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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 17, 1998
COMPUTER LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 0-26040 36-3501869
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(State or other jurisdiction (Commission File Number) (IRS Employer Identification
of incorporation) Number)
11350 RANDOM HILLS ROAD
SUITE 240
FAIRFAX, VIRGINIA 22030
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (703) 359-9333
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On February 23, 1998, Computer Learning Centers, Inc. ("CLC") announced that
on February 17, 1998 it had completed the acquisition of Markerdowne Corporation
d/b/a Computer Learning Centers Paramus ("CLC Paramus"), a privately-held
provider of information technology ("IT") education and training based in
Paramus, New Jersey. The acquisition which will be accounted for as a pooling of
interests, was completed by issuing 510,287 shares of CLC Common Stock. CLC
Paramus had calendar 1997 annual revenues of approximately $6.7 million and
serves approximately 800 students.
On February 23, 1998, CLC announced that on February 20, 1998 it had
completed the acquisition of Delta College, a Montreal, Quebec-based,
privately-held provider of IT education and training. The transaction was
completed by means of an exchange of shares of Delta College for 548,408 shares
of CLC Common Stock. Delta College reported revenues of approximately U.S. $6.7
million (CM $9.4 million) for its fiscal year ended June 30, 1997. Delta College
serves approximately 800 students at three locations: Delta College--Montreal in
downtown Montreal; Delta College--Laval located on the north shore of Montreal;
and Delta College--Brossard, located on Montreal's south shore, which commenced
classes in January 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
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99.1 Asset Purchase Agreement dated December 31, 1997, as amended, among the Registrant,
Markerdowne Corporation, Graeme Dorras, Randy Proto and Chris Coutts.
99.2 Share Purchase Agreement dated February 20, as amended, among the Registrant, Delta
College Inc., Roger Matte, Richard Matte, Marie-Josee Matte, Dominique Matte, Johanne
Matte, Suzanne Matte and Dolmen (1994) Inc.
99.3 Press Release Dated February 23, 1998 relating to Markerdowne acquisition.
99.4 Press Release Dated February 23, 1998 relating to Delta acquisition.
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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.
COMPUTER LEARNING CENTERS, INC.
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By: /s/ CHARLES L. COSGROVE
-----------------------------------------
Charles L. Cosgrove
Dated: March 10, 1998 CHIEF FINANCIAL OFFICER
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INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION PAGE NO.
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99.1 Asset Purchase Agreement dated December 31, 1997, as amended, among the Registrant,
Markerdowne Corporation, Graeme Dorras, Randy Proto and Chris Coutts. 5
99.2 Share Purchase Agreement dated February 20, as amended, among the Registrant, and Delta
College Inc., Roger Matte, Richard Matte, Marie-Josee Matte, Dominique Matte, Johanne
Matte, Suzanne Matte and Dolmen (1994), Inc. 69
99.3 Press Release Dated February 23, 1998 relating to Markerdowne acquisition. 227
99.4 Press Release Dated February 23, 1998 relating to Delta acquisition. 228
</TABLE>
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Exhibit 99.1
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of December
31, 1997 by and among Computer Learning Centers, Inc., a Delaware corporation
(the "Buyer"), Markerdowne Corporation, a Delaware corporation (the
"Seller"), and Graeme Dorras ("Dorras"), Randy Proto ("Proto") and Chris
Coutts ("Coutts") (Dorras, Proto and Coutts are collectively referred to
herein as the "Seller's Shareholders" and individually referred to herein as
a "Shareholder").
WHEREAS, the Seller is solely engaged in the ownership and operation of
the Computer Learning Center, Paramus in Paramus, New Jersey, a business
which operates a school providing computer-related education and training
(the "Business").
WHEREAS, Buyer desires to purchase from the Seller, and the Seller
desires to sell to Buyer, the Business and all of the Seller's rights, title
and interest in the assets of Seller utilized in the conduct and operations
of the Business and the Buyer has agreed to assume certain liabilities of the
Seller associated with the Business;
WHEREAS, Dorras currently owns all of the issued and outstanding capital
stock of the Seller and Proto and Coutts each have an option to purchase
0.167 shares of the Seller's common stock, par value $1.00 per share, from
Dorras;
WHEREAS, the Seller's Shareholders desire that the Seller and the Buyer
enter into this Agreement and deem that such purchase and sale of the
Seller's assets is in the best interests of the Seller; and
WHEREAS, for accounting purposes, it is intended that the transaction
contemplated by this Agreement shall be accounted for as a
pooling-of-interests business combination and for tax purposes it is intended
that the transaction shall be treated as a tax-free reorganization; and
WHEREAS, the parties hereto desire to set forth herein the terms and
provisions of their understandings and agreements.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of these terms, unless the context otherwise
requires, may be used in the singular or plural depending upon the reference.
"ACCOUNTS" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, insurance claims and proceeds
and notes receivable of the Seller.
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"ACCOUNTS PAYABLE" shall mean bona fide trade accounts payable which
were incurred in the ordinary course of business.
"ACCREDITATION" shall mean accreditation, Licenses, Permits,
certifications, approvals, and other governmental, non-governmental,
quasi-governmental and regulatory authorizations required under all laws,
rules, regulations and standards applicable to or affecting the Seller or the
Institution, exclusive of Certification.
"ACCREDITING BODY" shall mean any state, governmental department and/or
agency or any non-governmental or quasi-governmental body that provides
Accreditation, including but not limited to the Accrediting Council for
Independent Colleges and Schools and the New Jersey Department of Education.
"AFFILIATE" means as to any party, any entity which directly or
indirectly, is in control of, is controlled by, or is under common control
with, such party, including any person who would be treated as a member of a
controlled group under Section 414 of the Code and any officer or director of
such party. For purposes of this definition, an entity shall be deemed to be
"controlled by" a person if the person possesses, directly or indirectly,
power either to (i) vote 10% or more of the securities (including convertible
securities) having ordinary voting power or (ii) direct or cause the
direction of the management or policies of such entity whether by contract or
otherwise; and, as to a party who is a natural person, such person's spouse,
parents, siblings and lineal descendants.
"ASSETS" shall have the meaning set forth in Section 2.1 hereof.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.3
hereof.
"BOOKS AND RECORDS" shall mean all customarily maintained records
pertaining to the Assets, the Assumed Liabilities, customers, or suppliers of
Seller, including, without limitation, all books, records and documents
required to be maintained pursuant to the provisions of the Higher Education
Act of 1965, as amended, and its implementing regulations.
"CERTIFICATION" shall mean a Program Participation Agreement issued and
counter-signed by the Secretary of the U.S. Department of Education
certifying an institution for participation (including participation on a
provisional basis) in the programs of Federal student financial assistance
administered pursuant to Title IV of the Higher Education Act of 1965, as
amended.
"CLC COMMON STOCK" shall mean the Buyer's Common Stock, par value $0.01
per share.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
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"COMMISSION" shall mean the Securities and Exchange Commission.
"CONTRACT" shall mean with respect to the Seller, the Institution or the
Business any of the agreements, contracts, Leases, notes, loans, evidences of
indebtedness, purchase orders, letters of credit, franchise agreements,
undertakings, covenants not to compete, employment agreements, licenses,
instruments, obligations, commitments to which either of the Seller, the
Seller's Shareholders or the Institution is a party or to which any of their
assets are subject, whether oral or written, express or implied.
"CONTRACT RIGHTS" shall mean with respect to the Seller, the Institution
or the Business all of the Seller's Shareholders' or Institution's rights and
obligations under the Contracts, to the extent such obligations are assumed
by Buyer pursuant to Section 2.3 hereof.
"CURRENT BALANCE SHEET" shall have the meaning set forth in Section 4.7
hereof.
"ED" shall mean the U.S. Department of Education.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance, mortgage or other
right that may impair title to any property or asset.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2 hereof.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.4
hereof.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment, spare parts, supplies, vehicles and
other tangible personal property owned by the Seller as of the date hereof
plus all additions, replacements or deletions since the date hereof in the
ordinary course of Seller's business.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time.
"HEA" shall mean the Higher Education Act of 1965, as amended, 20 U.S.C.
Section 1001 et seq.
"INSTITUTION" shall mean Seller's "Computer Learning Center" school located
in Paramus, New Jersey.
"INSURANCE POLICIES" shall mean with respect to the Seller the insurance
policies relating to the Assets.
"IRS" shall mean the United States Internal Revenue Service.
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"LEASES" shall mean all of the leases of the Seller listed on the
Schedules hereto and all other leases relating to the Assets (as defined in
Section 2.1) which are not required to be scheduled pursuant to this
Agreement.
"LICENSE" shall mean any authorization, approval, licensure,
Accreditation or Certification issued by the federal government or any state,
governmental department and/or agency, or non-governmental or
quasi-governmental body, including but not limited to the Accrediting Council
for Independent Colleges and Schools, the New Jersey Department of Education
and the U.S. Department of Education.
"MATERIAL ADVERSE EFFECT" shall mean with respect to the Seller or the
Institution a material adverse effect on (i) the Assets (as defined in
Section 2.1), the Business or the condition (financial or otherwise),
properties, liabilities, reserves, working capital, earnings, technology,
prospects or relations with customers, students, suppliers, distributors,
employees or regulators of the Seller or the Institution, or (ii) the right
or ability of the Seller to consummate the transactions contemplated hereby.
"MISCELLANEOUS ASSETS" shall mean all employee records relating to those
employees to be employed by the Buyer as of the Closing (as defined in
Section 3.1); all student records for students presently or historically
enrolled at the Institution; all accounting information pertaining to the
continued operations of the Seller and all media in which or on which any of
the information, knowledge, data or other records relating to the Assets may
be related or stored; all computer software relating to accounting and
operations systems; all of the Business's office and other supplies; all
warranties, claims and causes of action (and the benefit of any and all
collateral or security given in connection therewith) inuring to the benefit
of the Seller relating to the Assets; and all other assets used or useful in
connection with the business of the Seller not otherwise described in this
Agreement of any character whatsoever, whether personal, tangible or
intangible, wherever located, owned or possessed by the Seller and related to
the Business (other than the Excluded Assets).
"OTHER RIGHTS" shall mean all assignable or conveyable rights under
Licenses, Permits, approvals, qualifications or the like relating directly or
indirectly to the business of the Seller issued or to be issued prior to the
Closing by any government or by any governmental unit, agency, body or
instrumentality whether Federal, State, local, foreign or other.
"PERMITS" shall mean all Licenses, permits and other governmental
authorizations necessary to carry on the Business as presently conducted and
as proposed to be conducted.
