EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
BY AND AMONG
MES ACQUISITION CORP.
A DELAWARE CORPORATION
AS BUYER
BORON, XXXXXX & ASSOCIATES, INC.
A DELAWARE CORPORATION
AS PARENT
MEDICAL EDUCATION SYSTEMS, INC.
A PENNSYLVANIA CORPORATION
AS SELLER
AND
XXXX X. PARENTI
AND
XXXXX XXXXXXXX
AS STOCKHOLDERS
OF SELLER
MAY 4, 1998
TABLE OF CONTENTS
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PAGE
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SECTION 1. PURCHASE AND SALE OF ASSETS................................. 1
1.1 Sale of Assets.............................................. 1
1.2 Liabilities................................................. 3
1.3 Purchase Price and Payment.................................. 3
1.4 Place of Closing; Closing Date.............................. 4
1.5 Transfer of Subject Assets.................................. 4
1.6 Delivery of Records and Contracts........................... 4
1.7 Further Assurances.......................................... 4
1.8 Allocation of Purchase Price................................ 5
1.9 Procedures for Assets not Transferable...................... 5
1.10 Employees, Wages and Benefits............................... 5
1.11 Stockholders' Representatives............................... 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER.... 7
2.1 Making of Representations and Warranties.................... 7
2.2 Organization and Qualification; Capital Stock............... 7
2.3 Authority................................................... 8
2.4 Title to Properties; Liens; Condition of Properties......... 9
2.5 Location of Subject Assets.................................. 10
2.6 Financial Statements; Undisclosed Liabilities............... 10
2.7 Tax Matters................................................. 10
2.8 Collectibility of Accounts Receivable....................... 11
2.9 Intellectual Property Rights; Employee Restrictions......... 11
2.10 Business; Compliance with Laws.............................. 12
2.11 Insurance................................................... 13
2.12 Transactions with Affiliates................................ 13
2.13 Employee Benefit Plans...................................... 13
2.14 Hazardous Waste, Etc........................................ 13
2.15 List of Certain Employees and Suppliers..................... 14
2.16 Employees; Labor Matters.................................... 15
2.17 Customers, Distributors, Meeting Moderators, Salespersons... 15
2.18 Litigation.................................................. 15
2.19 Finder's Fee................................................ 16
2.20 Material Adverse Change..................................... 16
2.21 Contracts................................................... 16
2.22 Banking Relations........................................... 17
2.23 Millennium Compliance....................................... 18
2.24 Disclosure.................................................. 18
2.25 Securities Law Matters...................................... 18
(i)
Page
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SECTION 3. COVENANTS OF STOCKHOLDER AND SELLER.......................... 19
3.1 Making of Covenants and Agreements........................... 19
3.2 Conduct of Business.......................................... 19
3.3 Authorization from Others.................................... 20
3.4 Consummation of Agreement.................................... 20
3.5 Confidentiality.............................................. 21
3.6 Non-Use of Trade Names, etc.................................. 21
3.7 Non-Disclosure and Non-Competition........................... 21
3.8 Payment of Obligations....................................... 22
3.9 Collection of Assets......................................... 22
3.10 Securities Filings........................................... 22
3.11 Assist in Accreditation...................................... 23
3.12 Transfer of Bank Accounts.................................... 23
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT........... 23
4.1 Making of Representations and Warranties..................... 23
4.2 Organization of Buyer........................................ 23
4.3 Authority of Buyer........................................... 23
4.4 Finder's Fees................................................ 24
4.5 SEC Reports.................................................. 24
4.6 Material Adverse Change...................................... 25
4.7 Disclosure................................................... 25
4.8 Litigation................................................... 25
SECTION 5. COVENANTS OF BUYER AND PARENT................................ 25
5.1 Making of Covenants and Agreement............................ 25
5.2 Confidentiality.............................................. 25
5.3 Consummation of Agreement.................................... 25
5.4 No Disclosure of Consideration............................... 26
5.5 Registration Rights.......................................... 26
SECTION 6. CONDITIONS................................................... 26
6.1 Conditions to the Obligations of Buyer....................... 26
6.2 Conditions to Obligations of Seller.......................... 28
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.................. 29
7.1 Termination.................................................. 29
7.2 Effect of Termination........................................ 29
7.3 Right to Proceed............................................. 29
SECTION 8. SURVIVAL OF WARRANTIES....................................... 30
8.1 Survival of Warranties....................................... 30
(ii)
SECTION 9. INDEMNIFICATION............................................ 30
9.1 Indemnification by Stockholders............................ 30
9.2 Indemnification by Buyer and Parent........................ 32
9.3 Notice; Defense of Claims.................................. 34
9.4 Sole Remedy................................................ 35
9.5 Satisfaction of Indemnification Obligations................ 35
SECTION 10. MISCELLANEOUS.............................................. 35
10.1 Law Governing.............................................. 35
10.2 Notices.................................................... 35
10.3 Prior Agreements Superseded................................ 36
10.4 Assignability.............................................. 37
10.5 Captions and Gender........................................ 37
10.6 Certain Definitions........................................ 37
10.7 Execution in Counterparts.................................. 37
10.8 Amendments; Waivers........................................ 37
10.9 Severability............................................... 38
10.10 Publicity and Disclosures.................................. 38
10.11 Dispute Resolution......................................... 38
10.12 Expenses................................................... 38
(iii)
ASSET PURCHASE AGREEMENT dated as of May 4, 1998 by and among Boron, XxXxxx
& Associates, Inc., a Delaware corporation ("Parent"), MES Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Buyer"), Medical
Education Systems, Inc., a Pennsylvania corporation ("Seller"), and Xxxx X.
Parenti and Xxxxx Xxxxxxxx (each a stockholder and collectively, the
"Stockholders").
WHEREAS, subject to the terms and conditions set forth herein, Buyer
desires to purchase from Seller, and Seller desires to sell, transfer and assign
to Buyer, substantially all of the properties and assets of Seller. The
business and operations of Seller which include the properties and assets to be
transferred to Buyer under this Agreement are referred to herein as the
"Business."
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
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1.1 Sale of Assets.
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(a) Subject to the provisions of this Agreement, at the Closing (as
defined in Section 1.4 hereof) Seller shall sell, transfer and assign to Buyer
and Buyer shall acquire all right, title and interest in and to (1) the name
"Medical Education Systems" and all related and associated logos and trademarks
and all licenses to or from third parties with respect thereto (2) all of the
goodwill of the Business and (3) all of the properties, assets and business of
Seller used or held for use in the Business (except as hereinafter provided in
Section 1.1(b)) of every kind and description, tangible and intangible, real,
personal or mixed, and wherever located, including without limitation, the
following:
(i) all goodwill and intellectual property rights, including trade
secrets, proprietary information, designs, styles, technologies,
inventions, know-how, formulae, processes, procedures, research records,
test information, software and software documentation, source and object
code, algorithms, promotional materials, customer lists, supplier and
dealer lists, market surveys, marketing know-how and manufacturing,
research and technical information, trade names, copyrights and copyright
registrations, service marks and trademarks (including applications and
registrations therefor), patents and patent applications (including without
limitation the trade names, copyrights and copyright registrations, service
xxxx and trademark registrations and applications and patents and patent
applications described in Schedule 1.1(a)(i) attached hereto), and all
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licenses to or from third parties with respect to the foregoing or rights
related thereto, in each case which is used or held for use in the
Business, and all documentation and media constituting, describing or
relating to the foregoing, including without limitation, manuals, memoranda
and records (collectively, the "Intellectual Property Rights");
(ii) all accounts receivable of the Business, all of which are
listed on Schedule 1.1(a)(ii) attached hereto (the "Receivables");
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(iii) all cash and bank deposits of Seller, all of which are listed
on Schedule 1.1(a) (iii);
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(iv) all of Seller's rights and interests in and to the orders,
commitments, contracts and agreements of the Business, all of which are
listed on Schedule 1.1(a)(iv) attached hereto (the "Contracts");
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(v) all of Seller's right, title and interest in and to all
franchises, licenses, permits, certifications, approvals, accreditations
and authorizations relating to the Business, all of which are listed on
Schedule 1.1(a)(v) attached hereto (the "Certificates");
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(vi) all of Seller's inventory, stock in trade, work-in-progress,
finished goods and raw materials as set forth on Schedule 1.1(a)(vi)
(collectively, the "Inventory");
(vii) all of Seller's equipment, tools, spare parts, fixtures and
other tangible assets related to or used in connection with the Business,
all of which of value over $250 are listed on Schedule 1.1(a)(vii) attached
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hereto (collectively, the "Equipment");
(viii) all other assets and properties of every nature whatsoever
tangible and intangible, and wherever located, used or held for use in
connection with the Business, including without limitation, rights under
contracts or agreements with representatives marketing and selling the
products and services of the Business, copies of customer lists, customer
records and histories, customer invoices, lists of suppliers and vendors
and all records relating thereto, market research information, advertising
matter, catalogues, photographs, sales materials, purchasing materials,
files, data, media materials and all records with respect to the Business.
The assets, property and business of Seller being sold to and purchased by
Buyer under this Section 1.1(a) are hereinafter sometimes referred to as
"Subject Assets."
(b) Notwithstanding the foregoing, there shall be excluded from such
purchase and sale the following property and assets of Seller:
(i) Seller's corporate franchise, stock record books, and
corporate record books containing minutes of meetings of directors and
stockholders (collectively, the "Corporate Records");
(ii) those certain assets specified in Schedule 1.1(b); and
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(iii) the consideration delivered by Buyer to Seller pursuant to
Section 1.3 of this Agreement.
The assets, property and business of Seller which are excluded from the
Subject Assets under this Section 1.1(b) are hereinafter referred to as the
"Excluded Assets."
1.2 Liabilities. Except for the Contract Liabilities (as defined below),
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Buyer shall not assume or be bound by any obligations or liabilities of Seller
or any affiliate of Seller of any kind or nature, known, unknown, accrued,
absolute, contingent or otherwise, whether now existing or hereafter arising
whatsoever (the "Excluded Liabilities"). Seller shall be responsible for and
pay any and all losses, damages, obligations, liens, assessments, judgments,
fines, disposal and other costs and expenses, liabilities and claims, including,
without limitation, interest, penalties and reasonable fees of counsel,
engineers and experts, as the same are incurred, of every kind or nature
whatsoever (all the foregoing being a "Claim" or the "Claims"), made by or owed
to any person to the extent any of the foregoing relates to (a) the Excluded
Assets, (b) the Excluded Liabilities or (c) with the exception of the Contract
Liabilities, the operations or assets of the Business and arises in connection
with or on the basis of events, acts, omissions, conditions or any other state
of facts occurring or existing prior to or on the Closing Date (including, in
each case, without limitation, any Claim relating to or associated with tax
matters, pension and benefits matters, any failure to comply with applicable
laws and/or permitting or licensing requirements, environmental and worker
health and safety matters).
