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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 13, 1998
EDUCATIONAL MEDICAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
000-21567 65-0038445
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(Commission File Number (IRS Employer Identification No.)
Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, Georgia 30076
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (770) 475-9930
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 13, 1998, Educational Medical, Inc. (the "Company"), through
its subsidiary, New Hampshire Acquisition Corporation ("NHAC"), purchased all of
the stock of Hesser, Inc. (a New Hampshire corporation) ("Hesser"), from its
former shareholders (the "Shareholders"), and property located at 3 Sundial
Avenue, Manchester, New Hampshire (the "New Hampshire Acquisition") owned by a
related partnership (the "Partnership"). Hesser owns and operates postsecondary
schools in Manchester, Nashua, Salem, and Portsmouth New Hampshire, respectively
(the "Schools"). NHAC was formed for the sole purpose of effecting the New
Hampshire Acquisition and the Company is its sole shareholder. The Company
entered into the Agreement to reflect that it is jointly and severally liable
with NHAC with regard to the obligations of NHAC provided for in the Agreement.
Pursuant to the terms of the Agreement, NHAC paid to the Shareholders
$2,000,000 on March 13, 1998. The $13,000,000 remaining portion of the purchase
price was paid by delivery of:
(1) a promissory note in the amount of $11,000,000 (the "Second Payment
Note") payable with interest on the last business day within the first 30
calendar days following the date on which the Prerequisite Student Aid Approvals
are obtained. "Prerequisite Student Aid Approvals" are defined in the related
purchase agreement as all approvals by the United States Department of Education
and all other applicable private and governmental agencies and organizations of
the change in control resulting from the change in ownership of the Schools
which approvals are a prerequisite to receipt of federal and state aid by the
Schools' students. The Second Payment Note is secured by a Letter of Credit in
the same face amount as such note.
(2) 202,532 shares of the Company's Common Stock
The foregoing description of the Stock Purchase Agreement and the
exhibits to it, including the Second Payment Note, and transactions contemplated
by such documents, does not purport to be complete and is qualified in its
entirety by reference to each of such documents, copies of which are filed as
exhibits hereto.
ITEM 5: OTHER EVENTS
In March 1998, the Company entered into an amended and restated loan agreement
(the "Agreement") with a major U.S. bank (the "Bank"). The Agreement increases
its loan facilities with the Bank to $36 million (the "Bank Credit Facility").
The total amount of the Bank Credit Facility is divided into three separate
facilities: (i) a three year revolving line of credit of up to $10,000,000 which
may be utilized for advances or to support letters of credit; (ii) a revolving
term loan facility of up to $11,000,000 which may be utilized prior to March 1,
1999 for the purpose of financing permitted acquisitions, either directly or to
support letters of credit, reducing to $9,000,000 in March 1999 and subject to
quarterly reductions of $750,000 thereafter; and (iii) a three year
non-revolving line of credit up to $15,000,000 which may be utilized for the
purpose of financing permitted acquisitions. Interest is charged on borrowings
at different floating rates above LIBOR depending on
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certain financial conditions of the Company and depending on whether drawn under
the revolving line of credit or the term loan. In addition, the Bank Credit
Facility provides for commitment fees to be paid on the unused portion of the
facility. The Bank Credit Facility also contains restrictions on the payment of
dividends and incurrence of additional debt, and various other financial
covenants. The Bank Credit Facility is secured by substantially all of the
assets of the Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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(a) Financial Statements of Business Acquired: Will be filed by Amendment not later than 60 days
from March 28, 1998.
(b) Pro Forma Financial Information Relative to Acquired Business:
Will be filed by Amendment not later than 60 days from March
28, 1998.
(c) Exhibits
10.1 Stock Purchase Agreement dated March 13, 1998.
10.2 Legal Description of the Property (Exhibit 1 to Stock Purchase Agreement).
10.3 Second Payment Note (Exhibit 2 to Stock Purchase Agreement).
10.4 List of Shareholders (Exhibit 3 to Stock Purchase Agreement).
10.5 Form of Registration Rights Agreement (Exhibit 4 to Stock Purchase Agreement).
10.6 Form of Employment Agreement (Exhibit 5 to Stock Purchase Agreement).
10.7 Form of Non-Competition Agreement (Exhibit 6 to Stock Purchase Agreement).
10.8 Stock Power (Exhibit 7 to Stock Purchase Agreement).
10.9 Amendment to Bank Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EDUCATIONAL MEDICAL, INC.
Date: March 27, 1998 By:/s/ Vince Pisano
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Vince Pisano, Vice President and
Chief Financial Officer
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
Agreement dated as of March 13, 1998 among EDUCATIONAL MEDICAL, INC., a
Delaware corporation ("EMI"), NEW HAMPSHIRE ACQUISITION CORP., a Delaware
corporation wholly owned by EMI (the "Buyer"), HESSER, INC., a New Hampshire
corporation (the "Corporation"), THE LINWOOD W. GALEUCIA TRUST OF 1997, a
revocable trust organized under the laws of the State of New Hampshire, RICHARD
D. GALEUCIA, an individual residing within the State of New Hampshire
(collectively, the "Shareholders") and HARDWOOD PROPERTIES LIMITED PARTNERSHIP,
a New Hampshire limited partnership (the "Partnership").
PRELIMINARY STATEMENT
The Corporation is the owner of a post secondary educational
institution with locations in Manchester, Nashua, Salem and Portsmouth New
Hampshire (collectively, the "Schools"). The Shareholders own all of the
outstanding and issued capital stock (the "Stock") of the Corporation. Subject
to the terms and conditions contained in this Agreement, the Buyer wants to buy
the Stock, and the Shareholders want to sell the Stock to the Buyer.
The Partnership is the owner of the land and building located at 3
Sundial Avenue, Manchester, New Hampshire as more particularly described in
EXHIBIT 1 attached hereto together with all easements, permits, development
rights, leases and appurtenances thereto and improvements thereon (the
"Property"). Subject to the terms and conditions contained in this Agreement,
the Buyer wants to buy the Property, and the Partnership wants to sell the
Property to the Buyer.
This Agreement contains the terms pursuant to which (i) the
Shareholders have agreed to sell to Buyer all of the Stock and (ii) the
Partnership has agreed to sell to Buyer all of the Property. In addition, the
Shareholders have agreed not to compete with EMI and its schools pursuant to the
terms of this Agreement. EMI has entered into this Agreement to reflect that it
is jointly and severally liable with the Buyer with regard to the obligations of
the Buyer provided for in it.
IN CONSIDERATION OF THE COVENANTS CONTAINED IN THIS AGREEMENT, AND THE
OTHER CONSIDERATION PROVIDED FOR IN IT, THE PARTIES, EACH INTENDING TO BE
LEGALLY BOUND, AGREE AS FOLLOWS:
1. THE PURCHASE PRICE; CONVEYANCE OF THE STOCK AND THE PROPERTY;
CERTAIN DEFINITIONS; EFFECTIVE DATE OF TRANSACTION.
(a) The Purchase Price. The aggregate purchase price for the
Stock and the Property is $15,000,000 (the "Purchase Price"). The Purchase Price
shall be allocated $ 11,500,000 to the Shareholders (the "Stock Purchase Price")
and $3,500,000 to the Partnership (the "Property Purchase Price").
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(b) Conveyance of the Stock and the Property; Exclusive Right
to Purchase the Stock and the Property. On March 15, 1998 (the "Closing Date"),
or such other date as the parties may specify prior to April 15, 1998 (the
"Termination Date"), the Shareholders shall convey to Buyer all of their Stock
and the Partnership shall convey to Buyer all of the Property (the "Closing").
The Parties to this Agreement agree that EMI and the Buyer shall have the
exclusive right to consummate the transactions contemplated herein prior to the
Termination Date and that the Corporation and/or Shareholders and the
Partnership shall not negotiate with any other potential buyer during such
exclusivity period.
(c) Cash Payments by the Buyer. On the Closing Date the Buyer
shall pay to the Shareholders an aggregate sum equal to $2,000,000 (the "Initial
Payment"), by wire transfer or otherwise in immediately available funds which
amount shall be allocated to the Stock Purchase Price.
(d) Delivery of Second Payment Note. On the Closing Date the
Buyer shall deliver to the Shareholders and the Partnership:
(1) its Promissory Note for $11,000,000 (the "Second
Payment Note") in the form attached to this Agreement as EXHIBIT 2, payable with
interest payable at the rate of 2% per annum, all such principal and interest
becoming payable on the last business day within the first 30 calendar days
following the date on which the Prerequisite Student Aid Approvals are obtained.
Payment of the Second Payment Note shall first be allocated to the Property
Purchase Price and paid to the Partnership and the remaining allocated to the
Stock Purchase Price and paid to the Shareholders. The Second Payment Note shall
be secured by a letter of credit (the "Letter of Credit") in the same face
amount as such note. The Letter of Credit shall be issued by Bank of America,
N.A. "Prerequisite Student Aid Approvals" mean approvals by the United States
Department of Education and all other applicable private and governmental
agencies and organizations of the change in control resulting from the change in
ownership of the Schools resulting from the sale of the Schools pursuant to this
Stock Purchase Agreement which are a prerequisite to receipt of federal and
state aid by the Schools' students, and
(2) $2,000,000 of Common Stock of EMI (the "EMI Purchase
Stock") based upon the closing price (the "Closing Price") of EMI common stock
on the trading day immediately prior to the Closing Date as reported in the Wall
Street Journal. The specific number of shares of the EMI Purchase Stock shall be
calculated by dividing $2,000,000 by the Closing Price (which was 9 7/8 as March
12, 1998). All of the EMI Purchase Stock shall be allocated to the Stock
Purchase Price and issued to the Shareholders.
2. REPRESENTATIONS OF THE SHAREHOLDERS AND THE PARTNERSHIP.
Each of the Shareholders and, with respect to the representations contained in
subsection 2(x), the Partnership, jointly and severally represent and warrant
to Buyer as follows.
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(a) No Misstatements. The representations of the Shareholders and
information supplied by the Shareholders and/or the Corporation and the
Partnership contained in this Agreement, the Exhibits attached to it and the
documents incorporated into it by reference do not contain any untrue
statement of a material fact or omit to state any fact necessary to make such
representations or information not materially misleading.
(b) Validity of Actions. The Corporation (i) is duly organized, validly
existing and in good standing under the laws of its organization, (ii) has all
requisite corporate and other appropriate authorization to operate the Schools
in the manner in which it is currently operated, (iii) is qualified to do
business in all jurisdictions in which such qualification is necessary for the
operation of the Schools, other than those jurisdictions where the failure to
so qualify would not have a material adverse effect upon the Schools' assets
or operations, and (iv) has full power and authority to enter into this
Agreement and to carry out all acts contemplated by it. This Agreement has
been duly executed and delivered on behalf of the Shareholders and/or the
Corporation and the Partnership, has received all necessary corporate
authorization and is a legal, valid and binding obligation of the Corporation,
the Shareholders and the Partnership, enforceable against each of them in
accordance with its terms. The Partnership is duly organized, validly existing
and in good standing under the laws of its organization and has all requisite
corporate and other appropriate authorization to own and operate the Property
in the manner in which it is currently operated. Entering into this Stock
Purchase Agreement and the consummation of the transactions contemplated by it
will not (i) violate any provision of the Articles of Incorporation or Bylaws
of the Corporation or the Partnership Agreement of the Partnership or, (ii)
conflict with or result in any breach of in any material respect of any of the
provisions of any material agreement to which the Corporation, the
Shareholders or the Partnership are a party or by which any of them or any of
their respective assets are bound, or (iii) cause a breach of any applicable
law, governmental regulation, order, or other decree of any court or
governmental agency. The Articles of Incorporation and Bylaws of the
Corporation and the Partnership Agreement of the Partnership, as presently in
effect, are attached to the Disclosure Memorandum delivered to EMI and the
Buyer simultaneously with the execution and delivery of this Stock Purchase
Agreement (the "Disclosure Memorandum") as SCHEDULE 2(B).
(c) Corporation's Financial Statements
(1) Attached as SCHEDULE 2(C)(1)(I) to the Disclosure
Memorandum are the Corporation's audited balance sheets at December 31, 1997,
1996 and 1995, and statements of income and expense and cash flows for the years
then ending (the "Corporation's Financial Statements"). The balance sheet
included in the Corporation's 1997 Financial Statements is called the
"Corporations Most Recent Balance Sheet." Attached as Schedule 2(C)(1)(II) to
the Disclosure Memorandum are the Corporation's corporate tax returns for the
years of 1996 and 1995.
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(2) The Corporation's Financial Statements: (i) accurately
represent the transactions appearing on the books and records of the
Corporation, and (ii) fairly present in all material respects the Corporation's
financial condition and its results of operations at the times and for the
periods presented, including normal adjustments consistent with year end
adjustments to reflect properly accruals through the end of the period. The
Corporation's Audited Financial Statements have been prepared on the accrual
basis in accordance with generally accepted accounting principles consistently
applied ("GAAP"), except as otherwise disclosed in the reports accompanying them
or in the notes attached to them.
(3) To the best of the Shareholders knowledge, there have
been no material adverse changes in the financial condition or in the
operations, properties or assets of the Corporation since the date of the
Corporation's Most Recent Balance Sheets.
(d) Liabilities of the Corporation. The Corporation has no
liabilities, contingent or otherwise, including, without limitation, liabilities
for state or Federal income, withholding, sales, or other taxes, except to the
extent reflected, reserved against, or provided for, in the Corporation's Most
Recent Balance Sheet, except for taxes, trade payables and other obligations
incurred after the date of the Corporation's Most Recent Balance Sheet in
amounts consistent in all material respects, with those incurred in prior
periods in the ordinary course of business, including without limitation
liabilities for unearned tuition.
(e) Assets of the Corporation. The Corporation has good title
to all of its assets (the "Assets"). Except as otherwise disclosed in the
Corporation's Financial Statements or the related notes accompanying them or in
the Exhibits to this Agreement or the Disclosure Memorandum, all of the Assets
are owned free and clear of any adverse claims, security interests, or other
encumbrances or restrictions, except liens for current taxes not yet due and
payable, landlords' liens as provided for in the relevant leases or by
applicable law, or liens or similar security interests granted as part of
personal property financing agreements made in the ordinary course of business
and which in the aggregate are not material. The Assets constitute all of the
assets necessary for the operation of the Schools as currently conducted.
(f) Facility and Facility Operations.
(1) Included as SCHEDULE 2(F)(1) to the Disclosure
Memorandum are copies of the leases (the "Schools Facility Leases") pursuant to
which the Schools' Facilities (the "School Facilities") are leased. The Schools'
operations are conducted solely at the School Facilities and all of the tangible
Assets used in connection with such operations are located at the School
Facilities. All of the improvements located at the School Facilities are in good
operating condition and repair, subject only to ordinary wear and tear. There is
no pending or, to the knowledge of Shareholders, threatened condemnation
proceeding with respect to the School Facilities.
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(2) Attached as SCHEDULE 2(F)(2) to the Disclosure
Memorandum is a schedule of all of the furnishings, fixtures and equipment with
values in excess of the baseline used in determining such inventory, located on,
or used in connection with, the operation of the School Facilities as of the
date indicated on such inventory, subject to immaterial omissions occurring in
the ordinary course of compiling such inventory.
(3) Except for (i) environmental law compliance
(which is addressed in Section 2(f)(4) below) and (ii) accreditation,
recruitment, admissions, student loan and funding matters compliance (which are
addressed in Sections 2(h) and 2(i) below) as to which no representation or
warranty is made in this Section 2(f), all activities at, and the physical
condition of, the School Facilities are in compliance with all legal and
regulatory requirements applicable to the Corporation, the conduct of its
business, and the use of each Schools Facility, and the Corporation has not
received any actual notice to the contrary. The Corporation has paid for and
obtained all licenses, permits, and other authorizations material to the conduct
of its business at the School Facilities (the "Permits"). All Permits currently
in effect and pertaining to the School Facilities or the Corporation's
activities at the School Facilities are listed on SCHEDULE 2(F)(3) of the
Disclosure Memorandum. The representations contained in this subsection 3 shall
not apply to incidental instances of non-compliance occurring in the ordinary
course of business without the actual knowledge of the Corporation, which are
immaterial to the operation of the Schools and capable of being cured without
significantly disrupting the Schools' operations.
(4) To the best of the knowledge of Shareholders or
the Partnership, as the case may be, there are no Hazardous Substances (1) in,
on or under
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(1) The term "Hazardous Substance" shall include without limitation:
(i) Those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or
"solid waste" in CERCLA, RCRA, and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and in the
regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in any
applicable state statute and in the regulations promulgated pursuant to
any applicable state statute;
(iii) Those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(iv) Such other substances, materials and wastes which are or
become regulated under applicable local, state or federal law, or which
are classified as hazardous or toxic under federal, state, or local
laws or regulations; and
(v) Any material, waste or substance which is (A) petroleum,
(B) asbestos, (C) polychlorinated biphenyl, (D) designated as a
"hazardous substance" pursuant to Section 311
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the School Facilities except for those which are used by the Corporation in
compliance, in all material respects, with applicable law, and the Corporation
is not now engaged in any litigation, proceedings or investigations, nor knows
of any pending or threatened litigation, proceedings or investigations regarding
the presence of Hazardous Substances in, on or under the School Facilities.
(g) Equipment Leases and Financing Agreements. All of the
leases and financing agreements to which the Corporation is a party and which
relate to the operations of the Schools are described in SCHEDULE 2(G) of the
Disclosure Memorandum (the "Financing and Related Agreements"). Copies of the
Financing and Related Agreements are attached to such Schedule or have been
provided to the Buyer. Except as reflected in such Disclosure Memorandum, there
have been no modifications to any of the Financing and Related Agreements; the
Corporation is not in default in any material respect with respect to them; and
none of the interests of the Corporation in any of them is subject to any
restriction except as stated in the applicable document or as provided by
applicable law.
(h) Accreditation and Compliance with Title IV Requirements.
Attached as SCHEDULE 2(H) to the Disclosure Memorandum is a list of all Federal,
state or other licenses and approvals, including without limitation all
accreditations and certifications, granted to the Corporation with respect to
the conduct of its educational or training business at the Schools (the
"Accreditations and Certifications"), and the governmental body or agency or
other entity granting such Accreditation or Certification. Included in such
Disclosure Memorandum are copies of all such Accreditations and Certifications.
The Corporations Physical Therapy Assistant and Occupational Therapy Assistant
Programs are in candidate status and not accredited.
(1) Except for the Permits and the Accreditations and
Certifications, no license or approval is material to the conduct of the
Corporation's operation of the Schools as they are now being conducted, and the
Corporation has received no notice that any other license or approval is
necessary for the continued operation of the Schools or that any such license or
approval will not be renewed.
(2) The Corporation's operation of the Schools is and has
been conducted in all material respects in accordance with all relevant
standards imposed by applicable accrediting agencies, or agencies administering
state government student aid programs in which the Corporation, or any students
attending any of the Schools, participate, or other applicable laws or
regulations.
(3) Each of the Schools is an institution certified by the
United States Department of Education (the "Department of Education"). The
Corporation is a party to, and is and at all times has been in general
compliance with, a valid program participation agreement with the Department of
Education with respect to the
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of the Clean Water Act, 33 U.S.C. ss.ss.1251 et seq. or listed pursuant
to Section 307 of the Clean Water Act, (E) flammable explosive, or (F)
radioactive materials.
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operations being conducted by the Schools, and no instance of non-compliance has
occurred which will materially and adversely affect the financial condition of
the Corporation. Except as disclosed IN SCHEDULE 2(H)(3), the Corporation has
not received any notice, not previously complied with, with respect to any
alleged material violation of the rules or regulations of the Department of
Education or any applicable accrediting agency in respect of the Schools or the
terms of any program participation agreement to which it is or was a party. If
any such notices have been received and generally complied with, the Corporation
has disclosed its receipt and disposition to Buyer in Schedule 2(h)(3). The
Corporation is and at all times has been, in general compliance with all of the
provisions of the Higher Education Act of 1965 ("HEA") and the regulations
promulgated by the Department of Education thereunder (the "DOE Regulations")
necessary to establish and maintain its eligibility to participate in the Title
IV funding programs provided for therein ("Title IV Funding Programs"),
including without limitation, the demonstration of financial and administrative
responsibility as provided for in the DOE Regulations, and no instance of
non-compliance has occurred which will materially and adversely affect the
financial condition of the Corporation. The Corporation has submitted audited
financial statements to the Department of Education for the fiscal years ended
December 1996 and December 1995 relating to its financial responsibility to
participate in Title IV Funding Programs as provided for in the DOE Regulations
(the "DOE Financial Statements") and was in general compliance with all DOE
Regulations relating to financial and administrative responsibility as of the
date of this Agreement, and no instance of non-compliance has occurred which
will materially and adversely affect the financial condition of the Corporation.
The Corporation has submitted audits of the Title IV Financial Aid Programs to
the DOE for purposes of demonstrating compliance with the DOE Regulations
regarding the administration of funds received pursuant to Title IV Funding
Programs for the applicable years ended June 30, 1996 and June 30, 1995 (the
"Title IV Financial Aid Audits"). Except as set forth in SCHEDULE 2(H)(3) to the
Disclosure Memorandum, the DOE Financial Statements and Title IV Financial Aid
Audits are true and correct in all material respects.
(4) To the best of the Shareholders knowledge, there is no
investigation or review of student financial aid programs (including without
limitation Title IV Programs) in which the Schools or its students participate,
or any review of any of the Schools' Accreditations or Certifications whether by
a party to any relevant agreement, the issuer of such Accreditation or
Certification or otherwise.
(i) Recruitment; Admissions Procedures; Attendance; Reports.
Attached as SCHEDULE 2(I) to the Disclosure Memorandum are all policy manuals
and other statements of procedures or instruction relating to recruitment of the
Schools' students, including procedures for assisting in the application by
prospective students for direct or indirect state or Federal financial
assistance; admissions procedures, including any descriptions of procedures for
insuring compliance with state or Federal or other appropriate standards or
tests of eligibility; procedures for encouraging and verifying attendance,
minimum required attendance policies, and other relevant criteria relating to
course completion and certification (collectively referred to as the "Policy
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Guidelines"), which have previously been delivered to the Buyer by the
Corporation. The Schools' operations have been conducted in all material
respects in accordance with the Policy Guidelines.
To the best of the Shareholder's knowledge, the Corporation has
submitted all reports, audits, and other information, whether periodic in nature
or pursuant to specific requests ("Compliance Reports"), to all agencies or
other entities with which such filings are required relating to the Schools'
compliance with (i) applicable accreditation standards governing its activities
or (ii) laws or regulations governing programs pursuant to which the Schools or
students attending the Schools receive funding, including, without limitation,
the Perkins Loan Program, the Federal Family Education Loan Programs, the Pell
Grant program and the Supplemental Educational Opportunity Grant Program, the
Federal Direct Student Loan Program or the Federal Work Study Program, all of
which are provided for pursuant to Title IV of the HEA, and no instance of
non-compliance has occurred which will materially and adversely affect the
financial condition of the Corporation.
Complete and accurate records in all material respects for all present
and past students attending the Schools have been maintained consistent with the
operations of a school business. All forms and records have been prepared,
completed, maintained and filed in all material respects in accordance with all
federal and state laws and regulations applicable to the operations of the
Schools, and are true and correct in all material respects. All financial aid
grants and loans, disbursements and record keeping relating to them have been
completed in compliance in all material respects with all federal and state
requirements, and there are no material deficiencies in respect thereto. To the
best of the Shareholder's knowledge, no student at the Schools has been funded
prior to the date for which such student was eligible for funding and such
student's records have been processed in all material respects in accordance
with all applicable federal, state and relevant third party funding source
requirements. All appropriate reports and surveys have been accurately prepared,
taken and filed prior to delinquency.
(j) Default. Attached as SCHEDULE 2(J) to the Disclosure
Memorandum is a list indicating the cohort default rate, as calculated by the
Department of Education, of all students attending the Schools receiving
assistance pursuant to the Stafford Loan and Supplemental Loans for Students
programs (or their applicable predecessor programs) for the federal fiscal years
ended September 1993, 1994, 1995 and 1996. To the best of the knowledge of
Shareholders and the Corporation, such schedule is materially accurate in all
respects.
(k) Trademarks, etc. The Corporation does not use any
tradenames, trademarks, service marks, or copyrights. To the Shareholder's best
knowledge, the Corporation's operations of the Schools may be conducted without
license by others for the use of any tradename, trademark, service mark or
copyright.
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(l) Material Contracts. Attached as SCHEDULE 2(L) to the Disclosure
Memorandum is (I) a schedule identifying all material contracts relating to the
Schools' operations not otherwise specifically identified in the other Schedules
to the Disclosure Memorandum, including, without limitation, all agreements
relating to state or Federal funding of educational services provided by the
Corporation through grants, loans or direct payments either to the Corporation,
individual students or otherwise, and any agreements relating to the placement
of students following their completion of relevant educational programs provided
by the Schools other than agreements with students involving the teaching of
standard courses, for standard prices as set forth in the Schools' catalog or in
the enrollment agreement for such students (the "Contracts"); (ii) a summary of
all material provisions of the Contracts that are oral and not reduced to
written documents; and (iii) a copy of all written Contracts. Except as
disclosed in this SCHEDULE 2(L): (i) all of the Contracts remain unmodified and
in full force and effect, and (ii) the Corporation is not in default of any
material nature (nor, to the best knowledge of the Shareholders, does any state
of facts exist which, with the giving of notice, the passing of time, or
otherwise, would constitute a default of any material nature by the Corporation)
with respect to any of the Contracts. For purposes of this Subsection, a
contract or agreement shall not be regarded as material if it is inadvertently
omitted from the disclosure schedule and can be canceled by the Corporation on
no more than 30 days notice, or (x) has been entered into in the ordinary course
of business and is consistent with prior practices, (y) is an agreement entered
into on commercially reasonable terms between unrelated parties, and (z)
provides for annualized payments in an aggregate amount of less than $100,000.