"REAL PROPERTY" shall mean the real property owned by the Seller and
utilized in any manner in the business or operations of the Business, all of
which is described in Schedule 4.13 hereto.
"SUBSIDIARY" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or
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other persons performing similar functions are directly or indirectly owned by
the Seller.
"SUPPLIES" shall mean all of Seller's inventory and supplies and all
other materials utilized in connection with the Assets.
"TAX" or "TAXES" shall mean all federal, state, local, foreign and other
taxes, assessments or other government charges, including, without
limitation, income, estimated income, business, occupation, franchise,
property, sales, transfer, use, employment, commercial rent or withholding
taxes, including interest, penalties and additions in connection therewith
for which the Seller or the Seller's Shareholders may be liable.
"TITLE IV PROGRAMS" shall mean the programs of Federal student financial
assistance administered pursuant to Title IV of the Higher Education Act of
1965, as amended.
2. PURCHASE AND SALE OF ASSETS
2.1. Transfer of Assets. Upon the terms and subject to the conditions
of this Agreement, and based upon the representations, warranties, covenants
and agreements made herein by each of the parties to the other, on the
Closing Date (as defined in Section 3.1), the Seller hereby agrees to sell,
convey, assign, transfer and deliver to the Buyer and the Buyer hereby agrees
to purchase, accept and take from the Seller, all of the assets, properties
and other rights (excluding the Excluded Assets (as defined in Section 2.2))
owned or leased by, licensed or used by, the Seller relating to the Business
(the "Assets"), including without limitation, the following:
(a) all cash and cash equivalents of the Seller, wherever located,
which shall include but is not limited to, cash held with or by the
Institution;
(b) notes and notes receivable, Accounts, refunds or deposits and
prepaid expenses, including without limitation, any prepaid insurance
premiums;
(c) all Contract Rights;
(d) all Fixtures and Equipment;
(e) all Real Property;
(f) all Supplies;
(g) all Books and Records;
(h) the Insurance Policies to the extent Buyer desires such
policies to be assigned to the extent such policies may be assigned;
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(i) all of the Seller's rights in and to trade and service names,
assumed names, marks, copyrights, patents, and all applications and
registrations with respect to any of the foregoing, and all telephone and fax
numbers, electronic addresses and passwords, including, without limitation,
the Intellectual Property set forth on Schedule 4.21;
(j) all Permits, Accreditations, certifications, Licenses, program
participation agreements, and any other approvals from any applicable
Accrediting Body, ED, guaranty agency or state, governmental department
and/or agency or any non-governmental or quasi-governmental body from which
approval is necessary for the operations of the Institution, to the extent
such Permits, Accreditations, program participation agreements and approvals
are assignable;
(k) all Miscellaneous Assets;
(l) all Other Rights; and
(m) all goodwill of the Seller, going concern value and business
appurtenant thereto.
2.2. Excluded Assets. Notwithstanding the foregoing, the Assets shall
not include the following properties, assets and other rights (the "Excluded
Assets") which shall be retained by the Seller:
(a) the corporate seal, articles of incorporation, minute book,
stock book, tax returns, tax preparation work papers and other records
relating to the corporate organization of the Seller;
(b) the assets set forth on Schedule 2.2(b) (as amended and
supplemented by Buyer prior to the Closing).
2.3. Assumed Liabilities. As of the Closing, the Buyer shall assume,
discharge and perform when lawfully due only the following obligations,
duties and liabilities of the Seller relating to the Business (collectively,
the "Assumed Liabilities"):
(a) all liabilities of the Seller for Accounts Payable reflected
on the Current Balance Sheet (as defined in Section 4.7) or incurred in the
ordinary course of business consistent with past practice after the date of
the Current Balance Sheet and prior to the Closing Date, less any such
liabilities paid or discharged by the Seller prior to the Closing Date;
(b) all liabilities, obligations and commitments of the Seller
arising on or after the Closing Date pursuant to the Leases (including any
Taxes due thereunder) and Contracts of Seller but expressly excluding any
obligations or liabilities of the Seller for any breach of or
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default under any Leases or Contracts occurring on or prior to the Closing
Date;
(c) all liabilities of the Business as reflected on the Current
Balance Sheet (as defined in Section 4.7) and any and all normal operating
expenses, indebtedness and liabilities incurred in the ordinary course of
business consistent with past practice after the date of the Current Balance
Sheet and prior to the Closing Date, less any such liabilities paid or
discharged by the Seller prior to the Closing Date; and
(d) all accumulated sick leave and all vacation pay owed to the
employees of the Business (except for sick leave and vacation pay owed to any
of the Sellers' Shareholders).
2.4. Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.3, Buyer shall not assume, or otherwise be responsible for, any
obligations, liabilities, liens or encumbrances of Seller, whether actual or
contingent, matured or unmatured, liquidated or unliquidated, or known or
unknown, whether arising out of occurrences prior to, at or after the date
hereof and notwithstanding the fact that any such liability is identified
herein or on the schedules hereto (collectively, "Excluded Liabilities")
including, without limitation:
(a) all bank debt, senior debt or other debt obligations of the
Seller;
(b) any of the Seller's or the Seller's Shareholders' obligations
hereunder;
(c) any liability or obligation of the Seller or any other person
or entity, known or unknown, (i) not reflected on the Current Balance Sheet
(as defined in Section 4.7) or (ii) not incurred in the ordinary course of
business consistent with past practice after the date of the Current Balance
Sheet and prior to the Closing Date;
(d) Encumbrances (other than permitted liens and encumbrances
identified on Schedule 2.4(d)) to which the Assets are subject, which are (i)
not reflected on the Current Balance Sheet (as defined in Section 4.7) or
(ii) not incurred in the ordinary course of business consistent with past
practice after the date of the Current Balance Sheet and prior to the Closing
Date;
(e) any liability or obligation relating to Taxes (other than
Taxes accrued on the Closing Balance Sheet), including any interest or
penalties related thereto;
(f) any liability or obligation that constitutes a breach of the
Seller's representations and warranties hereunder;
(g) any liability of the Seller, the Institution or the Seller's
Shareholders arising out of or related to litigation involving the Seller,
the Institution or the Seller's Shareholders not specifically accrued on the
Current Balance Sheet;
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(h) any liability or obligation, whether in tort, contract or for
violation of any law, statute, rule or regulation by the Seller or any
officer, director, employee or agent of the Seller, that arises out of or
results from any act, omission, occurrence or state of facts on or prior to
the Closing Date not specifically accrued on the Current Balance Sheet and
any liability or obligation arising out of the specific litigation matters
set forth on Schedule 4.15.;
(i) any legal, accounting, brokerage, finder's fee or other
expenses incurred by the Seller in connection with this Agreement or the
consummation of the transactions contemplated hereunder;
(j) any obligation relating to overpayments, billing errors or
similar adjustments with respect to payments received by the Seller prior to
the Closing Date not specifically accrued on the Current Balance Sheet; and
(k) any liabilities asserted or assessed by ED, any guaranty
agency, any state or any other governmental, non-governmental or
quasi-governmental entity, including liabilities asserted or assessed with
respect to the Title IV Programs or to any other forms of student financial
assistance, grants or loans, to the extent such liabilities are related to
the operations of the Institution prior to the Closing not specifically
accrued on the Current Balance Sheet.
2.5. Purchase Price.
(a) The purchase price for the Assets shall be $12,400,000 (the
"Purchase Price"). The Purchase Price is payable to the Seller at Closing in
256,676 shares of CLC Common Stock to be issued by the Buyer to the Seller at
Closing which was determined by dividing (x) the Purchase Price by (y) $48.31
(the "Purchase Share Price"), the average closing prices of a share of CLC
Common Stock on the Nasdaq Stock Market for the thirty (30) consecutive
trading days which preceded December 2, 1997, as reported by The Wall Street
Journal. In the event that a reclassification, stock split, stock dividend or
other general distribution of securities with respect to CLC Common Stock
shall occur on or prior to the Closing Date, then an appropriate equitable
adjustment shall be made to the number of shares of CLC Common Stock issued
to the Seller pursuant to this section.
(b) Seller shall be responsible for any documentary transfer taxes
and any sales, use or other Taxes imposed by reason of the transfer of the
Assets, and the fees and costs of recording or filing all applicable
conveyancing instruments necessary to transfer the Assets. Buyer shall be
responsible for any transfer taxes, costs or fees incurred by the Buyer by
reason of the issuance of the shares of CLC Common Stock.
2.6. Closing Balance Sheet. As soon as reasonably practicable after the
Closing, but in any event not later than thirty (30) days after the Closing,
the Buyer shall cause to be delivered to the Seller (prepared with the
Seller's reasonable assistance) a balance sheet of the Business as of the
Closing Date prepared in accordance with GAAP (the "Closing Balance Sheet").
Within fifteen (15) days after the Seller
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receives the Closing Balance Sheet, the Seller shall give written notice to
the Buyer of any objections the Seller has in respect of the Closing Balance
Sheet, which notice shall specify the basis for such objections. If the
Seller does not notify the Buyer of any objections within such period then
the Seller shall be deemed to have accepted the Closing Balance Sheet which
shall become final and binding on the parties. If the Seller objects to the
Closing Balance Sheet as provided above, then the Buyer and the Seller shall
negotiate in good faith to resolve such objections and arrive at an agreed
upon Closing Balance Sheet. Any objections of the Seller which have not been
resolved by the parties within fifteen (15) days after the delivery of the
Seller's objections to the Buyer shall be promptly presented for resolution
to a mutually agreed upon, nationally recognized, firm of certified public
accountants (the "Accountants"). The Accountants shall promptly resolve the
disputed items in accordance with GAAP and the determinations of the
Accountants in respect thereof shall be final and binding upon the parties.
2.7. Escrowed Shares
(a) As collateral security for the payment of any indemnification
obligations of the Seller and the Seller's Shareholders pursuant to Section
11, the Seller and the Seller's Shareholders shall deliver to the Escrow
Agent (as defined in the Escrow Agreement to be entered into at the Closing
(the "Escrow Agreement")), pursuant to the terms of the Escrow Agreement:
(i) 25,668 shares of CLC Common Stock (the "Escrowed Shares"), and the
certificates and instruments, if any, representing or evidencing the Escrowed
Shares; (ii) all securities hereafter delivered to the Seller with respect to
or in substitution for the Escrowed Shares, all certificates and instruments
representing or evidencing such securities, and all cash and non-cash
dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event the Seller receives any such property, the Seller shall hold such
property in trust for the Buyer and shall immediately deliver such property
to the Buyer to be held hereunder as Escrowed Shares; and (iii) all cash and
non-cash proceeds of all of the foregoing property and all rights, titles,
interests, privileges and preferences appertaining or incident to the
foregoing property ((i) (ii) and (iii) are collectively referred to herein as
the "Escrow Fund"). The Seller and the Seller's Shareholders hereby grant
the Buyer a first priority security interest in the Escrowed Fund.