Upon the sale and purchase of the Subject Assets, Buyer agrees to perform
in accordance with their terms (i) the obligations of Seller arising under the
Contracts from and after the Closing, and (ii) those liabilities specified in
Schedule 1.2 (collectively, the "Contract Liabilities"). The assumption of the
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Contract Liabilities by Buyer hereunder shall not enlarge any rights of third
parties under contracts or arrangements with Buyer or Seller or any of their
respective affiliates or subsidiaries. No parties other than the Buyer, the
Parent, the Stockholders and Seller shall have any rights under this Agreement.
Notwithstanding anything contained in this Section 1.2 to the contrary, the only
liabilities and obligations of Seller existing on or prior to the Closing Date
(including, without limitation, contractual liabilities and obligations) to be
assumed by Buyer under this Agreement are the Contract Liabilities.
1.3 Purchase Price and Payment.
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(a) In consideration of the sale by Seller to Buyer of the Subject
Assets, Buyer shall pay to Seller on the Closing Date (i) by federal funds wire
transfer in immediately available funds to an account designated by Seller, the
sum of Ten Million Dollars ($10,000,000); and (ii) 160,103 shares of Parent's
common stock, par value $.01 per share ("Parent Stock").
(b) Upon the achievement of the performance goals listed in Schedule A
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hereto and subject to the terms and conditions contained therein, Buyer shall
deliver to Seller
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an aggregate payment of ten million dollars ($10,000,000) (the "Contingent
Payment") by check or wire transfer of immediately available funds to accounts
designated by Seller.
1.4 Place of Closing; Closing Date. The closing of the purchase and sale
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provided for in this Agreement (the "Closing") shall be held at the offices of
Manta and Xxxxx at 9:00 a.m. (local time) on May 28, 1998, or if the conditions
to Closing specified herein have not been satisfied or waived by such date, at
such other place or later date as may be fixed by mutual agreement of Buyer and
Seller (the "Closing Date") following satisfaction or waiver of such conditions.
1.5 Transfer of Subject Assets. At the Closing, (a) Seller shall deliver
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or cause to be delivered to Buyer (i) good and sufficient instruments of
transfer transferring to Buyer title to all of the Subject Assets and such
instruments of transfer (w) shall be in the form which is usual and customary
for transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers and which form will be provided to
Seller by Buyer at least one (1) day prior to the Closing, (x) shall be in form
and substance satisfactory to Buyer and its counsel, (y) shall effectively vest
in Buyer good title to all of the Subject Assets free and clear of all
mortgages, pledges, security interests, charges, liens, restrictions and
encumbrances of any kind, except for liens for taxes not yet due and payable
(collectively, "Liens"), and (z) where applicable, shall be accompanied by
evidence of the discharge of all liens and encumbrances against the Subject
Assets; and (ii) such other documentation as may be reasonably agreed to prior
to Closing by Buyer and Seller in connection with the consummation of the
transactions contemplated by this Agreement; and (b) Buyer shall deliver to
Seller and Stockholder (i) the amounts of cash and Parent Stock set forth in
Section 1.3; and (ii) such other documentation as may be reasonably agreed to
prior to Closing by Buyer and Seller in connection with the consummation of the
transactions contemplated by this Agreement.
1.6 Delivery of Records and Contracts. At the Closing, Seller shall
---------------------------------
deliver or cause to be delivered to Buyer all of the Contracts. Seller shall
also deliver to Buyer at the Closing, all of Seller's business records, books
and other data relating to the assets, business and operations of the Business,
to the extent the same constitute part of the Subject Assets. For five years
after the Closing Date, Buyer shall not destroy any business records, books or
data delivered to it by Seller in accordance with this Section 1.6 without first
giving notice to Seller of the intention to destroy such records, books or data
and providing Seller with reasonable opportunity to copy such records prior to
destruction, such copying to be permitted only for a purpose not in
contravention of the best interests of the Buyer. Seller at the Closing shall
also provide Buyer with copies of the Corporate Records.
1.7 Further Assurances. Seller from time to time after the Closing at the
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request of Buyer (at Buyer's expense if there is any expense) shall (i) execute
and deliver further instruments of transfer and assignment (in addition to those
delivered under Section 1.5) and take such other actions as Buyer may reasonably
require to more effectively transfer and assign to, including assignments in
such forms as are acceptable to the United States Patent and
4
Trademark Office, and vest in, Buyer each of the Subject Assets and (ii)
cooperate with and provide assistance to Buyer in taking possession of the
Subject Assets.
1.8 Allocation of Purchase Price. The purchase price payable by Buyer
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pursuant to Section 1.3 and the amount of the Contract Liabilities assumed by
Buyer shall represent payment for the Subject Assets in the amount set forth on
Schedule 1.8 hereto. The amounts reflected in said Schedule shall represent the
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fair market values of the Subject Assets at the Closing, to the best of the
knowledge and belief of the parties hereto. At or as soon as practicable after
the Closing, Buyer and Seller shall execute an IRS Form 8594 in accordance with
the allocation set forth in said Schedule and in compliance with Section 1060 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder. All tax returns and reports filed by Buyer and Seller with respect
to the transactions contemplated by this Agreement shall be consistent with such
Schedule. The Contingent Payment shall be allocated to goodwill.
1.9 Procedures for Assets not Transferable. If any of the contracts or
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agreements or any other property or rights included in the Subject Assets is not
assignable or transferable either by virtue of the provisions thereof or under
applicable law without the consent of some party or parties and any such consent
is not obtained prior to the Closing, this Agreement and the related instruments
of transfer shall not constitute an assignment or transfer thereof and, unless
otherwise agreed between Buyer and Seller with respect to such contract, Buyer
shall not assume Seller's obligations with respect thereto, but Seller shall use
all commercially reasonable efforts to obtain any such consent as soon as
possible after the Closing or otherwise obtain for Buyer the practical and
economic benefit of such property or rights and Buyer shall use all commercially
reasonable efforts to assist in that endeavor.
1.10 Employees, Wages and Benefits.
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(a) Seller shall terminate all employees of the Business and shall be
responsible for making all severance payments to such employees in respect of
such terminations. Buyer shall not assume or have any obligations or
liabilities with respect to such terminations.
(b) Buyer currently intends to offer employment to, and to attempt to
employ, those employees of Seller listed on Schedule 1.10(b) upon compensation
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terms substantially similar to those set forth on Schedule 1.10(b). Buyer
specifically reserves to itself the right to employ or reject any of Seller's
employees or other applicants in its sole and absolute discretion. Seller
acknowledges and agrees that Buyer may interview and discuss employment terms
and issues with employees. Nothing in this Agreement shall be construed as a
commitment or obligation of Buyer to accept for employment, or otherwise
continue the employment of, any of Seller's employees. Buyer reserves the right
to alter the employee benefits to be offered to its employees consistent with
those offered to other employees of Parent.
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(c) Seller shall pay all wages, salaries and the cost of all fringe
benefits provided to each employee of the Business which shall have become due
for work performed as of and through the day on which such employee is
terminated by Seller, and Seller shall collect and pay all taxes in respect of
such wages, salaries, commissions and benefits.
(d) Seller acknowledges and agrees that Buyer is not assuming and
shall not have any obligations or liabilities of under, any benefit plan
maintained by, or for the benefit of employees of, the Business, including
without limitation obligations for severance, or vacation accrued but not taken
as of the Closing Date.
(e) Buyer agrees to use its best efforts to cause stock options for
an aggregate of 15,000 shares of Parent Stock to be granted by Parent to
employees of the Business in connection with their employment by Buyer. Seller
acknowledges that the grant of such stock options is subject to the approval of
the Compensation Committee of Parent's Board of Directors and will have an
exercise price equal to fair market value on the date of grant.
1.11 Stockholders' Representatives.
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(a) In order to administer efficiently (i) the implementation of the
Agreement by the Stockholders, (ii) the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, and (iii) the settlement of any dispute with respect to the Agreement,
the Stockholders hereby designate Xxxx X. Parenti as their representative (the
"Stockholders' Representative").
(b) The Stockholders hereby authorize the Stockholders'
Representative (i) to take all action necessary in connection with the
implementation of the Agreement on behalf of the Stockholders, the waiver of any
condition to the obligations of the Stockholders to consummate the transactions
contemplated hereby, or the settlement of any dispute, (ii) to give and receive
all notices required to be given under the Agreement and (iii) to take any and
all additional action as is contemplated to be taken by or on behalf of the
Stockholders by the terms of this Agreement.
(c) In the event that the Stockholders' Representative dies, becomes
legally incapacitated or resigns from such position, Xxxxx Xxxxxxxx shall fill
such vacancy and shall be deemed to be the Stockholders' Representative for all
purposes of this Agreement; however, no change in the Stockholders'
Representative shall be effective until Buyer is given notice of it by the
Stockholders.
(d) All decisions and actions by the Stockholders' Representative
shall be binding upon all of the Stockholders, and no Stockholder shall have the
right to object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
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(i) Buyer shall be able to rely conclusively on the instructions
and decisions of the Stockholders' Representative as to any actions
required or permitted to be taken by the Stockholders or the Stockholders'
Representative hereunder, and no party hereunder shall have any cause of
action against Buyer for any action taken by Buyer in reliance upon the
instructions or decisions of the Stockholders' Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders
and no Stockholder shall have any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by
the Stockholders' Representative under this Agreement, except for fraud or
willful breach of this Agreement by the Stockholders' Representative;
(iii) remedies available at law for any breach of the provisions of
this Section 1.11 are inadequate; therefore, Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
damages if Buyer brings an action to enforce the provisions of this Section
1.11; and
(iv) the provisions of this Section 1.11 are independent and
severable, shall constitute an irrevocable power of attorney, coupled with
an interest and surviving death, granted by the Stockholders to the
Stockholders' Representative and shall be binding upon the executors,
heirs, legal representatives and successors of each Stockholder.
(f) All fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER.
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2.1 Making of Representations and Warranties. As a material inducement to
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Buyer and Parent to enter into this Agreement and consummate the transactions
contemplated hereby, Seller and Stockholder jointly and severally hereby make
the representations and warranties contained in this Section 2.
2.2 Organization and Qualification; Capital Stock. Seller is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania with full power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted by it.
Seller is qualified to do business as a foreign corporation in Georgia and has
filed an application to qualify to do business as a foreign corporation in
Michigan, these being the only jurisdictions in which such qualification is
necessary, except where the failure to be so qualified would not have a material
adverse effect on Seller or the Business. As of the Closing, all of the issued
and outstanding capital stock of the Seller will
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be owned beneficially and of record as set forth in Schedule 2.2, free and clear
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of any lien, restrictions or encumbrances, and there are no outstanding options,
warrants, rights, commitments, pre-emptive rights or agreements of any kind for
the issuance or sale of, or outstanding securities convertible into, any
additional shares of capital stock of any class of the Seller.
