SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 23, 1997
BERLITZ INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
New York 1-10390 35-3550016
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(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
400 Alexander Park
Princeton, New Jersey 08540-6306
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 514-9650
Not Applicable
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(Former name or former address, if changed since last report)
Page 1 of 3 Pages
Exhibit Index on Page 4
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ITEM 5. OTHER EVENTS.
On July 23, 1997, Berlitz International, Inc. (the "Company") announced
that it had reached an agreement to acquire ELS Educational Services, Inc.
("ELS"), a privately held provider of intensive English instruction in a stock
acquisition for a cash purchase price of $95.0 million. The Stock Purchase
Agreement in respect of the acquisition was signed as of July 23, 1997. The
closing of the acquisition, which is subject to certain conditions, including
regulatory approvals, is expected to occur in early September. Financing for the
transaction will be provided by NationsBank, National Association.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
1. Stock Purchase Agreement, dated as of July 23, 1997, between
ELS, its shareholders and the Company.
2. Press Release of the Company, dated July 23, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BERLITZ INTERNATIONAL, INC.
Dated: July 30, 1997 By: /s/ Henry D. James
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Henry D. James
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
BERLITZ INTERNATIONAL, INC.
Current Report on Form 8-K
Exhibit No. Description Page No.
- ----------- ----------- --------
1. Stock Purchase Agreement, dated as of July 23, 1997,
between ELS, its shareholders and the Company.
2. Press Release of the Company, dated July 23, 1997.
STOCK PURCHASE AGREEMENT
Between
ELS EDUCATIONAL SERVICES, INC.
(a Delaware corporation)
ROGER O. WALTHER S.P. TRUST
WENDY WALTHER
CHRISTINE WALTHER TRIPP
EDWARD WALTHER
ANNE DUNNING
JOHN DUNNING
and
BERLITZ INTERNATIONAL, INC.
(a New York corporation)
Dated: July 23, 1997
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TABLE OF CONTENTS
1. PLAN OF ACQUISITION.......................................................1
1.1 Sale and Purchase of Shares............................................1
1.2 Purchase Price and Payment.............................................1
1.3 Closing................................................................3
1.4 Execution and Delivery of Purchase Price and Closing Documents.........3
1.5 Excluded Assets and Liabilities........................................4
1.6 Section 338(h)(10) Elections...........................................4
2. REPRESENTATIONS AND WARRANTIES OF ELS AND SELLERS.........................4
2.1 Due Incorporation, Qualification and Corporate Power...................5
2.2 Outstanding Capital Stock; Title.......................................5
2.3 Subsidiaries and Other Affiliates......................................6
2.4 Consents...............................................................6
2.5 No Breach..............................................................6
2.6 Financial Statements of ELS............................................6
2.7 Absence of Certain Changes.............................................7
2.8 Absence of Liabilities.................................................8
2.9 Tax Matters............................................................8
2.10 Litigation............................................................9
2.11 Compliance With Laws..................................................9
2.12 Title to and Condition of Assets.....................................10
2.13 Labor Matters........................................................10
2.14 Intellectual Property................................................11
2.15 Employee Benefits Plan...............................................11
2.16 Employees and Employment Contracts...................................11
2.17 Contracts............................................................12
2.18 Insurance............................................................12
2.19 Environmental Compliance.............................................12
2.20 Related Transactions.................................................13
2.21 Brokers and Finders..................................................13
2.22 Disclosure...........................................................13
2.23 Best Knowledge.......................................................13
2.24 Survival.............................................................13
2.25 Working Capital......................................................14
3. REPRESENTATIONS AND WARRANTIES OF BUYER..................................14
3.1 Due Incorporation.....................................................14
3.2 Power and Authority...................................................14
3.3 Consents..............................................................14
3.4 No Breach.............................................................15
3.5 Brokers and Finders...................................................15
3.6 Financing.............................................................15
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3.7 Sophistication of Buyer...............................................15
3.8 Investment Intent.....................................................15
3.9 Survival..............................................................15
4. COVENANTS OF ELS AND SELLERS.............................................16
4.1 Operation of Business of ELS..........................................16
4.2 Access to Records.....................................................16
4.3 Consents..............................................................16
4.4 Notification..........................................................16
4.5 Other Transactions....................................................16
4.6 Hart-Scott Rodino Act.................................................17
4.7 Non-Competition.......................................................17
4.8 Payment of Certain Tax Liabilities....................................17
4.9 Cooperation...........................................................17
5. BUYER'S COVENANTS........................................................17
5.1 Confidentiality.......................................................17
5.2 Hart-Scott-Rodino Act.................................................17
5.3 Notification of Certain Matters.......................................18
5.4 Company Records.......................................................18
6. CONDITIONS TO BUYER'S OBLIGATIONS........................................18
6.1 Representations and Covenants.........................................18
6.2 Opinion of Counsel....................................................18
6.3 Consents and Approvals................................................18
6.4 No Government Proceeding or Litigation................................18
6.5 No Injunction.........................................................19
6.6 Assignment and Assumption.............................................19
6.7 Resignation of Directors and Officers.................................19
6.8 Optionholders Release.................................................19
6.9 Transfer Documents....................................................19
6.10 Financing............................................................19
6.11 Intentionally Deleted................................................19
6.12 Non-Competition Agreement............................................19
6.13 Due Diligence........................................................19
7. CONDITIONS TO SELLERS' OBLIGATIONS.......................................19
7.1 Representations and Covenants.........................................19
7.2 Consents and Authorizations...........................................20
7.3 No Governmental Proceeding or Litigation..............................20
7.4 No Injunction.........................................................20
7.5 Opinion of Counsel....................................................20
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8. INDEMNIFICATION AND CERTAIN REMEDIES.....................................20
8.1 Obligation of Sellers to Indemnify for Non-Tax and Title Liabilities..20
8.2 Obligation of Sellers to Indemnify for Tax Liabilities................20
8.3 Liability Cap.........................................................21
8.4 Obligation of Buyer to Indemnify......................................21
8.5 Claims................................................................21
9. TERMINATION AND ABANDONMENT..............................................22
9.1 Methods of Termination................................................22
9.2 Procedure Upon Termination............................................23
9.3 LIQUIDATED DAMAGES....................................................23
10. MISCELLANEOUS...........................................................23
10.1 Counterparts.........................................................23
10.2 Notices..............................................................23
10.3 Successors and Assigns...............................................24
10.4 Governing Law........................................................24
10.5 Waiver and Other Action..............................................24
10.6 Publicity............................................................24
10.7 Entire Agreement.....................................................25
10.8 Severability.........................................................25
10.9 Interpretation.......................................................25
10.10 Third Party Beneficiaries...........................................25
10.11 Roger O. Walther to Act as Agent for Sellers........................25
10.12 Resolution of Disputes..............................................25
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of July 23,
1997 (the "Effective Date"), among Roger O. Walther S.P. Trust, Wendy Walther,
Christine Walther Tripp, Edward Walther, Anne Dunning, and John Dunning
(collectively "Sellers"), ELS Educational Services, Inc., a Delaware corporation
("ELS" or the "Company"), and Berlitz International, Inc., a New York
corporation ("Buyer").
WHEREAS, Sellers are the owners of all of the issued and outstanding
shares of capital stock consisting of 827,710 shares of common stock of the
Company (collectively, the "Shares"); and
WHEREAS, Sellers wish to sell, and Buyer wishes to purchase, all the
Shares on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises,
representations, warranties and covenants contained herein, the parties hereto
agree as follows:
1. PLAN OF ACQUISITION.
1.1 SALE AND PURCHASE OF SHARES. Subject to and upon the terms and
conditions contained herein, at the closing provided for in Section 1.3 (the
"Closing"), Sellers will sell and deliver to Buyer, and Buyer will purchase from
Sellers, all of the Shares.
1.2 PURCHASE PRICE AND PAYMENT.
(A) PURCHASE PRICE. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing, Buyer will purchase the Shares from
Sellers for Ninety-Five Million Dollars ($95,000,000) (the "Purchase Price"), of
which Eighty-Five Million Dollars shall be paid in immediately available funds
and the remainder of the Purchase Price of Ten Million Dollars ($10,000,000)
(the "Escrowed Amount") shall be delivered by Buyer to First Trust of California
(the "Escrow Agent") by wire transfer of immediately available funds to be held
in an escrow account (the "Escrow Account") in accordance with the terms of an
escrow agreement in substantially the form of Exhibit 1.2(a) among the Buyer,
the Escrow Agent and each of the Sellers (the "Escrow Agreement"). As specified
by Sellers, not less than three business days prior to the Closing Date, at the
Closing a portion of the Purchase Price (excluding for this purpose the Escrowed
Amount) shall be paid directly to Sellers and the remainder shall be paid by
Buyer by assuming and discharging at Closing the Company's liabilities to
certain of its employees and former employees (the "Optionholders") in exchange
for the cancellation of promissory notes held by such Optionholders (the
"Notes"). The Notes shall be issued by the Company immediately prior to Closing
as payment in full of the Company's obligations to such Optionholders under
certain Non-Qualified Stock Option and Stock Appreciation Rights Agreements
(collectively "NQSOs") between the Company and the Optionholders including those
listed in Disclosure Schedule 2.2(c) and the NQSO referenced as document (n) in
Section 3 of Disclosure Schedule 2.16.
