<PAGE> 1
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) FEBRUARY 14, 1998
-----------------
EDUCATIONAL MEDICAL, INC.
-------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
--------
(STATE OR OTHER JURISDICTION OF INCORPORATION)
000-21567 65-0038445
--------- ----------
(COMMISSION FILE NUMBER (IRS EMPLOYER IDENTIFICATION NO.)
EDUCATIONAL MEDICAL, INC.
1327 NORTHMEADOW PARKWAY, SUITE 132
ROSWELL, GEORGIA 30076
----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 475-9930
--------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 14, 1998, Educational Medical, Inc. (the "Company"),
through its subsidiary, CHI Acquisition Corp. (a Delaware corporation) ("CHI"),
purchased all of the stock (the "Pennsylvania Acquisition") of Computer Hardware
Service Company, Inc. (a Pennsylvania corporation) ("CHSC"), from its former
shareholders (the "Sellers"). CHSC owns and operates two postsecondary
educational institutions (the "Schools") located in Broomall and Southampton,
Pennsylvania, respectively. The purchase was pursuant to a Stock Purchase
Agreement (the "Agreement") dated as of February 14, 1998. CHI was formed for
the sole purpose of effecting the Pennsylvania Acquisition and the Company is
its sole shareholder. The Company entered into the Agreement to reflect that is
jointly and severally liable with CHI with regard to the obligations to the
Sellers which are provided for in the Agreement.
The purchase price of the Pennsylvania Acquisition was $11.75 million.
Pursuant to the Agreement, the shareholders of CHSC sold to CHI all of their
stock in CHSC. Additionally, Sellers agreed not to compete with the Company and
its schools pursuant to the terms (as defined in Section 7(b) of the Agreement).
Pursuant to the terms of the Agreement, CHI paid to CHSC $1,500,000 on
February 14, 1998. The $10,250,000 remaining portion of the purchase price was
paid by delivery of:
(1) a promissory note in the amount of $3,000,000 (the "Second Payment
Note"), payable with interest on the earlier of the last business day within the
first 30 calendar days following the date on which all Prerequisite Student Aid
Approvals are obtained, but no later than August 14, 1998. "Prerequisite Student
Aid Approvals" are defined in the 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.
(2) a promissory note in the amount of $5,750,000 (the "Purchase Money
Promissory Note"), with an initial payment of $1,100,000 plus interest on the
first anniversary of the closing plus quarterly principal and accrued interest
over the remaining four years.
To secure the Second Payment Note and Purchase Money Promissory Note,
the Company pledged all of the issued and outstanding capital stock of CHI and
granted a security interest in the assets of CHSC. Both notes are subordinate to
the Company's senior lender.
(3) 151,900 shares of the Company's Common Stock.
The funds utilized by the Company for the Pennsylvania Acquisition were
provided from the proceeds received by the Company from its initial public
offering of $24,000,000 of Common Stock that was completed on October 28, 1996.
The foregoing description of the Stock Purchase Agreement and the
exhibits to it, including the Second Payment Note, Purchase Money Promissory
Note, Pledge Agreement, and the Security Agreement, 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.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired: Will be filed by
Amendment not later than 60 days from March 1, 1998.
(b) Pro Forma Financial Information Relative to Acquired
Business: Will be filed by Amendment not later than 60 days
from March 1, 1998.
(c) Exhibits
10.1 Stock Purchase Agreement dated February 14, 1998.
10.2 Second Payment Note (Exhibit 1 to Stock Purchase
Agreement).
10.3 Purchase Money Promissory Note (Exhibit 2 to Stock
Purchase Agreement).
10.4 Pledge Agreement (Exhibit 3 to Stock Purchase
Agreement).
10.5 Security Agreement (Exhibit 4 to Stock Purchase
Agreement).
10.6 Registration Rights Agreement (Exhibit 5 to Stock
Purchase Agreement).
10.7 Stock Power (Exhibit 6 to Stock Purchase Agreement).
10.8 Sellers' Subordination Agreement (Exhibit 7 to Stock
Purchase Agreement).
3
<PAGE> 4
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: February 23, 1998 By: /s/ Vince Pisano
------------------------------------
Vince Pisano, Vice President and
Chief Financial Officer
4
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
Agreement dated as of February 14, 1998 among EDUCATIONAL MEDICAL,
INC., a Delaware corporation ("EMI"), CHI ACQUISITION CORP., a Delaware
corporation wholly owned by EMI (the "Buyer"), COMPUTER HARDWARE SERVICE
COMPANY, INC., a Pennsylvania corporation (the "Corporation"), JOSEPH COLYAR, an
individual residing within the State of Pennsylvania ("Colyar"), CLAUDE H.
HARING, an individual residing within the State of Pennsylvania ("Haring"), and
JAMES FRITZ, an individual residing within the State of Pennsylvania ("Fritz").
(Colyar, Haring and Fritz shall be collectively referred to hereinafter as the
"Shareholders").
PRELIMINARY STATEMENT
The Corporation is the owner of two (2) postsecondary educational
institutions located at Westchester Pike and Malin Road, Broomall, Pennsylvania
19008 and 520 Street Road, Southampton, Pennsylvania 18966 (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.
This Agreement contains the terms pursuant to which the Shareholders
have agreed to sell to Buyer all of the Stock. 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; CERTAIN DEFINITIONS;
EFFECTIVE DATE OF TRANSACTION.
(a) The Purchase Price. The purchase price for the Stock is
$11,750,000 (the "Purchase Price"). The Purchase Price will be allocated as
follows: (i) $11,650,000 to the Stock, and (ii) $100,000 to the Non-Competition
Agreement (the "Non-Competition Agreement") contained in Section 7 of this Stock
Purchase Agreement.
(b) Conveyance of the Stock; Exclusive Right to Purchase the Stock.
On February 14, 1998 (the "Closing Date"), or such other date as the parties may
specify prior to March 31, 1998 (the "Termination Date"), the Shareholders shall
convey to Buyer all of their Stock (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 shall not negotiate with any other
potential buyer during such exclusivity period.
<PAGE> 2
(c) Cash Payments by the Buyer. On the Closing Date the Buyer shall
pay to the Shareholders $1,500,000 (the "Initial Payment"), by wire transfer or
otherwise in immediately available funds. Of the Initial Payment, $84,755 shall
be paid to Fritz as payment in full for his 250 shares of stock and payments of
$707,622 shall be made to each of Colyar and Haring, as the initial payment on
account of their 16,820 shares of Stock held by each of them.
(d) Delivery of Second Payment Note, the Purchase Money Promissory
Note, the Pledge Agreement, Security Agreement and the EMI Stock by the Buyer.
On the Closing Date the Buyer shall deliver to Messrs. Colyar and Haring:
(e) its Promissory Notes in the aggregate principal amount of
$3,000,000 (the "Second Payment Note") in the form attached to this Agreement as
EXHIBIT 1, payable with interest as provided below on the earlier of the last
business day within the first 30 calendar days following the date on which the
Prerequisite Student Aid Approvals are obtained, but no later than six months
from the date of Closing with interest accruing at an interest rate equal to 8%
per annum commencing ninety (90) days from the Closing Date. "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
(f) its Promissory Notes in the aggregate amount of $5,750,000 (the
"Purchase Money Promissory Note") in the form attached to this Agreement as
EXHIBIT 2, pursuant to which the Buyer shall pay to the Shareholders an initial
payment equal to One Million One Hundred Thousand and no/100 Dollars
($1,100,000) plus interest at 8% per annum on the first anniversary of the
Closing Date and thereafter amortize the remaining principal in equal quarterly
principal payments along with all accrued interest over the remaining four (4)
years with interest at 8% per annum.
(g) a pledge agreement in the form attached to this Agreement as
EXHIBIT 3 (the "Pledge Agreement") pursuant to which EMI secures the payment of
the Second Payment Notes and the Purchase Money Promissory Notes, and the
related interest by a pledge of all of the outstanding and issued capital stock
(the "Buyer's Stock") of the Buyer.
(h) a Security Agreement in the form attached to this Agreement as
EXHIBIT 4 (the "Security Agreement") pursuant to which the Buyer secures the
payment of the Second Payment Notes and the Purchase Money Promissory Notes by
granting to the Shareholders a security interest in the Assets (as defined in
Section 2(d) hereof) subordinate only to EMI's senior lender.
(i) $1,500,000 of Common Stock of EMI (the "EMI Purchase Stock")
based upon the last sale (the "Last Sale") of EMI Stock as of the business day
-2-
<PAGE> 3
immediately prior to the Closing Date. The specific number of shares of the EMI
Purchase Stock shall be calculated by dividing $1,500,000 by the price per share
of the Last Sale.
2. REPRESENTATIONS OF THE CERTAIN SHAREHOLDERS. Messrs. Colyar and
Haring, jointly and severally, represent and warrant to Buyer as follows,
provided, however, that except with respect to subsections (c), (d), (e), (h),
the second and third paragraphs of subsection (i) and subsection (x) of this
Section 2, such representations are made to the best of the knowledge of such
Shareholder or to facts or circumstances of which they reasonably should have
had knowledge:
(a) No Misstatements. The representations of the Shareholders and
information supplied by the Shareholders and/or the Corporation 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 they are 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, has received all necessary corporate authorization and is a legal,
valid and binding obligation of the Corporation and the Shareholders,
enforceable against each of them in accordance with its terms. 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, (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 or the Shareholders 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, 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 September 30, 1997,
1996 and 1995, and statements of income and expense and cash flows for the
years then ending (the "Corporation's Audited Financial Statements"). Attached
as SCHEDULE
-3-
<PAGE> 4
2(C)(1)(II) to the Disclosure Memorandum is the Corporation's unaudited balance
sheet as of January 31, 1997, modified to give effect to adjustments through
the date of Closing (February 14, 1998) based on the Corporation's divestiture
of assets used in lines of business unrelated to the operations of its Schools
and/or limited partnership interests in real estate to be leased to the
Corporation as a closing condition to the sale of the Stock and with Profit
and Loss Statements for the same period reflecting the same adjustments. No
cash flow statements for this period are included (the "Corporation's Most
Recent Balance Sheet") (collectively, the Corporation's Unaudited Financial
Statement"). The Corporation's Audited and Unaudited Financial Statements are
collectively called the "Corporation's Financial Statements." Attached as
SCHEDULE 2(C)(1)(III) to the Disclosure Memorandum are the Corporation's
corporate tax returns for the years of 1996 and 1995. [Definition of Schedule
2(c)(1)(ii) modified pursuant to stipulation by the parties' counsel dated
February 16, 1998.]
(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 properly reflect accruals through the end of the period;
provided, however, that the Corporation's Unaudited Financial Statements do not
contain footnotes and the related disclosures. 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) 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
-4-
<PAGE> 5
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 the Shareholders, threatened condemnation
proceeding with respect to the School Facilities.
(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
School's 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) There are no Hazardous Substances(1) in, on or under the
School Facilities except for those which are used by the Corporation in
compliance, in all
- ---------------------
(1) The term "Hazardous Substance" shall include without limitation:
(l) Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances," or "solid
waste" in CERCLA, RCRA, and the Hazardous Materials Transportation
-5-
<PAGE> 6
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
-----------------------------------------------------------------------
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 of the Clean Water Act, 33 U.S.C.
SS1251 et seq. or listed pursuant to Section 307 of the Clean Water
Act, (E) flammable explosive, or (F) radioactive materials.
-6-
<PAGE> 7
body or agency or other entity granting such Accreditation or Certification.
Included in such Disclosure Memorandum are copies of all such Accreditations and
Certifications.
(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 Schools are accredited by the Accrediting Commission
of Career Schools and Colleges of Technology. The Corporation's operation of the
Schools are and have 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 compliance with,
a valid program participation agreement with the Department of Education with
respect to the operations being conducted by the Schools. The Corporation has
not received any notice, not previously complied with, with respect to any
alleged 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 complied with, the Corporation has disclosed its
receipt and disposition to Buyer prior to the execution of this Agreement in
writing by a letter making specific reference to this Section of this Agreement.
The Corporation is and at all times has been, in 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. The Corporation has
submitted audited financial statements to the Department of Education for the
fiscal years ended September 30, 1996 and September 30, 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
compliance with all DOE Regulations relating to financial and administrative
responsibility as of September 30, 1997. 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 federal fiscal
years 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.
-7-
<PAGE> 8
(4) The Corporation is not aware of any 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(H)(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
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.
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.
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. 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
-8-
<PAGE> 9
Supplemental Loans for Students programs (or their applicable predecessor
programs) for the federal fiscal years ended September 30, 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. Attached to the Disclosure Memorandum as Schedule
15 is a list of all tradenames, trademarks, service marks, copyrights and the
registrations for them owned or used by the Corporation in connection with the
operation of the Schools. To the best knowledge of the Corporation, it has not
infringed and is not now infringing, any trademark, tradename, service mark, or
copyright belonging to any other person in connection with the operation of the
Schools. Except as set forth on such Schedule, the Corporation is not a party to
any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademark, tradename, service mark, or copyright
used by the Corporation in connection with the operation of the Schools. The
Corporation's operation of the School's may be conducted without license by
others for the use of any tradename, trademark, service mark, or copyright.
(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 16: (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.
(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
-9-
<PAGE> 10
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).
(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 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.