Seller does not have any subsidiaries or own any securities issued by any
other business organization or governmental authority or any direct or indirect
interest in or control over any corporation, partnership, joint venture or
entity of any kind relating to the business conducted by Seller.
2.3 Authority.
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(a) The Seller has full corporate power and authority to execute,
deliver and perform this Agreement and each other agreement or instrument
contemplated hereby and the execution and delivery of this Agreement and each
other agreement or instrument contemplated hereby and the performance of all
obligations hereunder and thereunder have been duly authorized by all necessary
action of Seller. This Agreement and each other agreement, document and
instrument executed by Seller pursuant to or in connection with this Agreement
constitutes, or when executed and delivered will constitute, the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable principles.
The execution, delivery and performance by the Seller of this Agreement and each
other agreement, document and instrument contemplated hereby:
(i) do not and will not violate any provision of the Articles of
Incorporation or By-laws of Seller, each as amended or restated to date;
(ii) do not and will not violate any laws of the United States or
any state or other jurisdiction applicable to Seller or require Seller to
obtain any approval, authorization, declaration, consent or waiver of, or
make any filing with or give notice to, any person, entity or public or
governmental authority that has not been obtained, made or given (except
that no representation is made with respect to the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 ("HSR") except as set forth in Section
2.3(c) below); and
(iii) do not and will not result in a material breach of, constitute
a material default under, accelerate any material obligation under, require
a material consent under or give rise to a material right of termination of
any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, license, authorization, order,
writ, judgment, injunction, decree, determination or arbitration award to
which Seller is a party or by which Seller or its property is bound or
affected, or result in the creation or imposition of any Lien on any of the
Subject Assets.
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(b) Each Stockholder has full right, authority, power and capacity to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by the or on behalf of him or her pursuant to or
contemplated by this Agreement and to carry out the transactions contemplated
hereby and thereby. This Agreement and each agreement, document and instrument
executed and delivered by each Stockholder pursuant to or contemplated by this
Agreement constitute, or when executed and delivered will constitute, valid and
binding obligations of each Stockholder enforceable in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency or
reorganization laws, or other laws relating to or affecting the availability of
the remedy of specific performance or equitable principles of general
application. The execution, delivery and performance by each Stockholder of
this Agreement and each such agreement, document and instrument:
(i) do not and will not violate any laws of the United States or
any state or other jurisdiction applicable to either stockholder or require
either Stockholder to obtain any approval, consent or waiver of, or make
any filing with, any person or entity (governmental or otherwise) that has
not been obtained or made (except that no representation is made with
respect to HSR except as set forth in Section 2.3(c) below); and
(ii) do not and will not result in a material breach of, constitute
a material default under, accelerate any material obligation under, or give
rise to a material right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which either Stockholder is a party
or by which the property of either Stockholder is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the Subject
Assets.
(c) With respect to the HSR, Xxxx Parenti is the "ultimate parent
entity" (as defined in HSR) of Seller and she does not have annual net sales or
total assets for purposes of HSR (after taking into account the applicable
attribution rules of HSR) in excess of $100 million.
2.4 Title to Properties; Liens; Condition of Properties.
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(a) The Subject Assets do not include any real property. Schedule
2.4 sets forth the addresses and uses of all real property that the Seller
leases. Seller owns all of the Subject Assets and Seller has and is conveying to
Buyer hereunder good title to all of its personal property, tangible and
intangible, included in the Subject Assets. Except as set forth on Schedule 2.4,
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none of such property or assets of Seller, tangible or intangible, is subject to
any lien. Except as set forth on Schedule 2.4, No financing statement under the
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Uniform Commercial Code with respect to any of the Subject Assets is active in
any jurisdiction, and Seller has not signed any such active financing statement
or any security agreement authorizing
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any secured party thereunder to file any such financing statement. The Subject
Assets and the Excluded Assets listed on Schedule 1.1(b) are all of the assets
used in the operation of the Business as the same has been operated prior to the
date hereof. Except as set forth on Schedule 2.4, the Subject Assets (i) are in
working order which is generally sufficient for the purpose for which they are
being used), (ii) have been and shall through the Closing be maintained in a
manner consistent with the past maintenance practices of Seller, and (iii) to
the best knowledge of Seller, conform with all applicable state and federal
statutes, ordinances, regulations and laws.
(b) Upon delivery to Buyer of the instruments of transfer referred to
in Section 1.5 hereof, Buyer will receive good and valid title to all of the
Subject Assets, free and clear of all Liens.
2.5 Location of Subject Assets. The tangible Subject Assets are located
--------------------------
at those locations set forth on Schedule 2.5.
------------
2.6 Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) Seller has previously furnished to Buyer and Parent copies of its
reviewed, unaudited financial statements for the fiscal years ended December 31,
1996 and 1997 and the unaudited interim period ending March 31, 1998. Except as
described in Schedule 2.6(a), the financial statements referred to in this
---------------
Section 2.6(a) fairly and accurately present the financial position of Seller as
of the dates thereof and the results of operations and cash flows of Seller for
the periods shown therein (subject to the absence of footnotes that would be
required by generally accepted accounting principles), are complete, correct and
consistent in all material respects with the books and records of Seller and to
the best knowledge of Seller, were prepared in conformity with generally
accepted accounting principles applied on a consistent basis (except that
revenues were recognized on a modified percentage of completion basis).
(b) Except as and to the extent reflected or reserved against in the
unaudited balance sheet of Seller at March 31, 1998 contained in the financial
statements referred to in Section 2.6(a) (the "Base Balance Sheet") or as listed
on Schedule 2.6(b), the Seller does not have and is not subject to any material
---------------
accrued liability or obligation, or to its best knowledge, any other material
obligation of any nature, whether contingent or otherwise.
2.7 Tax Matters. Except as set forth on Schedule 2.7, Seller has timely
----------- ------------
and properly filed all federal, state, local and foreign income, excise and
franchise tax returns, real estate and personal property tax returns, sales and
use tax returns and other tax returns required to be filed by it and has paid
all Taxes (as defined below) owing by it (whether or not shown on any Tax
Return), except Taxes which have not yet accrued or otherwise become due, for
which adequate provision has been made in the pertinent financial statements
referred to in Section 2.6 above. The provision for taxes on the Base Balance
Sheet is sufficient as of its date for the payment of all accrued and unpaid
federal, state, county and local taxes of any
10
nature of Seller, and any applicable taxes owing to any foreign jurisdiction
(collectively, "Taxes"), whether or not assessed or disputed. All Taxes and
other assessments and levies which Seller is required to withhold or collect
have been withheld and collected and have been paid over to the proper
governmental authorities. Seller has never received notice of any audit or of
any proposed deficiencies from the Internal Revenue Service or any other
taxation authority. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the best knowledge of Seller, threatening to
assert against the Seller any deficiency or claim for additional Taxes or
interest thereon or penalties in connection therewith. The Seller is and has
been since July 1, 1990, an "S Corporation" within the meaning of Section
1361(a)(1) of the Internal Revenue Code of 1986, as amended, and the applicable
laws of the Commonwealth of Pennsylvania.
2.8 Collectibility of Accounts Receivable. All of the accounts receivable
-------------------------------------
of the Seller (less the reserve for bad debts set forth on the Base Balance
Sheet) are valid and enforceable claims, are not subject to set-off or
counterclaim except for adjustments and carryovers in the ordinary course of
business, provided that the foregoing representation is not a guarantee of
collectibility. Seller does not have any accounts receivable or loans
receivable from any person, firm or corporation which is affiliated with Seller
or from any stockholder, director, officer or employee of Seller or any
affiliate thereof. Schedule 2.8 lists the accounts receivable of the Seller as
------------
of May 1, 1998.
2.9 Intellectual Property Rights; Employee Restrictions. Except as set
---------------------------------------------------
forth in Schedule 2.9:
------------
(a) Seller has exclusive ownership of, with the right to use, sell,
license, dispose of, and bring actions for infringement of, all patent,
copyright, trade secret, trademark or other proprietary rights ("Intellectual
Property Rights") material to the conduct of its business, as presently
conducted (the "Seller Rights"), provided that no representation is made with
respect to "off the shelf" software used by Seller that is generally
commercially available.
(b) To the best knowledge of Seller, the business of Seller as
presently conducted does not violate any agreements which Seller has with any
third party or infringe any patent, trademark, copyright or trade secret or any
other Intellectual Property Rights of any third party.
(c) No claim is pending or, to the best knowledge of the Seller,
threatened against the Seller nor has Seller received any notice or claim from
any person asserting that any of the Seller's present or contemplated activities
infringe or may infringe any Intellectual Property Rights of such person, and
Seller is not aware of any infringement by any other person of any rights of
Seller under any Intellectual Property Rights.
(d) Seller has taken commercially reasonable steps required to
establish and preserve its ownership of all of the Seller Rights; since 1996,
current and former employees of the Seller, and each of Seller's consultants and
independent contractors involved in
11
development of any of the Seller Rights has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions and
copyrights to Seller as set forth in Schedule 2.9(d), and, to the best knowledge
---------------
of Seller, none of such employees, consultants or independent contractors is in
violation of any agreement or in breach of any agreement or arrangement with
former or present employers relating to proprietary information or assignment of
inventions.
The registered patents, trademarks and copyrights constituting Intellectual
Property Rights have been duly registered in, filed in or issued by the United
States Patent and Trademark Office or the United States Register of Copyrights
identified on Schedule 2.9, and have been properly maintained and renewed in
------------
accordance with all applicable provisions of law and administrative regulations
in the United States.
2.10 Business; Compliance with Laws. Seller has all necessary material
------------------------------
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its property and to conduct the Business as it is presently
conducted. Seller is currently and has heretofore been in compliance in all
material respects with all federal, state, local and foreign laws, regulations
and guidelines, including without limitation all applicable laws, regulations
and guidelines of the Food and Drug Administration, the Federal Trade
Commission, the Federal Communications Commission, the American Medical
Association and the Pharmaceutical Marketing Association, in each case to the
extent applicable. Schedule 2.10 contains a complete and accurate description
-------------
of the status of Seller's accreditation status with the Accreditation Council
for Continuing Medical Education (the "ACCME"), the American Council on
Pharmaceutical Education (the "ACPE"), and the pending accreditation with the
Pennsylvania Nurses Association ("PNA"), and each additional action required to
be taken by Seller, the ACCME, the ACPE or the PNA in order for Seller to obtain
full accreditation from each of the ACCME, the ACPE and the PNA. Seller has no
knowledge that any other consent of either the ACCME or the ACPE is required in
order for Seller's accreditation status to remain in full force and effect
following the transactions contemplated by this Agreement. Seller has no
knowledge that the current director of the Seller's various continuing education
divisions or any person who was "accredited" by the ACCME or the ACPE does not
plan to accept employment with Buyer after the Closing. None of Seller, the
Stockholder or any former subsidiary of Seller has been: (a) convicted in a
criminal proceeding or named as a subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses); (b) subject to any
order, judgment, or decree (not subsequently reversed, suspended or vacated) of
any court of competent jurisdiction permanently or temporarily enjoining it or
him from, or otherwise imposing limits or conditions on its or his engaging in
any securities, investment advisory, banking, insurance or other type of
business or acting as an officer or director of a public company; (c) found by a
court of competent jurisdiction in a civil action or by the Securities and
Exchange Commission ("SEC") or the Commodity Futures Trading Commission to have
violated any federal or state commodities, securities or unfair trade practices
law, which such judgment or finding has not been subsequently reversed,
suspended, or vacated; or (d) involved in any other type of legal proceeding
that would require Stockholder to disclose such involvement under Item 401(f) of
SEC Regulation S-K if
12
Stockholder were subject to such Regulation. Seller is not subject to or bound
by any agreement, judgment, decree or order which may materially and adversely
affect any of the Subject Assets or the Business.