(m) Maintenance and Employment Agreements. Attached to the
Disclosure Memorandum as SCHEDULE 2(M) is (i) a schedule of all written
agreements between the Corporation and independent contractors, employees and
agents who are employed or engaged in the management or operation of the Schools
or the School Facilities; (ii) the names of all parties entitled to payments
from the Corporation under any such agreements or arrangements; (iii) the
amounts payable by the Corporation under the terms of all such agreements and
arrangements, including without limitation, the terms of employment and
compensation, including vacation and other employee benefit provisions and the
cost of all employee benefits and payroll taxes; and (iv) a copy of all written
contracts for such services. There are no material oral agreements in effect for
any such services. Except as disclosed on such Schedule 2(l): (x) there are no
written agreements between any of such contractors, employees or agents and the
Corporation; (y) there is no party entitled to compensation or remuneration for
any such services arising from the operation of the Schools after the Closing;
and (z) the Corporation's agreements and arrangements providing for the services
described on such Schedule may be terminated by the Corporation at any time,
with or without cause, and without any obligation to pay any of said parties any
amounts whatsoever except as may be required by law (including, without
limitation, severance pay or accrued vacation pay or other benefits). For
purposes of this Subsection, a contract or agreement shall not be regarded as
material if it is inadvertently omitted from the disclosure schedule and can be
canceled by the Corporation on no more than 30 days notice, or (x) has been
entered into in the ordinary course of business and is consistent
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with prior practices, and (y) is an agreement entered into on commercially
reasonable terms between unrelated parties.
(n) Employee Benefit Plans. The Corporation maintains employee
benefit plans as listed on SCHEDULE 2(N) of the Disclosure Memorandum (the
"Employee Benefit Plans") with respect to employees involved in the operation of
the Schools. Copies of such plans have been previously delivered to the Buyer.
Except as listed on such Schedule, the Corporation does not maintain any profit
sharing, pension or other employee benefit plan related to the Schools'
operations. The Corporation has no unfunded obligations pursuant to any
insurance, retirement, pension, profit sharing or deferred compensation plan or
program relating to the Schools' operations.
(o) Labor. There is no existing labor dispute affecting the
operation of the Schools. None of the Corporation's employees involved in the
operations of the Schools are covered by any union or collective bargaining
agreement.
(p) Insurance. A schedule of all of the major policies of
insurance maintained by the Corporation in connection with the operation of the
Schools is attached as SCHEDULE 2(P) to the Disclosure Memorandum. The insurance
coverage provided by such policies complies in all material respects, with all
agreements to which the Corporation is a party, and applicable legal
requirements to which it is subject. All such policies are currently in effect.
(q) Taxes. The Corporation has filed all Federal, state and
local tax returns which it is required to file and has no outstanding liability
for any Federal, state or local taxes or interest or penalties thereon, whether
disputed or not, except taxes not yet payable which have been provided for in
accordance with GAAP and are disclosed in the Corporation's Effective Most
Recent Balance Sheet or have subsequently accrued in the normal course of
business or taxes potentially payable with respect to currently active audits
relating to its taxable years ended December 31, 1993, 1994 and 1995 (the
Potential Federal Tax Audit Liabilities")
(r) Actions Pending. Except for a claim of approximately
$100,000 by a provider of teaching services relating to services rendered to
certain of the Corporation's students in 1997 (i) there are no actions, suits,
proceedings or claims pending or (to Shareholders' knowledge) threatened against
the Corporation or Shareholders which, if determined adversely to the
Corporation or Shareholders, would (A) have a material adverse effect on the
Assets, or the operation of the Schools, or (B) prevent or delay the
consummation of any of the transactions contemplated by this Agreement; (ii) the
Corporation or Shareholders, is not (to Shareholders' knowledge) the subject of
any pending or threatened investigation relating to any aspect of the
Corporation's operation of the Schools, by any Federal, state or local
governmental agency or authority; (iii) the Corporation, is not and has not been
(to Shareholders' knowledge) the subject of any formal or informal complaint,
investigation or inspection under the Equal Employment Opportunity Act or the
Occupational Safety and Health Act (or their state or local counterparts) or by
any other Federal, state or local authority.
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(s) Accounts Receivable. Each of the accounts receivable of
the Corporation relating to the Schools' operations constitutes a valid claim in
its full amount against the debtor charged on the Corporation's books and has
arisen in the ordinary course of the Schools' operations. Except as provided in
this subsection 2(s), the Shareholders make no representations or warranty with
respect to such receivable, and Buyer and EMI accept such accounts receivable as
is.
(t) No Guaranties. None of the Corporation's obligations or
liabilities is guaranteed by any other person, firm or corporation, nor does the
Corporation guaranty the obligations or liabilities of any other person, firm or
corporation.
(u) Bank Accounts and Deposit Boxes. Attached to the
Disclosure Memorandum as SCHEDULE 2(U) are the names and addresses of all banks
or financial institutions in which the Corporation has an account, deposit or
safety deposit box with the names of all persons authorized to draw on these
accounts or deposits or to have access to the boxes, and an indication of which
accounts or deposits or boxes contain financial aid funds, in each case to the
extent such accounts are used in connection with the Schools' operations.
(v) Records. The books of account of the Corporation relating
to the Schools' operations are complete and correct in all material respects,
and there have been no transactions involving the Schools' operations which
properly should have been set forth therein and which have not been accurately
so set forth.
(w) Capital Stock and Subsidiaries. The Corporation's
authorized capital stock consists solely of 200 shares of common stock with no
par value of which 100 shares (previously defined in the Preliminary Statement
set forth above as the "Stock") are outstanding, validly issued and are
presently held beneficially and of record by the Shareholders as set forth on
EXHIBIT 3 attached to this Agreement, 200 shares of non-voting common stock, no
par value, none of which are outstanding, and 1000 shares of non-voting
preferred stock, no par value, none of which are outstanding. The Stock is fully
paid and non-assessable. All of the Stock is owned absolutely by the
Shareholders, free and clear of all liens, encumbrances and adverse claims.
There are no voting trusts, proxies, Shareholders agreements or similar
contracts or understandings in effect relating to the Stock. Except for this
Agreement, there are no outstanding rights, options, warrants, convertible
securities or agreements of any kind entitling any person to purchase or acquire
any shares of capital stock or any other securities or agreements of any kind
entitling any person or purchase or acquire any shares of capital stock or any
other securities of the Corporation, including, without limitation, rights to
acquire capital stock contingent upon the payment of money, passage of time or
other contingency. The Corporation is not a partner or a joint venturer in any
enterprise, and has no subsidiaries.
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<PAGE> 12
(x) Representations and Warranties in Connection with the
Property.
(i) The Partnership has good and marketable title to the
Property, free and clear of all mortgages, liens, encumbrances, security
interests, covenants, conditions, restrictions, rights-of-way, easements,
judgments or other matters except for the Declaration of Condominium or as shown
in the title policy delivered to the Buyer at the Closing. No agreement
concerning or restricting the sale of the Property is in effect and no person or
entity has any right or option to acquire the Property other than Buyer.
(ii) With the exception of the Corporation's rights of
use and occupancy now in effect, there are no rights of use or occupancy now in
effect or hereafter to come into effect with respect to the Property.
(iii) There are no impact fees or any other fees, costs or
assessments (other than current real estate taxes) due or which will in the
future become due to any governmental entity with respect to the Property. The
Partnership has no knowledge of any violation of any laws, zoning ordinances,
regulations, licenses or permits affecting the Property or its current use;
further, no notice from any governmental authority has been issued requiring or
calling attention to the need for any work, repairs, construction or alterations
or installations on or in connection with the Property because of violations of
housing, zoning, building, safety, environmental or fire laws or ordinances, or
otherwise, which have not been complied with.
(iv) No commitments have been made to any governmental
authority, utility company, school board, church or other religious body, or any
homeowners or homeowners' association, or to any other organization, group or
individual relating to the Property which would impose an obligation upon Buyer
or its successors or assigns to make any contributions or dedications or money
or land or to construct, install or maintain any improvements of a public or
private nature on or off the Property. No governmental authority has imposed any
requirement that any developer of the Property pay directly or indirectly any
special fees or contributions or incur any expenses or obligations in connection
with the development of the Property.
(v) The Property has full, free, direct and adequate
access to and from public highways and streets and the Partnership has no
knowledge of any facts or conditions which would result in the interruption or
termination of such access.
(vi) The Partnership has no knowledge of any patent or
latent defects or adverse facts that exist with respect to the physical
condition of the Property which has not been specifically disclosed in writing
to the Buyer including, without limitation, adverse soil conditions and there is
no threatened earth movement, termite infestation, termite damage or structural
defects affecting the Property.
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<PAGE> 13
(vii) The Property is presently zoned to a classification
(or has received a proper variance) which permits its current use as a
post-secondary educational institution facility.
(viii) To the best of the knowledge of the Shareholders
and the Partnership, the Property and all appurtenances thereto, including, but
not limited to, the heating, air conditioning, plumbing, sanitary sewer, roof,
fire prevention system, mechanical and electrical systems, are in good working
order.
(ix) The Partnership has not received any notice, nor
does it have any knowledge, of any special assessments affecting the Property
and no federal, state or local taxing authority has asserted any tax deficiency,
lien or assessment against the Property which has not been paid or for the
payment of which, adequate provision has not been made. The Partnership has no
knowledge of any pending or threatened litigation, claim, cause of action or
administrative proceeding concerning the Property.
(x) All taxes and assessments related to the Property,
other than those not due and payable until subsequent to the Closing Date have
been paid in full.
(xi) All assessments of the Condominium Association have
been paid in full through the Closing Date and to the best knowledge of the
Shareholders and the Partnership, no special assessments are being considered.
3. REPRESENTATIONS AND WARRANTIES OF EMI AND BUYER. Each of EMI
and Buyer represents to the Corporation, Shareholders and the Partnership as
follows:
(a) No Misstatements. The representations and the information
supplied by it contained in this Agreement, the Exhibits attached to it, and the
documents incorporated by reference into it, including, without limitation the
Addendum do not contain any untrue statement of a material fact or omit to state
any fact necessary to make such representations or information not materially
misleading.
(b) Validity of Actions. It is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the authority to carry on its business as currently conducted, and is qualified
to do business in all jurisdictions in which such qualification is necessary. It
has full power and authority to enter into this Agreement and to carry out all
acts contemplated by it. This Agreement and each of the documents provided for
in it to be delivered as part of this transaction, have been duly executed and
have or will be delivered pursuant to all appropriate corporate authorization on
its behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms. The execution and delivery
of this Agreement, and each of the documents to be executed and delivered by EMI
and the
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<PAGE> 14
Buyer pursuant to its terms, and the consummation of the transactions
contemplated by them will not violate any provision of their respective
Certificates of Incorporation or Bylaws or, violate, conflict with or result in
any breach of any of the terms, provisions of or conditions of, or constitute a
default or cause acceleration of any indebtedness under, any indenture,
agreement or instrument to which it is a party or by which it or its assets may
be bound, or, cause a breach of any applicable law or governmental regulation,
or any applicable order, judgment, writ, award, injunction or decree of any
court or governmental instrumentality.
(c) Capitalization.
(1) EMI. The authorized capital stock of EMI consists
of: (i) 15,000,000 shares of EMI Common Stock, par value $0.01 per share, of
which as of the date of this Agreement, there were 7,524,332 shares issued and
outstanding; and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per
share ("EMI Preferred Stock") of which as of the date of this Agreement there
were no shares issued and outstanding. All outstanding shares of EMI Common
Stock have been validly issued by EMI and are fully paid, non-assessable and
free of preemptive rights. There are no subscriptions, options, warrants, calls,
rights, contracts, commitments, understandings or arrangements relating to the
issuance, sale or transfer by EMI of any shares of its Capital Stock, including
any right of conversion or exchange under any outstanding security or other
instrument, except as disclosed in EMI's Registration Statement on Form S-1 (No.
333-09777), or in its Quarterly Reports on Form 10-Q or its current reports on
Form 8-K, (all as may have been amended from time to time) filed pursuant to the
provisions of the Securities Act of 1933 and/or the Securities Exchange Act of
1934 with the Securities and Exchange Commission.
(2) The Buyer. As of the date of this Agreement, the
authorized capital stock of the Buyer consists of 1000 shares of Common Stock
all of which are issued and outstanding. All outstanding shares of the Buyer
have been validly issued and are fully paid, non-assessable and free of
preemptive rights, and all of such shares are owned, beneficially and of record,
by EMI.
(d) Actions Pending. There are no actions, suits, proceedings
or claims pending or to the knowledge of EMI or the Buyer, threatened against
either of them which, if determined adversely to either of them would (A) have a
material adverse effect on their operations, or (B) prevent or delay the
consummation of any of the transactions contemplated by this Agreement. Neither
EMI nor Buyer is the subject of any pending or (to its knowledge) threatened
investigation relating to any aspect of its operations.
(e) EMI's Financial Statements
(1) Attached as SCHEDULE 3(D) to the Disclosure
Memorandum are (A) EMI's audited balance sheets at March 31, 1995, 1996, and
1997, and statements of income and expense and cash flows for the years then
ending (EMI's
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<PAGE> 15
Audited Financial Statements") and (B) EMI's unaudited balance sheets at
September 30, 1997, and statements of income and expense and cash flows for the
periods then ending ("EMI's Interim Financial Statements" collectively with
EMI's Audited Financial Statements, "EMI's Financial Statements").
(2) EMI's Financial Statements: (i) have been prepared
on the accrual basis in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as otherwise disclosed in the reports
accompanying them or in the notes attached to them, and (ii) fairly present
EMI's financial condition and its results of operations at the times and for the
periods presented.
(3) There have been no material adverse changes in the
financial conditions or in the operations, business, prospects, properties or
assets of EMI sincce the date of EMI's Interim Financial Statements.
(f) Buyer's financial Condition. The Buyer is a newly formed
Corporation. It has no material liabilities except as provided for in this
Agreement, and no assets except the joint and several agreements of EMI to
perform in accordance with the terms of this Agreement.
4. COVENANTS OF THE PARTIES.
(a) Conduct of the Business Prior to the Closing. Pending
consummation of the transactions contemplated in this Agreement or prior to
termination of this Agreement, the Corporation, Shareholders and the Partnership
agree, without prior written consent of Buyer, given in a letter which
specifically refers to this Section of the Agreement:
(1) not to (i) perform any act or omit to take any act
that would make any of representations made in Section 2 above, inaccurate in
any material respect or materially misleading as of the Closing Date, or (ii)
allow the Corporation to make any payment or distribution with respect to the
Schools or their operations except for the payment of liabilities provided for
in the Corporation's Financial Statements or incurred in the ordinary course of
business;
(2) to conduct the business of the Schools in the
ordinary and regular course, maintain the School Facilities, protect the
Schools' Accreditation Certifications and Permits, and keep their books of
account, records and files in substantially the same manner as at present.
(3) to make all tuition refunds with respect to the
Schools' operations within the time frames provided for in the Regulations and
any applicable state or accrediting agency regulations, and to pay all accounts
payable as they become due.
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<PAGE> 16
(4) not transfer the Property or create any easements,
liens, mortgages, encumbrances or other interest that would affect the Property
or the Partnership's ability to comply with the terms of this Stock Purchase
Agreement.
(5) continue to maintain an repair the Property in at
least the manner in which the Property has heretofore been maintained and
repaired.
(6) promptly disclose in writing to the Buyer any change
in any facts or circumstances which would make any of the representations made
in Section 2 above, inaccurate, incomplete, or misleading to the detriment of
Buyer.
(b) Notice. Pending the consummation of the transactions
contemplated in this Agreement or prior to termination of this Agreement, each
party agrees that it will promptly advise the others of the occurrence of any
condition or event which would make any of its representations contained in this
Agreement inaccurate, incorrect, or materially misleading.
(c) Access. Prior to the Closing, the Corporation shall
afford to the Buyer (and its officers, attorneys, accountants and other
authorized representatives), upon reasonable notice, free and full access during
usual business hours to its relevant offices, personnel, books and records and
other data, financial or otherwise, so that Buyer may have full opportunity to
make such investigation as it shall desire of the Assets and the business and
operations of the Schools by the Corporation, provided that such investigation
shall not unreasonably interfere with the Corporation's operations. The scope of
the investigation will include, but not be limited to, a verification of the
Corporation's Financial Statements and a review of the Corporation's control
procedures, regulatory compliance relating to the Schools, the Schools Facility,
and material contracts and litigation relating to the Schools. Duly authorized
representatives of the Buyer shall also be entitled to discuss with officers of
the Corporation, its counsel, employees and independent public accountants, all
of its books, records and other corporate documents, contracts, pricing and
service policies, commitments and future prospects to the extent such materials
and matters relate to the operation of the Schools. Representatives of the
Corporation will furnish to Buyer and such other persons, copies of all
materials relating to the business affairs, operations, Facility, Assets and
liabilities of the Corporation relating to the Schools which may be reasonably
requested from time to time and will cause representatives and employees of the
Corporation to assist Buyer in its investigation of the matters relative to the
Schools. All information obtained by Buyer, EMI or any of their officers,
directors, employees, lender, investors, agents and other representatives (the
"Buyer's Representatives") in connection with the transactions contemplated by
this Agreement or in the course of their investigations of the Schools, whether
obtained before or after the date of this Agreement (the "Evaluation Material")
shall be used only in connection with this Agreement and the subsequent
operation of the Schools, and each of Buyer and EMI shall assure that all
Evaluation Material will be otherwise kept strictly confidential by each of them
and the Buyer's Representatives.
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<PAGE> 17
(d) Additional Documents. At the request of any party, each
party will execute and deliver any additional documents and perform in good
faith such acts as reasonably may be required in order to consummate the
transactions contemplated by this Agreement and to perfect the conveyance and
transfer of any property or rights to be conveyed or transferred or perfect the
assumption of any liabilities assumed under the terms of this Agreement.
(e) Compliance with Conditions to Closing. Subsequent to the
execution and delivery of this Agreement and prior to the Closing, each of the
parties to this Agreement will execute such documents and take such other
actions as reasonably may be appropriate to fulfill the conditions to Closing
provided for in Section 5 of this Agreement.
5. CONDITIONS TO CLOSING BY THE RESPECTIVE PARTIES. The obligation
of EMI and Buyer, on the one hand, and the Corporation and Shareholders on the
other hand, to consummate the transactions contemplated by this Agreement shall
be subject to compliance with or satisfaction of the following conditions by
the other, to the extent applicable:
(a) Bring Down. The representations and warranties set forth
in this Agreement shall be true and correct in all material respects on and at
the Closing Date as if then made by the relevant party (except for those
representations and warranties made as of a given date, which shall continue to
be true and correct as of such given date).
(b) Compliance. Each party shall have complied with all of the
covenants and agreements in this Agreement on its or their part, respectively,
to be complied with as of or prior to the Closing Date.
(c) No Material Adverse Changes. Since the date of the Most
Recent Balance Sheet, there shall not have occurred any material adverse change
in the condition or operations (financial or otherwise) of the Schools, the
School Facilities, or the Assets. Since December 31, 1997 there shall not have
occurred any material adverse change (financial or otherwise) of EMI.
(d) Buyer Certificates. There shall be delivered to the
Shareholders and the Partnership:
(1) a certificate executed by the President and Secretary
of each of Buyer and EMI, dated the Closing Date, certifying that the conditions
to be fulfilled by each of them set forth in this Section 5 have been fulfilled;
(2) a certificate of incumbency for each of the Buyer and
EMI executed by its President or any Vice President and by the Secretary or any
Assistant Secretary of such entity, listing the officers of such entity
authorized to execute (to the extent applicable) the Agreement and the other
documents, certificates, schedules and
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<PAGE> 18
instruments to be delivered on behalf of such entity, and their respective
offices, and containing the genuine signature of each such person set forth
opposite his name; and
(3) good standing certificates and certified charter
documents of each of them of recent date, from the Secretary of the State of the
jurisdiction of incorporation of such entity and a copy of their respective
By-Laws certified by an officer thereof.
The certificates described in subsections (1), (2) and (3) above are hereafter
referred to collectively as the "Buyer's Certificates."
(e) Corporation Certificates. There shall be delivered to the
Buyer and EMI:
(1) certificates executed by the President and Secretary of
the Corporation, the Shareholders and the Partnership, dated the Closing Date,
certifying that the conditions to be fulfilled by it as set forth in this
Section 5 have been fulfilled;
(2) a certificate of incumbency for the Corporation executed
by its President or any Vice President and by the Secretary or any Assistant
Secretary of the Corporation, listing the officers of such entity authorized to
execute (to the extent applicable) the Agreement and the other documents,
certificates, schedules and instruments to be delivered on behalf of such
entity, and their respective offices, and containing the genuine signature of
each such person set forth opposite his name; and
(3) good standing certificates and certified charter
documents of the Corporation and organizational documentation of the Partnership
dated of recent date, from the Secretary of the State of the jurisdiction of
incorporation of such entity and a copy of their respective By-Laws certified by
an officer thereof.
The certificates described in subsections (1), (2) and (3), above, are hereafter
referred to collectively as the "Stockholder, Partnership and Corporate
Certificates."
(f) No Suits. No action or proceeding shall have been instituted
in any court or before any Federal, state or local governmental agency against
any party seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or which could have a material adverse effect on
any of the parties, which shall not have been dismissed or withdrawn prior to
the Closing Date.
(g) Documents. All documents required to be delivered to Buyer
or the Corporation or the Shareholders pursuant to this Agreement at or prior to
Closing shall have been so delivered.
(h) Authority. There shall be in full force and effect on the
Closing Date resolutions (or in the case of the Partnership other appropriate
authorization) of the Boards of Directors of the Buyer, EMI, the Corporation and
the general partner(s) of
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the Partnership approving this Agreement, the other documents executed and
delivered by each of them in connection with this Agreement and the transactions
contemplated in it. At or prior to the Closing, each party will deliver to the
other a copy of the resolutions of its Board of Directors, and in the case of
the Corporation, the resolutions or consent of the Shareholders, together with
any and all required resolutions or consent of the Shareholders thereof and in
the case of the Partnership appropriate authorization by the general partner(s),
and, if applicable, the limited partner(s), approving the execution and delivery
of this Agreement and the other documents to be delivered pursuant to this
Agreement and the consummation of all of the transactions contemplated hereby,
duly certified by an appropriate officer.
(i) Opinions of Counsel. Each party shall receive the opinion
of counsel to the other party reasonably satisfactory in form and content to the
party receiving such opinion.
(j) Current Insurance Coverage. Payments will have been made
as of the Closing Date with respect to all of the Corporation's insurance
policies and all insurance coverage concerning the Assets and the Schools'
operations shall be continued in force through at least 10 days subsequent to
the Closing Date, unless canceled subsequent to the Closing Date by Buyer.
(k) Bankruptcy, Dissolution, etc. No petition or other
commencement of proceedings in bankruptcy or proceedings for dissolution,
termination, liquidation or an arrangement, reorganization or readjustment of
any party's debts under any state or Federal law enacted for the relief of
debtors or otherwise, whether instituted by or against a party, has been
effected or commenced by or against any party.
(l) Leases. The respective landlords of the leases under which
the School Facilities are leased shall have consented, if necessary, to the
assumption of such leases by the Buyer (or the change of control with respect to
the Corporation).
6. CLOSING AND POST CLOSING AGREEMENTS.
(a) Closing Date and Place. The closing of the transactions
provided for in this Agreement shall take place at the time provided for in
Section 1(b) of this Agreement at such place as the parties may agree, and shall
be effective as provided therein.
(b) Deliveries by Buyer to the Shareholders and the
Partnership. At the Closing, Buyer and EMI shall deliver to the Shareholders and
the Partnership:
(1) The Initial Payment;
(2) The Second Payment Note;
(3) Certificates Representing the EMI Purchase Stock;
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(4) The Buyer's Certificates;
(5) A registration rights agreement (the
"Registration Rights Agreement") in a form
satisfactory to the parties;
(6) Employment Agreements (the "Employment
Agreements) between the Corporation and Richard D.
Galeucia and Linwood W. Galeucia, respectively, in
form satisfactory to the parties; and
(7) A non-competition agreement (the "Non-Competition
Agreement") between the Buyer and Madeleine Galleucia
in form satisfactory to the parties.
(c) Deliveries by the Shareholders and the Partnership to
Buyer. At the Closing, Shareholders shall deliver to Buyer:
(1) The original certificates representing the Stock;
(2) Appropriate Stock Powers (the "Stock
Powers") to accomplish the transfer of the
Stock provided for in this Agreement;
(3) The Corporation's Certificates;
(4) A General Warranty Deed in recordable form.
(d) Filing of Tax Returns and Other Reports; Tax
Responsibility. The Shareholders shall timely file all federal and state income
tax and other tax returns or reports relating to the transactions provided for
in this Agreement and relating to all periods during which the Shareholders
owned the Stock, and shall be responsible for all unpaid federal tax liabilities
incurred by the Corporation and the related expenses for such period, including
without limitation the Federal Potential Federal Tax Audit Liabilities and any
refunds with respect thereto will be paid to the Shareholders upon receipt. To
the extent required by law or regulation the Shareholders shall file all reports
with the Department of Education or any other applicable state of federal
regulatory or accrediting agency relating to such periods including without
limitation the Financial Aid Audits for the federal fiscal year ended June 30,
1997 and March 31, 1998 to be filed by the Schools with the Department of
Education pursuant to applicable regulations.
(e) Access to Records. Following the effective Closing
Date, Buyer and EMI shall give to the Shareholders reasonable access to (and the
right to make copies at the expense of the Corporation) all financial and other
records of the Schools which reflect or relate to the business, operations,
income, expenses and assets of the Schools existing on, accruing or prior to the
Closing Date, and to preserve such records
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for a period of time reasonably necessary to insure their availability for
purposes of state and federal regulatory compliance or production or review in
the case of an audit, investigation or inquiry. Access to such records shall be
conducted by the Shareholders in such manner as not to interfere unreasonably
with the operations of the business following the Closing Date.
