<PAGE>
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: JANUARY 31, 1996
(DATE OF EARLIEST EVENT REPORTED)
PC ETCETERA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-17419 13-3260705
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF INCORPORATION) IDENTIFICATION NUMBER)
462 SEVENTH AVENUE, NEW YORK, NEW YORK 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 736-5870
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a Stock Purchase Agreement dated as of January 31, 1996 (the
"Agreement"), PC Etcetera, Inc. (the "Company") sold all of the outstanding
stock of PC Etcetera Inc., a Quebec corporation ("PC Canada"), to Training
Holdings L.L.C. (the "Purchaser") for a purchase price of $605,000 (inclusive of
approximately $55,000 paid to the Company prior to the closing). Simultaneously
with such sale, the Purchaser paid to the Company the sum of $200,000 as a non-
refundable royalty payment in consideration of the license by the Company to PC
Canada of certain computer software. Of the total proceeds received,
approximately $500,000 is to be used to repay certain indebtedness incurred by
the Company in December 1995.
Pursuant to the Agreement, the parties agreed to negotiate in good faith
the terms of a three year royalty agreement between the Company and PC Canada
which would provide for the grant of a license by the Company to PC Canada of
certain intellectual property, including the right to use certain computer
software, in consideration of the payment of certain royalty amounts to the
Company. In addition, concurrently with the execution of the Agreement, in
consideration of certain services to be performed by the Company with respect to
certain leases to which PC Canada is a party, the Purchaser agreed to pay to the
Company a fee based upon reductions in rents and other costs required to be paid
by PC Canada pursuant to such leases.
The Company is currently exploring the terms of a transaction pursuant to
which its United States instructor-led training operations would be sold to the
Purchaser. No assurances can be given that a definitive agreement between the
parties will be entered into or, if entered into, that the transaction will be
consummated.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
(i) Pro Forma Consolidated Balance Sheet of the Company as of
September 30, 1995;
(ii) Pro Forma Consolidated Statement of Operations of the
Company for the nine months ended September 30, 1995;
(iii)Pro Forma Consolidated Statement of Operations of the
Company for the year ended December 31, 1994.
(c) EXHIBITS.
(i) Stock Purchase Agreement dated as of January 31, 1996 by and
between Training Holdings L.L.C. and PC Etcetera, Inc., as
amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PC ETCETERA, INC.
Dated: February 12, 1996 By:/s/ Terry I . Steinberg
------------------------------
Terry I. Steinberg, President
<PAGE>
ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet as of September 30, 1995 and
Pro Forma Consolidated Statements of Operations for the year ended December 31,
1994 and the nine months ended September 30, 1995 have been prepared to reflect
the sale of all of the outstanding stock of PC Etcetera Inc., the Company's
wholly-owned Canadian subsidiary, and the adjustments described in the
accompanying notes. The pro forma financial information is based on the
historical consolidated financial statements of PC Etcetera, Inc. and its
subsidiaries (the "Company"). The Pro Forma Consolidated Balance Sheet was
prepared as if the sale occurred on September 30, 1995. The Pro Forma
Consolidated Statements of Operations for the year ended December 31, 1994 and
for the nine months ended September 30, 1995 were prepared assuming the
transaction occurred on January 1, 1994.
The pro forma financial information is unaudited and not necessarily indicative
of the consolidated results which actually would have occurred if the sale
transaction had been consummated at January 1, 1994, nor does it purport to
represent the future financial position or results of operations for future
periods.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The Company entered into a Stock Purchase Agreement dated as of January 31, 1996
to sell all of the outstanding stock of its wholly-owned Canadian subsidiary, PC
Etcetera Inc., a Quebec corporation, to Training Holdings L.L.C.
The accompanying unaudited Pro Forma Consolidated Balance Sheet is presented as
if the sale transaction occurred on September 30, 1995. Certain amounts have
been reclassified to conform with the current presentation. All references
herein to numbers of shares of Common Stock and per share amounts, and all
references herein to dollar amounts that are based upon the number of shares of
Common Stock that are issued, give retroactive effect to the one-for-five
reverse split of the shares of Common Stock effectuated as of April 19, 1995.
The accompanying unaudited Pro Forma Consolidated Statements of Operations are
presented as if the sale transaction occurred on January 1, 1994.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Company as of December
31, 1994 and September 30, 1995. In management's opinion, all material
adjustments necessary to reflect the effect of the transaction by the Company
have been made.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of what the actual financial position of the Company would have been
as of September 30, 1995, nor are they necessarily indicative of the results of
operations for future periods.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
AND NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
(A) To reclassify the effects of intercompany advances in the amount of
$371,384 from the Company to its subsidiary which are being forgiven and are
therefore reflected as an additional equity investment in the subsidiary.
(B) To reflect the elimination of the balances of the Company's wholly-owned
subsidiary, which was sold, from the Company's consolidated financial
statements.
(C) To reflect the $731,000 cash received (net of brokers fees of $74,000) and
the $359,616 gain on the sale of the subsidiary.
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS:
(A) To reflect the elimination of the results of operations of the Company's
wholly-owned subsidiary, which was sold, from the Company's consolidated
financial statements
(B) To reflect the adjustment of the management fees charged to the subsidiary
during the nine months ended September 30, 1995 and the year ended December 31,
1994.
(C) To reflect the revenues from software development services from the Company
to the subsidiary, which had been eliminated in the consolidation process, but
would have been payable had the Company been unaffiliated.
As a result of the above transactions, the Company would recognize a gain on the
sale of the Canadian subsidiary in the amount of $359,616. The Company does not
believe there will be any income tax payable as a resultof this gain due to the
operating losses incurred, along with significant net operating loss
carryforwards.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL PCE PRO FORMA NOTE PRO FORM AS
CONSOLIDATED ADJUSTMENTS 2 ADJUSTED
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and Cash Equivalents $ 55,740 $ 731,000 C $ 786,740
Accounts Receivable 1,652,183 (467,915) B 1,184,268
Prepaid Expenses 216,765 (24,398) B 192,367
------------------------------------------------------------------------
Total Current Assets 1,924,688 238,687 2,163,375
------------------------------------------------------------------------
Property and Equipment 1,611,395 (262,854) B 1,348,541
Leasehold Improvements 242,534 (34,005) B 208,529
Less: Accumulated
Depreciation and
Amortization (954,077) 138,890 B (815,187)
------------------------------------------------------------------------
899,852 (157,969) 741,883
------------------------------------------------------------------------
OTHER ASSETS:
Security Deposits 80,532 (9,842) B 70,690
Other Assets (Net) 20,000 0 20,000
Software (Net) 1,287,965 0 1,287,965
Investment in Canadian Subsidiary 371,384 A
(371,384) C
------------------------------------------------------------------------
Total Other Assets 1,388,497 (9,842) 1,378,655
------------------------------------------------------------------------
TOTAL ASSETS $4,213,037 $ 70,876 $4,283,913
------------------------------------------------------------------------
------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable and Accrued
Expenses $1,707,976 $(143,989) B $1,563,987
Payroll Taxes Payable 80,699 (41,073) B 39,626
Deferred Revenue 198,869 (50,596) B 148,273
Loans Payable - Bank -
Current Portion 76,260 0 76,260
Loans Payable - Other -
Current Portion 477,109 0 477,109
Loans Payable - Affiliate 36,540 0 36,540
Capital Equipment Payable -
Current Portion 195,319 (53,082) B 142,237
------------------------------------------------------------------------
Total Current
Liabilities 2,772,772 (288,740) 2,484,032
OTHER LIABILITIES:
Capital Equipment Obligations 8,601 0 8,601
Loans Payable - Bank 63,451 0 63,451
Intercompany Payables (371,384) D 0
371,384 A
------------------------------------------------------------------------
TOTAL LIABILITIES 2,844,824 288,740 2,556,084
------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common Stock 29,275 0 29,275
Preferred Stock 1,000 0 1,000
Paid In Capital 5,286,283 0 5,286,283
Retained Earnings (Deficit) (3,948,345) 359,616 C (3,588,729)
------------------------------------------------------------------------
Total Stockholders'
Equity 1,368,213 359,616 1,727,829
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,213,037 $70,876 $4,283,913
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL PCE PRO FORMA NOTE PRO FORMA
CONSOLIDATED ADJUSTMENTS 3 AS ADJUSTED
<S> <C> <C> <C> <C>
Revenues $8,427,704 $2,388,434 A $6,067,754
(28,484) C
Cost of Revenues 4,737,283 1,356,851 A 3,380,432
---------------------------------- ------------
Gross Profit 3,690,421 1,003,099 2,687,322
Selling, General and
Administrative Expenses 4,778,480 1,023,061 A 3,852,619
(97,200) B
Research and Development
Expenses 577,707 577,707
---------------------------------- ------------
Operating Income (Loss) (1,665,766) 77,238 (1,743,004)
Other (Expenses) (Net) (75,631) (4,954) A (70,677)
---------------------------------- ------------
Net Income (Loss) $(1,741,397) $72,284 $(1,813,681)
---------------------------------- ------------
---------------------------------- ------------
Earnings Per Share:
Net (Loss) ($0.64) ($0.67)
------------------- ------------
------------------- ------------
Weighted Average Number of
Shares 2,705,240 2,705,240
------------------- ------------
------------------- ------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
TOTAL PCE PRO FORMA NOTE PRO FORMA
CONSOLIDATED ADJUSTMENTS 3 AS ADJUSTED
<S> <C> <C> <C> <C>
Revenues $10,456,704 $2,141,361 A $ 8,317,708
(2,365) C
Cost of Revenues 4,847,301 961,760 A 3,885,541
---------------------------------- ------------
Gross Profit 5,609,403 1,177,236 4,432,167
Selling, General and
Administrative Expenses 6,264,655 1,165,767 A 5,250,061
(151,173) B
Research and Development
Expenses 541,439 541,439
---------------------------------- ------------
Operating Income (Loss) (1,196,691) 162,642 (1,359,333)
Other (Expenses) (Net) (121,847) (5,887) A (115,960)
---------------------------------- ------------
Net Income (Loss) $(1,318,538) $156,755 $(1,475,293)
---------------------------------- ------------
---------------------------------- ------------
Earnings Per Share:
Net (Loss) ($0.85) ($0.95)
---------------------------------- ------------
---------------------------------- ------------
Weighted Average Number
Shares 1,553,462 1,553,462
---------------------------------- ------------
---------------------------------- ------------
</TABLE>
<PAGE>
COMPOSITE CONFORMED COPY
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TRAINING HOLDINGS L.L.C.
