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UNITED STATES
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):
December 16, 1998 (December 2, 1998)
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CHILDREN'S COMPREHENSIVE SERVICES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Tennessee 0-16162 62-1240866
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3401 West End Avenue, Suite 500, Nashville, Tennessee 37203
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (615) 383-0376
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective December 1, 1998, Children's Comprehensive Services, Inc.
(the "Registrant") completed a transaction in which Children's Comprehensive
Services of California, Inc., the Registrant's wholly-owned subsidiary, acquired
all of the outstanding stock of Somerset, Incorporated ("Somerset"), a
California corporation. Based in Riverside, California, Somerset operates as
Somerset Educational Services and provides special educational services in a day
treatment environment to approximately two hundred at risk youth. Pursuant to
this transaction, the Registrant also acquired (1) real estate and improvements
from BMB Enterprises, a California general partnership whose partners owned 100%
of the outstanding stock of Somerset, (2) certain assets from Behavioral
Medicine Professional Services, Inc. a California corporation whose shareholders
owned 100% of the outstanding stock of Somerset, and (3) vehicles from B and B
Leasing, a general partnership whose partners owned 67% of the outstanding stock
of Somerset. The real property acquired includes a classroom and office building
which consists of approximately 24,000 square feet. The Registrant intends to
continue the operations of Somerset and the use of the acquired facilities to
strengthen the Registrant's continuum of services to at risk and troubled
children.
The aggregate consideration due the Somerset shareholders and the other
parties to this transaction consisted of approximately $9,500,000 in cash and
notes payable and the assumption of approximately $1,000,000 in debt. The
consideration for this transaction was determined based upon arms length
negotiations among parties.
The source of funds for the acquisition was from the Registrant's line
of credit.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of businesses acquired Not Required
(b) Pro forma financial information Not Required
(c) Exhibits
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<S> <C>
2.1 Stock Purchase Agreement between the Registrant and William M. Bosic,
Donald J. Bosic, Joseph C. McCoy and Somerset, Inc.
2.2 First Addendum to Stock Purchase Agreement between the Registrant
and William M. Bosic, Donald J. Bosic, Joseph C. McCoy and Somerset, Inc.
2.3 Agreement of Purchase and Sale and Joint Escrow Instructions between
the Registrant and BMB Enterprises
2.4 Asset Purchase Agreement between the Registrant and Behavioral
Medicine Professionals, Inc.
2.5 Asset Purchase Agreement between the Registrant and B and B Leasing
2.6 Noncompetition, Confidentiality and Nonsolicitation Agreement between the
Registrant and Joseph C. McCoy
2.7 Noncompetition, Confidentiality and Nonsolicitation Agreement between the
Registrant and Donald J. Bosic
2.8 Noncompetition, Confidentiality and Nonsolicitation Agreement between the
Registrant and William M. Bosic
99 December 4, 1998 Press Release
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
Dated: December 16, 1998 By: /s/ DONALD B. WHITFIELD
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Donald B. Whitfield
Vice President Finance and Chief
Financial Officer
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EXHIBIT INDEX
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<CAPTION>
Number Description
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<S> <C>
2.1 Stock Purchase Agreement between the Registrant and William M. Bosic, Donald J. Bosic,
Joseph C. McCoy and Somerset, Inc.
2.2 First Addendum to Stock Purchase Agreement between the Registrant and William M. Bosic,
Donald J. Bosic, Joseph C. McCoy and Somerset, Inc.
2.3 Agreement of Purchase and Sale and Joint Escrow Instructions between the Registrant and
BMB Enterprises
2.4 Asset Purchase Agreement between the Registrant and Behavioral Medicine Professionals, Inc.
2.5 Asset Purchase Agreement between the Registrant and B and B Leasing
2.6 Noncompetition, Confidentiality and Nonsolicitation Agreement between the Registrant and
Joseph C. McCoy
2.7 Noncompetition, Confidentiality and Nonsolicitation Agreement between the Registrant and
Donald J. Bosic
2.8 Noncompetition, Confidentiality and Nonsolicitation Agreement between the Registrant and
William M. Bosic
99 December 4, 1998 Press Release
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of the
1st day of December, 1998 (the "Effective Date"), by and between Children's
Comprehensive Services of California, Inc., a California corporation ("Buyer"),
on the one hand, and William M. Bosic, Donald J. Bosic, Joseph C. McCoy (with
Messrs. Bosic, Bosic, and McCoy sometimes referred to herein as "Seller" or
"Sellers" as the case may be) and Somerset, Incorporated, a California
corporation, and doing business as Somerset Educational Services ("Company"), on
the other hand; with Buyer, Sellers, and Company sometimes referred to herein as
"Party" or "Parties" as the case may be.
RECITALS
A. Sellers own as of the Effective Date, and will own as of
the Closing Date, all of the shares of common stock of Company issued
and outstanding in the amounts set forth beside each Seller's name on
Schedule 5.2.1 attached hereto.
B. Buyer desires to purchase from Sellers, and Sellers desire
to sell to Buyer, all of the shares of common stock of Company issued
and outstanding as of the Effective Date upon the terms and subject to
the conditions set forth in this Agreement.
C. Concurrently herewith and in connection with its
acquisition of the stock hereby, Buyer will enter into: (i) that
certain Agreement of Purchase and Sale and Joint Escrow Instructions
with BMB Enterprises, a California general partnership, of which each
of Sellers is a general partner; (ii) that certain Asset Purchase
Agreement with Behavioral Medicine Professional Services, Inc., a
California corporation, of which each of Sellers is a shareholder; and
(iii) that certain Asset Purchase Agreement with B and B Leasing, a
general partnership of Messrs. William M. Bosic and Donald J. Bosic.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises herein made and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows:
ARTICLE I
SALE OF STOCK
Sellers, in reliance upon the representations, warranties, and
covenants of Buyer contained herein and on the terms and conditions herein set
forth, hereby agree to sell, assign, transfer, convey, and deliver to Buyer at
the Closing all of their right, title, and interest in and to the Seller Shares.
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Buyer, in reliance upon the representations, warranties, and covenants of
Sellers and Company contained herein and on the terms and conditions herein set
forth, hereby agrees to purchase the Seller Shares from Sellers at the Closing
for a purchase price as provided in Article II hereof.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The purchase price for the Seller Shares (the
"Purchase Price") is Six Million Six Hundred Ninety Thousand and NO/100 Dollars
($6,690,000.00), payable in accordance with Section 2.2 hereof and subject to
adjustment as set forth in Section 2.3 hereof. The Purchase Price shall be
payable to Sellers in accordance with their respective percentages of ownership
of the Seller Shares (the "Ownership Percentages"), which Ownership Percentages
are set forth in Schedule 5.2.1 attached hereto. The allocation of the Purchase
Price among Sellers is more specifically set forth on Schedule 2.1 attached
hereto.
2.2 Payment of the Purchase Price. At the Closing, Buyer shall pay to
each Seller an amount equal to the Purchase Price multiplied by each Seller's
Ownership Percentage, by wire transfer of immediately available funds to the
account of such Seller at a bank or banks specified by such Seller.
2.3 Purchase Price Adjustment. Notwithstanding anything to the contrary
contained herein, the Purchase Price payable under Section 2.2 hereof shall be
ratably reduced to the extent that the Net Working Capital of Company as of the
Effective Date is less than $1 Million, determined as set forth below. For
purposes hereof, the term "Net Working Capital" means the excess of Company's
current assets over its current liabilities as of the Effective Date, determined
in accordance with GAAP. Sellers shall, not later than, and as of, one (1)
business day before the Effective Date, calculate the Net Working Capital of
Company (the "Tentative Net Working Capital"), in the manner set forth and
certified by Sellers in the form of Exhibit "A" attached hereto (the "Tentative
Balance Sheet"). If the Tentative Net Working Capital is less than $1 Million,
then the Purchase Price to be paid at the Closing shall be reduced by the amount
of such deficiency.
As of the sixtieth (60th) day following the Closing Date,
Buyer shall recalculate the Tentative Net Working Capital (the "Final Net
Working Capital"), which recalculation shall be determined as of the Closing
Date by (i) the elimination from the Tentative Balance Sheet of any and all
accounts receivable not collected on or prior to such sixtieth (60th) day, and
(ii) any and all adjustments to current assets or current liabilities otherwise
set forth on the Tentative Balance Sheet, redetermined in accordance with GAAP.
Such recalculation shall be in the manner set forth and certified by Buyer in
the form of Exhibit "B" attached hereto (the "Final Balance Sheet"). If the
Final Net Working Capital is less than $1 Million, then, notwithstanding
anything in this Agreement to the contrary, the principal amount of the Real
Estate Note automatically shall be reduced by the amount of such deficiency,
with such reduction deemed, for all purposes, effective as of the Closing.
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2.3 Closing Costs. Sellers shall pay at the Closing any stamp or other
sales, transfer, or transaction tax ("Transfer Tax") imposed under the laws of
the United States or any state, county, municipality, or other subdivision
thereof on the sale of the Seller Shares to Buyer (including any indirect
assessments of Transfer Tax, such as on property of any of Sellers or Company.
All escrow fees, closing fees, and other expenses or costs, including any
prepayment premiums, shall be borne fifty percent (50%) by Buyer and fifty
percent (50%) by Sellers. Any such Transfer Tax and other amounts payable by
Sellers under this Section 2.3 shall be deducted from the Purchase Price at the
Closing to the extent then known.
ARTICLE III
ADDITIONAL AGREEMENTS
3.1 Colorado Avenue Nonpublic School. At the Closing, Sellers shall
cooperate with Buyer and use their best efforts to effectuate (i) the
termination of Company's nonpublic school located at 9191 Colorado Avenue,
Riverside, California 92503 (the "Colorado Avenue Nonpublic School"), and (ii)
the transfer of its faculty, students, and personal property to Company's
nonpublic school located at 17241 Van Buren Boulevard, Riverside, California
92504 (the "Van Buren Boulevard Nonpublic School"). Notwithstanding anything
herein to the contrary, only those reasonable costs and expenses associated with
such termination and transfer shall be borne by Company, and all other costs and
expenses shall be borne solely by Sellers.
3.2 Resignations; Termination of Employment. At the Closing, Sellers
shall cause each individual who is a director or officer of Company to resign as
a director or officer of Company. All of the members of Sellers' immediate
family shall resign as employees of Company as of the Closing. Neither any
Seller nor any member of Sellers' immediate family shall make any claim for
compensation or benefits for any period after the Closing or severance pay or
unemployment compensation relating to their employment (if any) by Company for
any period.
3.3 Termination of Management and Consulting Agreements. At the
Closing, any management or consulting agreements, whether in writing or oral,
pursuant to which any Person provides management or consulting services to
Company shall be terminated.
3.4 Conveyance of Collateral Assets. At the Closing, Sellers shall
convey, or cause to be conveyed to Company, all collateral assets, Permits (to
the extent transferable and to the extent not transferable, shall be
relinquished in favor of Company) or rights owned or controlled by Sellers which
relate to business conducted by Company.
3.5 Noncompetition, Confidentiality, and Nonsolicitation Agreements. At
the Closing, Buyer and each of Sellers shall execute and deliver
"Noncompetition, Confidentiality, and Nonsolicitation Agreements" in the forms
of Exhibit "C", Exhibit "D", and Exhibit "E" attached hereto.
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3.6 Release of Liabilities. At or prior to the Closing, Company shall
be released from any and all liability or obligation, whether contingent or
otherwise, on any indebtedness or any agreement, contract, lease, commitment or
obligation of any Seller or any member of Sellers' family.
3.7 Assistance in Certification Renewal. After the Closing, Sellers,
jointly and severally, shall, upon request of Buyer, provide assistance, at
their sole cost and expense, in curing any conditions, deficiencies, or
restrictions imposed with respect to the renewal of the nonpublic school
certification of Company which is pending on the date hereof. Buyer shall cause
Company to cooperate with Sellers in connection with the same.
3.8 Interim Operation of Company; Profits and Losses and Expenses.
3.8.1 Interim Operation of Company. On and after the Effective
Date and continuously through the Closing Date (the "Interim Period"), Sellers
and Buyer, jointly and severally, shall, subject to each of its respective
representations, warranties, covenants, and agreements contained in this
Agreement, cooperate with each other and operate Company for and on behalf of
the sole account of Buyer. Seller shall not be entitled to any payment, in kind
or otherwise, from, without limitation, Buyer or Company, for its performance of
any services in respect of such operation of Company during the Interim Period.
3.8.2 Profits and Losses and Expenses. All profits and losses
of Company during the Interim Period shall belong only to, and be applied only
to the account of, Buyer; and the payment of all necessary and required
expenses, not otherwise prohibited by this Agreement, of Company during the
Interim Period shall be borne only by Buyer. In no event shall any such profits,
losses, or expenses be taken into account for purposes of this Agreement;
provided, however, that Sellers' operation of Company during the Interim Period
otherwise does not constitute a breach of any of its representations,
warranties, covenants, or agreements contained in this Agreement.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to each of Sellers that the statements
contained in this Article IV are correct and complete as of the Effective Date
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the Effective Date throughout
this Article IV):
4.1 Organization of Buyer. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
4.2 Buyer's Authority. Buyer has full power and authority (including
full corporate power and authority), and, subject to the necessary and required
approvals of the Agencies, the legal right to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement, subject to due
execution by the other Parties hereto, constitutes the valid and legally binding
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obligation of Buyer, enforceable in accordance with its terms and conditions,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors' rights and remedies generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
articles of incorporation or bylaws or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any of
its assets is subject.
4.4 Brokers' Fees. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any of Sellers could become liable or
obligated.
4.5 Investment. Buyer is not acquiring the Company Shares with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
ARTICLE V
SELLERS' AND COMPANY'S REPRESENTATIONS AND WARRANTIES
Each of Sellers jointly and severally represents and warrants to Buyer
that the statements contained in this Article V are correct and complete as of
the Effective Date and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
Effective Date throughout this Article V):
5.1 Authority; Organization; Qualification; Corporate Power.
5.1.1 Sellers' Authority. Each of Sellers has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each of Sellers, enforceable in accordance with its terms and conditions. No
notice to, filing with, or any authorization, consent, or approval of, any
governmental entity or other Person is necessary in connection with the
execution, delivery, and performance by any of Sellers of this Agreement and the
Transaction Documents and the consummation by any of Sellers of the transactions
contemplated hereby and thereby.
5.1.2 Organization; Qualification; Corporate Power. Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Company has full corporate power and
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authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Schedule 5.1.2 attached hereto lists all
directors and officers of Company.
5.2 Company Shares; Capitalization.
5.2.1 Company Shares. Each of Sellers holds of record and owns
beneficially the number of Company Shares set forth next to his name on Schedule
5.2.1 attached hereto, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act), Taxes, Encumbrances, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. Each of Sellers is not a party to any option, warrant, purchase right,
or other contract or commitment that could require him to sell, transfer, or
otherwise dispose of any capital stock of Company (other than this Agreement).
Each of Sellers is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of Company.
5.2.2 Capitalization. The entire authorized capital stock of
Company consists of One Thousand (1000) shares, of which Three Hundred (300) are
issued and outstanding and of which Seven Hundred (700) are held in treasury.
All of the issued and outstanding Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth on Schedule 5.2.1 attached hereto. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to Company.
5.3 Noncontravention. Neither the execution, delivery, or performance
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Sellers or Company is subject or
any provision of the Articles of Incorporation or bylaws of Company, (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any of Sellers or Company is a party
or by which any is bound or to which any of their or its assets is subject, or
result in the creation or imposition of any Encumbrances upon capital stock or
assets owned by any of Sellers or Company. Schedule 5.3 attached hereto lists
all notices to, filings with, or any authorizations, consents, or approvals of
any governmental entity or other Person necessary in connection with the
execution, delivery, and performance by any of Sellers or Company of this
Agreement and the consummation of the transactions contemplated hereby, and
except as listed on Schedule 5.3 attached hereto, no other such notices to,
filings with, or any authorizations, consents, or approvals are necessary.
5.4 Brokers' Fees. None of Sellers or Company has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
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5.5 Personal Property. Schedule 5.5 attached hereto lists (i) all fixed
assets owned or leased by, in the possession of, or used by, Company in
connection with its business, and (ii) all other tangible and intangible
personal property, rights and assets owned or leased by, in the possession of,
or used by, Company in connection with its business, which have a current fair
market value in excess of $5,000 individually or, with respect to similar or
related properties, $5,000 in the aggregate and are material to the operation of
the business (except property sold or otherwise disposed of in the Ordinary
Course of Business and except inventory and Proprietary Rights), which list also
indicates the location of such items. Company has good and marketable title to,
or a valid leasehold interest in, each item listed on Schedule 5.5 attached
hereto, in each case free and clear of any Encumbrances, except as disclosed on
Schedule 5.5 attached hereto. The property listed on Schedule 5.5 attached
hereto constitutes all tangible and intangible property, rights, and assets
necessary and required for the conduct by Company of its business as now
conducted or currently proposed to be conducted. Such property is in good
condition and repair, and none of such property requires any repair or
replacement except for maintenance in the Ordinary Course of Business. Except as
disclosed on Schedule 5.5 attached hereto, none of such listed property is
subject to any Encumbrances or is located other than on the premises of Company.
5.6 Subsidiaries. Schedule 5.6 attached hereto sets forth for each
Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii) the
number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in treasury. All of the
issued and outstanding shares of capital stock of each Subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable. Company holds
of record and owns beneficially all of the outstanding shares of each
Subsidiary.
5.7 Financial Statements. Schedule 5.7 attached hereto contains the
following financial statements (collectively, the "Financial Statements"): (i)
the unaudited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
November 30, 1994, November 30, 1995, November 30, 1996, and November 30, 1997,
for Company; and (ii) the unaudited consolidated balance sheets and statements
of income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the eleven months ended October 31, 1998
(the "Most Recent Fiscal Month End") for Company. The Financial Statements
(including the notes thereto) are complete and correct in all respects and have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly the financial condition of
Company as of such dates and the results of operations of Company for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items otherwise required by GAAP, none of which, if provided, would reflect
Adverse Consequences in respect of the operations or financial condition of
Company.
5.8 Events Subsequent to Most Recent Fiscal Month End. Since the Most
Recent Fiscal Month End, there has not been any Adverse Consequences in respect
of the operations or financial condition of Company taken as a whole. Without
limiting the generality of the foregoing, since that
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date, Company has neither engaged in any practice, taken any action, nor entered
into any transaction outside the Ordinary Course of Business.
5.9 Legal Compliance. Company has complied with all laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of any federal, state, local, and foreign
governmental entity (collectively, "Legal Requirements") applicable to it or its
conduct, ownership, use, occupancy, or operation in respect of its business or
properties, real or personal; nor has Company or any Seller received notice of
any violation by Company of any Legal Requirements.
5.10 Tax Matters. Except as set forth on Schedule 5.10 attached hereto,
Company has filed all Tax Returns that it was required to file, and all Taxes
due and payable by Company have been paid in full. Schedule 5.10 attached hereto
also lists all Tax Returns filed with respect to Company for taxable periods
ended on or after November 30, 1994, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Buyer correct and complete copies of all
federal and state Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Company since November 30, 1994.
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to any assessment of or deficiency in
Taxes. Company is not a party to any allocation or sharing agreement for Taxes.
Company has never been a member of an Affiliated Group filing a consolidated
federal corporate Tax Return (other than a group the common parent of which was
Company).
5.11 Real Property.
(a) Schedule 5.11(a) attached hereto lists all real property
owned by Company. With respect to each such listed parcel of owned real
property, and except for matters which would not have any Adverse Consequences
on the financial condition of Company taken as a whole: (i) the identified owner
has good and marketable title to the parcel of real property, free and clear of
any Encumbrances, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent, recorded easements,
covenants, and other restrictions, and utility easements, building restrictions,
zoning restrictions, and other easements and restrictions existing generally
with respect to properties of a similar character; (ii) there are no leases,
subleases, licenses, concessions, or other agreements granting to any party or
parties the right of use or occupancy of any portion of the parcel of real
property; and (iii) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein.
(b) Schedule 5.11(b) attached hereto lists all real property
leased or subleased to Company. Sellers have delivered to Buyer correct and
complete copies of the leases and subleases listed in Schedule 5.11(b) attached
hereto (as amended through the Closing Date). Each lease and sublease listed in
Schedule 5.11(b) attached hereto is legal, valid, binding, and enforceable in
accordance with its terms, and otherwise in full force and effect.
5.12 Intellectual Property. Schedule 5.12 attached hereto lists, at
subdivision (i), all patented and registered Proprietary Rights owned by Company
and all pending patent applications
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and applications for the registration of other Proprietary Rights owned or filed
by Company. Schedule 5.12 attached hereto lists, at subdivision (ii) thereon,
all trade or corporate names used by Company and all licenses and other rights
granted by Company to any third party with respect to Proprietary Rights and
licenses and other rights granted by any third party to Company. Except as set
forth at subdivision (iii) on Schedule 5.12 attached hereto: (i) Company owns
and possesses all right, title, and interest in and to, or has a valid license
to use, all of the Proprietary Rights necessary for the operation of the
Business as presently conducted and contemplated to be conducted hereby; (ii) no
claim by any third party contesting the validity, enforceability, use, or
ownership of any such Proprietary Rights has been made, is currently
outstanding, or threatened, and there is no reasonable basis for any such
claims; (iii) neither Company, any of Sellers, nor any registered agent of
Company have received any notices of, nor are aware of any reasonable basis for
an allegation of, any infringement or misappropriation by, or conflict with, any
third party with respect to such Proprietary Rights, nor have Company, any of
Sellers, or any registered agent of Company received any claims of infringement
or misappropriation of or other conflict with any Proprietary Rights of any
third party; and (iv) Company has not infringed, misappropriated, or otherwise
violated any Proprietary Rights of any third parties, and is unaware of any
infringement, misappropriation, or conflict which will occur as a result of the
continued operation of Company's business as presently conducted or as
contemplated to be conducted hereby.
5.13 Contracts. Schedule 5.13 attached hereto lists all contracts and
other agreements ("Contracts") to which Company is a party or by which Company
is bound, the performance of which will involve consideration in excess of
$1,000. Sellers have delivered to Buyer a correct and complete copy of each
contract or other agreement listed in Schedule 5.13 attached hereto (as amended
through the Closing Date). Company is not in default, nor has any event occurred
which, with the giving of notice or the passage of time or both, would
constitute a default under any Contract or any other obligation owed by Company,
which default would not have any Adverse Consequences on the operations,
financial condition, assets, or properties of Company, and no event has occurred
which, with the giving of notice or the passage of time or both, would
constitute a default by any other party to any such Contract or obligation.
5.14 Powers of Attorney. There are no outstanding powers of attorney
executed by or on behalf of Company.
