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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of the
1st day of December, 1998 (the "Effective Date"), by and between Children's
Comprehensive Services of California, Inc., a California corporation ("Buyer"),
on the one hand, and Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. XxXxx (with
Messrs. Bosic, Bosic, and XxXxx sometimes referred to herein as "Seller" or
"Sellers" as the case may be) and Somerset, Incorporated, a California
corporation, and doing business as Somerset Educational Services ("Company"), on
the other hand; with Buyer, Sellers, and Company sometimes referred to herein as
"Party" or "Parties" as the case may be.
RECITALS
A. Sellers own as of the Effective Date, and will own as of
the Closing Date, all of the shares of common stock of Company issued
and outstanding in the amounts set forth beside each Seller's name on
Schedule 5.2.1 attached hereto.
B. Buyer desires to purchase from Sellers, and Sellers desire
to sell to Buyer, all of the shares of common stock of Company issued
and outstanding as of the Effective Date upon the terms and subject to
the conditions set forth in this Agreement.
C. Concurrently herewith and in connection with its
acquisition of the stock hereby, Buyer will enter into: (i) that
certain Agreement of Purchase and Sale and Joint Escrow Instructions
with BMB Enterprises, a California general partnership, of which each
of Sellers is a general partner; (ii) that certain Asset Purchase
Agreement with Behavioral Medicine Professional Services, Inc., a
California corporation, of which each of Sellers is a shareholder; and
(iii) that certain Asset Purchase Agreement with B and B Leasing, a
general partnership of Messrs. Xxxxxxx X. Xxxxx and Xxxxxx X. Xxxxx.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises herein made and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows:
ARTICLE I
SALE OF STOCK
Sellers, in reliance upon the representations, warranties, and
covenants of Buyer contained herein and on the terms and conditions herein set
forth, hereby agree to sell, assign, transfer, convey, and deliver to Buyer at
the Closing all of their right, title, and interest in and to the Seller Shares.
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Buyer, in reliance upon the representations, warranties, and covenants of
Sellers and Company contained herein and on the terms and conditions herein set
forth, hereby agrees to purchase the Seller Shares from Sellers at the Closing
for a purchase price as provided in Article II hereof.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The purchase price for the Seller Shares (the
"Purchase Price") is Six Million Six Hundred Ninety Thousand and NO/100 Dollars
($6,690,000.00), payable in accordance with Section 2.2 hereof and subject to
adjustment as set forth in Section 2.3 hereof. The Purchase Price shall be
payable to Sellers in accordance with their respective percentages of ownership
of the Seller Shares (the "Ownership Percentages"), which Ownership Percentages
are set forth in Schedule 5.2.1 attached hereto. The allocation of the Purchase
Price among Sellers is more specifically set forth on Schedule 2.1 attached
hereto.
2.2 Payment of the Purchase Price. At the Closing, Buyer shall pay to
each Seller an amount equal to the Purchase Price multiplied by each Seller's
Ownership Percentage, by wire transfer of immediately available funds to the
account of such Seller at a bank or banks specified by such Seller.
2.3 Purchase Price Adjustment. Notwithstanding anything to the contrary
contained herein, the Purchase Price payable under Section 2.2 hereof shall be
ratably reduced to the extent that the Net Working Capital of Company as of the
Effective Date is less than $1 Million, determined as set forth below. For
purposes hereof, the term "Net Working Capital" means the excess of Company's
current assets over its current liabilities as of the Effective Date, determined
in accordance with GAAP. Sellers shall, not later than, and as of, one (1)
business day before the Effective Date, calculate the Net Working Capital of
Company (the "Tentative Net Working Capital"), in the manner set forth and
certified by Sellers in the form of Exhibit "A" attached hereto (the "Tentative
Balance Sheet"). If the Tentative Net Working Capital is less than $1 Million,
then the Purchase Price to be paid at the Closing shall be reduced by the amount
of such deficiency.
As of the sixtieth (60th) day following the Closing Date,
Buyer shall recalculate the Tentative Net Working Capital (the "Final Net
Working Capital"), which recalculation shall be determined as of the Closing
Date by (i) the elimination from the Tentative Balance Sheet of any and all
accounts receivable not collected on or prior to such sixtieth (60th) day, and
(ii) any and all adjustments to current assets or current liabilities otherwise
set forth on the Tentative Balance Sheet, redetermined in accordance with GAAP.
Such recalculation shall be in the manner set forth and certified by Buyer in
the form of Exhibit "B" attached hereto (the "Final Balance Sheet"). If the
Final Net Working Capital is less than $1 Million, then, notwithstanding
anything in this Agreement to the contrary, the principal amount of the Real
Estate Note automatically shall be reduced by the amount of such deficiency,
with such reduction deemed, for all purposes, effective as of the Closing.
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2.3 Closing Costs. Sellers shall pay at the Closing any stamp or other
sales, transfer, or transaction tax ("Transfer Tax") imposed under the laws of
the United States or any state, county, municipality, or other subdivision
thereof on the sale of the Seller Shares to Buyer (including any indirect
assessments of Transfer Tax, such as on property of any of Sellers or Company.
All escrow fees, closing fees, and other expenses or costs, including any
prepayment premiums, shall be borne fifty percent (50%) by Buyer and fifty
percent (50%) by Sellers. Any such Transfer Tax and other amounts payable by
Sellers under this Section 2.3 shall be deducted from the Purchase Price at the
Closing to the extent then known.
ARTICLE III
ADDITIONAL AGREEMENTS
3.1 Colorado Avenue Nonpublic School. At the Closing, Sellers shall
cooperate with Buyer and use their best efforts to effectuate (i) the
termination of Company's nonpublic school located at 0000 Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Colorado Avenue Nonpublic School"), and (ii)
the transfer of its faculty, students, and personal property to Company's
nonpublic school located at 00000 Xxx Xxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxxx
00000 (the "Van Buren Boulevard Nonpublic School"). Notwithstanding anything
herein to the contrary, only those reasonable costs and expenses associated with
such termination and transfer shall be borne by Company, and all other costs and
expenses shall be borne solely by Sellers.
3.2 Resignations; Termination of Employment. At the Closing, Sellers
shall cause each individual who is a director or officer of Company to resign as
a director or officer of Company. All of the members of Sellers' immediate
family shall resign as employees of Company as of the Closing. Neither any
Seller nor any member of Sellers' immediate family shall make any claim for
compensation or benefits for any period after the Closing or severance pay or
unemployment compensation relating to their employment (if any) by Company for
any period.
3.3 Termination of Management and Consulting Agreements. At the
Closing, any management or consulting agreements, whether in writing or oral,
pursuant to which any Person provides management or consulting services to
Company shall be terminated.
3.4 Conveyance of Collateral Assets. At the Closing, Sellers shall
convey, or cause to be conveyed to Company, all collateral assets, Permits (to
the extent transferable and to the extent not transferable, shall be
relinquished in favor of Company) or rights owned or controlled by Sellers which
relate to business conducted by Company.
3.5 Noncompetition, Confidentiality, and Nonsolicitation Agreements. At
the Closing, Buyer and each of Sellers shall execute and deliver
"Noncompetition, Confidentiality, and Nonsolicitation Agreements" in the forms
of Exhibit "C", Exhibit "D", and Exhibit "E" attached hereto.
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3.6 Release of Liabilities. At or prior to the Closing, Company shall
be released from any and all liability or obligation, whether contingent or
otherwise, on any indebtedness or any agreement, contract, lease, commitment or
obligation of any Seller or any member of Sellers' family.
3.7 Assistance in Certification Renewal. After the Closing, Sellers,
jointly and severally, shall, upon request of Buyer, provide assistance, at
their sole cost and expense, in curing any conditions, deficiencies, or
restrictions imposed with respect to the renewal of the nonpublic school
certification of Company which is pending on the date hereof. Buyer shall cause
Company to cooperate with Sellers in connection with the same.