AND
PC ETCETERA, INC.
DATED AS OF JANUARY 31, 1996
- -------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of January 31,
1996, by and between TRAINING HOLDINGS L.L.C., a Delaware limited liability
company ("Purchaser"), and PC ETCETERA, INC., a Delaware corporation ("Seller").
WHEREAS, Seller owns 10 common shares, without par value (the
"Shares"), of PC Etcetera Inc., a corporation formed under the laws of the
Province of Quebec (the "Company"), which Shares constitute all of the issued
and outstanding capital stock of the Company;
WHEREAS, the Company is in the business of developing and offering
instructor-led and computer-based personal computer training programs, primarily
to large businesses and public sector organizations located in Canada (such
business as it relates to the Company, the "Training Business");
WHEREAS, Seller desires to sell, transfer and convey to Purchaser, and
Purchaser desires to purchase and acquire from Seller, all of Seller's right,
title and interest in and to the Shares, all in accordance with the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS; HEADINGS
1.01 DEFINED TERMS. As used in this Agreement, terms defined in
the preamble and recitals of this Agreement have the meanings set forth
therein, and the following terms have the meanings set forth below:
(1) "Accounts Receivable" means all billed and unbilled costs and
accounts, fees, commissions, and all other receivables payable to the Company in
respect of goods sold or services rendered by the Company prior to the Closing.
(2) "CBT" means computer-based training.
(3) "Canadian Tax Clearance Certificates" means a certificate issued
by Revenue Canada in respect of the transactions contemplated by this Agreement
under Section
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<PAGE>
116 of the Income Tax Act (Canada) together with the comparable certificate
under the Taxation Act (Quebec), if applicable.
(4) "Closing" means the consummation of the purchase and sale of the
Shares as contemplated by this Agreement.
(5) "Code" means the Internal Revenue Code of 1986, as amended.
(6) "Dollars" or "$" means currency of the United States of America.
(7) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(8) "Environmental Laws" means all United States or Canadian
federal, provincial, state, municipal and local rules and regulations
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(9) "Financial Statements" means the unaudited financial
statements of the Company for each of the years ended December 31, 1995,
December 31, 1994 and December 31, 1993.
(10) "GAAP" means United States generally accepted accounting
principles consistently applied.
(11) "Governmental Authority" means any United States or Canadian
federal, provincial, state, municipal or local court, arbitration tribunal or
governmental department, board, commission, bureau, agency, authority,
utility or instrumentality.
(12) "Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls (PCBs); and (b)
any chemicals, materials or substances which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or waste,
exposure to which is prohibited, limited or regulated by any Governmental
Authority in a jurisdiction in which the Company operates.
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<PAGE>
(13) "Indemnified Purchaser Group" means Purchaser, any subsidiary or
affiliate thereof, and each of their respective successors, officers, directors
and controlling persons.
(14) "Indemnified Seller Group" means Seller, any subsidiary or
affiliate thereof, and each of their respective successors, officers, directors
and controlling persons.
(15) "Intellectual Property" means intangible assets, properties and
rights including, but not limited to, all trademarks, trademark registrations
and trademark applications, trade names, assumed names, service marks, service
names, copyrights, copyright registrations, patents and patent applications,
patent, trademark and copyright licenses, and proprietary information, and
rights thereto, including all rights to sue for past infringements.
(16) "Laws" means all (i) United States or Canadian federal,
provincial, state, municipal or local or foreign laws, rules and regulations,
(ii) orders, (iii) permits, and (iv) agreements with United States or Canadian
federal, provincial, state, municipal, local or foreign regulatory authorities
to which the Company or Seller, as the case may be, is a party.
(17) "Liens" means all liens, liabilities, claims, security interests,
mortgages, pledges, agreements, obligations, restrictions, or other encumbrances
of any nature whatsoever, whether absolute, legal, equitable, accrued,
contingent or otherwise, including, without limitation, any rights of first
refusal.
(18) "Major Customers" means the ten largest customers of the Company
for 1995, specifically, as set forth on SCHEDULE 3.01(y) hereof.
(19) "Permits" means all permits, licenses, franchises, orders,
certificates and approvals.
(20) "Prepaid Assets" means prepaid Taxes, prepaid rent and security
deposits, prepaid insurance, rebates, manufacturers' bonuses and non-tax
refunds, and Tax loss carry backs.
(21) "Purchase Price" means the amount specified in Section 2.02(a)
hereof.
(22) "Release" means any release, spill, emission, leak, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
(23) "Royalty Agreement" means an agreement, containing the material
economic terms described in SCHEDULE 3.01(w), which shall have a term of not
less than three
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<PAGE>
(3) years and shall contain no minimum purchase obligation, providing for the
grant of a license by Seller to the Company of the Intellectual Property
listed as Items 2 through 5 on such SCHEDULE 3.01(w) for a period of not less
than three (3) years following the Closing, and Item 1 on such SCHEDULE
3.01(w) for a transition period following the Closing, to be negotiated and
entered into by Seller and the Company as promptly as practicable after the
Closing, it being understood that the license of the Intellectual Property
listed as Item 2 on such SCHEDULE 3.01(w) will cover all areas outside of the
United States.
(24) "Taxes" means any taxes or other governmental charges or
assessments of whatever kind or nature imposed by any Governmental Authority,
including without limitation, any income, franchise or any other similar
taxes based on or measured by income or otherwise, any sales or use taxes,
goods and services tax, value added taxes, property, employment and employer
withholdings, unemployment insurance premiums, workmen's compensation levies,
social security, occupational, customs, excise or other taxes, together with
any interest or penalties relating thereto.
(25) "Tax Returns" means all returns or reports required to be
filed relating to Taxes.
1.02 OTHER DEFINITIONAL PROVISIONS. Wherever the context so
requires, words used herein in the masculine gender shall be deemed to
include the feminine and neuter. A definition of any term shall be equally
applicable to both the singular and plural forms of the term defined.
1.03 TITLES; HEADINGS. All titles and headings appearing in
this Agreement are for identification only and are not to be used for
interpretive purposes.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.01 PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions herein stated, Seller agrees to sell, assign, transfer and deliver
to Purchaser, and Purchaser agrees to purchase and acquire from Seller, all
of Seller's right, title and interest in and to the Shares.
2.02 PURCHASE PRICE; ROYALTY PAYMENTS TO SELLER.
(a) In full consideration for the purchase by Purchaser of the
Shares, Purchaser agrees to pay to Seller Five Hundred Fifty Thousand Two
Hundred Eighty-Eight Dollars ($550,288), representing a total purchase price
of Six Hundred Five Thousand Dollars ($605,000), reduced by a loan repayment
of Fifty-Four Thousand Seven Hundred Twelve Dollars ($54,712) paid by the
Company to Seller on January 10, 1996.
-4-
<PAGE>
(b) Simultaneously with the execution and delivery of this
Agreement, Purchaser will pay to Seller Two Hundred Thousand Dollars
($200,000), representing a non-refundable royalty payment being made to
Seller in consideration of the license by Seller to the Company of certain
computer software (courseware masters identified on SCHEDULE 3.01(w) hereto),
it being understood that such payment is in addition to royalties payable
pursuant to the Royalty Agreement.
2.03 CLOSING. The Closing shall take place at the offices of
Purchaser's counsel, Reid & Priest LLP, 40 West 57th Street, New York, New
York 10019, simultaneously with the execution hereof.
2.04 EFFECTIVE DATE OF SALE. The Parties agree that, for
financial and tax reporting purposes, the Closing shall be deemed to have
occurred on January 1, 1996.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Purchaser, as of the date of this Agreement, as
follows:
(a) OWNERSHIP OF SHARES. Seller is the lawful and beneficial owner
of the Shares, which constitute all of the issued and outstanding shares of
capital stock of the Company of any class, free and clear of all liens,
encumbrances, restrictions and claims of every kind; Seller has full legal
right, power and authority to enter into this Agreement and to sell, assign,
transfer and convey the Shares pursuant to this Agreement; the delivery to
Purchaser of the Shares pursuant to the provisions of this Agreement will
transfer to Purchaser valid title thereto, free and clear of all liens,
encumbrances, restrictions and claims of every kind.