2.11 Insurance. Seller has fire, casualty, product liability and business
---------
interruption and other insurance policies listed on Schedule 2.11. There is no
-------------
default or event which could give rise to a default under any such policy.
2.12 Transactions with Affiliates. There are no loans, leases, contracts
----------------------------
or other transactions between Seller and any officer, director or stockholder of
Seller or any family member or affiliate of the foregoing persons and there have
been no such transactions within the past three (3) years except as set forth in
Schedule 2.12.
-------------
2.13 Employee Benefit Plans. Seller does not maintain or contribute to
----------------------
any employee benefit plan, stock option, bonus or incentive plan, severance pay
policy or agreement, deferred compensation agreement, or any similar plan or
agreement (an "Employee Benefit Plan") other than the Employee Benefit Plans
identified in Schedule 2.13. The terms and operation of each Employee Benefit
-------------
Plan, to the best of Seller's knowledge, comply in all material respects with
all applicable laws and regulations relating to such Employee Benefit Plans.
There are no unfunded obligations of Seller under any retirement, pension,
profit-sharing, deferred compensation plan or similar program. Seller is not
required to make any payments or contributions to any Employee Benefit Plan
pursuant to any collective bargaining agreement or, to the knowledge of Seller,
any applicable labor relations law, and all Employee Benefit Plans are
terminable at the discretion of Seller without liability to the Seller upon or
following such termination. Seller has never maintained or contributed to any
Employee Benefit Plan providing or promising any health or other nonpension
benefits to terminated employees except with respect to the continuation of
group health plan benefits to the extent authorized by and consistent with 29
U.S.C. (S) 1161 et seq. (commonly known as "COBRA").
2.14 Hazardous Waste, Etc.
---------------------
(a) Except as set forth in Schedule 2.14 hereto, (i) Seller has never
-------------
generated, transported, used, stored, treated, disposed of, or managed any
Hazardous Waste (as defined below); (ii) to Seller's best knowledge, no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
operated, leased, or used by Seller, or has ever been located in the soil or
groundwater at any such site; (iii) to Seller's best knowledge, no Hazardous
Material has ever been transported from any site presently or formerly owned, or
operated, leased, or used by Seller for treatment, storage, or disposal at any
other place; (iv) to Seller's best knowledge, Seller does not presently own,
operate, lease, or use, nor has it previously owned, or previously operated,
leased, or used any site on which underground storage tanks are or were located;
and (v) to Seller's best knowledge, no lien has ever been imposed by any
13
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by Seller in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Schedule 2.14 hereto, (i) Seller does not
-------------
have any liability under, nor has it ever violated, any Environmental Law (as
defined below); (ii) to Seller's best knowledge, Seller, any property owned,
operated, leased, or used by Seller, and any facilities and operations thereon,
are presently in compliance with all applicable Environmental Laws; (iii) Seller
has never entered into or been subject to any judgment, consent decree,
compliance order, or administrative order with respect to any environmental or
health and safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any Environmental Law; and (iv) Seller has no reason to believe that any of the
items enumerated in clause (iii) of this subsection will be forthcoming.
(c) Except as set forth in Schedule 2.14 hereto, to Seller's best
-------------
knowledge, no site owned, operated, leased, or used by Seller or any of its
subsidiaries contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Seller has provided to Buyer copies of all documents, records,
and information in the possession and control of Seller or any of its
subsidiaries concerning any environmental or health and safety matter relevant
to Seller or any of its subsidiaries, whether generated by the Seller, its
subsidiaries, or others, including without limitation, environmental audits,
environmental risk assessments, site assessments, documentation regarding off-
site disposal of Hazardous Materials, spill control plans, and reports,
correspondence, permits, licenses, approvals, consents, and other authorizations
related to environmental or health and safety matters issued by any governmental
agency.
(e) For purposes of this Section 2.14, (i) "Hazardous Material" shall
------------
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, contaminant, or other
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) "Hazardous
Waste" shall mean and include any hazardous waste as defined or regulated under
any Environmental Law; (iii) "Environmental Law" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and
include Seller, each of its subsidiaries and all other entities for whose
conduct the Seller or any of its subsidiaries is or may be held responsible
under any Environmental Law.
2.15 List of Certain Employees and Suppliers. Schedule 2.15 contains a
--------------------------------------- -------------
list of all managers, employees and consultants and independent contractors of
Seller who, individually, have received or are scheduled to receive compensation
or payments for the fiscal year ended
14
December 31, 1997 in excess of $35,000. In each case such Schedule includes the
current job title and aggregate annual compensation of each such individual.
Schedule 2.15 sets forth a list of all suppliers material to the Business to
-------------
whom Seller made payments aggregating $35,000 or more during the fiscal year
ended December 31, 1997 showing, with respect to each, the name, address and
dollar volume involved. No supplier has terminated or reduced its business with
Seller or materially and adversely modified its relationship therewith.
2.16 Employees; Labor Matters. Seller employs approximately 53 full-time
------------------------
employees and 6 part-time employees as listed on Schedule 2.16, and generally
-------------
enjoys a good employer-employee relationship. Seller is not delinquent in
payments to any of its employees or independent contractors for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees or independent contractors. Upon termination of the employment of any
of said employees or independent contractors, no severance or other payments
will become due except for commissions earned and payable under Seller's
commission policy (as such commissions may be calculated on such projects) are
set forth on Schedule 2.16. Seller has no policy, practice, plan or program of
-------------
paying severance pay or any form of severance compensation in connection with
the termination of employment or services. Seller is in compliance in all
material respects with all applicable laws and regulations respecting labor,
employment, fair employment practices, terms and conditions of employment, and
wages and hours. There are no changes pending, or of which Seller has knowledge
threatened with respect to (including, without limitation, resignation of) the
senior management or key supervisory personnel or independent contractors of
Seller, except as contemplated by this Agreement, nor has Seller received any
notice or information concerning any prospective change with respect to such
senior management or key supervisory personnel.
2.17 Customers, Distributors, Meeting Moderators, Salespersons. Schedule
--------------------------------------------------------- --------
2.17 sets forth each representative, distributor and independent contractor of
----
Seller at the date hereof (whether pursuant to a commission, royalty or other
arrangement), and each customer, salesperson and/or broker of Seller who
accounted for more than 5% of the sales of Seller for the twelve (12) months
ended December 31, 1997 (collectively, the "Customers, Distributors and
Brokers"). Except as disclosed on Schedule 2.17, no Customer, Distributor or
-------------
Broker of Seller has canceled or otherwise terminated its relationship with
Seller, or has during the last twelve months decreased materially its services,
supplies or materials to Seller or its usage or purchases of the services or
products of Seller. No Customer, Distributor or Broker has, to the best
knowledge of the Seller, any plan or intention to terminate, to cancel or
otherwise materially and adversely modify its relationship with Seller or to
decrease materially or limit its services, supplies or materials to Seller or
its usage, purchase or distribution of the services or products of Seller.
2.18 Litigation. Except as set forth on Schedule 2.18, there is no
---------- -------------
litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in effect or, to the best knowledge of
Seller, threatened against Seller or either Stockholder relating to or affecting
any of the Subject Assets or the Business.
15
2.19 Finder's Fee. Seller has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
2.20 Material Adverse Change. Except as specifically disclosed on
-----------------------
Schedule 2.20 to this Agreement, since December 31, 1997:
-------------
(a) there has not been any material adverse change in the business,
results of operations, financial condition, properties, assets, liabilities
or obligations of the Business;
(b) there has not been any damage, destruction or loss (whether or
not covered by insurance), materially and adversely affecting the business,
prospects, results of operations, financial condition, assets or properties
of the Business;
(c) there has not been any change in the relationships of Seller with
respect to its suppliers, distributors, licensees, licensors, customers or
others with whom it has business relationships which would have a material
adverse effect on the Business; and Seller does not have knowledge of any
fact or contemplated event which may reasonably be expected to cause any
such material adverse change (other than facts or events affecting the
industry generally);
(d) the business conducted by the Business has been conducted and
carried on only in the ordinary and regular course consistent with past
practice;
(e) there has not been any payment made by Seller to either
Stockholder (except for salaries as disclosed on Schedule 2.15) or any
-------------
affiliate thereof, including without limitation, any payment by means of a
dividend, distribution, redemption of capital stock or similar payment; and
(f) there has not been any material alteration or change in the
methods of operation employed by the Business.
2.21 Contracts. Except for Contracts and Certificates listed in Schedule
--------- --------
1.1(a)(iv) and Schedule 1.1(a)(v) (true and complete copies (or, in the case of
----------- ------------------
verbal agreements, written descriptions) of which have been delivered to Buyer),
neither Seller nor either Stockholder is a party to or subject to any of the
following contracts or agreements, in each case which relates to, or is
necessary in connection with the operation of, the Business:
(a) any contract or agreement which by its terms does not terminate
or is not terminable without penalty by Seller or any successor or assign
within one year after the date hereof;
16
(b) any contract or agreement for the sale or lease of its products
or services, except orders in the ordinary course of the Business;
(c) any contract with any sales agent or distributor of products or
services of Seller;
(d) any contract containing covenants limiting the freedom of Seller
to compete in any line of business or with any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money and
any related security agreement;
(g) any contract or agreement with any officer, employee, director or
stockholder of Seller or with any persons or organizations controlled by or
affiliated with any of them; or
(h) any verbal contract, agreement, arrangement or understanding with
the suppliers or customers of the Business.
To the best of Seller's knowledge, all of the Contracts listed in Schedule
--------
1.1(a)(iv) are valid and are in full force and effect and constitute legal,
----------
valid and binding obligations of Seller enforceable in accordance with their
respective terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other rights affecting creditors' rights generally, and general
equitable principles. To the best knowledge of Seller, each Contract constitutes
the legal, valid and binding obligation of each party thereto other than Seller
enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other rights affecting creditors'
rights generally, and general equitable principles. To the best knowledge of
Stockholder or Seller, neither Seller nor any other party to any Contract is in
material default in complying with any provisions thereof, and no condition or
event or facts exist which, with notice, lapse of time or both would constitute
a material default thereof on the part of Seller or, to the best knowledge of
Seller, on the part of any other party thereto.