5.15 Litigation. Except as listed on Schedule 5.15 attached hereto,
there is no action, suit, proceeding, investigation, claim, or order pending or
threatened against Company or any of its directors, officers, or key employees
with respect to the business or proposed business of Company, or to which
Company otherwise is a party, which if adversely determined would have any
Adverse Consequences on Company, its assets or business, before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction; nor is there any reasonable basis for any such action, suit,
proceeding, investigation, claim, or order. Company is not subject to any
injunction, judgment, order, decree, or ruling of any court or governmental
entity. Company has not received any opinion or memorandum of legal advice from
legal counsel retained by Company or any Seller to the effect that any of them
is exposed, from a legal standpoint, to any liability which may have Adverse
Consequences on the business or proposed business of Company. Company is not
engaged in any action to recover monies due it or for damages sustained by it.
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<PAGE> 10
5.16 Employee Benefits. Except as listed on Schedule 5.16 attached
hereto, Company has not maintained, sponsored, adopted, made contributions to,
or obligated itself to make contributions or to pay any benefits or grant rights
under or with respect to, any Employee Benefit Plan, which could give rise to or
result in Company having any debt, liability, claim, or obligation of any kind
or nature, whether accrued, absolute, contingent, direct, indirect, known or
unknown, perfected or inchoate, or otherwise and whether or not due or to become
due. Sellers have delivered to Buyer correct and complete copies of the plan
documents and summary plan descriptions for each Employee Benefit Plan listed on
Schedule 5.16 attached hereto, and each such listed Employee Benefit Plan is in
compliance with its respective governing documents and agreements and with all
applicable Legal Requirements. More specifically:
(a) Schedule 5.16 attached hereto lists each Employee Benefit
Plan maintained by Company or to which Company contributes or is required to
contribute or in which any employee of the Company participates. Each Employee
Benefit Plan has been operated and administered in all respects in accordance
with all applicable Legal Requirements, including, but not limited to, ERISA and
the Code. There are no pending or threatened claims by or on behalf of any of
the Employee Benefit Plans, by any employee or beneficiary covered under any
such Employee Benefit Plan or otherwise involving any such Employee Benefit Plan
or any of its fiduciaries (other than for routine claims for benefits).
(b) Except as set forth on Schedule 5.16 attached hereto, (i)
each Employee Benefit Plan subject to section 401(a) of the Code qualifies
thereunder and is exempt from taxation pursuant to section 501(a) of the Code,
(ii) each trust subject to section 501(c) of the Code qualifies for exemption
from federal income tax thereunder, and (iii) each Employee Benefit Plan subject
to sections 125 and 129 of the Code qualifies thereunder.
(c) Company has not maintained, contributed to or been
required to contribute to, nor do any of its employees participate in, a
"multi-employer plan" (as defined in section 3(37) of ERISA) or a "defined
benefit plan" (as defined in section 3(35) of ERISA).
(d) Notwithstanding anything else set forth herein, Company
has not incurred any liability as of the Closing Date with respect to any
Employee Benefit Plan under ERISA (including, without limitation, Title I or
Title IV of ERISA), the Code, or other applicable law, which is due and payable
and which has not been satisfied in full, and no event has occurred, and there
exists no condition or set of circumstances which could result in the imposition
of any liability under ERISA (including, without limitation, Title I or Title IV
of ERISA), the Code, or other applicable law with respect to any of the Employee
Benefit Plans (other than the payment of routine claims for benefits, insurance
premiums or contributions required under the terms of the Employee Benefit
Plans).
(e) No Employee Benefit Plan, other than an Employee Benefit
Plan which is an employee pension benefit plan (within the meaning of section
3(2)(A) of ERISA), provides benefits, including without limitation, death,
health or medical benefits (whether or not insured), with respect to current or
former employees of Company beyond their retirement or other termination of
service with Company (other than (i) coverage mandated by applicable law, (ii)
deferred compensation
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<PAGE> 11
benefits fully accrued as liabilities on the books of Company or (iii) benefits
the full cost of which is borne by the current or former employee (or his or her
beneficiary)).
(f) The consummation of the transactions contemplated by this
Agreement (including but not limited to the resignation of Sellers and all of
Sellers' respective family members as employees of Company) will not (i) entitle
any current or former employee, officer, or director of Company to severance
pay, unemployment compensation or any other payment from Company, or (ii) except
for acceleration of vesting by reason of the termination of the Employee Benefit
Plans described in Schedule 5.16 attached hereto, accelerate the time of payment
or vesting, or increase the amount of compensation due any such employee,
officer or director. The entire amount payable to Company's employees with
respect to the Plans (after taking into account any amounts vested by reason of
the termination thereof) have been fully and adequately accrued as a liability
on the Most Recent Financial Statements.
(g) Except as set forth in Schedule 5.16 attached hereto,
Company has provided or made available to Buyer, its counsel or accountants true
and complete copies of the following for each Employee Benefit Plan as
applicable: (i) the Employee Benefit Plan; (ii) the summary plan description of
the Employee Benefit Plan; (iii) the trust agreement, insurance policy or other
instrument relating to the funding of the Employee Benefit Plan; (iv) the most
recent Annual Report (Form 5500 series) and accompanying schedule filed with the
Internal Revenue Service or United States Department of Labor with respect to
the Employee Benefit Plan; (v) the most recent audited financial statement for
the Employee Benefit Plan; (vi) the most recent actuarial report of the Employee
Benefit Plan; and (vii) the policy of fiduciary liability insurance (and
agreements related thereto) maintained in connection with the Employee Benefit
Plan.
(h) Except as contemplated in this Section 5.16, Company has
not amended or terminated any Employee Benefit Plan after providing Buyer with
copies of the Employee Benefit Plans referenced in Schedule 5.16 attached
hereto.
5.17 Environmental, Health, and Safety Matters. Company is in strict
compliance with all Environmental, Health, and Safety Requirements, and Company
possesses all required permits, licenses, and certificates, and has filed all
notices or applications, required thereby. Company has not received any written
notice, report or other information (and there is no reasonable basis for any
such notice, report, or information) regarding any actual or alleged violation
of Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to Company or its facilities arising under Environmental, Health, and
Safety Requirements. No facts, events, or circumstance with respect to the past
or present operations, business, or facilities of Company exist which reasonably
could be expected to interfere with or prevent continued compliance with, or
could give rise to any common law or statutory liability or otherwise form the
basis of any claim, action, suit, proceeding, hearing, or investigation against
or involving Company or its business under any Environmental, Health, and Safety
Requirement based upon any such fact, event, or circumstances, including,
without limitation, liability for cleanup costs, personal injury, or property
damage.
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<PAGE> 12
5.18 Certain Business Relationships with Company. Except as listed on
Schedule 5.18 attached hereto, none of Sellers has been involved in any business
arrangement or relationship with Company within the past twelve (12) months, and
none of Sellers owns any asset, tangible or intangible, which is used in the
business of Company. Sellers have delivered to Buyer all documents and other
information evidencing each such arrangement or relationship listed on Schedule
5.18 attached hereto, and each such listed arrangement or relationship was
effected on terms equivalent to those which would have been established in an
arms-length negotiation.
5.19 No Undisclosed Liabilities. Company does not have any debt,
liability, or obligation of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated, or otherwise and whether
due or to become due) arising out of any transaction entered into at or prior to
the Effective Date, or any transaction, series of transactions, action or
inaction at or prior to the Effective Date, or any state of facts or condition
existing at or prior to the Effective Date (regardless of when such debt,
liability, or obligation is asserted), including, but not limited to, debts,
liabilities, and obligations on account of Taxes or governmental charges or
penalties, interest or fines thereon or in respect thereof, except (i) to the
extent specifically reflected and accrued for or reserved against in the
Financial Statements, (ii) for debts, liabilities, and obligations listed on
Schedule 5.19 attached hereto, or (iii) debts, liabilities, and obligations
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business (none of which is a liability resulting from breach of Contract,
breach of warranty, tort, infringement, claim, or lawsuit).
5.20 Licenses and Permits. Company holds all permits, licenses,
franchises, and approvals of the Agencies necessary or required for its current
conduct, ownership, use, occupancy, or operation in respect of its business and
properties, real and personal, all of which are listed on Schedule 5.20 attached
hereto ("Permits"). Company is in compliance with such Permits, all of which are
in full force and effect, and neither Company nor any Seller has received any
notice thereof to the contrary.
5.21 Inventories, Accounts Receivable, and Accounts Payable.
(a) Except as disclosed on Schedule 5.21(a) attached hereto,
all inventories of Company are of good and standard quality and fitness.
(b) Schedule 5.21(b) attached hereto lists Company's accounts
receivable as of the Most Recent Fiscal Month End, and since such time, there
has been no material change, other than in the Ordinary Course of Business, in
the information disclosed in Schedule 5.21(b) attached hereto. All such
disclosed accounts receivable have arisen in bona-fide arms-length transactions
in the Ordinary Course of Business and are the valid and binding obligations of
the account debtors.
(c) Each of Company's accounts payable have arisen in
bona-fide arms-length transactions in the Ordinary Course of Business and have
been paid by Company in the ordinary course consistent with past practice.
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<PAGE> 13
5.22 Conduct of Business.
(a) Except as disclosed on Schedule 5.22(a) attached hereto,
since December 31, 1997, Company has conducted its business only in the Ordinary
Course of Business and has not incurred any liability other than in the Ordinary
Course of Business, and there has been no Adverse Consequences on the assets,
condition (financial or otherwise), operating results, employee or customer
relations, business activities, or business prospects of Company.
(b) Company has not, at any time, made or committed to make,
any payments for illegal political contributions, any bribes, any kickback
payments, or any other illegal payments.
5.23 Insurance Policies. Schedule 5.23 attached hereto lists and
describes, including policy numbers, all insurance policies owned by Company,
copies of which policies or binders have been delivered to Buyer. All such
policies are in full force and effect, and Company is not in default under any
of them. Company has not received any notice of cancellation or intent to cancel
or increase or intent to increase premiums with respect to such policies nor is
there any basis for any such action. Schedule 5.23 attached hereto also lists
all pending claims with any insurance company and any instance within the
previous three years of a denial of coverage of Company by any insurance
company.
5.24 Bank Accounts. Schedule 5.24 attached hereto lists each bank in
which Company has an account or safe deposit box, the number of each such
account or box, and the names of all Persons authorized to draw thereon or to
have access thereto, as the case may be.
5.25 Compensation and Personnel Matters. Schedule 5.25 attached hereto
lists the name, title, date of hiring and current annual rate of compensation of
each director and officer of Company, and of each employee and agent of Company
whose current annual rate of compensation is Forty Thousand Dollars ($40,000) or
more, together with a summary (containing estimates to the extent necessary) of
existing bonuses, additional compensation (whether current or deferred) and
other like benefits, if any, paid or payable to such Persons in respect of
calendar years 1997 and 1998. Except as disclosed on Schedule 5.25 attached
hereto, Company is not a party to, nor is any of its property bound by, any
contract, agreement or other transaction with any director, officer or employee
of Company and since December 31, 1997, has not made or authorized any payment
to its officers, directors, former directors, shareholders or employees except
in the Ordinary Course of Business and at the regular rates of salary or other
remuneration payable. Except as set forth in Schedule 5.25 attached hereto:
(i) Company is not a party to, and has not made any
commitment to or conducted any negotiations with any labor union or employee
association with respect to, any collective bargaining or similar agreement, nor
are any of Company's employees currently represented by a labor organization for
purposes of collective bargaining as provided under the National Labor Relations
Act, and there are current attempts to organize or establish any labor union or
employee association in Company;
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<PAGE> 14
(ii) there is no unfair labor practice charge or
complaint or any other matter against or involving Company pending or threatened
or contemplated before the National Labor Relations Board or any court of law;
(iii) there is no labor strike, or other dispute,
slowdown or stoppage pending or threatened against Company;
(iv) there are no charges, investigations,
administrative proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national origin,
sexual preference, disability or veteran status) pending before the Equal
Employment Opportunity Commission or any Governmental Authority against Company;
and
(v) Company has complied in all respects with all
Legal Requirements relating to the employment of labor with respect to its
employees, including any provisions thereof relating to wages, hours, benefits,
employment practices, collective bargaining and the payment of social security
and similar taxes.
5.26 Indebtedness. Company does not have any outstanding indebtedness
for borrowed money or capitalized lease obligations, except as disclosed on
Schedule 5.26 attached hereto.
5.27 Net Working Capital. Company's Net Working Capital as of the Most
Recent Fiscal Month End is $1,004,998.82.
5.28 Medical Expenses. Schedule 5.28 attached hereto lists all
expenses, obligations, duties, and liabilities relating to any claim by
employees and former employees (including dependents and spouses) of Company,
and the extent of any specific accrual on or reserve therefor disclosed on the
Financial Statements, for any medical costs and expenses. Except as disclosed on
Schedule 5.28 attached hereto, no claims, injuries, fact, event, or condition
exists which would give rise to a claim by employees and former employees
(including dependents and spouses) of Company for any medical costs and
expenses.
5.29 No Omissions and No Misrepresentations. Neither the
representations and warranties of Company nor any other document or written
information provided to Buyer by or on behalf of Company in connection with the
transactions contemplated hereby contain any untrue statement of any material
fact or omit to state any material fact necessary to make any such statement,
warranty, or representation not misleading. There is no material fact which has
not been disclosed to Buyer which adversely affects or could reasonably be
anticipated to have Adverse Consequences on the business conducted by Company or
Company's or any Seller's ability to consummate the transactions contemplated
hereby.
5.30 Year 2000 Compliance. The computer software and hardware operated
by Company are capable of providing uninterrupted millennium functionality to
record, store, process, and present calendar dates falling on or after January
1, 2000, and date-dependent data in the same manner and with the same
functionality as such software and hardware records, stores, processes, and
calendar
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<PAGE> 15
dates and date-dependent data as of the date hereof, in all events without
having any Adverse Consequences on the condition (financial or otherwise) of
Borrower.
5.31 Colorado Avenue Nonpublic School. Neither the termination of the
Colorado Avenue Nonpublic School nor the transfer of its faculty, students, and
personal property to the Van Buren Boulevard Nonpublic School will violate any
Legal Requirement and, to Seller's knowledge, will not have any Adverse
Consequences on the business (financial or otherwise) of Company as contemplated
to be conducted hereby.
ARTICLE VI
CLOSING MATTERS
6.1 Time and Place. The closing of the transactions that are the
subject of this Agreement (the "Closing") shall take place at the offices of
Best Best & Krieger LLP in Riverside, California, commencing at 9:00 a.m. local
time on the later of (i) the first business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself), or (ii) December 2,
1998, unless otherwise agreed to by the Parties (the "Closing Date").
6.2 Deliveries of Sellers. At the Closing, Sellers will execute or
deliver, or cause to be executed or delivered, the following:
(a) Certificates representing the Seller Shares,
endorsed over to Buyer or accompanied by duly executed stock powers, free and
clear of all Encumbrances.
(b) The Articles of Incorporation of Company,
certified by the Secretary of State of the State of California as of a date not
more than ten (10) days prior to the Closing, and the bylaws of Company,
certified by the Secretary of Company as in effect at the Closing.
(c) Certificates of Good Standing, dated not more
than ten (10) days prior to the Closing, with respect to Company, issued by the
Secretary of State of the State of California, by the Secretary of State of each
jurisdiction in which Company is qualified to do business as foreign
corporation, and by the Franchise Tax Board of the State of California.
(d) All minute books, stock ledgers, and similar
corporate records of Company.
(e) Evidence satisfactory to Buyer that all consents,
approvals, or authorizations of, or notifications to, any third parties
(including governmental entities), if any, required to sell and assign the
Seller Shares and to consummate the transactions contemplated hereby have been
obtained by Sellers and Company.
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<PAGE> 16
(f) A resolution of the Board of Directors of Company
authorizing the execution, delivery, and performance by Company of this
Agreement and the consummation of the transactions contemplated hereby,
certified by the Secretary of Company.
(g) A certificate of the Secretary of Company
attesting to the incumbency of the officers of Company executing this Agreement
and any other certificates or agreements delivered by Company to Buyer at or
prior to the Closing.
(h) A certificate of each Seller and of the President
of Company attesting on behalf of such Seller or Company, as the case may be, to
the matters, where applicable, set forth in Section 8.1 hereof.
(i) Each of the Transaction Documents.
(j) An opinion of counsel to Sellers and Company
addressed to Buyer, dated as of the Closing Date, covering customary matters in
a stock transaction.
(k) Such other documents and the like as reasonably
may be requested by counsel to Buyer.
6.3 Deliveries of Buyer. At the Closing, Buyer will execute or deliver,
or cause to be executed or delivered, the following:
(a) A certificate of the Secretary of Buyer attesting
to the incumbency of the officers of buyer executing this Agreement and any
other certificates or agreements delivered by Buyer to Sellers at or prior to
the Closing.
(b) A certificate of any officer of Buyer attesting
on behalf of Buyer to the matters set forth in Section 8.2(a) and (b) hereof.
(c) A resolution of the Board of Directors of Buyer
authorizing the execution, delivery, and performance by Buyer of this Agreement
and the consummation of the transactions contemplated hereby, certified by the
Secretary of Company.
(d) Each of the Transaction Documents.
(e) The Purchase Price payable in accordance with
Article II hereof.
(f) An opinion of counsel to Buyer addressed to
Sellers, dated as of the Closing Date, covering customary matters in a stock
transaction.
(h) Such other documents and the like as reasonably
may be requested by counsel to Sellers.
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ARTICLE VII
CLOSING COVENANTS
7.1 Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the Effective Date and the Closing:
7.1.1 General. Each Party will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions set forth
in Article VIII hereof).
7.1.2 Notices and Consents. Sellers will cause Company to give
any notices to third parties, and will cause Company to use its reasonable best
efforts to obtain any third party consents, that Buyer may request in connection
with the matters referred herein. Each of the Parties will (and Sellers will
cause Company to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governmental entities in connection with the matters referred herein.
7.1.3 Operation of Business. Sellers will not cause or permit
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business, or that otherwise would
constitute a breach of any representation, warranty, or covenant made by Sellers
or Company in this Agreement. Without limiting the generality of the foregoing,
Sellers will cause Company to:
(i) carry on the business conducted by Company in the
same manner as Sellers heretofore have and not make any material change in
personnel or operations, and not make any change in finance or accounting
policies;
(ii) maintain the assets of Company in good working
order and condition;
(iii) perform in all respects its obligations under
any agreement relating to or affecting its business;
(iv) keep in full force and effect present insurance
policies or other comparable insurance coverage in respect of its business;
(v) maintain and preserve Company's business
organization intact, retain Company's present employees, and maintain Company's
relationships with suppliers, customers, and others having business relations
therewith;
(vi) not effect, grant, or pay any increase in
compensation to any employee, officer, or director of Company other than annual
raises and bonuses to employees and officers consistent with those effected,
granted, or paid in prior years;
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<PAGE> 18
(vii) not issue, redeem, or repurchase any shares of,
or modify any of the terms of, its capital stock or any securities convertible
into or exercisable for any such capital stock, not declare or pay any dividend,
whether in cash, stock or property, or not otherwise take (or omit to take) any
action where the same would be out of the Ordinary Course of business or
inconsistent with past practices;
(viii) not, directly or indirectly, transfer any
Company Shares;
(ix) not make or consent to any modification or
termination of, or exercise or waive any rights under, or grant any option or
proxy with respect to, the Company Shares;
(x) not enter into any agreement containing any
provision that would be violated or breached by the performance of Sellers' or
Company's obligations hereunder or which would violate, breach, or conflict with
any provisions hereof;
(x) without the prior written consent of Buyer, not
sell or agree to sell any asset of Company, except for the depletion of
inventories sold in the Ordinary Course of Business;
(xii) without the prior written consent of Buyer, not
engage in any transaction out of the Ordinary Course of Business, including any
sale, transfer, lease, encumbrance, or granting of a security interest in any
portion of the assets (except as otherwise provided herein);
(xiii) without the prior written consent of Buyer,
acquire, or make any capital expenditure in respect of, any additional items of
property, plant, or equipment having a value in excess of $1,000 in the
aggregate;
(xiv) without the prior written consent of Buyer,
enter into, renew, or terminate any contract or lease;
(xv) (1) not accelerate booking or collection of
revenues or defer expenses or (2) except as required by GAAP and subject to
appropriate year-end adjustments, (A) not utilize accounting principles
different from those used in the preparation of the Financial Statements and the
Most Recent Financial Statements, (B) not change in any manner its method of
maintaining its books of account and records from such methods as reflected in
the Financial Statements and the Most Recent Financial Statements, or (C) not
accelerate booking of revenues or the collection of accounts receivable or the
deferral of expenses.
7.1.4 Full Access. Each of Sellers will permit, and Sellers
will cause Company to permit, representatives of Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of Company, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
each of Company. Buyer will treat and hold as such any Confidential Information
it receives from any of Sellers and Company in the course of the reviews
contemplated by this Agreement, will not use any
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<PAGE> 19
of the Confidential Information except in connection with this Agreement, and,
if this Agreement is terminated for any reason whatsoever, will return to
Sellers and Company all tangible embodiments (and all copies) of the
Confidential Information which are in its possession.
7.1.5 Notice of Developments. Any of Sellers may elect at any
time to notify the Buyer of any development causing a breach of any of the
representations and warranties herein. Unless Buyer has the right to terminate
this Agreement by reason of the development and exercises that right, the
written notice pursuant to this Section 7.1.5 will be deemed to have amended the
Schedules attached hereto, to have qualified such representations and
warranties, and to have cured any misrepresentation or breach of warranty that
otherwise might have existed hereunder by reason of the development. Each Party
will give prompt written notice to the others of any Adverse Consequences
causing a breach of any of his or its own representations and warranties. Except
as otherwise provided in this Section 7.1.5, no disclosure by any Party pursuant
hereto shall be deemed to amend or supplement any Schedule attached hereto or to
prevent or cure any misrepresentation or breach of representation or warranty.
7.1.6 Exclusivity. None of Sellers will (and Sellers will not
cause or permit Company to) solicit, initiate, or encourage the submission of
any proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of Company (including any
acquisition structured as a merger, consolidation, or share exchange).
7.2 Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
7.2.1 General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
this Agreement).
7.2.2 Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Company, each of the other Parties shall cooperate
with him or it and his or its counsel in the defense or contest, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the defense or contest, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under this
Agreement).
7.2.3 Transition. No Seller will take any action or inaction
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of Company from
maintaining the same business relationships with Company after the Closing as it
maintained with Company prior to the Closing.
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<PAGE> 20
7.2.4 Employee Matters.
(a) Effective as of the Closing Date, Sellers shall,
at their sole cost and expense, cause Company to terminate all Employee Benefit
Plans, other than Company's 401k Retirement Plan (the "401k Plan"), in strict
compliance with all Legal Requirements.
(b) Effective as of the Closing Date, Sellers shall,
at their sole cost and expense, cause Company to (1) spinoff the 401k Plan
accounts for Company's employees, and (2) transfer the assets in such accounts
to a qualified defined contribution plan designated and maintained by Buyer.
