans or policies of the
Company or otherwise. SCHEDULE 5.19(C) sets forth a tabulation showing the
amount of accrued but unused vacation and sick days for each employee of the
Company as of December 31, 1995.
5.20 LABOR MATTERS. None of the Company's employees is represented by any
union or other collective bargaining representative nor, to the Company's
knowledge, are there currently any attempts by any union or other collective
bargaining representative to organize employees and, to the Company's knowledge,
there have been no such attempts within the last one year. Since the
commencement of operations of the Company, there has not been, nor, to the
Company's knowledge, is there threatened or contemplated, any strike, slowdown,
picketing or work stoppage by any employees against the Company, its assets or
properties wherever located, any lockout by the Company of any of its employees
or any labor trouble or other occurrence, event or condition of a similar
character affecting in any material respect, or which may affect in any material
respect, the operations, assets, properties or prospects of the Company, the
Business or the Acquired Assets.
5.21 RELATIONSHIPS. Except as disclosed in SCHEDULE 5.21, there is no
dispute or controversy existing between the Company and any of its clients or
customers with respect to any services or product sold or furnished by the
Company; and there is no dispute or controversy existing between the Company and
any supplier or other contractor with respect to any product or service
purchased by the Company from such person or entity.
5.22 TRANSACTIONS WITH RELATED PARTIES. Except as disclosed on SCHEDULE
5.22, since January 1, 1993, no Related Party has engaged in any material
transaction with the Company (other than providing services as an employee of a
Company as disclosed pursuant to Section 5.19(b)). As used herein, a "RELATED
PARTY" means (i) any officer, director or shareholder of the Company, (ii) any
relative of any such officer, director or shareholder, or (iii) any business or
entity, or any officer, director or shareholder of any business or entity, in
which any of the persons referred to in clause (i) or (ii) has any direct or
material indirect interest.
16
5.23 NON-FOREIGN PERSONS. The Company is not a foreign person, foreign
partnership, foreign trust or foreign estate as defined in Section 1445(f)(3) of
the Code, and the delivery of the Nobel Shares and payment of the Earn-Out
Payment will not be subject to the withholding requirements of Section 1445 of
the Code.
5.24 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 5.24, the
Company does not maintain, or contribute to, any employee benefit plans. The
Company has never maintained any employee pension benefit plans qualified for
federal income tax purposes under the Code. The Company has made all required
contributions under each employee benefit plan listed on SCHEDULE 5.24 for all
periods through the Closing Date. The Company has not ever been obligated to
contribute to a multiemployer plan. The Company does not maintain any employee
benefit plan(s) providing for continued life or health benefits or coverage for
any employee (or beneficiary thereof) after the employee's termination of
employment, other than as required by Section 601 et. seq. of Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). As used in this
Section 5.24, the terms "employee benefit plan," "employee pension benefit plan"
and "multiemployer plan" shall have the respective meanings assigned to such
terms in Section 3 of ERISA. "Company" as used in this Section 5.24 shall
include any other entity required to be aggregated with the Company under
Section 414(b), 414(c), 414(m), or 414(o) of the Code.
5.25 ENVIRONMENTAL PROTECTION. Except as disclosed in SCHEDULE 5.25,
(a) The Business is now and always have been conducted and operated
in compliance with all federal, state, and local statutes, ordinances,
regulations and rules concerning or relating to industrial hygiene or the
protection of health and the environment (collectively, the "ENVIRONMENTAL
LAWS");
(b) To the Company's knowledge, there are no conditions on, about,
beneath, adjacent to or arising from the Acquired Center which might give rise
to liability, result in the imposition of a statutory lien or require any
"Response," "Removal" or "Remedial Action", under any of the Environmental Laws.
As used in this Agreement, the terms "RESPONSE," "REMOVAL" and "REMEDIAL ACTION"
shall be defined with reference to Sections 101(23) - 101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act (XXXX), 42 U.S.C.
(S)(S) 9601(23) - 9601(25);
(c) Hazardous Substances (as defined below) have never been used,
handled, generated, processed, treated, stored, transported to or from,
released, discharged, or disposed of on, about or beneath the Acquired Center by
the Company or any person acting on behalf or at the direction of the Company
or, to the Company's knowledge, by any other persons, except in compliance with
all Environmental Laws. To the Company's knowledge, there are no transformers or
other equipment containing or contaminated with polychlorinated biphenyls
17
("PCBS") or any above or underground storage tanks on, about or beneath the
Acquired Center. To the Company's knowledge, there is no asbestos or asbestos
containing material at the Acquired Center and no lead-based paint or lead-based
paint hazards are present at the Acquired Center. As used in this Agreement, the
term "HAZARDOUS SUBSTANCE" means a hazardous substance, material or waste
including, without limitation, any substance which: (i) is or contains
petroleum, asbestos, lead-based paint or PCBs; (ii) is defined, designated or
listed as a "Hazardous Substance" pursuant to Sections 307 and 311 of the Clean
Water Act, 33 U.S.C. (S)(S) 1317, 1321, Section 101(14) of CERCLA, 42 U.S.C. (S)
9601 or similar provision of applicable state law; (iii) is listed in the United
States Department of Transportation Hazardous Material Table, 49 C.F.R. (S)
172.101; or (iv) is defined, designated or listed as a "Hazardous Waste" under
Section 1004(3) of the Resource and Conservation and Recovery Act, 42 U.S.C.
9603(5), or similar provision of applicable state law; and
(d) Neither the Company (nor any Shareholder, with respect to matters
affecting the Company) has received notice or had any actual knowledge of: (i)
any claim, demand, investigation, enforcement, Response, Removal, Remedial
Action or other governmental or regulatory action instituted or threatened
against the Company or the Acquired Center pursuant to any of the Environmental
Laws; (ii) any claim, demand, suit or action made or threatened by any person or
entity against the Company or the Acquired Center relating to any form of
damage, loss or injury resulting from, or claimed to result from, any Hazardous
Substance on, about, beneath or arising from the Acquired Center or any alleged
violation of the Environmental Laws; or (iii) any communication to or from any
governmental or regulatory agency arising out of or in connection with Hazardous
Substances on, about, beneath, arising from or generated at the Acquired Center,
including, without limitation, any notice of violation, citation, complaint,
order, directive, request for information or response thereto, notice letter,
demand letter or compliance schedule.
5.26 BOOKS AND RECORDS.
(a) The copies of the articles of incorporation of the Company, as
certified by the Clerk of the State Corporation Commission of the Commonwealth
of Virginia, and of its bylaws, as certified by its secretary or assistant
secretary, which have been delivered to Nobel are true, complete and correct and
are in full force and effect as of the date hereof.
(b) The stock records of the Company fairly and accurately reflect
the record ownership of all of its outstanding shares of capital stock. The
minute books of the Company contain complete and accurate records of all
meetings held of, and corporate action taken by, the shareholders, the board of
directors and each committee of the board of directors of the Company. The other
books and records of the Company, including financial records and books of
account, are complete and accurate in all material respects and have been
maintained in accordance with sound business practices. Complete and accurate
copies, as of the date hereof, of all such minute books and stock records have
been made available to Nobel.
18
5.27 INTELLECTUAL PROPERTY. The Company has not granted or licensed to any
person or entity any rights with respect to any of the Intellectual Property.
The Company has not received any notice of any claim that any of the
Intellectual Property infringes any trademark, trade name, service xxxx,
copyright, patent or other proprietary right of any person. The Company has not
been in breach of, or is now in breach of, any agreement concerning third party
intellectual property rights or confidential information.
5.28 NO CHILD ABUSE OR SEXUAL ABUSE. Except as disclosed in SCHEDULE 5.28,
no acts or events have occurred or been committed by any present or former
officer, director, employee or agent of the Company that have resulted in or
which constitute, child (including physical or sexual) abuse or assault of any
type or nature, against any child or other person within the previous five
years. Except as disclosed in SCHEDULE 5.28, within the previous five years,
there has not been, nor, to the Company's knowledge, has there been threatened
or contemplated, any event, allegation, report or publicity, or any charge,
suit, action or other proceeding, regarding any acts of alleged child abuse or
sexual abuse, of any nature whatsoever, involving the Company or the Business or
any of the Company's present or former officers, directors, employees or agents.
5.29 NO OTHER AGREEMENTS. Other than this Agreement, neither the Company
nor any Shareholder has, directly or indirectly, through a finder, broker,
consultant, shareholder or other intermediary, any contract, arrangement or
understanding relating to (i) a merger or consolidation of the Company; (ii) the
sale, issuance or other disposition of the Acquired Assets or the Business (or
any portion thereof); or (iii) the sale, issuance or other disposition of any
shares of capital stock or other securities of the Company.