2.22 Banking Relations. All of the arrangements which the Seller has with
-----------------
any banking or similar institution are set forth in Schedule 2.22 attached
-------------
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof. The
signature cards and other authorization forms or requirements for such banking
arrangements have been amended as of Closing in the manner requested by Buyer
which request will be made two (2) days prior to Closing.
17
2.23 Millennium Compliance. To the best of Seller's knowledge, all
---------------------
computer software products, except for commercially available software, that are
owned by Seller, exclusively licensed to Seller, licensed, sold or otherwise
distributed to others by Seller or are otherwise required for the conduct of the
Business ("Software") are Millennium Compliant. As used herein, "Millennium
Compliant" shall mean the ability of the Software to provide the following date
related functions:
(i) consistently handle date information before, during and after
January 1, 2000, including but not limited to accepting date input,
providing date output and performing calculations on dates or portions of
dates; and
(ii) function accurately in accordance with the documentation
relating to the applicable Software and without interruption before, during
and after January 1, 2000, without any change in operations associated with
the advent of the new century.
2.24 Disclosure. To the best knowledge of Seller and the Stockholders,
----------
the representations, warranties and statements made or contained in this
Agreement, in the certificates, Schedules and Exhibits given or delivered by
Seller and the Stockholders pursuant to this Agreement do not, either
individually or when taken together, contain any untrue statement of a material
fact, and do not omit to state a material fact required to be stated therein or
necessary in order to make such representations, warranties and statements not
misleading in light of the circumstances in which they were made or delivered.
2.25 Securities Law Matters. Seller and each Stockholder hereby
----------------------
represent and warrant to the Buyer and Parent that with respect to Seller's
receipt of Parent Stock hereunder:
(a) Seller is acquiring the Parent Stock for its own account, for
investment, and not with a view to any "distribution" thereof within the
meaning of the Securities Act. Each of Seller and each Stockholder is an
"accredited investor" as defined in the Securities Act and is knowledgeable
and experienced in the making of investments of the type involved in the
acquisition of the Parent Stock pursuant to the Agreement, is able to bear
the economic risk of loss of its investment in the Parent, has been granted
the opportunity to investigate the affairs of the Buyer and Parent and to
ask questions of their officers and employees, and has availed itself of
such opportunity either directly or through its authorized representative;
and
(b) Each of Seller and each Stockholder understands that because the
shares of Parent Stock have not been registered under the Securities Act or
securities or "blue sky" laws of any jurisdiction, it cannot dispose of any
or all of the shares of the Parent Stock unless such shares of Parent Stock
are subsequently registered under the Securities Act or exemptions from
such registration are available. Each of Seller and each Stockholder
acknowledges and understands it has no right to require Parent to register
the Parent Stock. Each of Seller and each Stockholder further understands
that the Parent may, as a condition to the transfer of any of the Parent
Stock, require that
18
the request for transfer be accompanied by an opinion of counsel as
described below. Each of Seller and each Stockholder understands that each
certificate representing the Parent Stock will bear a legend in
substantially the form provided below (in addition to any legend required
under applicable state securities laws).
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE
HOLDER NAMED HEREON FOR THE HOLDER'S OWN ACCOUNT FOR
INVESTMENT; AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD OR
IN ANY OTHER WAY TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS IN EFFECT AT THAT TIME, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
SECTION 3. COVENANTS OF STOCKHOLDER AND SELLER.
-----------------------------------
3.1 Making of Covenants and Agreements. Seller and Stockholder hereby
----------------------------------
covenant and agree as set forth in this Section 3.
3.2 Conduct of Business. Between the date of this Agreement and the
-------------------
Closing Date, Seller will:
(a) Conduct its business only in the ordinary course and refrain from
changing or introducing any method of management or operations except in the
ordinary course of business and consistent with prior practices;
(b) Refrain from making any purchase, sale or disposition of any
asset or property other than in the ordinary course of business, from purchasing
any capital asset costing more than $7,500 and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets
other than in the ordinary course of business;
(c) Refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(d) Refrain from making any change or incurring any obligation to
make a change in its Articles of Incorporation, By-laws or authorized or issued
capital stock, it being understood that Seller may issue up to 78 shares of
Seller's treasury stock to Xxxxxxxx;
19
(e) Refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock;
(f) Refrain from making any change in the compensation payable or to
become payable to any of its officers, employees, agents or independent
contractors;
(g) Refrain from prepaying loans (if any) from its stockholders,
officers or directors or making any change in its borrowing arrangements;
(h) Use its best efforts to prevent any change with respect to its
management and supervisory personnel and banking arrangements, except as
contemplated by this Agreement;
(i) Except as contemplated by this Agreement, use its best efforts to
keep intact its business organization, to keep available its present officers
and employees, subject to any WARN Act or similar state or local notifications,
and to preserve the goodwill of all suppliers, customers, independent
contractors and others having business relations with it;
(j) Have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in the Schedule 2.11 hereto
-------------
or equivalent insurance with any substitute insurers approved in writing by
Buyer; and
(k) Furnish Buyer with unaudited monthly balance sheets and statements
of income and retained earnings and cash flows of Seller within fifteen (15)
days after each month end for each month ending more than ten (10) days before
the Closing.
(l) Permit Buyer and its authorized representatives to have, after
prior notice, reasonable full access to all its properties, assets, records, tax
returns, contracts and documents and furnish to Buyer or its authorized
representatives such financial and other information with respect to its
business or properties as Buyer may from time to time reasonably request.
3.3 Authorization from Others. Prior to the Closing Date, Seller will use
-------------------------
its best efforts to obtain all authorizations, consents and permits of others
required to permit the consummation by Seller of the transactions contemplated
by this Agreement.
3.4 Consummation of Agreement. Seller and Stockholder shall use their
-------------------------
best efforts to perform and fulfill all conditions and obligations on their
parts to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be fully carried out. To this
end, Seller will obtain prior to the Closing all necessary authorizations or
approvals of its stockholders and Board of Directors, including, without
limitation, the following:
20
(a) To change, by the Closing, Seller's corporate name to another
title which does not include the words Medical Education Systems; and
(b) Authorization of the officers and directors of Seller to discharge
all debts and obligations of Seller (other than those assumed by Buyer hereunder
and as set forth in Section 3.8 below).
3.5 Confidentiality. Seller and each Stockholder agree that, unless and
---------------
until the Closing has been consummated, Seller, its officers, directors, agents
and representatives, and each Stockholder will hold in strict confidence, and
will not use, any confidential or proprietary data or information obtained from
Buyer with respect to its business or financial condition except for the purpose
of evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in Buyer's industry or which has been disclosed to
Seller or either Stockholder by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
agreement. If the transaction contemplated by this Agreement is not
consummated, Seller and each Stockholder will return to Buyer (or certify that
it has destroyed) all copies of such data and information, including but not
limited to financial information, customer lists, business and corporate
records, worksheets, test reports, tax returns, lists, memoranda, and other
documents prepared by or made available to Seller in connection with the
transaction.
3.6 Non-Use of Trade Names, etc. After the Closing Date, neither Seller
---------------------------
nor either Stockholder, nor any entity controlled by or under common control
with Seller or either Stockholder will for any reason, directly or indirectly,
(a) use any Intellectual Property Rights transferred pursuant to this Agreement
(including the name "Medical Education Systems"), or (b) use or disclose any
Intellectual Property Rights or any trade secrets, confidential information,
know-how, proprietary information or other intellectual property described in
Section 1.1(a)(i) hereof and transferred pursuant to this Agreement, except that
Seller may disclose such information to Buyer and Parent in connection with the
operation of the Business by Buyer and Parent after the Closing Date.
3.7 Non-Disclosure and Non-Competition. Each Stockholder and Seller, in
----------------------------------
order to induce Buyer and Parent to enter into this Agreement, expressly
covenants and agrees that neither Seller nor either Stockholder, nor any of
their affiliates, nor any entity or person controlled by or under common control
with Seller or either Stockholder, will, directly or indirectly, (a) for a
period of eight (8) years following the Closing Date, disclose or furnish to any
person, other than Buyer or Parent, any proprietary information of, or
confidential information concerning, the Business, Seller, Buyer or Parent or
any affiliate of Seller, Buyer or Parent except as required by law; and (b) for
a period of three (3) years following the Closing Date, without the express
written consent of the Buyer, directly or indirectly, anywhere in the United
States, engage in any activity which is, or participate or invest in, or provide
or facilitate the provision of financing to, or assist (whether as owner, part-
owner, shareholder, partner, director, officer, trustee, employee, agent or
consultant, or in any other capacity), any business, organization or person
other than the Buyer or Parent (or any affiliate
21
of the Buyer or Parent whose business, activities, products or services are
competitive with any of the business, activities, products or services conducted
or offered by the Buyer or Parent and their subsidiaries during any period in
which Stockholder serves as an officer or employee of the Buyer or Parent or any
of its subsidiaries, which business, activities, products and services shall
include in any event the provision of providing outsourced promotional,
marketing, educational and field sales force logistics services, or providing
other services currently provided by Seller or contemplated to be provided by
Seller in such general areas of service. Without implied limitation, the
forgoing covenant shall include hiring or engaging or attempting to hire or
engage for or on behalf of themselves or any such competitor any officer or
employee of the Buyer or Parent or any of their direct and/or indirect
subsidiaries, encouraging for or on behalf of themselves or any such competitor
any such officer or employee to terminate his or her relationship or employment
with the Buyer or the Parent or any of their direct or indirect subsidiaries,
soliciting for or on behalf of themselves or any such competitor any client of
the Buyer or Parent or any of their direct or indirect subsidiaries and
diverting to any person (as hereinafter defined) any client or business
opportunity of the Buyer, the Parent or any of any of their direct or indirect
subsidiaries. In addition, Stockholder will not disparage the Buyer or Parent,
the Business or the products or services conducted or offered by the Buyer or
Parent and their subsidiaries.
3.8 Payment of Obligations. Subsequent to the Closing, Seller shall pay
----------------------
all of the Excluded Liabilities in the ordinary course of business as they
become due. Seller and each Stockholder agree that Seller shall maintain
sufficient net worth and liquidity after the Closing in order to satisfy such
Excluded Liabilities, it being understood that Seller may assign its rights to
receive payments hereunder (including Parent Stock) to the Stockholders. Seller
and Stockholders agree to dissolve Seller promptly following the satisfaction of
such Excluded Liabilities and the expiration of the period during which the
Contingent Payment can be earned.