(r) Actions Pending. Except as disclosed in SCHEDULE 2(R) to the
Disclosure Memorandum: (i) there are no actions, suits, proceedings or claims
pending or 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 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 the subject of any
formal or informal complaint, investigation or inspection under the Equal
Employment Opportunity
-10-
<PAGE> 11
Act or the Occupational Safety and Health Act (or their state or local
counterparts) or by any other Federal, state or local authority.
(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. The Shareholders have
no knowledge that each such account receivable is not fully collectible to the
extent of the face value thereof, except to the extent of the normal allowance
for doubtful accounts with respect to accounts receivable computed as a
percentage of sales consistent with the Corporation's prior practices as
reflected on the Effective Date Balance Sheet. No account debtor has asserted
any right to any setoff, deduction or defense with respect thereto.
(t) No Guaranties. None of the Corporation's obligations or liabilities
is guaranteed by any other person, firm or corporation, except the Shareholders
have guaranteed the Corporation's obligation which was originally incurred to
First Fidelity, N.A., in connection with its acquisitions of the Schools nor has
the Corporation guaranteed 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) Transactions With Certain Persons. The Schools, on the one hand,
and the Corporation, on the other, when considered on a consolidating basis, do
not owe any amount to, the other or have any contract with or commitment to the
other except as reflected on the Schools' Financial Statements. The Corporation
has made no distributions or other intra company transfers from or to the
Schools subsequent to the date of the Corporation's Most Recent Balance Sheet.
(x) Capital Stock and Subsidiaries. The Corporation's authorized
capital stock consists solely of 100,000 shares of common stock with no par
value of which 33,890 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. The Stock are
fully paid and non-assessable. All of the Stock are 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
-11-
<PAGE> 12
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.
3. REPRESENTATIONS AND WARRANTIES OF EMI AND BUYER. Each of EMI and
Buyer represents to the Corporation and Shareholders 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 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 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. As of the date hereof, 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 7,369,100
shares issued and outstanding as of December 31, 1997; 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,
-12-
<PAGE> 13
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 Annual Report on Form 10-K, 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 1,000 shares of Common Stock of which all
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
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
condition or in the operations, business, prospects, properties of assets of EMI
since 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.
-13-
<PAGE> 14
(g) EMI Purchase Stock. Upon issuance, the EMI Purchase Stock shall be
validly issued, fully paid and non-assessable to the Shareholders free and clear
of all liens, encumbrances and adverse claims.
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 and Shareholders 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 the Shareholders' 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.
(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
-14-
<PAGE> 15
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.
(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
-15-
<PAGE> 16
condition or operations (financial or otherwise) of the Schools, the School
Facilities, or the Assets. Since September 30, 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:
(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 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) Shareholders' Certificates. There shall be delivered to the
Buyer and EMI:
(1) a certificate executed by the President and Secretary of the
Corporation and the Shareholders, 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 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 "Corporation's Certificates."
-16-
<PAGE> 17
(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 of the Boards of Directors of the Buyer, EMI and the
Corporation 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,
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,
relating to the Schools, 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) State Approvals. The transactions provided for in this Agreement
shall have been approved by all applicable state regulatory agencies or
authorities and such approvals shall have been delivered to Buyer.
(m) Leases. The parties shall have entered into a satisfactory lease
with respect to the premises located at 520 Street Road, Southampton Park.
6. CLOSING AND POST CLOSING AGREEMENTS.
-17-
<PAGE> 18
(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. At the Closing, Buyer and
EMI shall deliver to the Shareholders:
(1) Initial Payment;
(2) The Second Payment Notes;
(3) The Purchase Money Promissory Notes;
(4) Certificates representing the EMI Purchase Stock;
(5) The Pledge Agreement;
(6) The Security Agreement and related UCC-1's;
(7) The Buyer's Certificates; and
(8) The Registration Rights Agreement in the form attached to
this Agreement as EXHIBIT 5.
(c) Deliveries by the Corporation to Buyer. At the Closing,
Shareholders shall deliver to Buyer:
(1) The original certificates representing the Stock;
(2) The Stock Power (the (Stock Power") in substantially the
form attached to this Agreement as EXHIBIT 6; and
(3) The Shareholders' Certificates;
(d) Filing of Tax Returns and Other Reports. The Corporation and
Shareholders shall timely file all federal and state income tax and other
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
to the extent required by law or regulation, 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, 1996 to be filed by the
Schools with the Department of Education pursuant to applicable regulations.
-18-
<PAGE> 19
(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 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) Filing for Prerequisite Student Aid Approvals. Prior to 30 days
after the Closing Date, the Buyer shall file all necessary applications for the
Prerequisite Student Aid Approvals.
(g) Acid Test; Minimum Stockholders' Equity. Within thirty (30) days
after the Closing Date, the Shareholders shall provide the Buyer with audited
balance sheets of each school and a combined balance sheet (the "Closing Balance
Sheets") (which shall be subject to the same representations and warranties
provided for in Section 2(c) of this Agreement), which indicates stockholders'
equity as of the Closing Date and the ratio (the "Ratio") of the Corporation's
(i) total cash, cash equivalents and current accounts receivable ("Eligible
Assets") to (ii) current liabilities. In the event that the Ratio on the Closing
Balance Sheets exceeds one (1) to (1) (without giving effect to recording any
liability with respect to the judgment entered against the Corporation in
Richardson v. CHI Institute (the "Judgment") in the aggregate principal amount
of approximately $230,000), the Buyer shall pay to the Shareholders within
fifteen (15) business days an amount equal to the excess Eligible Assets over
current liabilities, provided that such payment shall be limited to an amount
which, after giving effect to such pament, shall not reduce Shareholders' equity
as shown on such Closing Balance Sheet to less than $1,000,000 (without giving
effect to the recording of any liability with respect to the Judgment) and
further provided that $250,000 of such payment shall be deferred and paid on
March 15, 1999 as part of the Purchase Money Promissory Notes. In the event that
the Ratio is less than one (1) to one (1), then the Shareholders shall pay to
the Buyer within fifteen (15) business days an amount equal to the difference
between current liabilities and Eligible Assets The audit fees incurred in
connection with the preparation of the Closing Balance Sheet shall be shared
equally by the Shareholders and the Buyer.
(h) Payments With Respect to Judgments. The Shareholders shall pay to
the Buyer as provided herein up to $50,000 upon receipt of evidence of payment
to the plaintiffs and/or their attorneys with respect to the Judgment. Such
payments shall be made by deduction from the next applicable payment of
principal from the second payment Note or the Purchase Money Promissory Note, as
the case may be.
(i) Further Documents or Acts. The parties will execute, deliver,
record (where appropriate) and/or perform at Closing and from time to time
thereafter, at the
-19-
<PAGE> 20
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 evidence of
the transactions contemplated by this Agreement.
(j) Retention of Certain Key Employees. The Buyer intends to continue
the employment of (i) Glenn Murray through to September 4, 1998, and (ii) Kevin
Quinn prior to February 14, 1999, upon their present terms of employments,
subject to applicable regulations, provided that such employees' complete
interviews reasonably acceptable to the Buyer's management and perform their
employment tasks in a manner consistent with the reasonable expectations of the
Buyer's management.
(k) Guarantee. Within 180 days from the date of the Closing, Buyer will
(i) secure the release of any guaranty of any shareholder of the indebtedness of
the corporation to First Fidelity Bank, N.A. outstanding as of the date hereof
(the "Acquisition Debt") or (ii) satisfy such indebtedness in full.
7. CONFIDENTIALITY AND JOINT NON-COMPETITION AGREEMENT.
(a) Shareholders acknowledges that, as a result of his ownership of the
Schools he 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 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 covenants and agrees 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 agrees at no time retain or remove from the School Facilities
records of any kind or description whatsoever for any
-20-
<PAGE> 21
purpose whatsoever unless authorized by Buyer. Notwithstanding the foregoing
provisions of this Section 7(a), Shareholders may disclose Confidential
Information (i) to his 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 covenants and agrees for a period of ten (10) 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 Pennsylvania 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.
(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 agrees that, if he shall violate any of his 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, 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 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 agrees that the restrictions set forth above (including
without limitation the
-21-
<PAGE> 22
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) Colyar and Haring, jointly and severally agree 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 contained
in this Agreement or in any document incorporated by reference into this
Agreement.
(b) Buyer and EMI, jointly and severally, agree to defend, indemnify
and hold harmless Shareholders and their agents from and against any loss,
liability, damage, settlement or expense (including without limitation
attorneys' fees and disbursements) incurred by Shareholders 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.
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.
-22-
<PAGE> 23
(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 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 or appropriate action is
commenced within such time, pursued diligently and completed within a reasonable
time.
(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 Article
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 Article 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, Section
13(b) 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.
-23-
<PAGE> 24
(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 is
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 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, and fails to cure such default as provided for
in such Sections the nondefaulting party(ies) shall have the right to seek money
damages from the defaulting party(ies), either pursuant to Section 8 of this
Agreement or otherwise. Alternatively, 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
-24-
<PAGE> 25
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.
11. FINDERS FEES. 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 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 Uniform Arbitration Act of Pennsylvania. 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
-25-
<PAGE> 26
Requested, first class postage and registration fees prepaid and correctly
addressed to the parties at the following addresses:
If to Buyer: CHI Acquisition Corp.
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 EMI: Educational Medical, Inc.
1327 Northmeadow Parkway, Suite 132
Roswell, Georgia 33076
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: Computer Hardware Service Company, Inc.
11 Vincent Circle
Jacksonville Park, Ivyland, PA 18974
Attn: President
With a copy to: England & Young, P.C.
50 E. Court Street
Doylestown, PA 18901
Attn: Boyd A. England, Esq.
If to Shareholders: Joseph Colyar
212 Patrick Drive
Richboro, PA 18954
Claude H. Haring, Jr.
2113 Edgehill Drive
Furlong, PA 18925
James Fritz
210 Suffolk Road
Fairless Hills, PA 19030
-26-
<PAGE> 27
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, unles
(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.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania, exclusive of
its choice of law provisions.
(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.
-27-
<PAGE> 28
(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; (ii) claims arising out of a
misrepresentation as to matters contained in Section 2 (h) and 2 (i) (which
shall survive for a period ending on the seventh anniversary of the Closing
Date), or (iii) fraud. All obligations and liabilities described in clauses (i)
and (iii) 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.
-28-
<PAGE> 29
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.
CHI ACQUISITION CORP. ("BUYER") COMPUTER HARDWARE SERVICE
COMPANY, INC. ("CORPORATION")
By: /s/ GARY D. KERBER By: /s/ JOSEPH COLYAR
------------------------------ -----------------------------
Authorized Signatory Authorized Signatory
EDUCATIONAL MEDICAL, INC. ("EMI")
By: /s/ GARY D. KERBER /s/ JOSEPH COLYAR
------------------------------- ----------------------------
Authorized Signatory Joseph Colyar
/s/ CLAUDE H. HARING
----------------------------
Claude H. Haring
/s/ JAMES FRITZ
----------------------------
James Fritz
-29-
<PAGE> 30
EXHIBITS
1. The Second Payment Note
2. The Purchase Money Promissory Note
3. The Pledge Agreement
4. The Security Agreement and related UCC-1's
5. The Registration Rights Agreement
6. The Stock Power
7. The Subordination Agreement
<PAGE> 1
EXHIBIT 10.2
NON-NEGOTIABLE
SECOND PAYMENT PROMISSORY NOTE
U.S. $1,500,000.00 February 14, 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 JOSEPH COLYAR ("Seller"),
or permitted assigns ("Holder"), at 212 Patrick Drive, Richboro, PA 18954, or at
such other place or to such other party as Holder may from time to time
designate in writing, the principal sum of One Million Five Hundred Thousand and
00/100 Dollars (U.S. $1,500,000.00) in lawful currency of the United States.
This Note evidences a payment to be made to the Holder pursuant to the
Stock Purchase Agreement among Seller, Educational Medical, Inc., CHI
Acquisition Corp., and CHI Institutes, Inc., dated February 14, 1998 and
providing for the purchase by CHI Acquisition Corp. of all of the outstanding
and issued Capital Stock of CHI Institutes, Inc. owned by Seller (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 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.
All amounts represented by this Note shall be due and payable on the
earlier of (1) the last business day within the first 30 calendar days following
the date on which the Prerequisite Student Aid Approvals are obtained; or (2)
180 days from the date of Closing (the earlier of the dates referred to in the
preceding two clauses is called the "Maturity Date"). All amounts owing pursuant
to this Note and not paid as of ninety (90) days subsequent to the Closing Date
(the "Interest Commencement Date") shall bear interest at the rate of 8% per
annum commencing on the Interest Commencement Date until paid.
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 Maker shall have the right to offset (an "Offset") the amount
of the Claim, first against the Second Payment Promissory Note and then against
the Purchase Money Promissory Note. Offsets against the Purchase Money
Promissory Note shall be made first against principal payments and then interest
payments in order of such payments and to the extent that a principal payment
has been reduced as a result of such offset, all interest accrued with respect
to such principal amount cancelled and returned or set off, as the case may be.
In connection with any Offset, the Makers must
1
<PAGE> 2
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. The Seller may contest the right to such Offset as provided in the
Agreement.
Maker for itself, its 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. 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 is
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 of
one or more attorneys with regard to collection of this Note against Maker, or
for the protection of its rights under this Note. The term "attorneys' fees"
shall include attorneys' fees at trial and on appeal, and shall include
attorneys' fees incurred in connection with bankruptcy, conservatorship,
receivership or any other proceeding.