5.30 OPERATION OF OTHER CENTERS AND SCHOOLS. Except as disclosed on
SCHEDULE 5.30, as of the date of this Agreement, other than the Acquired Center,
neither the Company nor any Shareholder either directly or indirectly, operates,
manages, owns, controls, provides consulting services to, or is in any way
connected with or concerned with or interested in any day care or child care
facility or private school of any type.
5.31 SPECIAL ARRANGEMENTS. The Company does not have any unusual or cash
payment arrangements with any of its employees. All employees are paid through
the payroll systems of the Company and receive only the payments disclosed by
such systems, except for the shareholders of the Company who receive
distributions from time to time. Except as set forth in SCHEDULE 5.31, the
Company does not have any arrangements or obligations with any of its customers
or children whereby the Company offers (i) care or custody services at any
location other than the location of the Acquired Center, (ii) any pickup or
delivery services or (iii) any discounts from the Company's published tuition
rates.
5.32 BROKERS. No person or entity acting on behalf of the Company or any
Shareholder or any of their respective affiliates or under the authority of any
of the foregoing is, or will be entitled to, any brokers', advisors' or finders'
fee or any other commission or similar fee, directly
19
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement, other than fees payable to Xxxx
Xxxxxxxx and Childcare Center Brokerage and Development, Inc. (which fee is
being satisfied in full by the Company and Shareholders and with respect to
which Nobel shall have no responsibility).
5.33 DISCLOSURE. No representation or warranty by the Company in this
Agreement and no information in any statement, certificate, schedule or other
document furnished or to be furnished to Nobel pursuant hereto, or in connection
with the transactions contemplated hereby, and no information in any Schedule
attached to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. Except as disclosed in this Agreement and the
Schedules attached hereto (and excluding economic, business and regulatory
factors affecting the child care industry generally and such facts as are public
knowledge), there is no fact which the Company has not disclosed to Nobel in
writing which materially adversely affects nor, so far as the Sellers can now
reasonably foresee, may materially adversely affect the business, operations,
prospects, properties, assets, profits, condition (financial or otherwise) or
prospects of the Business. Disclosure of a matter on one schedule to this
Agreement shall be deemed to be disclosure of the matter on all relevant
schedules whether cross-referenced or not.
6. REPRESENTATIONS AND WARRANTIES OF ALL SHAREHOLDERS.
The Shareholders, jointly and severally, represent and warrant to Nobel as
follows:
6.1 POWER AND AUTHORITY. Each Shareholder has the full power, authority
and capacity to execute, deliver and perform this Agreement and the Sellers'
Transaction Documents to be executed by a Shareholder and to perform his or her
obligations hereunder and thereunder.
6.2 DUE AUTHORIZATION; BINDING AGREEMENT. This Agreement has been duly
executed and delivered by each Shareholder. This Agreement constitutes, and,
when executed and delivered, each of the Sellers' Transaction Documents to be
executed by a Shareholder will constitute, the legal, valid and binding
obligation of each Shareholder, enforceable against him or her in accordance
with its terms, except as such may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights generally, and except that the availability of
specific performance, injunctive relief or other equitable remedies is subject
to the discretion of the court before which any such proceeding therefor may be
brought.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. The execution and delivery of this
Agreement and the Sellers' Transaction Documents by the Shareholders, and the
performance by all of them of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice, lapse of time or both, conflict
with, or constitute a breach of or a default under, or violate or give to any
third party any rights under:
20
(a) any Law applicable to any Shareholder or by which any Shareholder
or any properties of any Shareholder is bound; or
(b) any material agreement, indenture, instrument or contract to
which any Shareholder is now a party or by which any Shareholder or any
properties of any Shareholder is bound.
6.4 CONSENTS AND APPROVALS. No consent, waiver, approval, license or
authorization of, or filing, registration or qualification with, or notice to,
any governmental authority or any other person or entity is required to be made,
obtained or given by in connection with the execution, delivery and performance
by any Shareholder of this Agreement or any of the Sellers' Transaction
Documents.
7. REPRESENTATIONS AND WARRANTIES OF BUYER.
Nobel hereby represents and warrants to the Company as follows:
7.1 ORGANIZATION AND STANDING. Nobel is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Nobel is duly qualified to do business as a foreign corporation in Pennsylvania
and Virginia and has the corporate power and authority to own and lease the
properties now owned or leased by it and to conduct the business presently being
conducted by it.
7.2 POWER AND AUTHORITY. Nobel has the full corporate power and authority
to execute, deliver and perform this Agreement and the other agreements,
documents and instruments required to be delivered by Nobel to the Company at
Closing (collectively, the "NOBEL'S TRANSACTION DOCUMENTS") and to perform its
obligations hereunder and thereunder.
7.3 DUE AUTHORIZATION; BINDING AGREEMENT. The execution and delivery by
Nobel of this Agreement and each of the Nobel's Transaction Documents, and the
performance by Nobel of its obligations hereunder and thereunder, have been duly
and validly authorized by all necessary action of the Board of Directors and
stockholders of Nobel. This Agreement has been duly authorized, executed and
delivered by Nobel. This Agreement constitutes, and when executed and delivered
by Nobel at the Closing each of the Nobel's Transaction Documents will
constitute, the legal, valid and binding obligations of Nobel, enforceable
against Nobel in accordance with its respective terms, except as such may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws relating to or affecting the enforcement of creditors' rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding therefor may be brought.
7.4 ABSENCE OF CONFLICTING AGREEMENTS. The execution and delivery of this
Agreement and the Nobel's Transaction Documents by Nobel, and the performance by
Nobel of
21
the transactions contemplated hereby and thereby, will not, with or without the
giving of notice, lapse of time or both, conflict with, or constitute a breach
of or a default under or violates or give to any third party any rights under
(i) any law applicable to Nobel or by which Nobel or any of its properties is
bound, (ii) the certificate of incorporation or by-laws of Nobel or (iii) any
agreement, indenture, instrument or contract to which Nobel is a party or by
which Nobel or any of its properties is bound.
7.5 CONSENTS. Except for any required filings under applicable Federal
and state securities laws, and except for such consents of lenders as have been
obtained as of the date hereof, and assuming the accuracy of each Shareholders'
representations set forth in Section 11.1, no consent, waiver, approval or
license of any person is required to be given or made by in connection with the
execution and delivery by Nobel of this Agreement and the Nobel Transaction
Documents and the issuance and sale of the Nobel Shares by Nobel.
7.6 CAPITALIZATION. The authorized capital stock of Nobel consists of
60,000,000 shares, including 50,000,000 shares of common stock, par value $.001
per share, and 10,000,000 shares of preferred stock, par value $.001 per share.
As of December 31, 1995, the outstanding capital stock of the Company consisted
of 4,070,908 shares of common stock (plus 312,500 shares the Company was
obligated to, and did, issue in January 1996), 1,971,320 shares of Series A
Preferred Stock, 2,500,000 shares of Series C Preferred Stock and 1,063,830
shares of Series D Preferred Stock. The Company also has outstanding various
options and warrants to purchase its common stock. The Nobel Shares to be
issued and delivered at Closing pursuant to this Agreement will, upon
consummation of the Closing, be duly authorized, validly issued, fully paid and
nonassessable by Nobel.
7.7 FINANCIAL CONDITION. The financial statements included in the SEC
Reports (defined below) have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto) and present fairly the consolidated financial position of Nobel
and its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their changes in cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein.
7.8 ABSENCE OF CHANGE. Since September 30, 1995, the business of Nobel
has been operated in the ordinary course consistent with past practice and there
has not been (a) any material adverse change in the operations, properties or
condition (financial or otherwise) of Nobel or (b) any other change in the
nature of, or the manner of conducting, the business of Nobel, other than
changes which neither have had, nor reasonably may be expected to have, a
material adverse effect on Nobel.
7.9 BROKERS. No person or entity acting on behalf of Nobel or any of its
affiliates or under the authority of any of the foregoing is, or will be,
entitled to any broker's, advisor's or
22
finder's fee or any other commission or similar fee, directly or indirectly,
from any of such parties in connection with any of the transactions contemplated
by this Agreement.
7.10 DISCLOSURE. No representation or warranty by Nobel in this Agreement
or any statements, information or disclosures contained in Nobel's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 or Nobel's Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1995, June 30, 1995
and September 30, 1995 filed with the Securities and Exchange Commission (the
"COMMISSION") (collectively, the "SEC REPORTS") or any other document furnished
to the Company on the Closing Date pursuant hereto contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
8. EMPLOYEES OF THE BUSINESS; EMPLOYEE BENEFITS.
8.1 EMPLOYEES OF THE COMPANY. Following Closing, Nobel will offer
employment to all employees of the Acquired Center, provided that Nobel shall
not be under any contractual restriction from subsequently terminating the
employment of any such employees. Notwithstanding the foregoing, with respect
to the director of the Acquired Center, such employment shall continue for the
remainder of the 1995-1996 school year, at such compensation level as is
currently in effect, provided that such director may be terminated by Nobel at
any time for cause as determined in good faith by Nobel and this Section shall
in no way obligate Nobel to continue the employment of any such person past the
end of such school year. During the Earn-Out Period, unless Xxxxx Xxxx
otherwise consents, the benefits afforded employees of Nobel located at the
Acquired Center shall be the same as the benefits afforded to employees of the
Acquired Center by the Company prior to the Closing Date.