(f) Acid Test; Repayment of Uncollected Accounts Receivable.
Within 30 days of the Closing Date, the Shareholders shall provide the Buyer
with an audited balance sheet (the "Closing Balance Sheet") which shall be
subject to the same representations and warranties provided for in Section 2(c)
of this Agreement, which indicates as of the Closing Date the ratio (the
"Ratio") of the Corporation's (i) current assets ("Eligible Assets") to (ii)
current liabilities in accordance with the DOE Regulations governing financial
responsibility. In the event that the Ratio on the Closing Balance Sheet exceeds
one (1) to one (1), the Buyer shall pay to the Shareholders within fifteen (5)
business days an amount equal to the excess Eligible Assets over current
liabilities (the "Excess Payment") provided that such amount shall not exceed
the amount of cash held by the Corporation as of the close of business on the
date of such Closing Balance Sheet. The bad debt reserve for accounts receivable
provided for in the Closing Balance Sheet shall be $1,196,224 or adjusted to
such amount for purposes of determining an amount of Excess Payment, and no
further adjustments shall be made with respect to such reserve.
(g) Filing of Application for Prerequisite Student Aid
Approvals. As soon as practicable after the Closing, Buyer and EMI shall cause
the filing of applications for the Prerequisite Student Aid Approvals and shall
use their best efforts to secure the receipt of such approvals in the shortest
possible time.
(h) Further Documents or Acts. The parties will also execute,
deliver, record (where appropriate) and/or perform at Closing and from time to
time thereafter, at the request of Buyer, EMI, or the Shareholders, all other
documents or acts required to consummate any of the transactions contemplated by
this Agreement or otherwise carry out the purposes of this Agreement, including
without limitation, any and all instruments or other documents of transfer,
conveyance, assignment and assumption as may be reasonably necessary to effect
of evidence the transfer of the Assets and the assumption of the Stated
Liabilities.
7. CONFIDENTIALITY AND JOINT NON-COMPETITION AGREEMENT.
(a) Shareholders acknowledge that, as a result of their
ownership of the Schools they each had access to and knowledge of confidential
or proprietary information developed by the Corporation and Shareholders with
respect to the Schools and its operations and of a special and unique nature and
value to the Buyer, including, but not limited to, the methods and systems used
in connection with the Schools' operations, the names and addresses of their
students and sources of referral, tuition charged and paid by with respect to
the Schools or their customers, curricula, related memoranda, research reports,
designs, records, student files, services, and operating
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<PAGE> 22
procedures, and other information, data, and documents now existing or later
acquired by the Corporation or Shareholders in connection with the Schools'
operations, regardless of whether any such information, data, or documents,
qualify as a "trade secret" under applicable Federal or state law (collectively
"Confidential Information"). Confidential Information does not include
information that (i) becomes generally available to the public other than as a
result of disclosures by the Corporation or Shareholders in violation of the
terms of this Agreement, or (ii) becomes available to the Corporation or
Shareholders on a non-confidential basis from a source that is not bound by a
confidentiality agreement with Buyer or EMI or each of their respective
directors, officers, employees, agents or representatives. As a material
inducement to Buyer to enter into this Agreement, the Shareholders covenant and
agree not at any time following the Closing Date directly or indirectly, to
divulge or disclose for any purpose whatsoever, any Confidential Information
which is in the possession of the Corporation or Shareholders as a result of
their ownership of the Schools, or otherwise as a result of the relationship
between the Corporation, Shareholders and the Schools' operations. In accordance
with the foregoing, the Shareholders agree at no time to retain or remove from
the School Facilities records of any kind or description whatsoever for any
purpose whatsoever unless authorized by Buyer. Notwithstanding the foregoing
provisions of this Section 7(a), Shareholders may disclose Confidential
Information (i) to their counsel, accountants and agents on a need-to-know basis
(provided that any such person shall be informed of the confidential nature of
such information and directed not to disclose or make public such Confidential
Information), (ii) to the extent required by applicable law, rules and
regulation, and (iii) in any action, suit or proceeding between the parties,
provided that in connection with disclosures permitted by clauses (ii) and (iii)
above, Shareholders shall provide Buyer with at least three (3) days notice of
such intent so that an appropriate protective order may be sought by Buyer if
desired.
(b) As a material inducement to Buyer to enter into this
Agreement, the Shareholders covenant and agree for a period of seven (7) years
after the Closing of the transactions provided for in this Agreement not to (i)
engage in the operation of a post secondary school facility (the "Prohibited
Activities") anywhere within the State of New Hampshire or within 50 miles (the
"Area") of the location of any school owned or operated by EMI or any
postsecondary educational school which EMI subsequently operates during such
period with respect to which EMI either gives written notice to the Buyer or
includes on its Internet Homepage or any successor generally available
information service prior to the Shareholders' commencement of such activities;
(ii) become associated as manager, consultant, advisor, or stockholder owning
more that 5% of the outstanding stock of a company or participate in the
management or direction of a company or otherwise with any person, the
Corporation or entity engaging in Prohibited Activities anywhere within the
Area; (iii) call upon any of Buyer's, EMI's or any of EMI's subsidiary schools'
students, teachers or referral sources for the purpose of promoting any
Prohibited Activities for any person, person, the Corporation or entity within
the Area; or (iv) divert, solicit or take away any of Buyer's, EMI's or any of
EMI's subsidiary school's teachers or other personnel for the purpose of
engaging in any Prohibited Activities regardless of the location of such
activities.
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<PAGE> 23
(c) In the event of a breach or threatened breach by the
Shareholders of any of the provisions of this Section 7, Buyer, in addition to
and not in limitation of any other rights, remedies, or damages available to
Buyer at law or in equity, shall be entitled to a permanent injunction in order
to prevent or to restrain any such breach by Shareholders, or by Shareholders'
partners, agents, representatives, servants, employers, employees and/or any and
all persons directly or indirectly acting for or with them.
(d) Shareholders jointly and severally agree that, if they
shall violate any of the covenants or agreements provided for in this Section 7,
Buyer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remuneration, or benefits which Shareholders
directly, or indirectly, have realized and/or may realize as a result of,
growing out of, or in connection with any such violation; such remedy shall be
in addition to and not in limitation of any injunctive relief or other rights or
remedies to which Buyer may be entitled to at law or in equity or under this
Agreement.
(e) Shareholders have carefully read and considered the
provisions of this Section 7, and agree that the restrictions set forth above
(including without limitation the time period and geographical areas of
restriction) are fair and reasonable and are reasonably required for the
protection of the interest of the Buyer and EMI. In the event that,
notwithstanding the foregoing, any of the provisions of this Section 7 are held
invalid or unenforceable, the remaining provisions shall continue to be valid
and enforceable. In the event that any provision of this Section 7 relating to
time period and/or areas of restriction are declared by a court of competent
jurisdiction to exceed the maximum time period or areas such court deems
reasonable and enforceable, said time period or areas of restriction shall be
deemed to become, and thereafter be, the maximum time period and/or area which
such court deems reasonable and enforceable.
8. INDEMNIFICATION.
(a) Except with respect to claims based on the Indemnity
Limitation Exception provided for in subsection (d) of this Section,
Shareholders, and, with respect to the representations contained in subsection
2(x) of this Agreement and the performance of all of its other obligations as
provided for in this Agreement, the Partnership, agree for a period of two (2)
years from the date of this Agreement to defend, indemnify and hold harmless the
Buyer and EMI and their directors, officers, employees and agents from and
against any loss, liability, damage, settlement or expense (including without
limitation, attorneys' fees and disbursements) incurred by Buyer or EMI arising
from or related to the inaccuracy or breach of any of the representations,
warranties, covenants or agreements of Shareholders and the Partnership
contained in this Agreement or in any document incorporated by reference into
this Agreement.
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<PAGE> 24
(b) Buyer and EMI, jointly and severally, agree to defend,
indemnify and hold harmless Shareholders and the Partnership and their
respective agents from and against any loss, liability, damage, settlement or
expense (including without limitation attorneys' fees and disbursements)
incurred by Shareholders or the Partnership arising from or related to the
inaccuracy or breach of any of the representations, warranties, covenants or
agreements of Buyer or EMI contained in this Agreement or in any document
incorporated by reference into this Agreement.
(c) The party seeking indemnification pursuant to this Section
8 (the "Indemnified Party") shall give (or cause to be given) to the party or
parties from whom indemnification is sought hereunder (the "Indemnifying Party")
written notice of any claim or matter for which indemnity is (or will be) sought
under this Section 8. Such notice shall be given promptly after the Indemnified
Party receives actual notice or knowledge of the claim or matter that is subject
to indemnification. With respect to any claim asserted by a third party against
an Indemnified Party for which indemnity is sought hereunder, the relevant
Indemnifying Party shall have the right to employ counsel reasonably acceptable
to the relevant Indemnified Party to defend against such assertion and such
Indemnifying Party shall have the right to compromise or otherwise settle any
such action or claim only with the prior written consent of such relevant
Indemnified Party, which consent shall not be unreasonably withheld.
(d) Except in the case of a judicial determination of
intentional fraud by a New Hampshire Court of competent jurisdiction (the
"Indemnity Limitation Exception"), Shareholders and/or the Partnership shall not
in any instance have any liability, including without limitation instances of
non-compliance described in Sections 2(h) and/or 2( ) of this Agreement, with
respect to any claims of Buyer or EMI for money damages, whether pursuant to
this section or otherwise, until such time, if any, as the aggregate amount of
all such amounts otherwise subject to recovery by Buyer or EMI shall exceed, in
the aggregate, $25,000, and then only to the extent of such excess; and provided
further that the Shareholders and/or the Partnership shall not be obligated to
pay such damages (other than the Indemnity Limitation Exception) to the extent
the total amount otherwise subject to recovery by Buyer or EMI from the
Shareholder and/or the Partnership exceeds $2,500,000.
9. EVENTS OF DEFAULT. If any one or more of the following events
occurs then, subject to the expiration of any specified grace period and the
giving of any prior notice required under this Section 9, such event shall
constitute an Event of Default by the party responsible for such event or
against whom it should be charged.
(a) Warranties or Representations. Any warranty or
representation by or on behalf of any party contained in this Agreement (or in
any document between the parties furnished in compliance with this Agreement at
Closing) is false or misleading in any material respect.
(b) Agreements. Any party fails to take any action required of
it to comply with its obligations contained in this Agreement, or takes any
action prohibited
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<PAGE> 25
or inconsistent with its obligations under this Agreement, and such failure to
act or action is not cured prior to ten (10) days after written notice thereof
is given to the defaulting party.
(c) Refusal to Close. A party refuses to consummate the
transactions provided for (and subject to the terms and conditions specified) in
this Agreement by 5 p.m., Eastern Daylight Time on the Termination Date, except
if the failure to close is based upon the failure of the other party to meet a
condition to Closing provided for in Section 5 of this Agreement.
(d) Failure of Closing Condition. Any party is unable to
comply with the conditions of Closing provided for in Section 5 of this
Agreement, other than as a result of an Event of Default as described in
Sections 9(a), (b), or (c) above.
10. TERMINATION AND RIGHTS AND REMEDIES ON DEFAULT.
(a) Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned prior to the Closing: (i) by the
mutual consent of Buyer, EMI, the Corporation and Shareholders; (ii) by Buyer
and EMI, if any condition to their obligations to close set forth in Section 5
hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; (iii) by the Corporation and
Shareholders if any condition to their obligations to close set forth in Section
5 hereof becomes impossible of performance or has not been satisfied in full (in
each case other than as a result of a breach of such party's obligations under
this Agreement) or previously waived by the other parties to this Agreement in
writing at or prior to the Termination Date; or (iv) by any party (other than a
party that is in breach of its obligations under this Agreement) if the Closing
shall not have occurred on or before the Termination Date. If this Agreement is
terminated pursuant to clause (i) of this Section 10, all obligations of the
parties hereunder shall terminate without any further liability or obligation of
either party to the other, except that the provisions of Section 11, and the
confidentiality provisions of Section 4(c) of this Agreement shall survive and
continue in full force and effect notwithstanding such termination. Except as
limited by the preceding sentence, the exercise by any party of the right to
terminate this Agreement shall not terminate or limit any remedy that such party
may have in this Section 10 as a result of an Event of Default.
(b) Rights and Remedies on Default. Upon and after an Event of
Default by any party, the other party shall have the following rights and
remedies:
(1) Default by Buyer. In the event that Buyer is
obligated to and fails to close by the Termination Date, and the Corporation or
Shareholders are not in default of their obligations under this Agreement, this
Agreement shall terminate and the Corporation and Shareholders shall have the
right to seek money damages as their
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<PAGE> 26
sole remedy. The Corporation and Shareholders hereby agree that neither of them
shall be entitled to seek or file suit for specific performance of this
Agreement.
(2) Default by the Corporation or Shareholders. If,
on the Termination Date, there exists an Event of Default as described in
Section 9 of this Agreement, chargeable against the Corporation or the
Shareholders, Buyer may either (i) waive such default and close, in which event
Buyer shall have the right to seek specific performance of this Agreement,
including, without limitation, the acquisition of the Shares and the
performance by the Corporation and Shareholders of the covenants provided for
in this Agreement, or (ii) refuse to close, and, except in the case of an Event
of Default described in Section 9(d) above, seek money damages from the
Corporation or Shareholders, including, without limitation, indemnification
pursuant to Section 8 of this Agreement. An election by Buyer to proceed in
accordance with subclause (i) of the preceding sentence shall constitute the
acknowledgment by Buyer and the Corporation or Shareholders that Buyer cannot
be adequately compensated by money damages for the failure to perform by the
Corporation or Shareholders, that such damages are indeterminate, and that a
court of competent jurisdiction may enter an order pursuant to which the
Corporation and Shareholders are obligated to specifically perform their
obligations to Buyer pursuant to the terms of this Agreement.
(3) Default Subsequent to Closing. If any party
breaches this Agreement subsequent to Closing, or if a default occurs pursuant
to Sections 9(a) or 9(b) of this Agreement, the nondefaulting party(ies) shall
have the right to seek money damages from the defaulting party(ies), pursuant to
Section 7 or 8 of this Agreement. In addition, if, (i) as a result of any action
taken or not taken by the Corporation or Shareholders in violation of any
applicable law or regulation which (ii) has not been disclosed to the Buyer in
this Agreement, and which (iii) the occurrence or non occurrence of which was
known or reasonably should have been known to the Corporation or Shareholders,
the Prerequisite Student Aid Approvals are not received prior to 12 months from
the date of the Closing, or, if received or offered, can only be obtained on
conditions imposing substantial financial burdens on the Buyer in addition to
those which would otherwise be imposed in connection which such approval, the
Buyer may elect to rescind the transactions provided for in this Agreement and,
upon such election, the parties will take such action as may be reasonably
required to restore the other party to its respective positions as they existed
prior to the Closing provided for in this Agreement.
(4) Nature of Remedies Cumulative. Except as otherwise
provided in this Agreement, all rights and remedies granted in this Agreement or
available under applicable law shall be deemed concurrent and cumulative and not
alternative or exclusive remedies, to the full extent permitted by law and this
Agreement, and any party may proceed with any number of remedies at the same
time or in any order. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and any party, upon the
occurrence of an event of default by another party under this Agreement, may
proceed at any time, under any agreement, in any order and with any available
remedy.
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<PAGE> 27
11. FINDERS FEES. With the exception of The Bigelow Company which will
receive an accomplishment fee paid by the Shareholders at the Closing, each of
the parties represents and warrants to the other that such party has not
employed any finder or broker in connection with transactions contemplated by
this Agreement. Each party agrees to indemnify and hold harmless the others from
and against any claim, damages, liabilities, and expenses (including without
limitation, attorneys' fees and disbursements) arising from any claim or demand
asserted by any person or entity other than the Bigelow Company on the basis of
its employment as a finder or broker by the respective party.
12. ARBITRATION. Any disputes between any of the parties to it with
respect to the agreements contained in it, or as modified in the future, are to
be settled by binding arbitration conducted pursuant to the commercial
arbitration rules of the American Arbitration Association, except for instances
in which an Indemnity Limitation Exception is alleged as a bar to the
limitations provided for in Section 8(d). In any such arbitration the scope and
timing of any discovery shall be determined by the arbitrators. Such arbitration
is to be the sole remedy for the settlement of such disputes. All of the parties
agree that money damages are inadequate to compensate for a breach of the
confidentiality and non-competition provisions of this Agreement and contained
in this Agreement. The Shareholders agree that upon application by EMI and/or
Acquisition, any court of competent jurisdiction, upon a showing sufficient to
justify the entry of a temporary injunction, may enjoin any activity allegedly
in breach of such agreement pending the outcome of binding arbitration or enter
a similar order of like force and effect, or may enforce the final determination
of such arbitrators by the issuance of such an injunction or similar order.
With respect to the provisions of Section 7 (Confidentiality and
Non-Competition), the Corporation and Shareholders agree that damages, by
themselves, are an inadequate remedy at law, that a material breach of the
provisions of such Section would cause irreparable injury to the aggrieved
party, and that the provisions of Section 7 may be specifically enforced by
injunction or similar remedy in any court of competent jurisdiction without
affecting any claim for damages, provided that any such injunction shall either
be preliminary in nature, enjoining such activity pending the outcome of
arbitration as provided for in Section 12 of this Agreement, or be in assistance
of the final determination of the arbitrators as provided for in such Section.
The Corporation and Shareholders agree that such injunction may be issued
without the necessity of bond.
13. NOTICES. All notices or other communications required or permitted
under the terms of this Agreement shall be made in writing and shall be deemed
given (i) upon hand delivery, (ii) when sent by commercial overnight courier
with written verification of receipt, or (iii) three days after deposit of same
in the Certified Mail, Return Receipt Requested, first class postage and
registration fees prepaid and correctly addressed to the parties at the
following addresses:
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<TABLE>
<S> <C>
If to Buyer: New Hampshire Acquisition Corp.
1327 North Meadow Parkway, Suite 132
Roswell, GA 30076
Attn: President
With a copy to: Greenberg Traurig Hoffman Rosen Lipoff & Quentel
777 South Flagler Drive, Suite 300 - East Tower
West Palm Beach, Florida 33401
Attn: Morris C. Brown, Esq.
If to EMI: Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, Georgia, 30076
Attn: President
With a copy to: Greenberg Traurig Hoffman Rosen Lipoff & Quentel
777 South Flagler Drive, Suite 300 - East Tower
West Palm Beach, Florida 33401
Attn: Morris C. Brown, Esq.
If to the Corporation: Hesser, Inc.
c/o Hesser College
3 Sundial Avenue
Manchester, NH 03103
With a copy to: William H. Kelley, Esq.
282 River Road
P.O. Box 3280
Manchester, NH 03105-3280
If to Shareholders: The Linwood W. Galeucia Trust of 1997
c/o Linwood W. Galeucia
Hesser College
3 Sundial Avenue
Manchester, NH 03103
Richard D. Galeucia
c/o Hesser College
3 Sundial Avenue
Manchester, NH 03103
With a copy to: William H. Kelley, Esq.
282 River Road
P.O. Box 3280
Manchester, NH 03105-3280
</TABLE>
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<PAGE> 29
<TABLE>
<S> <C>
If to the Partnership: Hardwood Properties Limited Partnership
c/o Linwood W. Galeucia
Hesser College
3 Sundial Avenue
Manchester, NH 03103
With a copy to: William H. Kelley, Esq.
282 River Road
P.O. Box 3280
Manchester, NH 03105-3280
</TABLE>
or to such other address as any of the parties hereto may designate by notice
to the others.
14. MISCELLANEOUS.
(a) Successors. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned prior to Closing without
the prior written consent of the other parties hereto.
(b) Expenses. Except as otherwise provided in this Agreement,
Buyer, the Corporation and Shareholders shall be responsible for any and all of
the respective fees, costs and expenses incurred by each, in connection with the
negotiation, preparation or performance of this Agreement.
(c) Entire Agreement. This Agreement incorporates by this
reference all Exhibits hereto and all documents executed and/or delivered at
Closing. This Agreement and the documents so incorporated into it contain the
parties' entire understanding and agreement with respect to the subject matter
hereof; and any and all conflicting or inconsistent discussions, agreements,
promises, representations and statements, if any, between the parties or their
representatives that are not incorporated in this Agreement shall be null and
void and are merged into this Agreement.
(d) Amendments Only in Writing. No amendment, modification,
waiver or discharge of this Agreement or any provision of this Agreement shall
be effective against any party, unless such party shall have consented thereto
in writing.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement.
(f) Cooperation. Each of the parties to this Agreement, when
requested by another party, shall give all reasonable and necessary cooperation
with respect to any reasonable matters relating to the transactions contemplated
by this Agreement.
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<PAGE> 30
(g) Governing Law; Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Hampshire,
exclusive of its choice of law provisions, and the parties agree that any
dispute hereunder shall be resolved by reference to court or tribunal in
Hillsborough County, New Hampshire, in accordance with terms of the Agreement,
and each hereby irrevocably consents to such jurisdiction.
(h) Headings. The various section headings are inserted for
purposes of reference only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(i) Gender; Number. All references to gender or number in this
Agreement shall be deemed interchangeably to have a masculine, feminine, neuter,
singular or plural meaning, as the sense of the context requires.
(j) Severability. The provisions of this Agreement shall be
severable, and any invalidity, unenforceability or illegality of any provision
or provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
(k) Survival. Except as otherwise expressly provided in this
Agreement, the liabilities and obligations of each party with respect to any and
all of its representations, warranties, covenants and agreements set forth in
this Agreement and/or in any document incorporated into it shall not be merged
into, affected or impaired by the Closing under this Agreement. All of the
representations, warranties, covenants and agreements set forth in this
Agreement shall survive the Closing for the period of two years thereafter, so
that (except as otherwise provided below) any claim under this Agreement must be
asserted by notice given to the party claimed to be liable on or before the
second anniversary of the Closing Date. Notwithstanding the foregoing, the time
limitation shall not apply to: (i) the covenants related to confidentiality and
non-competition contained in Section 7 above or (ii) fraud, including without
limitation intentional fraud upon which a claim for an Indemnity Limitation
Exception is based. All obligations and liabilities described in clauses (i) and
(ii) of the previous sentence shall survive the Closing for the period in which
a claim can be asserted with respect thereto under applicable law.
(l) No Third Party Beneficiaries. This Agreement has been
entered into solely for the benefit of the parties that have executed it, and
not to confer any benefit or enforceable right upon any other party or entity.
Accordingly, no party or entity that has not executed this Agreement shall have
any right to enforce any of the provisions of it.
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<PAGE> 31
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by an officer duly authorized to do so, all as of the day and year
first above written.
NEW HAMPSHIRE ACQUISITION HESSER, INC. ("CORPORATION")
CORP. ("BUYER")
By: By:
-------------------------------- ---------------------------------
Authorized Signatory Authorized Signatory
EDUCATIONAL MEDICAL, INC. ("EMI") SHAREHOLDERS
THE LINWOOD W. GALEUCIA
REVOCABLE TRUST OF 1997
By: By:
------------------------------ -------------------------------
Authorized Signatory ---------------, Trustee
------------------------------------
Richard D. Galeucia,
HARDWOOD PROPERTIES LIMITED
PARTNERSHIP ("PARTNERSHIP")
By:
------------------------------
Authorized Signatory
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<PAGE> 32
EXHIBITS
1. Legal Description of the Property
2. The Second Payment Note
3. List of Shareholders
4. Registration Rights Agreement
5. Form of Employment Agreement
6. Form of Non-Competition Agreement
7. The Stock Power
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<PAGE> 1
EXHIBIT 10.2
LEGAL DESCRIPTION
Hesser College
3 Sundial Avenue
Manchester, New Hampshire
A certain condominium unit in Sundial Avenue Condominium Manchester,
County of Hillsborough and State of New Hampshire, more particularly bounded and
described as follows:
South Wing Unit, Unit 1, Sundial Avenue Condominium, defined and
identified in the Declaration of Condominium of Northern Manchester Trust, dated
November 16, 1989 and recorded in the Hillsborough County Registry of Deeds,
Volume 5153, Page 1028, and also shown on certain plans entitled: "Site Plan,
Sundial Avenue Condominium, Sundial Avenue, Manchester, New Hampshire," prepared
for Northern Manchester Trust, dated November 9, 1989 by Cuoco & Cormier, Inc.,
recorded in said Registry with floor plans as Plans #24017.
<PAGE> 1
EXHIBIT 10.3
NON-NEGOTIABLE
SECOND PAYMENT PROMISSORY NOTE
U.S. $________________ March 13, 1998
FOR VALUE RECEIVED, each of the undersigned, jointly and severally,
(each individually called a "Maker" and collectively called the "Makers") hereby
unconditionally promises to pay to the order of ________________, (hereinafter
referred to as "Seller"), or permitted assigns ("Holder") at 3 Sundial Avenue,
Manchester, New Hampshire 03103, or at such other place or to such other party
as Holder may from time to time designate in writing, the principal sum of
_______________and 00/100 Dollars (U.S. $_______________) in lawful currency of
the United States along with interest computed at the rate of 2% per annum based
on the actual number of days and amount of principal outstanding..
This Note evidences obligations of the Makers to the Holder provided
for in the Stock Purchase Agreement among Educational Medical, Inc., New
Hampshire Acquisition Corp., Hesser, Inc., and Seller dated March 13, 1998, and
providing for the purchase by New Hampshire Acquisition Corp. of all of the
outstanding and issued Capital Stock of Hesser, Inc. and the Property (the
"Agreement"). The terms of the Agreement are incorporated into this Note, and
this Note is the Second Payment Promissory Note referred to in the Agreement
representing a portion of the Purchase Price for the Stock and the Property as
defined in the Agreement. Unless otherwise defined herein, all capitalized terms
used in this Note shall have the same meaning as set forth in the Agreement.