All issues arising hereunder shall be governed by the laws of
Pennsylvania. The undersigned consent to the jurisdiction of the Courts of
Pennsylvania in any action or proceeding which may be brought against the
undersigned, under or in connection with this Note or otherwise, and, in the
event any such action or proceeding shall be brought against the undersigned,
the undersigned agree not to raise any objection to such jurisdiction or to the
laying of venue in Bucks County. The undersigned agree that service of process
in any action or proceeding may be duly effected upon the undersigned by service
in accordance with the provisions of the Uniform Interstate and International
Procedure Act.
The undersigned agrees to pay Holder on demand such amounts as are
necessary to reimburse Holder for fees paid to a public officer for filing,
recording or releasing any instrument, financial statement or lien, and all
costs, including attorney's fees, of legal process or proceedings to secure or
collect any and all sums due hereunder.
The undersigned do hereby authorize and empower the Prothonotary or
Clerk or any attorney of any Court of Record of Pennsylvania or elsewhere to
appear for and to enter judgment against any one or more or all of the
undersigned at any time following the Maturity Date for the full principal
amount of this note with interest as stated herein and subject to any Offsets,
with or without declaration filed with costs of suit, release of errors, without
stay of execution, and the undersigned and each of them waive the right
2
<PAGE> 3
of inquisition on any real estate that may be levied on the collection of this
note and do hereby voluntarily condemn the same and authorize the Prothonotary
or Clerk to enter upon the fieri fascias (writ of execution) said voluntary
condemnation and agree that said real estate may be sold on a fieri fascias. The
undersigned hereby voluntarily agree that any property, real or personal,
subject to such judgment may be sold on a writ, and the undersigned hereby waive
and release all relief from any and all appraisement, stay or exemption laws of
any state, or of the United States, now in force or which hereafter may be
passed, and for doing so this agreement or a copy hereof verified by affidavit
shall be sufficient warrant. The authority herein granted to confess judgment
shall not be exhausted by any single exercise thereof, but shall continue from
time to time and at all times until full payment of all of said liability.
Except with respect to any Offsets, the undersigned hereby knowingly,
intelligently and voluntarily waive their right to due process to include a
prejudgment determination of liability and waive their right to enter a defense
on the liability. The undersigned also represent that they have consulted with
an attorney regarding the implications of this provision, that this is a
business transaction, and the Holder's income exceeds $10,000.00 per year.
The word "liability" as used herein shall include any and all debts and
obligations of the undersigned to Holder whether such be primary, secondary,
direct, contingent, sole, joint, or several, due or to become due, or that have
or may hereafter be contracted or incurred.
The obligation of every party who shall sign this Note shall be joint
and several, and any reference herein to the undersigned shall be deemed to
refer and be applicable to each one separately as well as to all. Holder may
surrender this note to any person paying the final installment hereunder, and
may endorse or assign to such person or his order without recourse.
EACH OF HOLDER AND MAKER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER IT OR ITS SUCCESSORS 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.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note on the date first above written.
3
<PAGE> 4
EDUCATIONAL MEDICAL, INC.,
a Delaware corporation
By: ______________________________
Authorized Signatory
CHI ACQUISITION CORP.,
a Delaware corporation
By: ______________________________
Authorized Signatory
4
<PAGE> 5
NON-NEGOTIABLE
SECOND PAYMENT PROMISSORY NOTE
U.S. $ 1,500,000.00 February 14, 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 CLAUDE H. HARING
("Seller"), or permitted assigns ("Holder"), at 2113 Edgehill Drive, Furlong, PA
18925 or at such other place or to such other party as Holder may from time to
time designate in writing, the principal sum of One Million Five Hundred
Thousand and 00/100 Dollars (U.S. $1,500,000.00) in lawful currency of the
United States.
This Note evidences a payment to be made to the Holder pursuant to the
Stock Purchase Agreement among Seller, Educational Medical, Inc., CHI
Acquisition Corp., and CHI Institutes, Inc., dated February 14, 1998 and
providing for the purchase by CHI Acquisition Corp. of all of the outstanding
and issued Capital Stock of CHI Institutes, Inc. owned by Seller (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 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.
All amounts represented by this Note shall be due and payable on the
earlier of (1) the last business day within the first 30 calendar days following
the date on which the Prerequisite Student Aid Approvals are obtained; or (2)
180 days from the date of Closing (the earlier of the dates referred to in the
preceding two clauses is called the "Maturity Date"). All amounts owing pursuant
to this Note and not paid as of ninety (90) days subsequent to the Closing Date
(the "Interest Commencement Date") shall bear interest at the rate of 8% per
annum commencing on the Interest Commencement Date until paid.
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 Maker shall have the right to offset (an "Offset") the amount
of the Claim, first against the Second Payment Promissory Note and then against
the Purchase Money Promissory Note. Offsets against the Purchase Money
Promissory Note shall be made first against principal payments and then interest
payments in order of such payments and to the extent that a principal payment
has been reduced as a result of such offset, all interest accrued with respect
to such principal amount cancelled and returned or set off, as the case may be.
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. The
<PAGE> 6
Seller may contest the right to such Offset as provided in the Agreement.
Maker for itself, its 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. 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 is
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 of
one or more attorneys with regard to collection of this Note against Maker, or
for the protection of its rights under this Note. The term "attorneys' fees"
shall include attorneys' fees at trial and on appeal, and shall include
attorneys' fees incurred in connection with bankruptcy, conservatorship,
receivership or any other proceeding.
All issues arising hereunder shall be governed by the laws of
Pennsylvania. The undersigned consent to the jurisdiction of the Courts of
Pennsylvania in any action or proceeding which may be brought against the
undersigned, under or in connection with this Note or otherwise, and, in the
event any such action or proceeding shall be brought against the undersigned,
the undersigned agree not to raise any objection to such jurisdiction or to the
laying of venue in Bucks County. The undersigned agree that service of process
in any action or proceeding may be duly effected upon the undersigned by service
in accordance with the provisions of the Uniform Interstate and International
Procedure Act.
The undersigned agrees to pay Holder on demand such amounts as are
necessary to reimburse Holder for fees paid to a public officer for filing,
recording or releasing any instrument, financial statement or lien, and all
costs, including attorney's fees, of legal process or proceedings to secure or
collect any and all sums due hereunder.
The undersigned do hereby authorize and empower the Prothonotary or
Clerk or any attorney of any Court of Record of Pennsylvania or elsewhere to
appear for and to enter judgment against any one or more or all of the
undersigned at any time following the Maturity Date for the full principal
amount of this note with interest as stated herein and subject to any Offsets,
with or without declaration filed with costs of suit, release of errors, without
stay of execution, and the undersigned and each of them waive the right of
inquisition on any real estate that may be levied on the collection of this note
and do hereby voluntarily condemn the same and authorize the Prothonotary or
Clerk to enter upon the fieri fascias (writ of execution) said voluntary
condemnation and agree that said real estate may be sold on a fieri fascias. The
undersigned hereby voluntarily agree that any property, real or personal,
subject to such judgment may be sold on a
<PAGE> 7
writ, and the undersigned hereby waive and release all relief from any and all
appraisement, stay or exemption laws of any state, or of the United States, now
in force or which hereafter may be passed, and for doing so this agreement or a
copy hereof verified by affidavit shall be sufficient warrant. The authority
herein granted to confess judgment shall not be exhausted by any single exercise
thereof, but shall continue from time to time and at all times until full
payment of all of said liability.
Except with respect to any Offsets, the undersigned hereby knowingly,
intelligently and voluntarily waive their right to due process to include a
prejudgment determination of liability and waive their right to enter a defense
on the liability. The undersigned also represent that they have consulted with
an attorney regarding the implications of this provision, that this is a
business transaction, and the Holder's income exceeds $10,000.00 per year.
The word "liability" as used herein shall include any and all debts and
obligations of the undersigned to Holder whether such be primary, secondary,
direct, contingent, sole, joint, or several, due or to become due, or that have
or may hereafter be contracted or incurred.
The obligation of every party who shall sign this Note shall be joint
and several, and any reference herein to the undersigned shall be deemed to
refer and be applicable to each one separately as well as to all. Holder may
surrender this note to any person paying the final installment hereunder, and
may endorse or assign to such person or his order without recourse.
EACH OF HOLDER AND MAKER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER IT OR ITS SUCCESSORS 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.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note on the date first above written.
EDUCATIONAL MEDICAL, INC.,
a Delaware corporation
By:
------------------------------------
Authorized Signatory
<PAGE> 8
CHI ACQUISITION CORP.,
a Delaware corporation
By:
-------------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.3
NON-NEGOTIABLE
PURCHASE MONEY PROMISSORY NOTE
U.S. $2,875,000.00 February 14, 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 jointly to the order of CLAUDE H. HARING
(hereinafter referred to as "Seller"), or permitted assigns ("Holder") at 2113
Edgehill Drive, Furlong, PA 18925, or at such other place or to such other
party as Holder may from time to time designate in writing, the principal sum
of Two Million Eight Hundred Seventy-Five Thousand and 00/100 Dollars (U.S.
$2,875,000.00) in lawful currency of the United States.
This Note evidences obligations of the Makers to the Holder provided for in the
Stock Purchase Agreement among Educational Medical, Inc., CHI Acquisition
Corp., CHI Institutes, Inc., and Seller dated February 14, 1998 and providing
for thepurchase by CHI Acquisition Corp. of all of the outstanding and issued
Capital Stock of CHI Institutes, Inc. owned by Seller (the "Agreement"). The
terms of the Agreement are incorporated into this Note, and this Note is the
Purchase Money Promissory Note referred to in the Agreement representing a
portion of the purchase price for the Stock 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.
This Note shall bear interest at the rate of eight percent (8%) per annum. An
initial principal payment equal to Five Hundred Fifty Thousand and 100 Dollars
($550,000) together with accrued interest shall be paid by the Makers to the
Holder on February 15, 1999. A principal payment of $125,000 plus all interest
accrued with respect to such principal payment shall be made on March 15, 1999.
Thereafter, the remaining principal balance shall amortize in equal quarterly
payments over a period of four years each in the amount of One Hundred Thirty
Seven Thousand Five Hundred and 00/100 Dollars ($137,500) plus accrued interest
commencing on the last business day in May 1999, and on the last business day
of each August, November, February and May thereafter with all remaining
principal and interest due on February 13, 2003 which payment shall include all
accrued interest.
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 Maker shall have the right to offset (an "Offset") the amount
of the Claim, first against the Second Payment Promissory Note and then against
the Purchase Money Promissory Note. Offsets against the Purchase Money
Promissory Note shall be made first against principal payments and then
interest payments in order of such payments and to the extent that a principal
payment has been reduced as a result of such offset, all interest accrued with
respect to such principal amount cancelled and returned or set off, as the case
may be. In connection with any Offset, the Makers must deliver to the Seller
1
<PAGE> 2
written notice at or prior to the time the related payment would otherwise be
due describing the basis for such Offset with reasonable detail. The Seller
may contest the right to such Offset as provided in the Agreement.
All amounts represented by this Note shall be due and payable (1) within 15
days following notice to the Maker from the Holder that a payment of principal
or interest 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, or (2) February 13, 2003 (the earlier
of the dates referred to in the preceding two clauses is called the "Maturity
Date"). All 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.
All issues arising hereunder shall be governed by the laws of
Pennsylvania. The undersigned consent to the jurisdiction of the Courts of
Pennsylvania in any action or proceeding which may be brought against the
undersigned, under or in connection with this Note or otherwise, and, in the
event any such action or proceeding shall be brought against the undersigned,
the undersigned agree not to raise any objection to such jurisdiction or to the
laying of venue in Bucks County. The undersigned agree that service of process
in any action or proceeding may be duly effected upon the undersigned by
service in accordance with the provisions of the Uniform Interstate and
International Procedure Act.
The undersigned agrees to pay Holder on demand such amounts as are
necessary to reimburse Holder for fees paid to a public officer for filing,
recording or releasing any instrument, financial statement or lien, and all
costs, including attorney's fees, of legal process or proceedings to secure or
collect any and all sums due hereunder.
2
<PAGE> 3
The undersigned do hereby authorize and empower the Prothonotary or
Clerk or any attorney of any Court of Record of Pennsylvania or elsewhere to
appear for and to enter judgment against any one or more or all of the
undersigned at any time following the Maturity Date for the full principal
amount of this note with interest as stated herein and subject to any Offsets,
with or without declaration filed with costs of suit, release of errors,
without stay of execution, and the undersigned and each of them waive the right
of inquisition on any real estate that may be levied on the collection of this
note and do hereby voluntarily condemn the same and authorize the Prothonotary
or Clerk to enter upon the fieri fascias (writ of execution) said voluntary
condemnation and agree that said real estate may be sold on a fieri fascias.
The undersigned hereby voluntarily agree that any property, real or personal,
subject to such judgment may be sold on a writ, and the undersigned hereby
waive and release all relief from any and all appraisement, stay or exemption
laws of any state, or of the United States, now in force or which hereafter may
be passed, and for doing so this agreement or a copy hereof verified by
affidavit shall be sufficient warrant. The authority herein granted to confess
judgment shall not be exhausted by any single exercise thereof, but shall
continue from time to time and at all times until full payment of all of said
liability.
Except with respect to any Offsets, the undersigned hereby knowingly,
intelligently and voluntarily waive their right to due process to include a
prejudgment determination of liability and waive their right to enter a defense
on the liability. The undersigned also represent that they have consulted with
an attorney regarding the implications of this provision, that this is a
business transaction, and the Holder's income exceeds $10,000.00 per year.