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(B) ADJUSTMENTS.
(1) There shall be a post-Closing adjustment on the
following basis:
a. In the event that during the period January 1, 1997
through and including the Closing Date (the "Stub Period"), cash distributed to
Sellers is either less than or greater than "Pre-Tax Earnings" (as that term is
defined in Subsection 1.2(b)(1)(c) below) generated by the Company during that
period, there shall be a post-closing adjustment to the Purchase Price pursuant
to Section 1.2(b)(2).
b. In the event that during the Stub Period, capital
expenditures of the Company exceeded $850,000, there shall be a post-closing
reduction to the Purchase Price in the amount of such excess pursuant to Section
1.2(b)(2).
c. For purposes of this Section 1.2, "Pre-Tax Earnings"
shall mean pre-tax earnings of the Company for the Stub Period as computed in
accordance with generally accepted accounting principles and consistent with
past practice (excluding for this purpose (i) any compensation expense related
to the NQSOs which such expense shall be borne by the Sellers directly and (ii)
the effect on earnings, if any, arising from the assignment to and assumption by
the Sellers of the Excluded Assets and Liabilities (as that term is defined in
Section 1.5 below)) and as computed in accordance with Section 1.2(b)(2).
d. Sellers shall provide Buyer with a copy of ELS'
proposed state and Federal income tax returns for the Stub Period at least 30
days prior to filing them, and shall modify such tax returns to the extent that
Buyer reasonably requests in order to more accurately reflect the transactions
contemplated hereby.
(2) Promptly following the Closing, Sellers shall cause KPMG
Peat Marwick, the Company's independent public accountants ("KPMG"), at Sellers'
expense, to commence auditing an operating statement for the Stub Period in
connection with filing the Company's tax return for the Stub Period and in
connection therewith to audit a report detailing Pre-Tax Earnings, distributions
to Seller and capital expenditures for the Stub Period (the "Adjustment
Calculation"). Prior to KPMG issuing the Adjustment Calculation, Sellers shall
provide a copy of such Adjustment Calculation to Buyer. Buyer shall have thirty
(30) days to review the Adjustment Calculation and, if Buyer so requests, the
working papers of KPMG relating thereto and to consult with KPMG regarding the
same. After the conclusion of the 30- day period, unless either (i) the period
is extended by mutual consent of the parties or (ii) Buyer gives notice to
Sellers that it disputes the Adjustment Calculation, Sellers shall issue the
Adjustment Calculation to Buyer and Buyer's accountant, together with supporting
documentation. In the event that Buyer gives notice to Sellers that it disputes
the Adjustment Calculation, then Buyer and Sellers shall jointly retain, at
their equally shared expense, one of the following independent public accounting
firms - Arthur Andersen, Ernst & Young, or Coopers & Lybrand - or another
accounting firm mutually satisfactory to Buyer and Sellers to review the
Adjustment Calculation and the working papers of KPMG relating thereto and,
within thirty (30) days, of such retention, recalculate the Adjustment
Calculation, and the determination of such firm shall be final and binding upon
the parties, and Sellers shall issue the Adjustment Calculation as so
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determined, to Buyer. Not later than ten (10) business days after issuance of
the Adjustment Calculation to Buyer, if either party owes funds to the other as
determined in the Adjustment Calculation, such party shall remit payment in full
to the other party or its designee in immediately available funds. In the event
of any failure to pay such amount, the amount due shall bear interest at the
reference rate announced from time to time by Bank of America, NT&SA (San
Francisco Main Branch) plus 200 basis points from the date due until paid.
(3) The Purchase Price shall be decreased by fifty percent
(50%) of all filing fees paid by Buyer in connection with this Agreement
pursuant to the Hart-Scott-Rodino Act.
1.3 CLOSING. Upon the terms and subject to the conditions contained in
this Agreement, the Closing shall take place at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, NY or such
other place as the parties may mutually agree no later than 10:00 a.m. on
September 30, 1997 or such other time as Sellers and Buyer shall mutually agree
in writing (the "Closing Date").
1.4 EXECUTION AND DELIVERY OF PURCHASE PRICE AND CLOSING DOCUMENTS. At
the Closing:
(A) Buyer shall deliver the Purchase Price less the Escrowed Amount
by wire transfer to Sellers' account and to the accounts of the Optionholders,
pursuant to written instructions given to Buyer by Sellers three business days
prior to Closing;
(B) Sellers shall deliver certificates representing all of the
Shares, duly endorsed or accompanied by stock powers executed and in form
sufficient to vest title fully in Buyer to all of such Shares;
(C) Each Seller shall deliver the written consent of his or her
spouse, if any, to this Agreement and the transactions contemplated hereby;
(D) Sellers shall deliver the stock books, stock ledgers, minute
books, corporate seals, tax documents and all other documents, instruments,
opinions, writings and other materials required to be delivered by Sellers
pursuant to this Agreement;
(E) ELS shall deliver an opinion of Sellers' counsel, Farella Braun
& Martel LLP in substantially the form attached as Exhibit 6.2 hereto;
(F) ELS shall deliver a Release of the Optionholders in
substantially the form attached as Exhibit 6.8 hereto (the "Release");
(G) Sellers shall have delivered Non-Competition Agreements from
each Seller in substantially the form attached as Exhibit 4.7 hereto (the
"Non-Competition Agreement");
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(H) Sellers, Buyer and the Escrow Agent shall have executed the
Escrow Agreement;
(I) All actions taken at the Closing shall be deemed to have been
taken simultaneously at the time the last of any such actions is taken or
completed.
1.5 EXCLUDED ASSETS AND LIABILITIES. The assets and liabilities set forth
in Exhibit 1.5 hereto (the "Excluded Assets and Liabilities") shall be
distributed to or assumed by Sellers or Sellers' designee immediately prior to
Closing and Sellers shall indemnify Buyer from any "Losses" (as that term is
defined in Section 8.1 below) arising from such assumed liabilities. Any
liability of Sellers to Buyer pursuant to the indemnification obligation in this
Section 1.5 shall not apply against, or be subject to, the maximum aggregate
liability of Sellers for indemnification pursuant to Section 8.3 of this
Agreement or the "Threshold Amount" (as that term is defined in Section 8.3).
1.6 SECTION 338(H)(10) ELECTIONS. At Buyer's election, which shall be
determined within 15 days following the Closing, Sellers shall each take any
action required to be taken by Sellers to effect an election under Section
338(h)(10) of the Internal Revenue Code (the "Code") and the regulations
thereunder and under comparable provisions of any state, local or foreign law
(separately and collectively, the "Section 338(h)(10) Elections") and to
effectuate the purchase price allocation described herein; provided, however,
Sellers shall not be required to make the Section 338(h)(10) Election with
respect to the State of California. Buyer agrees that it shall file all tax
returns for the State of Texas and the District of Columbia on the basis that no
effective election under Section 338 of the Code has been made with respect to
the acquisition of ELS by Buyer. Sellers shall assume liability for and shall
pay when due any tax imposed on Sellers individually as a result of the Section
338(h)(10) Elections under federal, state, local or foreign law and for any
federal, state, local or foreign income or franchise tax liability (other than
income or franchise tax imposed by the State of California) imposed on ELS as a
result of elections by Buyer or Seller under Section 338 of the Code or
comparable provisions of state, local or foreign law.
The allocation of the Purchase Price among the assets of the Company shall
be made in accordance with Sections 338 and 1060 of the Code. Sellers, unless it
would be unreasonable to do so, shall accept Buyer's determination of such
Purchase Price allocation and shall file tax returns consistent with such
determination of Buyer.
2. REPRESENTATIONS AND WARRANTIES OF ELS AND SELLERS.
ELS and Sellers, jointly and severally, represent and warrant to Buyer as
follows, which statements are true, correct, and complete as of the date of this
Agreement.
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2.1 DUE INCORPORATION, QUALIFICATION AND CORPORATE POWER. Except as set
forth Disclosure Schedule Section 2.1 in the schedule attached in the Disclosure
Schedule delivered to Buyer by Sellers on the Effective Date (the "Disclosure
Schedule"),
(A) INCORPORATION/QUALIFICATION. ELS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. ELS is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified or in good
standing could have a material adverse effect on the business, assets,
liabilities, results of operations, prospects or financial condition of ELS (a
"Material Adverse Effect").
(B) AUTHORITY. ELS has the full corporate power and authority, and
all authorizations and permits required by governmental or other authorities, to
own and operate its properties and assets and to carry on its business as now
and heretofore being conducted and to execute, deliver and perform this
Agreement. Each Seller has the legal capacity and authority to execute, deliver
and perform this Agreement. This Agreement has been (or upon execution will be)
duly authorized, executed and delivered by ELS and Sellers and no other
corporate proceedings on the part of ELS (or other action by Sellers) are
necessary to authorize this Agreement or to consummate and perform the
transactions contemplated by this Agreement. This Agreement is a legal, valid
and binding obligation of each of ELS and Sellers, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
reorganization, insolvency or similar laws and subject to general principles of
equity governing specific performance, injunctive relief or other equitable
remedies.