In the event that the Makers assert a claim for monetary damages or
indemnification against the Seller pursuant to the provisions of the Agreement
(a "Claim"), the Makers shall have the right to offset (an "Offset") the amount
of the Claim against the Second Payment Promissory Note. In connection with any
Offset, the Makers must deliver to the Seller written notice at or prior to the
time the related payment would otherwise be due describing the basis for such
Offset with reasonable detail and such payment shall be timely made into either
(1) the escrow account of William H. Kelley, or (2) a New Hampshire Court of Law
of appropriate jurisdiction, in either case at the discretion of the Maker. The
Seller may contest the right to such Offset as provided in the Agreement.
This Note and all interest due thereon shall be paid in full on (1) the
last business day within the first thirty (30) calendar days following the date
on which the Prerequisite Student Aid Approvals are obtained by the Makers; or
(2) within 15 days following notice to the Maker from the Holder that a payment
has not been made in accordance with the terms of this Note, which notice
specifically declares the entire amount owed to Holder and provided for in this
Note immediately due and payable, (the earlier of the dates referred to in the
preceding two clauses is called the "Maturity Date"). All
1
<PAGE> 2
amounts owing pursuant to this Note and not paid upon the Maturity Date shall
bear interest at the highest rate of interest permitted by law until paid.
Maker for itself, its heirs, legal representatives, successors and
assigns, waives presentment for payment, demand, notice of dishonor or
non-payment, notice of default, notice of protest, and protest of this Note, and
waives any right to be released by reason of any extension of time or change in
terms of payment or any change, alteration or release of any security given for
the payment hereof. Maker hereby consents to any number of extensions of time,
and any and all renewals, waivers, and modifications of this Note or any
combination of the foregoing that may be made or granted by Holder.
Maker agrees to pay immediately upon demand all reasonable costs and
expenses of Holder, including attorneys' fees, (i) if after default this Note be
placed in the hands of an attorney or attorneys for collection, or (ii) if
Holder finds it necessary or desirable upon default to secure the services or
advice of one or more attorneys with regard to collection of this Note against
Maker, or for the protection of its rights under this Note, or any instrument
relating to property securing the Note. The term "attorneys' fees" shall include
attorneys' fees incurred by Holder whether or not suit is brought and if suit is
brought, the term shall include attorneys' fees at trial and on appeal, and
shall include attorneys' fees incurred in connection with consultations,
arbitration, bankruptcy, conservatorship, receivership or any other proceeding.
This Note shall be interpreted, construed, governed and enforced in
accordance with the laws of the State of New Hampshire, and any suit, action or
proceeding arising out of or relating to this Note shall be commenced and
maintained in the court of appropriate jurisdiction in Hillsborough County, New
Hampshire or the appropriate United States District Court for the State of New
Hampshire and each party waives objection to such jurisdiction and venue.
EACH OF HOLDER AND MAKER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER IT OR ITS SUCCESSORS, PERSONAL
REPRESENTATIVES OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE
LOAN EVIDENCED BY THIS NOTE AND ANY AGREEMENTS CONTEMPLATED THEREBY TO BE
EXECUTED IN CONJUNCTION THEREWITH, OR IN CONJUNCTION WITH ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
PARTIES.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note in Manchester, New Hampshire, the date first above written.
EDUCATIONAL MEDICAL, INC.
a Delaware corporation
By:
-----------------------------
Authorized Signatory
NEW HAMPSHIRE ACQUISITION CORP.
a Delaware corporation
By:
-----------------------------
Authorized Signatory
3
<PAGE> 1
EXHIBIT 10.4
EXHIBIT 3
LIST OF SHAREHOLDERS OF HESSER, INC.
<TABLE>
<S> <C>
Richard D. Galeucia 50 Shares/Common Stock
The Linwood W. Galeucia Revocable
Trust of 1997 50 Shares/Common Stock
</TABLE>
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
EDUCATIONAL MEDICAL, INC.
AND
THE LINWOOD W. GALEUCIA REVOCABLE TRUST OF 1997
AND
RICHARD D. GALEUCIA
DATED AS OF MARCH 13, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Certain Definitions............................................................................................1
a. "Commission".............................................................................................1
b. "Exchange Act"...........................................................................................1
c. "Holders" or.............................................................................................1
d. "Holders' Shares"........................................................................................1
e. "Person".................................................................................................1
f. "Registrable Securities".................................................................................1
g. "Securities Act".........................................................................................2
2. Registration Rights............................................................................................2
3. Registration Procedures........................................................................................3
4. Registration Expenses..........................................................................................6
5. No Required Sale...............................................................................................7
6. Indemnification................................................................................................7
7. General.......................................................................................................10
8. Miscellaneous.................................................................................................12
9. No Inconsistent Agreements....................................................................................13
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of March __, 1998 (the
"Agreement"), by and between Educational Medical, Inc., a Delaware corporation
(the "Company"), and The Linwood W. Galeucia, a revocable trust organized under
the laws of the State of New Hampshire, and Richard D. Galeucia, an individual
residing within the State of New Hampshire, (collectively, the "Holders").
The Company, New Hampshire Acquisition Corp., a Delaware corporation
(the "Buyer") and the Holders, have entered into a Stock Purchase Agreement
dated March 13, 1998 (the "Stock Purchase Agreement") pursuant to which the
Buyer shall purchase all of the issued and outstanding shares of Common Stock of
Hesser, Inc., and certain Real Estate owned by Hardwood Properties Limited
Partnership, in consideration for the Purchase Price as more particularly set
forth in the Agreement, including, without limitation, a certain number of
shares of the Company's Common Stock (the "Holders' Shares").
The parties hereto desire to provide certain registration rights with
respect to the Holders' Shares.
Accordingly, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the meanings ascribed to them below:
a. "Commission": the Securities and Exchange Commission.
b. "Exchange Act": the Securities Exchange Act of 1934, as
amended.
c. "Holders": As defined in the recitals above.
d. "Holders' Shares": As defined in the recitals above.
e. "Person": any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.
f. "Registrable Securities": the Holders' Shares (and any
shares issued upon any subdivision, combination or reclassification of such
shares or any stock dividend in respect of any of the foregoing shares). As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, or (ii) such securities shall have been sold or become
salable (other than in a privately negotiated sale) pursuant
<PAGE> 4
to Rule 144 (or any successor provision) under the Securities Act and in
compliance with the requirements of paragraphs (c), (e), (f) and (g) of Rule 144
(notwithstanding the provisions of paragraph (k) of such Rule).
g. "Securities Act": the Securities Act of 1933, as
amended.
2. Registration Rights.
a. Within sixty (60) days following the consummation of the
transaction contemplated by the Stock Purchase Agreement, the Company shall file
a registration statement under the Securities Act covering all of the
Registrable Securities and use its best efforts to (x) effect such registration
under the Securities Act (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act if the Company is
then eligible to use such a registration) of the Registrable Securities, and (y)
if requested by the Holders, obtain acceleration of the effective date of the
registration statement relating to such registration.
b. If (i) the Board of Directors of the Company, in its good
faith judgment, determines that any registration of Registrable Securities
should not be made or continued because it would materially interfere with any
material financing, acquisition, corporate reorganization or merger or other
transaction involving the Company or any of its subsidiaries (a "Valid Business
Reason"), and (ii) the Valid Business Reason has not resulted from actions taken
by the Company, the Company may cause such registration statement to be
withdrawn and its effectiveness terminated or may postpone amending or
supplementing such registration statement; and the Company shall give written
notice of its determination to postpone or withdraw a registration statement and
of the fact that the Valid Business Reason for such postponement or withdrawal
no longer exists, in each case, promptly after the occurrence thereof.
If the Company shall give any notice of postponement or withdrawal of
any registration statement, the Company shall not, during the period of
postponement or withdrawal, register any Common Stock, other than pursuant to a
registration statement on Form S-4 or S-8 (or an equivalent registration form
then in effect). Each Holders of Registrable Securities agrees that, upon
receipt of any notice from the Company that the Company has determined to
withdraw any registration statement pursuant to clause 2b. above, such Holders
will discontinue its disposition of Registrable Securities pursuant to such
registration statement and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holders' possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. If the
Company shall have withdrawn or prematurely terminated a registration statement
filed under Section 2.a, (whether pursuant to clause 2b. above or as a result of
any stop order, injunction or other order or requirement of the Commission or
any other governmental agency or court), the Company shall not be considered to
have effected an effective registration for the purposes of this Agreement until
the Company shall have filed a new registration
2
<PAGE> 5
statement covering the Registrable Securities covered by the withdrawn
registration statement and such registration statement shall have been declared
effective and shall not have been withdrawn. If the Company shall give any
notice of withdrawal or postponement of a registration statement, the Company
shall, at such time as the Valid Business Reason that caused such withdrawal or
postponement no longer exists (but in no event later than two months alter the
date of the postponement), use its best efforts to effect the registration under
the Securities Act of the Registrable Securities covered by the withdrawn or
postponed registration statement in accordance with this Section (unless the
Holders shall have consented otherwise).
c. The Company, may elect to include in any registration statement
and offering made pursuant to Section 1(a), authorized but unissued shares of
Common Stock or shares of Common Stock held by the Company as treasury shares or
any other shares of Common Stock as to which it has granted registration rights.
3. Registration Procedures. With respect to the Company's obligation
provided for in Section of this Agreement, the Company shall, as expeditiously
as possible but no later than sixty (60) days from the date first above written:
a. prepare and file with the Commission a registration statement
on an appropriate registration form of the Commission for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, and such registration statement shall comply as to form in
all material respects with the requirements of the applicable form and include
all financial statements required by the Commission to be filed therewith, and
the Company shall use its best efforts to cause such registration statement to
become and remain effective.
b. prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period as any seller of Registrable Securities pursuant to such
registration statement shall request and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Registrable
Securities covered by such registration statement;
c. furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with all applicable law of each such registration statement (or
amendment or post-effective amendment thereto) and each such prospectus (or
preliminary prospectus or supplement thereto) by each such seller of
3
<PAGE> 6
Registrable Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by such registration
statement or prospectus);
d. use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities shall reasonably request, and do any and all other acts
and things which may be reasonably necessary or advisable to enable such sellers
or underwriter, if any, to consummate the disposition of the Registrable
Securities in such jurisdictions, except that in no event shall the Company be
required to qualify to do business as a foreign corporation in any jurisdiction
where it would not, but for the requirements of this clause d, be required to be
so qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
e. promptly notify each Holders selling Registrable
Securities covered by such registration statement: (i) when the registration
statement, any pre-effective amendment, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the registration
statement has been filed and, with respect to the registration statement or any
post effective amendment, when the same has become effective; (ii) of any
request by the Commission or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such purpose; (v) of
the existence of any fact of which the Company becomes aware which results in
the registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated below cease to be true and
correct in all material respects; and, if the notification relates to an event
described in clause (v), the Company shall promptly prepare and furnish to each
such seller and each underwriter, if any, a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein in the light of
the circumstances under which they were made not misleading;
f. comply with all applicable rules and regulations of the
Commission
g. cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities
4
<PAGE> 7
issued by the Company are then listed (if any) and, without limiting the
generality of the foregoing, take all actions that may be required by the
Company as the issuer of such Registrable Securities in order to facilitate the
registration of at least two market makers as such with respect to such shares
with the National Association of Securities Dealers, Inc. (the "NASD");
h. provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
i. deliver promptly to each Holders copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement, other than those portions of any such
correspondence and memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may reasonably request, make
reasonably available for inspection by any seller of such Registrable Securities
covered by such registration statement, and by any attorney, accountant or other
agent retained by any such Holders all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, attorney, accountant or agent in
connection with such registration statement;
j. use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement;
k. provide a CUSIP number for all Registrable Securities,
not later than the effective date of the registration statement; and
l. take all such other commercially reasonable actions as
are necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
The Company may require as a condition precedent to the Company's
obligations under this Agreement that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration.
The Holders agrees that upon receipt of any notice from the Company of
the happening of any event of the kind described in clause (v) of paragraph (e)
of this Section 3 the Holders will discontinue his disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until Holders' receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph
5
<PAGE> 8
(e) of this Section 3 and, if so directed by the Company, will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in Holders' possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period mentioned in
paragraph (b) of this Section 3 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (e) of this Section 3
If any such registration statement or comparable statement under "blue
sky" laws refers to Holders by name or otherwise as the Holders of any
securities of the Company, then Holders shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to Holders and
the Company, to the effect that the holding by Holders of such securities is not
to be construed as a recommendation by Holders of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
Holders will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to Holders by name or otherwise is not
in the judgment of the Company, as advised by counsel, required by the
Securities Act or any similar federal statute or any state "blue sky" or
securities law then in force, the deletion of the reference to Holders.
4. Registration Expenses.
a. "Expenses" shall mean any and all fees and expenses incident
to the Company's performance of or compliance with Section 3, including, without
limitation: (i) Commission, stock exchange or NASD registration and filing fees
and all listing fees and fees with respect to the inclusion of securities in
NASDAQ, (ii) fees and expenses of compliance with state securities or "blue sky"
laws and in connection with the preparation of a "blue sky" survey, including,
without limitation, reasonable fees and expenses of blue sky counsel, (iii)
printing expenses, (iv) messenger and delivery expenses, and (v) fees and
disbursements of counsel for the Company. All such Expenses shall be borne by
the Company.
b. Notwithstanding the foregoing, (x) the provisions of this
Section 4 shall be deemed amended to the extent necessary to cause these expense
provisions to comply with "blue sky" laws of each state in which the offering is
made and (y) the Company shall be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
5. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of the Holders to sell any
Registrable Securities pursuant to any effective registration statement.
6. Indemnification.
6
<PAGE> 9
a. In the event of any registration of the Registrable Securities
of the Company under the Securities Act pursuant to this Agreement, the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, the seller of any Registrable Securities covered by such
registration statement, its directors, officers, fiduciaries, employees and
stockholders or general and limited partners (and the directors, officers,
employees and stockholders thereof, each other individual, partnership, joint
venture, corporation, trust, unincorporated organization or government or any
department or agency thereof (each, a "Person") who participates as an
underwriter, if any, in the offering or sale of such securities, each officer,
director, employee, stockholders or partner of such underwriter, and each other
Person, if any, who controls such seller or any such underwriter within the
meaning of the Securities Act, against any and all losses, claims, damages or
liabilities, joint or several, actions or proceedings (whether commenced or
threatened) in respect thereof ("Claims") and expenses (including reasonable
fees of counsel and any amounts paid in any settlement effected with the
Company's consent, which consent shall not be unreasonably withheld or delayed)
to which each such indemnified party may become subject under the Securities Act
or otherwise, insofar as such Claims or expenses arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such securities were
registered under the Securities Act or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or summary
prospectus or any amendment or supplement thereto, together with the documents
incorporated by reference therein, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, and the Company will reimburse any such indemnified party for any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, that the Company shall not be liable to any such indemnified
party in any such case to the extent such Claim or expense arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact made in such registration
statement or amendment thereof or supplement thereto or in any such prospectus
or any preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
b. Each Holders of Registrable Securities that are included in the
securities as to which any registration is being effected shall, severally and
not jointly, indemnify
7
<PAGE> 10
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section to the extent permitted by law the Company, its
officers and directors, each Person controlling the Company within the meaning
of the Securities Act. and all other prospective sellers and their directors,
officers, general and limited partners and respective controlling Persons with
respect to any untrue statement or alleged untrue statement of any material fact
in, or omission or alleged omission of any material fact from, such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of such Holders or underwriter, if any, specifically for use therein and
reimburse such indemnified party for any legal or other expenses reasonably
incurred in connection with investigating or defending any such Claim as such
expenses are incurred, provided, however, that the aggregate amount which any
such Holders shall be required to pay pursuant to this Agreement shall in no
case be greater than the amount of the net proceeds received by such person upon
the sale of the Registrable Securities pursuant to the registration statement
giving rise to such claim. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of such securities by such Holders.
c. Indemnification similar to that specified in the preceding
paragraphs (a) and (b) (with appropriate modifications) shall be given by the
Company and each seller of Registrable Securities with respect to any required
registration or other qualification of securities under any state securities and
"blue sky" laws.
d. Any person entitled to indemnification under this Agreement shall
notify promptly the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section except to the extent the
indemnifying party is materially prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section. In case any action or proceeding is brought
against an indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, unless in the reasonable opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
there of jointly with any other indemnifying party similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party that it so chooses, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, that (i)
8
<PAGE> 11
if the indemnifying party fails to take reasonable steps necessary to defend
diligently the action or proceeding within 20 days after receiving notice from
such indemnified party that the indemnified party believes it has failed to do
so; or (ii) if such indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying party reasonably shall
have concluded that there may be one or more legal defenses available to such
indemnified party which are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction, except to the extent any indemnified party or
parties reasonably shall have concluded that there may be legal defenses
available to such party or parties which are not available to the other
indemnified parties or to the extent representation of all indemnified parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct) and the indemnifying party shall be liable for any
expenses therefor. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
e. If for any reason the previous sections is unavailable or is
insufficient to hold harmless an indemnified party under the previous Sections
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative faults but also the relative benefits of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section were to be determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the preceding sentences of this
Section. The amount paid or payable in respect of any Claim shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with
9
<PAGE> 12
investigating or defending any such Claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this Section to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section to contribute any amount in excess of the net proceeds
received by such indemnifying party from the sale of Registrable Securities in
the offering to which the losses, claims, damages or liabilities of the
indemnified parties relate, less the amount of any indemnification payment made
pursuant to this Sections.
f. The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
g. The indemnification and contribution required by this
Section shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
7. General.
a. Adjustments Affecting Registrable Securities. The Company
agrees that it shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the Holders of
any Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration.
b. Rule 144. The Company represents that the Holders will be
able to sell the Registrable Securities under the applicable provisions of Rule
144 of the Securities Act, as currently in effect, subsequent to April 15, 1999,
subject to applicable volume limitations. The Company covenants that it will
timely file the reports required to be filed by it under the Securities Act or
the Exchange Act (including, but not limited to, the reports under Sections 13
and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
under the Securities Act), and will take such further action as any Holders of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holders to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holders of Registrable Securities, the
Company will deliver to such Holders a written statement as to whether it has
complied with such requirements.
10
<PAGE> 13
c. Nominees for Beneficial Owners. If Registrable Securities
are held by a nominee for the beneficial owner thereof, the beneficial owner
thereof may, at its option, be treated as the Holders of such Registrable
Securities for purposes of any request or other action by the Holders of
Registrable Securities pursuant to this Agreement (or any determination of any
number or percentage of shares constituting Registrable Securities held by the
Holders of Registrable Securities contemplated by this Agreement); provided that
the Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.
d. Amendments and Waivers. This Agreement may be amended,
modified, supplemented or waived only upon the written agreement of the party
against whom enforcement of such amendment, modification, supplement or waiver
is sought.
e. Notices. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
delivered personally, by telecopy (with confirmation sent within three business
days by overnight courier) or by overnight courier, addressed to such party at
the address set forth below:
<TABLE>
<S> <C>
If to EMI: Educational Medical, Inc.
1327 Northmeadow Parkway
Suite 132
Roswell, GA, 30076
Attn: President
With a copy to: Greenberg Traurig
777 South Flagler Drive
Suite 300 - East
West Palm Beach, FL 33401
Attn: Morris C. Brown, Esq.
If to Holders: The Linwood W. Galeucia Revocable
Trust of 1997
Attention: Linwood W. Galeucia
c/o Hesser College
3 Sundial Avenue
Manchester, NH 03103
With a copy to: William H. Kelley, Esq.
282 River Road
P.O. Box 3280
Manchester, NH 03105-3280
Richard D. Galeucia
c/o Hesser College
3 Sundial Avenue
Manchester, NH 03103
</TABLE>
11
<PAGE> 14
<TABLE>
<S> <C>
With a copy to: William H. Kelley, Esq. Lawfirm
282 River Road
P.O. Box 3280
Manchester, NH 03105-3280
</TABLE>
The Holders, by written notice given to the Company in
accordance with this Section 4.5 may change the address to which such notice or
other communications is to be sent to Holders. All such notices and
communications shall be deemed to have been received on the date of delivery
thereof if delivered by hand, on the fifth day after the mailing thereof, if
mailed, on the next day after the sending thereof if by overnight courier, when
answered back if telexed and when receipt is acknowledged, if telecopied.
8. Miscellaneous.
a. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors and assigns of the parties hereto, whether so expressed or not. No
Person other than the Holders shall be entitled to any benefits under this
Agreement, except as otherwise expressly provided herein. This Agreement and the
rights of the parties hereunder may be assigned by any of the parties hereto to
any transferee of Registrable Securities.
b. This Agreement (with the documents referred to herein or
delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
c. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware without giving
effect to the conflicts of law principles thereof.
d. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.
e. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
f. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12
<PAGE> 15
g. It is hereby agreed and acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person will be irreparably damaged
and will not have an adequate remedy at law. Any such person shall, therefore,
be entitled to injunctive relief including specific performance, to enforce such
obligations, without the posting of any bond and if any action should be brought
in equity to enforce any of the provisions of this Agreement, none of the
parties hereto shall raise the defense that there is an adequate remedy at law.
h. Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
9. No Inconsistent Agreements. Without the prior written consent
of each of the parties to this Agreement, neither the Company nor the Holders
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities which is inconsistent with the rights granted in this
Agreement or otherwise conflicts with the provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
EDUCATIONAL MEDICAL, INC.
By:
------------------------------
Authorized Signatory
THE LINWOOD W. GALEUCIA REVOCABLE
TRUST OF 1997
----------------------------------
By: Linwood W. Galeucia, Trustee
----------------------------------
RICHARD D. GALEUCIA
13
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made to be effective as of
the 13th day of March, 1998, by and between Hesser, Inc., a New Hampshire
corporation (the "Employer"), and _____________________ (the "Employee").
BACKGROUND
A. The Employer is engaged in the business of operating post secondary
schools under the trade name "Hesser College;" and
B. The Employer desires to employ the Employee and the Employee is
willing to be employed by the Employer, pursuant to the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. TERM; DUTIES. Employer hereby hires and employs Employee as its
_______________________ and Employee hereby accepts and agrees to such
employment for an initial term of one (1) year from the date first above written
(such initial term as it may be extended from time to time in writing shall
hereinafter be referred to as the "Employment Term"). Employee shall perform
those duties as may be required by the Employer's Board of Directors and shall
at all times during the term of this Agreement be subject to the general
supervision, advise, and direction of Employer and the Employer's supervisory
personnel. Employee shall also perform such other additional or substituted
related or unrelated services and duties as may be assigned to Employee from
time to time by Employer. Employee understands that Employee is serving in this
position at the pleasure of the Board of Directors of Employer and can be
reassigned to another position with Employer at any time by the Board of
Directors. Subsequent to the Employment Term, in consideration for the
continuation of Employee's Benefits as set forth in Section 7 hereof, Employee
agrees to act as a consultant to the Employer and perform such incidental
consulting services as may from time to time reasonably be requested by the
Employer, provided that if Employee is requested to render consulting services
in excess of such incidental services he shall be compensated for such services
at a mutually agreed upon rate.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform faithfully,
industriously, and to the best of Employee's ability, experience and talents,
all of the duties that may be required by this Agreement. Such duties shall be
performed at the Employer's place of business located in Hillsborough County,
New Hampshire, and at such other places as the needs, business, or opportunities
of the Employer may require from time to time...
3. SALARY. As compensation for the services provided by Employee
under this Agreement, Employer will pay Employee an annual salary equal to
$_______ payable in accordance with Employer's payroll policies. Upon
termination of this Agreement, payments under this paragraph shall cease;
provided, however, that the Employee shall be entitled to payments for periods
or partial period that occurred prior to the date of termination and for which
the Employee has not yet been paid. This annual salary shall be reviewed on an
annual
<PAGE> 2
basis, and, if appropriate, increased by the Board of Directors at its
sole and absolute discretion.
4. DEATH OR DISABILITY OF EMPLOYEE. If Employee dies during the term
of this Agreement, Employee's estate shall be entitled to such payment of salary
as may be due and owing Employee as of the date of Employee's death, but due no
other compensation of any kind including, without limitation, payments in
connection with the remainder of the term of this Agreement from the date of
Employee's death. In the event Employee become disabled during the term of this
Agreement, subject to governmental statutes and regulations, the Employer may
terminate this Agreement at any time on ninety (90) days' notice to Employee.
For the purposes of this Agreement, the term "disability" shall mean a mental or
physical illness or condition that renders Employee incapable of performing all
of the essential functions of the services required of Employee under this
Agreement.
5. EXPENSES. The Employer will reimburse Employee for actual
"out-of-pocket" expenses in accordance with Employer's policies in effect from
time to time. Such expenses include, but are not limited to, expenses for
travel, entertainment, and miscellaneous incurred in the conduct of the business
of the Employer. Employee shall keep appropriate records of such expenses and
submit receipts or other evidence relating to them in accordance with the
Employer's policy.
6. VACATION; SICK LEAVE/HOLIDAYS. During the term of this Agreement,
Employee shall be entitled to annual paid vacation as provided within the
Employer's policy in effect from time to time. In addition, Employee shall be
entitled to paid sick time and paid holidays as provided within Employer's
policies in effect from time to time.
7. FRINGE AND MEDICAL BENEFITS. Employee and his immediate family
members shall be eligible to participate in the Employer's medical benefits as
other similarly situated employees of the Employer until such time as Employee
qualifies for the Medicare program; provided, however, that, subsequent to the
Employment Term, Employee shall reimburse employer for the costs associated with
providing such benefits to Employee and his immediate family members. In
addition, the Employer shall provide such fringe benefits to Employee and his
immediate family members, either through direct payments by Employer or by
reimbursement, as the Employer's Board of Directors may determine from time to
time, provided that notwithstanding any of the foregoing, during the Employment
Term the Employee shall be entitled to continue to receive such benefits and
perquisites (other than salary and bonuses) as he regularly received from the
employer during the 12 month period immediately prior to entering into the
Agreement.