(b) ORGANIZATION; GOOD STANDING OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority and legal
right to own, operate and lease its properties and assets and to carry on its
business as now being conducted and to enter into this Agreement and perform its
obligations hereunder.
(c) AUTHORITY. Seller has full corporate power, authority and legal
right to execute, deliver, and perform its obligations under this Agreement and
to consummate the transactions contemplated hereunder, and has taken all
necessary corporate action to authorize the sale hereunder on the terms and
conditions of this Agreement and to authorize the execution, delivery and
performance of this Agreement. No action by Seller's stockholders is required
in connection with the execution, delivery and performance by Seller of this
Agreement.
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<PAGE>
(d) DUE EXECUTION AND ENFORCEABILITY. This Agreement is a valid
and binding obligation of Seller enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights and general principles of equity.
(e) NO RESTRICTIONS AGAINST PERFORMANCE. Neither the execution,
delivery, authorization or performance of this Agreement, nor the
consummation of the transactions contemplated hereby will, with or without
the giving of notice or the passage of time, or both, violate any provisions
of, conflict with, result in a breach of, constitute a default under, or
result in the creation or imposition of any Lien or condition under (i)
Seller's Articles of Incorporation or By-Laws or equivalent organizational
documents of the Company; (ii) any United States or Canadian federal,
provincial, state, municipal or local law, statute, ordinance, regulation or
rule, which is applicable to Seller; (iii) except as set forth on SCHEDULE
3.01(e) hereto, any contract, indenture, instrument, agreement, mortgage,
lease, right or other obligation or restriction to which Seller is a party or
by which Seller is bound; or (iv) any order, judgment, writ, injunction,
decree, license, franchise, permit or other authorization of any United
States or Canadian federal, provincial, state, municipal or local court,
arbitration tribunal or governmental agency by which Seller is bound, any of
which, when taken as a whole, would have a material adverse affect on Seller.
(f) THIRD-PARTY AND GOVERNMENTAL CONSENTS OF SELLER. Except as
set forth on SCHEDULE 3.01(f) hereto, no approval, consent, waiver, order or
authorization of, or registration, qualification, declaration, or filings
with, or notice to, any United States or Canadian federal, provincial, state,
municipal or local Governmental Authority or other third party is required on
the part of Seller or the Company in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby.
Seller has obtained, or has caused the Company to obtain, all consents,
approvals, certificates and other documents required in connection with the
performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby. Seller has made, and has caused the
Company to make, all filings, applications, statements and reports to all
Governmental Authorities and other persons which are required to be made by
or on behalf of Seller or the Company pursuant to any applicable law or
contract in connection with this Agreement and the transactions contemplated
hereby.
(g) ORGANIZATION; GOOD STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the Province of Quebec, Canada, with all requisite corporate power
and authority and legal right to own, operate and lease its properties and
assets and to carry on its business as now being conducted. The Company is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the conduct of its business or the
ownership of its property requires such qualification including, without
limiting the generality of the foregoing, the Province of Ontario. The
jurisdictions in which the Company is qualified to do business are set forth
in SCHEDULE 3.01(g).
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<PAGE>
(h) CAPITAL STOCK OF THE COMPANY. The Company has an authorized
capitalization consisting of an unlimited number of common shares, without
par value, of which a total of 10 common shares are issued and outstanding.
All such outstanding shares have been duly authorized and validly issued and
are fully paid and nonassessable. There are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of the capital stock of the Company, other
than as contemplated by this Agreement. The Company does not have any
subsidiaries, nor is the Company a party to any agreement to acquire
securities of any other entity.
(i) EFFECT OF AGREEMENT. Except as set forth on SCHEDULE 3.01(i)
hereto, neither the execution, delivery nor performance of this Agreement,
nor the consummation of the transactions contemplated hereby, will, with or
without the giving of notice or the passage of time, or both, violate any
provisions of, conflict with, result in a breach of, constitute a default
under, or result in the creation or imposition of any Lien or adverse
condition under:
(i) the Company's Articles of Incorporation or By-Laws;
(ii) any United States or Canadian federal, provincial, state,
municipal or local law, statute, ordinance, regulation or rule, which is or
may be applicable to the Company or any of its properties or assets;
(iii) any contract, indenture, instrument, agreement,
mortgage, lease, right or other obligation or restriction to which the
Company is a party or by which the Company or any of its properties or assets
is or may be bound; or
(iv) any order, judgment, writ, injunction, decree, license,
franchise, permit or other authorization of any Governmental Authority by
which the Company or any of its properties or assets is or may be bound;
any of which, when taken as a whole, would have a material adverse effect on
the Company.
(j) HISTORICAL FINANCIAL INFORMATION. The Financial Statements,
copies of which are annexed hereto as SCHEDULE 3.01(j), have been prepared in
accordance with GAAP consistently applied. The Financial Statements present
fairly, in all material respects, the financial position, assets and
liabilities of the Company as of the dates thereof and the revenues,
expenses, results of operations and cash flows of the Company for the periods
covered thereby, all in accordance with GAAP consistently applied. The
Financial Statements are in accordance with the books and records of the
Company, do not reflect any transactions which are not bona fide transactions
and do not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading. The
Financial Statements make full and adequate disclosure of, and provision for,
all material
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obligations and liabilities of the Company as of the dates thereof. The
books and records of the Company have been maintained in accordance with
applicable laws, rules and regulations, and in the ordinary course of
business.
(k) NO UNDISCLOSED LIABILITIES. The Company does not have any
material liability or obligation of any nature, whether absolute, accrued,
contingent, known or unknown, which has not been adequately reserved against
or otherwise adequately provided for in the Financial Statements.
(l) NO ADVERSE EFFECTS OR CHANGES. Except as listed on SCHEDULE
3.01(l), since December 31, 1995, the Company has not:
(i) incurred any obligation or entered into any contract
which either (x) requires a payment by any party in excess of, or a series of
payments which in the aggregate exceed, $25,000 or provides for the delivery
of goods or performance of services, or any combination thereof, having a
value in excess of $25,000, or (y) has a term of, or requires the performance
of any obligations by the Company over a period in excess of, six months;
(ii) taken any action, or entered into or authorized any
contract or transaction other than in the ordinary course of business and
consistent with past practice;
(iii) sold, transferred, conveyed, assigned or otherwise
disposed of any of its assets or properties other than in the ordinary course
of business and consistent with past practice;
(iv) waived, released or canceled any claims against third
parties or debts owing to it, or any rights which have any value;
(v) made any changes in its accounting systems, policies,
principles or practices;
(vi) authorized for issuance, issued, sold, delivered or
agreed or committed to issue, sell or deliver (whether through the issuance
or granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares of
its capital stock or any other securities, or amend any of the terms of any
such securities;
(vii) made any borrowings, incurred any debt (other than
trade payables in the ordinary course of business), or assumed, guaranteed,
endorsed or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other person, except for endorsements
of negotiable instruments in the ordinary course;
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<PAGE>
(viii) made any loans, advances or capital
contributions to, or investments in, any other person;
(ix) entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increased in any manner the compensation or
fringe benefits of any director, officer or employee or paid any benefit not
required by any existing plan and arrangement or entered into any contract,
agreement, commitment or arrangement to do any of the foregoing;
(x) except for capital expenditures contemplated by (xi)
below, acquired, leased or encumbered any assets outside the ordinary course
of business or any assets which are material to the Company;
(xi) authorized or made any capital expenditures which
individually or in the aggregate are in excess of $10,000;
(xii) made any Tax election or settled or compromised any
United States or Canadian federal, provincial, state, municipal, local or
foreign income Tax liability, or waived or extended the statute of
limitations in respect of any such Taxes;
(xiii) paid or agreed to pay any amount in settlement or
compromise of any suits or claims of liability against the Company, its
directors, officers, employees or agents;
(xiv) terminated, modified, amended or otherwise altered
or changed any of the terms or provisions of any material contract to which
the Company is a party or breached the terms of any such contract or paid any
amount not required by law or by any contract;
(xv) issued or agreed to issue any additional shares of its
capital stock;
(xvi) paid any dividends or made any other distribution
on its capital stock; or
(xvii) taken or experienced any action which would have a
material adverse effect on the Training Business or any of the Company's
properties or assets, including, without limitation, the value or condition
thereof.