Such spinoff and transfer shall be undertaken in strict compliance with all
Legal Requirements and otherwise in accordance with and pursuant to section
414(l) of the Code and the Treasury Regulations promulgated thereunder.
(c) No family member of Sellers, nor any other
director or officer of Company shall make any claim for severance pay or
unemployment compensation relating to their employment, if any, by Company.
7.2.5 Accounts Receivable. Each of Sellers acknowledges and
understands that the Purchase Price has been determined assuming Net Working
Capital of Company as of the Closing Date will not be less than $1 Million.
Notwithstanding anything herein to the contrary, Sellers, jointly and severally,
guarantee the collection in full of all accounts receivable set forth on the
Tentative Balance Sheet within sixty (60) days of the Closing Date.
7.2.6 Colorado Avenue Nonpublic School. Effective as of the
Closing Date, Sellers shall cooperate with Buyer and use their best efforts to
terminate the Colorado Avenue Nonpublic School and transfer its faculty,
students, and personal property to the Van Buren Boulevard Nonpublic School.
Such termination and transfer shall be conducted in compliance with all Legal
Requirements.
7.2.7 Pre-Closing Tax Returns And Audits. As promptly as
possible after the Closing (and in any event within the time required by
applicable law), Sellers shall, at their sole cost and expense, cause Company's
certified public accountants to prepare all Tax Returns applicable to Company
for all periods, including portions thereof, up to and including the Closing
Date. All such Tax Returns shall be prepared in strict compliance with all
applicable Legal Requirements. After the Closing, Sellers shall, at their sole
cost and expense, be responsible for accumulating from Company's books and
records that information relating to the periods, including portions thereof,
ended on or prior to the Closing Date required and necessary to properly prepare
for audits conducted by any Person or the Agencies for any such periods,
including portions thereof, and furnishing the same to Company.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
8.1 Conditions Precedent to Obligation of Buyer. Buyer's obligation to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction on or prior to the Closing Date of all of the
following conditions (any of which may be waived in writing by Buyer in its sole
discretion):
(a) The representations and warranties of Company and Sellers
in this Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except for representations and
warranties that speak as of a specific date or time other than the Closing Date
(which need only be true and correct as of such date or time).
(b) The covenants and agreements of Company and Sellers to be
performed or complied with on or before the Closing Date in accordance with this
Agreement shall have been performed and complied with in all respects.
(c) All registrations, filings, applications, notices,
consents, approvals, waivers, authorizations, qualifications, and orders to be
filed, made, or obtained by Buyer, Company, or any Seller in order to consummate
the transactions contemplated by this Agreement or any of the Transaction
Documents and to operate the business hereof or thereof after the Closing in
compliance with all Legal Requirements shall have been filed, made, or obtained,
in form and substance satisfactory to Buyer.
(d) There shall be no injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated hereby or imposing conditions on such consummation not otherwise
provided for in this Agreement.
(e) Buyer shall have completed a due diligence investigation,
satisfactory to Buyer in its sole discretion, of the legal, financial, and
business affairs of Company.
(f) Sellers and Company shall have provided all Schedules
required hereunder, and shall have cured such Schedules or specific items in
such Schedules to Buyer's reasonable satisfaction.
(g) Sellers shall have delivered to Buyer a certificate to the
effect that each of the conditions specified in this Agreement is satisfied in
all respects.
(h) All conditions to the obligations of Buyer under the
Transaction Documents shall have been satisfied, unless waived by Buyer.
(i) Sellers shall produce evidence, in a form reasonably
acceptable to Buyer, of adequate insurance coverage for claims against Sellers
or Company arising from events occurring
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prior to the Closing Date, and shall maintain such insurance coverage for a
period of five (5) years after the Closing.
(j) Buyer shall have received from counsel to Sellers an
opinion in form and substance covering matters customary to a stock transaction,
addressed to Buyer, and dated as of the Closing Date.
(k) All actions to be taken by Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Buyer.
(l) Seller shall have executed or delivered the items set
forth in Section 6.2 hereof.
8.2 Conditions Precedent to Obligation of Sellers. Sellers' obligation
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction on or prior to the Closing Date of all of the
following conditions (any of which may be waived in writing by Sellers in their
sole discretion):
(a) The representations and warranties of Buyer in this
Agreement shall be true and correct in all respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of the Closing Date, except for representations and warranties
that speak as of a specific date or time other than the Closing Date (which need
only be true and correct as of such date or time).
(b) The covenants and agreements of Buyer to be performed or
complied with on or before the Closing Date in accordance with this Agreement
shall have been performed and complied with in all respects.
(c) There shall be no injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated hereby or imposing conditions on such consummation not otherwise
provided for in this Agreement.
(d) Buyer shall have provided all Schedules required
hereunder, and shall have cured such Schedules or specific items in such
Schedules to Sellers' reasonable satisfaction.
(e) Buyer shall have delivered to Sellers a certificate to the
effect that each of the conditions specified in this Agreement is satisfied in
all respects.
(f) Sellers shall have received from counsel to Buyer an
opinion in form and substance covering matters customary to a stock transaction,
addressed to Sellers, and dated as of the Closing Date.
(g) All actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents
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required to effect the transactions contemplated hereby will be satisfactory in
form and substance to Sellers.
(h) Buyer shall have executed or delivered the items set forth
in Section 6.3 hereof.
ARTICLE IX
INDEMNIFICATION
9.1 Survival. All representations, warranties, covenants, agreements,
and guarantees contained herein of any Party shall survive the Closing
indefinitely; except that the representations and warranties contained in
Section 5.17 hereof shall survive for a period of three (3) years following the
Closing.
9.2 Indemnification by Seller. From and after the Effective Date,
Sellers jointly and severally agree to indemnify, defend, and hold harmless
Buyer and Company, their Affiliates, their directors, officers, and employees,
and their successors and permitted assigns from and against any and all
liabilities, losses, damages, demands, claims, suits, actions, judgments, causes
of action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing and defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Damages", which term also includes,
expressly, those Damages that arise as a result of strict liability, whether
arising under environmental laws and regulations or otherwise), asserted
against, resulting to, imposed upon, or incurred or suffered by any of them,
directly or indirectly, as a result or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants, agreements, or guarantees
made by Sellers in this Agreement, in any certificate or instrument delivered
pursuant to this Agreement, or in the Transaction Documents;
(ii) any liability of Sellers or Company, or
liability arising out of Sellers' operation of the business conducted by Company
prior to the Closing Date, which is threatened or imposed on Buyer or Company;
(iii) any misrepresentation in or any omission from
any certificate or other document (collectively, the "Additional Documents")
furnished or to be furnished by or on behalf of Sellers or Company under this
Agreement or under the Transaction Documents;
(iv) any liability for Taxes on the part of Company
for any taxable period, or portion thereof, prior to the Closing Date;
(v) any and all professional liability claims against
Company where the occurrence giving rise to any such claim preceded or occurred
on the Closing Date;
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(vi) any liability on the part of Company or Buyer
arising in connection with the termination or spinoff and transfer described in
Sections 7.2.4(a) or 7.2.4(b) hereof; and
(vii) any liability threatened or imposed on Buyer or
Company arising out of Seller's operation of Company during the Interim Period.
To be entitled to such indemnification, Buyer (including for
purposes of this paragraph, its Affiliates, its directors, officers, and
employees, their successors and permitted assigns their successors and permitted
assigns, and Company) shall give Sellers written notice (in all events not later
than ten (10) days after Buyer's receipt of notice of any such breach or
assertion of claim contemplated herein) of any such breach or claim or the
assertion by a third party of any claim with respect to which Buyer may bring a
claim for indemnification hereunder. Sellers shall have ten (10) days thereafter
within which to pay the claim or, at Sellers' sole cost and expense, contest the
claim in good faith by appropriate proceedings; provided, however, that Sellers
may not settle or compromise any claim or matter for which an indemnity may be
payable by Sellers hereunder without the prior written consent of Buyer.
In addition to the foregoing, if any third party payor deducts
any amount from payments due Buyer or Company on and after the Closing Date in
respect of claims against or amounts owed by Sellers or Company, as the case may
be, prior to the Closing Date, Sellers promptly will reimburse Buyer for the
amounts so deducted within five (5) days after written demand therefor by Buyer.
Buyer agrees to give prompt notice to Sellers upon Buyer' notice of the
assertion of any claim, formal or informal, by any third party payor for which,
if deducted by such third party payor, Buyer would be entitled to reimbursement
by Sellers hereunder and will cooperate in good faith, at no out-of-pocket cost
to Buyer, with Sellers to permit Sellers to mitigate the amount of any such
claim by any such third party payor.
From and after the Effective Date, Sellers shall not have any
rights of contribution, indemnity, or reimbursement, or similar rights, at
common law, by statute, under this Agreement, or otherwise, against Company
based on a representation, warranty, covenant, or agreement in this Agreement
made by Sellers, any and all of the same being hereby released effective as of
the Effective Date.
9.2 Indemnification by Buyer. From and after the Closing, Buyer shall
defend, indemnify, save, and keep harmless Sellers and their successors and
permitted assigns from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by any of them, directly or
indirectly, as a result or arising from the following:
(i) any inaccuracy in or breach or nonfulfillment of
any of the representations, warranties, covenants, or agreements made by Buyer
in this Agreement or in any certificate or instrument delivered pursuant to this
Agreement;
(ii) any liability of Buyer, or liability arising out
of Buyer's operation of the business conducted by Company after the Closing
Date, which is threatened or imposed on Sellers;
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(iii) any misrepresentation in or any omission from
any Additional Documents furnished or to be furnished by or on behalf of Buyer
under this Agreement;
(iv) any liability for Taxes on the part of Company
for any taxable period commencing on or after the Closing Date; and
(vii) any liability threatened or imposed on Sellers
arising out of Buyer's operation of Company during the Interim Period.
9.3 Exclusive Remedy. Buyer and Sellers acknowledge and agree that the
indemnification provisions in this Article IX shall be the exclusive remedy of
Buyer and Sellers with respect to Company and the transactions contemplated by
this Agreement. All indemnification payments under this Article IX shall be
deemed adjustments to the Purchase Price.
ARTICLE X
TERMINATION
10.1 Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) Buyer and Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event (i) any of
Sellers has given Buyer any notice pursuant to Section 7.1.5 hereof, and (ii)
the development that is the subject of such notice has, in Buyer's sole
discretion, had an Adverse Consequences upon the financial condition of Company
taken as a whole;
(c) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event Buyer is not
satisfied with the results of its continuing business, legal, environmental, and
accounting due diligence in respect of the transactions contemplated by this
Agreement or by the Transaction Documents;
(d) Buyer may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing in the event any of Sellers
has breached any representation, warranty, agreement, or covenant contained in
this Agreement or in the Transaction Documents and such breach has continued
without cure to Buyer's satisfaction; and
(e) Sellers may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing in the event Buyer has breached
any representation, warranty, agreement, or covenant contained in this Agreement
or in the Transaction Documents and such breach has continued without cure to
Sellers' satisfaction.
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10.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 hereof, then all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except as otherwise provided in Section 10.3 hereof and except for any
liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in this Agreement shall survive any such
termination.
10.3 Wrongful Termination Fee. Notwithstanding any provision herein to
the contrary, if either Buyer, on the one hand, or any of Sellers, on the other
hand, ("Terminating Party") terminates this Agreement for any reason other than
stated in Section 10.1 hereof, then such Terminating Party shall be liable for
the immediate payment of an amount equal to Two Hundred Thousand Dollars
($200,000) (the "Wrongful Termination Fee") on account of such wrongful
termination. If any of Sellers is the Terminating Party, then Sellers jointly
and severally shall be obligated to pay the Wrongful Termination Fee to Buyer.
If Buyer is the Terminating Party, then Buyer shall be obligated to pay the
Wrongful Termination Fee to any of Sellers and upon such payment to any of
Sellers shall not have any liability or obligation to pay any amount under this
Section 10.3 to any other such Seller.
ARTICLE XI
MISCELLANEOUS
11.1 Definitions.
(a) "Additional Documents" has the meaning Section 9.2(iii)
hereof.
(b) "Adverse Consequences" shall mean all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, Taxes,
Encumbrances, losses, expenses, and fees, including court costs and attorneys'
fees and expenses.
(c) "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
(d) "Agencies" means any Person which governs, controls, or
otherwise has any authority over Company.
(e) "Agreement" means this Stock Purchase Agreement.
(f) "Buyer" has the meaning set forth in the preface above.
(g) "Closing" has the meaning set forth in Section 6.1 hereof.
(h) "Closing Date" has the meaning set forth in Section 6.1
hereof.
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(i) "COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Codess.4980B.
(j) "Code" means the Internal Revenue Code of 1986, as
amended.
(k) "Colorado Avenue Nonpublic School" has the meaning set
forth in Section 3.1 hereof.
(l) "Company" has the meaning set forth in the preface above
and includes its predecessors and Subsidiaries.
(m) "Company Share" means the shares of the common stock of
Company.
(n) "Confidential Information" means any information
concerning the businesses and affairs of Company that is not available to the
public.
(o) "Contracts" has the meaning set forth in Section 5.13
hereof.
(p) "Damages" has the meaning set forth in Section 9.2 hereof.
(q) "Effective Date" shall mean December 1, 1998.
(r) "Employee Benefit Plan" means any (a) nonqualified
deferred compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan (within the meaning of ERISA ss. 3(2)), (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan (within the meaning of ERISA ss. 3(37))), or
(d) Employee Welfare Benefit Plan (within the meaning of ERISA ss. 3(1)) or
material fringe benefit or other retirement, bonus, or incentive plan or
program.
(s) "Encumbrances" shall mean any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or interest or use, or other
encumbrance of any kind.
(t) "Environmental, Health, and Safety Requirements" shall
mean all federal, state, local and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, as such requirements are enacted and in effect
from time to time.
(u) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(v) "Final Balance Sheet" has the meaning set forth in Section
2.3 hereof.
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(w) "Final Net Working Capital" has the meaning set forth in
Section 2.3 hereof.
(x) "Financial Statements" has the meaning set forth in
Section 5.7 hereof.
(y) "GAAP" means United States generally accepted accounting
principles (as such term is used in the American Institute of Certified Public
Accountants' Professional Standards) from time to time in effect.
(z) "Interim Period" has the meaning set forth in Section
3.8.1 hereof.
(aa) "Legal Requirements" has the meaning set forth in Section
5.9 hereof.
(bb) "Most Recent Financial Statements" has the meaning set
forth in Section 5.7 hereof.
(cc) "Most Recent Fiscal Month End" has the meaning set forth
in Section 5.7 hereof.
(dd) "Net Working Capital" has the meaning set forth in
Section 2.3 hereof.
(ee) "Ordinary Course of Business" means the ordinary course
of business of Company consistent with past custom and practice including with
respect to quantity and frequency.
(ff) "Ownership Percentages" has the meaning set forth in
Section 2.1 hereof.
(gg) "Party" and "Parties" has the meaning set in the preface
above.
(hh) "Permits" has the meaning set forth in Section 5.20
hereof.
(ii) "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
(jj) "Proprietary Rights" shall mean all patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service mark rights, service names and service name rights,
brand names, inventions, procedures, formulae, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights of Company.
(kk) "Purchase Price" has the meaning set forth in Section 2.1
hereof.
(ll) "Real Estate Note" shall mean that promissory note given
to BMB Enterprises, a California general partnership, pursuant to that certain
Agreement of Purchase and Sale and Joint
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<PAGE> 29
Escrow Instructions by and between Buyer and BMB Enterprises, a California
general partnership, dated concurrently herewith.
(mm) "Securities Act" collectively means federal and state
laws governing securities, including, but not limited to, the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended.
(nn) "Seller" has the meaning set forth in the preface above.
(oo) "Seller Shares" shall mean the Company Shares owned by
Sellers.
(pp) "Subsidiary" means any corporation with respect to which
a specified Person (or Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
(qq) "Taxes" shall mean any federal, state, local, or foreign
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
(rr) "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto.
(ss) "Tentative Balance Sheet" has the meaning set forth in
Section 2.3 hereof.
(tt) "Tentative Net Working Capital" has the meaning set forth
in Section 2.3 hereof.
(uu) "Terminating Party" has the meaning set forth in Section
10.3 hereof.
(vv) "Transaction Documents" jointly and severally shall mean,
including any and all certificates, instruments, agreements, and the like
referenced therein:
1) that certain Agreement of Purchase and Sale and
Joint Escrow Instructions by and between Buyer and BMB Enterprises, a California
general partnership, dated concurrently herewith, in the form attached hereto at
Exhibit "F";
2) that certain Asset Purchase Agreement by and
between Buyer and Behavioral Medicine Professional Services, Inc., a California
corporation, dated concurrently herewith, in the form attached hereto at Exhibit
"G";
3) that certain Asset Purchase Agreement by and
between Buyer and B and B Leasing, a general partnership of Messrs. William M.
Bosic and Donald J. Bosic, dated concurrently herewith, in the form attached
hereto at Exhibit "H"; and
4) those certain Noncompetition, Confidentiality, and
Nonsolicitation Agreement by and between Buyer and each of Sellers, dated
concurrently herewith, in the forms attached hereto at Exhibit "C", Exhibit "D",
and Exhibit "E".
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<PAGE> 30
(ww) "Transfer Tax" has the meaning set forth in
Section 2.4 hereof.
(xx) "Van Buren Boulevard Nonpublic School" has the
meaning set forth in Section 3.1 hereof.
(yy) "Wrongful Termination Fee" has the meaning set
forth in Section 10.3 hereof.
(zz) "401k Plan" has the meaning set forth in Section
7.2.4(a) hereof.
11.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of Buyer
and Sellers; provided, however, that any Party may make any public disclosure it
believes in good faith is required by Legal Requirements (in which case the
disclosing Party will use its best efforts to advise the other Parties prior to
making the disclosure).
11.3 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.4 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
11.5 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and Sellers; provided, however, that Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
11.6 Counterparts; Facsimiles. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Each Party hereby agrees
to accept and rely upon documents with "facsimile" signatures under this
Agreement and any documents entered into pursuant to this Agreement and hereby
acknowledges and agrees to provide each other Party with such documents bearing
the original signatures within three (3) business days following transmission.
11.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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To Buyer: Children's Comprehensive Services of
California, Inc.
11980 Mount Vernon Avenue
Grand Terrace, California 92324
Attn: Ms. Amy Harrison
Telephone: (909) 783-8400
Facsimile: (909) 783-7754
And to: Children's Comprehensive Services of California, Inc.
3401 West End Avenue, Suite 500
Nashville, Tennessee 37203
Attn: Mr. Donald B. Whitfield
Telephone: (615) 386-7239
Facsimile: (615) 383-6375
With a copy to: Best Best & Krieger LLP
3750 University Avenue
Riverside, California 92502
Attn: George M. Reyes, Esq.
Telephone: (909) 686-1450
Facsimile: (909) 686-3083
To Sellers: Mr. William M. Bosic
Post Office Box 2278
Riverside, California 92516
Telephone: (909) 789-4144
Facsimile: (909) 788-2572
And to: Mr. Donald J. Bosic
Post Office Box 2278
Riverside, California 92516
Telephone: (909) 789-4144
Facsimile: (909) 788-2572
And to: Mr. Joseph C. McCoy
Post Office Box 2278
Riverside, California 92516
Telephone: (909) 789-4144
Facsimile: (909) 788-2572
With a Copy To: Stream & Stream, Inc.
4201 Brockton Avenue, Suite 200
Riverside, California 92501
Attention: Kenneth B. Stream, Jr., Esq.
Telephone: (909) 276-8444
Facsimile: (909) 686-4768
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Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
11.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of California.
11.10 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.12 Expenses. Buyer, Sellers, and Company will bear its or their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. Company will not
bear Sellers' costs and expenses (including all of their legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby, and Sellers shall pay same.
11.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Unless the context clearly requires otherwise:
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder;
references to the plural include the singular, the singular includes the plural,
"including" is not limiting, and "or" has the inclusive meaning represented by
the phrase "or"; the words "hereof", "herein", "hereby", "hereunder", and
similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision hereof; and references to Article,
Section, Exhibit, and Schedule are to this Agreement unless other specified.
11.14 Incorporation of Recitals, Exhibits, and Schedules. The Recitals,
Exhibits, and Schedules set forth or identified in this Agreement are
incorporated herein by reference and made a part hereof.
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11.15 Arbitration; Specific Performance.
(a) Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules, such arbitration to be held in Riverside, California, and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
(b) Notwithstanding anything in this Agreement to the
contrary, each of the Parties acknowledges that money damages would not be a
sufficient remedy for any breach of this Agreement and that irreparable harm
would result in this Agreement were not specifically enforced. Therefore, the
rights and obligations of the Parties under this Agreement shall be enforceable
by a decree of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for and granted
in connection with such decree. A Party's right to specific performance shall be
in addition to all other legal or equitable remedies available to such Party.
11.16 Right of Set-off. If, with respect to any matter arising under
this Agreement or under any of the Transaction Documents, in Buyer's good faith
belief Buyer is entitled to indemnification, reimbursement, or payment from
Sellers hereunder or thereunder, then, in addition to any other remedies which
Buyer may have available to it, Buyer shall have the right to set-off the entire
amount thereof against the amounts, if any, which Buyer shall owe at such time
or from time to time thereafter under the Real Estate Note.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
{SIGNATURES FOLLOW ON NEXT PAGE}
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<PAGE> 34
----------------------------------------
WILLIAM M. BOSIC
----------------------------------------
DONALD J. BOSIC
----------------------------------------
JOSEPH C. MCCOY
SOMERSET, INCORPORATED, A CALIFORNIA
CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA
CORPORATION
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
- 34 -
<PAGE> 1
EXHIBIT 2.2
FIRST ADDENDUM TO
STOCK PURCHASE AGREEMENT
This First Addendum to Stock Purchase Agreement ("Addendum") is made
and entered into as of December 1, 1998, by and between between Children's
Comprehensive Services of California, Inc., a California corporation ("Buyer"),
on the one hand, and William M. Bosic, Donald J. Bosic, Joseph C. McCoy (with
Messrs. Bosic, Bosic, and McCoy sometimes referred to herein as "Seller" or
"Sellers" as the case may be), Somerset, Incorporated, a California corporation,
and doing business as Somerset Educational Services ("Company"), and Julia E.
Lippman Bosic, Blayne Bosic, and Pamela J. McCoy (with Mesdames Bosic, Bosic,
and McCoy sometimes referred to herein as "Spouses") on the other hand; with
Buyer, Sellers, Company, and Spouses sometimes referred to herein as "Party" or
"Parties" as the case may be.
RECITALS
A. Buyer, Sellers, and Company entered into that certain Stock
Purchase Agreement ("Agreement"), dated as of December 1, 1998.