8. CONFIDENTIALITY AND NON-DISCLOSURE. Employee acknowledges that
Employee does and shall continue to have access to trade secrets and other
confidential information which is the property of Employer and/or its
affiliates1, including but not limited to information relating to their present
or future operations (all of the foregoing, whether or not it qualifies as a
"trade secret" under applicable law, is collectively called "Confidential
Information"). Employee recognizes that Confidential Information is proprietary
to Employee and its Affiliates and gives each of them significant competitive
advantage. Accordingly, Employee agrees not to use or disclose any of the
Confidential Information during or after the term of this Agreement, except for
- ----------------------------
1 An affiliate is any person or entity controlling, controlled by, or under
common control with, the Employer.
2
<PAGE> 3
the sole and exclusive benefit of the Employee or its Affiliates, or pursuant to
any relevant law or regulation, provided in the latter case Employee shall give
reasonable prior written notice of such disclosure to the Employer and only make
such disclosure upon receipt of an appropriate opinion of counsel confirming the
necessity of such disclosure, which opinion shall also be furnished to the
Employer. Upon any termination of this Agreement, Employee will return to the
Employee all tangible embodiments of any Confidential Information. Employee
agrees that each of the Employer and its Affiliates would be irreparably injured
by any breach of Employee's confidentiality agreement, that such injury would
not be adequately compensable by monetary damages, and that, accordingly, the
Employer and any offended Affiliate may specifically enforce the provisions of
this Paragraph by injunction or similar remedy by any court of competent
jurisdiction, without affecting any claim for damages.
9. NON-COMPETITION. Employee acknowledges that (i) the knowledge
Employee has obtained as a result of Employee's involvement with respect to any
of the business operations of Employer and (ii) the services to be rendered by
Employee pursuant to this Agreement are of a special and unusual character and
have a unique value to the Employer, the loss of which cannot adequately be
compensated by damages in an action at law. In view of this unique value, and
because of the Confidential Information which Employee shall have and will
obtain, and as a material inducement to the Employer to enter into this
Agreement, Employee agrees that Employee will not, for a period of one (1) year
from the date of the termination of Employee's employment pursuant to this
Agreement, (i) engage in the development or marketing or promotion of any
business which is, becomes, or reasonably may become competitive with any of the
business operations of Employer ("Prohibited Activities"); (ii) become
associated as manager, supervisor, employee, consultant, advisor, or stockholder
owning more than 5% of the outstanding stock of a company or participate in the
management or direction of a company or other entity with any person,
corporation or entity engaging in any Prohibited Activities; (iii) divert or
solicit any customer or prospective customer of the Employer for the benefit of
any other person or entity; or (iv) solicit on behalf of Employee or any other
person or entity the employment of any person employed by the Employer or any
entity controlling, controlled by or under common control with the Employer at
any time during the term of this Agreement.
10. ARBITRATION. Except for the agreements contained in Paragraphs 8
and 9, the exclusive remedy with respect to any dispute arising between Employee
and the Employer regarding the interpretation or enforcement of any portion of
this Agreement shall be determination by arbitration by a sole arbitrator under
the rules of the Commercial Division of the American Arbitration Association.
Arbitration shall take place in the appropriate jurisdiction in New Hampshire,
and any award, which may include attorneys' fees and costs, in the sole
discretion of the arbitrator, may be enforced in any court of competent
jurisdiction. All awards and determinations of the arbitration shall be final.
No written interrogatories or recorded testimony shall be provided to either
party prior to any arbitration proceeding, but in his sole discretion the
arbitrator may compel either party to produce witnesses for interviews and
documents for inspection prior to any hearing. With respect to the agreements
contained in Paragraphs 8 and 9, the Employer and Employee agree that damages,
by themselves, are an inadequate remedy at law, that a material breach of the
provisions of such paragraphs may be specifically enforced by injunction or
similar remedy in any court of competent jurisdiction without affecting any
claim for damages, provided that any such injunction shall either be preliminary
in nature, enjoining such activity pending the outcome of the arbitration as
provided in this section, or be in assistance of the final determination of the
arbitrators as provided for in such section. The Employer and Employee agree
that such injunction may be issued without the necessity of posting a bond.
3
<PAGE> 4
11. REMEDIES AND REASONABILITY.
A. Employee agrees that, if Employee shall violate any of the
covenants or agreements contained in Paragraphs 8 or 9 of this Agreement, the
Employer shall be entitled to an accounting and repayment of all profits,
compensation, commissions, remuneration, or benefits which Employee directly or
indirectly has realized and/or may realize as a result of, growing out of, or in
connection with any such violation; such remedy shall be in addition to and not
in limitation of any injunctive relief or other rights or remedies to which the
Employer may be entitled at law or in equity or under this Agreement.
B. With respect to the provisions of Paragraphs 8 and 9
Employee agrees that damages, by themselves, are an inadequate remedy at law,
that a material breach of the provisions of either of those Paragraphs would
cause irreparable injury to the aggrieved party, and that the provisions of
those Paragraphs may be specifically enforced by injunction or similar remedy in
any court of competent jurisdiction without affecting any claim for damages.
C. In the event that, notwithstanding the foregoing, any of
the provisions of Paragraphs 8 or 9 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall nevertheless continue to
be valid and enforceable as though invalid or unenforceable parts had not been
included therein. In the event that any provision of this Paragraph relating to
time period and/or areas of restriction shall be declared by a court of
competent jurisdiction to exceed the maximum time period or areas such panel or
court deems reasonable and enforceable, said time period and/or areas of
restriction shall be deemed to become, and thereafter be, the maximum time
period and/or area which such panel or court deems reasonable and enforceable.
D. Employee has carefully read and considered the provisions
of Paragraphs 8 and 9, and having done so, agree that the restrictions set forth
(including but not limited to the time period of restriction and the areas of
restriction) are fair and reasonable and are reasonably required for the
protection of the interests of the Employer, its officers, directors, and other
employees.
12. TERMINATION. The Employee shall have the right to terminate
the Employment Term at any time upon 30 days written notice to the Employer, and
all payments of compensation hereunder shall cease as of the date of such
termination. The Employer shall have the right to terminate the Employee's
employment for cause at any time. In the event the Employer elects to terminate
the Employee's employment for cause, or otherwise prior to the first anniversary
of this agreement, then the Employer shall continue Employee's current annual
salary through such anniversary date. No termination of employment pursuant to
this Section 12 shall effect the payments provided for pursuant to Section 7 of
this Agreement. For the purpose of this Section 12, the term "cause" shall mean
a substantial failure or refusal on the part of the Employee to perform
substantially such person's duties hereunder as determined by unanimous written
finding of the Board of Directors, the conviction of the Employee of a felony,
willful misconduct of the Employee contrary to the interest of the Employer, or
a material breach of the Employee's fiduciary duties to the Employer.
13. NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be deemed delivered when delivered in
person or deposited in the United States mail, postage paid, addressed as
follows:
4
<PAGE> 5
To Employer: Hesser, Inc.
c/o Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, GA 30076
Attention: President
To Employee: ----------------------------------
c/o Hesser College
3 Sundial Avenue
Manchester, NH 03103
Such addresses may be changed from time to time by either party by
providing written notice in the manner set forth above.
14. APPLICABLE LAW; VENUE. This Agreement shall be governed by the
State of New Hampshire. Venue for any action for either party in this Agreement
shall be the lowest state court of competent jurisdiction in Hillsborough
County, New Hampshire.
15. ATTORNEYS' FEES. In the event that any action is filed in relation
to this Agreement, the unsuccessful party in such action shall pay to the
successful party in addition to all the sums that either party may be called on
to pay, a reasonable sum for attorneys fees, including fees incurred for any and
all appeals.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
17. AMENDMENTS. This Agreement, or any provisions hereof, may not be
amended, changed or modified without the prior written consent of each of the
parties hereto.
18. ENTIRE AGREEMENT. This Agreement and the agreements referred to
in it contain the entire agreement between the parties with respect to the
transactions provided for in them and supersede all previously written or oral
negotiations, commitments, representations and/or agreements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EMPLOYER:
HESSER, INC., a New Hampshire
corporation
By:
----------------------------
EMPLOYEE:
-------------------------------
5
<PAGE> 6
EDUCATIONAL MEDICAL, INC. has joined in this Agreement for the
purposes of guaranteeing all of the obligations of the employer to the employee
hereunder.
EDUCATIONAL MEDICAL, INC., a
Delaware corporation
By:
-------------------------------
6
<PAGE> 1
EXHIBIT 10.7
NON COMPETITION AND CONFIDENTIALITY AGREEMENT
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT, dated as of March , 1998,
--
among ("Employee"), EDUCATIONAL MEDICAL, INC. , a
-----------------------
Delaware corporation ("EMI") and NEW HAMPSHIRE ACQUISITION CORP., a Delaware
corporation ("Acquisition").
PRELIMINARY STATEMENTS
Employee is an employee of Hesser, Inc. (the "Corporation"). The Corporation
is the owner of a postsecondary educational institution located in New
Hampshire which operates four postsecondary schools (the "Schools"). EMI is a
publicly traded corporation engaged in the operation of postsecondary
educational institutions. Acquisition is a wholly owned subsidiary of EMI.
Pursuant to the provisions of that certain Stock Purchase Agreement of even
date herewith, Acquisition will purchase the stock of the Corporation (the
"Purchase").
CONFIDENTIALITY
1. Confidentiality. Employee acknowledges that, as a result of her employment
by the Corporation, she has had access to and knowledge of confidential or
proprietary information developed by the Corporation with respect to the
Schools and their operation, which knowledge is of a special and unique nature
and value to EMI and Acquisition including, but not limited to, the methods and
systems used in connection with the Schools' operations, the names and
addresses of its students and sources of referral, tuition charged and paid by
with respect to the Schools or their customers, curricula, related memoranda,
research reports, designs, records, student files, services, and operating
procedures, and other information, data, and documents now existing or later
acquired by the Corporation in connection with the Schools' operations,
regardless of whether any such information, data, or documents, qualify as a
"trade secret" under applicable Federal or state law (collectively
"Confidential Information"). Confidential Information does not include
information that (i) becomes generally available to the public other than as a
result of disclosures by Employee in violation of the terms of this Agreement,
or (ii) becomes available to Employee on a non-confidential basis from a source
that is not bound by a confidentiality agreement with EMI or Acquisition or
each of their respective directors, officers, employees, agents or
representatives. As a material inducement to EMI and Acquisition to enter into
the Stock Purchase Agreement, Employee covenants and agrees not at any time
following the Purchase directly or indirectly, to divulge or disclose for any
purpose whatsoever, any Confidential Information which is in the possession of
Employee as a result of her employment by the Schools, or otherwise as a result
of the relationship between Employee and the Schools' operations. In accordance
with the foregoing, Employee agrees at no time to remove from the School
Facilities (as defined in the Stock Purchase) records of any kind or
description whatsoever for any purpose whatsoever unless authorized in writing
by EMI and Acquisition. Notwithstanding the foregoing
<PAGE> 2
provisions of this Section, Employee may disclose Confidential Information (i)
to any of the Schools' employees, counsel, accountants and agents on a
need-to-know basis (provided that any such person shall be informed of the
confidential nature of such information and directed not to disclose or make
public such Confidential Information), (ii) to the extent required by
applicable law, rules and regulation, and (iii) in any action, suit or
proceeding between the parties, provided that in connection with disclosures
permitted by clauses (ii) and (iii) above, Employee shall provide EMI and
Acquisition with at least three (3) days written notice of such intent so that
an appropriate protective order may be sought by EMI and Acquisition if
desired.
NON-COMPETITION
2. Non-Competition.
A. Employee acknowledges that the services rendered to the Schools prior to
the purchase and the knowledge obtained as a result of such services and such
employment were of a special and unusual character and have a unique value to
the Schools. In view of the unique value of the services, and as a material
inducement to EMI and Acquisition to enter into this Agreement and to pay to
her the consideration referred to below, Employee covenants and agrees that she
will not, after the effective date of the Purchase (i) directly or indirectly
engage in any business anywhere within 50 miles of the boundaries of the state
of New Hampshire (the "Area") if such business teaches courses similar to those
taught by EMI or Acquisition or any affiliate or subsidiary of EMI
("Affiliate") in the state of New Hampshire ("Prohibited Activities"); (ii)
become associated as manager, supervisor, employee, consultant, advisor, or
stockholder owning more than 5% of the outstanding stock of a company or
participate in the management or direction of a company or otherwise with any
person, corporation or entity engaging in Prohibited Activities anywhere within
the Area; (iii) call upon any of Acquisition's, EMI's or any of EMI's
subsidiary schools' students, teachers or referral sources for the promotion of
any Prohibited Activities for any person, corporation, or other entity within
the Area, or (iv) divert, solicit or take away any student or referral source
of Acquisition's, EMI's or any of EMI's subsidiary schools located in the Area.
B. Employee covenants and agrees that, if she shall violate any of the
covenants or agreements contained in this Section 2, EMI and/or Acquisition
shall be entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration, or benefits which she directly or indirectly has
realized and/or may realize as a result of, growing out of, or in connection
with any such violation; such remedy shall be in addition to and not in
limitation of any injunctive relief or other rights or remedies to which EMI
and/or Acquisition may be entitled at law or in equity or under this Agreement.
C. Employee has carefully read and considered the provisions of this Section
and Section 1, and having done so, agrees that the restrictions set forth
(including but not limited to the time period of restriction and the areas of
restriction) are fair and
2
<PAGE> 3
reasonable and are reasonably required for the protection of the interests
of EMI, Acquisition, its officers, directors, and other employees.
D. In the event that, notwithstanding the foregoing, any of the provisions
of this Section or Section 1 shall be held to be invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though invalid or unenforceable parts had not been included
therein. In the event that any provision of this Section relating to time
period and/or areas of restriction shall be declared by a panel of arbitrators
or a court of competent jurisdiction if such court refuses to refer such matter
to arbitration, to exceed the maximum time period or areas such panel or court
deems reasonable and enforceable, said time period and/or areas of restriction
shall be deemed to become, and thereafter be, the maximum time period and/or
area which such panel or court deems reasonable and enforceable.
E. With respect to the provisions of this Section, Employee agrees that
damages, by themselves, are an inadequate remedy at law, that a material breach
of the provisions of this Section would cause irreparable injury to the
aggrieved party, and that the provisions of this Section 2 may be specifically
enforced by injunction or similar remedy in any court of competent jurisdiction
without affecting any claim for damages, provided that any such injunction
shall either be preliminary in nature, enjoining such activity pending the
outcome of arbitration as provided for in Section 4 of this Agreement, or be in
assistance of the final determination of the arbitrators as provided for in
such Section. Employee agrees that such injunction may be issued without the
necessity of bond.
CONSIDERATION
3. Consideration. Upon the consummation of the Purchase and execution of
this Agreement, EMI and Acquisition will pay to Employee the sum of
-----
Thousand Dollars ($ ) and shall continue to pay to Employee such sum
-----------
on each anniversary of this Agreement for the remainder of Employee's life (the
"Consideration") in consideration for her execution, delivery and performance
of this Agreement. Upon Employee's death, this Agreement shall terminate and
her estate shall not be entitled to any Consideration under this Agreement.
GENERAL PROVISIONS
4. Governing Law; Arbitration. This Agreement shall be governed by, and
construed in accordance with the laws of the State of New Hampshire, without
regard to choice-of-law principles, as if made and to be performed solely in
New Hampshire. Any disputes between any of the parties to it with respect to
the agreements contained in it, or as modified in the future, are to be settled
by binding arbitration conducted pursuant to the commercial arbitration rules
of the American Arbitration Association. In any such arbitration the scope and
timing of any discovery shall be determined by the arbitrators. Such
arbitration is to be the sole remedy for the settlement of such disputes. All
of the parties agree that money damages are inadequate to compensate for a
breach of the
3
<PAGE> 4
confidentiality and non-competition provisions of this Agreement and contained
in this Agreement. Employee agrees that upon application by EMI and/or
Acquisition, any court of competent jurisdiction, upon a showing sufficient to
justify the entry of a temporary injunction, may enjoin any activity allegedly
in breach of such agreement pending the outcome of binding arbitration or enter
a similar order of like force and effect, or may enforce the final
determination of such arbitrators by the issuance of such an injunction or
similar order.
5. Entire Agreement. This Agreement and the agreements referred to in it
contain the entire agreement between the parties hereto with respect to the
transactions contemplated herein and supersedes all previously written or oral
negotiations, commitments, representations, and agreements.
6. Counterparts. This Agreement may be executed in one or more counterparts by
facsimile, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
7. Amendments. This Agreement, or any provisions hereof, may not be amended,
changed or modified without the prior written consent of each of the parties
hereto.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by the individual or officer duly authorized to do so, all as of the
day and year first above written.
EMPLOYEE NEW HAMPSHIRE ACQUISITION CORP.
By:
- ---------------------------------- --------------------------------
Authorized Signatory
EDUCATIONAL MEDICAL, INC.
By:
--------------------------------
Authorized Signatory
4
<PAGE> 1
EXHIBIT 10.8
STOCK POWER
FOR VALUE RECEIVED, The Linwood W. Galeucia Revocable Trust of 1997, a
revocable trust organized under the laws of the State of New Hampshire (the
"Transferor") hereby sells, assigns and transfers unto New Hampshire
Acquisition Corp., a Delaware corporation ("Transferee") Fifty (50) shares (the
"Shares") of the common stock of Hesser, Inc., a New Hampshire corporation (the
"Corporation") represented by Certificate Number 50, attached hereto and made a
part hereof by reference, and does hereby irrevocably constitute and appoint
the Secretary of the Corporation as its attorney in fact, with power of
substitution, to transfer the Shares on the books of the Corporation to the
Transferee consistent herewith.
Transferor hereby warrants that he has the right to sell, assign and transfer
the Shares and any person to whom the Shares may be transferred by Transferee
may rely upon this Stock Power as though it were unconditional and absolute,
without inquiry or investigation of the facts.
Dated this 13th day of March 1998.
Signed In Presence of: THE LINWOOD W. GALEUCIA
REVOCABLE TRUST OF 1997
- ---------------------------------- ----------------------------------
By: Linwood W. Galeucia, Trustee
- ----------------------------------
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
BETWEEN
BANK OF AMERICA, FSB (THE "BANK")
AND
EDUCATIONAL MEDICAL, INC. ("EMI")
AND ALL SUBSIDIARIES OF EMI ("BORROWERS")
DATED: MARCH 13,1998
<PAGE> 2
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-----------------
<S> <C>
1. DEFINITIONS..................................................................................................7
1.01 Borrowing Base........................................................................................7
--------------
1.02 Acceptable Receivable.................................................................................7
---------------------
1.03 Termination Date......................................................................................9
----------------
2. FACILITY NO. 1: REVOLVING LINE OF CREDIT AMOUNT AND TERMS....................................................9
2.01 Revolving Line of Credit Amount.......................................................................9
-------------------------------
2.02 Availability Period...................................................................................9
-------------------
2.03 Conditions to Each Extension of Credit...............................................................10
--------------------------------------
2.04 Repayment Terms......................................................................................10
---------------
2.05 Letters of Credit....................................................................................11
-----------------
2.06 Swap Contracts.......................................................................................12
--------------
3. FACILITY NO. 2: TERM LOAN FACILITY AMOUNT AND TERMS.........................................................13
3.01 Term Loan Facility...................................................................................13
------------------
3.02 Availability Period..................................................................................14
-------------------
3.03 Conditions to Each Extension of Credit...............................................................14
--------------------------------------
3.04 Repayment Terms......................................................................................14
---------------
3.05 Letters of Credit....................................................................................15
-----------------
4. FACILITY NO. 3: ACQUISITION LINE OF CREDIT AMOUNT AND TERMS.................................................16
4.01 Acquisition Line of Credit Amount....................................................................16
---------------------------------
4.02 Availability Period..................................................................................16
-------------------
4.03 Conditions to Each Extension of Credit...............................................................16
--------------------------------------
4.04 Repayment Terms......................................................................................17
---------------
4.05 Letters of Credit....................................................................................18
-----------------
5. INTEREST....................................................................................................18
5.01 Interest Rate.........................................................................................18
-------------
5.02 Optional Interest Rate................................................................................19
----------------------
6. COLLATERAL..................................................................................................20
6.01 Personal Property....................................................................................21
-----------------
7. DISBURSEMENTS, PAYMENTS AND COSTS...........................................................................21
7.01 Requests for Credit..................................................................................21
-------------------
7.02 Disbursements and Payments...........................................................................21
--------------------------
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
7.03 Direct Debit.........................................................................................21
------------
7.04 Banking Days.........................................................................................22
------------
7.05 Taxes................................................................................................22
-----
7.06 Additional Costs.....................................................................................22
----------------
7.07 Interest Calculation.................................................................................22
--------------------
7.08 Default Rate.........................................................................................22
------------
7.09 Overdrafts...........................................................................................23
----------
7.10 Payments in Kind.....................................................................................23
----------------
8. CONDITIONS..................................................................................................23
8.01 Authorizations.......................................................................................23
--------------
8.02 Governing Documents..................................................................................23
-------------------
8.03 Security Agreements..................................................................................23
-------------------
8.04 Evidence of Priority.................................................................................24
--------------------
8.05 Insurance............................................................................................24
---------
8.06 Legal Opinion........................................................................................24
-------------
8.07 Good Standing........................................................................................24
-------------
8.08 Payment of Closing Fee...............................................................................24
----------------------
8.09 Payment of Expenses and Fees.........................................................................24
----------------------------
8.10 Representations of Corporate Officers................................................................24
-------------------------------------
8.11 Other Items..........................................................................................24
-----------
9. CONDITIONS..................................................................................................24
9.01 Organization of Borrower.............................................................................24
------------------------
9.02 Authorization........................................................................................24
-------------
9.03 Enforceable Agreement................................................................................24
---------------------
9.04 Good Standing........................................................................................25
-------------
9.05 No Conflicts.........................................................................................25
------------
9.06 Financial Information................................................................................25
---------------------
9.07 Lawsuits.............................................................................................25
--------
9.08 Collateral...........................................................................................25
----------
9.09 Permits, Franchises..................................................................................25
-------------------
9.10 Other Obligations....................................................................................25
-----------------
9.11 Income Tax Returns...................................................................................26
------------------
9.12 No Tax Avoidance Plan................................................................................26
---------------------
9.13 No Event of Default..................................................................................26
-------------------
9.14 ERISA Plans..........................................................................................26
-----------
9.15 Locations of Borrowers...............................................................................27
----------------------
9.16 Subsidiaries.........................................................................................27
------------
9.17 Year 2000 Compliance.................................................................................27
--------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
10. COVENANTS..................................................................................................27
10.01 Use of Proceeds.....................................................................................27
---------------
10.02 Financial Information...............................................................................27
---------------------
10.03 Fixed Charge Coverage Ratio.........................................................................29
---------------------------
10.04 Total Funded Debt/Adjusted Cash Flow Ratio..........................................................29
------------------------------------------
10.05 Senior Funded Debt/Adjusted Cash Flow Ratio.........................................................30
-------------------------------------------
10.06 Financial Information...............................................................................30
---------------------
10.07 Other Debts.........................................................................................30
-----------
10.08 Other Liens.........................................................................................31
-----------
10.09 Capital Expenditures................................................................................32
--------------------
10.10 Dividends...........................................................................................32
---------
10.11 Loans and Investments...............................................................................32
---------------------
10.12 Change of Ownership.................................................................................33
-------------------
10.13 Notices to Bank.....................................................................................33
---------------
10.14 Books and Records...................................................................................33
-----------------
10.15 Audits..............................................................................................33
------
10.16 Compliance with Laws................................................................................33
--------------------
10.17 Preservation of Rights..............................................................................34
----------------------
10.18 Maintenance of Properties...........................................................................34
-------------------------
10.19 Perfection of Liens.................................................................................34
-------------------
10.20 Cooperation.........................................................................................34
-----------
10.21 Insurance...........................................................................................34
---------
10.22 Additional Negative Covenants.......................................................................34
-----------------------------
10.23 ERISA Plans.........................................................................................36
-----------
10.24 Title IV Program Requirements.......................................................................36
-----------------------------
10.25 Subsidiaries........................................................................................37
------------
11. HAZARDOUS WASTE INDEMNIFICATION............................................................................37
12. DEFAULT....................................................................................................37
1201 Failure to Pay.......................................................................................38
--------------
12.02 Lien Priority.......................................................................................38
-------------
12.03 False Information...................................................................................38
-----------------
12.04 Bankruptcy..........................................................................................38
----------
12.05 Receivers...........................................................................................38
---------
12.06 Lawsuits............................................................................................38
--------
12.07 Judgments...........................................................................................38
---------
12.08 Government Action...................................................................................38
-----------------
12.09 Material Adverse Change.............................................................................39
-----------------------
12.10 Cross-default.......................................................................................39
-------------
12.11 Default under Related Documents.....................................................................39
-------------------------------
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
12.12 Other Bank Agreements...............................................................................39
---------------------
12.13 ERISA Plans.........................................................................................39
-----------
12.14 Delisting...........................................................................................39
---------
12.15 Other Breach Under Agreement........................................................................39
----------------------------
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS....................................................................40
13.01 GAAP................................................................................................40
----
13.02 Georgia Law.........................................................................................40
-----------
13.03 Successors and Assigns..............................................................................40
----------------------
13.04 Arbitration.........................................................................................40
-----------
13.05 Severability; Waivers...............................................................................41
---------------------
13.06 Reimbursement Costs.................................................................................41
-------------------
13.07 Administration Costs................................................................................41
--------------------
13.08 Attorneys' Fees.....................................................................................42
---------------
13.09 Joint and Several Liability.........................................................................42
---------------------------
13.10 One Agreement.......................................................................................43
-------------
13.11 Disposition of Schedules............................................................................43
------------------------
13.12 Credit Adjustments..................................................................................43
------------------
13.13 Verification of Receivables.........................................................................44
---------------------------
13.14 Indemnification.....................................................................................44
---------------
13.15 Notices.............................................................................................44
-------
13.16 Headings............................................................................................44
--------
13.17 Counterparts........................................................................................44
------------
13.18 Amendment and Restatement...........................................................................44
-------------------------
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
List of Certain Defined Terms
-----------------------------
Defined Term Location in Text
------------ ----------------
<S> <C>
Acceptable Receivable Para. 1.2
BofA Para. 3. l(b)
banking day Para. 7.4
Borrower, Borrowers Page 1, First Paragraph
Borrowing Base Para. 1.1
Closing Date Page 1, First Paragraph
Default Para. 13
EBITDA Para. 10.4
EMI Page 1, First Paragraph
ERISA Para. 9.14(e)
evens of default Para. 13
Facilities or Facility Para. 5.1
Facility No. 1 Para. 2.1
Facility No. 1 Commitment Para. 2.1
Facility No. 2 Para. 3.1
Facility No. 2 Commitment Para. 3.1
Facility No. 3 Para. 4.1
Facility No. 3 Commitment Para. 4.1
</TABLE>
6
<PAGE> 7
AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
This Agreement, dated as of March 13, 1998 ("Closing Date"), is made among
BANK OF AMERICA, FSB (the "Bank"), EDUCATIONAL MEDICAL, INC. ("EMI") and all
those subsidiaries of EMI listed on the signature page(s) to this Agreement
(EMI and such subsidiaries hereinafter sometimes collectively called the
"Borrowers" and individually called a "Borrower").