3.8 Interim Operation of Company; Profits and Losses and Expenses.
3.8.1 Interim Operation of Company. On and after the Effective
Date and continuously through the Closing Date (the "Interim Period"), Sellers
and Buyer, jointly and severally, shall, subject to each of its respective
representations, warranties, covenants, and agreements contained in this
Agreement, cooperate with each other and operate Company for and on behalf of
the sole account of Buyer. Seller shall not be entitled to any payment, in kind
or otherwise, from, without limitation, Buyer or Company, for its performance of
any services in respect of such operation of Company during the Interim Period.
3.8.2 Profits and Losses and Expenses. All profits and losses
of Company during the Interim Period shall belong only to, and be applied only
to the account of, Buyer; and the payment of all necessary and required
expenses, not otherwise prohibited by this Agreement, of Company during the
Interim Period shall be borne only by Buyer. In no event shall any such profits,
losses, or expenses be taken into account for purposes of this Agreement;
provided, however, that Sellers' operation of Company during the Interim Period
otherwise does not constitute a breach of any of its representations,
warranties, covenants, or agreements contained in this Agreement.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to each of Sellers that the statements
contained in this Article IV are correct and complete as of the Effective Date
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the Effective Date throughout
this Article IV):
4.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 Buyer's Authority. Buyer has full power and authority (including
full corporate power and authority), and, subject to the necessary and required
approvals of the Agencies, the legal right to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement, subject to due
execution by the other Parties hereto, constitutes the valid and legally binding
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obligation of Buyer, enforceable in accordance with its terms and conditions,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors' rights and remedies generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
articles of incorporation or bylaws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any of
its assets is subject.
4.4 Brokers' Fees. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any of Sellers could become liable or
obligated.
4.5 Investment. Buyer is not acquiring the Company Shares with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
ARTICLE V
SELLERS' AND COMPANY'S REPRESENTATIONS AND WARRANTIES
Each of Sellers jointly and severally represents and warrants to Buyer
that the statements contained in this Article V are correct and complete as of
the Effective Date and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Article V):
5.1 Authority; Organization; Qualification; Corporate Power.
5.1.1 Sellers' Authority. Each of Sellers has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each of Sellers, enforceable in accordance with its terms and conditions. No
notice to, filing with, or any authorization, consent, or approval of, any
governmental entity or other Person is necessary in connection with the
execution, delivery, and performance by any of Sellers of this Agreement and the
Transaction Documents and the consummation by any of Sellers of the transactions
contemplated hereby and thereby.
5.1.2 Organization; Qualification; Corporate Power. Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Company has full corporate power and
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authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Schedule 5.1.2 attached hereto lists all
directors and officers of Company.
5.2 Company Shares; Capitalization.
5.2.1 Company Shares. Each of Sellers holds of record and owns
beneficially the number of Company Shares set forth next to his name on Schedule
5.2.1 attached hereto, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act), Taxes, Encumbrances, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. Each of Sellers is not a party to any option, warrant, purchase right,
or other contract or commitment that could require him to sell, transfer, or
otherwise dispose of any capital stock of Company (other than this Agreement).
Each of Sellers is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of Company.
5.2.2 Capitalization. The entire authorized capital stock of
Company consists of One Thousand (1000) shares, of which Three Hundred (300) are
issued and outstanding and of which Seven Hundred (700) are held in treasury.
All of the issued and outstanding Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth on Schedule 5.2.1 attached hereto. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to Company.
5.3 Noncontravention. Neither the execution, delivery, or performance
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Sellers or Company is subject or
any provision of the Articles of Incorporation or bylaws of Company, (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any of Sellers or Company is a party
or by which any is bound or to which any of their or its assets is subject, or
result in the creation or imposition of any Encumbrances upon capital stock or
assets owned by any of Sellers or Company. Schedule 5.3 attached hereto lists
all notices to, filings with, or any authorizations, consents, or approvals of
any governmental entity or other Person necessary in connection with the
execution, delivery, and performance by any of Sellers or Company of this
Agreement and the consummation of the transactions contemplated hereby, and
except as listed on Schedule 5.3 attached hereto, no other such notices to,
filings with, or any authorizations, consents, or approvals are necessary.
5.4 Brokers' Fees. None of Sellers or Company has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
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5.5 Personal Property. Schedule 5.5 attached hereto lists (i) all fixed
assets owned or leased by, in the possession of, or used by, Company in
connection with its business, and (ii) all other tangible and intangible
personal property, rights and assets owned or leased by, in the possession of,
or used by, Company in connection with its business, which have a current fair
market value in excess of $5,000 individually or, with respect to similar or
related properties, $5,000 in the aggregate and are material to the operation of
the business (except property sold or otherwise disposed of in the Ordinary
Course of Business and except inventory and Proprietary Rights), which list also
indicates the location of such items. Company has good and marketable title to,
or a valid leasehold interest in, each item listed on Schedule 5.5 attached
hereto, in each case free and clear of any Encumbrances, except as disclosed on
Schedule 5.5 attached hereto. The property listed on Schedule 5.5 attached
hereto constitutes all tangible and intangible property, rights, and assets
necessary and required for the conduct by Company of its business as now
conducted or currently proposed to be conducted. Such property is in good
condition and repair, and none of such property requires any repair or
replacement except for maintenance in the Ordinary Course of Business. Except as
disclosed on Schedule 5.5 attached hereto, none of such listed property is
subject to any Encumbrances or is located other than on the premises of Company.
5.6 Subsidiaries. Schedule 5.6 attached hereto sets forth for each
Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii) the
number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in treasury. All of the
issued and outstanding shares of capital stock of each Subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable. Company holds
of record and owns beneficially all of the outstanding shares of each
Subsidiary.
5.7 Financial Statements. Schedule 5.7 attached hereto contains the
following financial statements (collectively, the "Financial Statements"): (i)
the unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
November 30, 1994, November 30, 1995, November 30, 1996, and November 30, 1997,
for Company; and (ii) the unaudited consolidated balance sheets and statements
of income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the eleven months ended October 31, 1998
(the "Most Recent Fiscal Month End") for Company. The Financial Statements
(including the notes thereto) are complete and correct in all respects and have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly the financial condition of
Company as of such dates and the results of operations of Company for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items otherwise required by GAAP, none of which, if provided, would reflect
Adverse Consequences in respect of the operations or financial condition of
Company.
5.8 Events Subsequent to Most Recent Fiscal Month End. Since the Most
Recent Fiscal Month End, there has not been any Adverse Consequences in respect
of the operations or financial condition of Company taken as a whole. Without
limiting the generality of the foregoing, since that
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date, Company has neither engaged in any practice, taken any action, nor entered
into any transaction outside the Ordinary Course of Business.
5.9 Legal Compliance. Company has complied with all laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of any federal, state, local, and foreign
governmental entity (collectively, "Legal Requirements") applicable to it or its
conduct, ownership, use, occupancy, or operation in respect of its business or
properties, real or personal; nor has Company or any Seller received notice of
any violation by Company of any Legal Requirements.
5.10 Tax Matters. Except as set forth on Schedule 5.10 attached hereto,
Company has filed all Tax Returns that it was required to file, and all Taxes
due and payable by Company have been paid in full. Schedule 5.10 attached hereto
also lists all Tax Returns filed with respect to Company for taxable periods
ended on or after November 30, 1994, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Buyer correct and complete copies of all
federal and state Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Company since November 30, 1994.
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to any assessment of or deficiency in
Taxes. Company is not a party to any allocation or sharing agreement for Taxes.
Company has never been a member of an Affiliated Group filing a consolidated
federal corporate Tax Return (other than a group the common parent of which was
Company).