3.9 Collection of Assets. Subsequent to the Closing, Buyer and its
--------------------
assignees shall have the right and authority to collect all receivables and
other items transferred and assigned by Seller hereunder and to endorse with the
name of Seller or any of its affiliates any checks received on account of such
receivables or other items, and Seller and each Stockholder agree that they will
promptly transfer or deliver to Buyer and its assignees from time to time, any
cash or other property that it may receive on or after the Closing with respect
to any claims, contracts, licenses, leases, commitments, sales orders, purchase
orders, receivables of any character or any other items included in the assets
transferred to Buyer pursuant to this Agreement. Buyer agrees to defend, hold
harmless and indemnify Seller and the Stockholders for any claims, suits or
liabilities which may arise out of the conduct of these collection efforts
relating to the receivables, but not for any claims which Buyer may have against
Seller or either Stockholder arising from the receivables.
3.10 Securities Filings. Seller and Stockholder shall reasonably
------------------
cooperate at Buyer's expense with Buyer and Parent to permit the Buyer, Parent
and their subsidiaries in accordance with applicable law to promptly prepare and
file on or before the due date or any extension
22
thereof all filings required to be made by Buyer or Parent with the NASDAQ Stock
Market and the SEC, including without limitation, the 8-K (and related financial
statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement, and to permit Parent to include in
its filings with the SEC all information which may be required with respect to
Seller and Stockholder.
3.11 Assist in Accreditation. Seller and Stockholder shall each use their
-----------------------
reasonable best efforts to assist Buyer in transferring the accreditation status
of Seller to Buyer.
3.12 Transfer of Bank Accounts. At the Closing, Seller shall transfer to
-------------------------
Buyer all deposits held in any of Seller's bank accounts and any other cash of
Seller (which bank accounts and deposits therein and other cash as of the date
hereof are listed in Schedule 2.22), excluding payments made to Seller pursuant
-------------
to Sections 1.3(a) and 1.3(b).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.
--------------------------------------------------
4.1 Making of Representations and Warranties. As a material inducement to
----------------------------------------
Seller and Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and Parent hereby make the
representations and warranties to Seller and Stockholder contained in this
Section 4.
4.2 Organization of Buyer. Each of Buyer and Parent is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of Delaware with
full corporate power and authority to own or lease its properties and to conduct
its business in the manner and in the places where such properties are owned or
leased or such business is conducted by it. Buyer and Parent are qualified to do
business as a foreign corporation in each jurisdiction in which such
qualification is necessary, except where the failure to be so qualified would
not have a material adverse effect on Buyer and Parent as a whole.
4.3 Authority of Buyer.
------------------
(a) Buyer and Parent have full corporate power and authority to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer and Parent pursuant to this Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by Buyer and Parent of this Agreement and each such
other agreement, document and instrument have been duly authorized by all
necessary action of Buyer and Parent and no other action on the part of Buyer or
Parent is required in connection therewith. This Agreement and each other
agreement, document and instrument executed and delivered by Buyer and Parent
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the valid and binding obligation of Buyer and Parent enforceable in
accordance with its terms. The execution, delivery and performance by Buyer and
Parent of this Agreement and each agreement, document and instrument
contemplated hereby:
23
(i) do not and will not violate any provision of the certificate
of incorporation or by-laws of Buyer or Parent;
(ii) do not and will not violate any laws of the United States, or
any state or other jurisdiction applicable to Buyer or Parent
or require Buyer or Parent to obtain any approval, consent or
waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or
made; and
(iii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise
to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration
award, whether written or oral, to which Buyer or Parent is
bound or affected.
(b) With respect to HSR, Parent is the "ultimate parent entity"
(as defined in HSR) of Buyer and Parent does not have annual net sales or total
assets for purposes of HSR in excess of $100 million.
4.4 Finder's Fees. Buyer and Parent have not incurred or become liable
-------------
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement.
4.5 SEC Reports. Parent's Form 10-K filed with the SEC on March 30, 1998
-----------
and all other forms, reports and documents filed with the SEC since March 30,
1998 (collectively, the "SEC Reports") have been prepared in accordance with the
applicable requirements of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and accurately state all material facts
with respect to finances, operation and management of Parent. The balance sheets
(including the related notes) included in the SEC Reports are complete and
correct in all material respects and fairly present the financial position of
Parent as of the respective dates thereof, and the other related statements
(including the related notes) included therein are complete and correct in all
material respects and fairly present the results of operations and cash flows of
Parent for the respective fiscal periods set forth therein in accordance with
generally accepted accounting principles applied on a consistent basis, except
in the case of interim financial statements for normal recurring and certain
non-recurring audit adjustments necessary for a fair presentation of the
financial position and operating results of Parent for the interim periods which
will not be materially adverse and for the omission of footnotes to said interim
financial statements that would be required by generally accepted accounting
principles. Parent will promptly prepare and file on or before the due date or
any extension thereof all filings required to be made by Parent with the NASDAQ
Stock Market and the SEC, including without limitation, the 8-K (and related
financial statements) required to be filed with the SEC in connection with the
transactions contemplated by this Agreement.
24
4.6 Material Adverse Change. Except as set forth on Schedule 4.6, since
----------------------- ------------
December 31, 1998, (a) there has not been a material adverse change in the
business, results of operations, condition (financial or otherwise), properties,
assets, liabilities or obligations of Parent that would be required to be
disclosed in financial statements prepared in accordance with GAAP; and (b)
there is no material litigation pending or, to the best knowledge of Buyer or
Parent, threatened against Buyer or Parent.
4.7. Disclosure. To Buyer's knowledge, the representations, warranties
----------
and statements made or contained in this Agreement, in the certificates,
Schedules and Exhibits given or delivered by Buyer pursuant to this Agreement do
not, either individually or when taken together, contain any untrue statement of
a material fact, and do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties and
statements not misleading in light of the circumstances in which they were made
or delivered.
4.8. Litigation. Except as set forth on Schedule 4.8, there is no
---------- ------------
material litigation, claim or governmental, arbitration or other proceeding,
investigation, order or decree pending or in effect or, to the best knowledge of
Parent or Buyer, threatened against Parent or Buyer.
SECTION 5. COVENANTS OF BUYER AND PARENT.
-----------------------------
5.1 Making of Covenants and Agreement. Buyer and Parent hereby make the
---------------------------------
covenants and agreements set forth in this Section 5.
5.2 Confidentiality. Buyer and Parent agree that, unless and until the
---------------
Closing has been consummated, Buyer and Parent, their officers, directors,
agents and representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from Seller or the
Stockholders with respect to the business or financial condition of Seller
except for the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in Seller's industry or which
has been disclosed to Buyer by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not consummated,
Buyer will return to Seller (or certify that it has destroyed) all copies of
such data and information, including but not limited to financial information,
customer lists, business and corporate records, worksheets, test reports, tax
returns, lists, memoranda, and other documents prepared by or made available to
Buyer in connection with the transaction.
5.3 Consummation of Agreement. Buyer and Parent shall use their best
-------------------------
efforts to perform and fulfill all conditions and obligations on its part to be
performed and fulfilled under this agreement, to the end that the transactions
contemplated by this agreement shall be fully carried out. To this end, Buyer
and Parent will obtain prior to the Closing all necessary authorizations or
approvals of their stockholders and Board of Directors and provide a copy of
evidence thereof to Seller at Closing.
25
5.4 No Disclosure of Consideration. Unless otherwise required by any
------------------------------
statute, law, ordinance, regulation, judgment, order or decree or applicable
Nasdaq listing requirement, neither Buyer or Parent, or any affiliates, will
disclose to any third person the amount of consideration paid for the Subject
Assets pursuant to this Agreement, it being acknowledged and agreed that Parent
may disclose such information in its filings with the SEC, and in any press
releases announcing the signing of this Agreement and the consummation of the
transactions contemplated hereby in order to comply with applicable Nasdaq
listing requirements and federal securities laws.
5.5 Registration Rights. Parent agrees that if, one year following the
-------------------
Closing of this Agreement, Rule 144 promulgated under the Securities Act of
1933, as amended, (or any comparable provision available in replacement thereof)
becomes unavailable to Seller or the Stockholders, as applicable, to resell the
shares of Parent Stock to be received by Seller pursuant to this Agreement,
through no action of the Seller or Stockholders, as applicable, Parent shall
enter into a registration rights agreement with Seller or the Stockholders, as
applicable, pursuant to which Parent agrees to register Parent Stock received
pursuant to this Agreement. Such registration shall be at the expense of Parent,
with the exception of underwriting or broker discounts and commissions, and
shall contain standard terms and conditions as agreed to by the parties acting
in good faith.
SECTION 6. CONDITIONS.
----------
6.1 Conditions to the Obligations of Buyer. The obligation of Buyer to
--------------------------------------
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Seller and Stockholders contained in Section 2
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as though made on and as of the Closing; and Seller shall, on
or before the Closing, have performed all of its obligations hereunder which by
the terms hereof are to be performed on or before the Closing, unless such
performance has been waived in writing by Buyer.
(b) No Material Change. There shall have been no material adverse
------------------
change in the financial condition, prospects, properties, assets, liabilities,
business or operations of Seller since the date hereof, whether or not in the
ordinary course of business.
(c) Certificate from Officers. Seller shall have delivered to Buyer
-------------------------
a certificate of Seller's President and Chief Financial Officer dated as of the
Closing to the effect that the statements set forth in paragraph (a) and (b)
above in this Section 6.1 are true and correct.
26
(d) Title Insurance - Leased Real Property. If requested, Seller
--------------------------------------
will arrange (as evidenced by assurances from the issuer reasonably satisfactory
to Buyer) for Buyer to receive at Buyer's expense, immediately after the
Closing, a current ALTA leasehold form title insurance policy insuring
marketable leasehold title to the Leased Real Property and all appurtenances
thereto as more fully set forth in Section 2.6(b) above, subject only to the
Permitted Encumbrances and any other matters disclosed on Schedule 2.6(b) which
---------------
Buyer has agreed to accept.
(e) Approval of Buyer's Counsel. All actions, proceedings,
---------------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Xxxxxxx, Procter & Xxxx LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to such
counsel, as Buyer may reasonably require from Seller and the Stockholders to
evidence compliance with the terms and conditions hereof as of the Closing and
the correctness as of the Closing of the representations and warranties of the
Stockholders and Seller and the fulfillment of their respective covenants.
(f) Opinion of Counsel. On the Closing Date, Buyer shall have
------------------
received from Manta and Xxxxx counsel for Seller, an opinion as of said date, in
a form mutually agreed to by Buyer and Seller acting in good faith.
(g) No Litigation. There shall have been no determination by Buyer,
-------------
acting in good faith, that the consummation of the transactions contemplated by
this Agreement has become impracticable by reason of the institution or threat
by any person or any federal, state or other governmental authority of
litigation, proceedings or other action against Buyer, Seller or any Stockholder
or any material adverse change in the laws, regulations or accreditations
applicable to Seller.