(C) ARTICLES OF INCORPORATION AND BYLAWS; MINUTE BOOKS. ELS has (or
will cause to be) delivered to Buyer true and complete copies of the Articles of
Incorporation and Bylaws of the Company as in effect on the date hereof. The
minute books of ELS, copies of which have been delivered to Buyer, contain
accurate minutes of all meetings and accurate consents in lieu of meetings of
the Board of Directors and of the shareholders of ELS since January 1, 1993. The
Company is not in default under or in violation of any provision of its Articles
of Incorporation or Bylaws.
2.2 OUTSTANDING CAPITAL STOCK; TITLE. Except as set forth in Disclosure
Schedule Section 2.2;
(A) CAPITALIZATION. The authorized capital stock of ELS consists of
1,000,000 shares of Common Stock of which 827,710 Shares of Common Stock are
issued and outstanding, consisting of 763,154 Shares of Class A voting Shares
and 64,556 Shares of Class B non-voting Shares. The Shares have been duly
authorized and validly issued and are fully paid, nonassessable and free and
clear of all liens, claims, pledges and encumbrances, and the Shares constitute
100% of the outstanding capital stock of ELS. All such shares have been issued
in compliance with applicable state and federal securities laws and regulations.
(B) OWNERSHIP. Each Seller is the lawful record and beneficial owner
of the number of Shares listed next to his or her name on Disclosure Schedule
Section 2.2(b) which sets forth the allocation of Shares among the Sellers.
Collectively, the Sellers are the lawful record
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and beneficial owners of all the Shares. There are no voting trusts, voting
agreements, proxies or other agreements or instruments or understandings with
respect to the voting of the Shares. Except as set forth in Disclosure Schedule
2.2(b), each Seller has and, on the Closing Date, will transfer to Buyer, good,
valid and marketable title to the Shares, free and clear of any and all liens,
pledges, encumbrances and restrictions. Notwithstanding anything to the contrary
in this Agreement, Sellers representations hereunder are several and not joint.
(C) OPTIONS OR OTHER RIGHTS. Except as set forth in Disclosure Schedule
Section 2.2(c), there are no outstanding or authorized Shares, options,
warrants, or purchase, subscription, call, conversion, exchange or other
contracts or instruments convertible into Shares or rights presently outstanding
to purchase or otherwise acquire any authorized but unissued shares of capital
stock or other securities of the Company, nor any agreements or understanding
with respect thereto ("Securities") obligating ELS or Sellers to sell, exchange
or otherwise deliver, or to purchase, redeem or otherwise receive or acquire
Securities of ELS. No dividends have been declared and remain unpaid by ELS.
2.3 SUBSIDIARIES AND OTHER AFFILIATES. ELS does not own, directly or
indirectly, any capital stock of, or other investment or interest in, any
corporation, partnership, limited liability company, joint venture or other
entity.
2.4 CONSENTS. Except as set forth in Disclosure Schedule Section 2.4,
there are no authorizations, consents, orders, permits, licenses or approvals
of, or declarations, registrations or filings with, any governmental or
regulatory authority or any other person required by Sellers or ELS in
connection with the valid execution, delivery or performance by ELS or Sellers
of this Agreement or the consummation by ELS and Sellers of the transactions
contemplated hereby.
2.5 NO BREACH. Except as set forth in Disclosure Schedule Section 2.5, the
execution, delivery and performance of this Agreement by ELS and Sellers and the
consummation of the transactions contemplated hereby or thereby will not
violate, breach, conflict with, constitute, with or without the passage of time
or the giving of notice, a default under or result in the imposition of any
lien, claim or encumbrance upon the Shares or any property or asset of ELS or
require any consent pursuant to: (i) any provision of the Articles of
Incorporation or Bylaws of ELS; (ii) any law, statute, rule or regulation or
order, writ, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body to which either Sellers, ELS or any of their
respective properties are subject, or (iii) any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness, loan, lease, lien, instrument or other
agreement to which ELS or Sellers is a party, by which ELS or Sellers is bound,
or to which any of the assets or properties are subject.
2.6 FINANCIAL STATEMENTS OF ELS. ELS has delivered to Buyer true, correct
and complete copies of the following financial statements of ELS (collectively
the "Financial Statements") the audited balance sheets of ELS as of December 31,
1996 (the "Balance Sheet Date"), December 31, 1995, and December 31, 1994 with
the related statements of income, and statements of cash flows for the years
then ended, all certified by ELS's independent public accountants. Except as set
forth in Disclosure Schedule 2.6, the Financial Statements and the notes
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thereto have been prepared in accordance with generally accepted accounting
principles consistently applied by the Company throughout the periods indicated
and fairly present the financial position of the Company as of the respective
dates thereof and the results of its operations for the periods indicated. ELS
has delivered to Buyer an unaudited statement of income of ELS for the first
four sessions of the 1997 fiscal year ending April 20, 1997 with respect to "A"
sessions and May 2, 1997 with respect to "B" sessions (the "Interim Statement").
The Interim Statement fairly presents the results of the Company's operations
for the period indicated; provided, that, Buyer acknowledges that the Interim
Statement is (i) not prepared in accordance with generally accepted accounting
principles and (ii) revenues and expenses attributable to "B" session operations
during the periods 4/20/97-5/2/97 are included in the Interim Statement which is
dated 4/20/97. All financial statements furnished to Buyer have been certified
as true and correct by the President and the Chief Financial Officer of ELS.
2.7 ABSENCE OF CERTAIN CHANGES. Except as set forth in Disclosure Schedule
Section 2.7, since the Balance Sheet Date, the affairs of ELS have been
conducted only in the ordinary course of business, and consistent with past
practices, and ELS has not suffered any change in its business, results of
operations, working capital, assets, liabilities, condition or future business
prospects (financial or otherwise) or the manner of conducting its business
other than changes that, individually or in the aggregate, have not had and will
not reasonably be expected to have a Material Adverse Effect. Without limiting
the generality of the foregoing, since the Balance Sheet Date there has not
been:
(A) any transaction contracted for or concluded by ELS except in the
ordinary course of business, and consistent with past practices;
(B) any material adverse change in the financial condition,
liabilities, assets, business, or prospects of ELS;
(C) any destruction or loss of or damage to any asset of ELS
(whether or not covered by insurance) that materially and adversely affects the
ongoing financial condition, business or prospects of ELS;
(D) any change in accounting methods or practices by ELS;
(E) any increase in salary, bonus or other compensation payable or
to become payable by ELS to any of its officers, directors or employees in an
amount in excess of ELS' standard yearly increases;
(F) any sale or transfer of any ELS assets in excess of $10,000,
except in the ordinary course of business, and consistent with past practices;
(G) any amendment or termination of any material contract,
agreement, or license to which ELS is a party;
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(H) any loan by ELS to any person or entity in excess of $10,000, or
outside the ordinary course of business, or guaranty by ELS of any such loan or
any loans to ELS by any person in excess or entity in excess of $10,000 or
outside the ordinary course of business;
(I) any mortgage, pledge or other encumbrance of any ELS asset;
(J) any waiver or release of any material right or claim of ELS;
(K) commencement or notice or, to the "Best Knowledge of ELS" (as
that term is described in Section 2.22), threat of commencement of any civil
litigation or any governmental proceeding against or investigation of ELS;
(L) any claim of wrongful discharge or termination or other wrongful
labor or employment practice; or
(M) any cash dividend or other cash distribution to the Sellers.
2.8 ABSENCE OF LIABILITIES. ELS has no debt, liability or obligation of
any material nature, whether accrued, absolute, contingent, or otherwise, and
whether due or to become due, that is not reflected or reserved against in ELS'
Financial Statements, except (1) those that may have been incurred after the
date of such Financial Statement which are set forth in the applicable
Disclosure Schedules to this Agreement or (2) those that are not required by
generally accepted accounting principles to be included in Financial Statements.
For purposes of this Agreement, "material" shall mean current or future
obligations of ELS of over $100,000 or materially affecting the ongoing
operation of ELS.
2.9 TAX MATTERS. Except as set forth in the Disclosure Schedule Section
2.9:
(A) For purposes of this Agreement, the term "Taxes" means all taxes
of any kind or nature, including but not limited to U.S., state, local and
foreign income taxes, withholding taxes, branch profit taxes, gross receipts
taxes, franchise taxes, sales and use taxes, business and occupation taxes,
property taxes, VAT, customs duties or imposts, stamp taxes, excise taxes,
payroll taxes, intangible taxes and capital taxes and any penalties or interest
thereon.
(B) ELS has filed within the time and in the manner prescribed by
law all tax returns and reports required to be filed by it, and shall prepare
and file within the time and in the manner prescribed by law all tax returns and
reports required to be filed by it on or before the Closing Date, in each case
under the laws of the United States and each state or other jurisdiction in
which it conducts business activities requiring the filing of tax returns or
reports and has paid all taxes shown due on such returns or subsequent
assessments. All such tax returns and reports are or will be true, correct and
complete in all material respects. ELS has paid all Taxes that are due, or
claimed or asserted by any taxing authority to be due, except for those Taxes
with respect to which appropriate reserves have been reflected in the Financial
Statements, as adjusted for operations and transactions in the ordinary course
of business of ELS since December 31, 1996 in accordance with past custom and
practice.
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(C) There are no tax liens (whether imposed by the United States,
any state, local, foreign or other taxing authority) outstanding against ELS or
any of its assets (other than liens for taxes not yet due and owing).