5.11 Real Property.
(a) Schedule 5.11(a) attached hereto lists all real property
owned by Company. With respect to each such listed parcel of owned real
property, and except for matters which would not have any Adverse Consequences
on the financial condition of Company taken as a whole: (i) the identified owner
has good and marketable title to the parcel of real property, free and clear of
any Encumbrances, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent, recorded easements,
covenants, and other restrictions, and utility easements, building restrictions,
zoning restrictions, and other easements and restrictions existing generally
with respect to properties of a similar character; (ii) there are no leases,
subleases, licenses, concessions, or other agreements granting to any party or
parties the right of use or occupancy of any portion of the parcel of real
property; and (iii) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein.
(b) Schedule 5.11(b) attached hereto lists all real property
leased or subleased to Company. Sellers have delivered to Buyer correct and
complete copies of the leases and subleases listed in Schedule 5.11(b) attached
hereto (as amended through the Closing Date). Each lease and sublease listed in
Schedule 5.11(b) attached hereto is legal, valid, binding, and enforceable in
accordance with its terms, and otherwise in full force and effect.
5.12 Intellectual Property. Schedule 5.12 attached hereto lists, at
subdivision (i), all patented and registered Proprietary Rights owned by Company
and all pending patent applications
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and applications for the registration of other Proprietary Rights owned or filed
by Company. Schedule 5.12 attached hereto lists, at subdivision (ii) thereon,
all trade or corporate names used by Company and all licenses and other rights
granted by Company to any third party with respect to Proprietary Rights and
licenses and other rights granted by any third party to Company. Except as set
forth at subdivision (iii) on Schedule 5.12 attached hereto: (i) Company owns
and possesses all right, title, and interest in and to, or has a valid license
to use, all of the Proprietary Rights necessary for the operation of the
Business as presently conducted and contemplated to be conducted hereby; (ii) no
claim by any third party contesting the validity, enforceability, use, or
ownership of any such Proprietary Rights has been made, is currently
outstanding, or threatened, and there is no reasonable basis for any such
claims; (iii) neither Company, any of Sellers, nor any registered agent of
Company have received any notices of, nor are aware of any reasonable basis for
an allegation of, any infringement or misappropriation by, or conflict with, any
third party with respect to such Proprietary Rights, nor have Company, any of
Sellers, or any registered agent of Company received any claims of infringement
or misappropriation of or other conflict with any Proprietary Rights of any
third party; and (iv) Company has not infringed, misappropriated, or otherwise
violated any Proprietary Rights of any third parties, and is unaware of any
infringement, misappropriation, or conflict which will occur as a result of the
continued operation of Company's business as presently conducted or as
contemplated to be conducted hereby.
5.13 Contracts. Schedule 5.13 attached hereto lists all contracts and
other agreements ("Contracts") to which Company is a party or by which Company
is bound, the performance of which will involve consideration in excess of
$1,000. Sellers have delivered to Buyer a correct and complete copy of each
contract or other agreement listed in Schedule 5.13 attached hereto (as amended
through the Closing Date). Company is not in default, nor has any event occurred
which, with the giving of notice or the passage of time or both, would
constitute a default under any Contract or any other obligation owed by Company,
which default would not have any Adverse Consequences on the operations,
financial condition, assets, or properties of Company, and no event has occurred
which, with the giving of notice or the passage of time or both, would
constitute a default by any other party to any such Contract or obligation.
5.14 Powers of Attorney. There are no outstanding powers of attorney
executed by or on behalf of Company.
5.15 Litigation. Except as listed on Schedule 5.15 attached hereto,
there is no action, suit, proceeding, investigation, claim, or order pending or
threatened against Company or any of its directors, officers, or key employees
with respect to the business or proposed business of Company, or to which
Company otherwise is a party, which if adversely determined would have any
Adverse Consequences on Company, its assets or business, before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction; nor is there any reasonable basis for any such action, suit,
proceeding, investigation, claim, or order. Company is not subject to any
injunction, judgment, order, decree, or ruling of any court or governmental
entity. Company has not received any opinion or memorandum of legal advice from
legal counsel retained by Company or any Seller to the effect that any of them
is exposed, from a legal standpoint, to any liability which may have Adverse
Consequences on the business or proposed business of Company. Company is not
engaged in any action to recover monies due it or for damages sustained by it.
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5.16 Employee Benefits. Except as listed on Schedule 5.16 attached
hereto, Company has not maintained, sponsored, adopted, made contributions to,
or obligated itself to make contributions or to pay any benefits or grant rights
under or with respect to, any Employee Benefit Plan, which could give rise to or
result in Company having any debt, liability, claim, or obligation of any kind
or nature, whether accrued, absolute, contingent, direct, indirect, known or
unknown, perfected or inchoate, or otherwise and whether or not due or to become
due. Sellers have delivered to Buyer correct and complete copies of the plan
documents and summary plan descriptions for each Employee Benefit Plan listed on
Schedule 5.16 attached hereto, and each such listed Employee Benefit Plan is in
compliance with its respective governing documents and agreements and with all
applicable Legal Requirements. More specifically:
(a) Schedule 5.16 attached hereto lists each Employee Benefit
Plan maintained by Company or to which Company contributes or is required to
contribute or in which any employee of the Company participates. Each Employee
Benefit Plan has been operated and administered in all respects in accordance
with all applicable Legal Requirements, including, but not limited to, ERISA and
the Code. There are no pending or threatened claims by or on behalf of any of
the Employee Benefit Plans, by any employee or beneficiary covered under any
such Employee Benefit Plan or otherwise involving any such Employee Benefit Plan
or any of its fiduciaries (other than for routine claims for benefits).
(b) Except as set forth on Schedule 5.16 attached hereto, (i)
each Employee Benefit Plan subject to section 401(a) of the Code qualifies
thereunder and is exempt from taxation pursuant to section 501(a) of the Code,
(ii) each trust subject to section 501(c) of the Code qualifies for exemption
from federal income tax thereunder, and (iii) each Employee Benefit Plan subject
to sections 125 and 129 of the Code qualifies thereunder.
(c) Company has not maintained, contributed to or been
required to contribute to, nor do any of its employees participate in, a
"multi-employer plan" (as defined in section 3(37) of ERISA) or a "defined
benefit plan" (as defined in section 3(35) of ERISA).
(d) Notwithstanding anything else set forth herein, Company
has not incurred any liability as of the Closing Date with respect to any
Employee Benefit Plan under ERISA (including, without limitation, Title I or
Title IV of ERISA), the Code, or other applicable law, which is due and payable
and which has not been satisfied in full, and no event has occurred, and there
exists no condition or set of circumstances which could result in the imposition
of any liability under ERISA (including, without limitation, Title I or Title IV
of ERISA), the Code, or other applicable law with respect to any of the Employee
Benefit Plans (other than the payment of routine claims for benefits, insurance
premiums or contributions required under the terms of the Employee Benefit
Plans).
(e) No Employee Benefit Plan, other than an Employee Benefit
Plan which is an employee pension benefit plan (within the meaning of section
3(2)(A) of ERISA), provides benefits, including without limitation, death,
health or medical benefits (whether or not insured), with respect to current or
former employees of Company beyond their retirement or other termination of
service with Company (other than (i) coverage mandated by applicable law, (ii)
deferred compensation
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benefits fully accrued as liabilities on the books of Company or (iii) benefits
the full cost of which is borne by the current or former employee (or his or her
beneficiary)).
(f) The consummation of the transactions contemplated by this
Agreement (including but not limited to the resignation of Sellers and all of
Sellers' respective family members as employees of Company) will not (i) entitle
any current or former employee, officer, or director of Company to severance
pay, unemployment compensation or any other payment from Company, or (ii) except
for acceleration of vesting by reason of the termination of the Employee Benefit
Plans described in Schedule 5.16 attached hereto, accelerate the time of payment
or vesting, or increase the amount of compensation due any such employee,
officer or director. The entire amount payable to Company's employees with
respect to the Plans (after taking into account any amounts vested by reason of
the termination thereof) have been fully and adequately accrued as a liability
on the Most Recent Financial Statements.