(b) Prior to the Release Date (as defined in Section 2.7(d)), the
Escrow Agent shall hold in escrow for use as collateral, as set forth in
Section 2.7(a), the cash proceeds from the Escrow Fund. The Sellers shall be
entitled to exercise any voting powers incident to the Escrowed Shares to the
extent such shares remain in the Escrow Fund.
(c) Each certificate, if any, evidencing Escrowed Shares issued
pursuant to this Agreement shall be delivered to the Escrow Agent directly by
the transfer agent.
(d) The Escrow Fund (which shall be deemed to include the Escrowed
Shares) shall be available to satisfy any indemnification obligations of the
Seller pursuant to Section 11 until the date which is one (1) year after the
Closing Date (the "Release Date"). Promptly
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following the Release Date, the Escrow Agent shall return or cause to be
returned to the Seller the Escrowed Shares and any other cash or property
included in the Escrow Fund, less Escrowed Shares (or such other cash or
property) having an aggregate value equal to the amount of (i) any pending
claim for indemnification made by any Indemnified Party (as defined in
Section 11), and (ii) any indemnification obligations finally resolved and
satisfied, prior to the Release Date, in favor of the Buyer. For purposes of
the preceding sentence and Section 11, the CLC Common Stock held as Escrowed
Shares shall be valued at the Purchase Share Price.
2.8. Accounting and Tax Treatment. The Buyer, the Seller and the
Seller's Shareholders intend that the transactions contemplated by this
Agreement be treated for accounting purposes as a pooling interest business
combination and for tax purposes as a reorganization under Section
368(a)(1)(C) of the Code. Each of the parties hereto will report in their
respective federal income tax return for the taxable year including the
Closing Date that the Merger qualified as a reorganization under Section 368,
unless, by written opinion of counsel, such party is advised that there is
not a reasonable basis for such position, and the other parties hereto are
provided copies of such opinion.
3. CLOSING
3.1. Time and Place. Upon the terms and subject to the conditions set
forth herein, the closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of Tucker, Flyer and Lewis, 1615
L Street, N.W., Suite 400, Washington, D.C. 20036, as soon as practicable
after all of the conditions set forth in Sections 7 and 8 shall have been
satisfied or waived, or at such other time and date as the parties hereto may
mutually agree, which date shall be referred to as the "Closing Date."
3.2. Deliveries by the Seller To effect the transfer referred to in
Section 2.1 hereof, the Seller shall, on the Closing Date, execute and
deliver to Buyer:
(a) bills of sale, in form and substance satisfactory to Buyer,
conveying in the aggregate all personal property included in the Assets;
(b) assignments of the real property Leases (the "Real Property
Leases") of the Seller together with the consents of landlords, if required
by the terms of such Real Property Leases;
(c) assignments in form and substance satisfactory to Buyer, with
all required consents of Leases and other Contracts which Buyer has agreed to
assume;
(d) such other instruments as shall be reasonably requested by
Buyer to vest in Buyer title in and to the Assets in accordance with the
provisions hereof; and
(e) all other previously undelivered documents required to be
delivered at or
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prior to the Closing.
At or prior to the Closing, the Buyer may, in its sole and absolute
discretion, instruct the Seller to deliver the Assets to a direct or indirect
wholly-owned subsidiary of the Buyer; provided, that the Buyer agrees to
remain responsible for its obligations hereunder.
3.3. Deliveries by the Buyer. At the Closing, the Buyer shall:
(a) deliver to the Seller one or more certificates evidencing the
shares of CLC Common Stock issuable by the Buyer as the Purchase Price,
except for those shares set aside as the Escrowed Shares (the shares of CLC
Common Stock (including the Escrowed Shares) issuable by the Buyer as the
Purchase Price are sometimes referred to herein as the "CLC Shares");`
(b) deliver to the Escrow Agent the Escrowed Shares pursuant to
Sections 2.5 and 2.7 herein;
(c) deliver to the Seller instruments of assumption evidencing Buyer's
assumption of the Assumed Liabilities; and
(d) deliver to the Seller, all other previously undelivered
documents required to be delivered at or prior to the Closing.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SELLER'S SHAREHOLDERS
To induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, the Seller and Seller's
Shareholders, jointly and severally, represent and warrant to the Buyer, as
of the date hereof and as of the Closing Date, as set forth below:
4.1. Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2. Power and Authority. The Seller has all requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as presently conducted and is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction in which the
character of its properties or the nature of its business activities requires
such qualification.
4.3. Authority for Agreement. The Board of Directors and the
shareholders of the Seller have unanimously approved this
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Agreement, and have authorized the execution and delivery and performance
hereof. The Seller has full corporate power, authority and legal right to
enter into this Agreement and to consummate the transactions contemplated
hereby. The Seller's Shareholders have the legal capacity to enter into this
Agreement and to consummate the transactions contemplated hereby. This
Agreement is a legal, valid and binding obligation of the Seller and the
Seller's Shareholders, enforceable against the Seller and the Seller's
Shareholders in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights in general.
4.4. No Violation to Result. Except as set forth on Schedule 4.4, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and the fulfillment of the terms hereof:
(i) are not in violation or breach of, do not conflict with or constitute a
default under, and will not accelerate or permit the acceleration of the
performance required by, any of the terms of the charter documents or by-laws
of the Seller or any Contract or Assumed Liability, to which the Seller or
Seller's Shareholders is a party or which affects any of the Assets; (ii)
will not be an event which, after notice or lapse of time or both, will
result in any such violation, breach, conflict, default, or acceleration;
(iii) will not result in a violation under any law, judgment, decree, order,
rule, regulation, permit or other legal requirement of any governmental
authority, court or arbitration tribunal whether federal, state, provincial,
municipal or local (within the U.S. or otherwise) at law or in equity, and
applicable to the Seller or the Seller's Shareholders; and (iv) will not
result in the creation or imposition of any Encumbrance in favor of any
person upon any of the properties or assets of either of the Seller or
Seller's Shareholders.
4.5. Capitalization
(a) Schedule 4.5 sets forth, with respect to the Seller, (i) the
number of authorized shares of each class of its capital stock, (ii) the
number of issued and outstanding shares of each class of its capital stock
and (iii) the number of shares of each class which are held in treasury. All
of the issued and outstanding shares of capital stock of the Seller (i) have
been duly authorized and validly issued and are fully paid and
non-assessable, (ii) were issued in compliance with all applicable state and
federal laws and (iii) were not issued in violation of any preemptive rights
or rights of first refusal. Except as set forth in Schedule 4.5, no
preemptive rights or rights of first refusal exist with respect to the shares
of capital stock of the Seller, and no such rights arise by virtue of or in
connection with the transactions contemplated hereby; and, to the extent
permitted by law, the Seller's Shareholders have waived (or hereby waives)
any and all such preemptive rights and rights of first refusal. Except as
set forth on Schedule 4.5, there are no outstanding or authorized rights,
options, warrants, convertible securities, subscription rights, conversion
rights, exchange rights or other agreements or commitments of any kind that
could require the Seller or the Seller's Shareholders to issue or sell any
shares of its capital stock (or securities convertible into or exchangeable
for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights
with respect to the Seller. Except as set forth on Schedule 4.5, there are
no proxies, voting rights or
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other agreements or understandings with respect to the voting or transfer of the
capital stock of the Seller. The Seller is not obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock. None of the shares of
the Seller's capital stock was issued pursuant to any award, grant or bonus.
(b) As of the date hereof, Dorras is the sole holder of the issued
and outstanding capital stock of the Seller. Not later than January 5, 1998
and until the Seller may transfer the shares pursuant to Section 12.3 hereof,
the Seller's Shareholders shall be the sole holders of the issued and
outstanding shares of capital stock of the Seller in the amounts set forth in
Schedule 4.5. Except as set forth in Schedule 4.5, the Seller's Shareholders
own such shares as is set forth on Schedule 4.5 free and clear of any
mortgage, security interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge, preference,
priority or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, conversion, put, call or other claim or right,
restriction on transfer (other than restrictions imposed by federal and state
securities laws), or preferential arrangement of any kind or nature
whatsoever (including any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
4.6. Subsidiaries. The Seller does not own (directly or indirectly) any
Subsidiary.
4.7. Financial Statements.
(a) Schedule 4.7 includes true copies of (i) the audited balance
sheets of the Seller as of the end of the periods identified on Schedule 4.7
(such dates being the end of the Seller's three (3) most recently completed
fiscal years), and audited statements of income, cash flows and retained
earnings for each of its three (3) most recently completed fiscal years and
any additional financial statements previously filed with ED on behalf of the
Seller or the Institution on an individual basis, as appropriate, for each of
its three (3) most recently completed fiscal years (collectively, the "Annual
Financials"), and (ii) true copies of the Seller's unaudited interim balance
sheet (the "Current Balance Sheet") as of October 31, 1997 (the "Balance
Sheet Date") and the Seller's statements of income, cash flows and retained
earnings and any financial statements filed with ED on behalf of the Seller
or the Institution on an individual basis for that period of the current
fiscal year then ended (collectively, the "Interim Financials" and together
with the Annual Financials, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP consistently applied
(subject, in the case of the Interim Financials, to normal year-end audit
adjustments, which individually or in the aggregate will not be material, and
to the omission of footnote information). Each of the balance sheets
included in the Financial Statements presents fairly the financial condition
of the Seller as of the dates indicated thereon, and each of the statements
of income, cash flows and retained earnings included in the Financial
Statements presents fairly the results of its operations for the periods
indicated thereon. During the periods covered by the Financial Statements,
there has been no
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material change in the Seller's accounting policies. There are no material,
special or non-recurring items of income or expense during the periods
covered by the Financial Statements and the balance sheets included in the
Financial Statements do not reflect any write-up or revaluation increasing
the book value of any assets, except as specifically disclosed in the notes
thereto. The Financial Statements reflect all adjustments necessary for a
fair presentation of the financial information contained therein.
(b) The Books and Records, minute books, stock record books, and
other records of the Seller, all of which have been made available to the
Buyer, are complete and correct in all material respects. There have been no
transactions involving the business of the Seller or the Business which
properly should have been set forth in the Financial Statements and which
have not been accurately so set forth. The minute books of the Seller
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Seller, and no meeting of any such
stockholders, Boards of Directors, or committee has been held for which
minutes have not been prepared as of the date hereof and are not contained in
such minute books.
