Exhibit 4.5
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), effective as of
March 31, 1998 but dated this 30th day of March, 1998, by and among SYLVAN
LEARNING SYSTEMS, INC., a Maryland corporation (the "Purchaser"), Learning
Centers of West Houston, Inc., which has elected to be treated as an S
Corporation pursuant to Subchapter S of the Internal Revenue Code of 1986, as
amended (the "Code") and Xxxxxxx Xxxxxxxxx, the sole stockholder of the Company
(the "Stockholder," whether one or more).
WITNESSETH:
The Stockholder owns all the issued and outstanding capital stock of the
Company. The Purchaser and the Stockholder wish to enter into an agreement for
the acquisition of the Company by the Purchaser through a merger of the Company
into the Purchaser in a transaction qualifying as a tax-free reorganization
under Section 368(a)(l)(A) of the Code (the "Merger"). The parties agree and
acknowledge that for accounting purposes, the Merger is to be treated as a
purchase. The Purchaser, the Company and the Stockholder wish to enter into a
definitive agreement setting forth the terms and conditions of the Merger
Accordingly, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, the Purchaser,
the Company and the Stockholder hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIESS OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company and the Stockholder as follows:
1.1 Organization and Standing The Purchaser is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Maryland and has the corporate power to carry on its business as it is now being
conducted and to own or hold under lease the properties and assets it now owns
or holds under lease. Copies of the Charter and By-Laws of the Purchaser have
been delivered to the Company, and such copies are complete and correct and in
fulfill force and effect on the date of this Agreement. The Purchaser has at all
times in the past operated and used its assets in material compliance with, and
currently is not in violation of and has obtained all material licenses and
permits required by, any law, rule or regulation
12 Financial Statements. The Purchaser has delivered to the Company
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copies of the Purchaser's audited consolidated financial statements for the
fiscal years ended December 31, 1996 and 1997. These financial statements are
true and complete in all material respects, have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently followed
throughout the periods covered by such statements (except as may be stated in
the explanatory notes to such statements), and present fairly the consolidated
financial position and results of operations of the Purchaser at the dates of
such statements and for the periods covered thereby. The Purchaser also has
delivered to the Company copies of its Annual Report on Form 10-Q for the third
quarter year ended September 30, 1997, and all other reports or documents
required to be filed with the Securities and Exchange Commission pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), after the filing of such Quarter]y Report on Form 10-Q and
prior to the date of this Agreement.
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1.3 No Conflict With Other Documents, Neither the execution and delivery
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of this Agreement nor the carrying out of the transactions contemplated hereby
will result in any violation, termination or modification of or be in conflict
with, the Purchaser's Charter or By-Laws, or, any terms of any contract,
instrument or other agreement to which the Purchaser is a party or by which it
or any of its properties is bound or affected, or any law, rule, regulation,
license, permit, judgment, decree or order applicable to the Purchaser or by
which any of its properties or assets are bound or affected, or result in any
breach of or constitute a default (or with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation, or result in the creation of any lien, charge or
encumbrance upon any of its properties or assets, except where such event or
occurrence would not, singly or in the aggregate, have a material adverse on the
Purchaser.
1.4 Brokers and Advisors. The Purchaser has taken no action which would
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give rise to a valid claim against any party hereto for a brokerage commission,
finder's fee, counseling or advisory fee, or like payment.
1.5 Authority. The execution, delivery and performance of this Agreement
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by the Purchaser have been duly authorized by its Board of Directors, and this
Agreement is a valid, legally binding and enforceable obligation of the
Purchaser. Upon the satisfaction of all conditions contained herein and the
filing of Articles of Merger with the Maryland State Department of Assessments
and Taxation and the Texas Secretary of State, this Agreement will result in the
valid, legally binding and enforceable statutory merger of the Company and the
Purchaser.
1.6 Validity of Common Stock. The shares of Purchaser's Common Stock to be
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issued and delivered by the Purchaser in connection with the Merger have been
duly authorized for issuance and will, when issued and delivered as provided in
this Agreement, be duly and validly issued, fully paid and non-assessable.
1.7 Tax-Free Reorganization. The Purchaser is not aware of any events or
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conditions relating to the Purchaser which would preclude the Company or the
Stockholder from treating the Merger as a tax-free reorganization under the
Code.
1.8 Registration Statement on Form S-3. As of the date hereof, the
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Purchaser is aware of no events, actions or conditions which would prevent the
Purchaser from being able to comply with the provisions of Section 11.1(a) of
this Agreement, and will use its best efforts to continue to be eligible to
comply with the provisions of Section 11.1(a).
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SOLE
STOCKHOLDER. The Company and the sole Stockholder hereby jointly and severally
represent and warrant to the Purchaser as follows:
2.1 Authorized and Issued Shares. The Company's entire authorized capital
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stock consists of 1,000,000 shares of Common Stock, $1.00 par value per share
(the "Company Common Stock"), of which 1,000 shares are issued and outstanding.
No shares of Company Common Stock are held in the Company's treasury and no
shares are reserved for issuance. All outstanding shares of Company Common
Stock have
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been duly authorized and are validly issued and are fully paid and non-
assessable and are owned by the Stockholder. The Company is not a party to or
bound by any options, calls, contracts, preemptive rights or commitments of any
character relating to any issued or unissued capital stock, or any other equity
security issued or to be issued by the Company.
2.2 Organization. The Company is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Texas, and has the
corporate power and authority to carry on its business as it is now being
conducted and to own or hold under lease the properties or assets it now owns or
holds under lease and to perform the actions contemplated hereby. Complete and
accurate copies of the current Charter, By-Laws, minute books and stock transfer
books of the Company have been provided to the Purchaser, and such copies are
complete and correct and in hill force and effect. The Company does not own or
have any direct or indirect interest in any other corporation, firm,
partnership, joint venture enterprise or other business entity. The Company has
duly and effectively elected to be treated as an S Corporation under and is
presently operating in accordance with the provisions of Subchapter S of the
Code.
2.3 Transactions with Affiliates. Except as set forth in Section 2.3 of
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the disclosure schedule delivered to the Purchaser pursuant to this Agreement
(the "Disclosure Schedule/" /) or in the Company Financial Statements (as
hereinafter defined), the Company is not a party to any contract, agreement or
other arrangement with any current or former officer, director or stockholder or
any affiliate of any such persons. Each transaction required to be listed on the
Disclosure Schedule is on terms no less favorable than terms available from
unrelated parties.