(g) Except as set forth in Schedule 5.16 attached hereto,
Company has provided or made available to Buyer, its counsel or accountants true
and complete copies of the following for each Employee Benefit Plan as
applicable: (i) the Employee Benefit Plan; (ii) the summary plan description of
the Employee Benefit Plan; (iii) the trust agreement, insurance policy or other
instrument relating to the funding of the Employee Benefit Plan; (iv) the most
recent Annual Report (Form 5500 series) and accompanying schedule filed with the
Internal Revenue Service or United States Department of Labor with respect to
the Employee Benefit Plan; (v) the most recent audited financial statement for
the Employee Benefit Plan; (vi) the most recent actuarial report of the Employee
Benefit Plan; and (vii) the policy of fiduciary liability insurance (and
agreements related thereto) maintained in connection with the Employee Benefit
Plan.
(h) Except as contemplated in this Section 5.16, Company has
not amended or terminated any Employee Benefit Plan after providing Buyer with
copies of the Employee Benefit Plans referenced in Schedule 5.16 attached
hereto.
5.17 Environmental, Health, and Safety Matters. Company is in strict
compliance with all Environmental, Health, and Safety Requirements, and Company
possesses all required permits, licenses, and certificates, and has filed all
notices or applications, required thereby. Company has not received any written
notice, report or other information (and there is no reasonable basis for any
such notice, report, or information) regarding any actual or alleged violation
of Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to Company or its facilities arising under Environmental, Health, and
Safety Requirements. No facts, events, or circumstance with respect to the past
or present operations, business, or facilities of Company exist which reasonably
could be expected to interfere with or prevent continued compliance with, or
could give rise to any common law or statutory liability or otherwise form the
basis of any claim, action, suit, proceeding, hearing, or investigation against
or involving Company or its business under any Environmental, Health, and Safety
Requirement based upon any such fact, event, or circumstances, including,
without limitation, liability for cleanup costs, personal injury, or property
damage.
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12
5.18 Certain Business Relationships with Company. Except as listed on
Schedule 5.18 attached hereto, none of Sellers has been involved in any business
arrangement or relationship with Company within the past twelve (12) months, and
none of Sellers owns any asset, tangible or intangible, which is used in the
business of Company. Sellers have delivered to Buyer all documents and other
information evidencing each such arrangement or relationship listed on Schedule
5.18 attached hereto, and each such listed arrangement or relationship was
effected on terms equivalent to those which would have been established in an
arms-length negotiation.
5.19 No Undisclosed Liabilities. Company does not have any debt,
liability, or obligation of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated, or otherwise and whether
due or to become due) arising out of any transaction entered into at or prior to
the Effective Date, or any transaction, series of transactions, action or
inaction at or prior to the Effective Date, or any state of facts or condition
existing at or prior to the Effective Date (regardless of when such debt,
liability, or obligation is asserted), including, but not limited to, debts,
liabilities, and obligations on account of Taxes or governmental charges or
penalties, interest or fines thereon or in respect thereof, except (i) to the
extent specifically reflected and accrued for or reserved against in the
Financial Statements, (ii) for debts, liabilities, and obligations listed on
Schedule 5.19 attached hereto, or (iii) debts, liabilities, and obligations
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business (none of which is a liability resulting from breach of Contract,
breach of warranty, tort, infringement, claim, or lawsuit).
5.20 Licenses and Permits. Company holds all permits, licenses,
franchises, and approvals of the Agencies necessary or required for its current
conduct, ownership, use, occupancy, or operation in respect of its business and
properties, real and personal, all of which are listed on Schedule 5.20 attached
hereto ("Permits"). Company is in compliance with such Permits, all of which are
in full force and effect, and neither Company nor any Seller has received any
notice thereof to the contrary.
5.21 Inventories, Accounts Receivable, and Accounts Payable.
(a) Except as disclosed on Schedule 5.21(a) attached hereto,
all inventories of Company are of good and standard quality and fitness.
(b) Schedule 5.21(b) attached hereto lists Company's accounts
receivable as of the Most Recent Fiscal Month End, and since such time, there
has been no material change, other than in the Ordinary Course of Business, in
the information disclosed in Schedule 5.21(b) attached hereto. All such
disclosed accounts receivable have arisen in bona-fide arms-length transactions
in the Ordinary Course of Business and are the valid and binding obligations of
the account debtors.
(c) Each of Company's accounts payable have arisen in
bona-fide arms-length transactions in the Ordinary Course of Business and have
been paid by Company in the ordinary course consistent with past practice.
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5.22 Conduct of Business.
(a) Except as disclosed on Schedule 5.22(a) attached hereto,
since December 31, 1997, Company has conducted its business only in the Ordinary
Course of Business and has not incurred any liability other than in the Ordinary
Course of Business, and there has been no Adverse Consequences on the assets,
condition (financial or otherwise), operating results, employee or customer
relations, business activities, or business prospects of Company.
(b) Company has not, at any time, made or committed to make,
any payments for illegal political contributions, any bribes, any kickback
payments, or any other illegal payments.
5.23 Insurance Policies. Schedule 5.23 attached hereto lists and
describes, including policy numbers, all insurance policies owned by Company,
copies of which policies or binders have been delivered to Buyer. All such
policies are in full force and effect, and Company is not in default under any
of them. Company has not received any notice of cancellation or intent to cancel
or increase or intent to increase premiums with respect to such policies nor is
there any basis for any such action. Schedule 5.23 attached hereto also lists
all pending claims with any insurance company and any instance within the
previous three years of a denial of coverage of Company by any insurance
company.
5.24 Bank Accounts. Schedule 5.24 attached hereto lists each bank in
which Company has an account or safe deposit box, the number of each such
account or box, and the names of all Persons authorized to draw thereon or to
have access thereto, as the case may be.
5.25 Compensation and Personnel Matters. Schedule 5.25 attached hereto
lists the name, title, date of hiring and current annual rate of compensation of
each director and officer of Company, and of each employee and agent of Company
whose current annual rate of compensation is Forty Thousand Dollars ($40,000) or
more, together with a summary (containing estimates to the extent necessary) of
existing bonuses, additional compensation (whether current or deferred) and
other like benefits, if any, paid or payable to such Persons in respect of
calendar years 1997 and 1998. Except as disclosed on Schedule 5.25 attached
hereto, Company is not a party to, nor is any of its property bound by, any
contract, agreement or other transaction with any director, officer or employee
of Company and since December 31, 1997, has not made or authorized any payment
to its officers, directors, former directors, shareholders or employees except
in the Ordinary Course of Business and at the regular rates of salary or other
remuneration payable. Except as set forth in Schedule 5.25 attached hereto:
(i) Company is not a party to, and has not made any
commitment to or conducted any negotiations with any labor union or employee
association with respect to, any collective bargaining or similar agreement, nor
are any of Company's employees currently represented by a labor organization for
purposes of collective bargaining as provided under the National Labor Relations
Act, and there are current attempts to organize or establish any labor union or
employee association in Company;
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(ii) there is no unfair labor practice charge or
complaint or any other matter against or involving Company pending or threatened
or contemplated before the National Labor Relations Board or any court of law;
(iii) there is no labor strike, or other dispute,
slowdown or stoppage pending or threatened against Company;
(iv) there are no charges, investigations,
administrative proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national origin,
sexual preference, disability or veteran status) pending before the Equal
Employment Opportunity Commission or any Governmental Authority against Company;
and
(v) Company has complied in all respects with all
Legal Requirements relating to the employment of labor with respect to its
employees, including any provisions thereof relating to wages, hours, benefits,
employment practices, collective bargaining and the payment of social security
and similar taxes.
5.26 Indebtedness. Company does not have any outstanding indebtedness
for borrowed money or capitalized lease obligations, except as disclosed on
Schedule 5.26 attached hereto.
5.27 Net Working Capital. Company's Net Working Capital as of the Most
Recent Fiscal Month End is $1,004,998.82.