The word "liability" as used herein shall include any and all debts
and obligations of the undersigned to Holder whether such be primary,
secondary, direct, contingent, sole, joint, or several, due or to become due,
or that have or may hereafter be contracted or incurred.
The obligation of every party who shall sign this Note shall be joint
and several, and any reference herein to the undersigned shall be deemed to
refer and be applicable to each one separately as well as to all. Holder may
surrender this note to any person paying the final installment hereunder, and
may endorse or assign to such person or his order without recourse.
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.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note in Doylestown, Pennsylvania, the date first above written.
EDUCATIONAL MEDICAL, INC.
a Delaware corporation
By:_________________________
Authorized Signatory
CHI ACQUISITION CORP.,
a Delaware corporation
By:_________________________
Authorized Signatory
4
<PAGE> 5
NON-NEGOTIABLE
PURCHASE MONEY PROMISSORY NOTE
U.S. $2,875,000.00 February 14, 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 jointly to the order of JOSEPH COLYAR
(hereinafter referred to as "Seller"), or permitted assigns ("Holder") at 212
Patrick Drive, Richboro, PA 18954, or at such other place or to such other party
as Holder may from time to time designate in writing, the principal sum of Two
Million Eight Hundred Seventy-Five Thousand and 00/100 Dollars (U.S.
$2,875,000.00) in lawful currency of the United States.
This Note evidences obligations of the Makers to the Holder provided for in the
Stock Purchase Agreement among Educational Medical, Inc., CHI Acquisition Corp.,
CHI Institutes, Inc., and Seller dated February 14, 1998 and providing for the
purchase by CHI Acquisition Corp. of all of the outstanding and issued Capital
Stock of CHI Institutes, Inc. owned by Seller (the "Agreement"). The terms of
the Agreement are incorporated into this Note, and this Note is the Purchase
Money Promissory Note referred to in the Agreement representing a portion of the
purchase price for the Stock 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.
This Note shall bear interest at the rate of eight percent (8%) per annum. An
initial principal payment equal to Five Hundred Fifty Thousand and 100 Dollars
($550,000) together with accrued interest shall be paid by the Makers to the
Holder on February 15, 1999. A principal payment of $125,000 plus all interest
accrued with respect to such principal payment shall be made on March 15, 1999.
Thereafter, the remaining principal balance shall amortize in equal quarterly
payments over a period of four years each in the amount of One Hundred Thirty
Seven Thousand Five Hundred and 00/100 Dollars ($137,500) plus accrued interest
commencing on the last business day in May 1999, and on the last business day of
each August, November, February and May thereafter with all remaining principal
and interest due on February 13, 2003 which payment shall include all accrued
interest.
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 Maker shall have the right to offset (an "Offset") the amount
of the Claim, first against the Second Payment Promissory Note and then against
the Purchase Money Promissory Note. Offsets against the Purchase Money
Promissory Note shall be made first against principal payments and then interest
payments in order of such payments and to the extent that a principal payment
has been reduced as a result of such offset, all interest accrued with respect
to such principal amount cancelled and returned or set off, as the case may be.
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. The Seller may
contest the right to such Offset as
<PAGE> 6
provided in the Agreement.
All amounts represented by this Note shall be due and payable (1) within 15 days
following notice to the Maker from the Holder that a payment of principal or
interest 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, or (2) February 13, 2003 (the earlier
of the dates referred to in the preceding two clauses is called the "Maturity
Date"). All 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.
All issues arising hereunder shall be governed by the laws of Pennsylvania.
The undersigned consent to the jurisdiction of the Courts of Pennsylvania in any
action or proceeding which may be brought against the undersigned, under or in
connection with this Note or otherwise, and, in the event any such action or
proceeding shall be brought against the undersigned, the undersigned agree not
to raise any objection to such jurisdiction or to the laying of venue in Bucks
County. The undersigned agree that service of process in any action or
proceeding may be duly effected upon the undersigned by service in accordance
with the provisions of the Uniform Interstate and International Procedure Act.
The undersigned agrees to pay Holder on demand such amounts as are
necessary to reimburse Holder for fees paid to a public officer for filing,
recording or releasing any instrument, financial statement or lien, and all
costs, including attorney's fees, of legal process or proceedings to secure or
collect any and all sums due hereunder.
The undersigned do hereby authorize and empower the Prothonotary or Clerk
or any attorney of any Court of Record of Pennsylvania or elsewhere to appear
for and to enter judgment against any one or more or all of the undersigned at
any time following the Maturity
<PAGE> 7
Date for the full principal amount of this note with interest as stated herein
and subject to any Offsets, with or without declaration filed with costs of
suit, release of errors, without stay of execution, and the undersigned and each
of them waive the right of inquisition on any real estate that may be levied on
the collection of this note and do hereby voluntarily condemn the same and
authorize the Prothonotary or Clerk to enter upon the fieri fascias (writ of
execution) said voluntary condemnation and agree that said real estate may be
sold on a fieri fascias. The undersigned hereby voluntarily agree that any
property, real or personal, subject to such judgment may be sold on a writ, and
the undersigned hereby waive and release all relief from any and all
appraisement, stay or exemption laws of any state, or of the United States, now
in force or which hereafter may be passed, and for doing so this agreement or a
copy hereof verified by affidavit shall be sufficient warrant. The authority
herein granted to confess judgment shall not be exhausted by any single exercise
thereof, but shall continue from time to time and at all times until full
payment of all of said liability.
Except with respect to any Offsets, the undersigned hereby knowingly,
intelligently and voluntarily waive their right to due process to include a
prejudgment determination of liability and waive their right to enter a defense
on the liability. The undersigned also represent that they have consulted with
an attorney regarding the implications of this provision, that this is a
business transaction, and the Holder's income exceeds $10,000.00 per year.
The word "liability" as used herein shall include any and all debts and
obligations of the undersigned to Holder whether such be primary, secondary,
direct, contingent, sole, joint, or several, due or to become due, or that have
or may hereafter be contracted or incurred.
The obligation of every party who shall sign this Note shall be joint and
several, and any reference herein to the undersigned shall be deemed to refer
and be applicable to each one separately as well as to all. Holder may surrender
this note to any person paying the final installment hereunder, and may endorse
or assign to such person or his order without recourse.
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.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Note in
Doylestown, Pennsylvania, the date first above written.
EDUCATIONAL MEDICAL, INC.
a Delaware corporation
By:
------------------------------
Authorized Signatory
CHI ACQUISITION CORP.,
a Delaware corporation
By:
------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 10.4
PLEDGE AGREEMENT
AGREEMENT, dated as of February 14, 1998 between EDUCATIONAL MEDICAL, INC.,
a Delaware corporation (the "Pledgor"), JOSEPH COLYAR AND CLAUDE H. HARING,
individuals residing within the State of Pennsylvania (the "Pledgees") and CHI
ACQUISITION CORP., a Delaware corporation (the "Issuer").
PRELIMINARY STATEMENT
The Pledgor is the owner of all of the issued and outstanding common stock,
par value $.01 per share (the "Pledged Securities"), of the Issuer.
The Issuer and the Pledgor have jointly and severally executed and
delivered to Pledgees their Second Payment Promissory Note in the amount of
$3,000,000 and Purchase Money Promissory Note in the amount of $5,750,000
(collectively, the "Promissory Notes"), copies of which are attached hereto as
COMPOSITE EXHIBIT 1 to this Pledge Agreement. The Pledgor's obligations with
respect to the payment of the Promissory Notes (the "Secured Obligations") are
to be secured by the Pledged Collateral, as defined in Section 1.
In consideration of the premises and of the mutual covenants herein
contained, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
1. Pledge. As security for the due and punctual payment and performance of
the payment of the Secured Obligations, and this Agreement, the Pledgor hereby
pledges, hypothecates, assigns, transfers, sets over and delivers unto the
Pledgees, and hereby grants to the Pledgees a security interest in, the
following:
(a) the Pledged Securities and the certificates representing the
Pledged Securities, and all cash, proceeds, securities, dividends and other
property at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Securities; and
(b) all securities hereafter delivered or issued in substitution for or
in addition to any of the foregoing, all certificates and instruments
representing or evidencing such securities, together with the interest coupons
(if any) attached thereto, and all cash, proceeds, securities, interest,
dividends and other property at any time and from time to time received or
otherwise distributed in respect of or in exchange for any or all thereof (all
such Pledged Securities, certificates, interest coupons, cash, proceeds,
securities, interest, dividends and other property being herein collectively
called the "Pledged Collateral");
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
titles, interests, privileges and preferences appertaining or incidental
thereto, unto the
<PAGE> 2
Pledgees, its successors and assigns, forever, subject, however to the terms,
covenants and conditions hereinafter set forth.
2. Transfer to Escrow Agent. The original certificates representing all
Pledged Collateral shall be held on behalf of Pledgees by England & Young, P.C.
(the "Escrow Agent"). The Pledgor shall deliver to the Escrow Agent all original
certificates (the "Original Certificates") representing the Pledged Collateral
issued in the name of the Pledgor, endorsed or assigned in blank in favor of the
Pledgees, and subject only to customary restrictions on transferability provided
for in the Securities Act of 1933 and applicable related state laws and
regulations. All of the Pledged Securities represented by such certificate(s)
are validly issued, duly paid and non-assessable. The Pledgees may, upon request
to the Escrow Agent and delivery by the Escrow Agent of the appropriate Pledged
Collateral to the Issuer, exchange the certificates representing the Pledged
Collateral for certificates of smaller or larger denominations for any purpose
consistent with the terms of this Pledge Agreement.
3. Voting Rights; Dividends. So long as there is no failure to make due and
punctual payment to the Pledgees in accordance with the terms of the Secured
Obligations nor any other continuing event which would constitute an event of
default under this Agreement (an "Event of Default"):
(a) The Pledgor shall be entitled to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Pledged Collateral or
any part thereof.
(b) The Pledgor shall be entitled to receive and retain any and all
ordinary cash dividends and interest payable on the Pledged Collateral, but any
and all stock and/or liquidating dividends, distributions in property, returns
of capital or other distributions made on or in respect of the Pledged
Collateral, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of an Issuer or received in
exchange for Pledged Collateral or any part thereof, or as a result of any
merger, consolidation, acquisition or other exchange of assets to which the
Issuer may be a party or otherwise, and any and all cash and other property
received in payment of the principal of or in redemption of or in exchange for
any Pledged Collateral (either at maturity, upon call for redemption or
otherwise), shall be and become part of the collateral pledged by the Pledgor
hereunder and, if received by the Pledgor, shall be received in trust for the
benefit of the Pledgees or its assigns or the holder of any subsequent perfected
lien as provided in the addendum to this Pledge Agreement and shall forthwith be
delivered to the Escrow Agent (accompanied by proper instruments of assignment
and/or stock and/or bond powers executed by the Pledgor in accordance with the
Pledgees' instructions) to be held as Pledged Collateral subject to the terms of
this Pledge Agreement.
(c) The Pledgees shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies, powers of attorney, dividend orders,
interest coupons and other instruments as the Pledgor may request for the
purpose of
-2-
<PAGE> 3
enabling the Pledgor to exercise the voting and/or consensual rights and powers
which it is entitled to exercise pursuant to subparagraph (a) above and/or to
receive the dividends and/or interest payments which it is authorized to receive
and retain pursuant to subparagraph (b) above.
(d) Upon the occurrence and during the continuance of an Event of
Default, all rights of the Pledgor to exercise the voting and/or consensual
rights and powers which it is entitled to exercise pursuant to Section 3(a)
hereof and/or to receive the dividends and interest payments which it is
authorized to receive and retain pursuant to Section 3(b) hereof shall cease,
and all such rights shall thereupon become vested in the Pledgees who shall have
the sole and exclusive right and authority to exercise such voting and/or
consensual rights and powers and/or to receive and retain the dividends and/or
interest payments which the Pledgor would otherwise be authorized to retain
pursuant to Section 3(b) hereof. Any and all money and other property paid over
to or received by the Pledgees pursuant to the provisions of this paragraph (d)
or pursuant to the exercise by Pledgees of the voting and/or consensual rights
and powers shall be retained by the Pledgees as additional collateral hereunder
and be applied in accordance with the provisions of this Pledge Agreement.
4. Events of Default. The occurrence of any one or more of the following
shall constitute an Event of Default:
(a) if the Makers shall default in making any payment with respect to
the Secured Obligations; provided, however, that, in the event of a dispute as
to such payment, the relevant payment may be made into the escrow account of the
Escrow Agent subject to the resolution of such dispute or, at the discretion of
the Pledgor, into the registry of any court of competent jurisdiction and such
payment shall not constitute an Event of Default, or
(b) if Pledgor shall become bankrupt or insolvent, or file any petition
for reorganization or relief from creditors under any applicable law of any
jurisdiction, or make any general assignment for the benefit of creditors, and
in either event
(c) such default or event shall continue for 10 days after the giving
of written notice to the Pledgees.