(h) Consents. Seller shall have made, except as qualified by this
--------
Agreement, all filings with and notifications of governmental authorities,
regulatory agencies and other entities required to be made by Seller in
connection with the execution and delivery of this Agreement, the performance of
the transactions contemplated hereby and the continued operation of the business
of Seller by Buyer subsequent to the Closing; and Seller and Buyer shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required to permit the continuation of
the business of Seller and the consummation of the transactions contemplated by
this Agreement, and in connection with the transfer of Subject Assets or
Seller's contracts, permits, leases, licenses and franchises, to avoid a breach,
default, termination, acceleration or modification of any material indenture,
loan or credit agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award as a result of, or in connection
with, the execution and performance of this Agreement.
27
(i) FIRPTA Withholding. At or prior to the Closing, Buyer shall
------------------
have received from Seller a "transferor's certificate of non-foreign status" as
provided in the Treasury Regulations under Section 1445 of the Code.
(j) No Liens. The Subject Assets shall be free and clear of any
--------
liens, restrictions or encumbrances, and the public records applicable to Seller
shall reflect no Uniform Commercial Code financing statements applicable to
Seller or the Subject Assets.
6.2 Conditions to Obligations of Seller. Seller's obligation to
-----------------------------------
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer and Parent contained in Section 4 shall
be true and correct in all material respects as though made on and as of the
Closing; Buyer and Parent shall, on or before the Closing, have performed all of
its obligations hereunder which by the terms hereof are to be performed on or
before the Closing; and Buyer and Parent shall have delivered to Seller a
certificate of the President or any Vice President of Buyer and Parent dated on
the Closing to such effect.
(b) Approval of Seller's Counsel. All actions, proceedings,
----------------------------
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this agreement shall have been approved by Manta and Xxxxx as counsel for
Seller, and such counsel shall have received on behalf of Seller and the
Stockholders such other certificates, opinions and documents in form
satisfactory to counsel for Seller as Seller may reasonably require from Buyer
to evidence compliance with the terms and conditions hereof as of the Closing
and the correctness as of the Closing of the representations and warranties of
Buyer and Parent and the fulfillment of their covenants.
(c) No Litigation. There shall have been no determination by
-------------
Seller, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become impracticable by reason of the
institution or threat by any person or any federal, state or other governmental
authority of material litigation, proceedings or other action against Buyer,
Parent, Seller or any Stockholder.
(d) Opinion of Counsel. On the Closing Date, Seller shall have
------------------
received from Xxxxxxx, Procter & Xxxx LLP, counsel for Buyer, an opinion as of
said date, in a form to be mutually agreed upon by Buyer and Seller acting in
good faith.
(e) Buyer will have used its reasonable best efforts to offer
employment to the employees listed on Schedule 1.10(b) on the terms set forth
----------------
therein.
28
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
-------------------------------------------
7.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated as follows:
(i) by mutual written consent of all of the parties to this
Agreement;
(ii) by Buyer, pursuant to written notice by Buyer to Seller, if
any of the conditions set forth in Section 6.1 of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably
certain that any of such conditions, other than a condition within the
control of Seller or Stockholder, will not be satisfied at or prior to the
Closing, such written notice to set forth such conditions which have not
been or will not be so satisfied;
(iii) by Seller, pursuant to written notice by Seller to Buyer, if
any of the conditions set forth in Section 6.2 of this Agreement have not
been satisfied at or prior to the Closing, or if it has become reasonably
certain that any of such conditions, other than a condition within the
control of Buyer, will not be satisfied at or prior to the Closing, such
written notice to set forth such conditions which have not been or will not
be so satisfied; and
(iv) by either Seller or Parent if the Closing shall not have
occurred by June 30, 1998.
7.2 Effect of Termination. All obligations of the parties hereunder
---------------------
shall cease upon any termination pursuant to Section 7.1, provided, however,
that (i) the provisions of this Section 7, Section 3.5, Section 5.2, Section
10.2 and Section 10.10 hereof shall survive any termination of this Agreement;
(ii) nothing herein shall relieve any party from any liability for a material
error or omission in any of its representations or warranties contained herein
or a material failure to comply with any of its covenants, conditions or
agreements contained herein, if such error, omission or failure was willful or
deliberate (a "Deliberate Breach"), but in the absence of a Deliberate Breach,
the liability of the responsible party to the other party shall be limited to
out-of-pocket expenses incurred by the other party in connection with
negotiating, preparing and entering into this Agreement and carrying out the
transactions contemplated hereby and (iii) the parties shall have rights to
proceed as further set forth in Section 7.3 below.
7.3 Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, if any of the conditions specified in Section 6.1 hereof have
not been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 6.2 hereof have not been satisfied, Seller
shall have the right to proceed with the transactions contemplated hereby
without waiving any of its rights hereunder.
29
SECTION 8. SURVIVAL OF WARRANTIES.
----------------------
8.1 Survival of Warranties. All representations, warranties, agreements,
----------------------
covenants and obligations herein or in any Schedule or Exhibit to this Agreement
or any certificate or other document specifically required to be delivered under
this Agreement by any party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the parties receiving the
same and shall survive the Closing (subject to the provisions of Sections 9.1
and 9.2 hereof) regardless of any investigation and shall not merge into the
performance of any obligation by any party hereto; provided, however, that the
representations and warranties shall expire on the same dates and to the extent
that the rights to indemnification with respect thereto under Section 9 shall
expire.
SECTION 9. INDEMNIFICATION.
---------------
9.1 Indemnification by Stockholders.
-------------------------------
(a) Stockholders (subject to subsection (b) of this Section 9.1)
agree to defend, indemnify and hold Buyer, Parent and their respective
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof and any person who controls any of them within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act
(individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any and all Claims (as defined
in Section 1.2 hereof), and any diminution in value of the Subject Assets or the
Business, whether or not arising out of third-party claims and including all
reasonable amounts paid in investigation, defense or settlement of the
foregoing, which may be sustained or suffered by any of them based upon, arising
out of, by reason of or otherwise in respect of or in connection with:
(i) any inaccuracy in or breach of any representation or warranty
made by Seller or Stockholder in this Agreement, or in any Schedule or
exhibit to this Agreement or any certificate or other document delivered in
connection with the consummation of the transactions contemplated by this
Agreement (collectively, "Buyer Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Seller or
Stockholder in this Agreement or in any Schedule or exhibit to this
Agreement or any certificate or other document delivered in connection with
the consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the business or operations of Seller
other than the Business;
(iv) any Claim (other than the Contract Liabilities) relating to
the operations and assets of the Business which arises in connection with
or on the basis of events,
30
acts, omissions, conditions or any other state of facts or Claims occurring
or existing on or prior to the Closing Date (including, in each case,
without limitation, any Claim relating to or associated with the Business
on or prior to the Closing Date); and
(v) any liability of Seller other than the Contract Liabilities.
The rights of Buyer Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii), (iv), or (v) of this
Section 9.1(a) shall not be limited by the fact that such Claim may also
constitute a Buyer Representation and Warranty Claim.
(b) The rights of Buyer Indemnified Parties to recover
indemnification under this Section 9.1 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Seller or Stockholder
with respect to Buyer Representation and Warranty Claims or Claims arising
under Section 9.1(a)(i) or (ii) unless the total of all amounts payable
pursuant to this Section 9.1 shall exceed $50,000 in the aggregate,
whereupon the total amount of such Claims shall be recoverable in
accordance with the terms thereof; provided, however, that such $50,000
limitation shall not apply with respect to Claims involving fraud or
intentional misrepresentation and provided further that any claim brought
under Sections 9.1(a)(iii), 9.1(a)(iv) or 9.1(a)(v) above shall not be
subject to such limitation notwithstanding that they are also Buyer
Representation and Warranty Claims; and;
(ii) All rights to indemnification with respect to Buyer
Representation and Warranty Claims shall expire on the 18 month anniversary
of the Closing Date (that is, the same numbered day of the month on which
the Closing occurs in the 18th month following the Closing), except that
Buyer Representation and Warranty Claims relating to or involving fraud or
tax matters shall survive until and shall expire on the date three months
after the termination of the applicable statute of limitations relating
thereto. Notwithstanding the preceding sentence, if on or prior to the 18
month anniversary of the Closing Date a specific state of facts shall have
become known which may give rise to a claim for indemnification under
Section 9.1(a)(i) and a Buyer Indemnified Party shall have given written
notice of such facts known by such Buyer Indemnified Party at such time to
Seller and Stockholder, then the right to indemnification with respect
thereto shall remain in effect without regard to when such matter shall be
finally determined and disposed of. All rights to indemnification under
this Section 9.1 with respect to claims arising under Section 9.1(a)(ii),
9.1(a)(iii), 9.1(a)(iv) and 9.1(a)(v) shall, except as they may otherwise
be extended, survive until and shall expire on the date 20 days after the
termination of the applicable statute of limitations relating thereto. The
limitations herein with respect to Buyer Representation and Warranty Claims
and claims arising under Sections 9.1(a)(ii), 9.1(a)(iii) and 9.1(a)(iv)
shall not limit the rights of any Buyer Indemnified Party with respect to
any other claims under this Section 9.1; and
31
(iii) Notwithstanding anything contained in this Section 9.1 to the
contrary, Seller and Stockholder shall not be required to indemnify Buyer
Indemnified Parties with respect to Buyer Representation and Warranty
Claims or Claims arising under Section 9.1(a)(ii) in an aggregate amount in
excess of $6,500,000, plus any Contingent Payment actually paid (together,
the "Indemnity Cap"), except with respect to claims relating to or
involving fraud or tax matters, as to which no such limit shall apply.
9.2 Indemnification by Buyer and Parent.
-----------------------------------
(a) Buyer and Parent (subject to subsection (b) of this Section 9.2)
agrees to defend, indemnify and hold Seller and Stockholder and Seller's
subsidiaries and affiliates and persons serving as officers, directors, partners
or employees thereof (individually a "Seller Indemnified Party" and collectively
the "Seller Indemnified Parties") harmless from and against any and all Claims
(as defined in Section 1.2 hereof), whether or not arising out of third-party
claims and including all reasonable amounts paid in investigation, defense or
settlement of the foregoing, which may be sustained or suffered by any of them
based upon, arising out of, by reason of or otherwise in respect of or in
connection with:
(i) any inaccuracy in or breach of any representation or warranty
made by Buyer or Parent in this Agreement or in any Schedule or exhibit to
this Agreement or any certificate or other document delivered in connection
with the consummation of the transactions contemplated by this Agreement
(collectively, "Seller Representation and Warranty Claims");
(ii) any breach of any covenant or agreement made by Buyer or
Parent in this Agreement or in any Schedule or exhibit to this Agreement or
any certificate or other document delivered in connection with the
consummation of the transactions contemplated by this Agreement;
(iii) any Claim relating to the operation by Buyer of the Subject
Assets after the Closing Date which arises in connection with or on the
basis of events, acts, omissions, conditions or any other state of facts or
claims occurring or existing after the Closing Date (including, in each
case, without limitation, any Claim relating to or associated with the
products or services sold or provided by Buyer after the Closing Date,
product liability matters, warranty claims, tax matters, pension and
benefit matters, any failure to comply with applicable laws and/or
permitting or licensing requirements, personal injury and property damage
matters and environmental and worker health and safety matters); and
(iv) the non-performance of the Contract Liabilities to the extent
assumed by Buyer hereunder as they become due, in accordance with their
respective terms.