5.28 Medical Expenses. Schedule 5.28 attached hereto lists all
expenses, obligations, duties, and liabilities relating to any claim by
employees and former employees (including dependents and spouses) of Company,
and the extent of any specific accrual on or reserve therefor disclosed on the
Financial Statements, for any medical costs and expenses. Except as disclosed on
Schedule 5.28 attached hereto, no claims, injuries, fact, event, or condition
exists which would give rise to a claim by employees and former employees
(including dependents and spouses) of Company for any medical costs and
expenses.
5.29 No Omissions and No Misrepresentations. Neither the
representations and warranties of Company nor any other document or written
information provided to Buyer by or on behalf of Company in connection with the
transactions contemplated hereby contain any untrue statement of any material
fact or omit to state any material fact necessary to make any such statement,
warranty, or representation not misleading. There is no material fact which has
not been disclosed to Buyer which adversely affects or could reasonably be
anticipated to have Adverse Consequences on the business conducted by Company or
Company's or any Seller's ability to consummate the transactions contemplated
hereby.
5.30 Year 2000 Compliance. The computer software and hardware operated
by Company are capable of providing uninterrupted millennium functionality to
record, store, process, and present calendar dates falling on or after January
1, 2000, and date-dependent data in the same manner and with the same
functionality as such software and hardware records, stores, processes, and
calendar
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dates and date-dependent data as of the date hereof, in all events without
having any Adverse Consequences on the condition (financial or otherwise) of
Borrower.
5.31 Colorado Avenue Nonpublic School. Neither the termination of the
Colorado Avenue Nonpublic School nor the transfer of its faculty, students, and
personal property to the Van Buren Boulevard Nonpublic School will violate any
Legal Requirement and, to Seller's knowledge, will not have any Adverse
Consequences on the business (financial or otherwise) of Company as contemplated
to be conducted hereby.
ARTICLE VI
CLOSING MATTERS
6.1 Time and Place. The closing of the transactions that are the
subject of this Agreement (the "Closing") shall take place at the offices of
Best Best & Xxxxxxx LLP in Riverside, California, commencing at 9:00 a.m. local
time on the later of (i) the first business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself), or (ii) December 2,
1998, unless otherwise agreed to by the Parties (the "Closing Date").
6.2 Deliveries of Sellers. At the Closing, Sellers will execute or
deliver, or cause to be executed or delivered, the following:
(a) Certificates representing the Seller Shares,
endorsed over to Buyer or accompanied by duly executed stock powers, free and
clear of all Encumbrances.
(b) The Articles of Incorporation of Company,
certified by the Secretary of State of the State of California as of a date not
more than ten (10) days prior to the Closing, and the bylaws of Company,
certified by the Secretary of Company as in effect at the Closing.
(c) Certificates of Good Standing, dated not more
than ten (10) days prior to the Closing, with respect to Company, issued by the
Secretary of State of the State of California, by the Secretary of State of each
jurisdiction in which Company is qualified to do business as foreign
corporation, and by the Franchise Tax Board of the State of California.
(d) All minute books, stock ledgers, and similar
corporate records of Company.
(e) Evidence satisfactory to Buyer that all consents,
approvals, or authorizations of, or notifications to, any third parties
(including governmental entities), if any, required to sell and assign the
Seller Shares and to consummate the transactions contemplated hereby have been
obtained by Sellers and Company.
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(f) A resolution of the Board of Directors of Company
authorizing the execution, delivery, and performance by Company of this
Agreement and the consummation of the transactions contemplated hereby,
certified by the Secretary of Company.
(g) A certificate of the Secretary of Company
attesting to the incumbency of the officers of Company executing this Agreement
and any other certificates or agreements delivered by Company to Buyer at or
prior to the Closing.
(h) A certificate of each Seller and of the President
of Company attesting on behalf of such Seller or Company, as the case may be, to
the matters, where applicable, set forth in Section 8.1 hereof.
(i) Each of the Transaction Documents.
(j) An opinion of counsel to Sellers and Company
addressed to Buyer, dated as of the Closing Date, covering customary matters in
a stock transaction.
(k) Such other documents and the like as reasonably
may be requested by counsel to Buyer.
6.3 Deliveries of Buyer. At the Closing, Buyer will execute or deliver,
or cause to be executed or delivered, the following:
(a) A certificate of the Secretary of Buyer attesting
to the incumbency of the officers of buyer executing this Agreement and any
other certificates or agreements delivered by Buyer to Sellers at or prior to
the Closing.
(b) A certificate of any officer of Buyer attesting
on behalf of Buyer to the matters set forth in Section 8.2(a) and (b) hereof.
(c) A resolution of the Board of Directors of Buyer
authorizing the execution, delivery, and performance by Buyer of this Agreement
and the consummation of the transactions contemplated hereby, certified by the
Secretary of Company.
(d) Each of the Transaction Documents.
(e) The Purchase Price payable in accordance with
Article II hereof.
(f) An opinion of counsel to Buyer addressed to
Sellers, dated as of the Closing Date, covering customary matters in a stock
transaction.
(h) Such other documents and the like as reasonably
may be requested by counsel to Sellers.
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ARTICLE VII
CLOSING COVENANTS
7.1 Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the Effective Date and the Closing:
7.1.1 General. Each Party will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions set forth
in Article VIII hereof).
7.1.2 Notices and Consents. Sellers will cause Company to give
any notices to third parties, and will cause Company to use its reasonable best
efforts to obtain any third party consents, that Buyer may request in connection
with the matters referred herein. Each of the Parties will (and Sellers will
cause Company to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governmental entities in connection with the matters referred herein.
7.1.3 Operation of Business. Sellers will not cause or permit
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business, or that otherwise would
constitute a breach of any representation, warranty, or covenant made by Sellers
or Company in this Agreement. Without limiting the generality of the foregoing,
Sellers will cause Company to:
(i) carry on the business conducted by Company in the
same manner as Sellers heretofore have and not make any material change in
personnel or operations, and not make any change in finance or accounting
policies;
(ii) maintain the assets of Company in good working
order and condition;
(iii) perform in all respects its obligations under
any agreement relating to or affecting its business;
(iv) keep in full force and effect present insurance
policies or other comparable insurance coverage in respect of its business;
(v) maintain and preserve Company's business
organization intact, retain Company's present employees, and maintain Company's
relationships with suppliers, customers, and others having business relations
therewith;
(vi) not effect, grant, or pay any increase in
compensation to any employee, officer, or director of Company other than annual
raises and bonuses to employees and officers consistent with those effected,
granted, or paid in prior years;
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(vii) not issue, redeem, or repurchase any shares of,
or modify any of the terms of, its capital stock or any securities convertible
into or exercisable for any such capital stock, not declare or pay any dividend,
whether in cash, stock or property, or not otherwise take (or omit to take) any
action where the same would be out of the Ordinary Course of business or
inconsistent with past practices;
(viii) not, directly or indirectly, transfer any
Company Shares;
(ix) not make or consent to any modification or
termination of, or exercise or waive any rights under, or grant any option or
proxy with respect to, the Company Shares;
(x) not enter into any agreement containing any
provision that would be violated or breached by the performance of Sellers' or
Company's obligations hereunder or which would violate, breach, or conflict with
any provisions hereof;
(x) without the prior written consent of Buyer, not
sell or agree to sell any asset of Company, except for the depletion of
inventories sold in the Ordinary Course of Business;
(xii) without the prior written consent of Buyer, not
engage in any transaction out of the Ordinary Course of Business, including any
sale, transfer, lease, encumbrance, or granting of a security interest in any
portion of the assets (except as otherwise provided herein);
(xiii) without the prior written consent of Buyer,
acquire, or make any capital expenditure in respect of, any additional items of
property, plant, or equipment having a value in excess of $1,000 in the
aggregate;
(xiv) without the prior written consent of Buyer,
enter into, renew, or terminate any contract or lease;
(xv) (1) not accelerate booking or collection of
revenues or defer expenses or (2) except as required by GAAP and subject to
appropriate year-end adjustments, (A) not utilize accounting principles
different from those used in the preparation of the Financial Statements and the
Most Recent Financial Statements, (B) not change in any manner its method of
maintaining its books of account and records from such methods as reflected in
the Financial Statements and the Most Recent Financial Statements, or (C) not
accelerate booking of revenues or the collection of accounts receivable or the
deferral of expenses.