B. Pursuant to the Agreement, Buyer, Sellers, Company, or Spouses
executed the following documents (collectively, the "Documents"):
(1) Buyer's Officer's Certificate;
(2) Resignation of William M. Bosic as an employee, as Director,
and as President of Company;
(3) Resignation of Donald J. Bosic as an employee, as Director,
as Financial Officer and as Secretary of Company;
(4) Resignation of Joseph C. McCoy as an employee, as Director,
and as Vice President of Company;
(5) Spousal Consent of Julia E. Lippman Bosic;
(6) Spousal Consent of Blayne Bosic; and
(7) Spousal Consent of Pamela J. McCoy.
C. The Documents' references to a Stock Purchase Agreement, dated
November 30, 1998, and to an effectiveness of November 30, 1998,
are incorrect and such dates in both instances should be December
1, 1998.
D. The Parties desire by this Addendum to amend the aforementioned
incorrect references in the Documents with the correct date of
December 1, 1998.
AGREEMENT
NOW, THEREFORE, the Parties agree to amend the Documents as follows:
<PAGE> 2
1. The Parties agree that each and every reference in the Documents to
a Stock Purchase Agreement as having been dated November 30, 1998, should be
amended such to having been dated December 1, 1998, and further agree that each
and every reference in the Documents to an effective date of November 30, 1998,
should be amended such to having an effective date of December 1, 1998.
2. This Addendum may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument
3. This Addendum shall be effective as November 30, 1998.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
{SIGNATURES FOLLOW ON NEXT PAGE}
<PAGE> 3
----------------------------------------
WILLIAM M. BOSIC
----------------------------------------
DONALD J. BOSIC, individually and as
Secretary for Somerset, Incorporated
----------------------------------------
JOSEPH C. MCCOY
SOMERSET, INCORPORATED, A CALIFORNIA
CORPORATION
By:
------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
----------------------------------------
JULIA E. LIPPMAN BOSIC
----------------------------------------
BLAYNE BOSIC
----------------------------------------
PAMELA J. MCCOY
{SIGNATURES CONTINUE ON NEXT PAGE}
<PAGE> 4
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA CORPORATION
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE> 1
EXHIBIT 2.3
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
This Agreement of Purchase and Sale and Joint Escrow Instructions
("AGREEMENT") is dated for reference purposes only as of the 1st day of
December, 1998, and made and entered into by and between Children's
Comprehensive Services of California, a California corporation ("BUYER"), and
BMB Enterprises, a California general partnership ("SELLER"), with respect to
the following:
RECITALS
A. Seller desires to sell and convey to Buyer all of Seller's right,
title and interest in and to the following:
(1) That certain real property located at 17241 Van Buren Boulevard,
in the City of Riverside, County of Riverside, State of California, consisting
of approximately 1.38 acres of land, which is depicted on Exhibit "A" attached
hereto ("LAND") and more particularly described on Exhibit "B" attached hereto,
and all improvements located thereon ("IMPROVEMENTS");
(2) All rights, privileges, easements, and appurtenances benefiting
the Land and the Improvements, including, without limitation, all mineral and
water rights and all easements, rights-of-way and other appurtenances used or
connected with the beneficial use or enjoyment of the Land and the Improvements
(the Land, the Improvements and all such rights, privileges, easements and
appurtenances are sometimes collectively hereinafter referred to as the "REAL
PROPERTY"); and
(3) All of Seller's interest in any intangible property used or
useful in connection with the foregoing, including, without limitation, all
"LEASES," "IMPROVEMENT PLANS" and "CONTRACTS" (as those terms are defined in
Paragraphs 7.1.2(ii) and (iii), respectively, hereof), contract rights,
warranties, guaranties, licenses, permits, entitlements, governmental approvals,
and certificates of occupancy which benefit the Real Property ("INTANGIBLE
PERSONAL PROPERTY") (with the Real Property and the Intangible Personal Property
sometimes collectively hereinafter referred to as the "PROPERTY").
B. Seller desires to sell the Property to Buyer, and Buyer desires to
purchase, the Property from Seller upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer agree that the
terms and conditions of this Agreement and the instructions to Chicago Title
Company ("ESCROW HOLDER") with regard to the escrow ("ESCROW") created pursuant
hereto are as follows:
1. Purchase and Sale. Seller hereby agrees to sell the Property
to Buyer, and Buyer hereby agrees to purchase the Property from Seller, upon the
terms and conditions herein set forth.
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<PAGE> 2
2. Purchase Price. The purchase price ("PURCHASE PRICE") for
the Property shall be Two Million Five Hundred Thousand Dollars ($2,500,000)
plus an amount (the "PAYOFF AMOUNT") equal to the total sums required to pay off
all outstanding principal and accrued interest under that certain promissory
note in the original amount of $1,056,000 between Seller and Provident Savings
Bank, FSB dated September 13, 1994 (the "INDEBTEDNESS"), secured by that certain
deed of trust between Seller as trustor and Provident Financial Savings Bank,
FSB, as beneficiary, dated September 13, 1994, and recorded September 29, 1994,
as document number 377621 (the "EXISTING TRUST DEED"), it being specifically
understood by the parties, however, that in no event shall such Payoff Amount
exceed the sum of One Million Dollars ($1,000,000).
3. Payment of Purchase Price. The Purchase Price for the
Property shall be payable by Buyer as follows:
3.1 Deposit. Upon "OPENING OF ESCROW" (as that term is
defined in Paragraph 4.1 hereof), Buyer will deposit with Escrow Holder, in cash
or by certified or bank cashier's check made payable to Escrow Holder, or a
confirmed wire transfer of funds (alternatively, "CASH"), the sum of One Hundred
Twenty-Five Thousand Dollars ($125,000) (the "DEPOSIT"). The Deposit shall be
invested by Escrow Holder in an interest bearing account acceptable to Buyer
with the Deposit and all interest accruing thereon credited to the Purchase
Price or released to Buyer at its election.
3.2 Real Estate Note and Deed of Trust. A purchase money
first deed of trust ("DEED OF TRUST") to record at "CLOSE OF ESCROW" (as that
term is defined in Paragraph 4.2 hereof), executed by Buyer securing a
promissory note ("REAL ESTATE NOTE") for Two Million Three Hundred Seventy-Five
Thousand Dollars ($2,375,000) in favor of Seller, or order, payable at Post
Office Box 2278, Riverside, California 92516, or at place designated by the
beneficiary, with interest from the date hereof at the rate of six percent
(6.0%) per annum, with principal and interest payable quarterly in arrears from
the date hereof and continuing quarterly thereafter for three (3) years, at
which time the unpaid principal balance and any accrued interest thereon shall
be due and payable in full. In addition to such quarterly payments of principal
and interest, if, in Buyer's good faith belief, Buyer is entitled to
indemnification, reimbursement, or payment from Seller hereunder or as provided
otherwise under the "STOCK PURCHASE AGREEMENT," (as that term is defined in
Paragraph 7.1, below) then in addition to any other remedies which Buyer may
have available to it, Buyer shall have the right to set off the entire amount
thereof against the amounts, if any, which Buyer shall owe at such time or from
time to time thereafter to Seller under the Real Estate Note. The Real Estate
Note shall be in the form of, and upon the terms contained in, Exhibit "C"
hereto. The Deed of Trust shall be in the form of, and upon the terms contained
in, Exhibit "D" hereto. At the Close of Escrow, the principal amount of the Real
Estate Note shall be applied and credited toward the payment of the Purchase
Price.
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<PAGE> 3
3.3 Payoff Amount and Other Closing Funds. On or before the
Close of Escrow, Buyer shall deposit or cause to be deposited with Escrow
Holder, the Payoff Amount and an additional amount of Cash such that the sum of
the Deposit, the Real Estate Note, the Payoff Amount and such Cash equals the
Purchase Price plus Buyer's share of closing costs, prorations, and charges
payable pursuant to this Agreement and minus the amount of any payments by Buyer
for and on behalf of Seller of any of Seller's share of closing costs,
prorations, and charges payable pursuant to this Agreement.
4. Escrow.
4.1 Opening of Escrow. For purposes of this Agreement, the
Escrow shall be deemed opened on the date Escrow Holder receives a fully
executed original or originally executed counterparts of this Agreement from
both Buyer and Seller (such date being referred to hereinafter as the "OPENING
OF ESCROW"). Escrow Holder shall notify Buyer and Seller in writing of the date
Escrow is opened. Buyer and Seller agree to execute, deliver and be bound by any
reasonable or customary supplemental escrow instructions of Escrow Holder or
other instruments as may reasonably be required by Escrow Holder in order to
consummate the transaction contemplated by this Agreement. Any such supplemental
instructions shall not conflict with, amend or supersede any portions of this
Agreement, except as otherwise provided herein. If there is any conflict or
inconsistency between such supplemental instructions and this Agreement, then
this Agreement shall control.
4.2 Close of Escrow. For purposes of this Agreement, the
"CLOSE OF ESCROW" shall be the date that the grant deed, the form of which is
attached hereto as Exhibit "E" ("GRANT DEED"), conveying the Property to Buyer,
is recorded in the Official Records of Riverside County, California ("OFFICIAL
RECORDS"). Unless extended in writing by Buyer and Seller or unless extended
pursuant to the terms and provisions of Paragraph 7.1.2 hereof, the Close of
Escrow shall occur on the first business day following the satisfaction or
waiver of all conditions to the obligations of the parties to the Stock Purchase
Agreement ("CLOSING DATE"). Seller shall deliver possession of the Property to
Buyer upon the Close of Escrow, subject only to the "APPROVED CONDITION OF
TITLE" (as that term is defined in Paragraph 5 hereof).
5. Condition of Title. It shall be a condition to the Close of
Escrow for Buyer's benefit and a covenant of Seller that title to the Property
be conveyed to Buyer by Seller by the Grant Deed subject only to the following
approved condition of title ("APPROVED CONDITION OF TITLE"):
(a) a lien to secure payment of real estate taxes, not
delinquent;
(b) the lien of supplemental taxes assessed pursuant to
Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation
Code ("CODE"), but only to the extent that such supplemental taxes are
attributable to the transaction contemplated by this Agreement. Seller shall be
responsible for, and shall indemnify, protect, defend (with counsel chosen by
Buyer) and hold harmless Buyer and the Property from and against any and all
supplemental taxes assessed pursuant to the Code, to the extent that such taxes
relate to events (including, without
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<PAGE> 4
limitation, any changes in ownership and/or new construction) occurring on or
prior to the Close of Escrow;
(c) matters affecting the Property which are created by
or with the written consent of Buyer; and
(d) exceptions which are disclosed by the "REPORT" (as
that term is defined in Paragraph 7.1.1 hereof) and which are approved by Buyer
in accordance with said Paragraph 7.1.1 ("PERMITTED EXCEPTIONS").
Seller covenants and agrees that during the term of the
Escrow, it will not cause or permit title to the Property to differ from the
Approved Condition of Title described in this Paragraph 5. Any liens,
encumbrances, encroachments, easements, restrictions, conditions, covenants,
rights, rights-of-way, or other matters affecting the Approved Condition of
Title which may appear of record or be revealed after the date of the Report
shall also be subject to Buyer's approval and must be eliminated or ameliorated
by Seller to Buyer's sole, absolute, and subjective satisfaction prior to the
Close of Escrow.
6. Title Policy. Title shall be evidenced by the issuance by
Chicago Title Company in its capacity as title insurer ("TITLE COMPANY") of its
ALTA Extended Coverage (Form B-1970) Owner's Policy of Title Insurance ("TITLE
POLICY") in the amount of the Purchase Price, showing title to the Property
vested in Buyer or its title nominee as provided in Paragraph 20 hereof and
subject only to the Approved Condition of Title.
7. Conditions to Close of Escrow.
7.1 Conditions to Buyer's Obligations. The Close of Escrow
and Buyer's obligation to consummate the transaction contemplated by this
Agreement are subject to the satisfaction of the following conditions for
Buyer's benefit (or Buyer's written waiver thereof, it being agreed that Buyer
may waive in writing any or all of such conditions) on or prior to the dates
designated below for the satisfaction of such conditions. Notwithstanding
anything in this Agreement to the contrary, it is expressly agreed by and
between the parties that Buyer's obligation to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of all
conditions to the obligations of the parties set forth in that certain Stock
Purchase Agreement ("STOCK PURCHASE AGREEMENT"), dated currently herewith, by
and between Buyer on the one hand and William M. Bosic, Donald J. Bosic, Joseph
C. McCoy, and Somerset, Incorporated, a California corporation, on the other
hand.
In the event that Buyer terminates this Agreement
pursuant to the terms of this Paragraph 7.1, or Buyer terminates the Stock
Purchase Agreement pursuant to Article X thereof, or Buyer disapproves any of
the matters set forth in this Paragraph 7.1, or one or more of the following
conditions to Buyer's obligations to acquire the Property has not been satisfied
or waived on or before the Close of Escrow, the Escrow created pursuant hereto
shall terminate and Buyer shall be entitled to the return of the Deposit
together with all interest accrued thereon.
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<PAGE> 5
7.1.1 Title. Buyer shall have approved the legal
description of the Land and any matters of title as disclosed by the following
documents (collectively, "TITLE DOCUMENTS"), which are to be obtained by Seller
or Buyer and delivered to Buyer; all at Seller's sole cost and expense: (A) a
standard preliminary title report issued by Title Company with respect to the
Real Property, as such report may be amended or supplemented from time to time
to reflect additional title matters or survey exceptions ("REPORT"); (B) legible
copies of all documents, whether recorded or unrecorded, referred to in the
Report; and (C) an ALTA survey of the Real Property prepared by a licensed
engineer or surveyor acceptable to Buyer in Buyer's sole discretion ("SURVEY").
Buyer acknowledges that Buyer has received the Title Documents.
Buyer shall have until the expiration of the
Contingency Period (defined below) to give Seller and Escrow Holder written
notice ("BUYER'S TITLE NOTICE") of Buyer's disapproval or conditional approval
of the legal description or any matters shown in or disclosed by the Title
Documents.
If Buyer disapproves or conditionally approves
any of the foregoing matters, Seller may, within five (5) calendar days after
its receipt of Buyer's Title Notice, elect to eliminate or ameliorate to Buyer's
sole satisfaction such disapproved or conditionally approved matters. Within
such five (5) calendar day period, Seller shall give Buyer written notice (which
shall hereinafter be referred to as "SELLER'S TITLE NOTICE") of those
disapproved or conditionally approved matters, if any, which Seller covenants
and agrees to either eliminate from the Title Policy as exceptions to title to
the Property or to ameliorate to Buyer's satisfaction by the Closing Date as a
condition to the Close of Escrow for Buyer's benefit. If Seller does not elect
in Seller's Title Notice to eliminate or ameliorate any disapproved or
conditionally approved matters as provided above, or if Buyer disapproves, in
Buyer's discretion, Seller's Title Notice, then Buyer shall have the right, by a
writing delivered to Seller and Escrow Holder prior to the Closing Date, to: (A)
waive its prior disapproval, in which event said disapproved matter(s) shall be
deemed Permitted Exceptions, or (B) terminate this Agreement and the Escrow
created pursuant hereto and the Deposit and all interest earned thereon shall be
returned to Buyer. Notwithstanding anything to the contrary contained in this
Agreement, Buyer hereby disapproves all liens evidencing monetary encumbrances
(other than liens for non-delinquent real property taxes and the Indebtedness)
and Seller agrees to cause all such liens (other than liens for non-delinquent
real property taxes and the Indebtedness) to be eliminated at Seller's sole cost
and expense (including all prepayment penalties and charges) prior to or
concurrently with the Close of Escrow.
7.1.2 Review and Approval of Documents and Materials.
Seller shall have delivered or caused to be delivered to Buyer on or before the
opening of Escrow the documents and materials respecting the Property set forth
below which are in Seller's possession or control or are reasonably available to
Seller ("DOCUMENTS AND MATERIALS"). From the Opening of Escrow until and up
through the Closing ("CONTINGENCY PERIOD"), Buyer shall have the right to review
and approve or disapprove, in its sole and absolute discretion, any or all of
the Documents and Materials.
(i) Leases. Copies of any and all leases and
amendments thereto, with respect to the Property ("LEASES") and copies of any
and all documents, agreements, and other writings referenced therein affecting
the Leases
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<PAGE> 6
(ii) Zoning Compliance; Permits. Evidence that
the Property complies with any and all applicable governmental ordinances, rules
and regulations, including, but not limited to, zoning and building regulations,
and any and all other governmental approvals (such as approved building permits,
building inspection approvals) and/or authorizations pertaining to the Property
(collectively "PERMITS").
(iii) Improvement Plans. Complete "as-built"
plans, drawings and specifications, if any, relating to all of the Improvements
(collectively "IMPROVEMENT PLANS");
(iv) Agreements. Legible copies of any and all
insurance policies, construction contracts, reciprocal easement agreements, if
any, utility will-serve letters and any other contracts or agreements affecting
or relating to the ownership, operation, maintenance, construction or
development of the Property, (collectively, "CONTRACTS");
(v) Schedule of Expenses. A schedule
reflecting any and all expenses for the ownership, operation, and maintenance
and repair of the Property for twelve (12) month period ended December 31, 1997,
and for the eleven (11) month period ended November 30, 1998, which schedule
shall include, without limitation: (1) annual insurance premiums for all forms
of coverage; (2) real property taxes and assessments; and (3) utility charges,
management fees, and maintenance and repair costs;
(vi) Tax Statements. Legible copies of the
bills for all real property taxes, assessments or other charges and all personal
property taxes payable with respect to the Property, or any portion thereof for
the past three (3) tax years;
(vii) Soils and Engineering Reports. All
existing and available soils, environmental and building reports and engineering
data pertaining to the Real Property or any portion thereof and any and all
architectural studies, grading plans, topographical maps and similar data
respecting the Real Property;
(viii) Maps. Any and all tentative, parcel
and/or final maps and any other governmental approved or processed documents
relative to the subdivision of the Land ("MAPS");
(ix) Miscellaneous. Such other documents in
Seller's possession or control which relate to the Property which Buyer shall
request.
7.1.3 Inspections and Studies. On or before the
expiration of the Contingency Period, Buyer shall have the right to approve or
disapprove, in Buyer's sole discretion, the results of any and all inspections,
surveys, investigations, tests and studies, including, without limitation,
investigations with regard to zoning, building codes and other governmental
regulations, architectural inspections, engineering tests, economic feasibility
studies and soils, seismic and geologic reports, as well as toxic and
environmental studies and reports with respect to the Property, inspections and
surveys of all or any portion of the Improvements (including, without
limitation,
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<PAGE> 7
public utilities), and any other physical inspections and/or investigations as
Buyer may elect to make or obtain.
During the term of this Escrow, Buyer shall be afforded
access by Seller to review Seller's books and records relating to the Property,
and Buyer, its agents, consultants, contractors and subcontractors shall have
the right to enter upon the Property to conduct or make any and all inspections,
surveys and tests (including, without limitation, soil and environmental
assessments of the Real Property) as may be necessary or desirable in Buyer's
sole discretion.
7.1.4 Representation, Warranties, and Covenants of Seller.
Seller shall have duly performed each and every covenant and agreement to be
performed by Seller pursuant to this Agreement and Seller's representations,
warranties, and covenants set forth herein shall be true and correct as of the
Closing Date.
7.1.5 No Material Changes. At the Closing Date, there shall
have been no material changes in the physical or financial condition of the
Property from and after the Opening of Escrow.
7.2 Condition to Seller's Obligations. For the benefit of Seller,
the Close of Escrow shall be conditioned upon the performance by Buyer of all of
the obligations required by the terms of this Agreement to be performed by Buyer
(or Seller's waiver thereof, it being agreed that Seller may waive such
condition).
8. Deposits by Seller. At least one (1) business day prior to the
Close of Escrow, Seller shall deposit or cause to be deposited with Escrow
Holder the following documents and instruments:
(i) Grant Deed. The Grant Deed conveying the Real Property to
Buyer or its title nominee, as provided in Paragraph 20 hereof, duly executed as
appropriate by Seller, acknowledged and in recordable form in the form attached
hereto as Exhibit "E";
(ii) Reconveyance of the Existing Trust Deed. A Reconveyance
of the Existing Trust Deed (the "RECONVEYANCE") executed by Provident Savings
Bank, FSB, which Reconveyance Escrow Holder is instructed to record immediately
prior to recordation of the Grant Deed;
(iii) Leases. The original Leases;
(iv) Contracts. Any and all original contracts affecting the
maintenance, repair, improvement, and/or development of the Property approved by
Buyer in accordance with Paragraph 7.1.2 hereof ("CONTINUING CONTRACTS");
(v) Assignment of Contracts. An Assignment of Contracts
("ASSIGNMENT OF CONTRACTS"), duly executed by Seller, the form of which is
attached hereto as
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<PAGE> 8
Exhibit "F", pursuant to which Seller assigns to Buyer all of Seller's right,
title, and interest in and to the Continuing Contracts;
(vi) Assignment of Leases. An Assignment of Leases
("Assignment of Leases"), duly executed by Seller, the form of which is attached
hereto as Exhibit "G," pursuant to which Seller assigns to Buyer all of Seller's
right, title, and interest in and to the Leases;
(vii) Transferor's Certification of Non-Foreign Status.
Transferor's Certification of Non-Foreign Status in the form attached hereto as
Exhibit "H", duly executed by Seller ("FIRPTA CERTIFICATE");
(viii) Permits, Entitlements and the Like. Originals and any
and all building and development permits, utility will serve letters, use
permits and other governmental approvals and/or entitlements relative to the
Property;
(ix) General Assignment. A General Assignment ("GENERAL
ASSIGNMENT"), duly executed by Seller, in the form attached hereto as Exhibit
"I", conveying all of Seller's right, title, and interest in and to the
Intangible Personal Property;
(x) Tenant Letter. A letter signed by Seller, addressed to
each of the Tenants advising the Lessees of the sale herein to Buyer and
directing that all future rent payments and other charges are to be forwarded to
Buyer at an address to be supplied by Buyer; and
(xi) Other Instruments. Such other instruments and documents
as may be required by Paragraphs 11 and 21.2 hereof.
9. Deposits by Buyer. Buyer shall deposit or cause to be deposited
with Escrow Holder the funds which are to be applied towards the payment of the
Purchase Price in the amounts and at the times designated in Paragraph 3 hereof
(as reduced by the prorations and credits hereinafter provided). In addition,
Buyer shall deposit with Escrow Holder prior to the Close of Escrow the
following documents and instruments:
(i) Assignment of Leases. A counterpart of the Assignment of
Leases duly executed by Buyer;
(ii) Assignment of Contracts. A counterpart of the Assignment
of Contracts duly executed by Buyer;
(iii) General Assignment. A counterpart of the General
Assignment, duly executed by Buyer;
(iv) Loan Documents. An original executed Real Estate Note and
Deed of Trust; and
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<PAGE> 9
(v) Other Instruments. Such other instruments and documents as
may be required in Paragraphs 11 and 21.2 herein.