4.8. Liabilities and Obligations.
(a) Except as disclosed on Schedule 4.8(a), there are no
liabilities or obligations of the Seller relating to the Business, other
than: (i) those liabilities reflected on the Current Balance Sheet and not
previously paid or discharged; and (ii) those liabilities incurred after the
Balance Sheet Date arising in the ordinary course of business, which were
incurred consistent with past practice. For purposes of this Section 4.8(a),
the term "liabilities" shall include, without limitation, any direct or
indirect liability, indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, either accrued,
absolute, contingent, mature, unmature or otherwise and whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured.
(b) Schedule 4.8(b) sets forth a summary description of all
deposits held by the Seller and reflected in the Financial Statements.
4.9. Adverse Changes. Except as set forth on Schedule 4.9, from
December 31, 1996: (i) there has been no change in the condition (financial
or otherwise), business, net worth, assets, properties, liabilities or
obligations (fixed, contingent, known, unknown or otherwise) of the Seller
which has had or is likely to have a Material Adverse Effect, and there has
been no occurrence, circumstance or combination thereof which might
reasonably be expected to result in any such Material Adverse Effect before
or after the Closing Date; (ii) the Seller has not declared or paid any
dividend or distribution in respect of the capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of the capital
stock of the Seller, except as contemplated by this Agreement and (iii) the
Seller has complied with all of the covenants set forth in Section 6.5(b),
(c) (d), (h), (j), (l) or (m), to the same extent as if this Agreement had
been signed on December 31, 1996.
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4.10. Employee Benefit Plans; Employee Matters.
(a) All employee benefit plans, programs, policies and
arrangements (whether formal or informal, written or unwritten, and whether
maintained for the benefit of a single individual or more than one
individual) maintained or contributed to by the Seller for the benefit of any
current or former employee of the Seller or in which such employees are
entitled to participate are listed in Schedule 4.10 (the "Benefit Plans").
With respect to each Benefit Plan, true, correct and complete copies of all
of the following documents, if applicable, will be delivered or made
available to the Buyer prior to the Closing Date: all plan documents and
amendments thereto; all written descriptions of any oral plans or policies;
all trust agreements; all annuity contracts, insurance policies or contracts
and service agreements; the three (3) most recent Forms 5500 and any
financial statements attached thereto; the most recent actuarial and
valuation report; the most recent IRS determination letter; the most recent
summary plan description; and copies of the nondiscrimination testing for the
last three (3) years. Each Benefit Plan and the administration thereof
complies, and has at all times complied, with the terms of such Benefit Plan
and with the requirements of all applicable law, including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code. Each Benefit Plan intended to qualify under section
401(a) of the Code so qualifies, and each trust which forms a part of any
such Benefit Plan is exempt from taxation under section 501(a) of the Code.
No Benefit Plan subject to Part 3 of Title I of ERISA has incurred any
"accumulated funding deficiency" within the meaning of section 302 of ERISA
or section 412 of the Code. No liability has been incurred or is expected to
be incurred under Title IV of ERISA to any party with respect to any Benefit
Plan, or any other plan presently or heretofore maintained or contributed to
by the Seller, any predecessor to the Seller, or any entity that is or at any
time was a member of a controlled group, as defined in section 412(n)(6)(B)
of the Code, which includes or included the Seller ("Controlled Group
Member"). Neither the Seller, nor any Controlled Group Member has incurred
any liability for any Tax imposed under sections 4971 through 4980B of the
Code or civil liability under sections 502(i) or (l) of ERISA. The "amount
of unfunded benefit liabilities" within the meaning of section 4001(a)(18) of
ERISA does not exceed zero with respect to any Benefit Plan subject to Title
IV of ERISA. No Benefit Plan is a "multiemployer plan" within the meaning of
section 3 (37) of ERISA. No Benefit Plan provides health or death benefit
coverage to any employee or his spouse or dependents beyond the termination
of an employee's employment, except as required by Part 6 of Title I of ERISA
or section 4980B of the Code. No "reportable event" (within the meaning of
section 4043 of ERISA) has occurred with respect to any Benefit Plan or any
plan maintained by a Controlled Group Member since the effective date of said
section 4043. The Seller has no liability (whether actual, contingent or
otherwise) with respect to any employee benefit plan or arrangement sponsored
or maintained by a Controlled Group Member. No suit, actions or other
litigation (excluding claims for benefits incurred in the ordinary course of
plan activities) have been brought against or with respect to any Benefit
Plan, and no suit, action, or other litigation is threatened by, against, or
relating to any Benefit Plan and Seller does not have any knowledge of any
fact that could form the basis for any such suit, action or litigation. No
"prohibited transaction" within the meaning of sections 406 or 407 of ERISA
or section 4975 of the Code
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has occurred with respect to any Benefit Plan. No Benefit Plan is presently
under audit or examination by the IRS, the Department of Labor, or any other
governmental agency or entity, and no matters are pending with respect to any
Benefit Plan under the IRS voluntary Compliance Resolution Program, its
Closing Agreement Program, or any other similar program. All contributions
to Benefit Plans that were required to be made under such Benefit Plans will
have been made as of the Balance Sheet Date, and all benefits accrued under
any unfunded Benefit Plan will have been paid, accrued or otherwise
adequately reserved in accordance with GAAP as of such date will have
performed by the Closing Date any obligations required to be performed as of
such date under all Benefit Plan. No Benefit Plan contains any term or
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement, or that would give rise to the vesting of
benefits, payments, or liabilities as a result of the transactions
contemplated by this Agreement, except to the extent that full vesting is
required under any tax-qualified Benefit Plan under Section 411 of the Code.
(b) Schedule 4.10 contains a complete and correct list of all
employees of the Seller as of the date hereof and the 1997 compensation paid
or payable to each such employee. Except as set forth in Schedule 4.10, (i)
the terms of employment or engagement of all directors, officers, employees,
agents, consultants and professional advisers of the Seller are such that
their employment or engagement may be terminated upon not more than two
weeks' notice given at any time and without liability for payment of
compensation or damages, and (ii) there are no severance payments which are
or could become payable by the Seller to any director, officer or other
employee of the Seller under the terms of any oral or written agreement or
commitment or any law, custom, trade or practice.
(c) The Seller is not bound by or subject to (and none of its
assets or properties are bound by or subject to) any arrangement with any
labor union. No employees of the Seller are or ever have been represented by
any labor union or covered by any collective bargaining agreement while
employed by the Seller and no campaign to establish such representation is in
progress. There is no pending or threatened labor dispute involving the
Seller and any group of their employees nor has the Seller experienced any
labor interruptions. The Seller is and has been in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, including without limitation
any such laws regarding employment documentation, minimum wage and hours,
workers' compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and the Seller
has not engaged in any unfair labor practice. All persons classified by the
Seller as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and the Seller has fully and
accurately reported their compensation on IRS Forms 1099 when required to do
so.
4.11. Taxes. The Seller has timely and properly filed (or caused to be
timely and properly filed) with the appropriate federal, state, provincial,
municipal or local authorities (within the U.S. or otherwise) all tax returns,
information returns and other reports required to be filed and has paid or
accrued (or caused to be so paid or accrued) in full all Taxes, interest,
penalties, assessments or deficiencies, if any, due to, or claimed to be due by,
any
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taxing authority. The balance sheets included in the Financial Statements
and the Interim Financial Statements include appropriate provisions for all
Taxes, interest, penalties, assessments or deficiencies, if any, for the
periods indicated thereon to the extent not theretofore paid. The Seller has
not executed or filed with any taxing authority any agreement extending the
period for assessment or collection of any Taxes. The Seller are not a party
to any pending action or proceeding, nor is any such action or proceeding
threatened, by any governmental authority for the assessment or collection of
Taxes, and no claim for assessment or collection of Taxes has been asserted
against the Seller, and during the course of any audit currently in process
or not completed, no issues have been suggested by any representative of any
such governmental authority that, if asserted, would result in a proposed
assessment of Taxes, interest or penalties, against the Seller.
4.12. Title to Assets. The Seller has good and marketable title to the
Assets, free and clear of any and all Encumbrances and defects in title.
Except as set forth in Schedule 4.14(b), the Seller has the power to convey,
transfer and assign ownership of the Assets and the Assumed Liabilities
without the necessity of any approvals or consents of any other person or
entity. As of the Closing Date, the Seller will transfer to Buyer or its
designees good and marketable title to such properties and assets, free and
clear of any and all Encumbrances and defects in title. The Assets, taken
together, are adequate for the operation of the Business as it is being
currently conducted.
4.13. Property.
(a) Schedule 4.13(a) sets forth an accurate and complete list of
all real property and leaseholds of real property owned or leased by the
Seller or to which the Seller may have any ownership or leasehold rights
(collectively, the "Facilities"). Except as otherwise disclosed on Schedule
4.13(a), (i) there are no outstanding written or oral leases, rights to
occupancy, or tenancies of any kind (including tenancies by sufferance and/or
holdover tenancies arising under expired written or oral leases) covering or
in any way affecting the Facilities or any part or parts thereof; (ii) no
person, firm or corporation other than the Seller has any rights (including
rights arising under an installment contract, option to purchase, easement,
right-of-way, or otherwise) with respect to the Facilities or any part
thereof; and (iii) there have been no improvements to, construction on, work
done at, and/or services or material supplied to, the Facilities or any part
or parts thereof for which payment in full has not been made and which might
give rise to mechanic's liens or other lien rights. All leases set forth on
Schedule 4.13(a) are in full force and effect and constitute valid and
binding agreements of the Seller and, to the knowledge of the Seller, the
other parties thereto in accordance with their respective terms.
(b) Schedule 4.13(b) sets forth an accurate list of all owned and
leased personal property included on the Current Balance Sheet and all other
personal property owned or leased by the Seller relating to the Business (i)
as of the Balance Sheet Date, or (ii) acquired since the Balance Sheet Date,
including in each case true, complete and correct copies of leases for
equipment and also including an indication as to which assets are currently
owned, or were formerly owned, by any current or former stockholders of the
Seller or business or personal
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affiliates of the Seller or any current or former stockholder of the Seller.
All of the vehicles and other material machinery and equipment listed on
Schedule 4.13(b) are in good working order and condition, ordinary wear and
tear excepted. All fixed assets used by the Seller that are material to the
operation of the Business are either owned by the Seller or leased under an
agreement listed on Schedule 4.13(b).