5. Remedies upon Default. If any Event of Default shall have occurred and
be continuing, then, in addition to exercising any rights and remedies as a
secured party under the Uniform Commercial Code in effect in Pennsylvania, the
Pledgees may, at their option, do any one or more of the following without being
required to give any notice to the Pledgor:
(a) apply the cash (if any) then held by them as collateral hereunder,
first, to the payment of all costs of collection (including attorneys' fees)
incurred in enforcing Pledgees' rights under the Promissory Notes and this
Agreement; second to the payment of interest accrued and unpaid on the
Promissory Notes (first on the Second
-3-
<PAGE> 4
Payment Promissory Note and then on the Purchase Money Promissory Note (the
"Promissory Note Payment Order") to and including the date of such application,
third to the payment or prepayment of principal of the Promissory Notes in
accordance with the Promissory Note Payment Order, and fourth, to the payment of
all other amounts then owing to the Pledgees under the terms of the Promissory
Notes in accordance with the Promissory Note Payment Order and then otherwise
pursuant to this Pledge Agreement, and
(b) sell the Pledged Collateral, or any part thereof, at any public or
private sale or at any broker's board or in any securities exchange, for cash,
upon credit or for future delivery, as the Pledgees shall deem appropriate. The
Pledgees shall be authorized at any such sale (if they deem it advisable to do
so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Pledgees shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Pledged Collateral so sold, free and clear from any claims or rights of Pledgor.
Further, it shall be deemed commercially reasonable for the Pledgees to impose
sufficient conditions on any such sale so as to preclude the necessity of
registration of the Pledged Collateral under the Securities Act of 1933, as
amended. Each such purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of the Pledgor, and the
Pledgor hereby waives (to the extent permitted by law) all rights of redemption,
stay and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. The Pledgees
shall give the Pledgor at least 30 days' written notice in the manner specified
for notices under this Agreement of the Pledgees' intention to make any such
public or private sale or sales at any broker's board or on any such securities
exchange, and the Pledgor agrees that such notice of sale will be commercially
reasonable notice to it. Such notice, in case of public sale, shall state the
time and place fixed for such sale, and, in the case of sale at a broker's board
or exchange at which such sale is to be made, the day on which the Pledged
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places, as the Pledgees may fix in
the notice of such sale. At any such sale, the Pledged Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Pledgees may (in its sole and absolute discretion) determine and
the Pledgees or other holder of the Secured Obligations may bid (which bid may
be in whole or in part, in the form of cancellation of indebtedness) for and
purchase for the account of the Pledgees or other holder of the any Secured
Obligation the whole or any part of the Pledged Collateral. If the proceeds of
the Pledged Collateral are insufficient to satisfy Pledgor's obligations under
the Promissory Notes and this Agreement, Pledgor shall remain liable for any
deficiency. The Pledgees shall not be obligated to make any sale of Pledged
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of Pledged Collateral may have been given. The Pledgees may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announ-
-4-
<PAGE> 5
cement at the time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so adjourned. In
case sale of all or any part of the Pledged Collateral is made on credit or for
future delivery, the Pledged Collateral so sold may be retained by the Pledgees
until the sale price is paid by the purchaser or purchasers thereof, but neither
the Pledgees nor any other holder of the Secured Obligations or the assignee of
any of the Pledgees' rights, shall incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Pledged Collateral
so sold and, in the case of such failure, such Pledged Collateral may be sold
again upon like notice. As an alternative to exercising the power of sale herein
conferred upon it, the Pledgees may proceed by a suit or suits at law or in
equity to foreclose this Pledge Agreement and to sell the Pledged Collateral, or
any portion thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction; and
(c) purchase the Pledged Collateral or any part thereof at any public
or private sale.
6. Application of Proceeds of Sale. The proceeds of sale of Pledged
Collateral sold pursuant to Section 5 (c) hereof shall be applied by the
Pledgees as follows:
First: in the manner provided in paragraph (a) of Section 5 hereof; and
Second: the balance (if any) of such proceeds shall be paid to the
Pledgor, its successors or assigns in proportion to their ownership of the
Pledged Collateral, or as a court of competent jurisdiction may direct.
7. Extension or Modification of the Promissory Notes. The Pledged
Collateral pledged hereunder secures the payment and performance of all of the
indebtedness of the Pledgor with respect to the Secured Obligations and the
Pledgor agrees that the Promissory Notes may be extended or otherwise modified
in accordance with its terms without affecting this Pledge Agreement or the
obligations of Pledgor hereunder, which shall continue in full force and effect
until the Secured Obligations shall have been fully paid and performed.
8. Authority of Pledgees. The Pledgees shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to the Pledgees
by the terms hereof, together with such powers as are reasonably incidental
thereto. The Pledgees may execute any of its duties hereunder by or through
agents or employees and shall be entitled to retain counsel and to act in
reliance upon the advice of such counsel (whether written or oral) concerning
all matters pertaining to its duties hereunder. Neither the Pledgees, nor any
director, officer or employee of the Pledgees, shall be liable for any action
taken or omitted to be taken by it or them hereunder in connection herewith,
except for its or their own gross negligence or willful misconduct. The Pledgor
hereby agrees to reimburse the Pledgees, on demand, for all expenses incurred by
the Pledgees in connection with the administration and enforcement of this
Pledge Agreement (including expenses incurred by the Escrow Agent or any
subagent
-5-
<PAGE> 6
employed by the Pledgees) and agrees to indemnify and hold harmless the Pledgees
and/or any such subagent against any and all liability incurred by the Pledgees
(or such subagent hereunder or in connection herewith), unless such liability
shall be due to willful misconduct or gross negligence on the part of the
Pledgees or such subagent.
9. Pledgees Appointed Attorney in Fact. The Pledgor hereby appoints the
Pledgees the Pledgor's attorney-in-fact (any proxy with full power of
substitution to vote and otherwise act following an Event of Default) for the
purpose of carrying out the provisions of this Pledge Agreement and, upon the
occurrence of any Event of Default, taking any action and executing any
instrument which the Pledgees may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, upon an Event of Default, the
Pledgees shall have the right and power to receive, endorse and collect all
checks and other orders for the payment of money made payable to the Pledgor
representing any dividend, interest payment or other distribution payable or
distributable in respect of the Pledged Collateral or any part thereof and to
settle or compromise any claims relating thereto and to give full discharge for
the same.
10. Representations, Warranties and Agreements of Pledgor. To induce
Pledgees to accept the Promissory Notes, Pledgor represents and warrants to, and
agrees with, Pledgees, that:
(a) it owns the Pledged Securities and by the execution and delivery of
this Agreement and delivery of the Pledged Collateral it has created is a first
priority lien granted in favor of the Pledgees with respect to such Pledged
Collateral; and
(b) this Agreement is the valid and binding obligation of Pledgor,
enforceable in accordance with its terms; and
(c) so long as this Agreement is in effect, not to sell substantially
of its assets without the prior written consent of Pledgees.
11. No Waiver; Cumulative Remedies. No failure on the part of the Pledgees
to exercise, and no delay in exercising any right, power, privilege or remedy
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power, privilege or remedy of the Pledgees preclude
any other or further exercise thereof or the exercise of any other right, power,
privilege or remedy. All remedies hereunder are cumulative and are not exclusive
of any other remedies provided herein or by law.
12. Termination. This Pledge Agreement shall terminate when all
indebtedness secured hereby has been fully paid and performed, at which time the
Pledgees shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Pledgor, or to such person or persons as the Pledgor shall
designate, such of the Pledged Collateral (if any) as shall not have been sold
or otherwise applied by the Pledgees pursuant to
-6-
<PAGE> 7
the terms hereof and shall still be held hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be without
recourse against or express or implied representation or warranty by the
Pledgees and at the expense of the Pledgor.
13. Assignability. The Pledgees may assign, in whole or in part, any or all
of its rights, title and interests provided for in this Pledge Agreement, to any
holder of the Secured Obligations or portion thereof.
14. Terms Relating to Escrow Agent.
(a) England & Young, P.C. shall initially act as Escrow Agent under
this Agreement. The Escrow Agent shall acknowledge its receipt of the original
certificate(s) representing the Pledged Securities by executing this Agreement.
Pledgor shall also deliver to the Escrow Agent any and all original
certificates, funds or documents as may hereafter become part of the Pledged
Collateral. The possession of the original certificates and other documents
relating to the Pledged Collateral shall be deemed to constitute the Pledgees'
possession thereof in order to perfect Pledgees' security interest in the
Pledged Collateral.
(b) The Escrow Agent shall hold all certificates, funds and documents
representing the Pledged Collateral (collectively, the "Instruments") subject to
the following terms and conditions:
(i) If the Pledgees at any time instructs the Escrow Agent to
exchange any certificates representing any securities included in the
Pledged Collateral to change the denominations of such certificates,
the Escrow Agent shall comply with such request promptly by so
exchanging certificates directly with the Issuer. The Escrow Agent
shall give Pledgor and the holder of any subsequent perfected lien as
provided in the addendum to this Pledge Agreement notice of any such
action within 10 days after it is completed.
(ii) Either Pledgor or Pledgees may give the Escrow Agent a notice
requesting the Escrow Agent to make any delivery or take any action
with respect to any Instruments that is proposed to be taken pursuant
to this Agreement. If the notice describing any such request is
executed by both the Pledgor and the Pledgees, the Escrow Agent shall
promptly comply with the request.
If the notice is given by Pledgor or Pledgees, and is not signed by
both, the Escrow Agent shall promptly forward by hand or overnight delivery a
copy of such notice to the party that did not sign it. Thereafter, the Escrow
Agent shall refrain from taking any action with respect to such request for at
least 5 business days, or until the other party authorizes the Escrow Agent in
writing to comply with such request. If the other party fails to deliver written
notice of objection to the Escrow Agent within such 5-day period, the Escrow
Agent shall be fully protected in complying with such request.
-7-
<PAGE> 8
(c) In order to induce the Escrow Agent to act under this Agreement,
the Pledgor and the Pledgees jointly and severally agree as follows:
(i) The Escrow Agent shall not in any way be bound or affected
by any notice or modification or cancellation of this Agreement unless
in writing, signed by all parties hereto, nor shall the Escrow Agent be
bound by any modification hereof unless the same shall be satisfactory
to the Escrow Agent. The Escrow Agent shall be entitled to rely upon
any judgment, certification, demand or other writing (including but not
limited to any instructions given to it under (b), above) without being
required to determine the authenticity or the correctness of any fact
stated therein, the propriety of validity of the service thereof, or
the jurisdiction of the court issuing such judgment or order.
(ii) The Escrow Agent may act in reliance upon any document,
instrument or signature believed by it to be genuine, and the Escrow
Agent may assume that any person purporting to give any notice or
instructions in accordance with the provisions hereof has been duly
authorized to do so.
(iii) The Escrow Agent may act relative hereto in reliance
upon advice of counsel in reference to any matter(s) connection
herewith, and shall not be liable for any mistake of fact or error of
judgment, or for any acts or omissions of any kind, unless caused by
the Escrow Agent's willful misconduct or gross negligence. The Escrow
Agent shall be entitled to consult with its counsel, which shall
include any attorney employed by it, and the Escrow Agent shall not be
liable for any action taken, suffered or omitted by it in accordance
with the advice (whether written or oral) of such counsel.
(iv) This Agreement sets forth exclusively the Escrow Agent's
duties with respect to any and all matters pertinent hereto. The Escrow
Agent shall not refer to, and shall not be bound by, the provisions of
any other agreement.
(v) The Escrow Agent may at any time resign hereunder by
giving written notice of its resignation to all parties hereto at least
thirty (30) days prior to the date specified for such resignation to
take effect, and upon the effective date of such resignation, all cash,
documents and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such persons as may be designated
in writing by all parties hereto, whereupon all its prospective
obligations as Escrow Agent hereunder shall cease and terminate. The
Escrow Agent's sole responsibility thereafter shall be to keep safely
all property then held by it and to deliver same to a person designated
by all parties hereto or in accordance with the directions of a final
order or judgment of a court of competent jurisdiction. In addition,
the Escrow Agent shall be discharged of its prospective duties and
obligations hereunder upon its interpleading in a court of competent
jurisdiction all of the funds and property then held by it hereunder.
All parties hereto hereby submit to the personal jurisdiction of said
court (but
-8-
<PAGE> 9
solely for the purpose of implementing this Agreement) and waive all
rights to contest said jurisdiction. However, the Escrow Agent's
resignation and/or interpleading of the Property shall not in any
manner affect or impair any of its obligations under this Agreement.
(vi) Pledgor and Pledgees shall be jointly and severally
obligated to reimburse the Escrow Agent for all its fees, costs and
expenses in connection herewith, including reasonable counsel fees, and
to indemnify it and hold it harmless against any claim asserted against
it or any liability, loss or damage incurred by it in connection
herewith.
(vii) Nothing herein contained shall be deemed to obligate the
Escrow Agent to deliver any securities, cash, instruments, documents or
any other property referred to herein, unless the same shall have first
been received by the Escrow Agent pursuant to this Agreement.
(viii) Pledgor acknowledges that the Escrow Agent is counsel
for the Pledgees, and agrees that no action taken by the Escrow Agent
under this Agreement shall affect or impair the right of the Escrow
Agent to represent the Pledgees in any matter, including an
interpleader action pursuant to this Agreement.
15. Miscellaneous. This Agreement shall be binding on and inure to the
benefit of the respective parties hereto and their successors and assigns. This
Agreement may be executed simultaneously in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
instrument. This Agreement represents the entire understanding of the parties
hereto, and supersedes any and all other prior agreements between the parties.
The terms and provisions of this Agreement cannot be terminated or modified or
amended except in writing and signed by the party against whom enforcement is
sought. The provisions of this Agreement are severable, and any invalidity,
unenforceability or illegality in any provision or provisions hereof shall not
affect the remaining provisions of this Agreement. In any suit, action or
proceeding arising out of or in connection with this Agreement, the prevailing
party shall be entitled to an award of the amount of costs and reasonable
attorneys' fees, including costs fees on one or more appeals and in bankruptcy
proceedings.