8.2 EMPLOYEE BENEFIT AND BONUS CLAIMS.
(a) Nobel's employee benefit plans shall be responsible for all
benefit claims of those employees of the Company who accept employment with
Nobel (or their eligible dependents) with respect to claims incurred after the
Closing Date;
(b) The Company's employee benefit plans shall be responsible for all
benefit claims of (i) those employees of the Company who accept employment with
Nobel (or their eligible dependents) with respect to claims incurred on or
before the Closing Date, (ii) those employees of the Company who do not accept
employment with Nobel (or their eligible dependents) (including any claims from
such employees or their dependents for "continuation coverage" under Part 6 of
Subtitle B of Title I of ERISA (sometimes referred to as "COBRA")) and (iii) all
retired employees (if any) (which obligations in (i), (ii) and (iii) shall be
included within the definition of "Excluded Liabilities");
(c) The Company shall deliver to the Nobel, on or before the Closing
Date, complete and correct copies of all current plan documents, associated
insurance contracts,
23
summary plan description, and the most recently filed Internal Revenue Service
Form 5500 series form (if any) for the Company's health insurance, dental
insurance, and life insurance plans; and
(d) The Company will be responsible for preparing and filing the Form
5500 series form for all plan years ended before the Closing Date (if required
and if not already filed).
9. CERTAIN OBLIGATIONS AND AGREEMENTS OF PARTIES AFTER CLOSING.
9.1 REMITTANCE OF PAYMENTS. From and after the Closing, the Company and
Shareholders shall immediately remit to Nobel, in the form received, any
payments which they or any affiliate may receive (such as payments of tuition or
other fees) which properly belong to Nobel.
9.2 COLLECTION OF RECEIVABLES. From and for a period of six months
after the Closing, Nobel shall cooperate with the Company in the Company's
collection of the accounts receivable described in SECTION 1.1(B)(III);
provided, however that nothing herein shall be construed as creating any duty or
obligation of Nobel to perform any collection duties whatsoever on behalf of the
Company. If proceedings to collect such accounts receivable are instituted, they
shall be brought at the Company's election, in the Company's own name and at its
sole expense. Any amounts received after Closing by Nobel or its subsidiaries
shall be applied to accounts receivable owed to Nobel or its subsidiaries,
unless the payor specifies that such amounts shall be payable in respect of
accounts receivable owed to a Company.
9.3 DISCHARGE OF LIABILITIES. The Company shall pay all the Excluded
Liabilities as and when the same shall become due and payable. Nobel shall pay
all the Assumed Liabilities as and when the same shall become due and payable.
Notwithstanding the foregoing, no party shall be obligated to pay to a third
party an Excluded Liability (in the case of the Company) or an Assumed Liability
(in the case of Nobel) which such party disputes in good faith.
9.4 NONDISCLOSURE; COVENANT NOT TO COMPETE.
(a) For a period of five (5) years from and after the Closing Date,
the Company shall not, directly or indirectly, operate, manage, own, control, be
employed by or provide consulting, advisory or similar services to, any school,
pre-school, day care or child care business of any type which is now or
hereafter located within Loudoun, Fairfax or Xxxxxx Xxxxxxxx Counties of
Virginia or within seven and one-half (7 1/2) miles of the outer boundaries of
the City of Richmond, Virginia as they exist on the date hereof (collectively,
the "TERRITORY").
(b) From and after the date hereof, the Company shall not disclose,
directly or indirectly, to any person or entity, other than an employee of
Nobel, without the express authorization of Nobel in each such instance, any
customer or client lists, pricing strategies, customer, client or employee files
or records, proprietary data or trade secrets of Nobel not in the public domain.
24
(c) From and after the date hereof until the fifth (5th) anniversary
of the Closing Date, the Company shall not, directly or indirectly, engage or
participate in any effort or action to induce any of the customers, clients,
suppliers, associates, employees or independent contractors of Nobel or its
subsidiaries relating to operations of Nobel within the Territory (including
those of the Acquired Center or the Business) to cease doing business or to
discontinue their association or employment with Nobel or its subsidiaries.
Prohibited actions shall include, without limitation, the solicitation of
Nobel's or any such subsidiary's customers, clients, suppliers, associates,
employees or independent contractors to cease doing business, or to discontinue
their association or employment, with Nobel or any such subsidiary.
(d) The Company expressly acknowledges that damages alone will be an
inadequate remedy for any breach or violation of any of the provisions of this
Section 9.4 and that Nobel, in addition to all other remedies under this
Agreement, shall be entitled as a matter of right to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction. If Nobel must resort to the courts to
enforce any of the covenants set forth in this Section 9.4, the term of such
covenants will be extended for a period of time equal to the period of such
breach (such extended period to commence on the later of (i) the date on which
the original (unextended) term of such covenants would have terminated or (ii)
the date of the final court order (without further right of appeal) enforcing
such covenants).
(e) The Company acknowledges and agrees that the covenants contained
in this Section 9.4 are fair and reasonable in light of the consideration paid
hereunder and in order to protect Nobel's investment in the Acquired Center and
the Business, and the invalidity or unenforceability of this provision, or any
other or part of any other provision, of this Agreement shall not affect the
other provisions or parts hereof. If any provision in this Section 9.4 is
determined to be invalid or unenforceable by a court of competent jurisdiction,
(i) the Company shall negotiate in good faith to provide Nobel with protection
as nearly equivalent to that found to be invalid or unenforceable and (ii) the
court making such determination shall have the power, and is directed by the
parties, to reduce the area covered, the duration thereof or the scope thereof,
so that the provision shall then be enforceable in its reduced form.
9.5 ACCESS TO RECORDS. Nobel shall give the Shareholders reasonable
access to the historical financial records of the Company included in the
Acquired Assets for five years following the Closing Date for the purpose of
preparing the tax returns of the Company and such Shareholders during normal
business hours and shall permit the Shareholders to make copies of such records
at the expense of the requesting Shareholder. The Company and the Shareholders
shall give Nobel reasonable access to the Retained Records for five years
following the Closing Date for all valid corporate purposes during normal
business hours and shall permit Nobel to make copies of such records at Nobel's
expense. No party shall destroy any of such records without the consent of the
other party.
9.6 REPRESENTATION LETTERS. The Company and Shareholders acknowledges
that Nobel is a publicly-held company, subject to the reporting provisions of
Section 13 of the Securities
25
Exchange Act of 1934, as amended (the "1934 ACT"), and that Nobel may be
required by the Act and the rules and regulations of the Securities and Exchange
Commission ("SEC") to include audited financial statements of the Business for
certain periods in reports filed by Nobel with the SEC under the Act and in
registration statements filed with the SEC under the Securities Act of 1933, as
amended (the "1933 ACT"). The Company and Shareholders will use their best
efforts, at Nobel's request, to assist Nobel after Closing to obtain audited
financial statements for those periods, such efforts to include but not be
limited to, cooperating by signing customary representation letters required by
Nobel's independent auditors. The cost of obtaining audited financial statements
shall be paid by Nobel.
9.7 POST-CLOSING COVENANTS OF NOBEL. Subsequent to the Closing and until
the end of the Earn-Out Period, (a) Nobel will cooperate with Xxxxx Xxxx (i) to
develop the business of the Acquired Center and (ii) to operate the Acquired
Center in a good and businesslike manner consistent with past business practices
and (b) Nobel will not change the name or curriculum of the Acquired Center
without the approval of Xxxxx Xxxx. If Nobel exercises renewal rights under the
Lease, it will make a good faith request of the landlord to release the Company
of its liability thereunder.
9.8 PERMITS AND LICENSES. From and after Closing and continuing for a
period of three months thereafter, the Company will allow, to the extent
allowable under applicable law, Nobel to operate the Acquired Center under
existing child care licenses and permits of the Company. Nobel will indemnify
and hold harmless the Company and its officers, directors and shareholders
against and in respect of any and all Damages which any of them may suffer,
incur or become subject to under such licenses and permits of the Company as a
result of Nobel's operation of the Purchased Center after the Closing, except to
the extent that any such Damages are due to (i) wrongful actions of Xxxxx Xxxx
personally (i.e., not actions imputed from employee actions) or (ii) any
condition or state of events the existence of which constitutes a breach of the
Company's representations and warranties hereunder.