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<PAGE>
(m) MATERIAL CONTRACTS. SCHEDULE 3.01(m) lists all contracts and
arrangements of the following types to which the Company is a party or by
which it is bound, or to which any of its assets or properties is subject:
(i) any contract or arrangement of any kind with any
employee, officer or director of the Company or any of its affiliates;
(ii) any contract or arrangement with a sales representative,
dealer, broker, marketing, sales agency, advertising agency or other person
engaged in sales, distributing, marketing, servicing or promotional
activities, or any contract to act as one of the foregoing on behalf of any
person;
(iii) any contract or arrangement of any nature which
involves the payment or receipt of cash or other property, an unperformed
commitment, or goods or services, having a value in excess of $25,000;
(iv) any contract or arrangement pursuant to which the Company
has made or will make loans or advances, or has or will have incurred debts
or become a guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business);
(v) any indenture, credit agreement, loan agreement, note,
mortgage, hypothec, security agreement, lease of real property or personal
property or agreement for financing;
(vi) any contract or arrangement involving a partnership,
joint venture or other cooperative undertaking;
(vii) any contract or arrangement involving any
restrictions with respect to the geographical area of operations or scope or
type of business of the Company;
(viii) any power of attorney or agency agreement or
arrangement with any person pursuant to which such person is granted the
authority to act for or on behalf of the Company, or the Company is granted
the authority to act for or on behalf of any person;
(ix) any contract for which the full performance thereof may
extend beyond sixty (60) days from the date of this Agreement;
(x) any real property leases to which the Company is a party,
whether as lessor or lessee, which relate to the business;
(xi) any contract not made in the ordinary course of business
which is to be performed at or after the date of this Agreement; and
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<PAGE>
(xii) any contract not specified above that is
material to the Company.
Except as set forth on SCHEDULE 3.01(m), each such contract is
valid and in full force and effect and constitutes the legal, valid and
binding obligation of the Company and the other parties thereto, enforceable
against the Company and to Seller's knowledge, the other parties thereto in
accordance with their respective terms, and there are no existing violations
or defaults by the Company or, to Seller's knowledge, by any other party
thereto and no event, act or omission has occurred which (with or without
notice, lapse of time or the happening or occurrence of any other event)
would result in a violation or default thereunder in any material respect.
No other party to any such contract has in writing or otherwise asserted the
right, and, to Seller's knowledge, no basis exists for the assertion of any
enforceable right, to renegotiate, or cancel or terminate prior to the full
term thereof, any of the terms or conditions of any such contract, nor does
Seller or the Company have any knowledge that any party to any such contract
intends to not renew any such contract upon termination of its current term.
Except as set forth on SCHEDULE 3.01(m) hereto, no consent of any party to
such contracts is required for the execution, delivery or performance of this
Agreement by Seller or the consummation of the transactions contemplated
hereby. Seller has heretofore caused the Company to deliver to Purchaser
true, correct and complete copies of all of such contracts.
(n) TITLE.
(i) PERSONAL PROPERTY. Except as otherwise identified on
SCHEDULE 3.01(n)(i) hereto, and except for properties and assets which have
been sold or otherwise disposed of in the ordinary course of business, the
Company has good, valid, marketable, legal and beneficial title to all of the
properties and assets reflected in the Financial Statements, free and clear
of all Liens. There are no outstanding options, warrants, commitments,
agreements or any other rights of any character, entitling any person or
entity to acquire any interest in all, or any part of such properties and
assets.
(ii) REAL PROPERTY LEASES. SCHEDULE 3.01(n)(ii) sets forth a
complete and correct list of all real property leases to which the Company is
a party, whether as lessor or lessee. All leases listed on such Schedule are
valid and subsisting and in full force and effect, and all rent and other
payments now due have been paid. The Company enjoys and is in peaceful and
undisturbed possession under each lease so listed in which it is a lessee.
The Company has not received any notice of, and to the best of its knowledge,
there does not exist, any event of default or event, occurrence or act which,
with the giving of notice or the lapse of time or both, would become a
default under any such lease and the Company has not violated any of the
terms or conditions under any such lease in any material respect. To
Seller's knowledge, the real property under the leases referred to in
SCHEDULE 3.01(n)(ii) is free from material physical defects. To Seller's
knowledge, such real property and the buildings, fixtures, equipment, and
other property attached, situated or appurtenant thereto are in good
operating condition and repair, in compliance with all applicable
governmental
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<PAGE>
laws or regulations and adequate and suitable for the purposes for which they
are presently being used, except for such matters which in the aggregate
would not have a material adverse effect on the Training Business.
(o) COMPLIANCE WITH LAW. The Company has complied with and is not
in default under any Laws the violation of which could have a material
adverse effect on the Training Business or the Company's properties or assets.
(p) SOLVENCY AND PAYMENT OF LIABILITIES. Each of Seller and the
Company is not, on the date hereof, either as a result of the transactions
contemplated by this Agreement or otherwise, "insolvent," as such term is
defined in Chapter 11 of Title 11 of the United States Code or any similar
state statute and is not an "insolvent person" as such term is defined in the
Bankruptcy and Insolvency Act (Canada); and that the sum of its debts is not
greater than all of its property on the date hereof either as a result of the
transactions contemplated herein or otherwise; and that it is on the date
hereof, and will be after consummation of the transactions contemplated
hereby, able to pay its debts as they mature.
(q) LITIGATION. There is no judicial or administrative action,
suit or proceeding pending or, to Seller's knowledge, threatened against or
relating to the Company or the officers or directors of the Company in their
capacities as officers or directors, the Training Business, the Company's
properties or assets or the transactions contemplated hereby, including, but
not limited to, actions or proceedings alleging any violation of any
Environmental Law, before any United States or Canadian federal, provincial,
state, municipal or local court, arbitration tribunal or Governmental
Authority, which would, individually or in the aggregate, materially
adversely affect the Company, the Training Business, the Company's properties
or assets or the transactions contemplated hereby, and Seller is not aware of
any facts or circumstances which may give rise to any of the foregoing.
There are no claims, actions, suits, proceedings or investigations pending
or, to Seller's knowledge, threatened by or against the Company with respect
to this Agreement, or in connection with the transactions contemplated
hereby, and Seller has no reason to believe there is a valid basis for any
such claim, action, suit, proceeding or investigation.
(r) PERMITS. SCHEDULE 3.01(r) hereto sets forth a true, correct
and complete list of all Permits of any United States or Canadian federal,
provincial, state, municipal or local regulatory or Governmental Authority
relating to the Training Business or the Company's properties or assets. The
Permits constitute all permits, licenses, franchises, orders, certificates
and approvals which are required for the lawful operation of the Training
Business and the operation of the Company's properties and assets. The
Company is in compliance in all material respects with all such Permits and
the Company owns or has owned or had valid Permits to use all properties,
tangible or intangible, necessary for the conduct of the Training Business
and the operation of the Company's properties and assets in the manner in
which they are presently conducted and operated.
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<PAGE>
(s) TAXES.
(i) All Taxes of the Company due to date to all United States
or Canadian federal, provincial, state, municipal, foreign or local
authorities (collectively, "Taxing Authorities") have been duly paid in full
or are adequately provided for. For Tax periods ending on or prior to
January 1, 1996, Seller has caused the Company to establish a cash reserve
for paying the Taxes for such periods for which Tax Returns are not yet due.
In addition, all Tax Returns to be filed by the Company that are required to
be filed on or prior to the date hereof have been duly and timely filed by
the Company on or prior to the date hereof. As of the time of filing, the
Tax Returns correctly reflected in all material respects the amount of Tax
due and the amount of income, taxes (including GST and QST), interest and
penalties and the facts regarding the business, assets, operations,
activities and status of the Company and any other information required to be
shown therein.
(ii) The Company has paid as and when due and has remitted as
required by law in all material respects all applicable payroll taxes,
obligations or assessments charged on or payable by the Company and it has
withheld at all relevant times for each payment made to any of its employees,
officers and directors the amount of all taxes and other deductions required
to be withheld therefrom and has paid same to the proper Taxing Authority
within the time required under any applicable legislation.
(iii) Except as set forth on SCHEDULE 3.01(s), there are no
agreements, waivers or other arrangements providing for extension of time
with respect to the assessment or collection of any Tax of the Company nor,
to the best knowledge of the Company, are there any actions, suits,
proceedings, investigations or claims now pending against the Company in
respect of any Tax, or any matters under discussion with any Taxing Authority
relating to any amount of any Tax. The Company has been reviewed, determined
and assessed for all Tax Returns for all years to and including the fiscal
year of the Company ended December 31, 1991 and for all relevant periods in
connection with GST and QST. The Tax Returns of the Company relating to its
corporate income have been audited for the period ended December 31, 1991.
Except as set forth on SCHEDULE 3.01(s), the other Tax Returns of the Company
have not been audited and are not in the process of being audited by the
applicable Taxing Authorities, and there is no tax deficiency with respect to
any Tax outstanding, proposed or assessed against the Company.
(iv) There are no outstanding or, to the knowledge of the
Company, asserted liens, security interests, charges, pledges or
hypothecations for Taxes (other than for current Taxes not yet due and
payable) upon any of the assets of the Company.
(v) The Company files (or has filed) provincial and/or
foreign Tax Returns in the provinces and foreign jurisdictions, respectively,
set forth in SCHEDULE 3.01(s). The Company pays (or has paid) state and/or
foreign income or franchise Taxes in the states and foreign jurisdictions,
respectively, set forth in SCHEDULE 3.01(s). Any jurisdiction in which the
Company has not paid Taxes either (A) has no income or Tax, (B) does not
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<PAGE>
impose Tax upon the Company because the Company does not engage in business
or have sufficient activities to create a nexus for taxation by such
jurisdiction, or (C) does not require the Company to pay the income or Tax
imposed by such jurisdiction.