4.14. Contracts.
(a) Schedule 4.14(a) constitutes an accurate and complete list of
each Contract requiring aggregate payments by the Seller, or receipt by the
Seller, of in excess of $1,500 and to which the Seller is a party, or which
affects either of the Seller or the Assets (other than student contracts).
Each of the Contracts listed in Schedule 4.14(a) and all agreements with
students are in full force and effect, are valid, binding and enforceable
obligations by or against the Seller and the other parties thereto, and no
event has occurred which constitutes or, with the giving of notice or passage
of time, or both, would constitute, a default or breach thereunder. None of
such Contracts is subject to re-negotiation by governmental authorities.
Every contract or agreement listed on Schedule 4.14(a), and all amendments
thereto, are correctly and completely summarized in such Schedule. Prior to
the Closing Date, the Seller will deliver or will cause to be delivered or
will make available to the Buyer correct and complete copies of each Contract
listed in Schedule 4.14(a) and all amendments thereto. To the best knowledge
of the Seller, no other party to any Contract is in material default
thereunder. There exist no restrictive covenants of any nature whatsoever in
any of the Contracts which individually or in the aggregate, could have a
Material Adverse Effect.
(b) Listed on Schedule 4.14(b) are all necessary novations,
consents, waivers and approvals of parties to any Contracts which are
required in connection with any of the transactions contemplated by this
Agreement, or as are required by any governmental agency or other third party
in order that any such Contract remain in effect without modification after
the consummation of the transactions contemplated by this Agreement and
without giving rise to any right to termination, cancellation or acceleration
or loss of any right or benefit (collectively, the "Third Party Consents").
(c) The relationships of the Seller with its suppliers are good
commercial working relationships. Except as set forth on Schedule 4.14(c),
no supplier has terminated or threatened to terminate, its relationship with
the Seller or the Business which, individually or in the aggregate, has had
or could have, individually or in the aggregate, a Material Adverse Effect or
has during the last twelve (12) months decreased or limited or threatened to
decrease or limit, its services, supplies or materials to the Seller or the
Business which, individually or in the aggregate, could have a Material
Adverse Effect. Except as set forth on Schedule 4.14(c), no supplier is a
sole source of supply of any good or service to the Seller. The Seller does
not have any knowledge that any of the suppliers intends to terminate or
otherwise modify adversely to the Seller its relationship with the Seller or
the Business or to decrease or limit its services, supplies or materials to
the Seller or the Business.
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4.15. Litigation. Except as set forth in Schedule 4.15, there is no
litigation, suit, proceeding, action, claim, demand or investigation, at law
or in equity, pending or, to the best knowledge of the Seller and Seller's
Shareholders, threatened against or affecting the Seller or the Assets before
any court, agency, authority or arbitration tribunal, including, without
limitation, any product liability, workers' compensation or wrongful
dismissal claims, or claims, actions, suits, demands or proceedings relating
to toxic materials, hazardous substances, pollution or the environment. To
the best knowledge of the Seller and Seller's Shareholders, there are no
facts that would likely result in any such litigation, suit, proceeding,
action, claim or investigation. The Seller is not subject to or in default
with respect to any notice, order, writ, injunction or decree of any court,
agency, authority or arbitration tribunal.
4.16. Compliance with Laws. To the best knowledge of the Seller and
Seller's Shareholders, the Seller has complied and is currently in
compliance, in all material respects, with all laws, regulations, rules,
orders, Permits, judgments, decrees and other requirements and policies
imposed by any governmental authority applicable to it, its properties or the
operation of the Business. Except as set forth on Schedule 4.16, the Seller
has not received any notice or citation for noncompliance with any of the
foregoing, and, to the best knowledge of the Seller and Seller's
Shareholders, there exists no condition, situation or circumstance, nor has
there existed such a condition, situation or circumstance, which, after
notice or lapse of time, or both, would constitute noncompliance with or give
rise to future liability with regard to any of the foregoing. The Seller has
all Licenses, Permits, approvals, qualifications, Accreditations or the like,
from any government or any governmental unit, agency, body or
instrumentality, whether federal, state, provincial, municipal or local
(within the U.S. or otherwise) or any third party necessary for the conduct
of the Business and all such items are in full force and effect.
4.17. Compliance with Title IV Programs.
(a) The Seller and the Institution have, to the best knowledge of
the Seller and the Seller's Shareholders, complied and are in compliance with
any and all applicable laws, regulations, requirements and standards relating
to any forms of student financial assistance, grants or loans, including all
statutory and regulatory provisions related to the Title IV Programs
("Financial Assistance").
(b) Schedule 4.17(b) lists all agreements relating to the Business
between the Seller's Shareholders or the Institution and ED or any other
state, governmental department and/or agency or any non-governmental or
quasi-governmental body, or any Accrediting Body or any guaranty agency
relating to Financial Assistance. To the best knowledge of the Seller and
the Seller's Shareholder, each of such agreements listed in Schedule 4.17(b)
is in full force and effect, is a valid, binding and enforceable obligation
by or against the Seller or the Institution and the other party or parties
thereto and no event has occurred which constitutes or, with the giving of
notice or the passage of time, or both, would constitute, a default or breach
thereunder other than as caused by this Agreement and the transactions
contemplated hereunder. The Seller has
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delivered, caused or will promptly cause to be delivered to the Buyer correct
and complete copies of each contract or agreement listed in Schedule 4.17(b)
and all amendments thereto.
(c) Schedule 4.17(c) lists each program pursuant to which
Financial Assistance is provided to or on behalf of the Seller, the
Institution or the Institution's students.
(d) Except as set forth on Schedule 4.17(d), to the best knowledge
of the Seller and the Seller's Shareholders, there exists no fact or set of
facts which could have an adverse effect on the ability of the Institution to
obtain Certification under the ownership of the Buyer. The Institution has
final, official cohort default rates of 15.3%, 6.7% and 6.3% on Federal
Family Education Loan Program ("FFELP") loans, for the fiscal years 1993,
1994 and 1995, respectively. The Institution has not made for the last seven
(7) years any new loans pursuant to the Federal Perkins loan program. The
Institution has not had and is not required to have any cohort default rates
calculated with respect to its Perkins loan program activities.
(e) The Seller has made available or will have made available at
least fifteen (15) days prior to the Closing to the Buyer true and complete
copies of all correspondence (excluding general correspondence routinely sent
to, or received from, ED or any Accrediting Body) received from or sent by or
on behalf of the Seller, Seller's Shareholders or the Institution to ED, any
Accrediting Body or any other governmental or regulatory authority having
jurisdiction over the provision, funding or approval of Financial Assistance
or the operation of the Institution, including the issuance of Licenses or
Permits to the Institution, to the extent such correspondence was sent or
received within the past three years or relates to any issue which remains
pending, including, without limitation (i) any documentation relating to the
agreements listed on Schedules 4.17(b)-(d); (ii) any documentation relating
to any audits or reviews conducted by ED, any Accrediting Body, any guaranty
agency or any other regulatory authority; (iii) notices or correspondence
concerning the qualification of the Seller or the Institution for the receipt
of Financial Assistance; and (iv) notices or correspondence indicating an
intention to limit, suspend or terminate the Accreditation or Certification
or the provision of Financial Assistance to the Seller or the Institution or
its students or to condition the provision of such Financial Assistance on
the posting of a letter of credit or other surety in favor of ED.
(f) Except as set forth in Schedule 4.17(f), since January 1,
1993, no principal, affiliate (as those terms are defined in 34 C.F.R. Part
85) owner, stockholder, trustee, or any other individual or entity holding an
ownership interest in the Seller or the Institution, whether legal or
equitable, is or has been a principal, affiliate, owner, stockholder or
trustee or held an ownership interest, whether legal or equitable, in any
other institution (whether or not participating in the Title IV Programs) or
any third-party servicer (as that term is defined at 34 C.F.R. Section
668.2). Except as set forth on Schedule 4.17(f), no institution (whether or
not participating in the Title IV Programs) or any third-party servicer (as
that term in defined at 34 C.F.R. Section 668.2) is, or has been,
administered commonly, jointly or in conjunction with the Seller, or the
Institution, and no other institution or organization of any sort has
provided educational services on behalf of the Institution.
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4.18. Institutional Approval and Accreditation. Schedule 4.18(a) lists
each state, governmental department and/or agency, or nongovernmental or
quasi-governmental body, including any Accrediting Body or agency, that has
issued a License or Accreditation to the Institution or with respect to any
of its educational programs, including, without limitation, the Accrediting
Council for Independent Colleges and Schools ("ACICS"), the New Jersey
Department of Education and ED. Except as otherwise set forth on Schedule
4.18(b) hereto, the Seller and the Institution have received all necessary
Accreditations and Licenses for their existing operations and receipt of
Financial Assistance, including, without limitation, any authorization,
approval or licensure issued by any state, governmental department and/or
agency or any, nongovernmental or quasi-governmental body and Accreditation
by ACICS. As of the date hereof, the Institution has no more than
eighty-five percent of its revenues derived from Title IV Program funds as
determined in accordance with 34 C.F.R. 600.5(d) and has not had more than
eighty-five percent of its revenues so derived since the effective date of
the applicable relevant regulation. Except as set forth on Schedule 4.18(c),
the Licenses and Accreditations set forth on Schedule 4.18(a) are in full
force and effect, and no proceeding for the suspension, limitation,
revocation, termination or cancellation of any of them is pending or, to the
best knowledge of the Seller and the Seller's Shareholders, threatened.
Except as set forth on Schedule 4.18(c), Seller and the Institution have not
received any notice that its Certification or any of the Licenses or
Accreditations set forth on Schedule 4.18(a) will not be renewed and there is
no basis for any nonrenewal. The Institution is accredited by ACICS and is
in compliance with the standards of ACICS and is certified by ED as an
eligible institution of higher education pursuant to Title IV of the HEA and
is a party to, and in material compliance with, a valid provisional program
participation agreement with ED, and is in material compliance with every
term thereof, including compliance with any terms that involve posting a
letter of credit or other surety in favor of ED. Except as set forth in
Schedule 4.18(c), Seller and the Institution have not received, and do not
have pending, any notice, including, but not limited to, any letter from
ACICS placing the Institution on reporting, probationary or show cause
status, of any alleged violation of the HEA or the regulations governing the
Title IV Programs or the standards of any applicable Accrediting Body,
including ACICS, with respect to the Institution. Except as set forth at
Schedule 4.18(c), Seller, Institution and Seller's Shareholders are not aware
of any investigation or review of the operation of the Institution's
Financial Assistance programs or any review of the Accreditation or the
Licenses by any state or governmental department and/or agency or any
nongovernmental or quasi-governmental body, including by ACICS, ED, the New
Jersey Department of Education or any guaranty agency. Except as set forth
on Schedule 4.18(d), the Seller, Seller's Shareholders and the Institution
have complied and are in substantial compliance with the laws, rules and
standards of or related to the New Jersey Department of Education and the
standards of ACICS.