All notices required or allowed hereunder shall be in writing and shall
be deemed given as provided for in the Stock Purchase Agreement dated of even
date herewith (the "Stock Purchase Agreement") pursuant to which the Promissory
Notes have been issued, at the address written in the first paragraph hereof if
not otherwise provided for in the Stock Purchase Agreement, or such other
address as is most recently noticed for such party as aforesaid.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Pennsylvania, exclusive of its choice of law
provisions.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the Pledgees has caused this Pledge Agreement to be
duly executed and delivered by its officer thereunto duly authorized, and the
Pledgor has duly executed and delivered this Agreement, as of the date first
above written.
In the Presence of: EDUCATIONAL MEDICAL, INC.,
Delaware corporation
- ------------------------------
- ------------------------------ By:
------------------------------
Authorized Signatory
CHI ACQUISITION CORP., a Delaware
corporation
- ------------------------------
- ------------------------------ By:
------------------------------
Authorized Signatory
- ------------------------------
- ------------------------------ ---------------------------------
Joseph Colyar
- ------------------------------
- ------------------------------ ---------------------------------
Claude H. Haring
ACCEPTANCE OF ESCROW AGENT
England & Young, P.C. acknowledges receipt of the foregoing Agreement and
the Original Certificates, and agrees to act as Escrow Agent under its terms.
By:
------------------------------
Authorized Signatory
-10-
<PAGE> 11
COMPOSITE EXHIBIT 1
The Promissory Notes
-11-
<PAGE> 1
EXHIBIT 10.5
SECURITY AGREEMENT
THIS AGREEMENT is made this 14TH day of February, 1998, by and between
COMPUTER HARDWARE SERVICE COMPANY, INC. a Pennsylvania corporation ("Borrower")
and JOSEPH COLYAR, an individual residing within the State of Pennsylvania
("Colyar") and CLAUDE H. HARING, an individual residing within the State of
Pennsylvania ("Haring"). (Colyar and Haring shall be collectively referred to
hereinafter as the "Lenders").
BACKGROUND
A. Pursuant to that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") among Educational Medical, Inc., a Delaware corporation, CHI
ACQUISITION CORP., a Delaware corporation ("Acquirer") and the Lenders, dated of
even date herewith, the Acquirer shall purchase all of the shares of Common
Stock of the Borrower from the Lenders in consideration for, among other things,
a $3,000,000 Promissory Note (the "Second Payment Note") and a $5,750,000
Promissory Note (the "Purchase Money Promissory Note") (collectively the Second
Payment Note and the Purchase Money Promissory Note shall be referred to
hereinafter as the "Notes") in favor of the Lenders.
B. To secure payment of the sums due under the Notes, Borrower has agreed
to grant to Lenders a security interest in certain assets of Borrower.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the promises herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. To secure (a) payment of all sums which may now or hereafter be due
under the Notes and (b) the full and prompt performance of all obligations of
Borrower under the Notes, as the Notes may hereafter be amended, Borrower hereby
grants to Lenders a security interest in all of Borrower's assets (the
"Collateral").
2. The security interest in the Collateral shall be a second lien
security interest subordinate only to the liens of the Borrower's senior lender
and the existing lien of First Fidelity Bank, N.A. (the "Permitted Liens").
<PAGE> 2
3. If certificates of title are now, or hereafter become, issued or
outstanding with respect to any of the Collateral, Borrower shall cause the
security interest of Lenders to be properly noted thereon.
4. Borrower further agrees that the Collateral will be kept in good
condition and repair, reasonable wear and tear excepted, and that the expenses
of any repairs and maintenance will be borne solely by Borrower; that the
Collateral will not be used or be permitted to be used illegally; to pay all
costs of filing this Agreement and financing and other statements required to
perfect and to continue perfection of Lenders' security interest in the
Collateral and all costs required to evidence the second priority of the
security interest; not to abandon, conceal, injure, or destroy the Collateral,
nor deface any identifying marks thereon; not to sell, lease, assign, or
encumber the Collateral without Lenders' prior written consent, nor grant any
further security interest in the Collateral, nor permit Borrower's rights
therein to be reached by judicial process; to keep the Collateral free of all
liens and encumbrances, except for the Permitted Liens, the Lenders' security
interest hereunder, and the lien of taxes not delinquent; and that no injury to
or loss or destruction of the Collateral shall relieve Borrower of its
obligation to pay the indebtedness secured hereby. Borrower agrees to maintain,
at Borrower's sole cost and expense, insurance against loss of or damage to the
Collateral by fire and such other casualties as are normally included in fire
and extended coverage insurance policies for personal property, in an amount
equal to the full replacement value thereof.
5. Each of the following shall be an event of default hereunder:
(a) If Borrower is in default under the Notes;
(b) If Borrower shall fail to observe or perform any of its
obligations under the Notes;
(c) If Borrower shall default in the performance of any term or
provision of this Agreement; and
(d) If Borrower shall sell or transfer, or attempt to sell or
transfer, the Collateral or any interest therein, except in connection with the
replacement of such items in the ordinary course of business, without the prior
written consent of Lenders.
6. Upon the occurrence of any event of default, the Lenders may (a)
declare all sums owing under the Notes to be immediately due and payable,
-2-
<PAGE> 3
without presentation, demand, or further action of any kind; (b) exercise all
the rights of a secured party under the Uniform Commercial Code of the State of
Pennsylvania and/or any other applicable law with respect to the Collateral,
including (without limitation) to require Borrower to assemble all or any of the
Collateral and make the same available to Lenders at a place reasonably mutually
convenient, to take immediate possession of the Collateral wherever found, with
or without legal process, and to sell or otherwise dispose of the Collateral. If
the proceeds of any sale or other lawful disposition by Lenders of the
Collateral subsequent to its retaking exceed the aggregate amount of the
outstanding balance of all monies owed under the Notes and the expenses of
Lenders in connection with the retaking and disposition of the Collateral, then
Borrower shall be entitled to such surplus. If all or any of the Collateral is
disposed of by private sale pursuant to any agreement whereby all or part of the
sale price is payable in installments, then the cash price (exclusive of credit
service charges, interest and any insurance premiums) shall be credited against
the indebtedness secured thereby. Neither failure nor delay on the part of
Lenders to exercise any of their rights hereunder, in whole or in part, shall
cause a waiver thereof in that or any other instance. The provisions of this
Agreement are cumulative and in addition to any other or additional rights
Lenders may have at law or in equity or under the terms of the Notes, the Stock
Purchase Agreement or any other document collateral thereto.
7. Borrower shall execute, deliver, file and refile any financing
statements, continuation statements, or other security agreements Lenders may
require from time to time to confirm the lien of this Agreement with respect to
the Collateral. Without limiting the foregoing, Borrower hereby irrevocably
appoints Lenders attorney-in-fact for Borrower to execute, deliver and file such
instruments for and on behalf of Borrower.
8. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their respective successors and assigns.
9. This Agreement shall be governed by and construed in accordance
with the laws of the State of Pennsylvania. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid or unenforceable under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, under seal, the day and year first
above written.
WITNESSES: LENDERS:
- ---------------------------------
- --------------------------------- ---------------------------------
Joseph Colyar
- ---------------------------------
- --------------------------------- ---------------------------------
Claude H. Haring
BORROWER:
Computer Hardware Service Company,
Inc., a Pennsylvania corporation
- ---------------------------------
- --------------------------------- ---------------------------------
Authorized Signatory
-4-
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
EDUCATIONAL MEDICAL, INC.
AND
JOSEPH COLYAR
DATED AS OF FEBRUARY 14, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. "Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
b. "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
c. "Holder" or . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
d. "Holder's 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 February 14, 1998 (the
"Agreement"), by and between Educational Medical, Inc., a Delaware corporation
(the "Company"), and Joseph Colyar, an individual residing within the State of
Pennsylvania (the "Holder").
The Company, CHI Acquisition Corp., a Delaware corporation (the
"Buyer"), the Holder, Claude H. Haring and James Fritz have entered into a
Stock Purchase Agreement dated February 14, 1998 (the "Stock Purchase
Agreement") pursuant to which the Buyer shall purchase all of the issued and
outstanding shares of Common Stock of Computer Hardware Service Company, Inc.,
a Pennsylvania corporation, 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 "Holder's 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. "Holder": As defined in the recitals above.
d. "Holder's 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 Holder's 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. As soon as practicable subsequent to 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 Holder, 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 Holder 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 Holder
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 Holder's 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
2
<PAGE> 5
purposes of this Agreement until the Company shall have filed a new
registration 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 Holder 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 Thirty (30) 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
3
<PAGE> 6
statement (or amendment or post-effective amendment thereto) and each such
prospectus (or preliminary prospectus or supplement thereto) by each such
seller of 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 Holder 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
4
<PAGE> 7
g. cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities 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 Holder 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 Holder 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.
5
<PAGE> 8
The Holder 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 Holder will discontinue his disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (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 Holder's 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 Holder by name or otherwise as the Holder of any securities
of the Company, then Holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to Holder and the
Company, to the effect that the holding by Holder of such securities is not to
be construed as a recommendation by Holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
Holder will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to Holder 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 Holder.
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).
6
<PAGE> 9
5. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of the Holder to sell any
Registrable Securities pursuant to any effective registration statement.
6. Indemnification.
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, stockholder 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
7
<PAGE> 10
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 Holder of Registrable Securities that are included in the
securities as to which any registration is being effected shall, severally and
not jointly, indemnify 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 Holder 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 Holder 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 Holder.
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
8
<PAGE> 11
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) 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
9
<PAGE> 12
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 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 Holder 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 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 Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by
10
<PAGE> 13
(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 Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
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 Holder of such
Registrable Securities for purposes of any request or other action by the
Holder of Registrable Securities pursuant to this Agreement (or any
determination of any number or percentage of shares constituting Registrable
Securities held by the Holder 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 310 - East
West Palm Beach, FL 33401
Attn: Morris C. Brown, Esq.
If to Holder: Joseph Colyar
--------------------
--------------------
With a copy to:
--------------------
--------------------
--------------------
--------------------
</TABLE>
11
<PAGE> 14
The Holder, 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 Holder. 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 Holder 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.
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
12
<PAGE> 15
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 Holder
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: /s/ Gary D. Keeber
-----------------------
Authorized Signatory
/s/ Joseph Colyar
---------------------------
JOSEPH COLYAR
13
<PAGE> 16
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
EDUCATIONAL MEDICAL, INC.
AND
CLAUDE H. HARING
DATED AS OF FEBRUARY 14, 1998
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. "Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
b. "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
c. "Holder" or . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
d. "Holder's 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> 18
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 14, 1998 (the
"Agreement"), by and between Educational Medical, Inc., a Delaware corporation
(the "Company"), and Claude H. Haring, an individual residing within the State
of Pennsylvania (the "Holder").
The Company, CHI Acquisition Corp., a Delaware corporation (the
"Buyer"), the Holder, Joseph Colyar and James Fritz have entered into a Stock
Purchase Agreement dated February 14, 1998 (the "Stock Purchase Agreement")
pursuant to which the Buyer shall purchase all of the issued and outstanding
shares of Common Stock of Computer Hardware Service Company, Inc., a
Pennsylvania corporation, 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 "Holder's 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. "Holder": As defined in the recitals above.
d. "Holder's 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 Holder's 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 to Rule 144 (or
any successor provision) under the Securities Act and in compliance
<PAGE> 19
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. As soon as practicable subsequent to 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 Holder, 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 Holder 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 Holder
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 Holder's 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> 20
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
Holder 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 Thirty (30) 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
3
<PAGE> 21
prospectus (or preliminary prospectus or supplement thereto) by each such
seller of 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 Holder 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
4
<PAGE> 22
g. cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities 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 Holder 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 Holder 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 Holder 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
5
<PAGE> 23
Section 3 the Holder will discontinue his disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (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 Holder's 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 Holder by name or otherwise as the Holder of any securities
of the Company, then Holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to Holder and the
Company, to the effect that the holding by Holder of such securities is not to
be construed as a recommendation by Holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
Holder will assist in meeting any future financial requirements of the Company,
or (ii) in the event that such reference to Holder 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 Holder.
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).
6
<PAGE> 24
5. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of the Holder to sell any
Registrable Securities pursuant to any effective registration statement.
6. Indemnification.
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, stockholder 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
7
<PAGE> 25
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 Holder of Registrable Securities that are included in the
securities as to which any registration is being effected shall, severally and
not jointly, indemnify 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 Holder 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 Holder 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 Holder.
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
8
<PAGE> 26
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) 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
9
<PAGE> 27
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 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 Holder 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 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 Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder 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,
10
<PAGE> 28
or (ii) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder of Registrable Securities, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
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 Holder of such
Registrable Securities for purposes of any request or other action by the
Holder of Registrable Securities pursuant to this Agreement (or any
determination of any number or percentage of shares constituting Registrable
Securities held by the Holder 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 310 - East
West Palm Beach, FL 33401
Attn: Morris C. Brown, Esq.
If to Holder: Claude H. Haring
--------------------
--------------------
With a copy to:
--------------------
--------------------
--------------------
--------------------
</TABLE>
The Holder, 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
11
<PAGE> 29
is to be sent to Holder. 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 Holder 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.