7.1.4 Full Access. Each of Sellers will permit, and Sellers
will cause Company to permit, representatives of Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of Company, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
each of Company. Buyer will treat and hold as such any Confidential Information
it receives from any of Sellers and Company in the course of the reviews
contemplated by this Agreement, will not use any
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of the Confidential Information except in connection with this Agreement, and,
if this Agreement is terminated for any reason whatsoever, will return to
Sellers and Company all tangible embodiments (and all copies) of the
Confidential Information which are in its possession.
7.1.5 Notice of Developments. Any of Sellers may elect at any
time to notify the Buyer of any development causing a breach of any of the
representations and warranties herein. Unless Buyer has the right to terminate
this Agreement by reason of the development and exercises that right, the
written notice pursuant to this Section 7.1.5 will be deemed to have amended the
Schedules attached hereto, to have qualified such representations and
warranties, and to have cured any misrepresentation or breach of warranty that
otherwise might have existed hereunder by reason of the development. Each Party
will give prompt written notice to the others of any Adverse Consequences
causing a breach of any of his or its own representations and warranties. Except
as otherwise provided in this Section 7.1.5, no disclosure by any Party pursuant
hereto shall be deemed to amend or supplement any Schedule attached hereto or to
prevent or cure any misrepresentation or breach of representation or warranty.
7.1.6 Exclusivity. None of Sellers will (and Sellers will not
cause or permit Company to) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of Company (including any
acquisition structured as a merger, consolidation, or share exchange).
7.2 Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
7.2.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
this Agreement).
7.2.2 Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Company, each of the other Parties shall cooperate
with him or it and his or its counsel in the defense or contest, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the defense or contest, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under this
Agreement).
7.2.3 Transition. No Seller will take any action or inaction
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of Company from
maintaining the same business relationships with Company after the Closing as it
maintained with Company prior to the Closing.
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7.2.4 Employee Matters.
(a) Effective as of the Closing Date, Sellers shall,
at their sole cost and expense, cause Company to terminate all Employee Benefit
Plans, other than Company's 401k Retirement Plan (the "401k Plan"), in strict
compliance with all Legal Requirements.
(b) Effective as of the Closing Date, Sellers shall,
at their sole cost and expense, cause Company to (1) spinoff the 401k Plan
accounts for Company's employees, and (2) transfer the assets in such accounts
to a qualified defined contribution plan designated and maintained by Buyer.
Such spinoff and transfer shall be undertaken in strict compliance with all
Legal Requirements and otherwise in accordance with and pursuant to section
414(l) of the Code and the Treasury Regulations promulgated thereunder.
(c) No family member of Sellers, nor any other
director or officer of Company shall make any claim for severance pay or
unemployment compensation relating to their employment, if any, by Company.
7.2.5 Accounts Receivable. Each of Sellers acknowledges and
understands that the Purchase Price has been determined assuming Net Working
Capital of Company as of the Closing Date will not be less than $1 Million.
Notwithstanding anything herein to the contrary, Sellers, jointly and severally,
guarantee the collection in full of all accounts receivable set forth on the
Tentative Balance Sheet within sixty (60) days of the Closing Date.
7.2.6 Colorado Avenue Nonpublic School. Effective as of the
Closing Date, Sellers shall cooperate with Buyer and use their best efforts to
terminate the Colorado Avenue Nonpublic School and transfer its faculty,
students, and personal property to the Van Buren Boulevard Nonpublic School.
Such termination and transfer shall be conducted in compliance with all Legal
Requirements.
7.2.7 Pre-Closing Tax Returns And Audits. As promptly as
possible after the Closing (and in any event within the time required by
applicable law), Sellers shall, at their sole cost and expense, cause Company's
certified public accountants to prepare all Tax Returns applicable to Company
for all periods, including portions thereof, up to and including the Closing
Date. All such Tax Returns shall be prepared in strict compliance with all
applicable Legal Requirements. After the Closing, Sellers shall, at their sole
cost and expense, be responsible for accumulating from Company's books and
records that information relating to the periods, including portions thereof,
ended on or prior to the Closing Date required and necessary to properly prepare
for audits conducted by any Person or the Agencies for any such periods,
including portions thereof, and furnishing the same to Company.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
8.1 Conditions Precedent to Obligation of Buyer. Buyer's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction on or prior to the Closing Date of all of the
following conditions (any of which may be waived in writing by Buyer in its sole
discretion):
(a) The representations and warranties of Company and Sellers
in this Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except for representations and
warranties that speak as of a specific date or time other than the Closing Date
(which need only be true and correct as of such date or time).
(b) The covenants and agreements of Company and Sellers to be
performed or complied with on or before the Closing Date in accordance with this
Agreement shall have been performed and complied with in all respects.
(c) All registrations, filings, applications, notices,
consents, approvals, waivers, authorizations, qualifications, and orders to be
filed, made, or obtained by Buyer, Company, or any Seller in order to consummate
the transactions contemplated by this Agreement or any of the Transaction
Documents and to operate the business hereof or thereof after the Closing in
compliance with all Legal Requirements shall have been filed, made, or obtained,
in form and substance satisfactory to Buyer.
(d) There shall be no injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated hereby or imposing conditions on such consummation not otherwise
provided for in this Agreement.
(e) Buyer shall have completed a due diligence investigation,
satisfactory to Buyer in its sole discretion, of the legal, financial, and
business affairs of Company.
(f) Sellers and Company shall have provided all Schedules
required hereunder, and shall have cured such Schedules or specific items in
such Schedules to Buyer's reasonable satisfaction.
(g) Sellers shall have delivered to Buyer a certificate to the
effect that each of the conditions specified in this Agreement is satisfied in
all respects.
(h) All conditions to the obligations of Buyer under the
Transaction Documents shall have been satisfied, unless waived by Buyer.
(i) Sellers shall produce evidence, in a form reasonably
acceptable to Buyer, of adequate insurance coverage for claims against Sellers
or Company arising from events occurring
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prior to the Closing Date, and shall maintain such insurance coverage for a
period of five (5) years after the Closing.
(j) Buyer shall have received from counsel to Sellers an
opinion in form and substance covering matters customary to a stock transaction,
addressed to Buyer, and dated as of the Closing Date.
(k) All actions to be taken by Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Buyer.
(l) Seller shall have executed or delivered the items set
forth in Section 6.2 hereof.
8.2 Conditions Precedent to Obligation of Sellers. Sellers' obligation
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction on or prior to the Closing Date of all of the
following conditions (any of which may be waived in writing by Sellers in their
sole discretion):
(a) The representations and warranties of Buyer in this
Agreement shall be true and correct in all respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date, except for representations and warranties
that speak as of a specific date or time other than the Closing Date (which need
only be true and correct as of such date or time).
(b) The covenants and agreements of Buyer to be performed or
complied with on or before the Closing Date in accordance with this Agreement
shall have been performed and complied with in all respects.
(c) There shall be no injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated hereby or imposing conditions on such consummation not otherwise
provided for in this Agreement.
(d) Buyer shall have provided all Schedules required
hereunder, and shall have cured such Schedules or specific items in such
Schedules to Sellers' reasonable satisfaction.
(e) Buyer shall have delivered to Sellers a certificate to the
effect that each of the conditions specified in this Agreement is satisfied in
all respects.