4.19. Environmental and Safety Matters.
(a) For purposes of this Agreement, the term "Environmental and
Safety Requirements" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and
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determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution
or protection of the environment (including, without limitation, all those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control or cleanup of any hazardous
or otherwise regulated materials, substances or wastes, chemical substances
or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation); "Release" shall have the meaning set forth in CERCLA (as defined
below); and "Environmental Lien" shall mean any Lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to any liability of
the Seller arising under any Environmental and Safety Requirements.
(b) Except as set forth on Schedule 4.19:
(i) The Seller has complied with and are currently in
compliance with all Environmental and Safety Requirements, and the Seller has
not received any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) or any corrective, investigatory or remedial obligations arising
under Environmental and Safety Requirements which relate to the Seller or any
of their properties or facilities, except for any such noncompliance,
liability or obligation which has not had or would not reasonably be expected
to have a material adverse effect on the financial condition, operating
results, assets, operations or business prospects of the Seller and its
Subsidiaries, if any, taken as a whole.
(ii) Without limiting the generality of the foregoing, the
Seller has obtained and complied with, and are currently in compliance with,
all permits, licenses and other authorizations that may be required pursuant
to any Environmental and Safety Requirements for the occupancy of their
properties or facilities or the operation of their businesses, except for any
such failure to obtain or comply which has not had or would not reasonably be
expected to have a material adverse effect on the financial condition,
operating results, assets, operations or business prospects of the Seller
taken as a whole. A list of all such permits, licenses and other
authorizations which are material to the Seller is set forth on the attached
Schedule 4.19.
(iii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on
the Seller or otherwise for site investigation or cleanup, or notification to
or consent of any governmental agencies or third parties under any
Environmental and Safety Requirements (including, without limitation, any so
called "transaction-triggered" or "responsible property transfer" laws and
regulations).
(iv) None of the following exists at any property or facility
owned, occupied or operated by the Seller: (1) underground storage tanks or
surface impoundments; (2) asbestos-containing materials in any form or
condition; or (3) materials or equipment containing polychlorinated biphenyls.
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(v) The Seller has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or Released any
substance (including, without limitation, any hazardous substance) or owned,
occupied or operated any facility or property, so as to give rise to
liabilities of the Seller for response costs, natural resource damages or
attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other
Environmental and Safety Requirements.
(vi) Without limiting the generality of the foregoing, no
facts, events or conditions relating to the past or present properties,
facilities or operations of the Seller shall prevent, hinder or limit
continued compliance with Environmental and Safety Requirements, give rise to
any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant
to Environmental and Safety Requirements (including, without limitation,
those liabilities relating to onsite or offsite Releases or threatened
Releases of hazardous materials, substances or wastes, personal injury,
property damage or natural resources damage, except for any such
noncompliance, obligation or liability which has not had or would not
reasonably be expected to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Seller taken as a whole.
(vii) The Seller has not, either expressly or by operation of
law, assumed or undertaken any material liability or corrective,
investigatory or remedial obligation of any other Person relating to any
Environmental and Safety Requirements.
(viii) No Environmental Lien has attached to any property
owned, leased or operated by the Seller.
4.20. Isnurance. Schedule 4.20 sets forth an accurate list, as of the
Balance Sheet Date, of all insurance policies carried by the Seller (all of
which policies remain in full force and effect). Prior to the Closing, the
Seller shall have delivered insurance loss runs or workers' compensation claims
received for the past two (2) policy years. All premiums due and payable under
all such policies have been paid and the Seller are otherwise in full compliance
with the terms of such policies (or other policies providing substantially
similar insurance coverage). The Seller does not know of any threatened
termination of, or material premium increase with respect to, any of such
policies.
4.21. Trademarks, Patents and Copyrights. Except as set forth on
Schedule 4.21, the Seller owns or possesses adequate licenses, permits or
other rights to use, any patents, trademarks, service marks, trade names,
service names, copyrights, applications therefor, trade dress, logos,
corporate names, computer software programs, source codes, object codes,
information systems, proprietary interfaces, routines, modules, procedures,
functions, program specifications and related documentation (the
"Intellectual Property") necessary to conduct the Business as now operated by
the Seller. Schedule 4.21 sets forth all trademarks, trade names, service
marks, service names held or used by the Business. The Seller is not a
licensor of any of the Intellectual Property. Except as set
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forth on Schedule 4.21, the Intellectual Property does not infringe upon or
conflict with any rights of third parties, and, no use by the Seller of any
Intellectual Property violates the terms of any agreement pursuant to which
it is licensed or violates or infringes upon the asserted rights of others.
Except as disclosed on Schedule 4.21, the Intellectual Property is assignable
without the consent of any third party. All of the Intellectual Property
relating to the Business are or will be owned by, or properly assigned or
licensed to the Business at the Closing. Except as set forth on Schedule
4.21, the Seller has taken all necessary action to maintain and protect the
Intellectual Property relating to the Business.
4.22. Accounts Receivable. The accounts receivable of the Seller
transferred hereunder arose in the ordinary course of business from bona fide
transactions and are not subject to any setoff, counterclaim or defense. The
accounts receivable shall be fully collectible within 180 days of their due
date using commercially reasonable efforts, except (i) to the extent of any
reserve on the Closing Balance, (ii) for reductions in accounts receivable
for student withdrawals and (iii) as required for participation in and
compliance with the Title IV Programs.
4.23. Supplies. All Supplies of the Business consist of items of a
quality, quantity and condition usable and saleable in the ordinary course of
the business of the Seller and for the purpose for which they are intended.
4.24. Liability to Affiliates. Except as disclosed on Schedule 4.24, as
of the Closing, the Assumed Liabilities will not include any amounts owed by
the Seller to any Affiliate of the Seller or any person acting as a
transferee of any of them.
4.25. Securities Law Matters. The Seller is acquiring or will acquire
the CLC Shares solely for its own account as an investment and not with a
view to any distribution or resale thereof within the meanings of such terms
under the Securities Act. The Seller has been advised that the issuance of
the CLC Shares have not been registered under the Securities Act or under the
provisions of any state securities or "blue sky" law. The Seller is an
"Accredited Investor" (as such term in defined in Rule 501 of Regulation D of
the Securities Act). The knowledge and experience of the Seller and the
Seller's Shareholders in financial and business matters is such that they are
capable of evaluating the risk of the investment in the CLC Shares. The
Seller acknowledges that it has had access to such financial and other
information, including, but not limited to, the Buyer's most recent reports
on Forms 10-K, 10-Q and 8-K as filed with the Commission, and has been
afforded the opportunity to ask such questions of representatives of the
Buyer and receive answers thereto, as the Seller has deemed necessary in
connection with its decision to acquire the CLC Shares, and that no
representation or warranties, express or implied, are being made by the Buyer
with respect to the Buyer or the CLC Shares, other than those expressly set
forth herein.
4.26. Pooling of Interest. There have been no transactions or events
with respect to the Seller which would, and the ownership
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structure and attributes of the Seller and the Seller's Shareholders would
not, prevent the transactions contemplated hereby, if consummated, from being
considered as a pooling of interests business combination in accordance with
GAAP and the criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the Commission; provided, however, that the Seller and the
Seller's Shareholders make no representation or warranty hereunder as to the
ownership structure or the attributes of the Buyer.
4.27. Brokers. Neither the Seller nor the Seller's Shareholders has
expressly or impliedly engaged any broker, finder or agent with respect to
this Agreement or any transaction contemplated hereby.
4.28. Disclosure. No representation or warranty by the Seller and the
Seller's Shareholders contained in this Agreement, and no representation,
warranty or statement contained in any list, certificate, Schedule or other
instrument, document, agreement or writing furnished or to be furnished to,
or made with, the Buyer pursuant hereto or in connection with the
negotiation, execution or performance hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to make any statement herein or therein not
misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER
To induce the Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, the Buyer represents and warrants to the
Seller as of the date hereof and as of the Closing Date as set forth below:
5.1. Organization and Capitalization of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is authorized to do business in all jurisdictions where
such authorization is necessary.
5.2. Authority for Agreement. Subject to obtaining approval of this
Agreement by the Board of Directors of Buyer, (a) Buyer has full power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby; and (b) this Agreement has been duly
executed and delivered by Buyer and is a legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights in general.
5.3. No Violation to Result. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby: (i)
are not in violation or breach of, do not conflict with or constitute a
default under, and will not accelerate or permit the acceleration of the
performance required by,
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any of the terms of the charter documents or by-laws of the Buyer or any
note, debt instrument, security agreement or mortgage, or any other contract
or agreement, written or oral, to which the Buyer is a party or by which the
Buyer is bound; (ii) will not be an event which, after notice or lapse of
time or both, will result in any such violation, breach, conflict, default,
or acceleration; (iii) will not result in violation under any law, judgment,
decree, order, rule, regulation or other legal requirement of any
governmental authority, court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or otherwise) at law or in
equity, and applicable to Buyer; and (iv) will not result in the creation or
imposition of any lien, possibility of lien, encumbrance, security agreement,
equity, option, claim, charge, pledge or restriction in favor of any third
person upon any of the properties or assets of the Buyer.
5.4. CLC Shares. Upon the consummation of the transactions
contemplated by this Agreement and the issuance and delivery of
certifications representing the CLC Shares to the Seller, the CLC Shares will
be validly issued, fully paid and non-assessable shares of CLC Common Stock.
6. COVENANTS
6.1. Access to Properties and Records.
(a) The Seller shall afford to the officers, employees, attorneys,
accountants and other authorized representatives of the Buyer, free and full
access to all of the Seller's Assets, properties, Books and Records, students
and employees in order to afford the Buyer as full an opportunity of review,
examination and investigation as the Buyer shall desire to make of the
affairs of the Seller and the Institution, and the Buyer shall be permitted
to make extracts from, or take copies of, such Books and Records (including
the stock record and minute books) or other documentation or to obtain
temporary possession of any thereof as may be reasonably necessary; and the
Seller shall furnish or cause to be furnished to the Buyer such reasonable
financial and operating data and other information about the Business,
properties and assets which any of the Buyer's respective officers,
employees, attorneys, accountants or other authorized representatives may
request; provided that Buyer and its agents shall not unreasonably interfere
with the operations of the Business. No information or knowledge obtained in
any investigation pursuant to this Section 6.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the transactions contemplated by
this Agreement.