(D) All Taxes and assessments that ELS is required to withhold or to
collect have been duly withheld or collected and all withholdings and
collections either have been duly and timely paid over to the appropriate
governmental authorities or are, together with the payments due or to become due
in connection therewith, duly reflected on the Financial Statements.
(E) Each Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
(F) For all taxable periods beginning on or after April 28, 1993,
the United States federal, and the material state, local or foreign income tax
returns of ELS have not been audited or examined by the relevant taxing
authority.
(G) For United State federal income tax purposes and for Arizona,
California, Colorado, Connecticut, Florida, Illinois, Indiana, Massachusetts,
Minnesota, Ohio, Oklahoma, New York and Pennsylvania state tax purposes, ELS has
been an S corporation for all taxable periods beginning on or after January 1,
1996. For Georgia state tax purposes, ELS has been an S corporation for all
taxable periods beginning on or after January 1, 1997.
(H) ELS is not a party to, is not bound by, and has no obligation
under any Tax sharing agreement or similar contract.
2.10 LITIGATION. Except as set forth in Disclosure Schedule Section 2.10,
there are no (i) suits, actions, litigations or other similar proceedings
pending or, to the Best Knowledge of ELS, threatened before any court,
administrative agency or other governmental body against ELS or its properties,
which if determined adversely to ELS would either individually or in the
aggregate have a Material Adverse Effect or questioning the validity of this
Agreement or the right of ELS or any of Sellers to enter into it or to
consummate the transactions contemplated hereby or (ii) order, judgment or
decree to which ELS or its business, assets, properties or operations is
subject. There are no actions, suits, proceedings or investigations by ELS
currently pending or that ELS currently intends to initiate.
2.11 COMPLIANCE WITH LAWS. Except as set forth in Disclosure Schedule
Section 2.11, ELS is in compliance with all laws, ordinances, regulations and
orders applicable to its business or operations ("Laws") except with respect to
such Laws, the noncompliance by ELS would not have a Material Adverse Effect and
has not since January 1, 1994, received any notification of any asserted past or
present failure to comply with any law, ordinance, regulation or order.
Disclosure Schedule Section 2.11 contains, to the Best Knowledge of ELS, a
true, correct and complete list of all of the governmental licenses and permits,
consents, orders, decrees and other compliance requirements under which ELS is
operating or bound.
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To the Best Knowledge of ELS, ELS has all franchises, permits, licenses or
similar authority necessary for the conduct of its business as now being
conducted, the lack of which could have a Material Adverse Effect. ELS is not in
default in any material respect under any such franchises, permits, license or
other similar authority.
2.12 TITLE TO AND CONDITION OF ASSETS. Except as set forth in the
Financial Statements, ELS owns no real property. To the Best Knowledge of ELS,
the tangible personal property included in ELS' assets is in usable condition
subject in each case to exceptions which are, in the whole, not material. Except
as set forth in Disclosure Schedule Section 2.12, ELS has good and marketable
and unencumbered legal title to each of its assets, free and clear of any claim,
charge, easement, encumbrance, security interest, lien, option, pledge, right of
others, or restriction (whether on voting, sale, transfer, disposition or
otherwise), whether imposed by agreement, law, equity or otherwise except for
any restrictions on transfer generally arising under any applicable federal or
state securities law ("Encumbrances"). All rent and other sums and charges
payable by ELS as tenant hereunder are current, no notice of default or
termination under any real property lease is outstanding, no termination event
or condition or uncured default on the part of ELS or, to the Best Knowledge of
ELS, the landlord, exists under any real property lease, and no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a default or termination event or
condition. All material leasehold properties and all properties used under
partial use or occupancy agreements are held under valid, binding and
enforceable leases or occupancy agreements, subject only to such exceptions as
are not, individually or in the aggregate, material to ELS. There is no pending
or, to the Best Knowledge of ELS, threatened action that would materially
interfere with the quiet enjoyment of such leaseholds by ELS. Except as set
forth on Disclosure Schedule 2.12, there exists no actual or, to the Best
Knowledge of ELS, threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of ELS, or the
business of ELS, with any lessor or other material contracting party. ELS has
title to, or the lawful right to use, all assets used by it in connection with
the conduct of its business as presently conducted.
ELS has not received notice, and to the Best Knowledge of ELS, there are
no pending, threatened or contemplated condemnation proceedings affecting the
real property leased by ELS or any part thereof or of any sale or other
disposition of the real property or any part thereof in lieu of condemnation. No
portion of any real property leased by ELS has suffered any material damage by
fire or other casualty since the Balance Sheet Date which has not heretofore
been completely repaired and restored to its original condition.
2.13 LABOR MATTERS. Except as set forth on the Disclosure Schedule Section
2.13, ELS is not a party or subject to any collective bargaining agreement with
respect to its employees with any labor organization, group or association and
no labor union or other collective bargaining unit represents, or to the Best
Knowledge of ELS, claims to represent any of the employees of ELS. ELS has made
available to Buyer for inspection copies of all employee handbooks and employee
rules and regulations, if any. To the Best Knowledge of ELS, since January 1,
1994, ELS has not experienced any attempt by organized labor or its
representatives to make ELS conform to demands of organized labor relating to
its employees or to enter into a binding agreement with organized labor that
would cover the employees of ELS. There is no
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unfair labor practice charge or complaint against ELS pending before the
National Labor Relations Board or any other governmental agency, and since
January 1, 1994, the Company has not experienced a work stoppage or other labor
difficulty.
2.14 INTELLECTUAL PROPERTY. Set forth on the Disclosure Schedule Section
2.14 is a list and a brief description or identification of all trade names,
fictitious or assumed names, trademarks, trademark applications, service marks,
service mark applications, registered copyrights, copyright applications, trade
secrets, license agreements, and all other similar proprietary rights
(collectively, the "Intellectual Property"). To the Best Knowledge of ELS, ELS
owns or possesses adequate licenses or other rights to use all Intellectual
Property necessary to conduct its business as now operated free and clear of any
liens except as is otherwise specifically noted on such Schedule. Except as set
forth in Disclosure Schedule 2,14, all of such Intellectual Property is owned
outright by ELS and, to the Best Knowledge of ELS, there is no current
infringement, misappropriation or other misuse being made by any other party of
the Intellectual Property. No claim is pending or, to the Best Knowledge of ELS,
threatened to the effect that the present or past operations of ELS infringes or
conflicts with the asserted rights of others in respect of any Intellectual
Property, and no claim is pending or, to the Best Knowledge of ELS, threatened
to the effect that any such Intellectual Property is invalid or unenforceable.
2.15 EMPLOYEE BENEFITS PLAN.
Disclosure Schedule Section 2.15(a) lists all benefit plans and agreements
to which ELS is a party or by which ELS is bound with respect to (i) pension or
retirement income plans and agreements, (ii) plans, agreements, arrangements or
practices, whether or not written, relating to other "fringe benefits" to
employees, officers, directors, agents, or others, including, but not limited to
vacation, sick leave, medical, hospitalization, dental, child care, parenting,
sabbatical, life and other insurance, and similar or related benefits, and
perquisites including, but not limited to, company automobiles, club memberships
or privileges, and other similar or related benefits, (iii) any other "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended and the related regulations and published
interpretations ("ERISA") (such plans, agreements, arrangements or practices
described in this sentence herein referred to individually as a "Plan" and
collectively as the "Plans"). ELS has delivered to Buyer true and complete
copies of all documents constituting such Plans together with summary plan
descriptions of those plans or arrangements not otherwise in writing.
ELS is in full compliance with the applicable provisions of ERISA with
respect to all Plans, and ELS is in full compliance with Laws applicable to such
Plans. Without limiting the generality of the foregoing, except as set forth in
Disclosure Schedule Section 2.15, all Plans are fully funded in accordance with
their terms and applicable Law. ELS has performed all of its obligations under
all Plans. Each of the Plans, which is intended to be qualified and tax exempt
under code Sections 401(a) and 501(a), satisfies the requirements of such
sections and is subject to a current favorable determination letter from the
Internal Revenue Service.
2.16 EMPLOYEES AND EMPLOYMENT CONTRACTS. Disclosure Schedule Section 2.16
contains a true and complete list of all employment contracts, deferred
compensation, profit-
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sharing, stock purchase, stock option, stock appreciation right, bonus and
severance plans and agreements or similar agreements by which ELS is bound and a
description of the Company's disciplinary practices and termination procedures.
Except as set forth in such Schedule, all the contracts and arrangements
described in this Section 2.16 are in full force and effect and to the Best
Knowledge of ELS, there is no default by ELS under any of them, and ELS has not
entered into any written severance agreement or similar arrangement in respect
of any present or former employee that will result in any obligation (absolute
or contingent) of Buyer or the Company to make any payment in excess of $50,000
to any present or former employee following termination of employment or
$100,000 in the aggregate.