2.4 Financial Statements. The Company has provided to the Purchaser the
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unaudited financial statements for the fiscal years of the Company ended on
December 31, 1996, and December 31, 1997, which 1997 statement shall be restated
on an accrual basis and audited as soon as practicable after the execution of
this Agreement (collectively, the "Company Financial Statements"). The Company
Financial Statements are complete and correct, have been prepared on a
consistent basis throughout the periods covered thereby and present fairly and
accurately the financial position and results of operations of the Company as of
and for the periods indicated. There are no material liabilities or obligations
of the Company, whether contingent or absolute, as of the dates of such
statements, including liability for taxes of any type, which in accordance with
GAAP consistently applied should have been shown or provided for in the Company
Financial Statements and are not so shown or provided for. Since December 31,
1997, there has been no material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings, net worth, financial position,
business, operations, properties or prospects of the Company except as shown on
Schedule 2.4 of Disclosure Schedule. The Company's accounts receivable arose,
and all accounts receivable that will be outstanding as of the Closing Date
shall have arisen, from bona fide transactions in the ordinary course of
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business and will be collectible by the Company in full, less applicable
reserves shown in the Company Financial Statements, in the ordinary course of
business within ninety days of the Closing Date, and there are no offsets or
claims related to such accounts receivable.
2.5 Taxes. The Company and the Stockholder have properly prepared and
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filed all federal, state and other tax returns required to be filed in
connection with the operations of the Company. True and complete copies of all
federal and state income tax returns for the Company for each of the years ended
December 31, 1994 through December 31, 1997 have been delivered or made
available to the Purchaser on
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or prior to the date hereof and copies of other returns will be made available
upon request. Except as set forth on Section 2.5 of the Disclosure Schedule or
in the Company Financial Statements, neither the Company nor the Stockholder has
any liability for any federal, state, county, local or other taxes whatsoever
that arose or otherwise was incurred on or before the date of the balance sheet
for 1997 included in the Company Financial Statements. No proposed taxes,
additions to tax, interest or penalties have been asserted or are pending
against the Company or the Stockholder with respect to periods ending on or
before Closing, and no such matters are under discussion with the applicable
authorities. There are no agreements, waivers, or other arrangements providing
for extensions of time with respect to the assessment or collection of any
unpaid tax against the Company or the Stockholder. The Company and the
Stockholder have withheld or otherwise collected all taxes or amounts it or he
was required to withhold or collect under any applicable federal, state or local
law, including, without limitation, any amounts required to be withheld or
collected with respect to employee state and federal income tax withholding,
social security, unemployment compensation, sales or use taxes or workmen's
compensation, and all such amounts have been timely remitted to the proper
authorities.
2.6 Agreements. Section 2.6 of the Disclosure Schedule identifies
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each of the following agreements, contracts, documents and other items (whether
written or oral) as to which the Company is a party or otherwise is bound (and
all such contracts, or summaries thereof, have been made available to the
Purchaser). (i) all documents relating to indebtedness for money borrowed or
collateral therefor, including guarantees; (ii) all agreements or plans relating
to employment, compensation of or benefits for officers or employees of the
Company; (iii) all contracts for the purchase of materials, supplies, services,
merchandise or equipment involving consideration of more than $2,000 or
involving purchases in excess of normal operating requirements; (iv) any
contract, agreement, or instrument not entered into in the ordinary course of
the business of the Company on a basis consistent with past practice; (v) any
contract containing restrictions on the Company's operations or its ability to
compete in any geographic region or in any line of business; (vi) any lease of
real property and all personal property leases calling for annual lease payments
in excess of $2,000; and (vii) each and every other contract which is material
to the financial condition, earnings, operation or business of the Company. Each
of the contracts and agreements so listed (collectively, the "Contracts") is a
valid and existing contract or agreement in full force and effect and there
exists no default by the Company thereunder. None of the Contracts will be
violated or breached and no default or right of termination or modification
shall arise thereunder as a result of the consummation of the transactions
contemplated by this Agreement.
2.7 Property. Section 2.7 of the Disclosure Schedule sets forth a schedule
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(the "Property Schedule") of (i) all real property owned or leased by the
Company (the "Real Property"), (ii) all individual items of tangible personal
property and assets (other than inventory) of the Company having a fair market
value in excess of $2,000, and (iii) all patents, trademarks, trade names,
service marks, trade secrets, copyrights, franchise rights or applications
therefor which are held, used, prepared in connection with or otherwise related
to the conduct of the business of the Company. Except as set forth in the
Property Schedule, the Company has good and marketable title to all of such
property and assets owned by it, free of any pledge, mortgage, lien, lease,
security agreement, encumbrance, charge or claim of any nature whatsoever. The
machinery and equipment of the Company are, in all material respects, in good
operating condition and repair, ordinary wear and tear excepted. To the
Company's knowledge, the Company is not infringing on any patent, trademark,
trade name, service xxxx, trade secret or copyright of another entity and has
received no notice or claim of any such infringement.
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2.8 Legal Proceedings Etc. Except as set forth in Section 2.8 of the
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Disclosure Schedule, there are no legal, administrative, arbitration, or other
proceedings or governmental investigations pending or, to the best of the
Company's and the Stockholder's knowledge, threatened against the Company, the
Stockholder or the respective properties or assets of the Company and the
Stockholder.
2.9 Compliance: Licenses. The Company has at all times in the past
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operated and used its assets in material compliance with, and currently is not
in violation of, and has obtained all material licenses and permits required by,
any law, rule or regulation. Section 2.9 of the Disclosure Schedule contains a
true and complete list of all material licenses, permits, approvals, franchises
and other authorizations as are necessary in order to enable the Company to own
and conduct its business.
2.10 Bank Account, etc. Section 2.10 of the Disclosure Schedule sets forth
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a true and complete list of all bank accounts, safe deposit boxes and lock boxes
of the Company including, with respect to each such account and lock box
identification of all authorized signatories.
2.11 Insurance. Section 2.11 of the Disclosure Schedule sets forth a
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summary of all general liability, product liability, fire, casualty, motor
vehicle and other insurance currently maintained by or on behalf of the Company.
All requirements and provisions thereof are being complied with. True and
correct copies of all insurance policies relating to such coverage have been
provided by the Company to the Purchaser. No notice of cancellation has been
given to or received by the Company with respect to any of its insurance
policies, and no such policies are subject to any retroactive rate or audit
adjustments or coinsurance arrangements.
2.12 Employee Plans. Except as set forth in Section 2.12 of the Disclosure
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Schedule, the Company does not maintain, sponsor or contribute to any plans in
effect for pension, profit-sharing, deferred compensation, severance pay,
bonuses, stock options, stock purchases, or any other retirement or deferred
benefit, or for any health, accident or other welfare plan, or any other
employee or retired employee benefits or incentive plan, program, contract,
understanding or arrangement in which any employee, former employee, retired
employee, or beneficiary of any of these, of the Company is entitled to
participate. The plans, programs, contracts, understandings and arrangements
listed on the Disclosure Schedule pursuant to this Section 2.12 are hereinafter
referred to as the "Employee Plans." The Company has supplied the Purchaser
with complete and accurate copies of each such Employee Plan, each Employee Plan
has been operated according to its terms in compliance with all applicable laws.