10. Costs and Expenses.
10.1 Seller's Expenses. Seller shall be responsible and pay for:
(a) the cost and expense of the Title Policy; (b) one-half of the cost and
expense of the ALTA Survey; (c) one-half of the cost and expense of the Phase I
Environmental Study; (d) one-half of the escrow fee of Escrow Holder; (e) all
documentary transfer taxes payable in connection with the recordation of the
Grant Deed (the amount of such transfer taxes shall not be posted on the Grant
Deed but shall be supplied by separate affidavit); and (f) Escrow Holder's
customary charges for document drafting, recording, and miscellaneous charges.
If, as a result of no fault of Buyer or Seller, Escrow fails to close, then
Seller shall pay all of Escrow Holder's fees and charges.
10.2 Buyer's Expenses. Buyer shall be responsible and pay for
one-half of: (a) the cost and expense of the ALTA Survey; (b) the Phase I
Environmental Study; and (c) the escrow fee of Escrow Holder.
11. Prorations. The following prorations between Seller and Buyer
shall be made by Escrow Holder computed as of the Close of Escrow:
11.1 Taxes. Real and personal property taxes and assessments on
the Property shall be prorated on the basis that Seller is responsible for (i)
all such taxes for the fiscal year of the applicable taxing authorities
occurring prior to the "CURRENT TAX PERIOD" (as that term is defined in this
Paragraph 11.1) and (ii) that portion of such taxes for the Current Tax Period
determined on the basis of the number of days which have elapsed from the first
day of the Current Tax Period to the Close of Escrow, inclusive, whether or not
the same shall be payable prior to the Close of Escrow. The term "CURRENT TAX
PERIOD" refers to the fiscal year of the applicable taxing authority in which
the Close of Escrow occurs. In the event that, as of the Close of Escrow, the
actual tax bills for the year or years in question are not available and the
amount of taxes to be prorated as aforesaid cannot be ascertained, then rates
and assessed valuation of the previous year, with known changes, shall be used,
and when the actual amount of taxes and assessments for the year or years in
question shall be determinable, then such taxes and assessments will be prorated
between the parties to reflect the actual amount of such taxes and assessments.
11.2 Rentals. Rentals and other payments (other than "PERCENTAGE
RENT" as that term is defined in Paragraph 11.3 hereof) and operating cost
pass-throughs) payable by Lessees, licensees, concessionaires, and other persons
using or occupying the Property or any part thereof, for or in connection with
such use or occupancy. However, Buyer shall not be obligated to make any payment
or give any credit to Seller on account of, or by reason of, any rental or other
payments which are unpaid as of the Closing Date, but shall be required merely
to turn over to Seller its share of the same if, as and when received by Buyer.
All payments (other than Percentage Rent and operating cost pass-throughs)
received by Buyer from a Lessee, licensee, concessionaire, or other person shall
be applied against the most recently accrued obligation or obligations of the
payor. Any rental payments received by Seller following the Closing Date shall
be paid over to Buyer unless the
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tenant has specified in writing that such payment relates to a rental period
occurring prior to the Closing Date.
11.3 Percentage Rent. "PERCENTAGE RENT" and operating cost pass-
throughs shall be prorated by Buyer and Seller outside of Escrow and delivered
to Escrow Holder.
11.4 Security Deposits. Buyer shall be credited and Seller shall
be charged with any security deposits and advanced rentals in the nature of
security deposits made by Lessees under the Leases as reflected in the Rent
Roll. Buyer shall also be credited and Seller shall be charged for all operating
cost pass-throughs paid by such Lessees and held by Seller in reserve for the
benefit of Lessees for the repair and/or improvement of the Property;
11.5 Utilities. Gas, water, electricity, heat, fuel, and other
utilities and the operating expenses relating to the Property shall be prorated
as of the Close of Escrow. If the parties are unable to obtain final meter
readings as of the Close of Escrow, then such expenses shall be estimated as of
the Close of Escrow on the basis of the prior operating history of the Property.
11.6 Insurance Premiums. Premiums on all existing insurance
policies if assigned to and accepted by Buyer.
At least one (1) business day prior to the Close of Escrow, the
parties shall agree upon all of the prorations to be made and submit a statement
to Escrow Holder setting forth the same. In the event that any prorations,
apportionments or computations made under this Paragraph 11 shall require final
adjustment, then the parties shall make the appropriate adjustments promptly
when accurate information becomes available and either party hereto shall be
entitled to an adjustment to correct the same. Any corrected adjustment or
proration shall be paid in cash to the party entitled thereto.
12. Disbursements and Other Actions by Escrow Holder. Upon the Close
of Escrow, Escrow Holder shall promptly undertake all of the following in the
following manner:
12.1 Prorations. Prorate all matters referenced in Paragraph 11
hereof based upon the statement (referenced in Paragraph 11 hereof) delivered
into Escrow signed by the parties.
12.2 Recording. Cause the Reconveyance, Grant Deed, the Deed of
Trust, and any other documents which the parties hereto may mutually direct, to
be recorded in the Official Records in the order directed by the parties.
12.3 Funds. Disburse from funds deposited by Buyer with Escrow
Holder towards payment of all items chargeable to the account of Buyer pursuant
hereto in payment of such costs and disburse the balance of such funds, if any,
to Buyer.
12.4 Notices. Mail the approved form of letter to Lessees
advising them of this transaction.
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12.5 Documents to Seller. Deliver to Seller the Real Estate Note
And counterparts of the Assignment of Leases, the Assignment of Contracts, and
the General Assignment executed by Buyer;
12.6 Documents to Buyer. Deliver to Buyer originals of the
Leases, FIRPTA Certificate, counterparts of the the Assignment of Leases,
Assignment of Contracts, and the General Assignment appropriately executed by
Seller, and any other documents which are to be delivered to Buyer hereunder,
and, when issued, the Title Policy to Buyer.
12.6 Title Policy. Direct the Title Company to issue the Title
Policy to Buyer.
13. Covenants of Seller. Seller hereby covenants with Buyer, as
follows:
13.1 No Further Contracts. From and after the date of this
Agreement, Seller shall not, without the prior written consent of Buyer, which
consent Buyer may withhold in its sole discretion, enter into any maintenance
contract, service contract or any other contract affecting or relating to the
Property which will survive the Close of Escrow or will otherwise affect the
use, operation or enjoyment of the Property after the Close of Escrow.
13.2 Insurance. All insurance policies carried by Seller with
respect to the Property and in effect as of the date of this Agreement shall
remain continuously in full force and effect from the date of this Agreement
through the day upon which the Close of Escrow occurs.
13.3 No Modification of Leases or Contracts. From and after the
date of this Agreement, Seller shall not amend, modify, alter or supplement any
Lease or Contract which is approved by Buyer pursuant to Paragraph 7.1.2 hereof.
Further, Seller hereby covenants and agrees that it shall terminate on or before
the Close of Escrow any Lease or Contract which Buyer disapproves in accordance
with Paragraph 7.1.2 hereof.
13.4 Operation of Property. From the date of this Agreement until
the Close of Escrow, Seller hereby covenants and agrees that it shall (i)
operate and manage the Property in a first-class manner, and (ii) maintain the
Property in good condition, repair and working order and in accordance with all
applicable laws, ordinances, rules, and regulations affecting the Property. All
Intangible Personal Property shall be conveyed to Buyer by Seller at the Close
of Escrow free from any liens, encumbrances, or security interests of any kind
or nature.
13.5 No Further Encumbrance. After the date of this Agreement,
Seller shall not alienate, lien, encumber, or otherwise transfer all or any
portion of the Property (other than to Buyer at the Close of Escrow).
13.6 Notification. Seller shall promptly notify Buyer of any
change in any condition with respect to the Property or of any event or
circumstance which makes any representation or warranty of Seller to Buyer under
this Agreement materially untrue or misleading,
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and of any covenant of Seller under this Agreement which Seller will be
incapable of performing or less likely to perform.
13.7 Indemnification Re Encroachment. Seller hereby acknowledges
that the Survey has revealed a 3.3-foot encroachment (the "ENCROACHMENT") onto
real property located directly to the east of the Land by the retaining wall
(the "RETAINING WALL") currently located on the east side of the Land. Seller
hereby agrees, after the Close of Escrow, at its sole cost and expense, to
indemnify, protect, defend (with counsel of Buyer's choice), and hold Buyer, its
successors and assigns, partners, shareholders, officers and/or directors, from
and against any and all claims, demands, losses, liabilities, all reasonable
costs associated with the removal and/or reconstruction of the Retaining Wall,
obligations, penalties, fines, actions, causes of action, judgments, suits,
proceedings, costs, disbursements and expenses (including, without limitation,
attorneys' and experts' reasonable fees and costs) of any kind or nature
whatsoever which may at any time be imposed upon, incurred or suffered by, or
asserted or awarded against, Buyer, or its successors and assigns, partners,
shareholders, officers and/or directors relating to or arising from the
existence of the Encroachment.
Notwithstanding anything in this Agreement to the contrary,
this indemnification regarding the Encroachment shall survive the Close of
Escrow and the recordation of the Grant Deed in perpetuity.
14. Seller's Representations and Warranties. In consideration of
Buyer entering into this Agreement and as an inducement to Buyer to purchase the
Property, Seller makes the following representations and warranties, each of
which is material and is being relied upon by Buyer (and the continued truth and
accuracy of which shall constitute a condition precedent to Buyer's obligations
hereunder):
14.1 Authorization.
(i) Seller has the legal power, right, and authority to
enter into this Agreement and the instruments referenced herein, and to
consummate the transactions contemplated hereby.
(ii) All requisite action has been taken by Seller in
connection with the entering into of this Agreement, the instruments referenced
herein, and the consummation of the transaction contemplated hereby. No consent
of any partner, shareholder, trustee, trustor, beneficiary, creditor, investor,
judicial or administrative body, governmental authority or other party is
required.
(iii) The individuals executing this Agreement and the
instruments referenced herein for and on behalf of Seller and the
partners of Seller, if any, have the legal power, right, and actual authority to
bind Seller to the terms and conditions hereof and thereof.
(iv) This Agreement and all documents required hereby
to be executed by Seller are and shall be valid, legally binding obligations of
and enforceable against Seller in accordance with their terms.
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(v) Neither the execution and delivery of this
Agreement and the documents and instruments referenced herein, nor the
incurrence of the obligations set forth herein, nor the consummation of the
transaction contemplated herein, nor compliance with the terms of this Agreement
and the documents and instruments referenced herein conflict with or result in
the material breach of any terms, conditions or provisions of, or constitute a
default under, any bond, note, or other evidence of indebtedness or any
contract, indenture, mortgage, deed of trust, loan, partnership agreement, lease
or other agreement or instrument to which Seller is a party or affecting the
Property.
14.2 Threatened Actions. There are, and at the Close of
Escrow there will be, no pending actions, suits, arbitrations, claims or
proceedings, at law, in equity or otherwise, affecting, or which may affect, the
Leases or all or any portion of the Property or in which Seller is or will be a
party by reason of Seller's ownership of the Property or interest in the Leases,
including, but not limited to, judicial, municipal or administrative proceedings
in eminent domain, collection actions, alleged building code violations, health
and safety violations, federal, state or local agency actions regarding
environmental matters, federal environmental protection agency or zoning
violations, employment discrimination or unfair labor practices, or worker's
compensation, personal injuries or property damages alleged to have occurred at
the Property or by reason of the condition or use of or construction on the
Property. Seller is not aware of the existence of any threatened or contemplated
actions, claims or proceedings or of the existence of any facts which might give
rise to any such actions, claims or proceedings.
14.3 Compliance with Law. All applicable laws, ordinances,
rules, requirements, regulations, building codes and environmental rules of any
governmental agency, body or subdivision thereof bearing on the Property and the
construction of the Improvements have been complied with.
14.4 Agreements. There are no agreements (whether oral or
written), affecting or relating to the right of any party with respect to the
possession of the Property, or any portion thereof, which are obligations which
will affect the Property or any portion thereof subsequent to the recordation of
the Grant Deed, except as set forth in the Contracts provided to and approved by
Buyer in accordance with Paragraph 7.1.2 hereof, or as may be reflected in the
Approved Condition of Title.
14.5 Documents True. All documents delivered by Seller to
Buyer pursuant to this Agreement are true, accurate, correct and complete copies
of originals and any and all information prepared by Seller or at Seller's
direction and supplied to Buyer by Seller in accordance with Paragraph 7.1.2
hereof are true, accurate, correct and complete.
14.6 Contracts. There are no maintenance contracts, service
contracts or any other contracts (whether oral or written) affecting or relating
to the Property which will survive the Close of Escrow except as set forth in
the Contracts provided to and approved by Buyer in accordance with Paragraph
7.1.2 hereof. At the Close of Escrow, there will be no outstanding contracts
entered into by Seller for the construction or repair of any improvements to the
Real Property which have not been fully paid for, and Seller shall cause to be
discharged all mechanics, and
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materialmen's liens arising from any labor or materials furnished to the Real
Property prior to the Close of Escrow.
14.7 No Other Documents. The documents delivered by Seller
to Buyer pursuant to Paragraph 7.1.2 hereof are all of the documents known by
Seller to exist relative to the use, ownership, maintenance, management, and
construction on or of the Property. Seller has not assigned its rights
thereunder to any other person, firm or entity and no further consent is
necessary or required to make any of the Assignment of Leases, the Assignment of
Contracts or the General Assignment effective.
14.8 No Default. Seller is not in default with respect to
any of the Leases, nor will Seller be in default thereunder for the requirements
of notice or the passage of time, or both.
14.9 Hazardous Wastes. There is no asbestos or materials
containing asbestos incorporated into any of the Improvements. The Property is
not in violation of any federal, state or local law, ordinance or regulation
relating to industrial hygiene or to the environmental conditions on, under or
about the Property or the Improvements including, but not limited to, soil and
groundwater condition. Seller further represents and warrants that neither
Seller nor any third party has used, generated, manufactured, stored or disposed
of on, under or about the Property or transported to or from the Property any
flammable explosives, radioactive materials, hazardous wastes or materials,
toxic substances or related materials ("HAZARDOUS MATERIALS"). Seller has no
knowledge of the presence, use, treatment, storage, release or disposal of any
Hazardous Materials at, on, upon or beneath the Land or the Improvements. For
purposes of this Paragraph 14.9, the term "Hazardous Materials" shall include,
but not be limited to, asbestos, petroleum and any petroleum by-products,
formaldehyde, polychlorinated biphenyls, and any other substance which is a
"Hazardous Substance" under California Health and Safety Code Section 25316 and
in the regulations adopted and publications promulgated pursuant to said statute
and any amendments thereto.
14.10 No Notices. Seller has received no notice of (i) any
change contemplated in any applicable laws, ordinances, or restrictions, (ii)
any judicial or administrative action, (iii) any action by adjacent landowners,
or (iv) natural or artificial conditions upon the Property which would prevent,
impede, limit or render more costly Buyer's contemplated use of the Property.
14.11 Systems. Upon the Close of Escrow, all equipment,
heating, air conditioning, plumbing, and electrical systems shall be in good
working order and repair.
14.12 Licenses and Permits. (i) All licenses, approvals,
permits and certificates from all governmental or quasi-governmental
authorities with jurisdiction over the Property or from private parties
necessary for the construction and development of the Improvements, and for the
use and operation of the Property, were obtained prior to such construction,
development, use and operation, and are currently possessed by Seller, (ii) the
Improvements have been constructed in accordance with (A) all such approvals,
licenses, permits and certificates, (B) accepted standards of good materials and
workmanship, (C) all covenants, conditions, restrictions, easements and
agreements of any kind or nature affecting the Real Property,
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and (D) the Improvement Plans delivered to Buyer pursuant to Paragraph 7.1.2
above, and (iii) any conditions to any licenses, approvals, permits and
certificates for the construction and development of the Improvements have been
satisfied. Seller has obtained all easements and rights-of-way (including proof
of dedication) required from all governmental authorities having jurisdiction
over the Real Property or from private parties for the present use and operation
of the Property and to assure vehicular and pedestrian ingress to and egress
from the Real Property at all access points currently being used.
14.13 Taxes. Other than the amounts disclosed by the tax
bills delivered to Buyer by Seller, no other real property taxes, assessments or
charges have been or will be assessed against the Real Property for the current
tax year. Seller has no knowledge, and Seller has received no notice to the
contrary, of any special assessments or charges which have been levied against
the Property or which will result from work, activities or improvements done to
the Property by Seller. Seller has no knowledge and Seller has received no
notice to the contrary of any intended public improvements which will result in
any charge being levied against, or in the creation of any lien upon, the
Property or any portion thereof.
14.14 Utilities. The Improvements are and, as of the Closing
Date, shall be connected to and served by water, septic tank system for solid
waste and sewage disposal, drainage, telephone, gas, electricity and other
utility equipment facilities and services required by law and which are adequate
for the contemplated use and operation of the Property, or any portion thereof,
and which are installed and connected pursuant to valid permits and are in full
compliance with all governmental authorities with jurisdiction. No fact or
condition exists which would result in the termination or impairment in the
furnishing of utility services to the Improvements prior to the Closing Date.
Seller has not received any notice from any individual or entity indicating that
any of such facilities are inadequate or are not in good operating condition.
14.15 No Prior Transfer. Seller has not previously sold,
transferred, or conveyed the Property and Seller has not entered into any
executory contracts for the sale of the Property (other than this Agreement),
nor do there exist any rights of first refusal or options to purchase the
Property.
14.16 Soils Defects. There are no defects or conditions of
the soil which will impair the contemplated use and operation of the Property,
or any portion thereof, the soil condition of the Land is such that it will
support all of the Improvements located thereon for their foreseeable life
without the need for unusual or new subsurface excavations, fill, footings,
caissons or other installations, and the Improvements were constructed in a
manner compatible with the soil condition at the time of construction and all
necessary excavations, fills, footings, caissons and other installations were
provided.
14.17 Insurance Notices. Seller has not received any notice
from any of Seller's insurance carriers of any defects or inadequacies in the
Property, or any portion thereof, which would adversely affect the insurability
of the Property or the cost of any such insurance. There are no pending
insurance claims with respect to all or any portion of the Property.
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14.18 FIRPTA. Seller is not a foreign person within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, and Seller
will furnish the FIRPTA Certificate to Buyer prior to the Close of Escrow in
accordance with the terms and provisions of Paragraph 8 hereof.
14.19 State Tax Withholding. Seller has read and understands
the provisions of Sections 18805, 18815 and 26131 of the Code and hereby
represents (i) that (A) Seller is a "resident" of California within the meaning
of the Code and the regulations and guidelines of the California Franchise Tax
Board promulgated ("FTB") from time to time pursuant thereto ("FTB REGULATIONS")
and/or (B) this transaction is not otherwise subject to the withholding
requirements of the Code and the Regulations.
14.20 Omissions and Misrepresentations. Neither the
representations and warranties of Seller nor any other document or written
information provided to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby contain any untrue statement of any material
fact or omit to state any material fact necessary to make any such statement,
warranty, or representation not misleading.
14.20 Representations and Warranties at Closing. The
representations and warranties of Seller set forth in this Agreement shall be
deemed to be remade and restated by Seller on and as of the Close of Escrow.
15. Indemnity by Seller. Seller hereby agrees, after the Close
of Escrow, at its sole cost and expense, to indemnify, protect, defend (with
counsel of Buyer's choice), and hold Buyer, its successors and assigns,
partners, shareholders, officers and/or directors, from and against any and all
claims, demands, damages, losses, liabilities, obligations, penalties, fines,
actions, causes of action, judgments, suits, proceedings, costs, disbursements
and expenses (including, without limitation, attorneys' and experts' reasonable
fees and costs) of any kind or nature whatsoever which may at any time be
imposed upon, incurred or suffered by, or asserted or awarded against, Buyer, or
its successors and assigns, partners, shareholders, officers and/or directors
relating to or arising from (i) the Property or the ownership or operation
thereof on or before the Close of Escrow, (ii) the use on or before the Close of
Escrow of the Property by any third party, including, without limitation, any
invitee or licensee of Seller, (iii) any breach of any covenant, agreement,
representation or warranty of Seller contained in this Agreement; (iv) the
presence, use, handling, storage, disposal or release on or before the Close of
Escrow of Hazardous Materials on, under or about the Property and (v) the
violation of any federal, state or local law, ordinance or regulation, occurring
or allegedly occurring with respect to the Property prior to the Close of
Escrow.
The indemnity by Seller herein contained shall survive the
Close of Escrow and the recordation of the Grant Deed for a period of three (3)
years. Notwithstanding the foregoing three-year limitation, the indemnification
regarding the Encroachment set forth in Section 13.7 hereof shall survive the
Close of Escrow and the recordation of the Grant Deed in perpetuity.
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Notwithstanding anything in this Agreement to the contrary,
if, in Buyer's good faith belief, Buyer is entitled to indemnification,
reimbursement, or payment from Seller hereunder or otherwise under the Stock
Purchase Agreement, then in addition to any other remedies which Buyer may have
available to it, Buyer shall have the right to set off the entire amount thereof
against the amounts, if any, which Buyer shall owe at such time or from time to
time thereafter to Seller under the Real Estate Note.
16. Damage or Condemnation Prior to Closing.
16.1 Material Damage. In the event that prior to the Close
of Escrow, the Real Property, or any portion thereof, is destroyed or materially
damaged, Buyer shall have the right, exercisable by giving written notice to
Seller within seven (7) business days after receipt of written notice of such
damage or destruction, either (i) to terminate this Agreement, in which event
any documents or moneys, including the Deposit, together with any and all
interest earned thereon, in Escrow shall be returned to the party depositing the
same, and neither party hereto shall have any further rights or obligations
hereunder, or (ii) to accept the Real Property in its then condition and to
proceed with the consummation if the transaction contemplated by this Agreement,
with an abatement or reduction in the Purchase Price equal to the amount of the
deductible for the applicable insurance coverage, and to receive an assignment
of all of Seller's rights to any insurance proceeds payable by reason of such
damage or destruction. If Buyer elects to proceed under clause (ii) above,
Seller shall not compromise, settle or adjust any claims to such proceeds
without Buyer's prior written consent, which consent Buyer may withhold in its
sole, absolute, and subjective discretion.
16.2 Nonmaterial Damage. In the event that prior to the
Close of Escrow there is any nonmaterial damage to the Real Property, or any
part thereof, Seller shall repair or replace such damage prior to the Close of
Escrow. Notwithstanding the preceding sentence, in the event Seller is unable to
repair or replace such damage, Seller shall notify Buyer in writing of such fact
("NON-REPAIR NOTICE") and Buyer shall thereafter have the right, exercisable by
giving Seller notice within seven (7) business days after receiving the
Non-Repair Notice either (i) to terminate this Agreement, in which event any
documents or moneys, including the Deposit, together with any and all interest
earned thereon, in Escrow shall be returned to the party depositing the same,
and neither party hereto shall have any further rights or obligations hereunder,
or (ii) to accept the Real Property in its then condition with an abatement or
reduction in the Purchase Price equal to the amount of the deductible for the
applicable insurance coverage and proceed with the transaction contemplated by
this Agreement, in which event Buyer shall be entitled to an assignment of all
of Seller's rights to any insurance proceeds payable by reason of such damage or
destruction. If Buyer elects to proceed under clause (ii) above, Seller shall
not compromise, settle or adjust any claims to such proceeds without Buyer's
prior written consent, which consent Buyer may withhold in its sole, absolute
and subjective discretion.