(vi) The Company is not a party to any Tax sharing agreement,
Tax indemnity or any other arrangement.
(vii) There are no requests for rulings in respect of any Tax
pending between the Company and any Taxing Authority.
(viii) Except as set forth on SCHEDULE 3.01(s), no person
other than Seller has owned capital stock of the Company.
(ix) Except as set forth on SCHEDULE 3.01(s), the Company does
not earn income or earnings which for United States federal income tax
purposes would be treated as Subpart F income and does not have assets that
would be considered passive assets within the meaning of Code section
956A(c)(2), or assets which produce passive income within the meaning of Code
section 1296(b)(1).
(x) No Taxes are owed or required to be paid by Seller,
Purchaser or the Company in order for Seller to obtain and deliver the
Canadian Tax Clearance Certificates.
(t) EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS.
(i) Set forth on SCHEDULE 3.01(t) is a complete list of each
employee benefit plan (within the meaning of Section 3(3) of ERISA), written
or oral employment or consulting agreement, severance pay plan or agreement,
employee relations policy (or practice, agreement or arrangement), agreements
with respect to leased or temporary employees, vacation plan or arrangement,
sick pay plan, stock purchase plan, stock option plan, fringe benefit plan,
incentive plan, bonus plan and any deferred compensation agreement, (or plan,
program, or arrangement), including those sponsored by the federal government
of Canada or any province of Canada, covering any present or former employee
of the Company and which is, or at any time was, sponsored or maintained by
(or to which contributions are, were, or at any time were required to have
been, made by) (a) the Company or (b) any other organization which is a
member of a controlled group of organizations (within the meaning of Sections
414(b), (c), (m) or (o) of the Code of which the Company is a member (the
"Controlled Group"), regardless of whether ERISA applies to such employee
benefit plan or arrangement. Each and every such plan, program, policy,
practice, arrangement and agreement included on the list set forth under
SCHEDULE 3.01(t) is hereinafter referred to as an "Employee Benefit Plan".
(ii) With respect to each Employee Benefit Plan, Seller has
delivered to Purchaser, (a) current, accurate and complete copies of each
such Employee
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<PAGE>
Benefit Plan (including all trust agreements, insurance or annuity contracts,
descriptions, general notices to employees or beneficiaries and any other
material documents or instruments relating thereto); (b) the most recent
audited financial statement with respect to each such Employee Benefit Plan;
(c) copies of the most recent determination letters with respect to any such
Employee Benefit Plan which is an employee pension benefit plan (as such term
is defined in Section 3(2) of ERISA) intended to qualify under the Code; and
(d) copies of the most recent actuarial reports (including the most recent
Form 5500 and attached Schedules B).
(iii) With respect to each Employee Benefit Plan: (a)
each such Plan which is an employee pension benefit plan (as such term is
defined in ERISA Section 3(2)) intended to qualify under the Code so
qualifies and has received a favorable determination letter as to its
qualification under the Code; (b) Seller, the Company and each member of the
Controlled Group has complied in all material respects with all provisions of
ERISA to the extent applicable; (c) all insurance and annuity premiums
required for all periods up to and including the date hereof have been paid;
(d) no Employee Benefit Plan provides for any post-retirement life, medical,
dental or other welfare benefits (whether or not insured) for any current or
former employee except as required under Section 4980B of the Code, Part 6 of
Title I of ERISA or applicable Canadian federal, State, provincial or local
law; (e) all salary deferrals, under any plan described under Section 401(k)
of the Code, which may be made on or before the date hereof have been
contributed to the appropriate Plan on or before the date hereof; (f) all
contributions required to have been made by law or under the terms of any
contract, agreement or Employee Benefit Plan for all complete and partial
periods up to and including the date hereof have been made; (g) the
transactions contemplated by this Agreement will not be the direct or
indirect cause of any amount paid or payable from such Employee Benefit Plan
being classified as an excess parachute payment under Section 280G of the
Code; (h) there are no matters pending before the United States Internal
Revenue Service or the United States Department of Labor; (i) there have been
no claims or notice of claims filed under any fiduciary liability insurance
policy covering any Employee Benefit Plan; (j) to the extent applicable, each
such Plan has complied with the "secondary payor" requirements of Section
1862(b)(1) of the Social Security Act; (k) each and every such Employee
Benefit Plan which is a group health plan (as such term is defined under the
Code or ERISA Section 607(1)) complies, and in each and every case has
complied, with the applicable requirements of Code Section 4980B, Part 6 of
Title I of ERISA, and all other applicable United States or Canadian federal,
provincial, state, municipal or local Laws or ordinances requiring the
provision or continuance of health or medical benefits; and (l) neither
Seller, the Company nor any member of the Controlled Group maintains,
sponsors, or contributes to (or has at any time maintained, sponsored or
contributed to, or been obligated to maintain, sponsor or contribute to):
(1) any voluntary employees' beneficiary association (within the meaning of
Section 501(c)(9) of the Code; (2) any welfare benefit fund within the
meaning of Section 419 of the Code; (3) any plan or arrangement which is
subject to (A) the minimum funding requirements of Code Section 412, (B) Part
3 of Title I of ERISA or (C) Title IV of ERISA or (4) any multi-employer plan
with the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
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(iv) With respect to any employee benefit plan (within the
meaning of Section 3(3) of ERISA), stock purchase plan, stock option plan,
fringe benefit plan, bonus plan or any deferred compensation agreement, plan
or program (whether or not any such plan, program or agreement is currently
in effect): (a) there are no actions, suits or claims (other than routine
claims for benefits in the ordinary course) pending or, to the knowledge of
Seller or the Company, threatened, and Seller and the Company have no
knowledge of any facts which could give rise to any such actions, suits or
claims (other than routine claims for benefits in the ordinary course), which
could subject the Company or any member of the Controlled Group to any
liability; (b) none of Seller, the Company, any member of the Controlled
Group or any other person has engaged in a prohibited transaction, as such
term is defined in Code Section 4975 or ERISA Section 406, which would
subject the Company or any member of the Controlled Group to any taxes,
penalties or other liabilities resulting from prohibited transactions under
Code Section 4975 or under ERISA Sections 409 or 502(i); (c) no event has
occurred and no condition exists that could subject the Company or any member
of the Controlled Group to any tax or penalty under Code Sections 511, 4971,
4972, 4976, 4977, 4978, 4978A, 4979, 4979A, 4980B, or 5000, or to a fine
under ERISA Section 502(c); (d) neither the Company nor any member of the
Controlled Group is subject to (1) any liability, lien or other encumbrance
under any agreement imposing secondary liability on the Company or on any
member of the Controlled Group as a seller of the assets of a business in
accordance with Section 4204 of ERISA or under any other provision of Title
IV of ERISA or Section 412 of the Code, (2) contingent liability under Title
IV of ERISA to the PBGC or to any plan, participant, or other person or (3) a
lien or other encumbrance under Section 4068 of ERISA; and (e) the Company is
not subject to any liability pursuant to Section 4069 of ERISA.
(v) (a) Neither the Company nor any member of the Controlled
Group is subject to any legal, contractual, equitable, or other obligation to
(1) establish as of any date any employee benefit plan of any nature,
including, without limitation, any pension, profit sharing, welfare,
post-retirement welfare, stock option, stock or cash award, non-qualified
deferred compensation or executive compensation plan, policy or practice or
(2) continue any employee benefit plan of any nature, including, without
limitation any Employee Benefit Plan or any other pension, profit sharing,
welfare, or post-retirement welfare plan, or any stock option, stock or cash
award, non-qualified deferred compensation or executive compensation plan,
policy or practice (or to continue their participation in any such benefit
plan, policy or practice) on or after the date hereof; and (b) the Company
and each member of the Controlled Group may, in any manner, and without the
consent of any employee, beneficiary or other person, terminate, modify or
amend any such Employee Benefit Plan or any other plan, program or practice
(or its participation in such Employee Benefit Plan or any other plan,
program or practice) effective as of any date on or after the date hereof.
(vi) All contributions (including premiums), deductions, and
remittances required by law or by contract to have been made or approved by
the Company under or with respect to any Employee Benefit Plan have been paid
or accrued by the Company, and
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all deductions and remittances have been made as required by law or by
contract. Without limiting the generality of the foregoing, there are no
material unfunded liabilities under any Employee Benefit Plan.
(vii) Each Employee Benefit Plan that is required to or
intended to be qualified under applicable law or registered or approved by a
governmental agency or authority has been so qualified, registered or
approved by the appropriate governmental agency or authority, and nothing has
occurred since the date of the last qualification, registration or approval
to adversely affect or cause the appropriate governmental agency or authority
to revoke such qualification, registration or approval.
(viii) No condition or event has occurred with respect to any of
the Employee Benefit Plans which has or could reasonably be expected to
result in a material liability to the Company.
(u) ACCOUNTS RECEIVABLE. SCHEDULE 3.01(u) hereto contains a true
and accurate list of all Accounts Receivable of the Company as of December
31, 1995 and a true and accurate aging schedule thereof. All such Accounts
Receivable are bona fide, collectible (subject to reserves reflected on the
Financial Statements) and not subject to set off or counterclaim.