2.13 Recent Operations: Employee Matters. Since December 31, 1997, (i)
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the Company has operated its business substantially as it was operated
immediately prior to said date and only in the ordinary course, and the Company
and the Stockholder have used their best efforts to preserve intact the
Company's business relationships, (ii) there have been no bonuses paid to or
increases in the compensation of officers or employees, except as set forth in
Section 2. 13(u) of the Disclosure Schedule, and (iii) except as set forth in
Section 2. 13(iii) of the Disclosure Schedule, the Company has not declared or
paid any dividend or made any other distribution with respect to its capital
stock.
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2.14 Stockholder Distributions. No dividends or distributions were
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declared and/or paid to the Stockholder (whether in cash or other assets) after
December 31, 1997 through the date hereof (the "1998 Period").
2.15 Environmental Matters. To the best of Company's knowledge, no
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storage tanks, underground or otherwise, are now located on any properties
occupied by the Company, the Company has complied in all material respects with
all environmental laws relating to its operations or properties occupied by it
and there are no asbestos containing materials located on properties occupied by
the Company. The Company has not received any notice, demand, suit or
information request pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any comparable state law, nor does
it have knowledge of any other party's receipt of same relating to any
properties occupied by the Company.
2.16 Disclosure. The Company and the Stockholder have disclosed to the
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Purchaser all facts material to the assets, business, operations, financial
condition and prospects of the Company. All agreements, schedules, exhibits,
documents, certificates, reports or statements furnished or to be furnished to
the Purchaser by or on behalf of the Company in connection with this Agreement
or the transactions contemplated hereby are true, complete and accurate in all
material respects, and no such items contain any untrue statement of a material
fact or omit a material fact necessary in order to make the statements contained
herein and therein not misleading.
2.17 No Conflict With Other Documents. Neither the execution and delivery
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of this Agreement, nor the carrying out of any of the transactions contemplated
hereby, will result in any violation, termination or modification of, or be in
conflict with, the Company's Articles of Incorporation or By-Laws, any terms of
any contract, instrument or other agreement to which the Company is a party or
by which it or any of its properties is bound or affected, or any law, rule,
regulation, license, permit, judgment, decree or order applicable to the Company
or by which any of its properties or assets are bound or affected, or result in
any breach of or constitute a default (or with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation, or result in the creation of any lien,
charge or encumbrance upon any of its properties or assets, except where such
event or occurrence would not, singly or in the aggregate, have a material
adverse effect on the Company.
2.8 Brokers and Advisors. The Company has taken no action which would
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give rise to a valid claim against any party hereto for a brokerage commission,
finder's fee, counseling or advisory fee, or like payment.
2.9 Authority. The execution, delivery and performance of this Agreement by
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the Company have been duly authorized by the sole Director and the Stockholder,
and this Agreement is a valid and legally binding and enforceable obligation of
the Company. Upon the satisfaction of all conditions contained herein and the
filing of the Articles of Merger with the Maryland State Department of
Assessments and Taxation and the Texas Secretary of State, this Agreement will
result in the valid, legally binding and enforceable statutory merger of the
Company and the Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
hereby represents and warrants to the Purchaser as follows:
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3.1 Ownership of Company Common Stock. Such Stockholder has
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good and marketable title to the number of issued and outstanding shares of
Company Common Stock set forth opposite his or her name on Section 3.1 of the
Disclosure Schedule, free and clear of any pledges, liens, restrictions, claims
or encumbrances of any kind. Such Stockholder is not a party to or bound by any
options, calls, contracts, or commitments of any character relating to any
issued or unissued stock or any other equity security issued or to be issued by
the Company.
3.2 No Conflicts. Neither the execution and delivery of this Agreement nor
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the carrying out of the transactions contemplated hereby, will result in any
breach of or constitute a default (or with notice or lapse of time or both would
become a default), or give to others any rights, under the terms of any
contract, instrument or other agreement to which such Stockholder is a party or
is otherwise bound, or any judgment, decree or order applicable to such
Stockholder.
3.3 Binding Effect. This Agreement is a valid and legally binding and
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enforceable obligation of the Stockholder.
3.4 Litigation. There is no litigation, proceeding or governmental
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investigation pending as to which Stockholder has been served with process or
summons, or to the best of Stockholder's knowledge, threatened or in prospect
against or relating to such Stockholder or the shares of Company Common Stock
owned by him or her or the transactions contemplated by this Agreement.
3.5 Brokers and Advisors. Such Stockholder has taken no action which
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would give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment.
3.6 Investment Intent. It is understood that the shares of Purchaser
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Common Stock to be delivered to the Stockholder pursuant to this Agreement are
not being registered, for purposes of the transactions hereunder, under the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities laws, and the shares are being delivered without registration in
reliance upon an exemption from the registration requirements of the Securities
Act or any state securities laws. The Stockholder is acquiring the Purchaser
Common Stock hereunder only for his own account and not with any intention of
making, or with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act unless such shares first are
registered under the Securities Act.
In connection with the foregoing, each of the Stockholder hereby represents
and warrants that:
(a) such Stockholder has reviewed, discussed and evaluated the information
delivered under Section 1.2 and has had the opportunity to ask questions of, and
receive answers from, executive officers of the Purchaser concerning the terms
and conditions of this Agreement and to obtain any additional information which
such Stockholder considered necessary to verify the accuracy of the information
delivered under Section 1.2,
(b) such Stockholder understands that he or she must bear the economic
risks of the investment in Purchaser Common Stock to be made hereunder for an
indefinite period of time because such
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stock has not been registered under the Securities Act and, therefore, may not
be sold until such stock subsequently is registered under the Securities Act or
an exemption from registration is available; and
(c) such Stockholder has sufficient knowledge and experience in financial
and business matters to enable such Stockholder to be capable of evaluating the
merits and the risks of the exchange of the Company Common Stock for the
Purchaser Common Stock contemplated by this Agreement and such Stockholder's
prospective investment in the Purchaser.
3.7 Legends. It is understood and agreed that, to implement the
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requirements of the Securities Act and state securities laws and evidence the
restrictions upon transfer contained in this Agreement, the Purchaser will cause
a legend to be conspicuously noted on the certificates representing the
Purchaser Common Stock deliverable hereunder, and that the Purchaser will issue
stop transfer instructions to its transfer agent, to the effect that such stock
has not been registered under the Securities Act and that no transfer may take
place except as permitted by Section 11 of this Agreement and after delivery of
an opinion of Purchaser's counsel to the effect that registration thereof for
the purpose of transfer is not required under the Securities Act or that the
stock proposed to be transferred has been effectively registered for that
purpose under the Securities Act.