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
12
<PAGE> 30
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 Holder
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: /s/ Gary D. Keeber
----------------------------
Authorized Signatory
/s/ Claude H. Haring
--------------------------------
CLAUDE H. HARING
13
<PAGE> 1
EXHIBIT 10.7
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer unto __________________________________________________________
______________________________ (_________) shares of the common stock of
Computer Hardware Service Company, Inc. represented by Certificate No. ___ and
does hereby irrevocably constitute and appoint as attorney to transfer the
Shares on the books of the Corporation with full power of substitution in the
premises.
Dated: .
------------------
---------------------------------
Joseph F. Colyar or Claude Haring
<PAGE> 1
EXHIBIT 10.8
SELLER SUBORDINATION AGREEMENT
THIS SELLER SUBORDINATION AGREEMENT (this "Agreement"), made and entered
into by and among JOSEPH COLYAR AND CLAUDE H. HARING (collectively,
"Subordinator"), EDUCATIONAL MEDICAL, INC., a Delaware corporation ("EMI"), CHI
ACQUISITION CORP., a Delaware corporation ("CHI"), and BANK OF AMERICA, FSB
("Lender").
WITNESSETH
WHEREAS, pursuant to a Stock Purchase Agreement, dated as of February 14,
1998, by and among EMI, CHI, as purchaser, Computer Hardware Service Company,
Inc ("Acquired Subsidiary"), and Subordinator and James Fritz, as sellers
(herein the "Stock Purchase Agreement"), effective this date, Subordinator has
sold to CHI, and CHI has purchased from Subordinator, all of the issued and
outstanding capital stock of the Acquired Subsidiary in exchange for cash and
the "Subordinated Notes," as that term is defined and described more
particularly below, and certain other consideration; and
WHEREAS, pursuant to the Stock Purchase Agreement, EMI is jointly and
severally liable for all obligations of CHI to Subordinator under the
Subordinated Notes; and
WHEREAS, concurrently with the consummation of such acquisition the
Acquired Subsidiary has been merged with and into CHI; and
WHEREAS, Lender and EMI, together with certain subsidiaries of EMI (EMI
and such subsidiaries, together with CHI and such other subsidiaries of EMI from
time to time may be added as co-borrowers to the "Loan Agreement" described
below, are herein called, individually and collectively, the "Borrower") are
parties to a certain Loan and Security Agreement, dated as of February 25, 1997
(as the same may be amended from time to time, together with any and all
documents, instruments, certificates and agreements now or hereafter delivered
in connection therewith to evidence or secure the payment of the Senior
Liabilities, collectively called therein the "Loan Agreement"), pursuant to
which Lender has agreed to make certain loans, advances and other financial
accommodations to or for the benefit of Borrower subject to Borrower's
continuing compliance with certain terms and condition therein contained; and
WHEREAS, at the request of EMI and CHI, Subordinator wishes to enter into
this Agreement in favor of Lender; and
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants herein exchanged, and for other good and valuable consideration, the
receipt and sufficiency whereof are hereby acknowledged, the parties hereto, by
and
<PAGE> 2
through their respective duly authorized officers, agents or legal
representatives, intending in each case to be legally bound, do hereby agree as
follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Bankruptcy Proceeding" shall mean any dissolution, winding
up, liquidation, readjustment, reorganization or other similar proceedings
relating to Borrower or to its creditors, as such, or to its property; whether
voluntary or involuntary, partial or complete, and whether in bankruptcy,
insolvency or receivership, or upon an assignment for the benefit of creditors,
or any other marshaling of the assets and liabilities of Borrower, or any forced
sale of all or substantially all of the assets of Borrower, or otherwise.
(b) "Borrower Property" shall mean any and all property of
Borrower, or rights, title or interests of Borrower in property, howsoever
arising, acquired or obtained, whether now or hereafter existing, whether
tangible or intangible, whether real or personal, and wherever located.
(c) "Business Day" shall mean any day of the year on which
banks are not required to close in Atlanta, Georgia, and on which Lender is
otherwise not closed for business.
(d) "Lender Collateral" shall mean, collectively, any and all
Borrower Property in which, now or hereafter, a Lien is granted to, or obtained
by, Lender, as security for the payment and performance of any Senior
Liabilities, including, particularly, but without limitation, all "Collateral"
(as such term is defined in the Loan Agreement).
(e) "Liabilities" shall mean all debts, liabilities and
obligations of Borrower, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, joint or several, as maker, endorser,
surety, guarantor or otherwise, and whether now or hereafter existing or due or
to become due.
(f) "Lien" shall mean, collectively, any lien, security,
interest, security title, encumbrance, mortgage, pledge, hypothecation,
assignment or claim in or to any Borrower Property, whether now or hereafter
existing and howsoever granted, acquired or obtained by either Subordinator or
Lender, and whether arising by contact, by judicial decree, by statute or
otherwise.
(g) "Senior Liabilities" shall mean all liabilities of Borrower
to Lender arising under, pursuant to or in connection with the Loan Agreement.
Without limitation of the foregoing, the term "Senior Liabilities," as used
herein, shall expressly include (i) any and all "Obligations" of Borrower to
Lender (as that term, "Obligations," is defined in the Loan Agreement), (ii) any
interest accruing on any of the Senior Liabilities after the
2
<PAGE> 3
commencement of any Bankruptcy Proceedings, notwithstanding any provisions or
rule of law which might restrict rights of Lender, as against Borrower or anyone
else, to collect such interest and (iii) any premiums, fees and expenses
chargeable to, or reimbursable by, Borrower under or pursuant to the Loan
Agreement, including, without limitation, reasonable attorneys' fees and other
costs of collection and enforcement; all notwithstanding any right or power of
Borrower or any one else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
affect or impair the agreements and obligations of Subordinator hereunder. The
term "Senior Liabilities" shall also include any Liabilities incurred in
connection with the refinancing of the Liabilities under the Loan Agreement.
(h) "Subordinated Liabilities" shall mean all those Liabilities
of Borrower to Subordinator, aggregating Eight Million Seven Hundred Fifty
Thousand Dollars ($8,750,000) in original principal amount, representing the
amount of purchase money indebtedness of EMI and CHI to Subordinator incurred
effective this date by EMI and CHI, jointly and severally, pursuant to the Stock
Purchase Agreement, together with all interest thereon, whether now or hereafter
accruing, and all costs, fees and expenses charged or chargeable to EMI and CHI
by Subordinator in connection therewith.
(i) "Subordinated Notes" shall mean collectively the promissory
note in original principal amount of Five Million Seven Hundred Fifty Thousand
Dollars ($5,750,000), and the promissory note in the original principal amount
of Three Million Dollars ($3,000,000), each issued by CHI to Subordinator to
evidence the principal amount of the Subordinated Liabilities as to which EMI is
jointly and severally liable pursuant to the Stock Purchase Agreement. True and
correct copies of such promissory notes as in effect on the date hereof, are
attached hereto as EXHIBIT "A."
2. Consent and Agreement.
(a) Subject to the terms and conditions of this Agreement,
Lender consents to the incurrence by EMI and CHI of the Subordinated
Liabilities.
(b) Subordinator agrees that hereafter, without the prior
written consent of Lender, Subordinator will not create, take, consent to or
acquiesce in any Lien on any Borrower Property to secure the payment or
performance of any debt, liability or obligation of EMI or CHI to Subordinator,
except that (i) Subordinator may take a pledge of the stock of CHI as security
for such obligations (the "CHI Stock Pledge") and (ii) subject to the
subordination provisions contained in this Agreement, Subordinator may take a
lien on the assets of CHI as security for such obligations.
3. Debt Subordination.
(a) The payment of all Subordinated Liabilities shall be
subordinated to the payment in full of all Senior Liabilities. Without
limitation except as provided in
3
<PAGE> 4
clause (b) of this Section 3, no payments may be made on any Subordinated
Liabilities unless and until all Senior Liabilities have been paid and satisfied
in full and the Loan Agreement has been terminated.
(b) Notwithstanding the provisions of the foregoing subsection
(a), CHI shall be entitled to pay, and Subordinator shall be entitled to
receive, regularly scheduled payments of principal and accrued interest in
respect of the Subordinated Liabilities, as and when expressly set forth in the
Subordinated Note to be due and payable (and without giving effect, however, to
any provision thereof, including, for example, but not by way of limitation, any
mandatory prepayment event or condition, which would have the effect of
increasing the amount or frequency of any such payment); provided, however,
that, from and after the date on which Subordinator receives written notice from
Lender that an "Event of Default" under the Loan Agreement (as that term is
defined therein; herein, an "Event of Default") has occurred and is continuing,
no such payment shall be made or received unless and until Subordinator receives
written notice from Lender that such Event of Default has been cured or waived
or that any such payment otherwise may be made notwithstanding the existence and
continuation of such Event of Default.
(c) Any payments of principal or accrued interest on the
Subordinated Liabilities which are not paid or received as a result of the
operation and effect of this Section 3 shall be added to the final installment
of principal due and payable on the Subordinated Note and be payable (subject to
the foregoing terms and limitations) at maturity.
(d) In no event shall Subordinator be entitled at any time
during which this Agreement shall be effective to set off against any of the
Subordinated Liabilities the amount of any sum owing by Subordinator to EMI or
CHI, including, for example, but not by way of limitation, any sum now or
hereafter owing pursuant to any indemnity or similar provision under the Stock
Purchase Agreement.
4. Priority of Security Interests. Any Lien which heretofore or
hereafter may have been (or may be) granted to Subordinator by Borrower, or
retained or reserved by Subordinator in or on Borrower Property (excluding the
stock of CHI pledged to Subordinator pursuant to the CHI Stock Pledge), shall be
and remain junior, inferior and subordinate to any Lien heretofore or hereafter
granted to or retained or reserved by Lender in or on Lender Collateral, and any
Lien of Lender in or on Lender Collateral shall be superior to and have priority
over any and all Liens of Subordinator therein or thereon, irrespective of (a)
the time or order of attachment, or the time or order of perfection of Liens,
(b) the time of filing or recording financial statements, mortgages or other
agreements or documents, (c) the time of giving or failure to give notice of
acquisition of purchase money or other Liens, (d) the taking of possession of
any Borrower Property by Lender or Subordinator, (e) the order in which any
loan, advance or extension of credit included in the Senior Liabilities or the
Subordinated Liabilities is made, or (f) any other matter whatsoever. The
subordination and
4
<PAGE> 5
postponement of priority, operation and effect of Subordinator's Liens in the
Lender Collateral provided for herein shall have the same force and effect as
though Lender's Liens in or on Lender Collateral attached and were perfected
prior to the time Subordinator's Liens attached thereto or thereon and were
perfected, and shall be effective even though Lender's Liens may not have been
perfected. Nothing contained in this Section 4 is intended or shall be deemed or
construed to waive the provisions of Section 2(b) above or in any event permit
the grant by Borrower of any Lien on any Borrower Property to Subordinator
(which is, presently, expressly prohibited under the Loan Agreement), except as
and to the extent consented to by Lender in such Section 2(b).
5. Deferral of Remedies. Subordinator agrees that it will not make
any claim with respect to, foreclose upon, take possession of, sell, lease or
otherwise dispose of, or in any other manner realize or seek to realize upon the
whole or any part of any Borrower Property, whether pursuant to Article 9, Part
5 of the Uniform Commercial Code, by foreclosure, by setoff, by self-help
repossession, by deed in lieu of foreclosure, by lawsuit, other judicial action,
administrative proceeding, arbitration or otherwise, or exercise any other
remedies with respect to any Borrower Property, unless and until all of the
Senior Liabilities have been fully paid and satisfied, and this Agreement shall
have terminated; and that, as between Subordinator and Lender, Lender, and only
Lender, shall have the sole and exclusive right to exercise all such remedies
and claims, including the right to sell, transfer, dispose of or otherwise
realize upon any such Borrower Property (if and to the extent then constituting
Lender Collateral); provided, however, that, nothing contained in this Section 5
shall prohibit Subordinator from filing a proof of claim in any case involving
EMI or CHI, as debtor, under Title 11 of the United States Code, as amended,
subject always to the provisions of this Agreement; and, provided further, that
if, pursuant to the operation and effect of Section 3 above, Subordinator has
been barred for a period of one hundred eighty (180) days from receiving any
payment then due and owing in respect of the Subordinated Liabilities, then
Subordinator may at any time after the passage of such one hundred eighty (180)
day period, but prior to the resumption of payments being permitted to be made
and received thereon, institute a lawsuit or other judicial action or an
administrative or arbitration proceeding to enforce its right to collect any and
all of such past due sums from CHI and realize or seek to realize upon any
property of CHI and the stock of CHI pledged to it pursuant to the CHI Stock
Pledge pursuant to any judgment obtained in connection therewith in the manner,
to the extent and at the time permitted by applicable law, but at all times
otherwise subject to all terms and conditions of this Agreement.