2.17 CONTRACTS. All material contracts, agreements and instruments to
which ELS is a party are listed in Disclosure Schedule Section 2.17. For
purposes of this Section 2.17, all Facility Agreements, tax sharing agreements
and any contract with any director, officer or shareholder that survives the
Closing shall be deemed to be material. For purposes of this Section 2.17, a
Facility Agreement shall mean any lease, sublease, license or other occupancy
agreement with any college, university or other educational institution by which
ELS uses, occupies or has the right to occupy, now or in the future, any real
property. Except as set forth in Disclosure Schedule 2.17, to the Best Knowledge
of ELS, ELS is not in material default under any such contract and ELS has
performed all material obligations required to be performed by it to date under
such contracts. Except as set forth in such Schedule, ELS, nor to the Best
Knowledge of ELS, any other party to such contracts has improperly terminated or
is in material breach or default under such contracts and there exists no
condition or event which, after the giving of notice or laps of time or both,
would constitute any such material breach, termination or default on the part of
ELS or, to the Best Knowledge of ELS, any other party. Each such contract is in
full force and effect and is a legal, binding and enforceable obligation of ELS
and of each of the other parties thereto. Buyer or its counsel have had access
to true and complete copies of the contracts listed in Disclosure Schedule
Section 2.17 and such copies shall be in the Company's files as of the Closing.
2.18 INSURANCE. Disclosure Schedule Section 2.18 contains a list of all
insurance policies held by ELS concerning its business (including the name of
the insurer, a coverage summary, the applicable annual premium and expiration
date) which such policies are in full force and effect. To the Best Knowledge of
ELS, there is no current default with respect to the payment of premiums under
any such policies. Such policies and binders are valid and binding in accordance
with their terms and are in full force and effect.
2.19 ENVIRONMENTAL COMPLIANCE. ELS has not generated, used, transported,
treated, stored, released or disposed of, and has not expressly permitted anyone
else to generate, use, transport, treat, store, release or dispose of any
hazardous substance including substances that are defined or listed in, or
otherwise classified pursuant to any applicable laws as "hazardous substances"
"hazardous materials," "hazardous wastes" or "toxic substances," (collectively,
"Hazardous Substance") in violation of any law or in a manner which is
reasonably likely to result in liability under any law. Any Hazardous Substance
handled or dealt with in any way in
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connection with operation of ELS, whether by ELS or ELS' agents, during Sellers'
ownership, has been dealt with in all respects in compliance with applicable
laws. There has not been any generation, use, transportation, treatment,
storage, release or disposal of any Hazardous Substance by ELS or the use of any
property or facility of ELS by any person which has created or might reasonably
be expected to create any liability under any laws or which would require
reporting to or notification of any governmental entity. To the Best Knowledge
of ELS, the improvements owned or used by ELS on owned ELS property and on
leased property do not contain any asbestos that would constitute a violation of
or non-compliance with any Law. To the Best Knowledge of ELS, the equipment
owned or used by ELS as owned or leased property does not contain any
polychlorinated biphenyls that would constitute a violation of or non-compliance
with any applicable Law. The operations of ELS have in all material respects
been in compliance with applicable health and safety laws.
2.20 RELATED TRANSACTIONS. Except as set forth in Disclosure Schedule
Section 2.20, ELS is not, directly or indirectly, a party to any transactions
with any officer, director or shareholder of ELS or their affiliates, and none
of such persons has any direct or indirect interest in any, supplier, agent or
customer of ELS. All amounts owed ELS from officers, directors and employees or
their families and affiliates (except travel expenses advanced in the ordinary
course of business) shall be repaid to ELS in full prior to the Closing with the
exception of any items to be assigned to Sellers pursuant to Section 1.5.
2.21 BROKERS AND FINDERS. Other than ELS' arrangement with Montgomery
Securities which is described in Disclosure Schedule Section 2.21, no agent,
broker, finder or other person or entity acting on behalf of Sellers or ELS will
be entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement.
2.22 DISCLOSURE. No representation, warranty or statement by ELS or
Sellers contained herein and the Schedules attached hereto or in any written
statement or certificate furnished to Buyer pursuant hereto or the transactions
contemplated hereby (excluding for this purpose, the Offering Memo and any
exhibits thereto), contains any untrue statement of material fact or, when taken
as a whole, contains any untrue statement of a material fact or, when taken as a
whole, contains any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they are made, not
misleading.
2.23 BEST KNOWLEDGE. For the purposes of this agreement, the phrase "to
the Best Knowledge of ELS" means to the actual knowledge of Roger O. Walther,
Matthew Dickstein, Perry Akins, Rochelle McGilpin, Chris Noblet and Terry Cooper
without any independent duty of investigation.
2.24 SURVIVAL. Except as otherwise set forth herein, the several
representations and warranties of ELS and the Sellers contained herein (or in
any document delivered in connection herewith) will be deemed to have been made
on and as of the date of this Agreement and on and as of the Closing Date, will
survive the Closing Date and will remain operative and in full force and effect
until the date that is the first anniversary of the Closing Date (the
"Termination Date");
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provided, however, the representations and warranties contained in Section 2.2
(the "Title Representations") shall survive perpetually and the representations
and warranties contained in Section 2.9 shall survive until the indemnification
provisions of Section 8.2 terminate. Except with respect to certain assumptions
of liability and representations and warranties relating to Excluded Assets and
Liabilities as set forth in Section 1.5, taxes as set forth in Section 1.6 and
2.9, and the Title Representations and any right of indemnification pursuant to
Section 8.2, any right to indemnification with respect to any claimed breach of
a representation or a warranty will expire at 11:59 p.m. Pacific Time on the
Termination Date unless, on or prior to the Termination Date, a claim notice has
been given to the party from whom indemnification is sought. The
representations, warranties and covenants of ELS and the Sellers contained in
this Agreement (or any document delivered in connection herewith) will not be
diminished or otherwise affected as a result of any investigation or knowledge
of Buyer.
2.25 WORKING CAPITAL. The working capital of the Company (as computed in
accordance with the principles outlined in the letter, date July 16, 1997 of
Matthew Dickstein to Henry D. James) as of the Closing Date shall be not less
than a negative Four Million Seven Hundred Fifty Thousand ($4,750,000).
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to ELS and Sellers as follows:
3.1 DUE INCORPORATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
3.2 POWER AND AUTHORITY. Buyer has the corporate power and authority and
all authorizations and permits required by governmental or other authorities, to
own and operate its properties and assets and carry on its business as currently
being conducted and to execute, deliver and perform this Agreement and the other
documents required to be executed by it in connection with this Agreement, and
the execution, delivery and performance by it of this Agreement and the other
agreements and documents executed or to be executed by it in connection with
this Agreement have been duly authorized, executed and delivered by Buyer and no
other corporate proceedings on the part of Buyer are necessary to authorize this
Agreement and the agreements and instruments entered into by Buyer in connection
herewith or to consummate and perform the transactions contemplated hereby and
the agreements and instruments entered into by Buyer in connection herewith.
This Agreement and the agreements and instruments entered into by Buyer in
connection herewith constitute valid and binding agreements enforceable against
Buyer in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws and subject to general
principles of equity governing specific performance, injunctive relief or other
equitable remedies.
3.3 CONSENTS. Except filings required under the Hart-Scott-Rodino Act,
there are no authorizations, consents, permits, orders, licenses or approvals
of, or declarations, registrations or filings with, any governmental or
regulatory authority or agency required by Buyer that have not been received in
connection with the execution, delivery or performance by Buyer of this
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Agreement or the other agreements executed or to be executed by it in connection
with this Agreement or the consummation by Buyer of the transactions
contemplated by this Agreement.
3.4 NO BREACH. The execution, delivery and performance of this Agreement
and the consummation by Buyer of the transactions contemplated hereby, will not
constitute, with or without the passage of time or the giving of notice, a
default under, or permit the termination or the acceleration of maturity or
performance of, (i) any provision of the Articles of Incorporation or Bylaws of
Buyer; (ii) any law, statute, rule or regulation or order, writ, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body to which Buyer or its properties are subject, or (iii) any note,
bond, indenture, mortgage, deed of trust, evidence of indebtedness, loan or
lease instrument or other agreement to which Buyer is a party, by which Buyer is
bound, or to which any of its assets or properties are subject.
3.5 BROKERS AND FINDERS. With the exception of Goldman, Sachs & Co., whose
fee shall be the sole responsibility of the Buyer, no agent, broker, finder or
other person or entity acting on behalf of Buyer will be entitled to any
broker's, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement.
3.6 FINANCING. Buyer has obtained a commitment from NationsBank, N.A., a true
and correct copy of which has been delivered to Sellers, to provide Buyer
sufficient funds to enable it to consummate the transactions contemplated
hereby.
3.7 SOPHISTICATION OF BUYER. Buyer acknowledges that it is a sophisticated
investor, familiar with the education industry generally, has made a reasonable
investigation of the Company and its business, and is aware of the risks
inherent in an investment in a business such as that of the Company. Because of
its experience and business acumen it has the expertise to ask the questions
necessary to make an informed decision as to whether to purchase the Shares as
contemplated by this Agreement. Buyer has made reasonable investigation and
inquiry of all matters related to this agreement and the Disclosure Schedules
and has not been denied (i) access to any material information requested from
the Company or any of the Sellers or (ii) an opportunity to meet with and
question management personnel. Buyer acknowledges that it is not relying on any
projections or forecasts contained in any materials supplied by Sellers or the
Company or on any budgets for future periods prepared by the Company.
3.8 INVESTMENT INTENT. Buyer is acquiring the Shares for investment for
its own account, not as nominee or agent, and not with a view to the sale,
distribution, subdivision, transfer or fractionalization thereof. Buyer
acknowledges that the Shares (a) have not been registered under the Securities
Act of 1933 or any state securities law and there is no commitment to register
the Shares, and (b) cannot be resold, unless they are subsequently registered or
an exemption from registration is available.