3 8 No Agreements with Respect to Purchaser Common Stock. Except for
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this Agreement, Stockholder has not entered into any agreement or understanding
with anyone for the sale, at Stockholder's option or otherwise, of any of the
Purchaser Common Stock to be delivered hereunder to Stockholder at the Closing.
4. COVENANTS OF THE PURCHASER. The Purchaser covenants to the Company
and the Stockholder that, except as otherwise consented to in writing by the
Company after the date of this Agreement:
4.1 Stock Reservation. Between the date hereof and the Closing Date, the
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Purchaser will keep available and reserve a sufficient number of shares of
Purchaser Common Stock for issuance and delivery to the Stockholder as
contemplated in this Agreement.
4.2 Cause Conditions to be Satisfied. The Purchaser will use its best
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efforts to cause all of the conditions described in Sections 8 of this Agreement
to be satisfied (to the extent such matters reasonably are within its control).
4.3 Registration Statement on Form S-3. The Purchaser will use its best
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efforts to meet the requirements for eligibility set forth in paragraph A. of
the General Instructions to Form S-3, as promulgated by the U.S. Securities and
Exchange Commission in fulfilling its obligations under Section 11 hereof
4.4 Consents. The Purchaser agrees to take all necessary corporate or
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other action and to use best efforts to obtain all consents and approvals
required for consummation of the transactions contemplated by this Agreement.
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4.5 Tax-Free Reorganization. The Purchaser recognizes that the Company and
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the Stockholder desire to treat the Merger as a tax-free reorganization, and
will use its best efforts to cooperate with the Company and the Stockholder in
this regard.
4.6 Establishment of New Centers. For and so long as Stockholder, Xxxxxxx
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Xxxxxxxxx, shall continue his employment with Purchaser and manage the Original
Centers, but not beyond January 1, 2001, Purchaser shall not establish a Sylvan
Learning Center at any location lying within four (4) miles of the intersection
of Interstate 10 and Bunker Hill Road (in west Houston) or within six (6) miles
of the intersection of Interstate 10 and Dominion Road (near Katy), without the
prior written approval of Xxxxxxx Xxxxxxxxx. This prohibition shall not limit
Purchaser from establishing contract-operated Sylvan Learning Centers in public
or non-public schools or in corporations for Sylvan-At-Work operations, at any
site within such areas.
5. COVENANTS OF THE COMPANY AND THE STOCKHOLDER. The Company and the
Stockholder jointly and severally covenant to the Purchaser that, except as
otherwise consented to in writing by the Purchaser after the date of this
Agreement.
5.1 Conduct of Business. After the date hereof and through the date of the
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Closing, with respect to the Company (a) its business will be conducted only in
the ordinary course; (b) it will terminate each of its Employee Plans and will
not enter into, adopt or amend any employee benefit plan, agreement or
arrangement, enter into or amend any employment contracts, or increase the
salaries or compensation of its officers or employees, other than ordinary
increases in salaries in accordance with past practices; (c) it shall pay in
hill all liabilities outstanding on the date hereof except for (i) those
balances owed to the holders of the Company's notes and other liabilities as
shown in Section 5.1(c) of the Disclosure Schedule, and (ii) accrued employee
compensation, leave and benefits and the taxes thereon as shown in Section 5.1
(c) of the Disclosure Schedule; and (d) it shall not incur any additional
liability for borrowed money, or encumber any of its assets; (e) all outstanding
loans payable by the Company to the Stockholder or receivable by the Company
from the Stockholder or any employee shall be repaid in hill by the appropriate
party; (f) its current assets at all times will exceed all of its liabilities;
(g) except as shown in Sec 5.1(g) of the Disclosure Schedule, all trade payables
and liabilities and obligations payable in installments shall be current; (h) it
will use its best efforts to preserve its business organization intact, to keep
available the service of its officers and employees and to preserve the goodwill
of suppliers, customers and others doing business with it; (i) it will not enter
into any agreement for the purchase, sale or other disposition, or purchase,
sell or dispose of, any equipment, supplies, inventory, investments or other
assets (other than sales of inventory and purchases of materials and supplies in
the ordinary course of business and in accordance with past practices); (j) it
will not compromise or write off any material account receivable other than by
collection of the hill recorded amount thereof, (k) no change shall be made in
its Charter or By-Laws; (l) no change shall be made in the number of shares or
terms of its authorized, issued or outstanding capital stock, nor shall it enter
into or grant any options, calls, contracts or commitments of any character
relating to any issued or unissued capital stock; (m) no dividend or other
distribution or payment shall be declared or paid in respect of its capital
stock; and (n) no bonus or additional compensation in excess of normal salary
shall be paid to or declared for the benefit of any Stockholder.
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5.2 Consents. The Company and the Stockholder agree to take all
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necessary corporate or other action and to use their best efforts to obtain all
consents and approvals required for consummation of the transactions
contemplated by this Agreement.
5.3 Audited Financial Statements. The Stockholder will cause the Company
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to deliver to Purchaser the Company's audited financial statements for the year
ended December 3 1, 1997 as soon as practicable after the execution of this
Agreement. Said statements shall be prepared to reflect the business operations
of the Company on an accrual basis in accordance withGAAP.
5.4 Cause Conditions to Be Satisfied. The Company and the Stockholder will
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use their best efforts to cause all of the conditions described in Sections 7
and 8 of this Agreement to be satisfied (to the extent such matters reasonably
are within their control).
5.5 Tax-Free Reorganization. The Company and the Stockholder recognize
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that the Purchaser desires to treat the Merger as a tax-free reorganization
under the Code and will use best efforts to cooperate with the Purchaser in this
regard.
5.6 Reviewed Financial Statement. The stockholder, at his sole expense,
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shall deliver to the Purchaser the Company's reviewed financial statement for
the three (3) months ended March 31, 1998 as soon as practicable after the
Closing. Said statements shall be prepared to reflect the business operations of
the Company on an accrual basis in accordance with GAAP.
6. MERGER OF PURCHASER AND THE COMPANY. Subject to the terms and
conditions of this Agreement, the Purchaser and the Company agree to effect the
following transactions at the Closing:
6.1 Conditions. The Purchaser and the Company will deliver to the other
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appropriate evidence of the satisfaction of the conditions to their respective
obligations hereunder.