(v) INVENTORY. All inventory of the Company used in the conduct
of the Training Business, including without limitation, raw materials,
work-in process and finished goods, was acquired and has been maintained in
the ordinary course of the Training Business; is of good and merchantable
quality; consists substantially of a quality, quantity and condition usable,
leasable or saleable in the ordinary course of the Training Business; is
valued at reasonable amounts based on the ordinary course of business of the
Company during the past six months; and is not subject to any write-down or
write-off. The Company is not under any liability or obligation with respect
to the return of inventory in the possession of wholesalers, retailers or
other customers.
(w) TRADEMARK RIGHTS; PROPRIETARY INFORMATION. SCHEDULE 3.01(w)
hereto is a true, correct and complete list of all Intellectual Property used
by the Company in the conduct of the Training Business. If any of such
Intellectual Property is registered, or is the subject of an application for
registration, Seller has delivered to Purchaser a true and complete copy of
such registration or application for registration. Except as disclosed on
SCHEDULE 3.01(w) hereto:
(i) all of the Intellectual Property is owned by the Company
free and clear of all Liens, and is not subject to any license, royalty or
other agreement;
(ii) none of the Intellectual Property has been or is the
subject of any pending or, to Seller's knowledge, threatened litigation or
claim of infringement;
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(iii) no license or royalty agreement to which the Company
is a party is in breach or default by any party thereto or the subject of any
notice of termination given or threatened;
(iv) the Company's properties and assets do not infringe any
confidential or proprietary rights of another, and the Company has not
received any notice contesting its right to use any Intellectual Property;
(v) the Company has not granted any license or agreed to pay
or receive any royalty in respect of any Intellectual Property; and
(vi) the Company owns or possesses adequate rights in
perpetuity in and to all Intellectual Property necessary to conduct the
Training Business.
(x) LABOR MATTERS. The Company has conducted, and currently is
conducting, the Training Business in full compliance in all material respects
with all laws relating to employment and employment practices, terms and
conditions of employment, wages and hours, and nondiscrimination in
employment. Except as disclosed on SCHEDULE 3.01(x), the relationships of the
Company with its employees are good and there is, and during the past five
(5) years there has been, no labor strike, dispute, slow-down, work stoppage
or other labor difficulty actually pending or, to Seller's knowledge,
threatened against or involving the Company. None of the employees of the
Company is covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated and, to Seller's
knowledge, no attempt is currently being made or during the past three (3)
years has been made to organize any employees of the Company to form or enter
a labor union or similar organization.
(y) MAJOR CUSTOMERS.
(i) SCHEDULE 3.01(y) sets forth a list of the Major Customers
in terms of revenue during each of the 1994 and 1995 fiscal years, showing
the approximate total revenue received in each such period from each such
Major Customer;
(ii) Except as set forth on SCHEDULE 3.01(y), no customer
represented in excess of 5% of the Company's total revenue during the 1994
and 1995 fiscal years. Except to the extent set forth in SCHEDULE 3.01(y),
since December 31, 1994, there has not been any adverse change in the
business relationship, and there has been no material dispute, between the
Company and any Major Customer, and the Company has no knowledge of any
indications that any Major Customer intends to adversely change in any
material respect its relationship with the Company.
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(z) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.01(z):
(i) The Company is currently in compliance in all material
respects with all appropriate Environmental Laws, has cured any past
violations or alleged violations of Environmental Laws to the satisfaction of
Governmental Authorities, is not currently in receipt of any notice of
violation, is not currently in receipt of any notice of any potential
liability for cleanup of Hazardous Materials and is not now subject to any
investigation or information request by a Governmental Authority concerning
Hazardous Materials or any Environmental Laws. The Company holds and is in
compliance in all material respects with all governmental permits, licenses,
and authorizations necessary to operate those aspects of the business that
relate to siting, wetlands, coastal zone management, air emissions,
discharges to surface or ground water, discharges to any sewer or septic
system, noise emissions, solid waste disposal or the generation, use,
transportation or other management of Hazardous Materials. The Company has
not ever generated, manufactured, refined, recycled, discharged, emitted,
released, buried, processed, produced, reclaimed, stored, treated,
transported, or disposed of any Hazardous Materials except in compliance in
all material respects with all applicable laws and regulations, including
permit requirements;
(ii) No assets of the Company are subject to any lien or claim
for lien in favor of any person as a result of any Hazardous Material or
response thereto;
(iii) To the best knowledge of Seller, all facilities
where any person has treated, stored, disposed of, reclaimed, or recycled any
Hazardous Material on behalf of the Company are in compliance in all material
respects with Environmental Laws.
(aa) BROKER'S FEES. Except as set forth on SCHEDULE 3.01(AA), no
agent, broker or other person acting pursuant to the express or implied
authority of Seller or the Company is or may be entitled to a commission or
finder's fee in connection with the transactions contemplated by this
Agreement, or is or may be entitled to make any claim against Seller, the
Company or Purchaser as a result of any actions by Seller or the Company for
a commission or finder's fee. The Seller agrees to indemnify Purchaser
against any claim for any such commission or finder's fee made by any agent,
broker or other person (including, but not limited to, Canadian Imperial Bank
of Commerce) acting pursuant to the express or implied authority of Seller or
the Company.
(ab) BANK ACCOUNTS; POWERS OF ATTORNEY AND COMPENSATION OF
EMPLOYEES. Set forth in SCHEDULE 3.01(AB) hereto is an accurate and complete
list showing (a) the name and address of each bank or other financial
institution in which the Company has an account or safe deposit box, the
number of any such account or any such box and the names of all persons
authorized to draw thereon or to have access thereto, (b) the names of all
persons, if any, holding powers of attorney from the Company and a summary
statement of the terms thereof and (c) the names of all persons whose
compensation from the Company exceeds an annualized rate of $25,000, together
with a statement of the full amount paid or payable to each such person for
services rendered during the Company's most recent fiscal year.
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(ac) NO MISSTATEMENTS OR OMISSIONS. No representation or warranty
made in this Agreement or on any Schedule hereto by Seller is false or
misleading as to any material fact, or omits to state a material fact
required to make any of the statements made herein or therein not misleading
in any material respect.
(ad) DEFINITION OF MATERIALITY. For purposes of this Section
3.01, a claim or liability shall be deemed to be "material" if it involves an
amount in excess of Seven Thousand Five Hundred Dollars ($7,500.00),
individually or in the aggregate, as the context requires.
(ae) NO INTERCOMPANY LIABILITIES. The Company does not have any
liability of any kind to Seller.
3.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to Seller, as of the date of this Agreement, as
follows:
(a) ORGANIZATION; GOOD STANDING. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Delaware. Purchaser has been formed for the purpose of
acquiring the Shares from Seller and, prior to the consummation of the
transactions contemplated hereby, will not have owned, operated or leased any
properties or assets or carried on any business.
(b) AUTHORITY. Purchaser has full power, authority and legal
right to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereunder, and has taken all
necessary action to authorize the purchase hereunder on the terms and
conditions of this Agreement and to authorize the execution, delivery and
performance of this Agreement.
(c) DUE EXECUTION AND ENFORCEABILITY. This Agreement is a valid
and binding obligation of Purchaser enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights and general principles of equity.
(d) NO RESTRICTIONS AGAINST PERFORMANCE. Neither the execution,
delivery, authorization or performance of this Agreement, nor the
consummation of the transactions contemplated hereby will, with or without
the giving of notice or the passage of time, or both, violate any provisions
of, conflict with, result in a breach of, constitute a default under, or
result in the creation or imposition of any Lien or condition under (i)
Purchaser's Certificate of Formation or Limited Liability Company Agreement;
(ii) any United States or Canadian federal, provincial, state, municipal or
local law, statute, ordinance, regulation or rule, which is applicable to
Purchaser; or (iii) any order, judgment, writ, injunction, decree, license,
franchise, permit or other authorization of any United States or Canadian
federal, provincial, state, municipal or local court, arbitration tribunal or
governmental agency by
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which Purchaser is bound, any of which, when taken as a whole, would have a
material adverse affect on the Purchaser.
(e) THIRD-PARTY AND GOVERNMENTAL CONSENTS. Except as set forth on
SCHEDULE 3.02(e) hereto, no approval, consent, waiver, order or authorization
of, or registration, qualification, declaration, or filings with, or notice
to, any United States or Canadian federal, provincial, state, municipal or
local Governmental Authority or other third party is required on the part of
the Purchaser in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby. Purchaser has obtained
all consents, approvals, certificates and other documents required in
connection with the performance by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby. Purchaser has made all
filings, applications, statements and reports to all Governmental Authorities
and other persons which are required to be made by or on behalf of Purchaser
pursuant to any applicable law or contract in connection with this Agreement
and the transactions contemplated hereby.
(f) BROKER'S FEES. No agent, broker or other person acting
pursuant to the express or implied authority of Purchaser is or may be
entitled to a commission or finder's fee in connection with the transactions
contemplated by this Agreement, or is or may be entitled to make any claim
against Seller or Purchaser as a result of any actions by Purchaser, for a
commission or finder's fee. Purchaser agrees to indemnify Seller against any
claim for any such commission or finder's fee made by any agent, broker or
other person acting pursuant to the express or implied authority of Purchaser.