9.9 INCOME TAX STATUS OF TRANSACTION.
(a) Nobel, the Company and the Shareholders acknowledge that the
acquisition of the Acquired Assets in consideration of the deliveries provided
for herein (the "TRANSACTION"), followed by the liquidation of the Company, is
intended to qualify as a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code and that the Transaction is intended to be pursuant to
a "plan of reorganization" within the meaning of Section 354 of the Code.
Nobel, the Company and the Shareholders will report the Transaction in
accordance with such intent for income tax purposes.
(b) Nobel represents and warrants that as of the date hereof it has
no plan or intention (i) to fail (A) to conduct the business currently conducted
by the Company or (B) to use a significant portion of the Acquired Assets in a
business or (ii) to dispose of a substantial portion of the Acquired Assets
outside the ordinary course of business, and Nobel covenants that for a
26
period of one year following closing it will not take actions inconsistent with
the foregoing. Nobel will defend, indemnify and hold the Shareholders harmless
from any damages (including the incurrence or acceleration of taxes) incurred by
the Shareholders if, as a result of any and all breaches of the representations
and covenants of Nobel contained in this Section 9.9, the Internal Revenue
Service determines that the Transaction does not qualify as a reorganization
under Section 368(a)(1)(C) of the Code (an "IRS DETERMINATION"). The
Shareholders may, but shall have no obligation to, contest any such IRS
Determination, but the Shareholders shall cooperate with Nobel to the extent
reasonably required if it contests any such IRS Determination. The Shareholders
shall not, however, be obligated to pay any tax or other amount as part of such
cooperation. Nobel shall have no obligation to the Shareholders under this
Section 9.9 to the extent that the Transaction fails to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code because
of actions taken or failed to be taken by the Company or the Shareholders.
10. INDEMNIFICATION.
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and agreements made by a party in this Agreement or in any
schedule, certificate, document or list delivered by any such party pursuant
hereto shall survive the Closing, and each party hereto shall be entitled to
rely upon the representations and warranties of the other parties
notwithstanding any investigation conducted before or after the Closing Date or
the decision of any party to complete the Closing.
10.2 INDEMNIFICATION BY THE COMPANY AND SHAREHOLDERS. The Company and the
Shareholders shall, jointly and severally, indemnify and hold harmless Nobel and
its officers, directors and shareholders against and in respect of any and all
losses, costs, expenses, claims, damages, obligations or liabilities (including
interest, penalties, reasonable legal and paralegal fees and expenses, and all
other costs and expenses incurred in investigating any of the foregoing or
preparing for or defending any proceeding, commenced or threatened, incident to
the foregoing or to the enforcement of this Agreement) (collectively, "DAMAGES")
which Nobel or any such person may suffer, incur or become subject to arising
out of, based upon or otherwise in respect of:
(a) any inaccuracy in or breach of any representation or warranty of
the Company or Shareholder made in or pursuant to this Agreement or any Sellers'
Transaction Document;
(b) any material breach or nonfulfillment of any covenant or
obligation of the Company or Shareholder contained in this Agreement or any
Sellers' Transaction Document;
(c) all liabilities of the Company for or with respect to any Taxes
for which returns are filed (whether or not reserved against or contested) for
taxable periods up to and including the Closing Date; and
27
(d) the Company's failure timely to pay the Excluded Liabilities.
10.3 INDEMNIFICATION BY NOBEL. Nobel shall indemnify and hold harmless
the Company and its officers, directors and shareholders against and in respect
of any and all Damages which the Company or its officers, directors and
shareholders may suffer, incur or become subject to arising out of, based upon
or otherwise in respect of:
(a) any inaccuracy in or breach of any representation or warranty of
Nobel made in or pursuant to this Agreement or any Nobel's Transaction Document;
(b) any material breach or nonfulfillment of any covenant or
obligation of Nobel contained in this Agreement or any Nobel's Transaction
Document;
(c) Nobel's failure timely to pay the Assumed Liabilities.
Any amount payable by Nobel pursuant to Section 9.8 or this Section 10.3 shall
be paid solely in shares of Nobel Common Stock (such shares to be valued for
such purpose at the average closing price of Nobel Common Stock as reported on
the NASDAQ Small Cap Market for the 20 trading days preceding the date of
payment).
10.4 PROCEDURES RELATING TO INDEMNIFICATION.
(a) In order for a party (the "INDEMNIFIED PARTY") to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim or demand made by any individual, entity or governmental
authority against the indemnified party (a "THIRD PARTY CLAIM"), such
indemnified party must notify the other party (the "INDEMNIFYING PARTY") in
writing of the Third Party Claim within 45 days after 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 (and only 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, within five business days after 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. (For purposes of this
Section 10.4, the Company jointly and severally shall be considered to be one
party (represented by Company's Agent, as provided below) and Nobel being the
other party.)
(b) The indemnifying party will be entitled to participate in the
defense of a Third Party Claim made against an indemnified party and, if it so
chooses, to assume the defense thereof with counsel selected by the indemnifying
party; provided that, with respect to such assumption, (i) such counsel is not
reasonably objected to by the indemnified party and (ii) the indemnifying party
first admits in writing its obligation hereunder to the indemnified party to
indemnify the indemnified party with respect to the claim and notifies the
indemnified party of its intention to assume such defense within 30 days of
receipt of notice of a Third Party Claim.
28
If the indemnifying party does not timely give written notice of its intention
to assume control in the defense of any Third Party Claim, or, after giving such
notice, fails to do so, the indemnifying party shall be bound by the results
obtained by the indemnified party with respect to such claim. If the
indemnifying party does timely give such notice, the indemnified party (x) will
cooperate in all reasonable respects with the indemnifying party in connection
with such defense, (y) will not admit any liability with respect to, or settle,
compromise or discharge any Third Party Claim without the indemnifying party's
prior written consent and (z) will agree to any settlement, compromise or
discharge of a Third Party Claim which the indemnifying party may recommend and
which by its terms obligates the indemnifying party to pay the full amount of
the liability in connection with such Third Party Claim, which releases the
indemnified party completely in connection with such Third Party Claim, which
does not obligate the indemnified party to take or forbear to take any action,
and which would not, in the case Nobel is the indemnified party, adversely
affect the business, operations or properties of Nobel or its subsidiaries. If
the indemnifying party assumes the defense of any Third Party Claim as provided
above, the indemnified party shall be entitled to participate in (but not
control) such defense with its own counsel and at its own expense. An
indemnifying party who does not assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim.
(c) Anything contained in this Agreement to the contrary
notwithstanding, no Company shall be entitled to assume the defense of any Third
Party Claim (and shall be liable for counsel's fees and expenses incurred by
Nobel in defending such Third Party Claim) if the Third Party Claim seeks an
order, injunction or other equitable relief or relief for other than money
damages against Nobel which Nobel reasonably determines would, if successful,
adversely affect the business, operations or properties of Nobel and its
subsidiaries; provided, however, that if such equitable relief portion of the
Third Party Claim can be separated from any related claim for money damages
(such determination to be made solely by Nobel, after conferring with its
outside counsel), the Company shall be entitled to assume the defense of the
portion relating to money damages.
10.5 LIMITATION.
(a) All claims for breach of any representation or warranty made by
any party must be asserted prior to the second anniversary of the Closing Date,
and no party shall be entitled to indemnity hereunder or other relief for any
such claims asserted after that date; provided, however, that in the case of
income or other tax claims and claims relating to environmental matters, notice
may be given within the period of the applicable statute of limitations. This
Section 10.5 shall not impose any time limitation on the assertion of claims for
indemnification (x) otherwise than under Sections 10.2(a) and 10.3(a) or (y)
with respect to the breach of any of representation and warranty if such
representation or warranty was made with actual knowledge that it contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements or facts contained therein not misleading.
29
(b) No claims under Section 10.2(a) or in respect of Excluded
Liabilities which are alleged by third parties but not valid shall be made until
and unless there are aggregate Damages in respect thereof equal to at least
$10,000.
(c) The liability of the Company and Shareholders for breaches of the
Company's representations and warranties under Section 5.28 and for Excluded
Liabilities relating to child or sexual abuse, in each case of which the Company
does not have knowledge, shall be limited as follows:
(i) The Company shall only be responsible for Third Party
Claims (and related expenses, including reasonable legal and paralegal fees and
expenses, and all other costs and expenses incurred in investigating any of the
foregoing or preparing for or defending any proceeding, commenced or threatened,
incident to the foregoing or to the enforcement of this indemnification
obligation) and not for consequential damages (such as loss of enrolled children
or the increased cost of raising capital due to a reduction in Nobel's stock
price);
(ii) Nobel shall be responsible for the payment of Nobel's
legal and paralegal fees and expenses relating to the assertion of any defenses
which are applicable to Nobel but not to the Company or the Shareholders (such
as the assertion of the defense that a third party cannot proceed against Nobel
because Nobel is not a transferee of the liabilities of the Company);
(iii) Such liability shall terminate if and when the Company
assigns to Nobel the benefits under the insurance policies described on SCHEDULE
10.5 if such insurance policy will afford to Nobel the same protection for
events occurring prior to the Closing Date as such insurance policy afforded to
the Company prior to such assignment; and
(iv) The Company and Shareholders shall not be obligated to
indemnify for any Damages relating to acts occurring after the Closing Date even
if committed by a person who was employed by the Company.