6.2 Merger. At the Closing, the Company will be merged with and into the
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Purchaser pursuant to the provisions and with the effect provided in the general
corporation laws of the States of Maryland and Texas. The parties shall prepare
and execute appropriate merger documents under the corporate laws of Maryland
and Texas, containing the terms provided in this Agreement, including a
Certificate and Articles of Merger which shall be filed with the Maryland State
Department of Assessments and Taxation and with the Texas Secretary of State on
the Effective Closing Date, or immediately thereafter. The Purchaser shall be
the surviving corporation in the Merger.
6.3 Initial Considerarion/Conversion Amount: Conversion of the Company
------------------------------------------------------------------
Shares. As a result of the Merger and without any action by the holders thereof,
------
all of the shares of Company Common Stock issued and outstanding immediately
prior to the Merger and all rights in respect thereof, shall be converted into
that number shares of Purchaser Common Stock having a market value of $944,146
(the "Conversion Amount" or "Initial Consideration"). As a result of such
conversion, the Stockholder will receive the number of shares of Purchaser
Common Stock to be issued pursuant to the Merger, rounded to the nearest whole
share. In order to effect such conversion, (i) the Stockholder will deliver to
the Purchaser at the Closing certificates in due and proper form representing
the shares of Company Common Stock owned by
10
such Stockholder, duly endorsed or accompanied by duly executed stock powers,
with signatures guaranteed by a commercial bank or a member of the National
Association of Securities Dealers, Inc., and (ii) the Purchaser shall deliver to
the Stockholder a certificate, in due and proper form, representing the number
of shares of Purchaser Common Stock to which such Stockholder is entitled. Each
share of Purchaser Common Stock issued pursuant to the Merger shall be frilly
paid and non-assessable. For purposes of the foregoing, the market value of the
Purchaser Common Stock shall equal the average of the closing prices reported in
the Wall Street Journal for each of the fifteen (15) trading days ended and
including Friday, March27, 1998.
6.4 Earnout Consideration. In addition to the Initial Consideration to be
----------------------
paid at Closing, the Purchaser shall pay to the Stockholder the amounts set
forth in clauses (a), (b) and (c) below (together, the "Earnout Consideration,"
and, collectively with the Initial Consideration, the "Aggregate Purchase
Price"), subject to the terms and conditions of those clauses.
(a) The Purchaser agrees to pay the Stockholder as additional
consideration for the Company Common Stock that number of shares of the
Purchaser Common Stock having a then Market Value (as defined below) equal to
the result of multiplying the West Houston EBIT(as defined below) for 1998 in
excess of $200,000 by .333 and then by 5, with three-fourths of such shares
being delivered to Stockholder on April 1, 1999, and the remaining one-fourth of
such shares being delivered to Stockholder on April 1, 2001, subject to the
conditions that Stockholder Xxxxxxx Xxxxxxxxx shall not as of December 31, 1998
(to receive the three-fourths portion) and March 31, 2001 (to receive the one-
fourth portion), respectively, have terminated his employment with Purchaser
"without cause" as of such dates or as of such dates had his employment
terminated "for cause" by Purchaser, as those terms are used in the Employment
Contract attached hereto as Exhibit A.
(b) The Purchaser agrees to pay the Stockholder as additional
consideration for the Company Common Stock that number of shares of the
Purchaser Common Stock having a then Market Value (as defined below) equal to
the result of multiplying the West Houston EBIT (as defined below) for 1999 in
excess of $200,000 by 333 and then by 5, with three-fourths of such shares being
delivered to Stockholder on April 1, 2000 and the remaining one-fourth of such
shares being delivered to Stockholder on April 1, 2001, subject to the
conditions that Stockholder Xxxxxxx Xxxxxxxxx shall not as of December 31, 1999
(to receive the three-fourths portion) and March 31, 2001 (to receive the one-
fourth portion), respectively, have terminated his employment with Purchaser
"without cause" as of such dates or as of such dates had his employment
terminated "for cause" by Purchaser, as those terms are used in the Employment
Contract attached hereto as Exhibit A.
(c) The Purchaser agrees to pay the Stockholder as additional
consideration for the Company Common Stock that number of shares of the
Purchaser Common Stock having a then Market Value (as defined below) equal to
the result of multiplying the West Houston EBIT (as defined below) for 2000 in
excess of $200,000 by .333 and then by 5, with three-fourths of such shares
being delivered to Stockholder on April 1, 2001, and the remaining one-fourth of
such shares being delivered to Stockholder on April 1, 2001, subject to the
conditions that Stockholder Xxxxxxx Xxxxxxxxx shall not as of December 31, 2000
(to receive the three-fourths portion) and March 31, 2001 (to receive the
one-fourth portion), respectively, have terminated his employment with Purchaser
"without cause" as of such date, or, as of such dates had his employment
terminated "for cause" by Purchaser, as those terms are used in the Employment
Contract attached hereto as Exhibit A.
11
(d) For purposes of this Section 6.4, the Market Value of a share of
Purchaser Common Stock shall equal the average of the closing per share sales
prices reported in the Wall Street Journal, for each of the 15 trading days
immediately prior to issuance.
(e) For purposes of this Section 6.4, West Houston EBIT shall mean the
net profits of Purchaser derived from the operation of the existing Sylvan
Learning Centers located at 0000 Xxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
and 00000 Xxxx Xxxxxxx, Xxxxx 000, Xxxx, Xxxxx 00000 (the "Original Centers"),
and no others unless either of the two Centers aforementioned shall be closed
and relocated to another site pursuant to the written approval of Purchaser. The
term "net profits" shall be calculated on an accrual basis center by center for
the Original Centers in accordance with generally accepted accounting principles
consistently applied, and shall mean (whether any given Original Center has, in
fact, a profit or a loss) the yearly revenues attributable to all learning
center operations conducted therein, less the sum of 1) all operating expenses
and local, co-op and hill national advertising costs and charges directly
incurred in operating said Centers, 2) depreciation and amortization charges
against capitalized items in the Original Center, 3) 6% of the yearly revenues
(as an adjustment to reach comparability to franchised center operations), and
4) Employee's salary and bonuses (under Section 2.0) and benefits (under Section
5.0), and Employee's staff; office and travel and entertainment expenses. Items
under this last category will be divided equally only among those Centers (which
may include additional centers to the two Original Centers) subject to
Employee's managerial control from the date they open, which are located in the
------
area of the Territory of Sylvan License Agreement #314 as configured immediately
----
prior to the Closing. In calculating net profits, no consideration or effect
shall be given to a) extraordinary and/or non-recurring expenses associated with
the closing of any Original Center(s), b) capitalized expenditures associated
with expansion of Original Centers (these amounts being later reflected in
depreciation and amortization charges, and c) any indirect internal overhead
expense incurred by Employer for accounting, marketing, finance, management,
administration, human resources, and legal functions that benefit the Original
Centers and their operations. The net profit of each of the Original Centers
will be combined to determine the combined net profit, if any.