(b) The Seller shall furnish the Buyer, upon reasonable request,
with all information concerning the Seller and the Institution reasonably
required for inclusion in any application made by the Buyer to ACICS, ED, any
Accrediting Body, New Jersey Department of Education or any other state
governmental department and/or agency or any non-governmental or
quasi-governmental body or regulatory body in connection with the
transactions contemplated by this Agreement and the reinstatement of
Licenses, Accreditations and Certifications following the consummation of
such transactions.
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(c) After the Closing Date, the Buyer shall provide the Seller
with reasonable access to the pre-Closing books and records of the Business
to the extent required by the Seller to fulfill its obligations under this
Agreement.
6.2. Financial Statements.
(a) Prior to the execution of this Agreement, Seller has delivered
to Buyer true copies of the complete, audited financial statements as
previously filed with ED on behalf of the Seller or any Institution on an
individual basis, as appropriate, for each of the three fiscal years ended
December 31, 1994, 1995 and 1996.
(b) To the extent that the audited financial statements of the
Seller or the Institution for the fiscal year ended December 31, 1996
identify a "related party," as that term is defined in 34 C.F.R. Section
668.23(d)(1) (as effective on July 1, 1997), the Seller has delivered to
Buyer, prior to the execution of this Agreement, true and correct copies of
the complete, audited financial statements of each such related party for
that related party's most recent fiscal year. To the extent that the audited
financial statements of the Seller or the Institution for the fiscal year
ended December 31, 1997 will identify such a "related party," the Seller will
deliver to Buyer, prior to the Closing Date, true and correct copies of the
complete, audited financial statements of each such related party for that
related party's most recent fiscal year.
(c) The Seller and Seller's Shareholders shall cause their
auditors, working together with Buyer's auditors, to complete and deliver to
Buyer unaudited financial statements of the Seller and of the Institution as
of, and for the ten months ended October 31, 1997. The Seller shall bear the
costs and fees associated with the work performed by its auditors and Buyer
shall bear the costs and fees associated with work performed by Buyer's
auditors. All the aforesaid financial statements shall be completed and
delivered to Buyer no less than fifteen (15) days prior to the Closing Date.
(d) Seller shall cause its auditors, in response to any request by
Buyer's auditors, promptly to provide all information necessary for Buyer's
auditors to complete, as expeditiously as possible, an audited balance sheet
of the Institution as of the Closing Date.
6.3. Accounting Treatment. The Buyer, the Seller's Shareholders and
the Seller shall each use their best efforts to cause the transaction
contemplated by this Agreement to be accounted for as a pooling of interests.
Each of the Buyer, the Seller's Shareholders and the Seller shall use their
best efforts to prevent its affiliates from taking any action that could
preclude the transactions contemplated hereby from receiving pooling of
interests accounting treatment in accordance with GAAP.
6.4. Confidentiality.
(a) The Seller and the Seller's Shareholders recognize and
acknowledge that
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they have in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Seller and/or the Buyer,
such as lists of customers, operational policies, and pricing and cost
policies, that are valuable, special and unique assets of the Seller's or the
Buyer's respective businesses. The Seller and the Seller's Shareholders
agree that they will not disclose confidential information with respect to
the Seller and/or the Buyer to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever (except to authorized
representatives of the Seller and/or the Buyer and to counsel and other
advisers, provided that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 6.4), unless (i) such information
becomes known to the public generally through no fault of the Seller or the
Seller's Shareholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party or for Accreditation,
Certification or state licensure purposes; provided, that prior to disclosing
any information pursuant to clause (i), (ii) or (iii) above, the Seller or
the Seller's Shareholders, shall, if possible, give prior written notice
thereof to the Buyer and provide the Buyer with the opportunity to contest
such disclosure. Notwithstanding the foregoing, Proto shall only be subject
to the covenants set forth in this Section 6.4(a) with respect to
nondisclosure of written confidential information relating to the Buyer, the
Seller or the Business except for the information set forth on Schedule 6.4.
Prior to the Closing, Proto shall deliver to the Buyer all such written
confidential information in his personal possession and thereafter shall not
obtain or retain any such written confidential information.
(b) The Buyer recognizes and acknowledges that it has in the past,
currently has, and in the future may possibly have, access to certain
confidential information of the Seller, such as lists of customers,
operational policies, and pricing and cost policies, that are valuable,
special and unique assets of the Business. The Buyer agrees that prior to
the Closing, and at all times if Closing does not occur, it will not use for
its own benefit nor will it disclose confidential information with respect to
the Seller to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever (except to authorized representatives of the
Seller and/or the Buyer and to counsel and other advisers, provided that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 6.4), unless (i) such information becomes known to the public
generally through no fault of the Buyer, (ii) disclosure is required by law
or the order of any court or governmental authority under color of law, or
(iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party or for Accreditation, Certification or state licensure purposes;
provided, that prior to disclosing any information pursuant to clause (i),
(ii) or (iii) above, the Buyer shall, if possible, give prior written notice
thereof to the Sellers or the Sellers' Shareholders and provide the Seller or
the Seller's Shareholders with the opportunity to contest such disclosure.
If the Closing shall not occur, for a period of one (1) year the Buyer shall
not knowingly recruit, solicit or induce any employee of the Seller to
terminate their employment with the Seller.
6.5. Interim Covenants of the Seller. From the date of this Agreement
until the Closing Date, except to the extent expressly
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permitted by this Agreement or otherwise consented to by an instrument in
writing signed by the Buyer or as otherwise set forth in Schedule 6.5, the
Seller shall (i) make reasonable efforts to keep the Business and
organization intact and shall not take or permit to be taken or do or suffer
to be done anything other than in the ordinary course of its business as the
same is presently being conducted, (ii) shall use its best efforts to keep
available the services of its directors, officers, employees and agents and
retain and maintain its current relationships with its students and maintain
the Facilities in their current condition, (iii) shall perform its
obligations under the Contracts, (iv) shall maintain the goodwill and
reputation associated with the Business and (v) shall prior to the Closing,
and as of Closing, satisfy all outstanding indebtedness of the Seller (other
than capitalized leases). Without limiting the generality of the foregoing,
the Seller shall not:
(a) purchase, sell, lease or dispose of or make any contract for
the purchase, sale, lease or disposition of or subject to lien or security
interest or any other Encumbrance any of its properties or assets, other than
in the ordinary and usual course of its business, consistent with the
representations and warranties contained herein, and not in breach of any of
the provisions of this Section 6, in each case for a consideration at least
equal to the fair value of such property or asset;
(b) except consistent with past compensation practices, grant any
salary increase to, or increase the draw of, any of its officers, directors,
employees or agents, or enter into any new, or amend or alter any existing,
employment, bonus, incentive compensation, deferred compensation, profit
sharing, retirement, pension, stock option, group insurance, death benefit or
other fringe benefit plan, trust agreement or other similar or dissimilar
arrangement, or any employment or consulting agreement;
(c) incur any bank indebtedness or borrowings, whether or not in
the ordinary course of its business, or issue any commercial paper;
(d) enter into any leases of real property;
(e) enter into any material leases of equipment and machinery;
(f) enter into any contract (other than student contracts), (i)
which would be required to be listed on Schedule 4.14(a) had it been entered
into prior to the date hereof; or (ii) in which any Affiliate of the Seller
has any beneficial interest;
(g) create, incur or assume any liability or indebtedness, except
in the ordinary course of business consistent with past practices; or
postpone or defer the creation, incurrence, or assumption of any liability or
indebtedness that would otherwise be created, incurred or assumed in the
ordinary course of business absent the execution of this Agreement;
(h) pay or apply any of its assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount, directly or
indirectly, to or for the benefit of the Seller's
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Shareholders or any Affiliate of the Seller;
(i) declare or pay any dividend, or make any distribution (whether
in cash, stock or property) with respect of its stock whether now or
hereafter outstanding, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or
purchase, redeem or otherwise acquire or retire for value any shares of its
stock;
(j) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree
to acquire any assets that are material, individually or in the aggregate, to
the Seller;
(k) commit a breach of or amend or terminate any material
agreement, permit, license or other right;
(l) solicit prospective or existing students of Institution to
complete their education elsewhere; or
(m) enter into any other transaction (i) that is not negotiated
at arm's length with a third party not affiliated with the Seller or any
officer, director or stockholder of the Seller or (ii) outside the ordinary
course of business consistent with past practice or (iii) prohibited
hereunder.
6.6. No Solicitation. Neither the Seller, the Seller's Shareholders,
nor any agent, officer, director or any representative thereof, shall during
the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing or the termination of this Agreement in
accordance with its terms, directly or indirectly: (a) solicit, encourage or
initiate the submission of proposals or offers from any person or entity for,
(b) participate in any discussions pertaining to, or (c) furnish any
information to any person or entity, other than the Buyer, relating to, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Seller or a merger, consolidation or business
combination involving the Seller or the Institution, the Business or the
Assets. If either the Seller or the Seller's Shareholders receives any
unsolicited offer or proposal relating to any of the above, the Seller or the
Seller's Shareholders, as applicable, shall immediately notify the Buyer
thereof, including the identity of the party making such offer or proposal
and the specific terms of such offer or proposal.
6.7. Tax Returns; Sales, Use and Transfer Taxes
(a) The Seller and Seller's Shareholders shall timely file all
federal and state income tax returns for taxable periods ending on or prior
to the Closing Date and have paid or will pay all Taxes attributable to such
periods. Such returns shall be prepared and filed in
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accordance with applicable law and in a manner consistent with past practices.
(b) Within the earlier of thirty (30) days after the Closing, all
Taxes, including, without limitation, all sales, use, stamp, conveyance or
transfer taxes, land transfer taxes, registration fees and all recording or
reporting fees and other similar duties, taxes and fees, if any, imposed
upon, arising out of or resulting from, the consummation of the transactions
contemplated by this Agreement shall be paid by the Seller.
6.8 Use of Name. The Seller shall not use the names "Computer Learning
Centers," "Computer Learning Center" or the letters "CLC" or any name similar
to any of the foregoing from and after the Closing. The Seller shall
promptly after the Closing withdraw its authority for the use of the name
"Computer Learning Centers" from the State of New Jersey. The Seller shall
not dissolve or liquidate and shall maintain its corporate existence until
the expiration of the resale period set forth in Section 12.3.