(d) Nobel's right to recover Damages under this Section 10 shall be
limited to $1,500,000 plus the Earn-Out Payment.
10.6 REMEDIES NOT EXCLUSIVE. The indemnification obligations contained in
this Section 10 are not intended to waive or preclude any other claims, rights
or remedies which may exist at law (whether statutory or otherwise) or in equity
with respect to the matters covered hereby.
10.7 COSTS AND EXPENSES. Any and all costs and expenses (including,
without limitation, all legal, accounting and financial advisory fees) incurred
by the Shareholders or the Company in connection with the negotiations leading
up to and performance under this Agreement shall be borne by the Shareholders
and the Company and shall be paid by them on or before the
30
Closing Date. If any cost or expense is not so paid and is paid by Nobel, the
Company and the Shareholders shall promptly reimburse Nobel for any such
expenses so paid.
10.8 RIGHT OF OFFSET. Nobel shall have the option of offsetting against
its obligations to deliver the Earn-Out Payment all or any part of damages Nobel
may suffer upon ten days prior written notice to the Company's Agent (which such
offset amount shall be credited against any indemnification to which Nobel is
entitled under Section 10.3). If, upon Nobel's exercise of this right of
offset, the Company's Agent disputes the amount being offset in a notice
delivered to Nobel by the Company's Agent, Nobel shall immediately deposit the
disputed amount into escrow pending resolution of the dispute.
11. SECURITIES MATTERS.
11.1 INVESTMENT REPRESENTATIONS AND COVENANTS.
(a) The Company and each Shareholder (each, an "INVESTOR")
understands that the issuance of the Nobel Shares will not be registered under
the 1933 Act, or qualified under any state securities laws on the basis that the
issuance of the Nobel Shares is exempt from registration pursuant to Section
4(2) of the 1933 Act and/or Regulation D promulgated under the 1933 Act
("REGULATION D") and from qualification pursuant to Section 13.1-514B(13) of the
Virginia Securities Act and Rule 503 thereunder, and that the reliance of Nobel
on such exemptions is predicated in part on the Investors' representations,
warranties, covenants and acknowledgments set forth in this Section.
(b) Each Investor hereby represents and warrants to Nobel that:
(i) the Nobel Shares will be acquired by such Investor for
such Investor's own account, not as a nominee or agent, for investment and
without a view to resale or other distribution within the meaning of the 1933
Act and the rules and regulations thereunder, and such Investor will not
distribute any of the Nobel Shares in violation of the 1933 Act or any state
securities laws (it being understood that the Company will transfer the Nobel
Shares to the Shareholders upon liquidation of the Company);
(ii) such Investor or she understands that:
(A) the Nobel Shares are not registered under the 1933
Act and must be held indefinitely by such Investor unless the Nobel Shares are
subsequently registered under the 1933 Act (in accordance with the provisions of
Section 11.2 or otherwise) or an exemption from registration is available;
(B) any routine sales of the Nobel Shares made under Rule
144 promulgated under the 1933 Act may be made only in accordance with the terms
and conditions of that Rule (which may include limits as to the amount which may
be sold in specified periods)
31
and that in such cases where Rule 144 is not applicable, registration or
compliance with some other registration exemption will be required;
(C) Rule 144 is not presently, and for a period of at
least two years following the Closing Date probably will not be, available for
use by such Investor for resale of the Nobel Shares;
(D) Nobel is not obligated to register any sale, transfer
or other disposition of the Nobel Shares except in accordance with the
provisions of Section 11.2; and
(E) the certificates representing the Nobel Shares
issuable to such Investor will contain a restrictive legend noting the
restrictions on transfer described herein and under federal and applicable state
securities laws, and appropriate "stop-transfer" instructions will be given to
Nobel's stock transfer agent; and
(iii) such Investor acknowledges receipt of the SEC Reports and
confirms and acknowledges that: (i) Nobel has afforded such Investor the
opportunity to ask questions of and receive answers from Nobel's officers and
directors concerning the business and financial condition of Nobel and such
Investor's investment in Nobel Shares and to obtain such additional information
as such Investor has desired, and (ii) such Investor has utilized such
opportunity to the extent such Investor deems necessary and has received the
information requested;
(iv) such Investor has a net worth (or joint net worth with
such investor's spouse) equal to at least $1,000,000 and, accordingly, is an
"accredited investors" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act.
(v) such Investor's financial situation is such that such
Investor can afford to bear the economic risk of holding the Nobel Shares for an
indefinite period of time and suffer a loss of such Investor's investment in the
Nobel Shares; and
(vi) such Investor's knowledge and experience in financial and
business matters are such that such Investor is capable of evaluating the merits
and risks of such Investor's acquisition of the Nobel Shares as contemplated by
this Agreement.
(c) In order to ensure compliance with the foregoing provisions, each
Investor agrees that, after the Closing, such Investor will not sell, transfer
or otherwise dispose of any of the Nobel Shares or any interest therein (other
than a transfer of the Nobel Shares to the Shareholders pursuant to the
liquidation of the Company) (unless such sale, transfer or disposition has been
registered under the 1933 Act in accordance with the provisions of Section 11.2
hereof or otherwise) without there first having been compliance with either of
the following conditions:
(i) Nobel shall have received a written opinion of counsel in
form and substance reasonably satisfactory to Nobel, or a copy of a "no-action"
or interpretive letter of the
32
Commission, specifying the nature and circumstances of the proposed transfer and
indicating that the proposed transfer will not be in violation of any of the
provisions of the 1933 Act and the rules and regulations promulgated thereunder
and any applicable state securities laws; or
(ii) Nobel shall have received an opinion from its own counsel
to the effect that the proposed transfer will not be in violation of any of the
provisions of the 1933 Act and the rules and regulations promulgated thereunder
and any applicable state securities laws.
11.2 REGISTRATION OF NOBEL SHARES.
(A) REGISTRATION STATEMENT.
(i) On or prior to the Target Date, Nobel shall prepare and
file with the Commission a registration statement on Form S-3 or such other form
as Nobel may be required to use for the registration of the Nobel Shares (the
"REGISTRATION STATEMENT") under the 1933 Act to permit the offer and sale of the
Nobel Shares by the Shareholders from time to time through the facilities of the
National Association of Securities Dealers Automated Quotation System at market
prices current at the time of sale or in other transactions at negotiated
prices; provided, however, that the Shareholders will not sell during any
calender month during the Effectiveness Period (defined below) in the aggregate
more than the total number of Nobel Shares divided by the Divisor, where the
"DIVISOR" equals nine minus the number of full months (if any) elapsed between
the date which is twenty days after the date hereof and the date on which Nobel
files the Registration Statement; provided further that (x) the Divisor shall
not be reduced to less than five and (y) if the Divisor is five or six the words
"calender month" in the first proviso clause of this sentence shall be changed
to "30-day period." Nobel shall use best efforts to cause the Registration
Statement to be declared effective promptly and, except as set forth below, to
remain effective under the 1933 Act for 12 months thereafter, and will prepare
and file with the Commission any amendments or supplements or post-effective
amendments to the Registration Statement and the prospectus used in connection
therewith (the "PROSPECTUS") as may be necessary to keep the Registration
Statement effective under the 1933 Act during that period. Nobel will promptly
notify the Shareholders in writing of the date on which the Registration
Statement is declared effective. Notwithstanding the foregoing, if keeping the
Registration Statement effective or the Prospectus current would require the
disclosure of material information which Nobel is not otherwise required to
disclose and which Nobel has a bona fide business purpose for preserving as
confidential or would require disclosure of financial information regarding a
business acquired or to be acquired which is not available pending completion of
an audit, upon notice to the Shareholders in each case of such an event, Nobel's
obligation to keep the Registration Statement effective or the Prospectus
current shall be suspended for period or periods which include in the aggregate
up to 120 days ("BLACK-OUT PERIODS"), provided that the Effectiveness Period
shall be extended for such number of days that the Registration Statement is not
kept effective or the Prospectus is not kept current pursuant to this sentence;
provided further that for a period commencing on the effective date of the
Registration Statement and continuing for the lesser of (x) four months or (y)
the number of days elapsed between the date twenty days following the date
33
hereof and the date that the Registration Statement is first filed, Nobel will
not wilfully engage in any transaction (other than a transaction disclosed to
Shareholders prior to the Closing Date) which would require Nobel to impose such
period of suspension. For purposes of this Agreement, the "EFFECTIVENESS PERIOD"
shall be the period during which the Registration Statement is kept effective
and the Prospectus is kept current pursuant to the provisions of this Section
11.2(a). For purposes hereof, "TARGET DATE" shall mean the earlier to occur of
(i) the date which is twenty days following the earlier to occur of (x) the date
that Nobel ceases its negotiations with respect to its proposed acquisition of
certain businesses whose audited financial statements would need to be included
in the Registration Statement (the "PROPOSED ACQUISITIONS") (such audited
financial statements, the "REQUIRED ACQUISITION FINANCIAL STATEMENTS") or (y)
the later of the closing of the Proposed Acquisitions and the date of delivery
to Nobel by Coopers & Xxxxxxx of the Required Acquisition Financial Statements
and (ii) the day that Nobel files any other registration statement with respect
to its securities (other than a registration on Form S-8 or any successor form
to such form or in connection with an offering of securities solely to the
employees, consultants or directors of the Company). Nobel will not permit any
registration statement with respect to an underwritten public offering of its
common stock to become effective prior to the Registration Statement.