3.9 SURVIVAL. The several representations and warranties of Buyer
contained herein (or in any document delivered in connection herewith) will be
deemed to have been made on and of the date of this Agreement and on and as of
the Closing Date, will survive the Closing Date and will remain operative and in
full force and effect until the first anniversary of the Closing Date.
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4. COVENANTS OF ELS AND SELLERS.
ELS and the Sellers jointly and severally covenant and agree that from the
date of this Agreement until the earlier of the Closing or termination of this
Agreement:
4.1 OPERATION OF BUSINESS OF ELS. ELS will carry on its business and
activities in the ordinary course and in substantially the same manner as
previously carried out and will use its reasonable efforts, consistent with past
practices, to preserve existing relationships with vendors, customers, and
others having business relationships with ELS; provided, that (i) the Excluded
Assets and Liabilities shall be transferred from ELS to the Seller prior to the
Closing Date, and (ii) ELS shall forbear from declaring and paying any cash
dividends or cash distributions to Sellers. ELS will continue to carry its
existing insurance, if present coverage continues to be generally available at
substantially the same premium cost. ELS will allocate all initial franchise
fees collected after January 1, 1997 and on or prior to the Closing pro rata for
the applicable period regardless of accounting or tax treatment and shall
include such fees in cash among the assets remaining in the Company at Closing
adjusted for any taxes paid for periods following the Closing.
4.2 ACCESS TO RECORDS. Until Closing, ELS shall afford to Buyer, its
officers, employees, counsel, accountants, and other representatives reasonable
access upon reasonable prior notice, to inspect and copy the books, records,
contracts and other documents of ELS at the Company's Culver City offices in
order that Buyer may have full opportunity to make such investigations as it
shall desire to make of the affairs of ELS; and ELS will cause its officers and
accountants to furnish such additional financial and operating data and other
information relating to the business and assets of ELS as Buyer shall, from time
to time, reasonably request.
4.3 CONSENTS. The Sellers shall use their reasonable efforts to assist
Buyers in obtaining any consents required to effect the transactions
contemplated in this Agreement.
4.4 NOTIFICATION. From time to time prior to the Closing, ELS and Sellers
shall promptly advise Buyer in writing of (i) any event known to ELS and Sellers
which will have a Material Adverse Effect; (ii) any event occurring subsequent
to the date of this Agreement which would render any representation or warranty
of ELS or Sellers contained in this Agreement, if made on or as of the date of
such event or the Closing Date, untrue, incomplete or inaccurate in any material
respect; or (iii) any failure of ELS or Sellers to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
4.5 OTHER TRANSACTIONS. Until the Closing, without the written approval of
Buyer, neither Sellers nor ELS shall, directly or indirectly, enter into any
agreements, material negotiations or discussions concerning any sale or issuance
of capital stock of ELS, any incurrence of indebtedness for borrowed money
outside the ordinary course of business, any merger or consolidation of ELS, any
disposition of a material portion of ELS' business, properties, or assets, or
any acquisition or other business combination or proposal therefore involving
ELS, or furnish or cause to be furnished any information concerning the
business, properties, or assets of ELS (other than to Buyer pursuant to this
Agreement) to any party in connection with any such transactions.
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4.6 HART-SCOTT RODINO ACT. Sellers shall make any and all filings required
to be made on their part under the Hart-Scott-Rodino Act. Sellers shall furnish
to Buyer such necessary information and reasonable assistance as Buyer may
request in connection with its preparation of necessary filings or submissions
under the provisions of the Hart-Scott Rodino Act. Sellers shall supply Buyer
with copies of all correspondence, filings or communications, including file
memoranda evidencing telephonic conferences with representatives of either the
Federal Trade Commission, the Antitrust Division of the United States Department
of Justice, or any other governmental entity or members of their respective
staffs, with respect to the transactions contemplated by this Agreement and any
related or contemplated transactions, except for documents filed pursuant to
Item 4(c) of the Notification and Report Form or communications regarding the
same. All required filing fees shall be paid by Buyer.
4.7 NON-COMPETITION. Each Seller shall enter into a non-competition
agreement in form and substance similar to Exhibit 4.7 attached hereto, agreeing
not to compete with ELS for three (3) years after the Closing Date.
4.8 PAYMENT OF CERTAIN TAX LIABILITIES. Sellers shall timely pay all
federal, state and local income Taxes imposed on them or on ELS as a result of
the Section 338(h)(10) Elections and with respect to the operations of ELS for
all taxable periods ending on or prior to the Closing Date. Buyer shall
cooperate in the preparation of all returns or reports required to be filed by
the Sellers and ELS with respect to such Taxes and shall provide, or cause to be
provided, any records or other information reasonably requested by Sellers in
connection therewith.
4.9 COOPERATION. After the Closing Date, Sellers agree to cooperate with
Buyer in connection with any litigation, regulatory matter, tax audit or
proceeding or dispute with a party to any ELS contract as reasonably requested
by Buyer. ELS shall pay any expenses incurred in connection with such
cooperation.
5. BUYER'S COVENANTS. Buyer covenants as follows:
5.1 CONFIDENTIALITY. That unless and until the Closing has been
consummated, Buyer and its officers, employees, counsel, accountants and other
representatives shall hold in strictest confidence, and shall not distribute,
transmit or use any of the data and information obtained from the Sellers or
developed by Buyer in connection with the transactions contemplated by this
Agreement except in furtherance of the Closing. If the Closing is not
consummated for any reason, Buyer shall return to the Sellers all such data and
information.
5.2 HART-SCOTT-RODINO ACT. Buyer shall make any and all filings required
to be made on its part under the Hart-Scott-Rodino Act. Buyers shall furnish
Sellers such necessary information and reasonable assistance as Sellers may
request in connection with its preparation of necessary filings or submissions
under the provisions of the Hart-Scott Rodino Act. Buyer shall supply Sellers
with copies of all correspondence, filings or communications, including file
memoranda evidencing telephonic conferences with representatives of either the
Federal Trade Commission, the Antitrust Division of the United States Department
of Justice, or any other governmental entity or members of their respective
staffs, with respect to the transactions
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contemplated by this Agreement and any related or contemplated transactions,
except for documents filed pursuant to Item 4(c) of the Notification and Report
Form or communications regarding the same. All required filing fees shall be
jointly paid by Sellers and Buyer.
5.3 NOTIFICATION OF CERTAIN MATTERS. Buyer shall give prompt notice to
Sellers, of (i) the occurrence, or failure to occur, of any event that would be
likely to cause any representation or warranty by Buyer contained in this
Agreement to be untrue or inaccurate in any material respect; and (ii) any
failure of Buyer to comply with or satisfy, in any material respect, any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.
5.4 COMPANY RECORDS. Buyer agrees for a period of five (5) years
subsequent to the Closing Date, upon written request of the Sellers, to make
available during normal business hours to the Sellers all information and
statements in the Company's possession with regard to periods prior to the
Closing Date which may be reasonably required by the Sellers.
6. CONDITIONS TO BUYER'S OBLIGATIONS.
The obligation of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, at or before the Closing,
of each of the following conditions, unless waived in writing by Buyer:
6.1 REPRESENTATIONS AND COVENANTS. ELS and Sellers shall have performed
and complied in all material respects with all agreements, covenants and
conditions on their part required to be performed or complied with on or prior
to the Closing Date. All representations and warranties of the Sellers and ELS
contained in this Agreement shall be true and correct at and as of the Closing
Date as though made at and as of that time except (a) to the extent any such
representation or warranty is expressly stated only as of a specified earlier
date or dates in which case such representation or warranty shall be true and
accurate as of such earlier specified date or dates, (b) for changes that are
permitted or contemplated pursuant to this Agreement. In addition, if Sellers
agree to assume full responsibility to Buyer's reasonable satisfaction for any
such consequences of the failure of any such representation and warranty to be
true, then such failure shall not be deemed to constitute nonsatisfaction of
this Section 6.1.
6.2 OPINION OF COUNSEL. Buyer shall have received from ELS' counsel a
legal opinion in substantially the form set forth in Exhibit 6.2 hereto.
6.3 CONSENTS AND APPROVALS. ELS and Sellers shall have delivered to Buyer
duly executed copies of any consents and approvals contemplated by this
Agreement or otherwise required for consummation of the transactions
contemplated by this Agreement.
6.4 NO GOVERNMENT PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry, or other proceeding by or before any court or
governmental body or agency shall have been instituted or threatened which
questions the validity or legality of this Agreement or the transactions
contemplated by this Agreement.
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6.5 NO INJUNCTION. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order, or any order of any nature
issued by a court of competent jurisdiction or agency or other authority
directing that the transactions contemplated by this Agreement or any of them
not be consummated as so provided or imposing any conditions on the consummation
of the transactions contemplated by this Agreement which Buyer deems
unacceptable in its reasonable discretion.
6.6 ASSIGNMENT AND ASSUMPTION. The Assignment of certain assets of the
Company to Sellers and the assumption of certain liabilities by Sellers as set
forth in Section 1.6 shall have been completed.