(f) Purchaser covenants to Stockholder that it will, at all times,
reserve a sufficient number of shares of Purchaser Common Stock to enable it to
pay the Earn-out Consideration in full.
6.5 Closing. The closing (the "Closing") of the transactions contemplated
-------
by this Agreement shall take place at the offices of the Company, in Houston,
Texas, beginning at 4:00 p.m. on March 30, 1998, or at such other time and place
as may be agreed upon in writing by the Purchaser and the Stockholder (the
"Closing Date"). The closing shall be effective as of the close of business on
March 31, 1998 (the "Effective Closing Date").
7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. Unless waived by the
Purchaser in writing in its sole discretion, all obligations of the Purchaser
under this Agreement are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
7.1 Approvals of Governmental Authorities. All governmental approvals
-------------------------------------
necessary or advisable in the reasonable opinion of the Purchaser's counsel to
consummate the transactions contemplated by this Agreement shall have been
received and shall not contain any provision which, in the reasonable judgment
of the Purchaser, is unduly burdensome. Transactions contemplated by this
12
Agreement shall have been received and shall not contain any provision which, in
the reasonable judgment of the Purchaser, is unduly burdensome.
7.2 No Adverse Proceedings or Events. No suit, action or other proceeding
--------------------------------
against the Company or the Purchaser, or their respective officers or directors,
or either of the Stockholder, shall be threatened or pending before any court or
governmental agency in which it will be, or it is, sought to restrain or
prohibit any of the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
7.3 Consents and Actions: Contracts. All requisite consents of any third
-------------------------------
parties and other actions which the Company has covenanted to use its best
efforts to obtain and take under Section 5.2 hereof shall have been obtained and
completed. All material contracts and agreements of the Company, including,
without limitation, all contracts and agreements listed on Section 2.6 of the
Disclosure Schedule, shall be in full force and effect and shall not be affected
by the consummation of the transactions contemplated hereby.
7 4 Other Evidence. The Purchaser shall have received from the Company
--------------
and the Stockholder such further certificates and documents evidencing due
action in accordance with this Agreement, including certified copies of
proceedings of the Board of Directors and stockholders of the Company, as the
Purchaser reasonably shall request.
7.5 Emoloyment Agreement. The Purchaser and Xxxxxxx Xxxxxxxxx shall have
--------------------
entered into an Employment Agreement in substantially the form of Exhibit A
-------
attached hereto.
7.6 Current Financial Statements and Projections. The Stockholder shall
--------------------------------------------
have provided, or caused the Company to have provided to Purchaser the audited
financial statements of the Company for calendar year 1997 showing an EBIT of at
least $200,000 for such year, as well as a projection of revenues and expenses
for calendar year 1998, which projection reflects net income of at least
$240,000 for such year. Such audited financial statements shall be prepared on
an accrual basis, in accordance with GAAP. "EBIT" means the Company's net
revenues minus all of its expense items including any extraordinary and non-
recurring items and depreciation and amortization, but excluding interest and
taxes. For the 1998 projection, EBIT shall be calculated in the same manner as
"profits subject to bonus' under paragraph 2.02 of the Employment Agreement
attached hereto as Exhibit A.
7. 7 Purchase of Other Houston and deliver to Stockholder the Purchaser
-------------------------
Common the purchase of at least seven (7) of the following 315, 316, 323, 326,
327, 347 and 351 on or before Centers. The obligation of Purchaser to close
Stock is conditioned on Purchaser closing on nine (9) Sylvan Learning Centers
#311, 314, April 1, 1998. At the present time, Purchaser has non-binding letters
of agreement to purchase all of said centers by April 1, 1998. If the closing of
purchases on at least seven (7) of the centers listed above does not occur, for
whatever reason, by April 1, 1998, Purchaser reserves the right to cancel
this transaction by telephonic notice to Stockholder not later than 10:00 p.m.
April 1, 1998, in which case the Purchaser Common Stock shall not be delivered
to Stockholder, and Purchaser will promptly return all closing documents
delivered by the Company and Stockholder at the Closing.
13
7.8 Resignation of Officers and Directors. Each and every officer and
------------ ----------------------
director of the Company shall have resigned from any and all positions with the
Company as director, officer or employee effective as of immediately prior to
the Effective Closing Date.
8. CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDER'S OBLIGATIONS. Unless
waived by the Company and the Stockholder, all obligations of the Company and
the Stockholder under this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
8.1 No Adverse Proceedings or Events. No suit, action or other proceeding
--------------------------------
against the Company or the Purchaser, or their respective officers or directors,
or the Stockholder, shall be threatened or pending before any court or
governmental agency in which it will be, or it is, sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the transactions contemplated hereby.
8.2 Consents and Actions, All requisite consents of any third parties and
--------------------
other actions which the Purchaser has covenanted to use its best efforts to
obtain and take under Section 4.4 of this Agreement shall have been obtained and
completed.
8.3 Other Evidence. The Company and the Stockholder shall have received
--------------
from the Purchaser such further certificates and documents evidencing due action
in accordance with this Agreement, including certified copies of proceedings of
the Board of Directors of the Purchaser, as the Company and the Stockholder
reasonably shall request.
9. INDEMNIFICATION.
9.1. Indemnification bv the Stockholder. The Stockholder hereby
----------------------------------
covenants to indemnify and hold harmless the Purchaser and its respective
successors and assigns from and after the date of Effective Closing Date against
and in respect of the following:
(i) any damage or loss resulting from any misrepresentation, breach of
representation or warranty or breach or non-fulfillment of any agreement or
covenant on the part of the Company or the Stockholder under this Agreement, or
from any inaccuracy or misrepresentation in or omission from any certificate or
other instrument or document furnished or to be furnished by the Company or the
Stockholder hereunder;
(ii) any liabilities or obligations of the Company or the Stockholder
for federal, state or local income tax or, to the extent not accrued or
reflected in the Financial Statements, any personal property, FICA, withholding,
excise, unemployment, sales or franchise taxes arising from
operations of the Company prior to the Effective Closing Date except as shown in
Schedule 5.1(c) and 5.1(g) of the Disclosure Schedule.
(iii) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs, reasonable attorneys' fees and expenses of any nature incident
to any of the matters indemnified
14
against pursuant to this Section 9.1, including, without limitation, all such
costs and expenses incurred in the defense thereof or in the enforcement of any
rights of the Purchaser hereunder.