32
The rights of Seller Indemnified Parties to recover indemnification in
respect of any Claim arising under clause (ii), (iii) or (iv) of this Section
9.2(a) shall not be limited by the fact that such Claim may also constitute a
Seller Representation and Warranty Claim.
(b) The rights of Seller Indemnified Parties to recover
indemnification under this Section 9.2 shall be subject to the following
limitations:
(i) No indemnification shall be payable by Buyer or Parent with
respect to Seller Representation and Warranty Claims or Claims arising
under Section 9.2(a)(i) or (ii) unless the total of all amounts payable by
Buyer and Parent taken as a whole pursuant to this Section 9.2 shall exceed
$50,000 in the aggregate, whereupon the total amount of such Claims shall
be recoverable in accordance with the terms thereof; provided, however,
that such $50,000 limitation shall not apply with respect to Claims
involving fraud (it being understood that any claim brought under Sections
9.1(a)(iii) or 9.1(a)(iv) above shall not be subject to such limitation if
they are also Seller Representation and Warranty Claims).
(ii) All rights to indemnification with respect to Seller
Representation and Warranty Claims shall expire on the 18 month anniversary
of the Closing Date (that is, the same numbered day of the month on which
the Closing occurs in the 18th month following the Closing), except that
Seller Representation and Warranty Claims relating to or involving fraud,
or product liability matters shall survive until and shall expire on the
date three months after the termination of the applicable statute of
limitations relating thereto. Notwithstanding the preceding sentence, if
on or prior to the 18 month anniversary of the Closing Date a specific
state of facts shall have become known which may give rise to a claim for
indemnification under Section 9.2(a)(i) and a Seller Indemnified Party
shall have given written notice of such facts known by such Seller
Indemnified Party at such time to Buyer, then the right to indemnification
with respect thereto shall remain in effect without regard to when such
matter shall be finally determined and disposed of. All rights to
indemnification under this Section 9.2 with respect to Claims arising under
Section 9.2(a)(ii), 9.2(a)(iii) and 9.2(a)(iv), except as they may
otherwise be extended, survive until and shall expire on the date 20 days
after the termination of the applicable statute of limitations relating
thereto. The limitations herein with respect to Seller Representation and
Warranty Claims and Claims arising under Section 9.2(a)(ii), 9.2(a)(iii)
and 9.2(a)(iv) shall not limit the rights of any Seller Indemnified Party
with respect to any other claims under this Section 9.2; and
(iii) Notwithstanding anything contained in this Section 9.2 to the
contrary, Buyer and Parent shall not be required to indemnify Seller
Indemnified Parties with respect to Seller Representation and Warranty
Claims or Claims arising under Section 9.2(a)(ii) in an aggregate amount in
excess of the Indemnity Cap, except with respect to claims relating to or
involving fraud, as to which no such limit shall apply.
33
9.3 Notice; Defense of Claims.
-------------------------
(a) Notice of Claims. Promptly after receipt by an indemnified party
----------------
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) Third Party Claims. With respect to third party claims, if within
------------------
20 days after receiving the notice described in clause (a) above the
indemnifying party gives (i) written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnifying party shall not be required to make any payment with respect to
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense or the payment is required
in accordance with any settlement or adjudication in accordance with the
provisions of this Section 7.3; provided, however, that the assumption of
defense of any such matters by the indemnifying party shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled provided the indemnifying parties' obligation to
indemnify the indemnified party therefor will be fully satisfied and such
settlement does not involve the establishment of any obligations or limitations
applicable to the indemnified party. The indemnifying party shall keep the
indemnified party apprised of the status of the claim, liability or expense and
any resulting suit, proceeding or enforcement action, shall furnish the
indemnified party with all documents and information that the indemnified party
shall reasonably request and shall consult with the indemnified party prior to
acting on major matters, including settlement discussions. Notwithstanding
anything herein stated, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of
34
the indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) Non-Third Party Claims. With respect to non-third party claims,
----------------------
if within 20 days after receiving the notice described in clause (a) above the
indemnifying party does not give written notice to the indemnified party that it
contests such indemnity, the amount of indemnity payable for such claim shall be
as set forth in the indemnified party's notice. If the indemnifying party
provides written notice to the indemnified party within such 20-day period that
it contests such indemnity, the matter shall be resolved by arbitration in
accordance with Section 10.11 hereof.
9.4 Sole Remedy. Following the Closing, the parties agree that the rights
-----------
to indemnification under this Section 9 shall be exclusive of all rights of
indemnification or other remedies that any Seller Indemnified Party or Buyer
Indemnified Party would otherwise have in connection with the transactions
contemplated by this Agreement, except for Claims relating to or involving
fraud, intentional misrepresentation or the breach of Section 3.2, 3.7, 3.9 or
5.2 hereof.
9.5 Satisfaction of Indemnification Obligations. In order to satisfy the
-------------------------------------------
indemnification obligations set forth in Section 9.1 above, a Buyer Indemnified
Party shall have the right (in addition to collecting directly from the
Stockholders) to notify the Stockholders of its intention to set off
indemnification claims against amounts under the Contingent Payment (whether or
not then due and payable); provided that if the Stockholders object to such set-
off, Buyer shall place any payment due to Seller or Stockholders on account of
the Contingent Payment, in escrow with a third party escrow agent in accordance
with the terms of a mutually acceptable escrow agreement (with any Contingent
Payment to be invested in investment grade obligations), pending final
determination of the dispute in accordance with Section 10.11.
SECTION 10. MISCELLANEOUS.
-------------
10.1 Law Governing. This Agreement shall be construed under and governed
-------------
by the laws of the Commonwealth of Pennsylvania without regard to the conflicts
of laws provisions thereof.
10.2 Notices. All communications, notices and consents provided for herein
-------
shall be in writing and be given in person, by facsimile (with request for
assurance of receipt in a manner typical with respect to such communications) or
by mail, and shall become effective (x) on delivery if given in person, (y) on
the date of transmission if sent by facsimile, or
35
(z) four business days after being deposited in the United States mails, with
proper postage, for first-class registered or certified mail, prepaid.
Notices shall be addressed as follows:
If to Buyer, to:
---------------
Boron, XxXxxx & Associates, Inc.
00-00 Xxxxx 000 Xxxxx
Xxxx Xxxx, XX 00000
Attn: President
Facsimile Number: (000) 000-0000
With a copy to:
--------------
Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109
Attn: Xxxx X. XxXxxxxx, P.C.
Facsimile Number: 000-000-0000
If to Seller or Stockholders:
----------------------------
Medical Education Systems
0000 Xxxx X. Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxx X. Parenti and Xxxxx Xxxxxxxx
Facsimile Number: (000) 000-0000
With a copy to:
--------------
Manta and Xxxxx
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. X'Xxxxx, Xx., Esq.
Facsimile: (000) 000-0000
provided, however, that if any party shall have designated a different address
by notice to the others in accordance with this Section 10.2, then to the last
address so designated.
10.3 Prior Agreements Superseded. This Agreement supersedes all prior
---------------------------
understandings and agreements among the parties relating to the subject matter
hereof, including without limitation the letter of intent dated March 23, 1998
among Parent, Seller and the Stockholder.
36
10.4 Assignability. This Agreement shall not be assignable by any party,
-------------
except by Buyer and Parent to an affiliate of Parent (which assignment shall not
relieve Buyer or Parent of any of their obligations hereunder), without the
prior written consent of the other parties hereto. This Agreement (including
without limitation the provisions of Section 8) shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
10.5 Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
10.6 Certain Definitions. For purposes of this Agreement, the term:
-------------------
(a) "affiliate" of a person shall mean a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee, partner or executor, by contract or credit arrangement or
otherwise;
(c) "knowledge" or "to best of a person's knowledge" means actual
knowledge, the conscious awareness of facts or other information of such
person.
(d) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization; and
(e) "subsidiary" of a person means any corporation more than 50
percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity
interest, is directly or indirectly owned by such person.
10.7 Execution in Counterparts. For the convenience of the parties and
-------------------------
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
10.8 Amendments; Waivers. This Agreement may not be amended or modified
-------------------
except by a writing duly and validly executed by Parent and Seller or, following
the Closing, by Parent and the Stockholders' Representative. Compliance with
any condition or covenant set forth herein may not be waived except by a writing
duly and validly executed by the party or parties to be bound. No delay on the
part of any party in exercising any right, power or
37
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, or any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
10.9 Severability. Each of the provisions contained in this Agreement
------------
shall be severable and the unenforceability of one shall not affect the
enforceability of any other provision or the remainder of this Agreement.
10.10 Publicity and Disclosures. Except as required by law or the rules
-------------------------
and regulations of the SEC or any state securities commission, or applicable
NASDAQ listing requirements, neither Buyer or Parent on the one hand, or Seller
and/or Stockholders, on the other hand, shall make any public disclosure
regarding the proposed transaction without the prior written consent of Seller
or the Buyer, respectively, which consent shall not be unreasonably withheld.
10.11 Dispute Resolution. Except with respect to matters as to which
------------------
injunctive relief is being sought, in the event of a dispute between the parties
concerning their respective rights and obligations under this Agreement that the
parties are unable to resolve amicably between themselves within sixty (60) days
of proper notice from one party to another, such dispute shall be settled by
arbitration in the State of New York in an expedited manner in accordance with
the Commercial Rules of the American Arbitration Association (the "AAA") by
three duly registered arbitrators to be selected jointly by the parties in
accordance with AAA rules. The decision of the arbitrators shall be final and
binding upon the parties.
10.12 Expenses. Buyer, Seller and Stockholder shall each bear its own
--------
expenses in connection with the negotiation and performance of this Agreement
and the transactions contemplated hereby. All transfer, excise or other taxes
payable by any party to this Agreement to any jurisdiction by reason of the sale
and transfer of the Subject Assets pursuant to this Agreement, if any (excluding
any such taxes arising solely from the identity or location of Buyer or any
affiliate of Buyer), shall be paid 50% by Seller out of the proceeds of the sale
of the Subject Assets and 50% by Buyer.
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
BUYER:
-----
MES Acquisition Corp.
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
Treasurer
PARENT:
------
BORON, XXXXXX & ASSOCIATES, INC.
By:/s/ Xxxxxxx X. XxXxxx
----------------------
Xxxxxxx X. XxXxxx
President
SELLER:
------
Medical Education Systems, Inc.
By:/s/ Xxxx X. Parenti
----------------------
Xxxx X. Parenti
President and Chief Executive Officer
39
STOCKHOLDERS:
------------
/s/ Xxxx X. Parenti
-----------------------------------
Xxxx X. Parenti, individually
/s/ Xxxxx Xxxxxxxx
-----------------------------------
Xxxxx Xxxxxxxx, Individually
40