16.3 Condemnation (Material). In the event that prior to
the Close of Escrow, all or any material portion of the Real Property is subject
to a taking by a public or governmental authority, Buyer shall have the right,
exercisable by giving written notice to Seller within seven (7) business days
after receiving written notice of such taking, either (i) to terminate this
Agreement, in which event any documents or moneys, including the Deposit,
together with any and
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<PAGE> 18
all interest earned thereon, in Escrow shall be returned to the party depositing
the same, and neither party hereto shall have any further rights or obligations
hereunder, or (ii) to accept the Real Property in its then condition, without a
reduction in the Purchase Price, and to receive an assignment of all of Seller's
rights to any condemnation award or proceeds payable by reason of such taking.
If Buyer elects to proceed under clause (ii) above, Seller shall not compromise,
settle or adjust any claims to such award without Buyer's prior written consent,
which consent Buyer may withhold in its sole, absolute and subjective
discretion.
16.4 Condemnation (Nonmaterial). In the event that prior
to the Close of Escrow, any nonmaterial portion of the Real Property is subject
to a taking by any public or governmental authority, Buyer shall accept the Real
Property in its then condition and proceed with the consummation of the
transaction contemplated by this Agreement, in which event Buyer shall be
entitled to an assignment of all of Seller's rights to any award or proceeds
payable in connection with such taking. In the event of any such nonmaterial
taking, Seller shall not compromise, settle or adjust any claims to such award
without Buyer's prior written consent, which consent Buyer may withhold in its
sole, absolute and subjective discretion.
16.5 "MATERIAL". For purposes of this Paragraph 16, damage
to the Property or a taking of a portion thereof shall be deemed to involve a
material portion thereof if the estimated cost of restoration or repair, as
estimated by Buyer in Buyer's sole, absolute, and subjective discretion, of such
damage or the amount of the condemnation award with respect to such taking shall
exceed Twenty-five Thousand Dollars ($25,000.00).
16.6 Notice. Seller agrees to give Buyer prompt written
notice of any taking of, proposed taking of, damage to or destruction of the
Real Property.
17. Notices. All notices or other communications required or
permitted hereunder shall be in writing, and shall be personally delivered, sent
by overnight mail (Federal Express or the like) or sent by registered or
certified mail, postage prepaid, return receipt requested, telegraphed,
delivered or sent by telex, telecopy, facsimile, fax or cable and shall be
deemed received upon the earlier of (i) if personally delivered, the date of
delivery to the address of the person to receive such notice, (ii) if sent by
overnight mail, the business day following its deposit in such overnight mail
facility, (iii) if mailed, four (4) business days after the date of posting by
the United States post office, (iv) if given by telegraph or cable, when
delivered to the telegraph company with charges prepaid, or (v) if given by
telex, telecopy, facsimile or fax, when sent. Any notice, request, demand,
direction or other communication sent by cable, telex, telecopy, facsimile or
fax must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing.
To Buyer: Children's Comprehensive Services of California, Inc.
11980 Mount Vernon Avenue
Grand Terrace, California 92324
Attn: Ms. Amy Harrison
Phone No.(909) 783-8400
Fax No.(909) 783-7754
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<PAGE> 19
With a copy to: Best Best & Krieger LLP
3750 University Avenue
Riverside, California 92502
Attn: George M. Reyes, Esq.
Phone No. (909) 686-1450
Fax No. (909) 686-3083
To Seller: BMB Enterprises
Post Office Box 2278
Riverside, California 92516
Attention: Mr. William M. Bosic, Mr. Donald J. Bosic
or Mr. Joseph C. McCoy
Phone No. (909) 789-4144
Fax No. (909) 788-2572
With a Copy To: Stream & Stream, Inc.
4201 Brockton Avenue, Suite 200
Riverside, California 92501
Attention: Kenneth B. Stream, Jr., Esq.
Phone No. (909) 276-8444
Fax No. (909) 686-4768
To Escrow Chicago Title Company
560 East Hospitality Lane
San Bernardino, California 92408
Attention: Ms. Kandy Knotts, Senior Escrow Officer
Re: Escrow No. 8241227-K41
Phone No. (909) 384-7857
Fax No. (909) 384-7855
Notice of change of address shall be given by written
notice in the manner detailed in this Paragraph 17. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no
notice was given shall be deemed to constitute receipt of the notice, demand,
request or communication sent.
18. Brokers. The parties hereto represent and warrant to each
other that there are no brokers involved in this transaction. If any claims for
brokers' or finders, fees for the consummation of this Agreement arise, then
Buyer hereby agrees to indemnify, protect, save harmless and defend Seller from
and against such claims if they are based upon any statement, representation or
agreement made by Buyer, and Seller hereby agrees to indemnify, protect, save
harmless and defend Buyer from and against such claims if they are based upon
any statement, representation or agreement made by Seller.
19. Fees, Costs, and Expenses. In the event of the bringing of
any action or suit by a party hereto against another party hereunder by reason
of any breach of any of covenants and
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agreements or any inaccuracies in any of the representations and warranties on
the part of the other party arising out of this Agreement, then in that event,
the prevailing party in such action or dispute, whether by final judgment or out
of court settlement, shall be entitled to have and recover of and from the other
party all costs and expenses of suit, including actual attorneys' fees. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including actual attorneys' fees (collectively "COSTS") incurred in enforcing,
perfecting and executing such judgment. For the purposes of this paragraph,
Costs shall include, without limitation, attorneys' fees, costs and expenses
incurred in the following: (i) post-judgment motions; (ii) contempt proceeding;
(iii) garnishment, levy, and debtor and third party examination; (iv) discovery;
and (v) bankruptcy litigation.
Notwithstanding anything in this Agreement to the contrary, if
Buyer is entitled to any amount from Seller under this Paragraph 19, then in
addition to any other remedies which Buyer may have available to it to collect
such amount, Buyer shall have the right to set off the entire amount thereof
against the amounts, if any, which Buyer shall owe at such time or from time to
time thereafter to Seller under the Real Estate Note.
20. Assignment. Seller may not assign, transfer or convey its
rights or obligations under this Agreement without the prior written consent of
Buyer, and then only if Seller's assignee assumes in writing all of Seller's
obligations hereunder; provided, however, Seller shall in no event be released
from its obligations hereunder by reason of such assignment. Buyer, without
being relieved of liability hereunder and without obtaining Seller's consent,
shall have the right to assign its rights and obligations hereunder or to
nominate another person or entity in whom title to the Property shall vest.
21. Miscellaneous.
21.1 Survival of Covenants. Except as otherwise provided
herein, the covenants, representations and warranties of Seller set forth in
this Agreement shall survive the recordation of the Grant Deed and the Close of
Escrow.
21.2 Required Actions of Buyer and Seller. Buyer and
Seller agree to execute such instruments and documents and to diligently
undertake such actions as may be required in order to consummate the purchase
and sale herein contemplated and shall use their best efforts to accomplish the
Close of Escrow in accordance with the provisions hereof.
21.3 Computation of Time Periods. If the date upon which
the Contingency Period expires, the Closing Date or any other date or time
period provided for in this Agreement is or ends on a Saturday, Sunday or
federal, state or legal holiday, then such date shall automatically be extended
until 5:00 p.m. Pacific Time of the next day which is not a Saturday, Sunday or
federal, state or legal holiday.
21.4 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which, together, shall constitute but one and the same instrument.
-20-
<PAGE> 21
21.5 Captions. Any captions to, or headings of, the
paragraphs or subparagraphs of this Agreement are solely for the convenience of
the parties hereto, are not a part of this Agreement, and shall not be used for
the interpretation or determination of the validity of this Agreement or any
provision hereof.
21.6 No Obligations to Third Parties. Except as otherwise
expressly provided herein, the execution and delivery of this Agreement shall
not be deemed to confer any rights upon, nor obligate any of the parties hereto,
to any person or entity other than the parties hereto.
21.7 Exhibits and Schedules. The Exhibits and schedules
attached hereto are hereby incorporated herein by this reference for all
purposes.
21.8 Amendment to this Agreement. The terms of this
Agreement may not be modified or amended except by an instrument in writing
executed by each of the parties hereto.
21.9 Waiver. The waiver or failure to enforce any
provision of this Agreement shall not operate as a waiver of any future breach
of any such provision or any other provision hereof.
21.10 Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
21.11 Fees and Other Expenses. Except as otherwise
provided herein, each of the parties hereto shall pay its own fees and expenses
in connection with this Agreement.
21.12 Entire Agreement. This Agreement supersedes any
prior agreements, negotiations and communications, oral or written, and contains
the entire agreement between Buyer and Seller as to the subject matter hereof.
No subsequent agreement, representation, or promise made by either party hereto,
or by or to an employee, officer, agent or representative of either party hereto
shall be of any effect unless it is in writing and executed by the party to be
bound thereby.
21.13 Successors and Assigns. Subject to the restrictions
set forth in Paragraph 20 hereof, this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of the parties hereto.
21.14 Construction. The parties hereto hereby acknowledge
and agree that (i) each party hereto is of equal bargaining strength, (ii) each
such party has actively participated in the drafting, preparation and
negotiation of this Agreement, (iii) each such party has consulted with such
party's own, independent counsel, and such other professional advisors as such
party has deemed appropriate, relative to any and all matters contemplated under
this Agreement, (iv) each such party and such party's counsel and advisors have
reviewed this Agreement, (v) each such party has agreed to enter into this
Agreement following such review and the rendering of such advice, and (vi) any
rule of construction to the effect that ambiguities are to be resolved against
the drafting
-21-
<PAGE> 22
parties shall not apply in the interpretation of this Agreement, or any portions
hereof, or any amendments hereto.
21.15 Consideration. In the event that this Agreement is
canceled by reason of Buyer's disapproval of any of the matters which are
subject to Buyer's approval under Paragraph 7.1 hereof, Buyer shall deliver to
Seller any and all reports, studies and the like prepared by or for Buyer with
respect to the Property; provided, however, that Buyer shall only be obligated
to deliver those reports, studies and the like which are freely transferable by
Buyer, at no cost or expense to Buyer. Any and all such reports, studies and the
like delivered by Buyer to Seller pursuant to this paragraph shall be accepted
by Seller (i) "as-is" without any representation or warranty by Buyer, express,
implied or statutory, with respect to any matter pertaining thereto, and (ii)
subject to the rights of any other party (other than Buyer) with respect
thereto. Seller hereby acknowledges and confirms that such obligation
constitutes sufficient consideration for Seller's obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
"BUYER"
Dated: November 30, 1998 CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., a California corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
------------------------------------
{SIGNATURES CONTINUE ON NEXT PAGE]
-22-
<PAGE> 23
"SELLER"
Dated: November 30, 1998 BMB ENTERPRISES,
a California general partnership
By:
------------------------------------
Donald J. Bosic
Its: General Partner
And:
------------------------------------
William M. Bosic
Its: General Partner
And:
------------------------------------
Joseph C. McCoy
Its: General Partner
-23-
<PAGE> 24
ACCEPTANCE BY ESCROW HOLDER:
Chicago Title Company hereby acknowledges that it has received
a fully executed original or original executed counterparts of the foregoing
Agreement of Purchase and Sale and Joint Escrow Instructions and agrees to act
as Escrow Holder thereunder and to be bound by and strictly perform the terms
thereof as such terms apply to Escrow Holder.
Dated: ____________________, 1998
CHICAGO TITLE COMPANY
By:
-----------------------------------
Kandy Knotts, Senior Escrow Officer
Its Authorized Agent
-24-
<PAGE> 1
EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of the
1st day of December, 1998 (the "Effective Date"), by and between Behavioral
Medicine Professional Services, Inc., a California corporation ("Seller"), and
Children's Comprehensive Services of California, Inc., a California corporation
("Buyer"); with Seller and Buyer sometimes referred to herein as "Party" or
"Parties" as the case may be.
RECITALS
A. Seller is engaged in the business of providing mental health
services (the "Business") in Riverside, California.
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain of the assets, properties, and rights relating to
the Business on the terms and subject to the conditions set forth
in this Agreement.
C. Concurrently herewith and in connection with its acquisition of the
assets, properties, and rights hereby, Buyer will enter into: (i)
that certain Stock Purchase Agreement with Somerset,
Incorporated, a California corporation, of which the shareholders
of Seller also are shareholders; (ii) that certain Agreement of
Purchase and Sale and Joint Escrow Instructions with BMB
Enterprises, a California general partnership, of which the
shareholders of Seller are general partners; (iii) that certain
Asset Purchase Agreement with B and B Leasing, a general partnership
of Messrs. William M. Bosic and Donald J. Bosic, both of whom are
shareholders of Seller.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements and covenants contained herein, the Parties hereto agree as
follows:
AGREEMENT
1. Purchase of Assets. Seller agrees to transfer, convey, and deliver
to Buyer all of its right, title, and interest in and to the assets set forth on
the attached Exhibit "A" (the "Assets"). Except as disclosed on Schedule 1
attached hereto, the Assets shall be transferred, conveyed, and delivered to
Buyer free and clear of all Encumbrances.
2. Purchase Price. The purchase price for the Assets shall be Ten
Thousand and NO/100 Dollars ($10,000.00) ("Purchase Price"), payable by the
transfer of said sum to Seller in immediately available funds at the Closing.
<PAGE> 2
3. Allocation of Purchase Price. The Purchase Price shall be allocated
as shown on Exhibit "B" attached hereto. Buyer and Seller each agree to use the
allocations as shown on Exhibit "B" in reporting the purchase and sale of the
Assets for federal and state income tax purposes.
4. Excluded Liabilities. Except as shown on Schedule 4 attached hereto,
Buyer shall not assume, or otherwise be responsible for, any liabilities or
obligation of Seller, whether actual or contingent, matured or unmatured,
liquidated or unliquidated, known or unknown, with respect to either the
Business or the Assets (collectively, "Excluded Liabilities"), including without
limitation, any claim or liability with respect to any prior creditors or tax
obligations of the Business.
5. Seller's Representations and Warranties. Seller represents and
warrants to Buyer that the statements contained in this Paragraph 5 are correct
and complete as of the Effective Date and will be correct and complete as of the
Closing Date both generally with respect to the Business and specifically with
respect to the Assets (as though made then and as though the Closing Date were
substituted for the Effective Date throughout this Paragraph 5):
A. Organization, Qualification, and Corporate Power. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Seller is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Seller has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
B. Noncontravention. Neither the execution, delivery, or performance
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller is subject or any provision of the
Articles of Incorporation or bylaws of Seller, (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement affecting the Assets. No notice to, filing with, or any
authorization, consent, or approval of any governmental entity or other person
is necessary in connection with the execution, delivery, and performance by
Seller of this Agreement and the consummation of the transactions contemplated
hereby.
C. Brokers' Fees. Seller does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
D. Title to Assets. Seller has good and marketable title to, or a
valid interest in, each item listed on Exhibit "A", in each case free and clear
of all Encumbrances, except as disclosed on Schedule 1 attached hereto. Where
applicable, each listed item is, as of the Closing Date, in good condition and
repair, and none of such listed items require any repair or replacement; it
otherwise being understood that such items are being sold "AS-IS".
2
<PAGE> 3
E. Legal Compliance. Seller has complied with all Legal Requirements
applicable to it or its conduct, ownership, use, occupancy, or operation in
respect of the Assets; nor, in this regard, has Seller received notice of its
violation of any Legal Requirements.
F. Tax Matters. Seller has filed all Tax Returns that it was
required to file, and all Taxes due and payable by Seller have been paid in
full.
G. Litigation. There is no action, suit, proceeding, investigation,
claim, or order pending or threatened against Seller or any of its directors,
officers, or key employees with respect to the Business or proposed business of
Seller, or to which Seller otherwise is a party, which if adversely determined
would have Adverse Consequences on Seller, its assets, including the Assets, or
the Business, before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction; nor is there any reasonable
basis for any such action, suit, proceeding, investigation, claim, or order.
Seller is not subject to any injunction, judgment, order, decree, or ruling of
any court or governmental entity. Seller has not received any opinion or
memorandum of legal advice from legal counsel retained by Seller or any Seller
to the effect that any of them is exposed, from a legal standpoint, to any
liability which may have Adverse Consequences on the Business or proposed
business of Seller or the Assets. Seller is not engaged in any action to recover
monies due it or for damages sustained by it.
H. Environmental, Health, and Safety Matters. Seller is in strict
compliance with all Environmental, Health, and Safety Requirements, and Seller
possesses all required permits, licenses, and certificates, and has filed all
notices or applications, required thereby. Seller has not received any written
notice, report or other information (and there is no reasonable basis for any
such notice, report, or information) regarding any actual or alleged violation
of Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to Seller or its facilities arising under Environmental, Health, and
Safety Requirements. No facts, events, or circumstance with respect to the past
or present operations, business, or facilities of Seller exist which reasonably
could be expected to interfere with or prevent continued compliance with, or
could give rise to any common law or statutory liability or otherwise form the
basis of any claim, action, suit, proceeding, hearing, or investigation against
or involving Seller or its business under any Environment Health, and Safety
Requirement based upon any such fact, event, or circumstances, including,
without limitation, liability for cleanup costs, personal injury, or property
damage.
I. No Undisclosed Liabilities. Seller does not have any debt,
liability, or obligation of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated, or otherwise and whether
due or to become due) arising out of any transaction entered into at or prior to
the Effective Date, or any transaction, series of transactions, action or
inaction at or prior to the Effective Date, or any state of facts or condition
existing at or prior to the Effective Date (regardless of when such debt,
liability, or obligation is asserted), including, but not limited to, debts,
liabilities, and obligations on account of Taxes or governmental charges or
penalties, interest or fines thereon or in respect thereof, except to the extent
specifically reflected and accrued for or reserved against in the financial
statements.
3
<PAGE> 4
J. Licenses and Permits. Seller holds all permits, licenses,
franchises, and approvals of governmental authorities necessary or required for
its current conduct, ownership, use, occupancy, or operation in respect of its
business and properties, real and personal, all of which are listed on Schedule
5.J attached hereto ("Permits"). Seller is in compliance with such Permits, all
of which are in full force and effect, and neither Seller nor any Seller has
received any notice thereof to the contrary.
K. No Omissions and No Misrepresentations. Neither the
representations and warranties of Seller nor any other document or written
information provided to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby contain any untrue statement of any material
fact or omit to state any material fact necessary to make any such statement,
warranty, or representation not misleading. There is no material fact which has
not been disclosed to Buyer which would have Adverse Consequences or could
reasonably be anticipated to have Adverse Consequences on the Assets or the
business conducted by Seller or Seller's ability to consummate the transactions
contemplated hereby.
6. Buyer Representations. Buyer hereby represents and warrants to
Seller as follows:
A. Organization and Authority. Buyer is a corporation validly
existing under the laws of the State of California. Buyer has all requisite
power and authority to enter into this Agreement and to perform the transactions
contemplated hereby.
B. Authorization and Enforceability. Prior to the Closing, all
internal action on the part of Buyer necessary for the authorization, execution,
delivery and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby will have been taken. This Agreement is a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as limited by bankruptcy, insolvency or other
laws affecting creditors' rights generally or by the availability of equitable
remedies.
7. Taxes and Prorations. Seller shall pay any or all Transfer Taxes
arising out of the transfer of the Assets hereunder.
8. Closing. This Agreement shall close concurrently with the closing of
the Stock Purchase Agreement (the "Closing"). Buyer and Seller shall make the
following deliveries on the date of Closing:
A. Buyer's Closing Conditions. Buyer's obligation to purchase the
Assets is subject to the fulfillment on or before the Closing of the following
conditions and contingencies:
(1) The representations and warranties herein made by Seller
shall be true and correct when made and as of the Closing and Seller shall have
delivered to Buyer a Certificate of Seller dated as of the Closing to all such
effects;
(2) Seller shall deliver a Bill of Sale in the form attached
hereto at Exhibit "C" transferring title to the Assets to Buyer; and
4
<PAGE> 5
(3) All conditions to the obligations of the parties to the
Stock Purchase Agreement shall have been satisfied or waived.
B. Seller's Closing Conditions. The obligations of Seller to
sell the Assets at the Closing is subject to the fulfillment on or before the
Closing of the following conditions:
(1) Buyer's representations and warranties set forth herein
shall be true and correct when made and as of the Closing and Buyer shall have
delivered a Certificate of Buyer dated as of the Closing to all such effects;
and
(2) All conditions to the obligations of the parties to the
Stock Purchase Agreement shall have been satisfied or waived.
9. Indemnification; Right of Set-Off.
9.1 Indemnification by Seller. From and after the Closing, Seller
shall indemnify, defend and hold harmless Buyer and its successors and assigns
against and from all Damages (as defined below) sustained or incurred by any of
them resulting from or arising out of or by virtue of; (i) any inaccuracy in or
breach of any representation or warranty made by Seller in this Agreement; (ii)
any breach by Seller of, or failure to comply with, any of its covenants or
obligations under this Agreement (including, without limitation, the obligations
under this Section 9); (iii) any federal, state, or local tax liability of
Seller arising out of any period prior to the Closing, or (iv) any Damages
arising from any claims against the Business or the Assets, to the extent the
same arose, accrued or were otherwise incurred prior to the Closing.
9.2 Indemnification by Buyer. From and after the Closing, Buyer
shall indemnify, defend and hold harmless Seller and its successors and
permitted assigns against and from all Damages sustained or incurred by Seller
resulting from or arising out of or by virtue of; (i) any inaccuracy in or
breach of any representation or warranty made by Buyer in this Agreement; (ii)
any breach by Buyer of, or failure by Buyer to comply with, any of its covenants
or obligations under this Agreement (including, without limitation, Buyer's
obligations under this Section 9); or (iii) any Damages arising from Buyer's use
of the Assets following the Closing.
9.3 Right of Set-off. If, with respect to any matter arising under
this Agreement, in Buyer's good faith belief Buyer is entitled to
indemnification, reimbursement or payment from Seller hereunder, then, in
addition to any other remedies which Buyer may have available to it, Buyer shall
have the right to set-off the entire amount thereof against the amounts, if any,
then due under the Real Estate Note.
10. Survival. The covenants, representations, warranties, and
indemnities contained herein shall survive the Closing.
11. Assignment. Neither party shall have the right to assign this
Agreement without the written consent of the other party, which consent shall
not be unreasonably withheld.
5
<PAGE> 6
12. Incorporation of Exhibits. All Exhibits and Schedules referenced in
this Agreement shall be incorporated fully herein and shall be given legal
effect as if included within the text of this Agreement.