6.7 RESIGNATION OF DIRECTORS AND OFFICERS. Sellers shall have provided a
resignation of Roger O. Walther as sole director and an officer of the Company
effective on Closing Date and Sellers shall be fully responsible for any
payments due Mr. Walther upon such termination.
6.8 OPTIONHOLDERS RELEASE. Buyer shall have received the Release as duly
executed by the Optionholders.
6.9 TRANSFER DOCUMENTS. All transfer documents and actions in connection
with such transfers shall be satisfactory in form and substance to Buyer in its
reasonable judgment and shall have been received by Buyer.
6.10 FINANCING. The Buyer shall have obtained financing, upon terms and
conditions reasonably satisfactory to the Buyer and consistent with the
Commitment Letter from NationsBank, N.A., necessary to purchase the Shares as
contemplated herein.
6.11 INTENTIONALLY DELETED.
6.12 NON-COMPETITION AGREEMENT. Each Seller shall have executed and
delivered to Buyer a Non-Competition Agreement.
6.13 DUE DILIGENCE. In the reasonable discretion of Buyer, Buyer shall be
satisfied within its due diligence review of each of the matters specified in
Exhibit 6.13 hereto. This condition shall be deemed fulfilled unless written
notice of nonfulfillment is delivered by Buyer to Sellers on or prior to 5:00
p.m., P.D.T., on July 25, 1997.
7. CONDITIONS TO SELLERS' OBLIGATIONS
The obligation of Sellers to consummate the transaction contemplated by
this Agreement shall be subject to the satisfaction, at or before the Closing,
of each of the following conditions, unless waived in writing by Sellers:
7.1 REPRESENTATIONS AND COVENANTS. Buyer shall have performed and complied
in all material respects with all agreements, covenants and conditions on its
part required to be performed or complied with on or prior to the Closing Date.
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7.2 CONSENTS AND AUTHORIZATIONS. Buyer shall have delivered all consents,
or approvals of any Federal, state, local or foreign governmental commission,
board or other regulatory body or third parties required to be obtained by Buyer
in connection with the execution and delivery by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated by this Agreement.
7.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry, or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated by this Agreement.
7.4 NO INJUNCTION. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order, or any order of any nature
issued by a court of competent jurisdiction or agency or other authority
directing that the transactions contemplated by this Agreement not be
consummated as so provided or imposing any conditions on the consummation
of the transactions contemplated by this Agreement which Sellers deems
unacceptable in his reasonable discretion.
7.5 OPINION OF COUNSEL. Sellers shall receive at Closing from Paul, Weiss,
Rifkind, Wharton & Garrison, Buyer's Counsel, an opinion dated the Closing Date,
in substantially the form set forth in Exhibit 7.5.
8. INDEMNIFICATION AND CERTAIN REMEDIES.
8.1 OBLIGATION OF SELLERS TO INDEMNIFY FOR NON-TAX AND TITLE LIABILITIES.
Sellers jointly and severally shall indemnify Buyer and hold harmless and, upon
Buyer's request, defend Buyer, and/or its affiliates, subsidiaries, directors,
officers, employees, agents and assigns from and against any claims, demands,
causes of action, proceedings, losses, liabilities, damages, deficiencies,
interest, penalties, expenses, judgments and costs (including reasonable
attorneys', consultants' and accountants' fees and disbursements, court costs,
amounts paid in settlement and expenses of investigation) (collectively,
"Losses") incurred by Buyer based upon, arising out of or otherwise in respect
of (a) any breach of any representation, warranty of the Sellers or ELS
contained herein or in any other document delivered by the Sellers or ELS in
connection herewith, (b) any breach of any covenant of the Sellers or ELS to be
performed at or prior to Closing contained herein or in any other document
delivered by the Sellers or ELS in connection herewith, with the exception of
those Losses relating to (i) Taxes which such Losses shall be subject to the
provisions of Section 8.2 below, or (ii) Title Representations or Excluded
Assets and Liabilities for which Sellers' responsibility shall be perpetual and
not subject to the limitations of Section 8.3, to the extent Buyer or ELS is not
reimbursed for such Loss after reasonable good faith efforts to obtain
reimbursement under ELS's insurance policies, subject in each instance to
Section 8.3 below. Any claim by Buyers hereunder shall be made no later than the
first anniversary of the Closing Date.
8.2 OBLIGATION OF SELLERS TO INDEMNIFY FOR TAX LIABILITIES. Sellers shall
jointly and severally indemnify Buyer and hold harmless and, upon Buyer's
request, defend Buyer, and/or its affiliates, subsidiaries, directors, officers,
employees, agents and assigns from and against
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Losses based upon, arising out of or otherwise with respect to (i) Taxes imposed
on Sellers or ELS for any period prior to and including the Closing Date, (ii)
for any Taxes imposed on Sellers or ELS for periods beginning prior to and
ending after the Closing Date, to the extent such Taxes are attributable (based,
in the case of Taxes measured by income or gross receipts, on a closing of the
books as of the Closing and, in the case of property taxes, by proration) to the
period ending on the Closing Date (including within the indemnities set forth in
clauses (i) and (ii) of this Section 8.2, without limitation, any liability for
income or franchise tax expressly assumed by Sellers in Section 1.6 hereof and
on built-in gain arising under Section 1374 of the Code and any similar
provisions of applicable state law resulting from the Company not having an S
election in effect from the date its predecessors commenced operations, but
excluding from such indemnities Taxes resulting from transactions not in the
ordinary course of business occurring on the Closing Date after the Closing, and
further excluding income and franchise taxes resulting from elections under
Section 338 of the Code or comparable provisions of any state, local or foreign
law, except to the extent expressly assumed by Sellers in Section 1.6 hereof).
The indemnities set forth in clauses (i) and (ii) of this Section 8.2 shall
expire three years following the later of (x) the date on which the
applicable Tax return is filed, or (y) the date such return is required to be
filed, unless prior to such date, a taxing authority has delivered a written
claim for Tax subject to the indemnity, or an audit with respect to such Tax has
been commenced by a taxing authority, which claim or audit has not been finally
determined, in which case the indemnity with respect to such Tax shall expire
sixty (60) days following final determination of such claim or audit.
8.3 LIABILITY CAP. The maximum aggregate liability of Sellers with respect
to Losses indemnifiable under (i) Section 8.1 shall be Ten Million Dollars
($10,000,000) and under (ii) Section 8.2 shall be Fifteen Million Dollars
($15,000,000). In addition, no claim shall be made by Buyer under Section 8.1 or
8.2 except to the extent Buyer's cumulative Losses exceed Five Hundred Thousand
Dollars ($500,000) (the "Threshold Amount"); in which case Sellers shall be
liable for the entire amount of such Losses. The limitations set forth in this
Section 8.3 shall not apply to any claim of Buyer for indemnification (i)
pursuant to Section 1.5, (ii) with respect to a violation of the representations
and warranties set forth in Section 2.2, or (iii) with respect to any Taxes for
which Sellers are liable pursuant to Section 1.6 in the amounts shown on the
federal, state, local and foreign tax returns for the period including the
Section 338 transaction (but excluding for this purpose any deficiencies found
with respect to the payment of such Taxes as a result of subsequent tax audits).
8.4 OBLIGATION OF BUYER TO INDEMNIFY. Buyer shall indemnify, defend and
hold harmless Sellers and his respective heirs and assigns from and against any
Losses (as the term "Losses" is defined in Section 8.1 above) arising out of or
otherwise in respect of the breach of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement and for any liabilities arising
with respect to the operation of ELS after the Closing Date.
8.5 CLAIMS. If any party (the "Indemnitee") receives notice of
circumstances that would give rise to a claim by such party or notice of any
claim or the commencement of any action or proceeding with respect to which any
other party (or parties) is obligated to provide
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indemnification (the "Indemnifying Party") pursuant to Section 8.1, 8.2 or 8.4
(a "Claim"), the Indemnitee shall promptly give the Indemnifying Party notice
thereof; provided, however, that the failure to give notice hereunder shall not
affect a Party's rights to indemnification under this Agreement. Within 30 days
after such notice, the Indemnifying Party shall notify the Indemnitee whether it
irrevocably elects to make payment of the amount claimed or, with respect to
third party claims or claims to setoff by Buyers, to contest such claim by
appropriate legal proceedings. The failure of the Indemnifying Party to notify
the Indemnitee of its intention within such 30 days shall constitute an
irrevocable election by them that it shall pay the amount claimed or consent to
setoff, as appropriate. Any defense of a claim shall be conducted by counsel of
good standing chosen by Indemnitee and satisfactory to Indemnifying Party. Such
defense shall be conducted at the expense of Indemnifying Party, except that if
any proceeding involves both claims against which indemnity is granted hereunder
and other claims for which indemnification is not granted hereunder, the
expenses of defending against such claims shall be borne by the Indemnifying
Party and the Indemnitee in respective proportions to the dollar amount of the
claims for which they may be liable based on the aggregate dollar amount of the
claims.
Nothing contained in this Section 8 shall preclude Buyer from maintaining
any action against Sellers with respect to any violation of Sellers' obligations
under Sections 4.7, 4.8 and 4.9 of this Agreement.