PREAMBLE. EMI and its subsidiaries are engaged In a common business
enterprise and, in connection therewith, have determined it to be in their
mutual economic interests to apply to the Bank on a collective basis for
extensions of credit for working capital and to finance continued expansion,
with EMI acting as agent for all Borrowers in connection with any requests for,
the receipt, disbursement, allocation and administration of, and the repayment
of, the extensions of credit to be made hereunder. Accordingly, the Borrowers
hereby covenant to and agree with the Bank as follows:
1. DEFINITIONS
In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:
1.01 "Borrowing Base means 80% of the balance due on Acceptable
Receivables of the --------------- Borrowers.
1.02 "Acceptable Receivable means an account receivable of a Borrower
which satisfies the following requirements:
(a) The account has resulted from the sale of goods or the
performance of services by the Borrower in the ordinary course of the
Borrower's business.
(b) There are no conditions which must be satisfied before the
Borrower is entitled to receive payment of the account. Accounts arising from
COD sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment
of the account.
(d) The account balance does not include the amount of any
counterclaims or offsets which have been or may be asserted against the
Borrower by the account debtor (including offsets for any "contra accounts"
owed by the Borrower to the account debtor for goods purchased by the
7
<PAGE> 8
Borrower or for services performed for the Borrower). To the extent any
counterclaims, offsets, contra accounts, or credit balances exist in favor of
the debtor, such amounts shall be deducted from the account balance.
(e) The account represents a genuine obligation of the debtor for
goods sold and accepted by the debtor, or for services performed for and
accepted by the debtor.
(f) The Borrower has sent an invoice to the debtor in the amount of
the account.
(g) The Borrower is not prohibited by the laws of the state where the
account debtor is located from bringing an action in the courts of that state
to enforce the debtor's obligation to pay the account. The Borrower has taken
all appropriate actions to ensure access to the courts of the state where the
account debtor is located, including, where necessary, the filing of a notice
of business activities report or other similar filing with the applicable state
agency or the qualification by the Borrower as a foreign corporation authorized
to transact business in such state.
(h) The account is owned by the Borrower free of any title defects or
any liens or interests of others except the security interest in favor of the
Bank, and except as permitted under Paragraph 10.8.
(i) The debtor upon the account is not any of the following:
(1) an employee, affiliate, parent or subsidiary of the Borrower, or,
an entity which has common officers or directors with the Borrower;
(2) any state, county, city, town or municipality;
(3) any person or entity located in a foreign country.
(j) The account is not in default. An account will be considered it
default if any of the following occur:
(1) The account is not paid within the 180 day period starting on it.
billing date; or
(2) Any petition is filed by or against the debtor obligated upon the
account under any bankruptcy law or any other law or laws for the relief of
debtors
8
<PAGE> 9
(k) The account is not the obligation of a debtor who is in default
(as defined above) on 50% or more of the accounts (if more than one) with the
Borrower upon which such debtor is obligated.
(l) The account is not evidenced by a promissory note or chattel
paper.
(m) The account is otherwise acceptable to the Bank.
1.03 "Termination Date shall mean the third (3rd) anniversary of the date
of this Agreement; provided however, that the Bank, in its sole discretion,
upon the Borrowers' request, may elect, by giving written notice to the
Borrowers to such effect, beginning in the second year of this Agreement, but
not later than 120 days before any then effective Termination Date, to extend
such "Termination Date" for up to two (2) additional periods of up to one (1)
year each on such terms and conditions (which may differ from those set forth
herein) as the Bank may offer, and the Borrowers may accept.
2. FACILITY NO. 1: REVOLVING LINE OF CREDIT AMOUNT AND TERMS
2.01 Revolving Line of Credit Amount.
(a) During the availability period described below, the Bank will
provide a revolving line of credit ("Facility No. 1 ") to the Borrowers. The
amount of this revolving line of credit (the "Facility No. 1 Commitment") is
equal to the lesser of (i) $10,000,000 or (ii) the Borrowing Base.
(b) Facility No. 1 is a revolving line of credit for advances with a
within line facility for letters of credit. During the availability period, the
Borrowers may repay principal amounts and reborrow them.
(c) Each advance under Facility No. 1 must be for at least $250,000
or for the amount of the remaining available line of credit, if less.
(d) The Borrowers agree not to permit the sum of outstanding
principal amount of advances obtained under Facility No. 1 plus the outstanding
amounts of any letters of credit under Paragraph 2.5, including amounts drawn
on letters of credit and not yet reimbursed, to exceed the Facility No. 1
Commitment. If the Borrowers exceed this limit, the Borrowers will immediately
pay the excess to the Bank upon the Bank's demand.
9
<PAGE> 10
Unless and until an Event of Default has occurred and is continuing? the
Borrowers shall have the right to direct the manner or order in which payments
received from the Borrowers under this Paragraph shall be applied to this
Facility. From and after the occurrence of an Event of Default and during its
continuance, the Bank may apply payments received from the Borrowers under this
Paragraph to the obligations of the Borrowers to the Bank in the order and the
manner as the Bank, in its discretion, may determine, including to this
Facility or the other Facility.
2.02 Availability Period. Facility No. 1 is available between the
date of this Agreement and the Termination Date, unless the Borrowers are in
default.
2.03 Conditions to Each Extension of Credit. Before each extension of
credit under Facility No. 1, including the first, the Borrowers will deliver to
the Bank (i) a notice of borrowing, in form and detail satisfactory to the
Bank, issued by EMI as agent for and on behalf of the Borrowers, specifying the
amount of the requested advance, the intended use of the proceeds thereof, the
requested disbursement date and the desired interest rate to be applicable,
initially, thereto; and (ii) a borrowing base certificate, in form and detail
satisfactory to the Bank, issued by EMI as agent for and on behalf of the
Borrowers, setting forth the Acceptable Receivables on which the requested
extension of credit is to be based and setting forth calculations demonstrating
the Borrowers' compliance with the requirements of Paragraphs 10.4 and 10.5
after giving effect to such advance.
2.04 Repayment Terms
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below on outstanding advances under Facility
No. 1 on the first day of the calendar month following the disbursement of any
advance under Facility No. 1 and then on a monthly basis thereafter until
payment in full of such advance. The interest rate payable on outstanding
advances under Facility No. 1 shall be determined as follows:
<TABLE>
<CAPTION>
Interest Interest
Rate shall Rate shall be
If the Test be Reference -or- LIBOR Rate
Ratio is: Rate plus plus
<S> <C> <C>
2.0:1 or greater 0% 1.75%
1.0:1 or greater, but less than 2.0:1 (.25)% 1.50%
less than 1.0: 1 (.50)% 1.25%
</TABLE>
10
<PAGE> 11
As used herein, (i) "Reference Rate" is defined in Paragraph S.1, (ii) "LIBOR
Rate" is defined in Paragraph 5.2, and (iii) the "Test Ratio" shall be the
Total Funded Debt/Adjusted Cash Flow Ratio, as defined in Paragraph 10.4. The
Test Ratio shall be calculated on a quarterly basis by the Bank from the
Borrowers' quarterly or, as the case may be, annual financial statements then
most recently delivered to it pursuant to Paragraphs l0.2(a) and l0.2(b), and
the interest rate(s) described above shall be adjusted by the Bank, as
appropriate, effective as of the first day of the month following the month in
which such financial statements are delivered to the Bank, (i) as to all
advances then outstanding and any made on or after such date, for all advances
which bear interest determined by reference to the Reference Rate and (ii) as
to all advances made on or after such date (including any "rollover" of
existing LIBOR Rate portions during such period), for LIBOR Rate portions; in
each case, until the next such determination by the Bank becomes effective. If,
however, the Borrowers fail to timely deliver their quarterly or, as the case
may be, annual financial statements to the Bank pursuant to Paragraphs l0.2(a)
or l0.2(b) for any fiscal quarter, the Bank shall use an assumed Test Ratio of
2.0: 1 to make its calculations.
(b) The Borrowers agree to pay the Bank a commitment fee,
determined by multiplying (i) the difference between (A) the full amount of the
Bank's Facility No. 1 Commitment and (B) the amount of credit which the
Borrowers actually use of Facility No. 1, based on the weighted average credit
outstanding under Facility No. 1 during the specified period, by (ii) the per
annum commitment fee described below,
computed as follows:
<TABLE>
<CAPTION>
The Per Annum
If the Test Commitment
Ratio is Fee shall be
<S> <C>
2.0:1 or greater .500%
1.0:1 or greater but less than 2.0:1 .375%
less than 1.0:1 .250%
</TABLE>
with the Test Ratio being computed by the Bank in the same manner, and to take
effect at the same time, as is provided in subparagraph (a) above. The
calculation of credit outstanding under Facility No. 1 shall include the
undrawn amount of letters of credit. This commitment fee shall be due and
payable monthly in arrears on the first day of each calendar month until the
expiration of the availability period for Facility No. 1, commencing on the
first day of the first calendar month following the date of this Agreement.
11
<PAGE> 12
(c) The Borrowers will repay in full all principal and any
unpaid interest or other charges outstanding under Facility No. 1 no later than
the Termination Date.
2.05 Letters of Credit. Facility No. 1 may also be used for financing
standby letters of credit with a maximum maturity not to extend for more than
one (1) year or, in any event, beyond the Termination Date. The standby letters
of credit will be issued by Bank of America National Trust and Savings
Association or its designated affiliate bank (herein, an "issuer") subject to a
reimbursement obligation on the part of the Bank (which, in turn, will be
reimbursed by the Borrowers). The amount of such letters of credit outstanding
at any one time (including amounts drawn on letters of credit and not yet
reimbursed) may not exceed $4,000,000. In further regard to these standby
letters of credit, the Borrowers agree:
(a) any sum drawn under a letter of credit issued pursuant to
this Section 2.5 and reimbursed by the Bank may, at the option of the Bank, be
added to the principal amount outstanding under Facility No. 1. This amount
will bear interest and be due as described elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for its liability to the issuer for any
outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's and the issuer's written approval and
must be in form and content satisfactory to the Bank and the issuer and in
favor of a beneficiary acceptable to the Bank and the issuer.
(d) at the Bank's or the issuer's request, to sign the issuer's
form application and agreement for standby letters of credit.
(e) to pay any issuance and/or other fees that the Bank or the
issuer notifies the Borrower will be charged for issuing and processing letters
of credit for the Borrower.
(f) to pay the Bank a non-refundable fee equal to 1-1/2% per
annum of the average daily balance of the outstanding undrawn amount of each
standby letter of credit, payable monthly in arrears. If there is a default
under this Agreement, at the Bank's option, the amount of the fee shall be
increased by 2% per annum, effective starting on the day the Bank provides
notice of the increase to the Borrowers.
12
<PAGE> 13
2.06 Swap Contracts. Facility No. 1 may also be used by the Borrowers
to obtain "swap contracts" from time to time, which term shall include any
agreement, whether or not in writing, relating to any transaction that is an
interest rate swap, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap or option, bond, note or bill
option, interest rate option, forward foreign exchange transaction cap. collar
or floor transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option to
enter into any of the foregoing) or any combination of the foregoing, and,
unless the context otherwise clearly requires, any master agreement relating to
or governing any or all of the foregoing. Swap contracts shall be issued by
Bank of America National Trust and Savings Association or its designated
affiliate (herein, a "swap provider"), subject to a reimbursement obligation on
the part of the Bank (which, in turn, will be reimbursed by the Borrowers). The
termination value of all such swap contracts outstanding at any one time
(including any amounts then subject to reimbursement by the Borrowers, but not
then reimbursed) may not exceed, in any event, $3,000,000. All such swap
contracts shall have maturity dates not later than, and be co-terminous with,
the Termination Date. Swap contracts may be issued only for the reasonable
requirements of the Borrowers' business, and no swap contracts may be issued
for speculative purposes. In further regard to these swap contracts, the
Borrowers agree:
(a) that any sum for which the Bank reimburses the swap provider
pursuant hereto may, at the option of the Bank, be added to the principal
amount outstanding under Facility No. 1. This amount will bear interest and be
due as described elsewhere in this Agreement.
(b) that if there is a default under this Agreement, to
immediately prepay and make the Bank whole for its liability to the swap
provider for any outstanding swap contracts.
(c) that the issuance of any swap contract (and any amendment to
any swap contract) is subject to the Bank's and the swap provider's written
approval and must be in form and content satisfactory to the Bank and the swap
provider.
(d) at the Bank's or the swap provider's request, to sign a form
application and agreement for swap contracts, commonly known as an "ISDA
Contract."
13
<PAGE> 14
(e) to pay any issuance and/or other fees that the Bank or the
swap provider notifies the Borrowers will be charged for issuing and processing
swap contracts for the Borrowers.
3. FACILITY NO. 2: TERM LOAN FACILITY AMOUNT AND TERMS
3.01 Term Loan Facility.
(a) During the availability period described below, the Bank
will provide a term loan facility to the Borrowers for the purpose of
financing, in whole or in part, permitted acquisitions under Paragraph 10.22(e)
("Facility No. 2"). The amount of this term loan facility (the "Facility No. 2
Commitment"), is equal to $11,000,000, initially, subject, however, to
reduction as provided in subparagraph (b).
(b) Each advance obtained under the Facility No. 2 Commitment
shall reduce, dollar-for-dollar, borrowing availability under the Facility No.
2 Commitment, but such advance may be re-borrowed, once repaid, if such
repayment and subsequent reborrowing occurs within the availability period
described in Paragraph 3.2 below. After the availability period for this
Facility No. 2 has expired, no further borrowing (or reborrowing) under this
Facility No. 2 may be obtained. In addition, the amount of the Facility No. 2
Commitment shall be reduced to $9,000,000, effective on March 31, 1999, and
shall continue to be reduced thereafter, in increments of $750,000, on a
quarterly basis, commencing on June 30, 1999, and continuing thereafter on each
successive September 30, December 31, March 31 and June 30, until the Facility
No. 2 Commitment is reduced to zero.
(c) Each advance under Facility No. 2 must be for at least
$500,000, or for the amount of the then remaining available Facility No. 2
Commitment, if less.
(d) The Borrowers agree not to permit the outstanding principal
amount of advances obtained under Facility No. 2 to exceed the Facility No. 2
Commitment (as it will be reduced from time to time). If the Borrowers exceed
this limit, the Borrowers will immediately pay the excess to the Bank upon the
Bank's demand. Unless and until an Event of Default has occurred and is
continuing, the Borrowers shall have the right to direct the manner or order in
which payments received from the Borrowers under this Paragraph shall be
applied to this Facility. From and after the occurrence of an Event of Default
and during its continuance, the Bank may apply any payments received from the
Borrowers under this Paragraph to the obligations of the
14
<PAGE> 15
Borrowers to the Bank in the order and manner as the Bank, in its discretion,
may determine, including to this Facility or another Facility.
3.02 Availability Period. Advances under Facility No. 2 may be made
between the date of this Agreement and March 31, 1999, unless the Borrowers are
in default.
3.03 Conditions to Each Extension of Credit. Before each extension of
credit is made under Facility No. 2, including the first, the Bank shall
receive a notice of borrowing, in form and detail satisfactory to the Bank,
issued by EMI as agent for and on behalf of the Borrowers, specifying the
amount of the requested advance, the intended use of the proceeds thereof, the
requested disbursement date of the requested advance and the desired interest
rate to be applicable, initially, thereto, together with evidence satisfactory
to the Bank from the Borrowers that (i) the acquisition proposed to be financed
is then permitted under Paragraph 10.22(e) and (ii) EMI is then in compliance
with the requirements of Paragraphs 10.4 and 10.5 and will remain so after such
advance is obtained.
3.04 Repayment Terms.
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below, on each advance made under this
Facility No. 2 on the first day of each calendar month following its
disbursement and then on a monthly basis thereafter and at maturity. The
interest rate payable on each advance made under this Facility No. 2 shall be
determined as follows:
<TABLE>
<CAPTION>
Interest Interest
Rate shall Rate shall
If the Test be Reference -or- be LIBOR
Ratio is : Rate plus Rate plus
<S> <C> <C>
2.0:1 or greater .25% 2.125%
l.0:1 or greater, but less than 2.0:1 0% 1.875%
less than 1.0:1 (.25)% 1.500%
</TABLE>
with the Test Ratio, and resulting interest rate, being computed by the Bank in
the same manner as is provided in Paragraph 2.4(a).
(b) The Borrowers will pay the Bank a non-refundable closing fee
in respect of Facility No. 2, equal to .125% of the full amount of the Facility
No. 2 Commitment, or $13,750, on the date of this Agreement.
15
<PAGE> 16
(c) The Borrowers further agree to pay the Bank a commitment fee
determined by multiplying (i) the difference between (A) the then full amount
of the Bank's Facility No. 2 Commitment and (B) the amount of credit which the
Borrowers actually use of the Facility, based on the weighted average credit
outstanding under Facility No. 2 during the availability period specified in
Paragraph 3.2 (including, for this purpose, letters of credit opened pursuant
to Paragraph 3.5 below), by (ii) the per annum commitment fee
described below, computed as follows:
<TABLE>
<CAPTION>
Per Annum
If the Test Commitment
Ratio is Fee shall be
<S> <C>
2.0:1 or greater .500%
1.0: 1 or greater, but less than 2.0: 1 .375%
less than 1.0:1 .250%
</TABLE>
The fee shall be due and payable monthly in arrears on the first day of each
calendar month until the expiration of the availability period for Facility No.
2, commencing on the first day of the first calendar month following the date
of this Agreement.
(d) The Borrowers will repay in full, all principal or other
charges outstanding under this Facility No. 2 on the Termination Date.
3.05 Letters of Credit. During the availability period specified in
Paragraph 3.2, Facility No. 2 may also be used for financing one or more
standby letters of credit in an amount not to exceed borrowing availability
then existing under this Facility, with a maximum maturity not to extend beyond
the end of the availability period or for more than one (1) year in any event,
to be issued to the seller under any acquisition otherwise approved by the Bank
pursuant to Paragraph 10.22(e). Any such standby letter of credit will be
issued by the issuer subject to a reimbursement obligation on the part of the
Bank (which, in turn, will be reimbursed by the Borrowers). The amount of
advances which the Borrowers may obtain under Facility No. 2 will be reduced
dollar-for-dollar by the amount of each such letter of credit so long as it
remains outstanding. In further regard to each standby letter of credit, the
Borrowers agree:
16
<PAGE> 17
(a) any sum drawn under each such letter of credit and
reimbursed by the Bank shall constitute an advance under Facility No. 2,
bearing interest, and payable as provided in Paragraph 3.4 hereof; and
(b) the provisions of clauses (b) through (f) of Paragraph 2.5
hereof shall apply in all respects to each such letter of credit.
4. FACILITY NO. 3: ACQUISITION LINE OF CREDIT AMOUNT AND TERMS
4.01 Acquisition Line of Credit Amount
(a) During the availability period described below, the Bank
will also provide a line of credit to the Borrowers for the purpose of
financing, in whole or in part, permitted acquisitions under Paragraph 10.22(e)
("Facility No. 3"). The amount of this acquisition line of credit (the
"Facility No. 3 Commitment") is equal to $15,000,000, subject, however, to
reduction in each year as provided in subparagraph (b).
(b) Facility No. 3 is not a revolving line of credit. That is,
each advance obtained under Facility No. 3 shall reduce, dollar-for-dollar, the
Facility No. 3 Commitment, regardless if and when such advance is made or
repaid; that is, an advance made in the first year shall reduce the Facility
No. 3 commitment dollar-for-dollar in such year and in all subsequent years;
(c) Each advance under Facility No. 3 must be for at least
$500,000, or for the amount of the then remaining available Facility No. 3
Commitment, if less.
(d) The Borrowers agree not to permit the outstanding principal
amount of advances obtained under Facility No. 3 to exceed the Facility No. 3
Commitment. If the Borrowers exceed this limit, the Borrowers will immediately
pay the excess to the Bank upon the Bank's demand. Unless and until an Event of
Default has occurred and is continuing, the Borrowers shall have the right to
direct the manner or order in which payments received from the Borrowers under
this Paragraph shall be applied to this Facility. from and after the occurrence
of an Event of Default and during its continuance, the Bank may apply any
payments received from the Borrowers under this Paragraph to the obligations of
the Borrowers to the Bank in the order and manner as the Bank, in its
discretion, may determine, including to this Facility or another Facility.
17
<PAGE> 18
4.02 Availability Period. Facility No. 3 is available between the
date of this Agreement and the Termination Date, unless the Borrowers are in
default.
4.03 Conditions to Each Extension of Credit. Before each extension of
credit under Facility No. 3, including the first, the Bank shall receive a
notice of borrowing, in form and detail satisfactory to the Bank, issued by EMI
as agent for and on behalf of the Borrowers, specifying the amount of the
requested advance, the intended use of the proceeds thereof, the requested
disbursement date and the desired interest rate to be applicable, initially,
thereto, together with evidence satisfactory to the Bank from the Borrowers
that (i) the acquisition proposed to be financed is then permitted under
Paragraph l0.22(e) and (ii) EMI is then in compliance with the requirements of
Paragraphs 10.4 and l0.5.
4.04 Repayment Terms.
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below, on outstanding advances under
Facility No. 3 on the first day of the calendar month following the
disbursement of any advance under Facility No. 3 and then on a monthly basis
thereafter until such advance is paid in full. The interest rate payable on
outstanding advances under Facility No. 3 shall be determined as follows:
<TABLE>
<CAPTION>
Interest Interest
Rate shall Rate shall
If the Test be Reference -or- be LIBOR
Ratio is : Rate plus Rate plus
<S> <C> <C>
2.0:1 or greater .50% 2.25%
1.0:1 or greater but less than 2.0:1 .25% 2.00%
less than l.0:1 0% 1.75%
</TABLE>
with the Test Ratio, and resulting interest rate, being computed by the Bank in
the same manner as is provided in Paragraph 2.4(a).
(b) The Borrowers agree to pay the Bank a nonrefundable closing
fee for Facility No. 3, equal in amount to .25% of the initial Facility No. 3
Commitment, or $37,500, on the date of this Agreement.
(c) The Borrowers further agree to pay the Bank a commitment fee
determined by multiplying (i) the difference between (A) the then full amount
of the Bank's Facility No. 3 Commitment and (B) the amount of credit which the
Borrowers actually use of the Facility, based on the weighted
18
<PAGE> 19
average credit outstanding under Facility No. 3 during the specified period, by
(ii) the per annum commitment fee described below, computed as follows:
<TABLE>
<CAPTION>
Per Annum
If the Test Commitment
Ratio is Fee shall be
<S> <C>
2.0:1 or greater .500%
1.0:l or greater, but less than 2.0:1 .375%
less than 1.0:1 .250%
</TABLE>
The fee shall be due and payable monthly in arrears on the first day of each
calendar month until the expiration of the availability period for Facility No.
3, commencing on the first day of the first calendar month following the date
of this Agreement.
(d) The Borrowers will repay in full all principal or other
charges outstanding under this Facility No. 3 no later than the Termination
Date
4.05 Letters of Credit. During the availability period specified in
Paragraph 4.2, Facility No. 3 may also be used for financing one or more
standby letters of credit in an amount not to exceed borrowing availability
then existing under this Facility or $12,000,000, in the aggregate (whichever
is the lesser), with a maximum maturity not to extend beyond the end of the
availability period or for more than one year or beyond the Termination Date in
any event, to be issued to the seller under any acquisition otherwise approved
by the Bank pursuant to Paragraph 10..22(e). Any such standby letter of credit
will be issued by the issuer subject to a reimbursement obligation on the part
of the Bank (which, in turn, will be reimbursed by the Borrowers). The amount
of advances which the Borrowers may obtain under Facility No. 3 will be reduced
dollar-for-dollar by the amount of each such letter of credit so long as it
remains outstanding. In further regard to each standby letter of credit, the
Borrowers agree:
(a) any sum drawn under each such letter of credit and
reimbursed by the Bank shall constitute an advance under Facility No. 2,
bearing interest, and payable as provided in Paragraph 3.4 hereof; and
(b) the provisions of clauses (b) through (f) of Paragraph 2.5
hereof shall apply in all respects to each such letter of credit.