13. Final Agreement. This Agreement together with any documents
expressly referred to herein, constitutes the final agreement of the parties
concerning the matters referred to herein, and supersedes all prior agreements
and understandings among the Parties. The caption headings of the sections of
this Agreement are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
14. Applicable Law. This Agreement and all documents executed and
delivered in connection herewith and the rights and obligations of the parties
hereto and thereto shall be governed by and construed in accordance with the
laws of the State of California.
15. Inurement. This Agreement and the other documents executed and
delivered in connection herewith shall be binding upon and inure to the benefit
of the parties hereto and their respective personal and legal representatives,
heirs, successors, and permitted assigns.
16. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
agreement.
17. Severability. It is intended that each paragraph of this Agreement
shall be treated as separate and divisible, and in the event that any paragraphs
are deemed unenforceable, the remainder shall continue to be in full force and
effect so long as the primary purpose of this Agreement is unaffected.
18. Legal Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, default, misrepresentation, or breach in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, expenses, and other
costs incurred in that action or proceeding in addition to any other relief to
which such party may be entitled. The right to such attorneys' fees, expenses,
and costs shall be deemed to have accrued upon the commencement of such action
and shall be enforceable whether or not such action is prosecuted to judgment.
19. Further Cooperation. Each party hereto covenants and agrees to
prepare, execute, acknowledge, file, record, publish, and deliver to the other
parties hereto such other instruments, documents, and statements, including
without limitation instruments and documents of assignment, transfer, and
conveyance, and take such other action as may be reasonably necessary or
convenient in the discretion of the requesting party to carry out more
effectively the purposes of this Agreement.
20. Modifications. This Agreement may not be altered, amended, changed,
waived, terminated, or modified in any manner unless the same shall be in
writing and signed by or on behalf of the party to be bound.
6
<PAGE> 7
21. Definitions. Each undefined capitalized term herein shall have the
meaning ascribed thereto in the Stock Purchase Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., a California corporation
By:
---------------------------------------
Name:
--------------------------------------
Title:
------------------------------------
SELLER:
BEHAVIORAL MEDICINE PROFESSIONAL
SERVICES, INC., a California corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
7
<PAGE> 1
EXHIBIT 2.5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of the
1st day of December, 1998 (the "Effective Date"), by and between B and B
Leasing, a general partnership of William M. Bosic and Donald J. Bosic
(collectively, "Seller"), on the one hand, and Children's Comprehensive Services
of California, Inc., a California corporation ("Buyer"), on the other hand; with
Seller and Buyer sometimes referred to herein as "Party" or "Parties" as the
case may be.
RECITALS
A. Seller is engaged in the business of owning or liening certain
vehicles (the "Business") used by Somerset, Inc., a California
corporation, all of the issued and outstanding stock of which
Buyer will acquire concurrently herewith.
B. Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the vehicles on the terms and subject to the
conditions set forth in this Agreement.
C. Concurrently herewith and in connection with its acquisition
of the assets, properties, and rights hereby, Buyer will enter
into: (i) that certain Stock Purchase Agreement with Somerset,
Incorporated, a California corporation, of which the partners
of Seller are shareholders; (ii) that certain Agreement of
Purchase and Sale and Joint Escrow Instructions with BMB
Enterprises, a California general partnership, of which the
partners of Seller are general partners; (iii) that certain
Asset Purchase Agreement with Behavioral Medicine Professional
Services, Inc., a California corporation, of which the
partners of Seller are shareholders.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements and covenants contained herein, the Parties hereto agree as
follows:
AGREEMENT
1. Purchase of Assets. Seller agrees to transfer, convey, and deliver
to Buyer all of its right, title, and interest in and to the assets set forth on
the attached Exhibit "A" (the "Assets"). Except as disclosed on Schedule 1
attached hereto, the Assets shall be transferred, conveyed, and delivered to
Buyer free and clear of all Encumbrances.
2. Purchase Price. The purchase price for the Assets shall be Three
Hundred Thousand and NO/100 Dollars ($300,000.00) ("Purchase Price"), payable by
the transfer of said sum to Seller in immediately available funds at the
Closing.
<PAGE> 2
3. Allocation of Purchase Price. The Parties shall allocate the
Purchase Price among the Assets and agree to use such allocation in reporting
the purchase and sale of the Assets for federal and state income tax purposes.
4. Excluded Liabilities. Except as shown on Schedule 4 attached hereto,
Buyer shall not assume, or otherwise be responsible for, any liabilities or
obligation of Seller, whether actual or contingent, matured or unmatured,
liquidated or unliquidated, known or unknown, with respect to either the
Business or the Assets (collectively, "Excluded Liabilities"), including without
limitation, any claim or liability with respect to any prior creditors or tax
obligations of the Business or the Assets.
5. Seller's Representations and Warranties. Seller, jointly and
severally, represents and warrants to Buyer that the statements contained in
this Paragraph 5 are correct and complete as of the Effective Date and will be
correct and complete as of the Closing Date both generally with respect to the
Business and specifically with respect to the Assets (as though made then and as
though the Closing Date were substituted for the Effective Date throughout this
Paragraph 5):
A. Capacity; Execution; Validity; Binding Effect. Seller has
the full power and capacity necessary to enter into and perform his or its
obligations under this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Seller and
constitutes the legal, valid, and binding obligation of Seller. Seller has read
all provisions of this Agreement in full, has reviewed such provisions with
counsel, and understands each of such provisions and voluntarily agrees to be
bound thereby.
B. Noncontravention. Neither the execution, delivery, or
performance of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Seller is subject,
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement affecting the Assets. No notice to,
filing with, or any authorization, consent, or approval of any governmental
entity or other person is necessary in connection with the execution, delivery,
and performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby.
C. Brokers' Fees. Seller does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
D. Title to Assets. Seller has good and marketable title to,
or a valid interest in, each item listed on Exhibit "A", in each case free and
clear of all Encumbrances, except as disclosed on Schedule 1 attached hereto. As
of the Closing Date, each listed Asset is in good condition and repair, and none
of such listed Assets require any repair or replacement; it being understood
that the Assets otherwise are being sold "AS-IS".
2
<PAGE> 3
E. Legal Compliance. Seller has complied with all Legal
Requirements applicable to him or his, or it or its, conduct, ownership, use,
occupancy, or operation in respect of the Assets; nor, in this regard, has
Seller received notice of any violation of any Legal Requirements.
F. Tax Matters. Seller has filed all Tax Returns that were
required to be filed, and all Taxes due and payable by Seller have been paid in
full.
G. Litigation. There is no action, suit, proceeding,
investigation, claim, or order pending or threatened against Seller with respect
to the Business or proposed business of Seller, or to which Seller otherwise is
a party, which if adversely determined would have Adverse Consequences on
Seller, his or its assets, including the Assets, or the Business, before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction; nor is there any reasonable basis for any such action,
suit, proceeding, investigation, claim, or order. Seller is not subject to any
injunction, judgment, order, decree, or ruling of any court or governmental
entity. Seller has not received any opinion or memorandum of legal advice from
legal counsel retained by Seller or any Seller to the effect that any is
exposed, from a legal standpoint, to any liability which may have Adverse
Consequences on the Business or proposed business of Seller or the Assets.
Seller is not engaged in any action to recover monies due him or it or for
damages sustained by him or it.
H. Environmental, Health, and Safety Matters. Seller is in
strict compliance with all Environmental, Health, and Safety Requirements, and
Seller possesses all required permits, licenses, and certificates, and has filed
all notices or applications, required thereby. Seller has not received any
written notice, report or other information (and there is no reasonable basis
for any such notice, report, or information) regarding any actual or alleged
violation of Environmental, Health, and Safety Requirements, or any liabilities
or potential liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to Seller or its facilities arising under Environmental, Health, and
Safety Requirements. No facts, events, or circumstance with respect to the past
or present operations, business, or facilities of Seller exist which reasonably
could be expected to interfere with or prevent continued compliance with, or
could give rise to any common law or statutory liability or otherwise form the
basis of any claim, action, suit, proceeding, hearing, or investigation against
or involving Seller or its business under any Environment Health, and Safety
Requirement based upon any such fact, event, or circumstances, including,
without limitation, liability for cleanup costs, personal injury, or property
damage.
I. No Undisclosed Liabilities. Seller does not have any debt,
liability, or obligation of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated, or otherwise and whether
due or to become due) arising out of any transaction entered into at or prior to
the Effective Date, or any transaction, series of transactions, action or
inaction at or prior to the Effective Date, or any state of facts or condition
existing at or prior to the Effective Date (regardless of when such debt,
liability, or obligation is asserted), including, but not limited to, debts,
liabilities, and obligations on account of Taxes or governmental charges or
penalties, interest or fines thereon or in respect thereof, except to the extent
specifically reflected and accrued for or reserved against in the financial
statements.
3
<PAGE> 4
J. Licenses and Permits. Seller holds all permits, licenses,
franchises, and approvals of governmental authorities necessary or required for
its current conduct, ownership, use, occupancy, or operation in respect of its
business and properties, real and personal, all of which are listed on Schedule
5.J attached hereto ("Permits"). Seller is in compliance with such Permits, all
of which are in full force and effect, and neither Seller nor any Seller has
received any notice thereof to the contrary.
K. No Omissions and No Misrepresentations. Neither the
representations and warranties of Seller nor any other document or written
information provided to Buyer by or on behalf of Seller in connection with the
transactions contemplated hereby contain any untrue statement of any material
fact or omit to state any material fact necessary to make any such statement,
warranty, or representation not misleading. There is no material fact which has
not been disclosed to Buyer which would have Adverse Consequences or could
reasonably be anticipated to have Adverse Consequences on the Assets or the
business conducted by Seller or Seller's ability to consummate the transactions
contemplated hereby.
6. Buyer Representations. Buyer hereby represents and warrants to
Seller as follows:
A. Organization and Authority. Buyer is a corporation validly
existing under the laws of the State of California. Buyer has all requisite
power and authority to enter into this Agreement and to perform the transactions
contemplated hereby.
B. Authorization and Enforceability. Prior to the Closing, all
internal action on the part of Buyer necessary for the authorization, execution,
delivery and performance by Buyer of this Agreement and the consummation of the
transactions contemplated hereby will have been taken. This Agreement is a
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as limited by bankruptcy, insolvency or other
laws affecting creditors' rights generally or by the availability of equitable
remedies.
7. Taxes and Prorations. Seller shall pay any or all Transfer Taxes
arising out of the transfer of the Assets hereunder.
8. Closing. This Agreement shall close concurrently with the closing of
the Stock Purchase Agreement (the "Closing"). Buyer and Seller shall make the
following deliveries on the date of Closing:
A. Buyer's Closing Conditions. Buyer's obligation to purchase
the Assets is subject to the fulfillment on or before the Closing of the
following conditions and contingencies:
(1) The representations and warranties herein made by
Seller shall be true and correct when made and as of the Closing and Seller
shall have delivered to Buyer a Certificate of Seller dated as of the Closing to
all such effects;
(2) Seller shall deliver a Bill of Sale in the form
attached hereto at Exhibit "B" transferring title to the Assets to Buyer; and
4
<PAGE> 5
(3) All conditions to the obligations of the parties
to the Stock Purchase Agreement shall have been satisfied or waived.
B. Seller's Closing Conditions. The obligations of Seller to
sell the Assets at the Closing is subject to the fulfillment on or before the
Closing of the following conditions:
(1) Buyer's representations and warranties set forth
herein shall be true and correct when made and as of the Closing and Buyer shall
have delivered a Certificate of Buyer dated as of the Closing to all such
effects; and
(2) All conditions to the obligations of the parties
to the Stock Purchase Agreement shall have been satisfied or waived.
9. Indemnification; Right of Set-Off.
9.1 Indemnification by Seller. From and after the Closing,
Seller shall indemnify, defend and hold harmless Buyer and its successors and
assigns against and from all Damages (as defined below) sustained or incurred by
any of them resulting from or arising out of or by virtue of; (i) any inaccuracy
in or breach of any representation or warranty made by Seller in this Agreement;
(ii) any breach by Seller of, or failure to comply with, any of its covenants or
obligations under this Agreement (including, without limitation, the obligations
under this Section 9); (iii) any federal, state, or local tax liability of
Seller arising out of any period prior to the Closing, or (iv) any Damages
arising from any claims against the Business or the Assets, to the extent the
same arose, accrued or were otherwise incurred prior to the Closing.
9.2 Indemnification by Buyer. From and after the Closing,
Buyer shall indemnify, defend and hold harmless Seller and his successors and
permitted assigns against and from all Damages sustained or incurred by Seller
resulting from or arising out of or by virtue of; (i) any inaccuracy in or
breach of any representation or warranty made by Buyer in this Agreement; (ii)
any breach by Buyer of, or failure by Buyer to comply with, any of its covenants
or obligations under this Agreement (including, without limitation, Buyer's
obligations under this Section 9); or (iii) any Damages arising from Buyer's use
of the Assets following the Closing.
9.3 Right of Set-off. If, with respect to any matter arising
under this Agreement, in Buyer's good faith belief Buyer is entitled to
indemnification, reimbursement or payment from Seller hereunder, then, in
addition to any other remedies which Buyer may have available to it, Buyer shall
have the right to set-off the entire amount thereof against the amounts, if any,
then due under the Real Estate Note.
10. Survival. The covenants, representations, warranties, and
indemnities contained herein shall survive the Closing.
11. Assignment. Neither party shall have the right to assign this
Agreement without the written consent of the other party, which consent shall
not be unreasonably withheld.
5
<PAGE> 6
12. Incorporation of Exhibits. All Exhibits and Schedules referenced in
this Agreement shall be incorporated fully herein and shall be given legal
effect as if included within the text of this Agreement.
13. Final Agreement. This Agreement together with any documents
expressly referred to herein, constitutes the final agreement of the parties
concerning the matters referred to herein, and supersedes all prior agreements
and understandings among the Parties. The caption headings of the sections of
this Agreement are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
14. Applicable Law. This Agreement and all documents executed and
delivered in connection herewith and the rights and obligations of the parties
hereto and thereto shall be governed by and construed in accordance with the
laws of the State of California.
15. Inurement. This Agreement and the other documents executed and
delivered in connection herewith shall be binding upon and inure to the benefit
of the parties hereto and their respective personal and legal representatives,
heirs, successors, and permitted assigns.
16. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
agreement.
17. Severability. It is intended that each paragraph of this Agreement
shall be treated as separate and divisible, and in the event that any paragraphs
are deemed unenforceable, the remainder shall continue to be in full force and
effect so long as the primary purpose of this Agreement is unaffected.
18. Legal Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, default, misrepresentation, or breach in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, expenses, and other
costs incurred in that action or proceeding in addition to any other relief to
which such party may be entitled. The right to such attorneys' fees, expenses,
and costs shall be deemed to have accrued upon the commencement of such action
and shall be enforceable whether or not such action is prosecuted to judgment.
19. Further Cooperation. Each party hereto covenants and agrees to
prepare, execute, acknowledge, file, record, publish, and deliver to the other
parties hereto such other instruments, documents, and statements, including
without limitation instruments and documents of assignment, transfer, and
conveyance, and take such other action as may be reasonably necessary or
convenient in the discretion of the requesting party to carry out more
effectively the purposes of this Agreement.
20. Modifications. This Agreement may not be altered, amended, changed,
waived, terminated, or modified in any manner unless the same shall be in
writing and signed by or on behalf of the party to be bound.
6
<PAGE> 7
21. Definitions. Each undefined capitalized term herein shall have the
meaning ascribed thereto in the Stock Purchase Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., a California corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
SELLER:
B AND B LEASING, a general partnership of
William M. Bosic and Donald J. Bosic
By:
-----------------------------------------
William M. Bosic, individually and as a
general partner of B and B Leasing
By:
-----------------------------------------
Donald J. Bosic, individually and as a
general partner of B and B Leasing
7
<PAGE> 1
EXHIBIT 2.6
NONCOMPETITION, CONFIDENTIALITY, AND
NONSOLICITATION AGREEMENT
This Noncompetition, Confidentiality, and Nonsolicitation Agreement
("Noncompetition Agreement"), is made this 2nd day of December, 1998, by and
between Children's Comprehensive Services of California, Inc., a California
corporation, ("Purchaser") and Joseph C. McCoy, an individual resident of
California ("McCoy").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated
concurrently herewith, (the "Stock Purchase Agreement"),
Purchaser has, on the date hereof, purchased from McCoy,
William M. Bosic, and Donald J. Bosic all of the issued and
outstanding capital stock of Somerset, Incorporated, a
California corporation (the "Company").
B. Prior to the consummation of such transactions, McCoy was a
shareholder, Director, Officer, and employee of Company, and
in such capacity, had access to proprietary and confidential
information relating to financial and business operations of
Company.
C. Sections 6.2(j) and 6.3(e) of the Stock Purchase Agreement
provide that, as a condition to the consummation of the
transactions contemplated therein, McCoy execute a
Noncompetition, Confidentiality, and Nonsolicitation Agreement
providing for certain obligations of McCoy to refrain from
competing with Purchaser, its parent corporation and
affiliates, including but not limited to Purchaser or Company
(collectively, the "Companies"), within a certain geographical
area, soliciting employees or clients of the Companies, or
disclosing confidential information relating to the Companies.
D. McCoy recognizes that in connection with the closing of the
transactions contemplated in the Stock Purchase Agreement that
it is in Purchaser's interests to restrict McCoy's ability to
compete with, solicit employees or clients from and disclose
confidential information regarding the Companies.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants hereinafter set forth and in the Stock Purchase Agreement, the
parties hereto agree as follows:
1. Covenant Not to Compete and Engage in Solicitation. McCoy agrees that for a
period of five (5) years following the later of (x) the date hereof and (y) the
last date of employment of McCoy by any of the Companies, he shall not, directly
or indirectly:
<PAGE> 2
A. own, manage, operate, join, have an interest in, control or
participate in the ownership, management, operation or control of, be employed
by, assist in, act as a consultant to, or be connected with, directly or
indirectly, as an officer, director, shareholder, member, partner, proprietor,
employee, agent, independent contractor, or otherwise be connected in any manner
with, or have any direct or indirect financial interest, including, without
limitation, an interest as a creditor, in any form of business activity which is
directly or indirectly in competition with the business activity conducted by or
on behalf of any of the Companies (the "Business") throughout the State of
California (the "Territory");
B. hire, or promote to others, the hiring of any of the
Companies' employees, during and for a period of one (1) year following
termination of the respective employee's employment with any of the Companies;
or
C. solicit, or promote to others, the solicitation of clients
or customers of any of the Companies.
Notwithstanding the foregoing, McCoy shall not be in violation of the
foregoing covenant not to compete and engage in solicitation with respect to any
of the activities prohibited by subparagraphs A (in its entirety) and B (but not
to include the promotion to others) to the extent (i) such activities are
conducted by or on behalf of Children's Therapeutic Communities, a California
nonprofit corporation ("CTC"), and (ii) McCoy is, at each such time, either a
director, officer, or employee of CTC.
2. Covenant Not to Disclose Confidential Information. At any time following the
date hereof, McCoy will not, directly or indirectly, disclose or use or
otherwise exploit for his own benefit, or the benefit of any other person, any
Confidential Information (as defined below). For purposes of this Noncompetition
Agreement, the term "Confidential Information" shall mean any business or
financial information relating to any of the Companies or to the Business of the
Companies (whether or not constituting a trade secret), which is not in the
public domain. Without limiting the generality of the foregoing, so long as such
information is not generally known in the Business or ascertainable by proper
means and is treated by any of the Companies as proprietary and confidential,
Confidential Information shall include, but shall not be limited to, the
following information regarding any of the Companies:
A. any patent, patent application, copyright, trademark, trade
name, service mark, service name, "know-how" or trade secrets;
B. customer lists and information relating to (i) any client
of any Company or (ii) any client of the operations of any other person or
entity for which operations any Company provides management services;
C. supplier lists, pricing policies, consulting contracts and
competitive bid information;
2
<PAGE> 3
D. company records, operational methods and company policies
and procedures, including manuals and forms;
E. marketing data, plans and strategies;
F. business acquisition, development, expansion or capital
investment plan or activities;
G. software and any other confidential technical programs;
H. personnel information, employee payroll and benefits data;
I. accounts receivable and accounts payable;
J. other financial information, including financial
statements, budgets, projections, earnings and any unpublished financial
information; and
K. company correspondence and communications with outside
parties.
As used in this Section 2, the term "person" shall mean an individual,
a partnership, an association, a corporation, a trust, an unincorporated
organization, a limited liability company, a registered limited liability
partnership or any other business entity or enterprise. Notwithstanding the
provisions of this Section 2 to the contrary, McCoy shall not be prohibited
hereunder from making any disclosure required by law.
3. Injunctive Relief; Invalidity of Any Provision. McCoy acknowledges that (a)
his ownership of and positions as a shareholder, a director, an officer and an
employee of Company afforded his access to Confidential Information regarding
the Business of Company, (b) he will benefit from the consummation of the
transactions contemplated by the Stock Purchase Agreement, including but not
limited to by reason of the consideration received by him thereby, (c) the
nature and periods of restrictions imposed by the covenants contained in
Sections 1 and 2 hereof are fair, reasonable and necessary to protect the
Companies, (d) the Companies would sustain irreparable loss and damage if McCoy
were to breach any of such covenants, (e) the Companies actively conduct the
Business and are actively expanding the Business throughout the Territory, and
(f) the Companies' remedy at law for such a breach will be inadequate.
Accordingly, McCoy agrees and consents that the Companies, in addition to all
other remedies available to any of them, at law or in equity, shall be entitled
to:
A. seek both preliminary and permanent injunctions to prevent
or halt a breach or threatened breach by McCoy of any covenant contained in
either Sections 1 or 2 hereof; and
B. set-off the entire amount of any Damages arising by such
breach or threatened breach against the amounts, if any, then due under the Real
Estate Note.
If any provision of either of Sections 1 or 2 of this Noncompetition
Agreement is determined by a court of competent jurisdiction to be invalid in
whole or in part, it shall be deemed to have been
3
<PAGE> 4
amended, whether as to time, area covered or otherwise, as and to the extent
required for its validity by such court, and as so amended, shall be
enforceable. The parties further agree to execute all documents necessary to
evidence such amendment.
4. Notices. All notices, requests, demands and other communications required or
permitted to be given or made under this Noncompetition Agreement shall be in
writing and shall be given to Purchaser or to McCoy in accordance with the
provisions of Section 11.8 of the Stock Purchase Agreement.
5. Construction of Agreement.
5.1 Written Changes Only. This Noncompetition Agreement may not be
changed or terminated orally, and no modification, termination or attempted
waiver shall be valid unless in writing and signed by the party against whom
enforcement is sought (other than as provided in the last sentence of Section 4
hereof).
5.2 Tense; Captions. In construing this Noncompetition Agreement,
whenever appropriate, the singular tense shall also be deemed to mean the
plural, and vice versa, and the captions contained in this Noncompetition
Agreement shall be ignored.