6. Priority on Distribution. In the event that there should ever
occur (a) any Bankruptcy Proceeding or (b) any realization by Lender with
respect to the Lender Collateral upon the exercise by Lender of any of its
rights and remedies under the Loan Agreement or under applicable law, the Senior
Liabilities shall first be paid in full before CHI, or EMI shall be entitled to
make or pay or Subordinator shall be entitled to receive and to retain any
payment or distribution in respect of the Subordinated
5
<PAGE> 6
Liabilities, and, in order to implement the foregoing, unless and until all of
the Senior Liabilities shall have been fully paid and satisfied and this
Agreement shall have terminated, (i) all of the Borrower Property (other than
the stock of CHI pledged to Subordinator pursuant to the CHI Stock Pledge) and
any proceeds thereof so distributed, applied or realized upon shall be
distributed or paid to (or retained by) Lender for application to the Senior
Liabilities to the extent of Lender's Lien thereon, and none of such proceeds
shall be distributed or paid to Subordinator for application to the Subordinated
Liabilities, (ii) all payments and distributions of any kind or character in
respect of the Subordinated Liabilities to which Subordinator would have been
entitled if the Subordinated Liabilities were not subordinated pursuant to this
Agreement shall be made directly to Lender, (iii) Subordinator shall promptly
file a claim or claims, in the form required in such proceedings, or the full
outstanding amount of the Subordinated Liabilities owing to it, and shall cause
such claim or claims to be approved and all payments and other distributions in
respect thereof to be made directly to Lender, and (iv) Subordinator hereby
irrevocably agrees that Lender may, at its election, in the name of Subordinator
or otherwise, upon the failure, refusal or inability of Subordinator to do so
itself after demand by Lender, demand, sue for, collect, receive and receipt for
any and all such payments or distributions, and file, prove, and vote or consent
in any such proceedings with respect to, any and all claims of Subordinator
relating to the Subordinated Liabilities owing to it.
7. Payments and Other Distributions Received in Trust. In the event
that Subordinator receives any payment or other distribution of any kind or
character from EMI or CHI or from any other source whatsoever in respect of any
of the Subordinated Liabilities, other than as expressly permitted to be paid
and received by the terms of this Agreement, such payments or other distribution
shall be received in trust for Lender and promptly turned over by Subordinator
to Lender. Subordinator will cause to be clearly inserted in the Subordinated
Note and in any other promissory note or other instrument which at any time
evidences any of the Subordinated Liabilities a statement to the effect that the
payment thereof is subordinated in accordance with the terms of this Agreement.
Subordinator will execute such further documents or instruments and take such
further action as Lender may reasonably request from time to time to carry out
and enforce the provisions of this Agreement.
8. Payments on Subordinated Liabilities Received by Lender. All
payments and distributions received by Lender in respect of the Subordinated
Liabilities pursuant to this Agreement, to the extent received in or converted
into cash, may be applied by Lender first to the payment of any and all expenses
(including reasonable attorneys' fees and legal expenses) paid or incurred by
Lender in enforcing this Agreement or in endeavoring to collect or realize upon
any of the Subordinated Liabilities or any security therefor, and any balance
thereof shall be applied by Lender in such order of application as Lender may
from time to time elect in accordance with the terms of the Loan Agreement,
toward the payment of the Senior Liabilities remaining unpaid; and,
notwithstanding any such payments or distributions received by Lender in respect
of the Subordinated Liabilities and so applied by Lender toward the
6
<PAGE> 7
payment of the Senior Liabilities, Subordinator shall be subrogated to the then
existing rights of Lender, if any, in respect of the Senior Liabilities only at
such time as this Agreement shall have been terminated and Lender shall have
received payment of the full amount of the Senior Liabilities.
9. Waivers.
(a) The Subordinator hereby waives: (i) notice of acceptance by
Lender of this Agreement; (ii) notice of the existence or creation or
non-payment of all or any of the Senior Liabilities; and (iii) all diligence in
collection or protection of or realization upon the Senior Liabilities or any
thereof or any security therefor.
(b) Lender shall have the right at any and all times to
determine the order in which (i) recourse is sought against Borrower or any
other obligor with respect to the Senior Liabilities, or (ii) any or all of the
collateral security for the Senior Liabilities (including, particularly, the
Lender Collateral) in which a Lien has been granted to or obtained by Lender
shall be enforced; and Subordinator hereby waives any and all rights to require
that Lender pursue or exhaust any rights or remedies with respect to Borrower or
any Borrower Property prior to exercising its rights and remedies with respect
to the Lender Collateral or in any other manner to require the marshaling of
assets or security in connection with the exercise by Lender of any of the
remedies provided for in the Loan Agreement or any other such document,
instrument or agreement.
(c) Lender shall have no liability to Subordinate and
Subordinator hereby waives any claim, right, action or cause of action which it
may now or hereafter have against Lender arising out of, any and all actions
which Lender takes or omits to take with respect to the Senior Liabilities, or
any Lender Collateral including, without limitation, any actions with respect to
the creation, perfection or continuation of liens or security interest with
respect to the Lender Collateral; any foreclosure upon, taking of possession of,
or any sale, lease or other disposition of the Lender Collateral; any release of
any of the collateral securing the Senior Liabilities; any custody, valuation,
protection, preservation, use or depreciation of any of the Lender Collateral;
any realizing upon or failure to realize upon, the Lender Collateral or any
other collateral securing the Senior Liabilities; or any collection of the
Senior Liabilities, including, without limitation, any and all claims, rights,
actions or causes of action that Subordinator might have against Lender under
Sections 9-207 and 9-507 of the Uniform Commercial Code in the absence of this
provision.
10. Prohibitions on Certain Actions by Subordinator. The Subordinator
will not without the prior written consent of Lender: (a) modify or amend any
instrument presently or hereafter evidencing or securing the Subordinated
Liabilities or acquiesce in any amendment or modification thereof which would
(i) increase the interest rate payable on any of the Subordinated Liabilities,
(ii) change the dates on which any payment of principal or interest or other
payments are due on the Subordinated
7
<PAGE> 8
Liabilities (except for extensions of such dates), (iii) change any event of
default or add any covenant with respect to the Subordinated Liabilities, (iv)
change nay payment provisions with respect to the Subordinated Liabilities, (v)
change any subordination provisions with respect to the Subordinated Liabilities
or (vi) change or amend any other term if such change or amendment would
materially increase the obligations of EMI or CHI or confer additional rights on
Subordinator in a manner adverse to EMI or CHI or Lender; (b) cancel, waive,
forgive, transfer or assign (except in accordance with the provisions hereof),
or attempt to enforce or collect, or subordinate to any Liabilities other than
the Senior Liabilities, any Subordinated Liabilities (except as expressly
permitted herein) or any rights in respect thereof; (c) take any collateral
security for any Subordinated Liabilities; or (d) commence, or join with any
other creditor in commencing, (i) any bankruptcy, reorganization or insolvency
proceedings with respect to Borrower, or (ii) any proceeding to enforce any of
its rights under any of the Subordinated Liabilities or otherwise with respect
to any Subordinated Liabilities; or (e) retain or accept the primary or
secondary obligation of any party in respect of the Subordinated Liabilities.
11. Permitted Actions by Lender. Lender may, at any time or from time
to time, without the necessity of giving notice to, or obtaining the consent of,
Subordinator, take any or all of the following actions: (a) retain or obtain a
security interest in any property of Borrower or any person to secure any of the
Senior Liabilities; (b) retain or obtain the primary or secondary obligation of
any other person or persons with respect to any of the Senior Liabilities; (c)
extend, renew, alter or exchange any of the Senior Liabilities; (d) increase,
combine or restate any of the Senior Liabilities; (e) release or compromise any
obligation with respect to any of the Senior Liabilities; (f) release its
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Senior
Liabilities; and (g) modify or amend, grant waivers with respect to or forbear
from exercising any term, covenant or condition of the Loan Agreement.
12. Assignment; Refinancing.
(a) Lender also may, at any time or from time to time, without
the necessity of giving notice to or obtaining the consent of Subordinator,
assign or transfer any or all of the Senior Liabilities owned by Lender
including, without limitation, to any refinancing lender; and, notwithstanding
any such assignment or transfer or any subsequent assignment or transfer
thereof, such Senior Liabilities shall be and remain Senior Liabilities for all
purposes of this Agreement, and every immediate and successive assignee or
transferee of any of the Senior Liabilities or of any interest therein shall, to
the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were Lender.
(b) In the event that the Senior Liabilities are refinanced in
full, whether pursuant to an assignment as described in the preceding paragraph
(a) or otherwise,
8
<PAGE> 9
Subordinator agrees at the request of the refinancing lender to enter into a
subordination agreement with Borrower and such refinancing lender on terms
substantially similar to this Agreement, and in any event satisfactory to the
refinancing lender. In furtherance of the foregoing, Subordinator hereby
irrevocably appoints Lender as its attorney-in-fact, with full authority in the
place and stead of Subordinator and in the name of Subordinator or otherwise, to
execute and deliver any such subordination agreement if Subordinator fails to
either execute and deliver to the subject refinancing lender such subordination
agreement within five (5) Business Days after a refinancing lender's request
therefor.
13. Failure of EMI, CHI or Subordinator to Act. Lender shall not be
prejudiced in its rights under this Agreement by any act or failure to act on
the part of EMI, CHI or Subordinator, or any noncompliance by EMI, CHI or
Subordinator with any agreement or obligation, regardless of any knowledge
thereof which Lender may have or with which Lender may be charged; and no action
of Lender permitted hereunder shall in any way affect or impair the rights of
Lender and the obligations of EMI, CHI and Subordinator under this Agreement.
14. Delay No Bar. No delay on the part of Lender in the exercise of
any right or remedy hereunder shall operate as a waiver thereof, and no single
or partial exercise by Lender of any such right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy by
Lender; nor shall any modification or waiver of any of the provisions of this
Agreement be binding upon Lender except as expressly set forth in a writing duly
signed and delivered on behalf of Lender.
15. Ownership of Subordinated Liabilities; Assignment by Subordinator.
Subordinator represents and warrants that as of the date hereof it is the owner
of all of the Subordinated Liabilities. Subordinator hereby agrees that it will
not hereafter assign or transfer the Subordinated Liabilities, or any of them,
to any Person unless such Person has agreed in a writing, in form and substance
satisfactory to Lender, to be bound by all of the provisions of this Agreement.
16. Successors and Assigns. This Agreement shall be binding upon
Lender and Subordinator and upon their respective successors and assigns. There
shall be no third party beneficiaries of this Agreement, other than any lender
refinancing the Liabilities of Borrower to Lender under the Loan Agreement.
17. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of Georgia, without regard
to conflicts of law principles. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without
9
<PAGE> 10
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
18. Jurisdiction. Each party hereby consents to the jurisdiction of
any state or federal court located within the County of Fulton, State of Georgia
and irrevocably agrees that, subject to Lender's election, all actions or
proceedings arising out of or relating to this Agreement shall be litigated in
such courts. Subordinator accepted for itself and in connection with its
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives an defense or forum non conveniens, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Nothing herein shall limit the right of Lender to bring proceedings
against Subordinator or EMI or CHI in the courts of any other jurisdiction.
Lender, Subordinator and EMI or CHI further waive any right to trial by jury in
any proceeding brought hereunder.
19. EMI's and CHI's Covenants. EMI and CHI hereby agree to be bound by
the terms and provisions hereof, to make no payments contrary to the terms and
provisions thereof, and to do every other act and thing necessary or appropriate
to carry out such terms and provisions. In the event of any violation of any of
the terms and provisions of this Agreement, then, at the election of Lender, any
and all Obligations shall forthwith become due and payable and any and all
agreements of Lender to make loans, advances or other financial accommodations
to Borrower pursuant to the Loan Agreement shall forthwith terminate.
20. Notices. Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective party as set forth on
the signature page (s) hereof and may be personally served, telecopied or sent
by overnight courier service or United States mail and shall be deemed to have
been given: (a) if delivered in person, when delivered; (b) if delivered by
telecopy, on the date of transmission if transmitted on a business day before
4:00 p.m. (Atlanta time) or, if not, on the next succeeding business day; (c) if
delivered by overnight courier, two days after delivery to such courier properly
addressed; or (d) if by U.S. Mail, five (5) Business Days after depositing in
the United States mail, with postage prepaid and properly addressed or to such
other address as the party addressed shall have previously designated by written
notice to the serving party, given in accordance with this Section.
21. Continuing Effect. This Agreement shall in all respects be a
continuing agreement and shall remain in full force and effect until all Senior
Liabilities have been paid and satisfied in full and the Loan Agreement has been
terminated.
22. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes and replaces any agreement, written or oral, heretofore existing
among or between the parties in respect thereof.
10
<PAGE> 11
IN WITNESS WHEREOF, this Agreement has been made and delivered as of the
14th day of February, 1998 by each of the undersigned.
"EMI"
EDUCATIONAL MEDICAL, INC. (SEAL)
By:
------------------------
Name:
------------------
Title:
------------------
Attest:
------------------------
Name:
------------------
Title:
------------------
Address for Notices:
-------------------------------
-------------------------------
-------------------------------
"CHI"
CHI ACQUISITION CORP. (SEAL)
By:
------------------------
Name:
------------------
Title:
------------------
Attest:
------------------------
Name:
------------------
Title:
------------------
Address for Notices:
-------------------------------
-------------------------------
-------------------------------
11
<PAGE> 12
"SUBORDINATOR"
-------------------------------
JOSEPH COLYAR
Address for Notices:
-------------------------------
-------------------------------
-------------------------------
"SUBORDINATOR"
-------------------------------
CLAUDE H. HARING
Address for Notices:
-------------------------------
-------------------------------
-------------------------------
"LENDER"
BANK OF AMERICA, F.S.B. (SEAL)
By:
------------------------
Name:
------------------
Title:
------------------
Attest:
------------------------
Name:
------------------
Title:
------------------
Address for Notices:
-------------------------------
-------------------------------
-------------------------------
12
<PAGE> 13
EXHIBIT "A"
SUBORDINATED NOTES