19
<PAGE> 20
5. INTEREST
5.01 Interest Rate
(a) Unless the Borrowers elect the optional interest rate
described below, the interest rate payable on advances outstanding under
Facility No. 1, Facility No. 2 and Facility No. 3 (the "Facilities" or a
"Facility") shall be based on the Bank's Reference Rate (described below), plus
the addition of a spread, as described more particularly in Paragraphs 2.4(a),
3.4(a) and 4.4(a).
(b) The "Reference Rate" is the rate of interest publicly
announced from time to time by Bank of America, National Trust and Saving
Association ("BofA") in San Francisco, California, as its Reference Rate. The
Reference Rate is set by BofA based on various factors, including its costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. BofA may price loans to its customers
at, above, or below the Reference Rate. Any change in the Reference Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in BofA's Reference Rate.
5.02 Optional Interest Rate. Instead of an interest rate based on the
Reference Rate, the Borrowers may elect to have all or portions of their
outstanding advances and loans (herein called a "LIBOR Rate Portion") bear
interest based on the "LIBOR Rate" (described below), plus the addition of a
spread, as described more particularly in Paragraphs 2.4(a), 3.4(a) and 4.4(a).
Designation of a LIBOR Rate Portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in
effect will be one, two, three or six months. The first day of the interest
period must be a day other than a Saturday or a Sunday on which BofA is open
for business in California, New York and London and dealing in offshore dollars
(a "LIBOR Banking Day"). The last day of the interest period and the actual
number of days during the interest period will be determined by the Bank using
the practices of the London interbank market. No interest period may extend
beyond the Termination Date, however.
(b) Each LIBOR Rate Portion will be for an amount not less than
$500,000, and no more than four (4) LIBOR Rate Portions, in total, per each
Facility, may be outstanding at any one time.
(c) The "LIBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/l00th of one percent. (All
amounts in the calculation will be determined by the Bank as of the first day
of the interest period.)
20
<PAGE> 21
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
( 1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank offered Rate" means the interest rate at
which BofA's London Branch, London, Great Britain, would offer U.S. dollar
deposits in amounts comparable to the LIBOR Rate Portion for the applicable
interest period to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking Days before the
commencement of the interest period. A "London Banking Day" is a day on which
BofA's London Branch is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks of
the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve Board Regulation D, rounded upward to the nearest 1/l00th of one
percent. The percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(d) The Borrowers shall irrevocably request a LIBOR Rate Portion
no later than 9:00 a.m. Atlanta time on the LIBOR Banking Day preceding the day
on which the London Inter-Bank offered Rate will be set, as specified above;
that is, three (3) LIBOR Banking Days before the date on which the requested
advance is to be made.
(e) The Borrowers may not elect a LIBOR Rate with respect to any
principal amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) Any portion of an advance or loan already bearing interest
at the LIBOR Rate will not be converted to a different rate during its interest
period.
(g) Each prepayment of a LIBOR Rate Portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and by a prepayment fee, which shall be
equal to the amount (if any) by which:
21
<PAGE> 22
(i) the additional interest which would have been payable at the
LIBOR Rate, without the addition of any spread; i.e., add-on, during the
Reinvestment Period (as defined below) on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank
by relending the amount prepaid at the Reinvestment Rate, for a period starting
on the date on which it was prepaid and ending on the last day of the interest
period for such portion (or the scheduled payment date for the amount prepaid,
if earlier) (the "Reinvestment Period"). The "Reinvestment Rate" shall be the
LIBOR Rate, without the addition of any spread, determined as of the date of
the prepayment, for the entire Reinvestment Period.
(h) The Bank will have no obligation to accept an election for a
LIBOR Rate Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, of a LIBOR Rate Portion are not available in the
London inter-bank market;
(ii) the LIBOR Rate does not accurately reflect the cost of a
LIBOR Rate Portion; or
(iii) the Borrowers are in default.
22
<PAGE> 23
6. COLLATERAL
6.01 Personal Property. The Borrowers' obligations to the Bank
under this Agreement will be secured by all personal property which the
Borrowers now own or will Own in the future and, at the Bank's option, all or
portions of any real property (or interests in real property) owned or acquired
by the Borrowers from time to time. Collateral shall specifically include, but
not be limited to, all accounts receivables and general intangibles of each
Borrower, all equipment of each Borrower and the capital stock of each Borrower
(other than the capital stock of EMI, and except for any capital stock which,
now or hereafter, is encumbered in accordance with Section 10.8(e)). The
collateral is further defined in security agreement(s) executed by the
Borrowers. In addition, all collateral securing obligations under this
Agreement shall also secure all other present and future obligations of the
Borrowers to the Bank, any "issuer" or any "swap provider" (as those terms are
elsewhere defined herein); and all collateral securing any other present or
future obligations of the Borrowers to the Bank, any such "issuer" or any such
"swap provider" shall also secure obligations under this Agreement.
7. DISBURSEMENTS, PAYMENTS AND COSTS.
7.01 Requests for Credit. Each request for an extension of
credit will be made in writing in a manner acceptable to the Bank, or by
another means acceptable to the Bank, to be issued by EMI, as agent for and on
behalf of all the Borrowers.
7.02 Disbursements and Payments. Each disbursement by the Bank
and each payment by the Borrowers will be: (a) made at the Bank's branch (or
other location) selected by the Bank from time to time; (b) made for the
account of the Bank's branch selected by the Bank from time to time; (c) made
in immediately available funds, or such other type of funds selected by the
Bank; and (d) evidenced by records kept by the Bank. In addition, the Bank may,
at its discretion, require the Borrowers to sign one or more promissory notes
to evidence the debt arising from such disbursements.
7.03 Direct Debit. The Borrowers agree that after their
default in the payment of any such obligation, the Bank may create advances
under Facility No. 1 to pay interest, principal payments, and any fees that are
due under this Agreement. The Bank will create such advances on the dates the
payments become due. If a due date does not fall on a banking day, the Bank
will create the advance on the first banking day following the due date. If the
creation of an advance under Facility No. 1 causes the total amount of credit
outstanding under Facility No. 1 to exceed the limitations set forth in this
Agreement, the Borrowers will immediately pay the excess to the Bank upon the
Bank's demand. The foregoing shall not constitute a waiver by the Bank of any
such default.
<PAGE> 24
7.04 Banking Days. Unless otherwise provided in this
Agreement, a "banking day" is a day other than a Saturday or a Sunday on which
the Bank is open for business in Georgia. All payments and disbursements which
would be due on a day which is not a banking day will be due on the next
banking day. All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
7.05 Taxes.
(a) If any payments to the Bank under this Agreement are
made from outside the United States, the Borrowers will not deduct any foreign
taxes from any payments it makes to the Bank. If any such taxes are imposed on
any payments made by the Borrower (including payments under this paragraph),
the Borrowers will pay the taxes and will also pay to the Bank, at the time
interest is paid, any additional amount which the Bank specifies as necessary
to preserve the after-tax yield the Bank would have received if such taxes had
not been imposed. The Borrowers will confirm that they have paid any such taxes
by giving the Bank official tax receipts (or notarized copies) within 30 days
after the due date.
(b) Payments made by the Borrowers to the Bank will be
made without deduction of United States withholding or similar taxes. If the
Borrowers are required to pay U.S. withholding taxes, the Borrowers will pay
such taxes in addition to the amounts due to the Bank under this Agreement. If
the Borrowers fail to make such tax payments when due, each of the Borrowers
indemnifies the Bank against any liability for such taxes, as well as for any
related interest, expenses, additions to tax, or penalties asserted against or
suffered by the Bank with respect to such taxes.
7.06 Additional Costs. The Borrowers will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to the advances in a manner determined by the Bank, using any
reasonable method. The costs include the following: (a) any reserve or deposit
requirements; and (b) any capital requirements relating to the Bank's assets
and commitments for credit.
7.07 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
<PAGE> 25
360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.
7.08 Default Rate. Upon the occurrence and during the
continuation of any default under this Agreement, principal amounts outstanding
under this Agreement will at the option of the Bank bear interest at a rate
which is two percent (2%) per annum higher than the rate of interest otherwise
provided under this Agreement. This will not constitute a waiver of any
default. Installments of principal which are not paid when due under this
Agreement shall continue to bear interest until paid. Any interest, fees or
costs which are not paid when due shall bear interest at the Reference Rate
plus two percent (2%) per annum. This may result in compounding of interest.
7.09 Overdrafts. At the Bank's sole option in each instance,
the Bank may do one of the following:
(a) The Bank may make advances under this Agreement to
prevent or cover an overdraft on any account of the Borrowers with the Bank or
BofA. Each such advance will accrue interest from the date of the advance or
the date on which the account is overdrawn, whichever occurs first, at the
Reference Rate plus two percent (2%) per annum.
(b) The Bank may reduce the amount of credit otherwise
available under this Agreement by the amount of any overdraft on any account of
the Borrowers with the Bank or BofA. This paragraph shall not be deemed to
authorize the Borrowers to create overdrafts on any of the Borrower's accounts
with the Bank or BofA.
7.10 Payments in Kind. If the Bank requires delivery in kind
of the proceeds of collection of any Borrower's accounts receivable, such
proceeds shall be credited to interest, principal, and other sums owed to the
Bank under this Agreement in the order and proportion determined by the Bank in
its sole discretion. All such credits will be conditioned upon collection and
any returned items may, at the Bank's option, be charged to the Borrowers.
8. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrowers under this Agreement:
<PAGE> 26
8.01 Authorizations. Evidence that the execution, delivery and
performance by the Borrowers of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
8.02 Governing Documents. A copy of each Borrower's articles
of incorporation and bylaws.
8.03 Security Agreements. Signed original security agreements
(or amendments to existing security agreements made by the Borrowers in favor
of the Bank pursuant to the Existing Loan Agreement), assignments, financing
statements and fixture filings (together with collateral in which the Bank
requires a possessory security interest), which the Bank may require from any
Borrower.
8.04 Evidence of Priority. Evidence that security interests
and liens in favor of the Bank are valid, enforceable, and prior to all others'
rights and interests, except as provided in Paragraph 10.8.
8.05 Insurance. Evidence of insurance coverage, as required in
Paragraph 1 O.2 1.
8.06 Legal Opinion. A written opinion from the Borrowers'
legal counsel, covering such matters as the Bank may require. The legal counsel
and the terms of the opinion must be acceptable to the Bank.
8.07 Good Standing. Certificates of good standing for each
Borrower from its state of formation and from any other state in which each
Borrower is required to qualify to conduct its business.
8.08 Payment of Closing Fee. Payment upon execution of this
Agreement of the non-refundable closing fees described in Paragraphs 3.4(b) and
4.4(b) above.
8.09 Payment of Expenses and Fees. Payment of all accrued and
unpaid expenses incurred by the Bank as required by Paragraph 13.6.
8.10 Representations of Corporate Officers. A completed
original of the Bank's form of Representations and Warranties of Corporate
officers executed by the principal officers of each Borrower.
8.11 Other Items. Any other items that the Bank reasonably
requires.
9. REPRESENTATIONS AND WARRANTIES
<PAGE> 27
When the Borrowers sign this Agreement, and until the Bank is
repaid in full the Borrowers make the following representations and warranties.
Each request for an extension of credit (including any letter of credit)
constitutes a renewed representation:
9.01 Organization of Borrower. Each Borrower is a corporation
duly formed and existing under the laws of the state where organized.
9.02 Authorization. This Agreement, and any instrument or
agreement required hereunder, are within the Borrowers' powers, have been duly
authorized, and do not conflict with any of their organizational papers.
9.03 Enforceable Agreement. This Agreement is a legal, valid
and binding agreement of the Borrowers, enforceable against the Borrowers in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable.
9.04 Good Standing. In each state in which a Borrower does
business, it is properly licensed, in good standing, and, where required, in
compliance with fictitious name statutes.
9.05 No Conflicts. This Agreement does not conflict with any
law, agreement, or obligation by which any Borrower is bound.
9.06 Financial Information. All financial and other
information that has been or will be supplied to the Bank, including the
Borrowers' financial statements as of and for the most recently completed
fiscal quarter of the Borrowers for which financial statements are available,
is:
(a) sufficiently complete to give the Bank accurate
knowledge of the Borrowers' financial condition.
(b) in compliance with all government regulations that
apply.
Since the date of the financial statements specified above, there has been no
material adverse change in the business condition (financial or otherwise),
operations, properties or prospects of the Borrowers.
9.07 Lawsuits. There is no lawsuit, tax claim or other dispute
pending or threatened against any Borrower which, if lost, would impair such
Borrower's
<PAGE> 28
financial condition or ability to repay the loans made pursuant hereto, except
as have been disclosed in writing to the Bank.
9.08 Collateral. All collateral required in this Agreement is
owned by the grantor of the security interest free of any title defects or any
liens or interests of others, except for those title defects, liens or
interests of others, as applicable thereto, specified in Paragraph 10.8.
9.09 Permits. Franchises. The Borrowers possess all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary
to enable it to conduct the business in which it is now engaged.
9.10 Other Obligations. The Borrowers are not in default on
any obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
9.11 Income Tax Returns. The Borrowers have no knowledge of
any pending assessments or adjustments of their income tax liabilities for any
year.
9.12 No Tax Avoidance Plan. The Borrowers' obtaining of credit
from the Bank under this Agreement does not have as a principal purpose the
avoidance of U.S. withholding taxes.
9.13 No Event of Default There is no event which is, or with
notice or lapse of time or both would be, a default under this Agreement.
9.14 ERISA Plans.
(a) The Borrowers have fulfilled their obligations, if
any, under the minimum funding standards of ERISA and the Code with respect to
each Plan and are in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and have not incurred any
liability with respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(c) No action by the Borrowers to terminate or withdraw
from any Plan has been taken and no notice of intent to terminate a Plan has
been filed under Section 4041 of ERISA.
<PAGE> 29
(d) No proceeding has been commenced with respect to a
Plan under Section 4042 of ERISA, and no event has occurred or condition exists
which might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for
purposes of this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "ER1SA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan
maintained or contributed to by the Borrowers and insured by the Pension
Benefit Guaranty Corporation under Title IV of ERISA.
9.15 Locations of Borrowers. Each Borrower's place of business
(or, if such Borrower has more than one place of business, its chief executive
of lice) is located at the address listed under such Borrower's signature on
this Agreement.
9.16 Subsidiaries. No Borrower has any subsidiaries, except as
disclosed on Schedule 9.16 attached hereto. All subsidiaries of EMI are
Borrowers under this Agreement.
9.17 Year 2000 Compliance. The Borrowers have conducted a
comprehensive review and assessment of their computer applications and made
inquiry of the Borrowers' key suppliers, vendors and customers as they have
determined to be appropriate with respect to the "year 2000 problem" (that is,
the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and, based on that review and
inquiry, the Borrowers do not believe the year 2000 problem will result in a
material adverse change in their business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the credit.
<PAGE> 30
10. COVENANTS
The Borrowers agree, so long as credit is available under this
Agreement and until the Bank is repaid in full:
10.01 Use of Proceeds. To use the proceeds of the credit only
for working capital and general operating needs under Facility No. 1 and
permitted acquisitions under Facility No. 2 and Facility No. 3.
10.02 Financial Information. To provide the following
financial information and statements in form and content acceptable to the
Bank, and such additional information as requested by the Bank from time to
time:
(a) Within 120 days following the end of EMI's fiscal
year (1) consolidated financial statements meeting the requirements of
regulation S-X ("Regulation S-X") promulgated by the Securities Exchange
Commission ("SEC") for financial statements to be included in EMI's Annual
Report on Form 10-K to be filed with the SEC pursuant to the provisions of the
Securities Exchange Act of 1934 (the "34 Act") audited (with an unqualified
opinion) by a firm of certified public accountants acceptable to the Bank; (2)
unaudited annual consolidating statements of operations; and (3) audited
balance sheets and statements of operations for the individual schools operated
by EMI, likewise accompanied by the unqualified opinion of such certified
public accountants.
(b) Within 45 days of EMI's first, second and third
fiscal quarter (i) unaudited consolidated financial statements meeting the
requirements of regulation S-X for financial statements to be included in EMI's
Quarterly Report on Form 10-Q to be filed with the SEC pursuant to the
provisions of the "34 Act," (ii) unaudited quarterly consolidating statements
of operations for the applicable quarter, and (iii) unaudited statements of
operations for the individual schools operated by EMI.
(c) Within 30 days of the period's end, EMI's monthly
(i) unaudited consolidated statements of operations for the applicable period,
(ii) unaudited monthly consolidating statements of operations for the
applicable period, and (iii) unaudited statements of operations for the
individual schools operated by EMI for the applicable period.
(d) Copies of EMI's Form 10-K Annual Report and Form
10-Q Quarterly Report within 5 days after the date of filing with the
Securities and Exchange Commission, copies of EMI's Form 8-K Current Report
within 1 business day after the date of its filing with the Securities and
Exchange Commission and copies of any news releases within 1 business day after
their publication.
<PAGE> 31
(e) Within the period(s) provided in (a) and (b) above,
a compliance certificate of the Borrowers signed by an authorized financial
officer of EMI, as agent for the Borrowers, setting forth (i) the information
and computations (in sufficient detail) to establish that the Borrowers are in
compliance with all financial covenants contained herein at the end of the
period covered by the financial statements then being furnished and (ii)
whether there existed as of the date of such financial statements and whether
there exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature thereof and
the action the Borrowers are taking and propose to take with respect thereto.
(f) A borrowing certificate, signed by EMI, as agent for
the Borrowers, setting forth the amount of Acceptable Receivables as of the
last day of each fiscal month as to which average daily advances outstanding
under Facility No. 1 equaled or exceeded $5,000,000 within 30 days after each
month end and as of the last day of each fiscal quarter within 45 days after
each quarter end, and on a pro forma basis in connection with each proposed
advance under either Facility No. 2 or Facility No. 3.
(g) Statements showing an aging and reconciliation of
the Borrowers' receivables upon Bank's request.
(h) A statement showing an aging of accounts payable of
the Borrowers upon Bank's request.
(i) A listing of the names and addresses of all debtors
obligated upon the Borrowers' accounts receivable upon the Bank's request.
(j) Promptly upon the Bank's request, such other
statements, lists of property and accounts, budgets, forecasts, reports or
information as to the Borrowers, any school, or group of schools, and as to
each guarantor of the Borrowers' obligations to the Bank as the Bank may
request from time to time.
(k) a report of continuing compliance and eligibility in
respect of all Title IV Program Requirements within 120 days after each fiscal
year end of EMI, such report to demonstrate, among other things, each school's
continuing maintenance of prescribed- financial responsibility standards which
are part of the Title IV Program Requirements, to include calculations
demonstrating maintenance of at least the following: (i) a 1:1 "acid test;"
(ii) a positive tangible net worth; and (iii) net operating results (two years)
which do not show an aggregate net loss of 10% of tangible net worth.
<PAGE> 32
10.03 Fixed Charge Coverage Ratio. To maintain on a
consolidated basis a Fixed Charge Coverage Ratio of at least the ratio set
forth below for each fiscal quarter end occurring within each "Applicable
Period" set forth below:
<TABLE>
<CAPTION>
Applicable Period Ratio
- ---------------------------------- --------
<S> <C>
Fiscal year ending March 31, 1998 1.10:1.0
Fiscal year ending March 31, l999 1.15:1.0
Fiscal year ending March 31, 2000 1.20:1.0
and each fiscal year thereafter
</TABLE>
"Fixed Charge Coverage Ratio" means the ratio of (1) Adjusted EBIRTDA to (2)
the sum of interest expense, lease expense and rent expense plus scheduled debt
repayments capital expenditures of EMI and its subsidiaries (excluding
therefrom any payment made in respect of permitted school acquisitions), on a
consolidated basis, in the preceding four fiscal quarters. "Adjusted EBIRTDA"
means the sum of net income after taxes (considered without regard to any
extraordinary items of gain or loss unless otherwise approved by the Bank after
consultation with EMI), EM interest expense, lease expense and rent expense,
plus tax expense, ~ depreciation and amortization expense, on a consolidated
basis. This ratio will be calculated at the end of each fiscal quarter of EMI,
using the results of that quarter and each of the three immediately preceding
quarters.
10.04 Total Funded Debt/Adjusted Cash Flow Ratio. To maintain
on a consolidated basis a Total Funded Debt/Adjusted Cash Flow Ratio of not
more than 3.0:1.
"Total Funded Debt/Adjusted Cash Flow Ratio" means the ratio of Total Funded
Debt to Adjusted Cash Flow. "Total Funded Debt" means purchase money debt
(including, without limitation, any such debts to sellers of schools, but
excluding trade payables) and indebtedness for money borrowed and guarantees of
such debts, including, without limitation, any debts represented by notes
payable, bonds, debentures, capitalized lease obligations and letters of credit
and any subordinated debt, of EMI and its subsidiaries, on a consolidated
basis. "Adjusted Cash Flow" means the sum of (a) "EBITDA" (as defined below) of
EMI and its consolidated subsidiaries less dividends, withdrawals, loans,
advances, and other distributions to any stockholders, of EMI and its
subsidiaries on a consolidated basis and (b) 75 of EBITDA for all schools
acquired by EMI during the measurement period (to the extent that the operating
results of such schools would not otherwise be included in the calculation set
forth in the preceding clause (a)). For purposes hereof "EBITDA" for any entity
shall mean net income after taxes of such entity (considered without regard to
any extraordinary items of gain or loss unless otherwise approved by the Bank
after consultation with
<PAGE> 33
EMI), and, in the case of EMI, its consolidated subsidiaries, after adjustment
to reflect the following, as applicable: plus in the case of any newly acquired
school, any non-recurring charges or expenses; plus interest expense; plus tax
expense; plus depreciation and amortization expense, each for the same said
entities and period. This ratio will be calculated (a) at the end of each
fiscal quarter of EMI, using the results of that quarter and each of the three
immediately preceding quarters and (b) prior to the making of any loan or
advance hereunder under any of the Facilities, on a pro forma basis, as of the
most recently ended fiscal quarter of EMI, after giving effect to such loan or
advance.
10.05 Senior Funded Debt/Adjusted Cash Flow Ratio. To maintain
a Senior Funded Debt/Adjusted Cash Flow Ratio of not more than 2.25:1 during
the fiscal years of EMI and its consolidated subsidiaries ending March 31, 1998
and March 31, 1999 and 2.0:1.0 during each fiscal year thereafter.
"Senior Funded Debt/Adjusted Cash Flow Ratio" means the ratio of "Senior Funded
Debt" to "Adjusted Cash Flow." Senior Funded Debt is equal to Total Funded Debt
(as defined above) less any such debt which has been subordinated, in a form,
manner and substance acceptable to the Bank, to all of the Borrowers'
obligations to the Bank. "Adjusted Cash Flow" has the meaning described in
Paragraph 10.4 above. This ratio will be calculated (a) at the end of each
fiscal quarter, using the results of that quarter and each of the three
immediately preceding quarters (b) and prior to the making of any loan or
advance hereunder under any of the Facilities, on a pro forma basis, as of the
most recently ended fiscal quarter of EMI, after giving effect to such loan or
advance.
10.06 Total Liabilities to Net Worth Ratio. To maintain at all
times on a consolidated basis a ratio of total liabilities to book net worth of
not more than 1.6 to 1.0. "Total liabilities" and "book net worth" shall have
the respective meanings given to such terms under GAAP.
10.07 Other Debts. Not to have outstanding or incur any direct
or contingent liabilities or lease obligations (other than those to the Bank,
any "issuer," any "swap provider" or any of its other affiliates, whether
arising pursuant hereto or otherwise), or Become liable for the liabilities of
others (other than those to the Bank or any of its affiliates, whether arising
pursuant hereto or otherwise) without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal
trade credit.
<PAGE> 34
(b) Endorsing negotiable instruments received in the
usual course of business.
(c) obtaining surety bonds in the usual course of
business.
(d) Liabilities in existence on the date of this
Agreement disclosed in the Borrowers' financial statements described in
Paragraph 9.6.
(e) Additional debts and lease obligations for the
acquisition of fixed or capital assets, to the extent permitted elsewhere in
this Agreement.
(f) unsecured (except for permitted liens, as described
below) debt to sellers of schools provided that (i) such indebtedness is on
terms and conditions satisfactory to the Bank and (ii) the maximum amount of
such indebtedness does not exceed $10,000,000.
(g) swap contracts, as defined in Paragraph 2.6. to the
extent made in accordance with the terms thereof.
(h) Additional debts and lease obligations incurred for
business purposes not otherwise described in, and permitted by, subparagraphs
(a) through (g) above, which, m aggregate amount, do not exceed a total
principal amount of $2,000,000 outstanding at any one time.
10.08 Other Liens. Not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrowers
now or later own, except:
(a) Deeds of trust and security agreements in favor of
the Bank, any "issuer" or any "swap provider" or any of its other affiliates,
whether arising pursuant hereto or otherwise.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement and
disclosed in writing to the Bank on Schedule 10.8 attached hereto.
(d) Additional purchase money security interests in
personal or real property acquired after the date of this Agreement, if the
total principal amount of all debts secured by such liens does not exceed
$2,500,000 at any one time.
<PAGE> 35
(e) Pledges of a school's capital stock given to support
the payment of permitted purchase money debt to the seller of a school pursuant
to an acquisition permitted in Paragraph 10.22(e).
(f) Liens which the DOE may claim in respect of certain
deposit accounts which the schools may be required to maintain for the receipt
of funds under Title IV Programs as part of the Title IV Program Requirements.
(g) Liens in the form of letters of credit issued to
seller under Facility No. 2 or Facility No. 3.