5.3 Governing Law and Severability. This Noncompetition Agreement shall
be governed by, construed and enforced in accordance with, the laws of the State
of California. If any court holds any provision of this Noncompetition Agreement
or the application of the provision to any person or circumstance invalid, the
remaining provisions of this Noncompetition Agreement, and the application of
the provision to persons or circumstances other than those to which it is held
invalid, shall not be affected.
5.4 Assignment Prohibited. McCoy's obligations hereunder shall not be
assignable to any other person or entity.
5.5 Binding Effect; Benefit. Except as otherwise specifically provided
herein, this Noncompetition Agreement shall be binding upon, and shall inure to
the benefit of, the Companies and their respective successors and assigns.
5.6 Integrated Agreement. This Noncompetition Agreement constitutes the
entire agreement between the parties by which they agreed to be bound and
supersede all prior and contemporaneous agreements, correspondence, arrangements
and understanding (whether written or oral) relating to its subject matter and
the transactions contemplated by it.
5.7 Execution in Counterparts. This Noncompetition Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
5.8 Third Party Beneficiaries. With respect to the provisions of
Sections 1 and 2 hereof, the parent corporation of Purchaser, the Company and
all current and any future direct or indirect
4
<PAGE> 5
Affiliates (as defined below) of such parent corporation, are hereby made
third-party beneficiaries of this Noncompetition Agreement. As used herein, the
term "Affiliates" refers to any corporation or entity that controls, is
controlled by or is under common control with either Purchaser or any successor
or assignee of such parent corporation.
5.9 Recovery of Attorneys' Fees. If either party brings an action
against the other to enforce any condition or covenant of this Noncompetition
Agreement, the prevailing party in such action shall be entitled to recover its
court costs and reasonable attorneys' fees in the judgment rendered through such
action.
IN WITNESS WHEREOF, the parties have executed this Noncompetition
Agreement as of the date first written above.
----------------------------------------
JOSEPH C. MCCOY
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA CORPORATION
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
5
<PAGE> 1
EXHIBIT 2.7
NONCOMPETITION, CONFIDENTIALITY, AND
NONSOLICITATION AGREEMENT
This Noncompetition, Confidentiality, and Nonsolicitation Agreement
("Noncompetition Agreement"), is made this 2nd day of December, 1998, by and
between Children's Comprehensive Services of California, Inc., a California
corporation, ("Purchaser") and Donald J. Bosic, an individual resident of
California ("Bosic").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated
concurrently herewith, (the "Stock Purchase Agreement"), Purchaser
has, on the date hereof, purchased from Bosic, William M. Bosic,
and Joseph C. McCoy all of the issued and outstanding capital
stock of Somerset, Incorporated, a California corporation (the
"Company").
B. Prior to the consummation of such transactions, Bosic was a
shareholder, Director, Officer, and employee of Company, and, in
such capacity, had access to proprietary and confidential
information relating to financial and business operations of
Company.
C. Sections 6.2(j) and 6.3(e) of the Stock Purchase Agreement provide
that, as a condition to the consummation of the transactions
contemplated therein, Bosic execute a Noncompetition,
Confidentiality, and Nonsolicitation Agreement providing for
certain obligations of Bosic to refrain from competing with
Purchaser, its parent corporation and affiliates, including but
not limited to Purchaser or Company (collectively, the
"Companies"), within a certain geographical area, soliciting
employees or clients of the Companies, or disclosing confidential
information relating to the Companies.
D. Bosic recognizes that in connection with the closing of the
transactions contemplated in the Stock Purchase Agreement that
it is in Purchaser's interests to restrict Bosic's ability to
compete with, solicit employees or clients from and disclose
confidential information regarding the Companies.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants hereinafter set forth and in the Stock Purchase Agreement, the
parties hereto agree as follows:
<PAGE> 2
1. Covenant Not to Compete and Engage in Solicitation. Bosic agrees that for a
period of five (5) years following the later of (x) the date hereof and (y) the
last date of employment of Bosic by any of the Companies, he shall not, directly
or indirectly:
A. own, manage, operate, join, have an interest in, control or
participate in the ownership, management, operation or control of, be employed
by, assist in, act as a consultant to, or be connected with, directly or
indirectly, as an officer, director, shareholder, member, partner, proprietor,
employee, agent, independent contractor, or otherwise be connected in any manner
with, or have any direct or indirect financial interest, including, without
limitation, an interest as a creditor, in any form of business activity which is
directly or indirectly in competition with the business activity conducted by or
on behalf of any of the Companies (the "Business") throughout the State of
California (the "Territory");
B. hire, or promote to others, the hiring of any of the Companies'
employees, during and for a period of one (1) year following termination of the
respective employee's employment with any of the Companies; or
C. solicit, or promote to others, the solicitation of clients or
customers of any of the Companies.
Notwithstanding the foregoing, Bosic shall not be in violation of the
foregoing covenant not to compete and engage in solicitation with respect to any
of the activities prohibited by subparagraphs A (in its entirety) and B (but not
to include the promotion to others) to the extent (i) such activities are
conducted by or on behalf of Children's Therapeutic Communities, a California
nonprofit corporation ("CTC"), and (ii) Bosic is, at each such time, either a
director, officer, or employee of CTC.
2. Covenant Not to Disclose Confidential Information. At any time following the
date hereof, Bosic will not, directly or indirectly, disclose or use or
otherwise exploit for his own benefit, or the benefit of any other person, any
Confidential Information (as defined below). For purposes of this Noncompetition
Agreement, the term "Confidential Information" shall mean any business or
financial information relating to any of the Companies or to the Business of the
Companies (whether or not constituting a trade secret), which is not in the
public domain. Without limiting the generality of the foregoing, so long as such
information is not generally known in the Business or ascertainable by proper
means and is treated by any of the Companies as proprietary and confidential,
Confidential Information shall include, but shall not be limited to, the
following information regarding any of the Companies:
A. any patent, patent application, copyright, trademark, trade name,
service mark, service name, "know-how" or trade secrets;
2
<PAGE> 3
B. customer lists and information relating to (i) any client of any
Company or (ii) any client of the operations of any other person or entity for
which operations any Company provides management services;
C. supplier lists, pricing policies, consulting contracts and
competitive bid information;
D. company records, operational methods and company policies and
procedures, including manuals and forms;
E. marketing data, plans and strategies;
F. business acquisition, development, expansion or capital
investment plan or activities;
G. software and any other confidential technical programs;
H. personnel information, employee payroll and benefits data;
I. accounts receivable and accounts payable;
J. other financial information, including financial statements,
budgets, projections, earnings and any unpublished financial information; and
K. company correspondence and communications with outside parties.
As used in this Section 2, the term "person" shall mean an individual,
a partnership, an association, a corporation, a trust, an unincorporated
organization, a limited liability company, a registered limited liability
partnership or any other business entity or enterprise.
3. Injunctive Relief; Invalidity of Any Provision. Bosic acknowledges that (a)
his ownership of and positions as a shareholder, a director, an officer and an
employee of Company afforded his access to Confidential Information regarding
the Business of Company, (b) he will benefit from the consummation of the
transactions contemplated by the Stock Purchase Agreement, including but not
limited to by reason of the consideration received by him thereby, (c) the
nature and periods of restrictions imposed by the covenants contained in
Sections 1 and 2 hereof are fair, reasonable and necessary to protect the
Companies, (d) the Companies would sustain irreparable loss and damage if Bosic
were to breach any of such covenants, (e) the Companies actively conduct the
Business and are actively expanding the Business throughout the Territory, and
(f) the Companies' remedy at law for such a breach will be inadequate.
Accordingly, Bosic agrees and consents that the Companies, in addition to all
other remedies available to any of them, at law or in equity, shall be entitled
to:
3
<PAGE> 4
A. seek both preliminary and permanent injunctions to prevent
or halt a breach or threatened breach by Bosic of any covenant contained in
either Sections 1 or 2 hereof; and
B. set-off the entire amount of any Damages arising by such
breach or threatened breach against the amounts, if any, then due under the Real
Estate Note.
If any provision of either of Sections 1 or 2 of this Noncompetition
Agreement is determined by a court of competent jurisdiction to be invalid in
whole or in part, it shall be deemed to have been amended, whether as to time,
area covered or otherwise, as and to the extent required for its validity by
such court, and as so amended, shall be enforceable. The parties further agree
to execute all documents necessary to evidence such amendment.
4. Notices. All notices, requests, demands and other communications required or
permitted to be given or made under this Noncompetition Agreement shall be in
writing and shall be given to Purchaser or to Bosic in accordance with the
provisions of Section 11.8 of the Stock Purchase Agreement.
5. Construction of Agreement.
5.1 Written Changes Only. This Noncompetition Agreement may not be changed
or terminated orally, and no modification, termination or attempted waiver shall
be valid unless in writing and signed by the party against whom enforcement is
sought (other than as provided in the last sentence of Section 4 hereof).
5.2 Tense; Captions. In construing this Noncompetition Agreement, whenever
appropriate, the singular tense shall also be deemed to mean the plural, and
vice versa, and the captions contained in this Noncompetition Agreement shall be
ignored.
5.3 Governing Law and Severability. This Noncompetition Agreement shall be
governed by, construed and enforced in accordance with, the laws of the State of
California. If any court holds any provision of this Noncompetition Agreement or
the application of the provision to any person or circumstance invalid, the
remaining provisions of this Noncompetition Agreement, and the application of
the provision to persons or circumstances other than those to which it is held
invalid, shall not be affected.
5.4 Assignment Prohibited. Bosic's obligations hereunder shall not be
assignable to any other person or entity.
5.5 Binding Effect; Benefit. Except as otherwise specifically provided
herein, this Noncompetition Agreement shall be binding upon, and shall inure to
the benefit of, the Companies and their respective successors and assigns.
4
<PAGE> 5
5.6 Integrated Agreement. This Noncompetition Agreement constitutes the
entire agreement between the parties by which they agreed to be bound and
supersede all prior and contemporaneous agreements, correspondence, arrangements
and understanding (whether written or oral) relating to its subject matter and
the transactions contemplated by it.
5.7 Execution in Counterparts. This Noncompetition Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
5.8 Third Party Beneficiaries. With respect to the provisions of Sections 1
and 2 hereof, the parent corporation of Purchaser, the Company and all current
and any future direct or indirect Affiliates (as defined below) of such parent
corporation, are hereby made third-party beneficiaries of this Noncompetition
Agreement. As used herein, the term "Affiliates" refers to any corporation or
entity that controls, is controlled by or is under common control with either
Purchaser or any successor or assignee of such parent corporation.
5.9 Recovery of Attorneys' Fees. If either party brings an action against
the other to enforce any condition or covenant of this Noncompetition Agreement,
the prevailing party in such action shall be entitled to recover its court costs
and reasonable attorneys' fees in the judgment rendered through such action.
IN WITNESS WHEREOF, the parties have executed this Noncompetition Agreement
as of the date first written above.
----------------------------------------
DONALD J. BOSIC
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA CORPORATION
By:
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Name:
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Title:
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EXHIBIT 2.8
NONCOMPETITION, CONFIDENTIALITY, AND
NONSOLICITATION AGREEMENT
This Noncompetition, Confidentiality, and Nonsolicitation Agreement
("Noncompetition Agreement"), is made this 2nd day of December, 1998, by and
between Children's Comprehensive Services of California, Inc., a California
corporation, ("Purchaser") and William M. Bosic, an individual resident of
California ("Bosic").
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated
concurrently herewith, (the "Stock Purchase Agreement"), Purchaser
has, on the date hereof, purchased from Bosic, Donald J. Bosic,
and Joseph C. McCoy all of the issued and outstanding capital
stock of Somerset, Incorporated, a California corporation (the
"Company").
B. Prior to the consummation of such transactions, Bosic was a
shareholder, Director, Officer, and employee of Company, and in
such capacity, had access to proprietary and confidential
information relating to financial and business operations of
Company.
C. Sections 6.2(j) and 6.3(e) of the Stock Purchase Agreement provide
that, as a condition to the consummation of the transactions
contemplated therein, Bosic execute a Noncompetition,
Confidentiality, and Nonsolicitation Agreement providing for
certain obligations of Bosic to refrain from competing with
Purchaser, its parent corporation and affiliates, including but
not limited to Purchaser or Company (collectively, the
"Companies"), within a certain geographical area, soliciting
employees or clients of the Companies, or disclosing confidential
information relating to the Companies.
D. Bosic recognizes that in connection with the closing of the
transactions contemplated in the Stock Purchase Agreement that
it is in Purchaser's interests to restrict Bosic's ability to
compete with, solicit employees or clients from and disclose
confidential information regarding the Companies.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants hereinafter set forth and in the Stock Purchase Agreement, the
parties hereto agree as follows:
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1. Covenant Not to Compete and Engage in Solicitation. Bosic agrees that for a
period of five (5) years following the later of (x) the date hereof and (y) the
last date of employment of Bosic by any of the Companies, he shall not, directly
or indirectly:
A. own, manage, operate, join, have an interest in, control or
participate in the ownership, management, operation or control of, be employed
by, assist in, act as a consultant to, or be connected with, directly or
indirectly, as an officer, director, shareholder, member, partner, proprietor,
employee, agent, independent contractor, or otherwise be connected in any manner
with, or have any direct or indirect financial interest, including, without
limitation, an interest as a creditor, in any form of business activity which is
directly or indirectly in competition with the business activity conducted by or
on behalf of any of the Companies (the "Business") throughout the State of
California (the "Territory");
B. hire, or promote to others, the hiring of any of the Companies'
employees, during and for a period of one (1) year following termination of the
respective employee's employment with any of the Companies; or
C. solicit, or promote to others, the solicitation of clients or
customers of any of the Companies.
Notwithstanding the foregoing, Bosic shall not be in violation of the
foregoing covenant not to compete and engage in solicitation with respect to any
of the activities prohibited by subparagraphs A (in its entirety) and B (but not
to include the promotion to others) to the extent (i) such activities are
conducted by or on behalf of Children's Therapeutic Communities, a California
nonprofit corporation ("CTC"), and (ii) Bosic is, at each such time, either a
director, officer, or employee of CTC.
2. Covenant Not to Disclose Confidential Information. At any time following the
date hereof, Bosic will not, directly or indirectly, disclose or use or
otherwise exploit for his own benefit, or the benefit of any other person, any
Confidential Information (as defined below). For purposes of this Noncompetition
Agreement, the term "Confidential Information" shall mean any business or
financial information relating to any of the Companies or to the Business of the
Companies (whether or not constituting a trade secret), which is not in the
public domain. Without limiting the generality of the foregoing, so long as such
information is not generally known in the Business or ascertainable by proper
means and is treated by any of the Companies as proprietary and confidential,
Confidential Information shall include, but shall not be limited to, the
following information regarding any of the Companies:
A. any patent, patent application, copyright, trademark, trade
name, service mark, service name, "know-how" or trade secrets;
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B. customer lists and information relating to (i) any client of
any Company or (ii) any client of the operations of any other person or entity
for which operations any Company provides management services;
C. supplier lists, pricing policies, consulting contracts and
competitive bid information;
D. company records, operational methods and company policies and
procedures, including manuals and forms;
E. marketing data, plans and strategies;
F. business acquisition, development, expansion or capital
investment plan or activities;
G. software and any other confidential technical programs;
H. personnel information, employee payroll and benefits data;
I. accounts receivable and accounts payable;
J. other financial information, including financial statements,
budgets, projections, earnings and any unpublished financial information; and
K. company correspondence and communications with outside parties.
As used in this Section 2, the term "person" shall mean an individual,
a partnership, an association, a corporation, a trust, an unincorporated
organization, a limited liability company, a registered limited liability
partnership or any other business entity or enterprise. Notwithstanding the
provisions of this Section 2 to the contrary, Bosic shall not be prohibited
hereunder from making any disclosure required by law.
3. Injunctive Relief; Invalidity of Any Provision. Bosic acknowledges that (a)
his ownership of and positions as a shareholder, a director, an officer and an
employee of Company afforded his access to Confidential Information regarding
the Business of Company, (b) he will benefit from the consummation of the
transactions contemplated by the Stock Purchase Agreement, including but not
limited to by reason of the consideration received by him thereby, (c) the
nature and periods of restrictions imposed by the covenants contained in
Sections 1 and 2 hereof are fair, reasonable and necessary to protect the
Companies, (d) the Companies would sustain irreparable loss and damage if Bosic
were to breach any of such covenants, (e) the Companies actively conduct the
Business and are actively expanding the Business throughout the Territory, and
(f) the Companies' remedy at law for such a breach will be inadequate.
Accordingly, Bosic agrees and consents that the Companies, in addition to all
other remedies available to any of them, at law or in equity, shall be entitled
to:
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A. seek both preliminary and permanent injunctions to prevent or
halt a breach or threatened breach by Bosic of any covenant contained in either
Sections 1 or 2 hereof; and
B. set-off the entire amount of any Damages arising by such
breach or threatened breach against the amounts, if any, then due under the Real
Estate Note.
If any provision of either of Sections 1 or 2 of this Noncompetition
Agreement is determined by a court of competent jurisdiction to be invalid in
whole or in part, it shall be deemed to have been amended, whether as to time,
area covered or otherwise, as and to the extent required for its validity by
such court, and as so amended, shall be enforceable. The parties further agree
to execute all documents necessary to evidence such amendment.
4. Notices. All notices, requests, demands and other communications required or
permitted to be given or made under this Noncompetition Agreement shall be in
writing and shall be given to Purchaser or to Bosic in accordance with the
provisions of Section 11.8 of the Stock Purchase Agreement.
5. Construction of Agreement.
5.1 Written Changes Only. This Noncompetition Agreement may not be changed or
terminated orally, and no modification, termination or attempted waiver shall be
valid unless in writing and signed by the party against whom enforcement is
sought (other than as provided in the last sentence of Section 4 hereof).
5.2 Tense; Captions. In construing this Noncompetition Agreement, whenever
appropriate, the singular tense shall also be deemed to mean the plural, and
vice versa, and the captions contained in this Noncompetition Agreement shall be
ignored.
5.3 Governing Law and Severability. This Noncompetition Agreement shall be
governed by, construed and enforced in accordance with, the laws of the State of
California. If any court holds any provision of this Noncompetition Agreement or
the application of the provision to any person or circumstance invalid, the
remaining provisions of this Noncompetition Agreement, and the application of
the provision to persons or circumstances other than those to which it is held
invalid, shall not be affected.
5.4 Assignment Prohibited. Bosic's obligations hereunder shall not be
assignable to any other person or entity.
5.5 Binding Effect; Benefit. Except as otherwise specifically provided
herein, this Noncompetition Agreement shall be binding upon, and shall inure to
the benefit of, the Companies and their respective successors and assigns.
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5.6 Integrated Agreement. This Noncompetition Agreement constitutes the
entire agreement between the parties by which they agreed to be bound and
supersede all prior and contemporaneous agreements, correspondence, arrangements
and understanding (whether written or oral) relating to its subject matter and
the transactions contemplated by it.
5.7 Execution in Counterparts. This Noncompetition Agreement may be executed
in multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
5.8 Third Party Beneficiaries. With respect to the provisions of Sections 1
and 2 hereof, the parent corporation of Purchaser, the Company and all current
and any future direct or indirect Affiliates (as defined below) of such parent
corporation, are hereby made third-party beneficiaries of this Noncompetition
Agreement. As used herein, the term "Affiliates" refers to any corporation or
entity that controls, is controlled by or is under common control with either
Purchaser or any successor or assignee of such parent corporation.
5.9 Recovery of Attorneys' Fees. If either party brings an action against
the other to enforce any condition or covenant of this Noncompetition Agreement,
the prevailing party in such action shall be entitled to recover its court costs
and reasonable attorneys' fees in the judgment rendered through such action.
IN WITNESS WHEREOF, the parties have executed this Noncompetition Agreement
as of the date first written above.
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WILLIAM M. BOSIC
CHILDREN'S COMPREHENSIVE SERVICES OF
CALIFORNIA, INC., A CALIFORNIA CORPORATION
By:
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Name:
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Title:
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EXHIBIT 99
[CHILDREN'S COMPREHENSIVE SERVICES LETTERHEAD]
FOR IMMEDIATE RELEASE Contact: Donald B. Whitfield
Chief Financial Officer
(615) 383-0376
CHILDREN'S COMPREHENSIVE SERVICES ACQUIRES OPERATOR OF 200-SEAT
EDUCATIONAL DAY TREATMENT PROGRAM IN CALIFORNIA
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SECURES NEW $40 MILLION CREDIT FACILITY
Nashville, Tennessee (December 4, 1998) - Children's Comprehensive Services,
Inc. ("CCS") (Nasdaq/NM:KIDS) today announced that it has acquired Somerset
Educational Services, the operator of a 200-seat educational day treatment
program in Riverside County, California. Included in the acquisition,
consideration for which was approximately $9.5 million in cash and the
assumption of approximately $1.0 million in debt, is a 24,000 square foot
facility in Riverside County that provides the capacity for CCS to pursue the
expansion of the program to 250 seats. At current capacity, the program is
expected to generate approximately $6 million in annual revenue.
William J Ballard, Chairman and Chief Executive Officer of CCS,
commented, "Somerset Educational Services has developed a strong reputation for
high quality special education programming. We expect this transaction, which is
CCS's second major acquisition thus far in fiscal 1999, to enhance our presence
in Southern California. It is also another example of the continuing
opportunities we see to consolidate the market for services to at-risk youth
through the acquisition of well-run providers that bring new customers to CCS,
broaden its product line or expand its geographic presence."
CCS also announced that it has secured a new $40 million credit
facility from SunTrust Bank, Nashville, N.A. and First American National Bank.
The new facility, which replaces CCS's existing $23 million facility with First
American, includes a seven-year, fixed-rate term loan for $15 million and a
three-year revolving credit loan for $25 million.
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"We are pleased to announce the Company's new credit facility." said
Mr. Ballard. "We have had a productive investment banking relationship with
SunTrust Equitable Securities, and we are now benefitting from the commercial
banking capabilities SunTrust also provides. In addition, the transaction
extends CCS's long-term relationship with First American. With this facility in
place, we are confident of our ability to finance our internal growth
strategies."
To take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, you are hereby cautioned that this
release contains forward-looking statements that are based upon current
expectations and involve a number of risks and uncertainties. Actual operations
and results may differ materially from those expressed in the forward-looking
statements made by the Company. Please refer to CCS's filings with the
Securities and Exchange Commission for additional information. The Company
disclaims any intent or obligation to update these forward-looking statements.
Children's Comprehensive Services provides education, treatment and
juvenile justice services for at-risk and troubled youth either directly or
through management contracts. It currently offers these services through the
operation and management of nonresidential specialized education programs and
day treatment programs and both open and secured residential treatment centers
in Alabama, Arkansas, California, Florida, Kentucky, Louisiana, Michigan,
Montana, Pennsylvania, Tennessee, Texas and Utah.
-END-