(B) PIGGY-BACK REGISTRATION RIGHTS.
(I) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time
following the date the Effectiveness Period terminates and prior to one year
following such date, Nobel shall propose to file a registration statement under
the 1933 Act with respect to an offering by Nobel of Nobel Common Stock (other
than a registration statement on Form S-4 or S-8, or any form substituted
therefor or any equivalent form prescribed by the rules of the SEC, or filed in
connection in with an exchange offer, a unit offering, or an offering of
securities solely to Nobel's existing shareholders or employees, directors and
consultants), then Nobel shall in each case give written notice of such proposed
filing to the Shareholders and of the Shareholders' rights under this Section
11.2(b). Any Shareholder who desires to include Nobel Shares in such
registration shall, within 15 days after the date of Nobel's notice to the
Shareholders of its intended registration, send a written notice to Nobel
specifying the number of Nobel Shares he or she desires to register and the
intended method of disposition thereof. Nobel shall use its best efforts to
permit such disposition in accordance with such intended methods of disposition
of all such Nobel Shares by including such Nobel Shares in the registration
statement pursuant to which Nobel proposes to register the shares of Nobel
Common Stock (a "PIGGY-BACK REGISTRATION"); provided, however, that if such
registration involves an underwritten offering, all Shareholders requesting
inclusion in the registration shall be required to sell their Nobel Shares to
the underwriters selected by Nobel at the same price and on the same terms of
underwriting applicable to Nobel and any other persons selling shares of Nobel
Common Stock.
(II) RIGHT TO TERMINATE OR DELAY OFFERING. Notwithstanding the
foregoing, if, at any time after giving written notice of its intention to
register Nobel Common Stock and prior to the effective date of the registration
statement filed in connection with such
34
registration, Nobel determines for any reason either not to effect such
registration or to delay such registration, Nobel may, at its election, by the
delivery of written notice to each holder of Nobel Shares, (i) in the case of a
determination not to effect registration, relieve itself of its obligation to
register the Nobel Shares in connection with such registration (but not from its
obligation to pay all expenses, if any, in connection therewith), or (ii) in the
case of a determination to delay the registration, delay the registration of
such Nobel Shares for the same period as the delay in the registration of such
other shares of Nobel Common Stock (but will pay all expenses, if any, as and
when the same become due and payable during such delay).
(III) PRIORITY IN PIGGY-BACK REGISTRATIONS. If any of the
shares of Nobel Common Stock registered pursuant to any Piggy-Back Registration
are to be sold in one or more firm commitment underwritten offerings, and the
managing underwriter or underwriters advise Nobel and the holders of such shares
of Nobel Common Stock in writing that in its or their opinion the number of
shares of Nobel Common Stock (including Nobel Shares) proposed to be sold in
such offering exceeds the maximum number that can be sold in such offering
without materially adversely affecting the success thereof, Nobel shall include
in such registration only such maximum number of shares of Nobel Common Stock
which, in the opinion of such underwriter or underwriters, can be sold without
such material adverse effect, such shares to be allocated as follows: first,
there shall be included in such offering prior to any Nobel Shares (i) all the
shares of Nobel Common Stock which Nobel proposes to sell for its own account,
(ii) any and all shares of Nobel Common Stock being registered pursuant to
"demand" registration rights of a holder or holders (provided that the number of
demand registration rights held by the holders of such shares is reduced upon
completion of the offering), (iii) any and all shares of Nobel Common Stock held
by persons (or their successors) who as of February 2, 1996 are entitled to
contractual "piggy-back" or "incidental" rights to be included in the Piggy-Back
Registration, and (iv) any and all shares of Nobel Common Stock held by persons
to whom shares of Nobel Common Stock are issued after the date hereof in
connection with a financing transaction (not including Seller financing of the
acquisition by Nobel of a business); second, there shall be included in such
offering Nobel Shares and other shares of Nobel Common Stock held by persons
having rights to include their shares in the Piggy-Back Registration (but not
entitled to priority under clause "first") pro rata among all holders as nearly
as practicable to the respective numbers of shares of Nobel Common Stock
requested to be included therein by such holders; third, shares held by persons
who have no or inferior contractual "piggy-back" or "incidental" rights.
(C) HOLD-BACK AGREEMENTS. If requested by the managing underwriter
or underwriters in an underwritten offering of any Nobel Common Stock, each
holder of Nobel Shares will not effect any public sale or distribution of Nobel
Shares, including a sale pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act (except as part of such underwritten
registration), during the 10-day period prior to, and during the 90-day period
beginning on, the effective date of such Registration Statement, to the extent
timely notified in writing by Nobel or the managing underwriter or underwriters
(irrespective of whether Nobel Shares are included in such underwritten
offering); provided that this restriction shall apply only during the period
that the Shareholders are entitled to the rights specified in Section 11.2(b).
35
(D) COPIES OF DOCUMENTS. During the Effectiveness Period, Nobel
shall furnish to the Shareholders such number of conformed copies of the
Registration Statement, the Prospectus (including each preliminary Prospectus)
and any amendments and supplements thereto and any documents incorporated by
reference in the Registration Statement in order to facilitate the disposition
of the Nobel Shares by the Shareholders as the Shareholders shall reasonably
request.
(E) BLUE SKY COMPLIANCE. Nobel shall use reasonable efforts to
register or qualify (or use reasonable efforts to obtain exemption from such
registration or qualification with respect to) the Nobel Shares under the
securities or blue sky laws of such jurisdictions in the United States as the
Shareholders reasonably shall request up to a maximum of five states (not
counting states in which Nobel can file a registration by coordination and such
registration is not subject to merit review); provided that, in no event shall
Nobel be required to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified, to subject itself to taxation in any
jurisdiction where it has not theretofore done so or to take any action which
would subject it to general service of process in any such jurisdiction where it
is not then so subject.
(F) NOTIFICATION. During the Effectiveness Period, Nobel shall notify
the Shareholders promptly of (i) any request by the Commission for amendments or
supplements to the Registration Statement or a Prospectus or for additional
information relating thereto, (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (iii) the receipt by Nobel of
any notification with respect to the suspension of the registration,
qualification or exemption from registration or qualification of any of the
Nobel Shares covered by the Registration Statement for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose and (iv) the
happening of any event which makes any statement made in the Registration
Statement or in the Prospectus or any document incorporated therein by
reference, or deemed to be incorporated therein by reference, untrue in any
material respect or which requires the making of any changes in the Registration
Statement or the Prospectus so that such documents will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(G) SUPPLEMENTS AND POST-EFFECTIVE AMENDMENTS. During the
Effectiveness Period (other than during Black-Out Periods), upon the occurrence
of any event contemplated by clause (i) or (iv) of Section 11.2(f), Nobel will
prepare a post-effective amendment to the Registration Statement or a supplement
to the Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Nobel Shares being sold thereunder, the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
36
Nobel shall, as soon as reasonably practicable, provide each Shareholder with a
reasonable number of copies of any documents filed under this Section 11.2(g).
(H) LISTING. Nobel shall use its best efforts to cause all of the
Nobel Shares covered by the Registration Statement to be listed on each
securities exchange or automated quotation system, if any, on which shares of
common stock issued by Nobel are then listed, if the listing of the Nobel Shares
is then permitted under the rules of such exchange or automated quotation
system.
(I) STOCK CERTIFICATES. Nobel will cooperate with the Shareholders
to facilitate the timely preparation and delivery of certificates representing
Nobel Shares sold under the Registration Statement, which certificates shall not
have any restrictive legends.