9.2. Notice and Defense. The Purchaser shall notify the Stockholder of any
------------------
asserted liability, damage, loss or expense claimed to give rise to
indemnification hereunder and the Stockholder shall have an initial right to
defend, compromise and settle such matter provided that the Purchaser is fully
protected from any liability, loss damage, cost or expense in connection
therewith, Within ten (10) days of receipt of such notice, Stockholder shall
respond in writing as to whether Stockholder will engage counsel at
Stockholder's expense to defend the claim. If Stockholder does not respond, or
affirmatively declines to defend the claim or disputes its obligation to
indemnify, the Purchaser shall then have, at its election, the right to
compromise or defend any such matter at the Stockholder's sole cost and expense
through counsel chosen by the Purchaser and reasonably acceptable to the
Stockholder; provided, however, that any such compromise or defense shall be
conducted in a manner which is reasonable and the Stockholder shall in all
events have a right to veto any such compromise or defense which might increase
the potential liability of, or create a new liability for, the Stockholder
(other than under Section 9.1). Each party agrees in all cases to cooperate with
the defending party and its or his counsel in the compromise of or defending of
any such liabilities or claims. In addition, the non-defending party shall at
all times be entitled to monitor such defense through the appointment, at its or
his own cost and expense, of advisory counsel of its own choosing. As to any
claim paid by the Purchaser for which the Stockholder has indemnity liability
under this Section 9, and which the Stockholder does not reimburse Purchaser
within five (5) days following demand for reimbursement by Purchaser, Purchaser
may, in addition to any other remedies, (if such Stockholder is then an employee
of Purchaser) offset the amount of the Stockholders liability on the claim paid
against any compensation payable to the Stockholder.
9.3. Indemnification bv the Purchaser. From and after the Closing Date,
--------------------------------
the Purchaser hereby covenants and agrees to indemnify and hold harmless the
Stockholder against and in respect of the following.
(i) any liability, loss, damage or expense resulting from any
misrepresentation on, breach of warranty or non-fulfillment of any agreement or
covenant on the part of Purchaser under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument or
document furnished or to be furnished by the Purchaser hereunder; and
(ii) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs, reasonable attorneys' fees and expenses of any nature incident
to any of the matters indemnified against pursuant to this Section 9.3,
including without limitation, all such costs and expenses incurred in the
defense thereof or in the enforcement of any rights of the Stockholder
hereunder.
The Stockholder shall notify the Purchaser of any asserted liability,
damage, loss or expense claimed to give rise to indemnification hereunder and
thereafter the Purchaser shall have the right to defend, compromise and settle
such matter provided that the Stockholder is fully protected from any cost or
expense in connection therewith. - - -right to defend, compromise and settle
such matter provided that the Stockholder is fully protected from any cost or
expense in connection therewith.
15
10 SURVIVAL; LIMITATIONS.
10.1 Survival. The representations, warranties and agreements made by the
--------
parties in this Agreement and in any other certificates and documents delivered
in connection herewith, including the indemnification obligations of the
Stockholder and Purchaser set forth in Section 9 hereof, shall survive the
Closing under this Agreement regardless of any investigation made by the party
making claim hereunder, except that, subject to the provisions of the next
sentence, neither the Purchaser, on the one hand, nor the Stockholder, on the
other, shall have any liability with respect to any matter if notice of a claim
has not been provided on or prior to March 31, 2000. Notwithstanding the
foregoing, (i) any indemnification obligations of the Stockholder relating to
federal, state or local tax matters or environmental matters of any sort shall
continue in hill force and effect without limitation until expiration of the
statute of limitations applicable to such tax or environmental matters, (ii) the
representation and warranty contained in Sections 2.1, 2.2 or 3.1 and any
indemnification obligations of the Stockholder in connection therewith shall
continue in hill force and effect without any limitation, (iii) any claims,
actions or suits the Purchaser, on the one hand, or the Company or the
Stockholder, on the other hand, may have which arises from any fraud or willful
misconduct on the part of the Stockholder or the Company, or any representative
of either, on the one hand, and the Purchaser or any representative of it, on
the other hand, shall continue in full force and effect without limitation until
expiration of the statute of limitations applicable thereto.
10.2 Limitations. No indemnified party shall be entitled to
-----------
indemnification hereunder until such time as a single loss or an aggregate of
several losses equals Ten Thousand Dollars ($10,000), at which time such
indemnified party shall be entitled to indemnification for all losses sustained,
incurred, paid or required to be paid by such indemnified party in excess of the
$10,000; and in no event shall any party to this Agreement be entitled to
indemnification for a single loss or an aggregate of several losses which
exceeds the Aggregate Purchase Price.
11 REGISTRATION RIGHTS.
11.1 Registration Procedures and Expenses. So long as the Stockholder has
------------------------------------
not initiated the termination of his employment with the Purchaser pursuant to
Section 4.01 of the Employment Agreement between the Stockholder and the
Purchaser dated as of the date hereof, Purchaser shall:
(a) as soon as practicable after the closing date but in no event
later than ninety (90) days after the closing date, prepare and file with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 which meets the requirements of Rule 415 promulgated under the
Securities Act (a "Shelf Registration Statement") covering the sale by the
Stockholder from time to time of one half of the shares of the Purchaser Common
Stock received by the Stockholder in the Merger, and as soon as practicable
after the first anniversary of the closing date, but in no event later than
ninety (90) days after the first anniversary of the closing date, a Shelf
Registration Statement covering the sale by the Stockholder from time to time of
the remaining shares of Purchaser Common Stock. The foregoing notwithstanding,
Purchaser shall have no obligation to file a Shelf Registration Statement or to
maintain the effectiveness of any previously filed Shelf Registration Statement
if the sale of the Purchaser Common Stock pursuant to exemption from
registration under Rule 144 is available to the Stock-holder, Further, the
Purchaser may extend its obligation to file a registration statement if the
Purchaser advises the Stockholder that there is a pending, but unannounced
transaction or
16
development which Purchaser determines is not then appropriate for disclosure,
and that registration of the Purchaser Common Stock would require such
disclosure.