(f) Sellers shall have received from counsel to Buyer an
opinion in form and substance covering matters customary to a stock transaction,
addressed to Sellers, and dated as of the Closing Date.
(g) All actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents
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required to effect the transactions contemplated hereby will be satisfactory in
form and substance to Sellers.
(h) Buyer shall have executed or delivered the items set forth
in Section 6.3 hereof.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. All representations, warranties, covenants, agreements,
and guarantees contained herein of any Party shall survive the Closing
indefinitely; except that the representations and warranties contained in
Section 5.17 hereof shall survive for a period of three (3) years following the
Closing.
9.2 Indemnification by Seller. From and after the Effective Date,
Sellers jointly and severally agree to indemnify, defend, and hold harmless
Buyer and Company, their Affiliates, their directors, officers, and employees,
and their successors and permitted assigns from and against any and all
liabilities, losses, damages, demands, claims, suits, actions, judgments, causes
of action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing and defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages", which term also includes,
expressly, those Damages that arise as a result of strict liability, whether
arising under environmental laws and regulations or otherwise), asserted
against, resulting to, imposed upon, or incurred or suffered by any of them,
directly or indirectly, as a result or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants, agreements, or guarantees
made by Sellers in this Agreement, in any certificate or instrument delivered
pursuant to this Agreement, or in the Transaction Documents;
(ii) any liability of Sellers or Company, or
liability arising out of Sellers' operation of the business conducted by Company
prior to the Closing Date, which is threatened or imposed on Buyer or Company;
(iii) any misrepresentation in or any omission from
any certificate or other document (collectively, the "Additional Documents")
furnished or to be furnished by or on behalf of Sellers or Company under this
Agreement or under the Transaction Documents;
(iv) any liability for Taxes on the part of Company
for any taxable period, or portion thereof, prior to the Closing Date;
(v) any and all professional liability claims against
Company where the occurrence giving rise to any such claim preceded or occurred
on the Closing Date;
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(vi) any liability on the part of Company or Buyer
arising in connection with the termination or spinoff and transfer described in
Sections 7.2.4(a) or 7.2.4(b) hereof; and
(vii) any liability threatened or imposed on Buyer or
Company arising out of Seller's operation of Company during the Interim Period.
To be entitled to such indemnification, Buyer (including for
purposes of this paragraph, its Affiliates, its directors, officers, and
employees, their successors and permitted assigns their successors and permitted
assigns, and Company) shall give Sellers written notice (in all events not later
than ten (10) days after Buyer's receipt of notice of any such breach or
assertion of claim contemplated herein) of any such breach or claim or the
assertion by a third party of any claim with respect to which Buyer may bring a
claim for indemnification hereunder. Sellers shall have ten (10) days thereafter
within which to pay the claim or, at Sellers' sole cost and expense, contest the
claim in good faith by appropriate proceedings; provided, however, that Sellers
may not settle or compromise any claim or matter for which an indemnity may be
payable by Sellers hereunder without the prior written consent of Buyer.
In addition to the foregoing, if any third party payor deducts
any amount from payments due Buyer or Company on and after the Closing Date in
respect of claims against or amounts owed by Sellers or Company, as the case may
be, prior to the Closing Date, Sellers promptly will reimburse Buyer for the
amounts so deducted within five (5) days after written demand therefor by Buyer.
Buyer agrees to give prompt notice to Sellers upon Buyer' notice of the
assertion of any claim, formal or informal, by any third party payor for which,
if deducted by such third party payor, Buyer would be entitled to reimbursement
by Sellers hereunder and will cooperate in good faith, at no out-of-pocket cost
to Buyer, with Sellers to permit Sellers to mitigate the amount of any such
claim by any such third party payor.
From and after the Effective Date, Sellers shall not have any
rights of contribution, indemnity, or reimbursement, or similar rights, at
common law, by statute, under this Agreement, or otherwise, against Company
based on a representation, warranty, covenant, or agreement in this Agreement
made by Sellers, any and all of the same being hereby released effective as of
the Effective Date.
9.2 Indemnification by Buyer. From and after the Closing, Buyer shall
defend, indemnify, save, and keep harmless Sellers and their successors and
permitted assigns from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by any of them, directly or
indirectly, as a result or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants, or agreements made by Buyer
in this Agreement or in any certificate or instrument delivered pursuant to this
Agreement;
(ii) any liability of Buyer, or liability arising out
of Buyer's operation of the business conducted by Company after the Closing
Date, which is threatened or imposed on Sellers;
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(iii) any misrepresentation in or any omission from
any Additional Documents furnished or to be furnished by or on behalf of Buyer
under this Agreement;
(iv) any liability for Taxes on the part of Company
for any taxable period commencing on or after the Closing Date; and
(vii) any liability threatened or imposed on Sellers
arising out of Buyer's operation of Company during the Interim Period.
9.3 Exclusive Remedy. Buyer and Sellers acknowledge and agree that the
indemnification provisions in this Article IX shall be the exclusive remedy of
Buyer and Sellers with respect to Company and the transactions contemplated by
this Agreement. All indemnification payments under this Article IX shall be
deemed adjustments to the Purchase Price.
ARTICLE X
TERMINATION
10.1 Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) Buyer and Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event (i) any of
Sellers has given Buyer any notice pursuant to Section 7.1.5 hereof, and (ii)
the development that is the subject of such notice has, in Buyer's sole
discretion, had an Adverse Consequences upon the financial condition of Company
taken as a whole;
(c) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event Buyer is not
satisfied with the results of its continuing business, legal, environmental, and
accounting due diligence in respect of the transactions contemplated by this
Agreement or by the Transaction Documents;
(d) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event any of Sellers
has breached any representation, warranty, agreement, or covenant contained in
this Agreement or in the Transaction Documents and such breach has continued
without cure to Buyer's satisfaction; and
(e) Sellers may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing in the event Buyer has breached
any representation, warranty, agreement, or covenant contained in this Agreement
or in the Transaction Documents and such breach has continued without cure to
Sellers' satisfaction.
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26
10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 hereof, then all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except as otherwise provided in Section 10.3 hereof and except for any
liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in this Agreement shall survive any such
termination.
10.3 Wrongful Termination Fee. Notwithstanding any provision herein to
the contrary, if either Buyer, on the one hand, or any of Sellers, on the other
hand, ("Terminating Party") terminates this Agreement for any reason other than
stated in Section 10.1 hereof, then such Terminating Party shall be liable for
the immediate payment of an amount equal to Two Hundred Thousand Dollars
($200,000) (the "Wrongful Termination Fee") on account of such wrongful
termination. If any of Sellers is the Terminating Party, then Sellers jointly
and severally shall be obligated to pay the Wrongful Termination Fee to Buyer.
If Buyer is the Terminating Party, then Buyer shall be obligated to pay the
Wrongful Termination Fee to any of Sellers and upon such payment to any of
Sellers shall not have any liability or obligation to pay any amount under this
Section 10.3 to any other such Seller.
ARTICLE XI
MISCELLANEOUS
11.1 Definitions.
(a) "Additional Documents" has the meaning Section 9.2(iii)
hereof.
(b) "Adverse Consequences" shall mean all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, Taxes,
Encumbrances, losses, expenses, and fees, including court costs and attorneys'
fees and expenses.
(c) "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
(d) "Agencies" means any Person which governs, controls, or
otherwise has any authority over Company.
(e) "Agreement" means this Stock Purchase Agreement.
(f) "Buyer" has the meaning set forth in the preface above.
(g) "Closing" has the meaning set forth in Section 6.1 hereof.
(h) "Closing Date" has the meaning set forth in Section 6.1
hereof.
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27
(i) "COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Codess.4980B.
(j) "Code" means the Internal Revenue Code of 1986, as
amended.
(k) "Colorado Avenue Nonpublic School" has the meaning set
forth in Section 3.1 hereof.
(l) "Company" has the meaning set forth in the preface above
and includes its predecessors and Subsidiaries.