(g) NO MISSTATEMENTS OR OMISSIONS. No representation or warranty
made in this Agreement or on any Schedule hereto by Purchaser is false or
misleading as to any material fact, or omits to state a material fact
required to make any of the statements made herein or therein not misleading
in any material respect.
ARTICLE 4
COVENANTS
4.01 NON-COMPETITION; NON-INTERFERENCE. In consideration of
the purchase of the Shares by Purchaser, Seller agrees that beginning on the
date of this Agreement and ending three (3) years after the date hereof
Seller will not:
(a) within Canada, directly or indirectly own, manage, operate,
control or participate in the ownership, management, operation or control of,
or be connected in any manner with, any business of the type and character
engaged in and competitive with the Training Business. For these purposes,
ownership of securities of not in excess of 1% of any class of securities of
a public company shall not be considered to be competition with the Company
or any of its subsidiaries or affiliates; or
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(b) persuade or attempt to persuade any potential customer or
client to which the Company or any of its subsidiaries has made a
presentation, or with which the Company or any of its subsidiaries has been
having discussions, not to hire the Company or such subsidiary, or to hire
another company; or
(c) solicit for itself or any of its subsidiaries the business in
Canada of any company which is a customer or client of the Company or any of
its subsidiaries, or was its customer or client within two years prior to the
date of this Agreement;
(d) persuade or attempt to persuade any employee of the Company or
any of its subsidiaries, or any individual who was its employee during the
two years prior to the date of this Agreement, to leave the Company's or such
subsidiary's employ, or to become employed by any person other than the
Company or such subsidiary; or
(e) disclose or use any confidential or secret information
relating to the Company, any of its subsidiaries or any of their clients and
customers.
Notwithstanding anything hereinabove to the contrary, Purchaser
acknowledges and agrees that Seller is currently engaged, and intends to
continue to be engaged, in the business of developing and marketing CBT
programs and nothing herein shall be construed to restrict Seller or any of
its subsidiaries or affiliates in any manner from continuing to engage in
such business within or outside of Canada or from soliciting the CBT business
of any company which is a customer or client of the Company or any of its
subsidiaries, or was its customer or client within two years prior to the
date of this Agreement.
It is the desire and intent of the parties to this Agreement that
the provisions of this Section 4.01 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which enforcement is sought. If any particular provisions or portion of
this Section 4.01 shall be adjudicated to be invalid or unenforceable, this
Section shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such Section in the particular jurisdiction in
which such adjudication is made.
The parties recognize that the performance of the obligations under
this Section 4.01 by Seller is special, unique and extraordinary in
character, and that in the event of the breach by Seller of the terms and
conditions of this Section 4.01 to be performed, Purchaser and the Company
shall be entitled, if they so elect, to institute and prosecute proceedings
in any court of competent jurisdiction, either in law or in equity, to obtain
damages for any breach of this Section 4.01, or to enforce the specific
performance thereof by Seller or to enjoin Seller from performing services
for any such other person, firm or corporation.
4.02 ROYALTY AGREEMENT. Following the Closing, Seller and the
Company will negotiate in good faith the terms of the Royalty Agreement.
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4.03 BOOKS AND RECORDS. From and after the Closing, Purchaser
shall cause the Company to allow Seller and its agents access to such
business records, documents and files of the Company as are reasonably
necessary for Seller's tax, accounting and/or corporate purposes, and Seller
shall have the right to make copies of any and all such records, documents
and files. Purchaser shall cause the Company to retain all such records,
documents and files for a period of at least three years following the date
hereof.
ARTICLE 5
DELIVERIES
The following deliveries shall be made by the respective parties
simultaneously with the execution and delivery of this Agreement:
5.01 SELLER'S DELIVERIES. In addition to any other documents or
agreements required under this Agreement, Seller shall deliver to Purchaser
the following:
(a) The certificates representing the Shares duly endorsed in
blank with signatures guaranteed by a domestic commercial bank or trust
company, with all necessary transfer tax and other revenue stamps, acquired
at Seller's expense, affixed and canceled. Seller agrees to cure any
deficiencies with respect to the endorsement of the certificates representing
the Shares or with respect to the stock power accompanying any such
certificates;
(b) a certificate executed by the secretary or assistant secretary
of Seller, certifying resolutions of the Board of Directors of Seller
approving and authorizing the execution, delivery and performance by Seller
of this Agreement and the transactions contemplated hereby (together with an
incumbency and signature certificate regarding the officer(s) signing this
Agreement on behalf of Seller);
(c) copies of all consents and approvals obtained, and
registrations, qualifications, declarations, filings and notices made by
Seller or the Company pursuant to Section 3.01(f) hereof;
(d) the Articles of Incorporation of the Company and any
amendments thereto certified by the Inspector General of Financial
Institutions, and all By-laws of the Company currently in effect, certified
by the secretary or assistant secretary of the Company;
(e) a Certificate of Good Standing for Seller from the State of
Delaware;
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(f) a Certificate of Good Standing for the Company from the
Province of Quebec under the Companies Act (Quebec) and the Act respecting
the legal publicity of sole proprietorships, partnerships and legal persons
(Quebec);
(g) the resignation of each of the Company's directors;
(h) the favorable opinion of Certilman Balin Adler & Hyman, LLP,
counsel to Seller, in form and substance satisfactory to Purchaser and its
counsel, to the effect that no action by Seller's stockholders is required in
connection with the execution, delivery and performance by Seller of this
Agreement;
(i) a certificate executed by the secretary or an assistant
secretary of the Company, certifying resolutions of Seller, as sole
shareholder of the Company, authorizing the transfer of the Shares to
Purchaser pursuant to this Agreement under the Company's Articles of
Incorporation; and
(j) such other documents and certificates as reasonably may be
required by Purchaser to consummate this Agreement and the transactions
contemplated hereby.
5.02 PURCHASER'S DELIVERIES. In addition to any other documents
or agreements required under this Agreement, Purchaser shall deliver to
Seller the following:
(a) the Purchase Price by wire transfer of immediately available
funds to the account of Seller designated in writing;
(b) a certificate executed by the Managing Member or duly
authorized representative of Purchaser, certifying resolutions of the
Managing Member of Purchaser authorizing and approving the execution,
delivery and performance by Purchaser of this Agreement and the transactions
contemplated hereby and the appointment of one or more authorized
representatives having authority to bind Purchaser, together with an
incumbency and signature certificate regarding the Managing Member or duly
authorized representative signing this Agreement on behalf of Purchaser;
(c) the Certificate of Formation of Purchaser (and all amendments
thereto), certified by the Secretary of State of the State of Delaware and
Limited Liability Company Agreement of Purchaser, certified by the Managing
Member or duly authorized representative of Purchaser;
(d) a Certificate of Good Standing for Purchaser from the State of
Delaware;
(e) such other documents, instruments of assumption, and
certificates of officers as reasonably may be required by Seller to
consummate this Agreement and the transactions contemplated hereby.
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5.03 CANADIAN TAX CLEARANCE CERTIFICATES. Seller will use its
best efforts to obtain and deliver to Purchaser, as promptly as practicable
after the Closing, the Canadian Tax Clearance Certificates or evidence
satisfactory to Purchaser and its counsel (which may include an opinion of
Seller's Canadian counsel in form and substance satisfactory to Purchaser and
its counsel) that such Tax Clearance Certificates are not required in
connection with the transactions contemplated by this Agreement.
ARTICLE 6
INDEMNIFICATION
6.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Regardless of any investigation by any party hereto, the representations,
warranties and covenants contained in this Agreement or any document
delivered hereunder shall survive the Closing. Such representations,
warranties and covenants (other than those which relate to Taxes) shall
remain in full force and effect until one (1) year after the Closing. The
representations, warranties and covenants relating to Taxes and employee
benefit matters contained in Section 3.01(z) shall remain in full force and
effect until the date on which the relevant statute of limitations expires
for the assessment of such Taxes (giving effect to any waiver, mitigation or
extension thereof).
6.02 INDEMNIFICATION BY AND ON BEHALF OF SELLER. Seller agrees
to defend, indemnify and hold the Indemnified Purchaser Group harmless from
and against any and all losses, liabilities, damages, costs or expenses
(including reasonable attorneys' fees, penalties and interest), collectively
hereinafter referred to as "Losses", payable to or for the benefit of, or
asserted by, any party, resulting from, arising out of, or incurred as a
result of:
(a) the breach of any representation made by Seller herein or in
accordance herewith;
(b) the breach of any warranty or covenant made by Seller herein
or in accordance herewith; or
(c) any claim, whether made before or after the date of this
Agreement, or any litigation, proceeding or governmental investigation,
whether commenced before or after the date of this Agreement, arising out of
the Training Business prior to the Closing, or otherwise arising out of any
act or occurrence prior to, or any state or facts existing as of, the Closing
(except to the extent referred to on a Schedule to this Agreement or
otherwise disclosed or known to Purchaser as of the Closing).