(J) OBLIGATIONS OF THE SHAREHOLDERS. Following the filing of the
Registration Statement and during any period that the Registration Statement is
effective, each Shareholder shall:
(i) not effect any stabilization transactions or engage in any
stabilization activity in connection with shares of Nobel Common Stock in
contravention of Rule 10b-7 under the 1934 Act;
(ii) furnish each broker through whom the Shareholder offers
Nobel Shares such number of copies of the Prospectus as the broker may require
and otherwise comply with the prospectus delivery requirements under the 1933
Act;
(iii) report to Nobel each month all sales, pledges and other
dispositions of Nobel Shares made by the Shareholder during said month;
(iv) not, and shall not permit any Affiliated Purchaser (as
that term is defined in Rule 10b-6 under the 0000 Xxx) to, bid for or purchase
for any account in which the Shareholder has a beneficial interest, or attempt
to induce any other person to purchase, any shares of stock of Nobel in
contravention of Rule 10b-6 under the 1934 Act;
(v) cooperate with all reasonable requests of Nobel in
connection with Nobel's satisfaction of its obligations under this Section 11.2;
(vi) furnish such information concerning such Shareholder and
his or her plan of distribution as Nobel may from time to time request;
(vii) sell Nobel Shares pursuant to the Registration Statement
only in "brokers' transactions" or in transactions directly with a "market
maker," as defined in paragraphs (f) and (g) of Rule 144 under the 1933 Act
(collectively, "BROKERS' TRANSACTIONS"); and
37
(viii) not offer or sell any Nobel Shares under the Registration
Statement during any period after Nobel has provided notice to the Shareholder
pursuant to Section 11.2(a)(i) or 11.2(f), until Nobel provides to the
Shareholder copies of all documents required to be filed under Section 11.2(f)
and notice that offers and sales may again be made.
(K) EXPENSES. Nobel shall pay all expenses incident to Nobel's
performance of or compliance with this Section 11.2, including, without
limitation, (i) all registration, filing and stock exchange or automated
quotation system listing fees, (ii) all fees and expenses of complying with
securities or blue sky laws (provided that the Shareholders shall pay all fees
payable under blue sky laws after Nobel has expended an aggregate of $10,000 in
respect of such fees), (iii) all word processing, duplicating and printing
expenses, (iv) all messenger and delivery expenses and (v) the fees and
disbursements of counsel for Nobel and of its independent public accountants;
provided that, Nobel shall not be required to bear the expenses of any
underwriting discounts or commissions or brokerage commissions attributable to
the sale of the Nobel Shares or any out-of-pocket expenses of the Shareholders,
including travel costs and the costs of any counsel or any other advisers
engaged by the Shareholders to represent or advise them in connection with the
transactions contemplated by this Section 11.2.
(I) INDEMNIFICATION.
(i) INDEMNITY BY NOBEL. Nobel shall (i) indemnify and hold
harmless each Shareholder (each such person being hereinafter referred to in
this Section 11.2(l)(i) as an "Indemnified Party") against any losses, claims,
damages, liabilities or expenses (for purposes of this Section 11.2(l),
"Losses"), to which each such Indemnified Party may become subject, under the
1933 Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or underlying Prospectus, as amended or
supplemented if Nobel has furnished any amendments or supplements thereto, or
any document filed under a state securities or blue sky law (each such document
individually being referred to as a "REGISTRATION DOCUMENT" and collectively as
"REGISTRATION DOCUMENTS") or insofar as any Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon the omission or alleged omission to state in any Registration Document or
underlying Prospectus, as amended or supplemented if Nobel has furnished any
amendments or supplements thereto, a material fact required to be stated therein
or necessary to make the statements made therein (in the case of a Prospectus,
in the light of the circumstances under which they were made), not misleading,
and (ii) reimburse each Indemnified Party for all legal or other expenses
reasonably incurred by it in connection with investigating or defending any
Loss, including any amounts paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the prior written consent of
Nobel; provided, however, that Nobel shall not be liable for any Losses arising
out of or based upon any untrue statement or omission made in any Registration
Document in reliance upon and in conformity with written information furnished
to Nobel by or on behalf of a Shareholder stating that it is for use in the
preparation of the Registration Document; provided further, that Nobel
38
shall not be liable in any case to the extent that any Losses arise out of or
are based upon an untrue statement or alleged untrue statement or omission or
alleged omission in a Prospectus, if such untrue statement, alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and the selling Shareholder or other person making
a claim for indemnification failed to deliver, within the time required by the
1933 Act, such Prospectus as so amended or supplemented prior to or concurrently
with the sale of the Nobel Shares to the person purchasing Nobel Shares after
Nobel had furnished such Shareholder with the number of copies of such amended
or supplemented Prospectus reasonably requested by such Shareholder.
(ii) INDEMNITY BY THE SHAREHOLDERS. Each Shareholder shall (i)
indemnify and hold harmless Nobel, any officer, director, employee or agent of
Nobel, and each other person, if any, who controls Nobel within the meaning of
Section 15 of the 1933 Act (each such person being hereinafter referred to in
this Section 11.2(l)(ii) as an "Indemnified Party") against any Losses to which
each such Indemnified Party may become subject under the 1933 Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Document, or arise out of or are based upon the omission or alleged
omission to state in any Registration Document a material fact required to be
stated therein or necessary to make the statements made therein (in the case of
a prospectus, in the light of the circumstances under which they were made,) not
misleading, and (ii) reimburse each Indemnified Party for all legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such Losses or action, including any amounts paid in settlement of any
litigation, commenced or threatened, if such settlement is effected with the
prior written consent of the Shareholder; provided, however, that such
indemnification or reimbursement shall be payable only if, and to the extent
that, any Losses arise out of or are based upon an untrue statement or omission
made in any Registration Document in reliance upon and in conformity with
written information furnished to Nobel by the Shareholder specifically stating
that it is for use in the preparation thereof.
(III) PROCEDURE FOR INDEMNIFICATION. In order for an
Indemnified Party (as defined under Sections 11.2(l)(ii) or 11.2(l)(ii), as the
case may be) to be entitled to any indemnification provided for under this
Section 11.2(l), such Indemnified Party must notify the person from whom
indemnification is being sought (for purposes of this Section 11.2(l), the
"Indemnifying Party") in writing of the claim within 45 days after receipt by
such Indemnified Party of written notice thereof; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent (and only 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, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the claim. The Indemnifying Party will be entitled to participate in the defense
of a Third Party Claim made against an Indemnified Party and, if it so chooses,
to assume the defense thereof with counsel selected by the Indemnifying Party;
39
provided that, with respect to such assumption, (i) such counsel is not
reasonably objected to by the Indemnified Party and (ii) the Indemnifying Party
first admits in writing its obligation hereunder to the Indemnified Party to
indemnify the Indemnified Party with respect to the claim and notifies the
Indemnified Party of its intention to assume such defense within 30 days of
receipt of notice of a Third Party Claim. If the Indemnifying Party does not
timely give written notice of its intention to assume control in the defense of
any Third Party Claim, or, after giving such notice, fails to do so, the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party with respect to such claim. If the Indemnifying Party does timely give
such notice, the Indemnified Party (x) will cooperate in all reasonable respects
with the Indemnifying Party in connection with such defense, (y) will not admit
any liability with respect to, or settle, compromise or discharge any Third
Party Claim without the Indemnifying Party's prior written consent and (z) will
agree to any settlement, compromise or discharge of a claim which the
Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of the liability in connection with
such claim, which releases the Indemnified Party completely in connection with
such claim, which does not obligate the Indemnified Party to take or forbear to
take any action. If the Indemnifying Party assumes the defense of any claim as
provided above, the Indemnified Party shall be entitled to participate in (but
not control) such defense with its own counsel and at its own expense. An
Indemnifying Party who does not assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such Indemnifying Party with respect to such claim.
11.3 PUT RIGHTS. If Nobel has not filed the Registration Statement prior
to the date 140 days following the date hereof, then for each full month
thereafter that the Registration Statement continues not to be filed, the
Shareholders shall have the right to require Nobel to purchase a number of Nobel
Shares equal to the total number of Nobel Shares divided by five. Nobel will
purchase such Nobel Shares within five days of receipt of written notice from
the Shareholders. The purchase price for such Nobel Shares will equal the
Current Market Value on the date of purchase. Nobel's obligation to repurchase
Nobel Shares pursuant to this Section 11.3 shall terminate upon filing of the
Registration Statement. For the purposes hereof, "CURRENT MARKET VALUE" of a
share of Nobel Common Stock on a specified date shall be the average of the
closing prices of Nobel Common Stock for the 20 consecutive trading days
immediately preceding such date.