(m) "Company Share" means the shares of the common stock of
Company.
(n) "Confidential Information" means any information
concerning the businesses and affairs of Company that is not available to the
public.
(o) "Contracts" has the meaning set forth in Section 5.13
hereof.
(p) "Damages" has the meaning set forth in Section 9.2 hereof.
(q) "Effective Date" shall mean December 1, 1998.
(r) "Employee Benefit Plan" means any (a) nonqualified
deferred compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan (within the meaning of ERISA ss. 3(2)), (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan (within the meaning of ERISA ss. 3(37))), or
(d) Employee Welfare Benefit Plan (within the meaning of ERISA ss. 3(1)) or
material fringe benefit or other retirement, bonus, or incentive plan or
program.
(s) "Encumbrances" shall mean any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or interest or use, or other
encumbrance of any kind.
(t) "Environmental, Health, and Safety Requirements" shall
mean all federal, state, local and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, as such requirements are enacted and in effect
from time to time.
(u) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(v) "Final Balance Sheet" has the meaning set forth in Section
2.3 hereof.
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28
(w) "Final Net Working Capital" has the meaning set forth in
Section 2.3 hereof.
(x) "Financial Statements" has the meaning set forth in
Section 5.7 hereof.
(y) "GAAP" means United States generally accepted accounting
principles (as such term is used in the American Institute of Certified Public
Accountants' Professional Standards) from time to time in effect.
(z) "Interim Period" has the meaning set forth in Section
3.8.1 hereof.
(aa) "Legal Requirements" has the meaning set forth in Section
5.9 hereof.
(bb) "Most Recent Financial Statements" has the meaning set
forth in Section 5.7 hereof.
(cc) "Most Recent Fiscal Month End" has the meaning set forth
in Section 5.7 hereof.
(dd) "Net Working Capital" has the meaning set forth in
Section 2.3 hereof.
(ee) "Ordinary Course of Business" means the ordinary course
of business of Company consistent with past custom and practice including with
respect to quantity and frequency.
(ff) "Ownership Percentages" has the meaning set forth in
Section 2.1 hereof.
(gg) "Party" and "Parties" has the meaning set in the preface
above.
(hh) "Permits" has the meaning set forth in Section 5.20
hereof.
(ii) "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
(jj) "Proprietary Rights" shall mean all patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service xxxx rights, service names and service name rights,
brand names, inventions, procedures, formulae, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights of Company.
(kk) "Purchase Price" has the meaning set forth in Section 2.1
hereof.
(ll) "Real Estate Note" shall mean that promissory note given
to BMB Enterprises, a California general partnership, pursuant to that certain
Agreement of Purchase and Sale and Joint
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29
Escrow Instructions by and between Buyer and BMB Enterprises, a California
general partnership, dated concurrently herewith.
(mm) "Securities Act" collectively means federal and state
laws governing securities, including, but not limited to, the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended.
(nn) "Seller" has the meaning set forth in the preface above.
(oo) "Seller Shares" shall mean the Company Shares owned by
Sellers.
(pp) "Subsidiary" means any corporation with respect to which
a specified Person (or Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
(qq) "Taxes" shall mean any federal, state, local, or foreign
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
(rr) "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto.
(ss) "Tentative Balance Sheet" has the meaning set forth in
Section 2.3 hereof.
(tt) "Tentative Net Working Capital" has the meaning set forth
in Section 2.3 hereof.
(uu) "Terminating Party" has the meaning set forth in Section
10.3 hereof.
(vv) "Transaction Documents" jointly and severally shall mean,
including any and all certificates, instruments, agreements, and the like
referenced therein:
1) that certain Agreement of Purchase and Sale and
Joint Escrow Instructions by and between Buyer and BMB Enterprises, a California
general partnership, dated concurrently herewith, in the form attached hereto at
Exhibit "F";
2) that certain Asset Purchase Agreement by and
between Buyer and Behavioral Medicine Professional Services, Inc., a California
corporation, dated concurrently herewith, in the form attached hereto at Exhibit
"G";
3) that certain Asset Purchase Agreement by and
between Buyer and B and B Leasing, a general partnership of Messrs. Xxxxxxx X.
Xxxxx and Xxxxxx X. Xxxxx, dated concurrently herewith, in the form attached
hereto at Exhibit "H"; and
4) those certain Noncompetition, Confidentiality, and
Nonsolicitation Agreement by and between Buyer and each of Sellers, dated
concurrently herewith, in the forms attached hereto at Exhibit "C", Exhibit "D",
and Exhibit "E".
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30
(ww) "Transfer Tax" has the meaning set forth in
Section 2.4 hereof.
(xx) "Van Buren Boulevard Nonpublic School" has the
meaning set forth in Section 3.1 hereof.
(yy) "Wrongful Termination Fee" has the meaning set
forth in Section 10.3 hereof.
(zz) "401k Plan" has the meaning set forth in Section
7.2.4(a) hereof.
11.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of Buyer
and Sellers; provided, however, that any Party may make any public disclosure it
believes in good faith is required by Legal Requirements (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
11.3 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.4 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
11.5 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and Sellers; provided, however, that Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
11.6 Counterparts; Facsimiles. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Each Party hereby agrees
to accept and rely upon documents with "facsimile" signatures under this
Agreement and any documents entered into pursuant to this Agreement and hereby
acknowledges and agrees to provide each other Party with such documents bearing
the original signatures within three (3) business days following transmission.
11.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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31
To Buyer: Children's Comprehensive Services of
California, Inc.
00000 Xxxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Ms. Xxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And to: Children's Comprehensive Services of California, Inc.
0000 Xxxx Xxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Best Best & Xxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Sellers: Xx. Xxxxxxx X. Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And to: Xx. Xxxxxx X. Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
And to: Xx. Xxxxxx X. XxXxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy To: Stream & Stream, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Stream, Jr., Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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32
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
11.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California.
11.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.12 Expenses. Buyer, Sellers, and Company will bear its or their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. Company will not
bear Sellers' costs and expenses (including all of their legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby, and Sellers shall pay same.
11.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Unless the context clearly requires otherwise:
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder;
references to the plural include the singular, the singular includes the plural,
"including" is not limiting, and "or" has the inclusive meaning represented by
the phrase "or"; the words "hereof", "herein", "hereby", "hereunder", and
similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision hereof; and references to Article,
Section, Exhibit, and Schedule are to this Agreement unless other specified.
11.14 Incorporation of Recitals, Exhibits, and Schedules. The Recitals,
Exhibits, and Schedules set forth or identified in this Agreement are
incorporated herein by reference and made a part hereof.
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11.15 Arbitration; Specific Performance.
(a) Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, such arbitration to be held in Riverside, California, and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
(b) Notwithstanding anything in this Agreement to the
contrary, each of the Parties acknowledges that money damages would not be a
sufficient remedy for any breach of this Agreement and that irreparable harm
would result in this Agreement were not specifically enforced. Therefore, the
rights and obligations of the Parties under this Agreement shall be enforceable
by a decree of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for and granted
in connection with such decree. A Party's right to specific performance shall be
in addition to all other legal or equitable remedies available to such Party.
11.16 Right of Set-off. If, with respect to any matter arising under
this Agreement or under any of the Transaction Documents, in Buyer's good faith
belief Buyer is entitled to indemnification, reimbursement, or payment from
Sellers hereunder or thereunder, then, in addition to any other remedies which
Buyer may have available to it, Buyer shall have the right to set-off the entire
amount thereof against the amounts, if any, which Buyer shall owe at such time
or from time to time thereafter under the Real Estate Note.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
{SIGNATURES FOLLOW ON NEXT PAGE}
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----------------------------------------
XXXXXXX X. XXXXX
----------------------------------------
XXXXXX X. XXXXX
----------------------------------------
XXXXXX X. XXXXX
SOMERSET, INCORPORATED, A CALIFORNIA
CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA
CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
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