(b) use its best efforts, subject to receipt of necessary information
from the Stockholder, to cause each of the Shelf Registration Statements to
become effective;
(c) prepare and file with the Commission such amendments and
supplements to the Shelf Registration Statements and the prospectus used in
connection therewith as may be necessary to keep the Shelf Registration
Statements effective until the earlier of the date on which the Purchaser Common
Stock registered by such Shelf Registration Statement has been sold, or one year
from the date of the initial filing thereof,
(d) during the period referred to in (c) above, prepare and promptly
file with the Commission, and promptly notify the Stockholder of the filing of,
such amendment or supplement to each such Shelf Registration Statement and the
prospectus as may be necessary to correct any statements or omissions if, at any
time when a prospectus relating to the Purchaser Common Stock is required to be
delivered under the Securities Act, any event has occurred the result of which
is that any such prospectus then in effect would include or incorporate an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the circumstances in
which they were made;
(e) advise the Stockholder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of any of such Shelf Registration Statements or the
initiation or threatening of any proceeding for that purpose and promptly use
its diligent best efforts to prevent the issuance of any stop order and to
obtain its withdrawal if such stop order should be issued;
(f) furnish to the Stockholder with respect to the Purchaser Common
Stock registered under any of the Shelf Registration Statements such number of
copies of prospectuses and preliminary prospectuses in conformity with the
requirements of the Securities Act and such other documents as the Stockholder
may reasonably request (but in no event more than 100 copies), in order to
facilitate the public sale or other disposition of all or any of the registered
Purchaser Common Stock by the Stockholder; provided, however; that the
--------- -------
obligation of Purchaser to deliver copies of prospectuses or preliminary
prospectuses to the Stockholder shall be subject to the receipt by Purchaser of
reasonable assurances from the Stockholder that the Stockholder will comply with
the applicable provisions of the Securities Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
prospectuses or preliminary prospectuses;
(g) file documents required of Purchaser for normal blue sky clearance
in states reasonably specified in writing by the Stockholder, provided, however,
that Purchaser shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented; and
(h) bear all expenses in connection with the procedures in paragraphs
(a) through (g) of this Section 11.1 and the registration of the Purchaser
Common Stock pursuant to each of the
17
Shelf Registration Statements, other than fees and expenses, if any, of counsel
or other advisers to the Stockholder.
11.2 Engagement of Underwriters. The parties hereto agree that the
------------- ------------
Purchaser obligation to (i) conduct, arrange or coordinate any distribution or
sales activities on Stockholder with respect to the Purchaser Common Stock other
than as set forth in Section 11.1 above or (ii) retain any underwriter(s) in
connection with the registration and/or distribution of the Purchaser Common
Stock pursuant to this Section 11. The Stockholder agrees that any
underwriter(s) or counsel engaged in connection with the registration or
distribution of the Purchaser Common Stock required to be registered pursuant to
this Section 11 will be retained by and at the sole expense of the Stockholder
and agrees further that any discounts or commissions payable to such
underwriter(s) shall also be an expense solely of the Stockholder. In the event
the Stockholder engages one or more underwriters pursuant to this Section 11.2,
the Stockholder shall enter into an underwriting agreement with the managing or
lead managing underwriter in the form customarily used by such underwriter with
such changes thereto as the parties thereto shall agree; and, further, shall
provide to such underwriter any documents or other information as is necessary,
in the underwriter's reasonable opinion, to facilitate the effectiveness of the
Shelf Registration Statement and the completion of the distribution of the
Purchaser Common Stock so registered.
11.3 Indemnification with respect to Shelf Registration Statements.
------------------------------------- -----------------------
Purchaser hereby agrees to indemnify the Stockholder against liability arising
out of or based upon any untrue statement or alleged untrue statement of
material fact in any of the Shelf Registration Statements filed by Purchaser
pursuant hereto, or the omission or alleged omission to state or incorporate by
reference in such Shelf Registration Statements any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, other than any such statement included or incorporated by reference
in, or omitted from, such Shelf Registration Statements by Purchaser in reliance
upon and in conformity with written information furnished to Purchaser
specifically for use therein by or on behalf of the Stockholder. The Stockholder
hereby agrees to indemnify Purchaser against liability arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
included or incorporated by reference in the Shelf Registration Statements or
the omission or alleged omission to state or incorporate by reference therein
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading, if such statement or omission was made by
Purchaser in reliance upon and in conformity with written information furnished
to Purchaser for use or incorporation by reference in such Shelf Registration
Statements.
12. CONFIDENTIALITY. After the date hereof the Stockholder will hold
in confidence and not reveal to any third parties any knowledge or information
of a confidential nature with respect to the business, products, know-how and
methods of operation of the Company, and will not disclose, publish or make use
of the same, provided, however, that the foregoing shall not be applicable to
any disclosure or use of confidential information or knowledge that can be
demonstrated to have (i) been publicly known prior to the date of this
Agreement, (ii) become well known by publication or otherwise not due to the
unauthorized act or omission on the part of the Stockholder, or (iii) been
supplied to the Stockholder by a third party without violation of the rights of
the Company or the Purchaser or any other party. The parties agree that the
remedy at are consummated, it is expressly understood that the Stockholder will
bear, and will not cause the Company to pay, any legal fees or other expenses
incurred by Company in connection with the transactions contemplated by this
agreement, as well as the cost of furnishing the audited and reviewed
18
Company Financial Statements referred to in Section 2.4; provided, however, that
in the event of any litigation between the parties hereto relating to or arising
from this Agreement, the prevailing party in such litigation shall be entitled
to payment by the non-prevailing party of all reasonable attorney's fees and
costs.
13. NOTICES. Except as otherwise provided herein, all notices, requests,
demands and other communications under or in connection with this Agreement
shall be in writing, and, (a) if to the Purchaser, shall be addressed to:
0. Xxxxxx Xxxxx, General Counsel
Sylvan Learning Systems, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxxx, Xx,, Esquire
Piper & Marbury
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 0]00]
(b) if to the Company or the Stockholder, shall be addressed to:
Xxxxxxx Xxxxxxxxx
0000 Xxxxxx Xxxx
Xxxx, Xxxxx 00000
All such notices, requests, demands or communications shall be mailed
postage prepaid, certified mail, return receipt requested, or by overnight
delivery or delivered personally, and shall be sufficient and effective when
delivered to or received at the address so specified. Any party may change the
address at which it is to receive notice by like written notice to the other.
14. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and
the lists, schedules and documents delivered pursuant hereto, which are a part
hereof) is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transactions contemplated by this Agreement.
This Agreement supersedes any and all prior understandings, written or oral,
between the parties, and this Agreement may be amended, modified, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the amendment, modification, waiver, discharge or
termination is sought.
15. GENERAL. The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns, but nothing herein,
19
express or implied, is intended to or shall confer any rights, remedies or
benefits upon any person other than the parties hereto. This Agreement may not
be assigned by any party hereto. This Agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
20
IN WITNESS WHEREOF, the Purchaser, the Company and the Stockholder have
caused this Agreement to be duly executed and their respective seals to be
hereunto affixed as of the date first above written.
WITNESS: SYLVAN LEARNING SYSTEMS, INC.
__________________________ By: __________________________
Name: O. Xxxxxx Xxxxx
Title: Vice President
WITNESS: LEARNING CENTERS OF WEST HOUSTON, INC.
__________________________ By: __________________________
Name: Xxxxxxx Xxxxxxxxx
Title: President
WITNESS: STOCKHOLDER
__________________________ ______________________________
Xxxxxxx Xxxxxxxxx
21