11.4 NOBEL'S COVENANTS.
(a) For so long as the Nobel Common Stock is publicly traded, Nobel
shall take all actions necessary or reasonably requested by the Shareholders to
enable the Shareholders to sell the Nobel Shares without registration under the
Securities Act within the limitation of the exemption provided by Rule 144 under
the 1933 Act, as such rules maybe amended form time to time, and any similar
rules or regulations hereafter adopted by the SEC, including, without
limitation, the filing on a timely basis of all reports required to be filed by
the 1934 Act (or, if Nobel is not required to file such reports, making publicly
available, the information referenced in paragraph (c)(2) of Rule 144 (or any
similar provision of a successor rule)). Upon the request
40
of the Shareholders, Nobel will deliver to the Shareholders a written statement
as to whether it has complied with such requirements. Notwithstanding the
foregoing, it shall not be a violation of this Section if Nobel fails to file
timely a report required to be filed by the 1934 Act if Nobel has a valid
business reason for delaying the filing of such report.
(b) Nobel understands and acknowledges that the Company intends to
distribute Nobel Shares to the Shareholders as soon as practicable following
Closing. In connection therewith, Nobel will take all actions (not involving
the payment of money) reasonably required to permit the Nobel Shares to be
registered in the names of the Shareholders, including, without limitation,
providing Nobel's transfer agent with an authorization to effect such transfer.
12. REPRESENTATION OF SHAREHOLDERS BY COMPANY'S AGENT.
12.1 APPOINTMENT OF COMPANY'S AGENT.
(a) Each of the Shareholders (herein called the "REPRESENTED
SHAREHOLDERS") hereby irrevocably appoints Xxxxx Xxxx (herein called the
"COMPANY'S AGENT") as such Represented Shareholders' agent and attorney-in-fact
to take any action required or permitted to be taken by such Represented
Shareholder under the terms of this Agreement, including, without limitation,
the execution, delivery and receipt of any notices, certificates or other
documents to be executed, delivered or received by or on behalf of any or all of
the Represented Shareholders, the payment of expenses relating to the
transactions contemplated by this Agreement, the representation of the
Represented Shareholders in the resolution of any disputed matters hereunder and
in indemnification proceedings hereunder, and the right to waive, modify or
amend any of the terms of this Agreement. Each Represented Shareholder agrees
to be bound by any and all actions taken by the Company's Agent on such
Represented Shareholder's behalf.
(b) Nobel shall be entitled to rely exclusively upon any
communications given by the Company's Agent on behalf of any Represented
Shareholder and shall not be liable in any manner whatsoever for any action
taken or not taken in reliance upon actions taken or not taken or communications
made by the Company's Agent. Nobel shall be entitled to disregard any notices or
communications given or made by Represented Shareholders unless given or made
through the Company's Agent, except as provided in Section 12.2.
12.2 SUCCESSOR AGENT. In the event of the death or resignation of the
Company's Agent or her inability to perform her functions hereunder, the
Represented Shareholders shall promptly appoint a new agent or agents as
attorney-in-fact or attorneys-in-fact, and such appointment or appointments
shall be deemed to have been made when communicated to the Nobel in writing
signed by the former holders (or the personal representatives thereof) of at
least 51% of the Nobel Shares owned by Represented Shareholders immediately
prior to the Closing Date. If the Represented Shareholders do not within fifteen
days appoint a new agent or agents, then the Represented Seller then living who
previously owned the greatest number of Nobel Shares outstanding immediately
prior to the Closing Date shall serve as Company's Agent if he or she
41
is able and willing to do so, until a successor agent or agents shall have been
appointed in accordance with the provisions hereof.
12.3 SHAREHOLDERS' ACTIONS. The manner and form by which the Represented
Shareholders shall decide upon any new agent and attorney-in-fact shall be
decided solely by the former holders (or the personal representatives thereof)
of at least 51% of the Nobel Shares owned by Represented Shareholders
outstanding immediately prior to the Closing Date. The Represented Shareholders
recognize, and hereby acknowledge, that the Company's Agent has an interest in
the subject matter of this Agreement and that the appointment of such Agent
(which shall include any person who becomes the Company's Agent pursuant to the
provisions of Section 12.2) as the Company's Agent constitutes an irrevocable
power-of-attorney coupled with an interest.
13. MISCELLANEOUS.
13.1 COSTS AND EXPENSES. Except as expressly otherwise provided in this
Agreement, Nobel shall bear its own costs and expenses and the Company and
Shareholders shall bear all of the costs and expenses of the Company and
Shareholders in connection with this Agreement and the transactions contemplated
hereby.
13.2 LITIGATION. Should any party default in performance of any of the
terms and conditions of this Agreement or any other agreement referred to herein
which results in the filing of a lawsuit for damages, specific performance or
other remedy, the prevailing party in such lawsuit shall be entitled to its
reasonable attorneys' fees and court costs from the losing party.
13.3 ASSIGNMENT AND BENEFIT. No party shall assign this Agreement or any
rights hereunder, or delegate any obligations hereunder, without the prior
written consent of the other parties. Subject to the foregoing, this Agreement
shall be binding upon the parties and the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto.
13.4 SCHEDULES. Any and all schedules referenced or incorporated herein
are deemed to be a part of this Agreement and are binding and enforceable as to
any terms contained therein. The submission of any information on a schedule
shall constitute a representation by the party providing such schedule of the
truth, correctness and completeness of all information set forth therein. In
the event of any inconsistency between the statements made in the body of this
Agreement and those contained on a schedule (other than an expressed exception
to a specifically-identified statement), those in this Agreement shall control.
13.5 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and
schedules hereto embody the entire agreement and understanding of the parties
and supersede any and all prior agreements, arrangements and understandings
relating to matters provided for herein. The captions are for convenience only
and will not control or affect the meaning or construction of the provisions of
this Agreement. Wherever the context may require, any pronouns used herein
shall be deemed also to refer to the corresponding singular, plural, masculine,
feminine or neuter form.
42
13.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
counterparts together shall be deemed to be one and the same instrument.
13.7 COOPERATION. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments and to do, or cause to be
done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
13.8 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to be properly given if
transmitted by messenger, overnight courier service, first class certified mail
(return receipt requested) or telecopy (which is confirmed), in each case
postage or other charges prepaid, addressed to the other party at the address
shown below. Any party may change such address by notice given in such manner.
All notices shall be effective (i) if sent by messenger or overnight courier
service, when delivered, (ii) if sent by mail, three days after posting, and
(iii) if sent by telecopy, when sent (provided that, if sent by telecopy, a
duplicate copy thereof is sent by mail by the following day).
If to Nobel:
Nobel Education Dynamics, Inc.
Rose Tree Corporate Center II
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to:
Nobel Education Dynamics, Inc.
Rose Tree Corporate Center II
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: General Counsel
Telecopier: (000) 000-0000
43
If to the Company or a Shareholder:
Ms. Xxxxx Xxxx
00000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX
With a copy to:
Cantor, Arkema & Xxxxxxx
The First National Bank Building
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxx, Esq.
Telecopier: (000) 000-0000
13.9 AMENDMENT, WAIVER, DISCHARGE, ETC. This Agreement may not be
released, discharged, abandoned, amended, changed or modified in any manner,
except by an instrument in writing signed on behalf of each of the parties
hereto by their duly authorized officers or representatives (which, in the case
of the Company and each Shareholder, shall include Company's Agent). The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to be a waiver of any other
or subsequent breach.
13.10 SEVERABILITY. The invalidity or unenforceability of any particular
provision, or part of any provision, of this Agreement shall not affect the
other provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
13.11 NUMBER OF DAYS. Except as otherwise provided herein, in computing
the number of days for purposes of this Agreement, all days shall be counted,
including Saturdays, Sundays and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday or holiday, then the final
day shall be deemed to be the next day which is not a Saturday, Sunday or
holiday.
13.12 NO THIRD PARTY BENEFICIARIES. The agreements included herein, and
otherwise made between the parties hereto as part of this transaction, are
solely the obligation of, and for the benefit of, the parties hereto, and there
shall be no third party beneficiary of any of the warranties, representations or
covenants made in this Agreement or any of the other agreements between the
parties hereto as part of this transaction.
44
13.13 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without reference to
that Commonwealth's conflict of laws provision.
13.14 FORUM SELECTION CLAUSE. The exclusive venue of the resolution of any
dispute arising from the provisions of this Agreement shall lie with any court
of competent jurisdiction in the city of Richmond, Virginia.
13.15 DEFINITION OF "COMPANY'S KNOWLEDGE". As used herein, the phrase "to
the Company's knowledge" (or similar phrases) shall mean the actual knowledge of
Xxxxx Xxxx, Xxxxxxx Xxxx, Xxx Xxxxxxx or Xxxxx Xxxxx.
In Witness Whereof, and intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the date first above written.
COMPANY:
Loudoun Children's Center, Inc.
By:_____________________________
Xxxxx Xxxx, President
SHAREHOLDERS:
________________________________
Xxxxx Xxxx
________________________________
Xxxxxxx Xxxx
BUYER:
Nobel Education Dynamics, Inc.
By:_____________________________
Xxxx X. Xxxxx
Executive Vice President
45