6.03 INDEMNIFICATION BY PURCHASER. Purchaser agrees to defend,
indemnify and hold the Indemnified Seller Group harmless from and against any
and all Losses payable to or for the benefit of, or asserted by, any party,
resulting from, arising out of, or incurred
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as a result of (a) the breach of any representation made by Purchaser herein
or in accordance herewith; (b) the breach of any warranty or covenant made by
Purchaser herein or in accordance herewith; (c) any claim, litigation,
proceeding or governmental investigation arising out of any act, occurrence
or any state of facts existing after the Closing; (d) arising out of the
guarantee by Seller of obligations of the Company under the Loan Agreement
between the Company and Hong Kong Bank of Canada; or (e) Taxes payable to any
Canadian Taxing Authorities with respect to the $200,000 payment being made
pursuant to Section 2.02(b) hereof.
6.04 LIMITATIONS ON INDEMNIFICATION. Neither Seller nor
Purchaser shall be entitled to make any claim for indemnification under this
Article 6, with respect to (i) the breach of any representation, warranty or
covenant contained herein (other than those representations, warranties or
covenants which by their terms survive for a longer period) after the date
one (1) year after the Closing, or (ii) the breach of any other
representation, warranty or covenant contained herein which, by its terms,
survives for a longer period, after the expiration of such survival period,
unless, with respect to any such representation, warranty or covenant
(regardless of the date on which such representation, warranty or covenant
ceases to survive), prior to the date on which such representation, warranty
or covenant ceases to survive, Seller or Purchaser, as the case may be, shall
assert such claim for indemnification, and shall specify, in reasonable
detail to the extent known, the specific facts constituting the basis for
such claim for indemnification.
No indemnity shall be payable by the Seller with respect to any
claim under Section 6.02, or by Purchaser with respect to any claim under
Section 6.03, unless and until the aggregate of all Losses due from Seller or
Purchaser, as the case may be, exceeds $25,000 and then the indemnifying
party shall be liable for only the excess thereof, except that claims arising
under Section 6.03(d) or (e) or in respect of any breach of the
representation contained in Section 3.01(s)(x) shall be fully indemnifiable.
In addition, the total indemnification to which Purchaser shall be entitled
under this Agreement shall be limited to an amount, in the aggregate, not to
exceed Eight Hundred Five Thousand Dollars ($805,000).
6.05 NOTICE OF CLAIMS. Purchaser and Seller agree to give
prompt written notice to each other of any claim by any party which might
give rise to a claim by it or them against the other parties hereto based
upon the indemnity provisions contained herein, stating the nature and basis
of the claim and the actual or estimated amount thereof; PROVIDED, HOWEVER,
that failure to give such notice will not affect the obligation of the
indemnifying party to provide indemnification in accordance with the
provisions of this Article 6 unless, and only to the extent that, such
indemnifying party is actually prejudiced thereby. In the event that any
action, suit or proceeding is brought against any member of the Indemnified
Seller Group or the Indemnified Purchaser Group with respect to which any
party hereto may have liability under the indemnification provisions
contained herein, the indemnifying party shall have the right, at its sole
cost and expense, to defend such action in the name or on behalf of the
indemnified party and, in connection with any such action, suit or
proceeding,
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the parties hereto agree to render to each other such assistance as may
reasonably be required in order to ensure the proper and adequate defense of
any such action, suit or proceeding; PROVIDED, HOWEVER, that an indemnified
party shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate because of actual or potential differing interests between such
indemnified party and any other party represented by such counsel. Neither
party hereto shall make any settlement of any claim which might give rise to
liability of the other party under the indemnification provisions contained
herein without the written consent of such other party, which consent such
other party covenants shall not be unreasonably withheld.
ARTICLE 7
GENERAL PROVISIONS
7.01 EXPENSES. Except as otherwise expressly provided herein,
each party to this Agreement shall pay its own expenses (including, without
limitation, the fees and expenses of its or his agents, representatives,
counsel, and accountants) incidental to the negotiation, drafting, and
performance of this Agreement. Seller shall not charge any of its expenses
to the Company.
7.02 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of Seller, Purchaser and their respective,
successors, representatives and assigns.
7.03 WAIVER. No provision of this Agreement shall be deemed
waived by course of conduct, including the act of closing, unless such waiver
is made in a writing signed by all parties hereto stating that it is intended
specifically to modify this Agreement, nor shall any course of conduct
operate or be construed as a waiver of any subsequent breach of this
Agreement, whether of a similar or dissimilar nature.
7.04 ENTIRE AGREEMENT. This Agreement (together with the
Schedules and Exhibits hereto) supersedes any other agreement, whether
written or oral, that may have been made or entered into by Purchaser and
Seller (or by any director, officer, agent, or other representative of such
parties) relating to the matters contemplated hereby. This Agreement
(together with the Schedules and Exhibits hereto) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements or commitments except as expressly set forth herein.
7.05 FURTHER ASSURANCES. Each of the parties hereto agrees to
execute all further documents and instruments and to take or to cause to be
taken all reasonable actions which are necessary or appropriate to complete
the transactions contemplated by this Agreement.
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<PAGE>
7.06 NOTICES. All notices, demands, requests, claims and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and shall be effective upon receipt if delivered by hand, or sent
by certified or registered United States mail, postage prepaid and return
receipt requested, or by prepaid overnight express service. Notices shall be
sent to the parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice; provided that such notice
shall be effective only upon receipt thereof):
(a) If to Seller:
PC Etcetera, Inc.
462 Seventh Avenue
New York, New York 10018
Attn: Terry I. Steinberg,
President
(212) 736-5870
(212) 736-0039 (Fax)
with a copy (which shall not constitute notice) to:
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
Attn: Fred S. Skolnik, Esq.
(516) 296-7000
(516) 296-7111 (Fax)
(b) If to Purchaser:
Training Holdings L.L.C.
c/o Airlie Group, L.P.
115 East Putnam Avenue
Greenwich, Connecticut 06830
Attn: Dort A. Cameron III
(203) 661-6200
(203) 661-0479 (Fax)
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with a copy (which shall not constitute notice) to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attn: Richard S. Green, Esq.
(212) 603-2000
(212) 603-2001 (Fax)
7.07 AMENDMENTS, SUPPLEMENTS, ETC. This Agreement may be
amended or modified only by a written instrument executed by all parties
hereto which states specifically that it is intended to amend or modify this
Agreement.
7.08 SEVERABILITY. In the event that any provision contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall 2not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions had never
been contained herein and, in lieu of each such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible but still be legal, valid and
enforceable.
7.09 SALES TAXES AND TRANSFER TAXES. Seller will be liable for
and will pay all Taxes, if any, other than sales taxes, which will be paid by
Purchaser, resulting from the transactions contemplated by this Agreement.
7.10 DISCLOSURE SCHEDULES. Notwithstanding any provision of
Section 3.01 to the contrary, Seller shall not be deemed to have breached any
representation or warranty contained herein based upon the omission of any
item required to be set forth on a particular Schedule ("Subject Schedule")
to this Agreement if such item has been disclosed on any other Schedule
hereto and sufficient information has been provided in connection with such
disclosure (taking into account the context in which the disclosure was made)
to reasonably inform the recipient that such disclosure may also apply to the
Subject Schedule.
7.11 ARBITRATION.
(a) All disputes between the parties hereto concerning the
performance, breach, construction or interpretation of this Agreement or any
portion thereof, or in any manner arising out of this Agreement or the
performance thereof, shall be submitted to binding arbitration, in accordance
with the rules of the American Arbitration Association, which arbitration
shall be carried out in the manner hereinafter set forth.
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(b) Within twenty (20) days after written notice by one party to
the other of its demand for arbitration, which demand shall set forth the
name and address of its arbiter, the other party shall select its arbitrator
and so notify the demanding party. Within twenty (20) days thereafter, the
two arbitrators so selected shall select the third arbitrator. The dispute
shall be heard by the arbitrators within sixty (60) days after selection of
the third arbitrator. The decision of the arbitrators shall be rendered
within thirty (30) days after the hearing. The decision of any two (2)
arbitrators shall be binding upon the parties. In default of either side
naming its arbitrator as aforesaid or in default of the selection of the said
third arbitrator as aforesaid, the American Arbitration Association shall
designate such arbitrator upon the application of either party. The
arbitration proceeding shall take place in New York, New York.
(c) A party who files a notice of demand for arbitration must
assert in the demand all claims then known to that party on which arbitration
is permitted to be demanded. When a party fails to include a claim through
excusable neglect, or when a claim has matured or been acquired subsequently,
the arbitrators may permit amendment.
(d) The award rendered by the arbitrators shall be final, binding
and conclusive, and judgment may be entered upon it in accordance with
applicable law in the appropriate court in the State of New York, with no
right of appeal therefrom.
(e) Each party shall pay its own expenses of arbitration, and the
expenses of the arbitrators and the arbitration proceeding shall be equally
shared; provided, however, that, if, in the opinion of a majority of the
arbiters, any claim or defense was unreasonable, the arbiters may assess, as
part of their award, all or any part of the arbitration expenses of the other
party (including reasonable attorneys' fees) and of the arbiters and the
arbitration proceeding against the party raising such unreasonable claim or
defense.
7.12 GOVERNING LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance
with the substantive laws of the State of New York, without giving effect to
the principles of conflicts of law thereof.
7.13 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TRAINING HOLDINGS L.L.C.
By:
--------------------------------
Philip F. Strassler
Authorized Representative
PC ETCETERA, INC.
By:
--------------------------------
Terry I. Steinberg
President
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