9. TERMINATION AND ABANDONMENT.
9.1 METHODS OF TERMINATION. The transactions contemplated by this
Agreement may be terminated at any time prior to the Closing as follows:
(A) By mutual written consent of the parties to this Agreement;
(B) By Sellers, upon written notice to Buyer, or by Buyer, upon
written notice to Sellers, any time after September 30, 1997, if the Closing has
not occurred; provided the party giving notice has been acting in compliance
with the terms and conditions of this Agreement prior to September 30, 1997;
(C) by Buyer, upon written notice to Sellers, if a condition set
forth in Article 6 has not been satisfied or if there has been a violation or
breach by Sellers of any material agreement, covenant, representation or
warranty of Sellers contained in this Agreement; provided that Sellers have been
given an opportunity to cure such violation or breach within 15 days of receipt
of such notice;
(D) By Sellers, upon written notice to Buyer, if there has been a
violation or breach by Buyer of any material agreement, covenant, representation
or warranty of Buyer contained in this Agreement; provided that Buyer has been
given an opportunity to cure such violation or breach within 15 days of receipt
of such notice; or
(E) By Sellers, if a condition set forth in Article 7 has not been
satisfied.
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9.2 PROCEDURE UPON TERMINATION. In the event of termination pursuant to
this Section 9, a written notice thereof shall forthwith be given by the
terminating party to the other party and the transactions contemplated by this
Agreement shall be terminated and abandoned without further actions. If the
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein, then:
(A) Each party will redeliver all documents, work papers, and other
material of any other party relating to the transactions contemplated by this
Agreement, whether obtained before or after the execution hereof, to the party
furnishing the same;
(B) The confidentiality of all confidential information received by
any party hereto with respect to the business of any other party or its
subsidiaries shall survive the termination of this Agreement; and
(C) Each party shall retain its rights against the other parties
with respect to any breach of this Agreement committed prior to such termination
or abandonment.
9.3 LIQUIDATED DAMAGES. If this Agreement is terminated pursuant to
Section 9.1(c) due to the failure of the condition set forth in Section 6.10
(Financing), the sum of Five Million Dollars ($5,000,000) shall be paid to
Sellers. Receipt of the Five Million Dollars shall constitute Sellers' exclusive
remedy against Buyer at law or in equity and shall terminate all of Buyer's
liability and obligations to Sellers under this Agreement with respect to
Buyer's termination of this Agreement as a result of the failure of the
condition set forth in Section 6.10 (Financing). The parties have agreed that
Sellers' damages, in the event of such termination by Buyer, would be extremely
difficult or impracticable to determine. Therefore, by placing their initials
below, the parties acknowledge that the Deposit has been agreed upon, after
negotiations, as the parties' reasonable estimate of Sellers' damages.
Sellers: Buyer:
------------- -------------
10. MISCELLANEOUS.
10.1 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
10.2 NOTICES. All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be delivered in
person, sent by facsimile, mailed by registered or certified mail, return
receipt requested, or delivered by a commercial courier guaranteeing overnight
delivery, addressed as follows:
If to ELS or Sellers: ELS Educational Services, Inc.
3661 Buchanan Street
San Francisco, CA 94123
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Attention: Roger O. Walther
Facsimile: (415) 563-4964
with a copy to: Farella Braun & Martel LLP
235 Montgomery Street, 30th Floor
San Francisco, CA 94104
Attention: Daniel E. Cohn, Esq.
Facsimile: (415) 954-4480
If to Buyer: Berlitz International, Inc.
400 Alexander Park
Princeton, NJ 08540-6306
Attn: Robert C. Hendon, Jr., Esq.
Facsimile: (609) 514-9670
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attn: Matthew Nimetz, Esq.
Facsimile: (212) 876-0159
If a Party has a facsimile terminal, Notice shall include facsimile
transmission. Delivery shall be effective upon delivery or refusal of delivery,
with the receipt or affidavit of messenger or facsimile confirmation deemed
conclusive evidence of such delivery or refusal. Each party may designate by
notice in writing a new address to which any notice, demand, request, or
communication may thereafter be so given, served, or sent.
10.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights, interests, and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns,
including, without limitation, Berlitz Languages, Inc.
("BLI").
10.4 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.
10.5 WAIVER AND OTHER ACTION. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification, or supplement is sought.
10.6 PUBLICITY. The parties agree that no publicity release or
announcement concerning this Agreement or the transactions contemplated in
connection therewith shall be made without advance approval thereof by both
Buyer and the Sellers.
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10.7 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and the other
documents executed or delivered pursuant hereto contain the complete agreement
among the parties with respect to the transactions contemplated hereby and
supersede all prior agreements and understandings among the parties with respect
to such transactions contemplated by this Agreement with the exception of the
Non-Disclosure Agreement executed by ELS and Buyer as of April ___, 1997.
Section and other headings are for reference purposes only and shall not affect
the interpretation or construction of this Agreement.
10.8 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance (except to the
extent such remaining provisions constitute obligations of another party to this
Agreement corresponding to the unenforceable provision); and in lieu of such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Agreement, a provision as similar in its terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal, valid, and
enforceable.
10.9 INTERPRETATION. This Agreement shall be construed according to the
fair meaning of its language. The rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in interpreting this Agreement. Whenever the term "including" is used in this
Agreement, it shall be interpreted as meaning "including, but not limited to"
the matter or matters thereafter enumerated.
10.10 THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended to
confer upon any person other than the parties hereto and their successors and
permitted assigns any rights or remedies under or by reason of this Agreement.
10.11 ROGER O. WALTHER TO ACT AS AGENT FOR SELLERS. Each Seller hereby
irrevocably designates and appoints Roger O. Walther as agent and
attorney-in-fact of such Seller under this Agreement and authorizes Roger O.
Walther to take such actions and give and receive such notices as are
contemplated to be taken, given or received by the Sellers under this Agreement.
Buyer shall be fully justified in relying on any notice or communication from
Roger O. Walther as agent and any notice or communication delivered to Roger O.
Walther as agent of a Seller will be deemed to have been delivered to the
Sellers.
10.12 RESOLUTION OF DISPUTES. In the event of any dispute or disagreement
arising from, or relating to, this Agreement, the parties shall negotiate in
good faith and use their respective reasonable efforts to reach a mutually
acceptable resolution of such dispute or disagreement within thirty (30) days
after either party has notified the other party of the subject of such dispute
or disagreement. In the event that, within thirty (30) days after such notice,
the parties are unable to reach a mutually acceptable resolution then either
party may initiate action in any Federal or state court located in San
Francisco, California, to enforce its rights under this Agreement. The parties
hereby consent to the jurisdiction and venue of such courts.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ELS: BUYER:
ELS Educational Services, Inc. Berlitz International, Inc.
By: /s/ Roger O. Walther By: /s/ Hiromasa Yokoi
-------------------------------- --------------------------------
Its: Chairman & C.E.O. Its: Vice Chairman, Chief Executive
Officer and President
------------------------------- -------------------------------
SELLERS:
Roger O. Walther, S. P. Trust
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
Roger O. Walther, Trustee
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
Wendy Walther
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
Christine Walther Tripp
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
Edward Walther
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
Anne Dunning
By: /s/ Roger O. Walther as attorney in fact for
--------------------------------
John Dunning
[LETTERHEAD OF BERLITZ INTERNATIONAL, INC.]
Contact: Henry D. James, Executive Vice President and Chief Financial Officer
Telephone Number: (609) 514-3024
FOR IMMEDIATE RELEASE
BERLITZ INTERNATIONAL, INC. AGREES TO ACQUIRE
ELS EDUCATIONAL SERVICES, INC.
PRINCETON, N.J., July 23, 1997 - Berlitz International, Inc. ("Berlitz")
(NYSE:BTZ) announced that it has reached an agreement to acquire ELS Educational
Services, Inc. ("ELS"), a privately held provider of intensive English language
instruction in a stock acquisition for a cash purchase price of $95.0 million.
Closing of the acquisition, which is subject to certain conditions, including
regulatory approvals, is expected to occur in early September.
Financing for the transaction, and simultaneous refinancing of existing long
term debt, will be provided by NationsBank, N.A. Goldman Sachs & Co. acted as
financial advisors to Berlitz. Montgomery Securities acted as financial advisors
to ELS.
ELS owns and operates 25 language centers in the United States and two in
England. In addition to intensive English language instruction, the programs
offered by ELS typically include accommodations in University dormitories or
host families which helps to reinforce what is learned in the classroom
environment. ELS also operates a language center franchise program in 16
countries. Consolidated revenue for ELS for the 12 months ended December 31,
1996 was $62.6 million.
Berlitz is the world's premier language services firm with operations in 38
countries. Berlitz offers intensive English language instruction programs
through its BERLITZ ON CAMPUS(R) division which operates ten centers in the
United States and one in Canada.
"We are extremely excited about the strengths and depth that ELS brings to
Berlitz", stated Mr. Hiromasa Yokoi, Vice Chairman, Chief Executive Officer and
President of Berlitz. "ELS has a solid brand, an exceptional reputation as a
service provider, and an extensive network of company owned and franchised
centers and sales representatives that are strategically located around the
world. These beneficial factors will allow us to maintain the ELS name and build
on the valuable relationships established during its 35 year history."
Commenting on the acquisition, ELS Chairman and principal shareholder, Roger O.
Walther and President Perry S. Atkins stated that "Our partners around the world
should feel confident that Berlitz will continue ELS Language Centers'
commitment to excellence."