10.09 Capital Expenditures. Not to spend more than the
following amounts in any specified fiscal year to acquire fixed or capital
assets (except any made for permitted school acquisitions under Paragraph
10.22(e)):
Fiscal Year
Ending Amount
March 31, 1999 $4,000,000
March 31, 2000 $5,000,000
March 31, 2001 $6,000,000
10.10 Dividends. Not to declare or pay any dividends on any
of its shares except dividends payable to EMI by its subsidiaries and dividends
payable in capital stock of a Borrower; and not to purchase, redeem or
otherwise acquire for value any of its shares, or create any sinking fund in
relation thereto.
10.11 Loans and Investments. Not to make any loans or other
extensions of credit to, or make any investments in, or make any capital
contributions or other transfers of assets to, any individual or entity, except
for:
(a) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business.
(b) investments in any of the following: (i) marketable,
direct obligations of the United States of America and its agencies maturing
within three hundred sixty-five (365) days of the date of purchase, (ii)
commercial paper issued by corporations maturing 180 days from the date of
original issue which is rated "P-1" or better by Moody's or "A-1" or better by
S&P, (iii) certificates of deposit maturing within l year of the date of
purchase issued by a United States national or state bank having deposits
totaling more than
<PAGE> 36
$250,000,000, and whose short-term debt is rated "P- 1" or better by Moody's or
"A- l" or better by S&P, and (iv) investments made with, or through, the Bank
or BofA.
(c) extensions of credit to and investments in other
Borrowers.
(d) acquisitions of schools permitted under Paragraph
10.22(e).
10.12 Change of Ownership. Not to cause, permit, or suffer
any change, direct or indirect, in (i) the capital ownership by EMI of its
subsidiaries; or (ii) the capital ownership of EMI, to the extent that a report
on Form 8-K is required to be filed with the Securities and Exchange Commission
disclosing a change in control.
10.13 Notices to Bank. To promptly notify the Bank in writing
of:
(a) any lawsuit claiming damages over $100,000 against a
Borrower.
(b) any dispute between a Borrower and any government
authority which the Bank determines, if resolved adversely to such Borrower,
would materially interfere with the conduct of such Borrower's business as then
being conducted by it.
(c) any failure to comply with this Agreement.
(d) any material adverse change in a Borrower's (or any
guarantor's) business condition (financial or otherwise), operations,
properties or prospects, or ability to repay the credit.
(e) any change in a Borrower's name, legal structure,
place of business, or chief executive of rice if such Borrower has more than
one place of business.
(f) any default or event of default under Paragraph 12.
10.14 Books and Records. To maintain adequate books and
records.
10.15 Audits. To allow the Bank and its agents to inspect
Borrowers' properties and examine, audit and make copies of books and records
<PAGE> 37
at any reasonable time. If any of the Borrowers' properties, books or records
are in the possession of a third party, the Borrowers authorize that third
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
10.16 Compliance with Laws. To comply with the laws
(including any fictitious name statute), regulations, and orders of any
government body with authority over each Borrower's business (excepting
therefrom, however, instances of incidental noncompliance occurring from time
to time in the ordinary course of a Borrower's business without actual
knowledge of a Borrower, which the Bank determines are immaterial to the
operation of its business and are capable of being cured without any
significant disruption to such business). The foregoing shall include,
specifically, but without limitation, compliance with all Title IV Program
Requirements, as prescribed with more particularity in Section 10.24.
10.17 Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises the Borrowers now have.
10.18 Maintenance of Properties. To make any repairs,
renewals, or replacements to keep the Borrowers' properties in good working
condition.
10.19 Perfection of Liens. To help the Bank perfect and
protect its security interests and liens, and reimburse it for related costs it
incurs to protect its security interests and liens.
10.20 Cooperation. To take any action reasonably requested by
the Bank to carry out the intent of this Agreement.
10.21 Insurance.
(a) Insurance Covering Collateral. To maintain all risk
property damage insurance policies covering the tangible property comprising
the collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to the
Bank and must include a lender's loss payable endorsement in favor of the Bank
in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance
satisfactory to the Bank as to amount, nature and carrier covering property
damage (including loss of use and occupancy) to any Borrower's properties,
public liability insurance including coverage for contractual liability,
product
<PAGE> 38
liability and workers' compensation, and any other insurance which is usual for
the Borrowers' businesses.
(c) Evidence of Insurance. Upon the request of the Bank,
to deliver to the Bank a copy of each insurance policy, or, if permitted by the
Bank, a certificate of insurance listing all insurance in force.
10.22 Additional Negative Covenants. Not to, without the
Bank's written consent:
(a) engage in any business activities substantially
different from the Borrowers' present businesses.
(b) liquidate or dissolve any of the Borrowers'
businesses.
(c) enter into any consolidation, merger, or other
combination, or become a partner in a partnership, a member of a joint venture,
or a member of a limited liability company, except (i) in connection with any
acquisition permitted under subparagraph (e) and (ii) that Subsidiaries of EMI
may merge, combine or consolidate with each other or with EMI (so long as, in
the case of any merger, combination or consolidation with EMI, EMI is the
survivor).
(d) sell, lease, transfer or dispose of all or a
substantial part of a Borrower's business or a Borrower's assets, except, in
the case of any Borrower, to any other Borrower.
(e) acquire or purchase a business or its assets;
provided, however, that, acquisitions of all, or substantially all, of the
assets of, or of all or a controlling interest in the shares of capital stock
of, any business engaged in the provision of career-oriented, postsecondary
education within the United States (herein, a "school"), shall be permitted,
if, but only if: (i) no default then exists under this Agreement, or would be
caused by, or would result from, such proposed acquisition (after giving pro
forma effect to such acquisition, in respect of the financial covenants set
forth at Paragraphs 10.3 through 10.6); (ii) both (A) the cash consideration
payable in respect of such acquisition does not exceed $5,000,000, and (B) the
cash consideration payable in respect of such acquisition (subject to the
foregoing limitation) plus the amount of any assumed liabilities plus the
amount of any seller debt does not exceed $10,000,000; (iii) the incremental
amount which the Borrower then may borrow under Facility No. 1 (after giving
pro forma effect to the proposed acquisition), determined under subparagraphs
(a) and (d) of Paragraph 2.1, is at least $4,000,000; (iv) the school being
acquired has a positive EBITDA (computed in the same manner as
<PAGE> 39
is defined in Paragraph 10.4 in respect of EMI, after adjustments by the Bank
as necessary for excessive compensation amounts and like items) for its most
recently concluded period of twelve (12) fiscal months; and (v) the acquisition
is not opposed by the board of directors of the school proposed to be acquired;
net, it is not a "hostile" acquisition. EMI, as agent on behalf of the
Borrowers, shall certify the foregoing to the Bank at the time of such
acquisition. Such certification shall include calculations of pro forma
compliance with Paragraphs 10.3 through 10.6 on both a consolidated basis
(including the school being acquired) and on a stand alone basis for such
school. The Bank has reserved to itself the right, in its sole discretion, to
consent in writing to any such acquisition notwithstanding the Borrower's
non-compliance with one or more of the foregoing conditions, but any such
consent may be made subject to such other terms and conditions as the Bank, in
its sole discretion, then may elect.
(f) sell, assign, lease, transfer or otherwise dispose
of any assets, or enter into any agreement to do so, except:
(i) dispositions of inventory, or used, worn-out
or surplus equipment, all in the ordinary course of business;
(ii) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(iii) dispositions not otherwise permitted hereunder
which are made for fair market value; provided, that (i) at the time of any
disposition, no event of default shall exist or shall result from such
disposition, (ii) the aggregate sales price from such disposition shall be paid
in cash, and (iii) the aggregate value of all assets so sold by the Borrowers
shall not exceed in any fiscal year $250,000.
(g) enter into any sale and leaseback agreement covering
any of its fixed or capital assets.
(h) close, or voluntarily suspend the business of any
school (other than for the purpose of consolidating the operations of one
school with one or more other schools) for more than 30 days, if that school's
contribution (computed as defined in Paragraph 10.24) then represents 5% or
more of the total school contributions for the most recently concluded period
of four fiscal quarters.
10.23 ERISA Plans. To give prompt written notice to the Bank
of:
<PAGE> 40
(a) The occurrence of any reportable event under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by a Borrower to terminate or withdraw
from a Plan or the filing of any notice of intent to terminate under Section
4041 of ERISA.
(c) Any notice of noncompliance made with respect to a
Plan under Section 404 1 (b) of ERISA.
(d) The commencement of any proceeding with respect to a
Plan under Section 4042 of ERISA.
10.24 Title IV Program Requirements. To maintain at all times
all Title IV Program Requirements for schools representing, in the aggregate,
not less than 80% of the total school contributions of all schools operated by
the Borrowers. For purposes hereof, "school contributions" for each school
shall be computed on a quarterly basis, for the most recently completed period
of four fiscal quarters, and shall be equal to each school's total revenue
minus all school operating costs (to include training expense, facility
expense, advertising expense, sales expense, administrative expense and bad
debt expense). "Total school contributions" of all schools shall be the
aggregate of each school's contribution.
"Title IV Program Requirements" shall mean and include all
eligibility, program and general requirements imposed upon schools under Title
IV programs administered by the U.S. Department of Education ("DOE") under the
Higher Education Act of 1965, as amended, and the regulations thereunder
("Title IV Programs"), including, without limitation, for each of the schools
operated by Borrowers (i) its continuing certification by the DOE as an
"eligible institution;" (ii) its continuing authorization to offer its programs
by the relevant state agency where it is located; (iii) its continuing
accreditation by a nationally recognized accrediting agency; (iv) its
continuing compliance with respect to maximum rates of default by its students
with respect to federally guaranteed or funded student loans; i.e., cohort
default rates; (v) its continuing satisfaction of certain financial
responsibility standards; (vi) its continuing compliance with standards for
maximum acceptable proportions of school revenues derived from Title IV
programs, i.e., "85/15" rule; and (vii) its continuing compliance in respect of
changes in curriculum, location and control. Without limitation of the
foregoing, to the extent that any school is at any time required by the DOE to
post a letter of credit, bond or other, similar evidence of financial assurance
as a condition to its remaining an "eligible institution," the Bank, in its
sole
<PAGE> 41
discretion shall have the right to declare that such school shall not be
considered as maintaining all Title IV Program Requirements for purposes of
this Paragraph.
10.25 Subsidiaries. Promptly upon its creation or
acquisition, to cause all subsidiaries of Borrowers hereafter created or
acquired (including any acquired as schools) to execute a joinder to this
Agreement in form and substance acceptable to the Bank whereby such subsidiary
shall become a Borrower hereunder.
11. HAZARDOUS WASTE INDEMNIFICATION
The Borrowers, jointly and severally, will indemnify and hold
harmless the Bank from any loss or liability directly or indirectly arising out
of the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about any
Borrower's property or operations or property leased to any Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to the Bank, its parent, its and its parent's subsidiaries
(including BofA) and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous"
or "toxic" under any federal, state or local law. This indemnity will survive
repayment of the Borrowers' obligations to the Bank and this Agreement's
termination.
12. DEFAULT
If any of the following events occurs (called in this
Agreement a "default" or "event of default"), the Bank may do one or more of
the following: declare the Borrowers in default, stop making any additional
credit available to the Borrowers, and require the Borrowers to repay the
entire debt immediately and without prior notice. If an event of default occurs
under the paragraph entitled "Bankruptcy," below, with respect to the
Borrowers, then, the entire debt outstanding under this Agreement will
automatically be due immediately.
12.01 Failure to Pay. A Borrower fails to make a payment
under this Agreement when due.
12.02 Lien Priority. The Bank fails to have an enforceable
first lien (except for any prior liens which are expressly permitted to exist
under this
<PAGE> 42
Agreement or as to which the Bank has consented in writing) on or security
interest in any property given as security for the advances.
12.03 False Information. A Borrower (or any guarantor) has
given the Bank false or misleading information or representations in respect of
any matter, event or occurrence which the Bank determines to be material.
12.04 Bankruptcy. A Borrower (or any guarantor) files a
bankruptcy petition, a bankruptcy petition is filed against a Borrower (or any
guarantor) or a Borrower (or any guarantor) makes a general assignment for the
benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed against a Borrower (or any guarantor) is dismissed within a
period of 60 days after the filing; provided. however. that the Bank will not
be obligated to extend any additional credit to the Borrowers during that
period.
12.05 Receivers. A receiver or similar official is appointed
for any Borrower's business, or the business is terminated.
12.06 Lawsuits. Any lawsuit or lawsuits are filed on behalf
of one or more creditors against a Borrower in an aggregate amount of $100,000
or more in excess of any insurance coverage.
12.07 Judgments. Any judgments or arbitration awards are
entered against any Borrower (or any guarantor), or any Borrower (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of $100,000 or more in excess of any
insurance coverage.
12.08 Government Action. Any government authority takes
action that the Bank believes materially adversely affects any Borrower's (or
any guarantor's) financial condition or ability to repay the advances.
12.09 Material Adverse Change. A material adverse change
occurs in any Borrower's (or any guarantor's) business condition (financial or
otherwise), operations, properties or prospects, or ability to repay the
advances.
12.10 Cross-default. Any default occurs under any agreement
in connection with any credit which any Borrower (or any guarantor) or any
Borrower's related entities or affiliates has obtained from another lender or
which any Borrower (or any guarantor) or any Borrower's related entities or
affiliates has guaranteed in the amount of $100,000 or more in the aggregate if
the default consists of failing to make a payment when due or gives the other
lender the right to accelerate the obligation.
<PAGE> 43
12.11 Default under Related Documents. Any guaranty,
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is violated or no longer in effect.
12.12 Other Bank Agreements. A Borrower (or any guarantor)
fails to meet the conditions of, or fails to perform any obligation under any
other agreement which a Borrower (or any guarantor) has with the Bank, BofA,
any "issuer," any "swap provider" or any other affiliate of the Bank. If, in
the Bank's opinion, the breach is capable of being remedied, the breach will
not be considered an event of default under this Agreement for a period of 10
days after the date on which the Bank gives written notice of the breach to the
Borrowers; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrowers during that period.
12.13 ERISA Plans. The occurrence of any one or more of the
following events with respect to any Borrower, provided such event or events
could reasonably be expected, in the judgment of the Bank, to subject any
Borrower to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, could have a material adverse effect on the financial
condition of any Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a
Plan which is, in the reasonable judgment of the Bank likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings
to terminate a Plan) or a Borrower's full or partial withdrawal from a Plan.
12.14 Delisting. EMI's stock ceases to be listed on NASDAQ
for any reason (except for its being listed, instead, on the NYSE or AMEX).
12.15 Other Breach Under Agreement. The Borrowers fail to
meet the conditions of, or fail to perform any obligation under, any term of
this Agreement not specifically referred to in this Article. This includes any
failure or anticipated failure by the Borrowers to comply with any financial
covenants set forth in this Agreement, whether such failure is evidenced by
financial statements delivered to the Bank or is otherwise known to the
Borrowers or the Bank. If, in the Bank's opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this Agreement for a period of 10 days after the date on which the Bank gives
written notice of the breach to the Borrowers; provided, however, that the Bank
will not be obligated to extend any additional credit to the Borrowers during
that period.
<PAGE> 44
13 ENFORCING THIS AGREEMENT; MISCELLANEOUS
13.01 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to the Bank and all financial covenants will be
made under generally accepted accounting principles, consistently applied
(herein, "GAAP").
13.02 Georgia Law. This Agreement is governed by Georgia law.
13.03 Successors and Assigns. This Agreement is binding on
each Borrower's and the Bank's successors and assignees. The Borrowers agree
that they will not assign this Agreement without the Bank's prior consent. The
Bank may sell participations in or assign this loan, and may exchange financial
information about the Borrowers with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrowers.
13.04 Arbitration
(a) Dispute Resolution. Any controversy or claim between
or among the parties or their assignees arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith, including any claim based on or arising from an alleged
tort, shall at the request of any party be determined by arbitration,
reference, or trial by a judge as provided hereafter. A controversy involving
only a single claimant, or claimants who are related or asserting claims
arising from a single transaction, shall be determined by arbitration as
described below. Any other controversy shall be determined by judicial
reference of the controversy to a referee appointed by the court or, if the
court where the controversy is venued lacks the power to appoint a referee, by
trial by a judge without a jury, as described below. THE PARTIES AGREE AND
UNDERSTAND THAT THEY ARE GIVING -UP THE RIGHT To TRIAL BY JURY, AND THERE SHALL
BE No JURY WHETHER THE CONTROVERSY OR CLAIM IS DECIDED BY ARBITRATION, BY
JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE.
(b) Arbitration. Since this Agreement touches and
concerns interstate commerce, an arbitration under this Agreement shall be
conducted in accordance with the United States Arbitration Act (Title 9, United
States Code), notwithstanding any choice of law provision in this Agreement.
The Commercial Rules of the American Arbitration Association ("AAA") also shall
apply. The arbitrator(s) shall follow the law and shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is
<PAGE> 45
arbitrable shall be determined by the arbitrator(s). The award of the
arbitrator(s) shall be in writing and include a statement of reasons for the
award. The award shall be final. Judgment upon the award may be entered in any
court having jurisdiction, and no challenge to entry of judgment upon the award
shall be entertained except as provided by Section 10 of the United States
Arbitration Act or upon a finding of manifest injustice.
(c) Judicial Reference or Trial by a Judge. At the
request of any party any controversy or claim under subparagraph (a) that is
not submitted to arbitration as provided in subparagraph (b) shall be
determined by reference to a referee appointed by the court who, sitting alone
and without a jury, shall decide all questions of law and fact. The parties
shall designate to the court a referee selected under the auspices of the AAA
in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The referee shall be an active attorney or retired judge. If the court where
the controversy is venued lacks the power to appoint a referee, the controversy
instead shall be decided by trial by a judge without a jury.
(d) Self-Help. Foreclosure. and Provisional Remedies. No
provision of this paragraph shall limit the right of any party to this
Agreement to exercise self-help remedies such as setoff or repossession, to
foreclose by power of sale or judicially against or sell any collateral or
security, or to obtain any provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
under subparagraph (b), above. Neither the obtaining nor the exercise of any
such remedy shall waive the right of either party to demand that the related or
any other dispute or controversy be determined by arbitration as provided
above.
13.05 Severability; Waivers. If any part of this Agreement is
not enforceable, the rest of the Agreement may be enforced. The Bank retains
all rights, even if it makes an advance after default. If the Bank waives a
default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.
13.06 Reimbursement Costs. The Borrowers agree to reimburse
the Bank immediately for any expenses it incurs in the preparation of this
Agreement and any agreement or instrument required by this Agreement. Expenses
include, but are not limited to, reasonable attorneys' fees, including any
allocated costs of the Bank's in-house counsel, filing, recording and search
fees, appraisal fees, title report fees and documentation fees.
<PAGE> 46
13.07 Administration Costs. The Borrowers shall pay the Bank
for all reasonable costs incurred by the Bank in connection with administering
this Agreement.
13.08 Attorneys' Fees. The Borrowers shall reimburse
the Bank for any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or remedies under
this Agreement and any other documents executed in connection with this
Agreement, and including any amendment, waiver, "workout" or restructuring
under this Agreement. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration proceeding, as
determined by the court or arbitrator. In the event that any case is commenced
by or against the Borrowers under the Bankruptcy Code (Title l l, United States
Code) or any similar or successor statute, the Bank is entitled to recover
costs and reasonable attorneys' fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a
case. As used in this paragraph, "attorneys' fees" includes the allocated costs
of the Bank's in-house counsel.
13.09 Joint and Several Liability.
(a) Each Borrower agrees that it is jointly and
severally liable to the Bank for the payment of all obligations arising under
this Agreement, and that such liability is independent of the obligations of
the other Borrower(s) (or any guarantor). The Bank may bring an action against
any Borrower, whether an action is brought against the other Borrower(s) (or
any guarantor).
(b) Each Borrower agrees that any release which may
be given by the Bank to the other Borrower(s) (or any guarantor) will not
release such Borrower from its obligations under this Agreement.
(c) Each Borrower waives any right to assert against
the Bank any defense, setoff, counterclaim, or claims which such Borrower may
have against the other Borrower(s) or any other party (including any guarantor)
liable to the Bank for the obligations of the Borrowers under this Agreement.
(d) Each Borrower agrees that it is solely
responsible for keeping itself informed as to the financial condition of the
other Borrower(s) and of all circumstances which bear upon the risk of
nonpayment. Each Borrower waives any right it may have to require the Bank to
disclose to such Borrower any information which the Bank may now or hereafter
acquire concerning the financial condition of the other Borrower(s).
(e) Each Borrower waives all rights to notices of
default or nonperformance by any other Borrower under this Agreement. Each
Borrower further waives all rights to notices of the existence or the creation
of new indebtedness by any other Borrower.
(f) The Borrowers represent and warrant to the Bank
that they each will derive benefit, directly and indirectly, from the
collective administration and
<PAGE> 47
availability of credit under this Agreement. The Borrowers agree that the Bank
will not be required to inquire as to the disposition by any Borrower of funds
disbursed in accordance with the terms of this Agreement.
(g) Each Borrower waives any right of subrogation,
reimbursement, indemnification and contribution (contractual, statutory or
otherwise), including without limitation, any claim or right of subrogation
under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute,
which such Borrower may now or hereafter have against any other Borrower with
respect to the indebtedness incurred under this Agreement, unless and until
this Agreement is terminated and all debts to the Bank arising hereunder have
been fully paid and satisfied. Each Borrower further waives any right to
enforce any remedy which the Bank now has or may hereafter have against any
other Borrower, and waives any benefit of, and any right to participate in, any
security now or hereafter held by the Bank.
13.10 One Agreement. This Agreement and any related security
or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and
agreements between the Bank and the Borrowers concerning this credit;
(b) replace any prior oral or written agreements
between the Bank and the Borrowers concerning this credit; and
(c) are intended by the Bank and the Borrowers as
the final, complete and exclusive statement of the terms agreed to by them. In
the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
13.11 Disposition of Schedules. The Bank will not be obligated
to return any schedules, invoices, statements, budgets, forecasts, reports or
other papers delivered by the Borrowers. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
13.12 Credit Adjustments. Until the Bank exercises its rights
to collect the accounts receivable as provided under any security agreement
required under this Agreement, the Borrowers may continue their present policies
for credit adjustments. If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall no longer be included
in the amount of such Acceptable Receivable in computing the Borrowing Base.
<PAGE> 48
13.13 Verification of Receivables The Bank may at any time,
either orally or in writing, request confirmation from any debtor of the current
amount and status of the accounts receivable upon which such debtor is
obligated.
13.14 Indemnification. The Borrowers will indemnify and hold
the Bank harmless from any loss, liability, damages, judgments, and costs of any
kind relating to or arising directly or indirectly out of (a) this Agreement or
any document required hereunder, (b) any credit extended or committed by the
Bank to the Borrowers hereunder, (c) any claim, whether well-founded or
otherwise, that there has been a failure to comply with any law regulating the
Borrowers' sales or leases to or performance of services for debtors obligated
upon the Borrowers' accounts receivable and disclosures in connection therewith,
and (d) any litigation or proceeding related to or arising out of this
Agreement, any such document, any such credit, or any such claim. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, its and its
parent's subsidiaries (including BofA) and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity Will
survive repayment of the Borrowers' obligations to the Bank and this Agreement's
termination. All sums due to the Bank hereunder shall be obligations of the
Borrowers, due and payable immediately without demand.
13.15 Notices. All notices required under this Agreement shall
be personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
the Bank and the Borrowers may specify from time to time in writing.
13.16 Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
13.17 Counterparts This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
13.18 Amendment and Restatement. This Agreement constitutes an
amendment and restatement of the Business Loan Agreement, dated as of February
25, 1997, between Borrowers (or certain of them, as the case may be) and the
Bank (the "Existing Loan Agreement"). The execution and delivery of this
Agreement shall not constitute a novation, waiver, release or modification of
any rights, claims or remedies of the Bank under the Existing Loan Agreement or
otherwise, or any indebtedness or other obligations owing to the Bank under the
Existing Loan Agreement or otherwise, based on any facts or events occurring or
existing prior to the execution and delivery of this Agreement.
<PAGE> 49
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA, FSB EDUCATIONAL MEDICAL, INC.
By: By:
-------------------------------- -------------------------------
Typed Name Typed Name
------------------------- ------------------------
Title Title Vice President and Chief
------------------------------ -----------------------------
Officer
-----------------------------
Attest
----------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
-----------------------------
Address where notices to Addresses where notices to
the Bank are to be sent: the Borrowers are to be sent:
1230 Peachtree Street 1327 Northmeadow Parkway
Suite 3600 Suite 132
Atlanta, Georgia 30309 Roswell, Georgia 30076
ANDON COLLEGES, INC.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------------
Officer
------------------------------
Attest
-----------------------------
Typed Name Morris C. Brown
-------------------------
Title Secretary
------------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 50
CALIFORNIA ACADEMY OF
MERCHANDISING, ART AND
DESIGN, INC.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 51
DBS ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 52
DEST EDUCATION CORPORATION
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 53
ICM ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 54
HBC ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 55
MARIC LEARNING SYSTEMS
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
- - Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 56
MTSX ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 57
OIOPT ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 58
PALO VISTA COLLEGE OF NURSING
AND ALLIED HEALTH
SCIENCES, INC.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 59
SACMD ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 60
SCOTTSDALE EDUCATIONAL
CENTER FOR ALLIED HEALTH
CAREERS, INCORPORATED
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
-----------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 61
NEBRASKA ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 62
CHI ACQUISITION CORP.
By:
-------------------------------
Typed Name Vince Pisano
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name Morris C. Brown
------------------------
Title Secretary
------------------------
Chief executive office:
1327 Northmeadow Parkway
Suite 132
Roswell, Georgia 30076
<PAGE> 63
SCHEDULE 3.1
Certain Acquisitions
<PAGE> 64
SCHEDULE 8.16
[SUBSIDIARIES]
Dest Education Corporation is a subsidiary of Andon Colleges, Inc.
<PAGE> 65
SCHEDULE 9.9
[LIENS]
[See attached]