6.9. Hiring of the Seller's Employees The Seller agrees that prior to
the Closing Date it will allow the Buyer to take applications of any Business
employee or any employee involved in providing support services to the
Business and to interview any of such employees for prospective employment
with the Buyer after the Closing. Except for those employees listed on
Schedule 6.9 or identified to the Seller prior to Closing, the Buyer shall
offer employment to the employees of the Seller listed on Schedule 4.10. The
Seller will use all reasonable efforts to cause such employees to make
available their employment services to the Buyer. The Seller shall be
responsible for (i) any severance, termination payments, or other amounts due
to its employees in excess of one weeks salary per year of service to the
Seller by reason of their termination at or before Closing, and (ii) any
other liability arising from such termination other than vacation and sick
pay included in Assumed Liabilities; provided, that Buyer shall not be
responsible for any severance, termination payment or other amounts due to
the Seller's Shareholders or the employees listed on Schedule 6.9. As to
any such employee offered employment by the Buyer, for a period of two (2)
years from the Closing Date, neither the Seller nor any of its shareholders,
officers, directors or affiliates (other than Proto in his capacity as an
officer of Whitman (as defined herein)) will solicit, offer to employ or
retain the services of or otherwise interfere with the relationship with any
former employee of the Seller employed by or otherwise engaged to perform
services for the Buyer. The Seller covenants that it will forever waive any
rights under any non-competition, non-disclosure, non-solicitation or similar
provisions it has under any employment, non-compete or other arrangements
with any of the Seller's former employees who are to be employed by the Buyer
after the Closing.
6.10. Termination of 401(k) Plan. Notwithstanding any other provision
of this Agreement to the contrary, the Board of Directors of the Seller, or
whosoever is authorized under the 401(k) Plan to take such action, shall
initiate and cause the termination of the Markerdowne Corporation 401(k)
Profit Sharing Plan (the "401(k) Plan") prior to the Closing Date. With
respect to the 401(k) Plan, the Seller shall (i) by proper resolutions and
plan amendments, if necessary, cease all contributions to and participation
in the
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401(k) Plan and establish an effective date of termination for such Plan that
is prior to the Closing Date, and (ii) file an application with the IRS to
obtain a final determination upon the termination of the qualified status of
the 401(k) Plan. The assets of the 401(k) Plan shall be distributed as soon
as administratively feasible following the receipt of a favorable
determination letter from the IRS with respect to the termination of such
Plan. The Seller shall pay all costs associated with (i) terminating the
401(k) Plan, (ii) contributions to or liabilities of the 401(k) Plan with
respect to the period prior to the Closing Date, and (iii) the vesting or
acceleration of benefits resulting from the termination of 401(k) Plan."
6.11. Disbursement of Title IV Funds. Seller agrees that immediately
prior to the Closing Date, Seller will disburse all Title IV Program funds,
consistent with past practices and the Title IV regulations, to students
enrolled in the Institution and maximize Buyer's opportunity subsequent to
the Closing Date to make disbursements of Title IV Program funds pursuant to
34 C.F.R. Sec. 668.26.
6.12. Bulk Transfer Provisions. The Seller and the Buyer hereby waive
compliance with the provisions of any applicable bulk transfer law; provided,
however, that the Seller agrees (i) to pay and discharge when due or to
contest or litigate all claims of creditors which are asserted against the
Buyer or the Assets (other than the Assumed Liabilities) by reason of such
noncompliance, (ii) to indemnify, defend and hold harmless the Buyer from and
against any and all such claims in the manner provided in Section 11 and
(iii) to take promptly all necessary action to remove any lien or encumbrance
which is placed on the Assets by reason of such noncompliance.
6.13. Actions After The Closing. Following the Closing, the Buyer shall
have the right to (i) receive and open all mail addressed to the Seller or
the Institution and deal with the contents thereof in its discretion to the
extent that such mail and the contents thereof relate to the Assets sold to
the Buyer and any of the obligations or liabilities assumed by the Buyer
pursuant to this Agreement; and (ii) collect for its own account all
receivables and other items transferred to the Buyer hereto and to endorse
with the name of the Seller any checks received on account of such
receivables or other items. The Seller agrees that it shall promptly
transfer and deliver any cash or property which the Seller may receive in
respect of the Assets. From and after the Closing Date, the Seller shall
prepare and deliver to the Buyer, on a weekly basis, true and correct reports
showing all collections by the Seller and the customer receivables against
which such collections were applied. In addition, the Buyer shall have the
right to audit such reports.
6.14. Notification of Certain Matters.
(a) The Seller shall give prompt notice to the Buyer of (a) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of the Seller
contained herein to be untrue or inaccurate in any material respect at or
prior to the Closing and (b) any material failure of the Seller to comply
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with or satisfy any covenant, condition or agreement to be complied with or
satisfied by the Seller hereunder. The delivery of any notice pursuant to
this Section 6.14(a) shall not, without the express written consent of the
Buyer, be deemed to (x) modify the representations or warranties hereunder of
the Seller, (y) modify the conditions set forth in Section 7 or (z) limit or
otherwise affect the remedies available hereunder to the Buyer.
(b) The Buyer shall give prompt notice to the Seller of (a) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of the Buyer
contained herein to be untrue or inaccurate in any material respect at or
prior to the Closing and (b) any material failure of the Buyer to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by the Buyer hereunder. The delivery of any notice pursuant to
this Section 6.14(b) shall not, without the express written consent of the
Seller, be deemed to (x) modify the representations or warranties hereunder
of the Buyer, (y) modify the conditions set forth in Section 8 or (z) limit
or otherwise affect the remedies available hereunder to the Seller.
6.15. Reasonable Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts
promptly to take, or cause to be taken, all actions and do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement including the satisfaction of all conditions thereto and shall
use their reasonable efforts to obtain all Third Party Consents and consents
of governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.
6.16. Further Assurances.
(a) Following the Closing, the Seller shall, and shall cause each
of its Affiliates to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions
as shall be reasonably necessary, or otherwise reasonably requested by the
Buyer, to confirm and assure the rights and obligations provided for in this
Agreement, including obtaining Certification for the Institution, and render
effective the consummation of the transactions contemplated hereby.
(b) Following the Closing, the Buyer shall, from time to time,
execute and deliver such additional instruments, documents, conveyances or
assurances and take such other actions as shall be reasonably necessary, or
otherwise reasonably requested by the Seller, to confirm and assure the
rights and obligations provided for in this Agreement and to render effective
the consummation of the transactions contemplated hereby.
7. CONDITIONS TO THE BUYER'S OBLIGATIONS
All obligations of the Buyer under this Agreement are subject to the
fulfillment and
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satisfaction, prior to or at the time at which the Closing Date is scheduled
to occur, of each of the following conditions precedent, any one or more of
which may be waived by the Buyer in writing.
7.1. Representations and Warranties True at the Closing Date. All of
the representations and warranties of the Seller contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of such date.
7.2. The Seller's Performance. All of the terms, covenants, agreements
and conditions of this Agreement to be complied with, performed or satisfied
by the Seller on or before the Closing Date shall have been duly complied
with, performed or satisfied.
7.3. No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
the transactions or limiting or restricting the conduct or operation of the
business of the Seller following the transactions shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending. There shall be no action, suit, claim or
proceeding of any nature pending or threatened, against the Buyer or the
Seller, their respective properties or any of their officers or directors,
that could have a material adverse effect on the Assets.
7.4. HSR. No investigation, action, or proceeding shall have been
commenced by the Federal Trade Commission (the "FTC"), the Antitrust Division
of the U.S. Department of Justice (the "Antitrust Division") or any other
governmental authority challenging or seeking to enjoin the consummation of
the transactions contemplated by this Agreement and neither the Buyer nor the
Seller shall have been notified of a present intention by the FTC, the
Antitrust Division or any other governmental authority to commence, or
recommend the commencement of, such an investigation, action, or proceeding.
All waiting periods applicable to this Agreement and the transactions
contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") shall have expired.
7.5. Opinion of the Seller's Counsel. The Buyer shall have been
furnished an opinion or opinions of counsel to the Seller, dated the date of
the Closing Date, in form and substance satisfactory to Buyer.
7.6. Securities Laws. The Buyer shall have received all necessary
consents and otherwise complied with any Federal or state securities or "blue
sky" laws applicable to the issuance of the CLC Shares, in connection with
the transactions contemplated hereby.
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7.7. Pooling Letters. The Buyer shall have received from Stephen F.
Landau, independent certified public accountant for the Seller, a letter, in
the form attached hereto as Annex I, dated the Closing Date, in form and
substance acceptable to the Buyer, confirming that, to their knowledge after
due and diligent inquiry of management, there have been no transactions or
events with respect to the Seller which would, and the ownership structure
and attributes of the Seller and the Seller's Shareholders would not,
proscribe the transactions contemplated hereby, if consummated, from being
considered as a pooling of interests business combination. The Buyer shall
have received from Price Waterhouse LLP, a letter dated the Closing Date,
confirming that the transactions contemplated hereby, if consummated, can
properly be accounted for as a pooling of interests combination in accordance
with GAAP and the criteria of Accounting Principles Board Opinion No. 16 and
the regulations of the Commission. The Seller and the Seller's Shareholders
shall have provided to the Buyer evidence satisfactory to the Buyer that
Proto and Coutts have been shareholders of the Seller for at least thirty-one
(31) days prior to the Closing Date.
7.8. Affiliate Letter. At or prior to the Closing the Seller's
Shareholders shall have delivered to the Buyer a letter agreement
acknowledging their status as an Affiliate of the Seller, their agreement to
comply with the "pooling of interests" restrictions, and their receipt of
Commission filings of the Buyer, in form and substance satisfactory to the
Buyer.
7.9. Stock Powers. At the Closing, the Seller and the Seller's
Shareholders shall each have delivered to the Escrow Agent, for use in
connection with the Escrowed Shares, ten stock powers executed in blank, with
signatures guaranteed.
7.10. No Material Adverse Change. There shall have been, between
December 31, 1996 and the Closing Date, no Material Adverse Effect.
7.11. Third Party Consents. The Seller shall have received Third Party
Consents in a form reasonably satisfactory to the Buyer.
7.12. Indebtedness. The Seller shall have repaid all of its outstanding
indebtedness (other than capitalized leases).
7.13. COBRA Obligations. Buyer shall have received assurances in form
and substance satisfactory to it (that may include insurance certificates)
that the Seller has made all provisions necessary under applicable law, with
regard to any employer's obligation to provide for a continuation of health
insurance and other benefits of an employee of the Seller, whether or not
employed by the Buyer following termination of employment.
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7.14. Buyer's Review. The Buyer shall be fully satisfied in its sole
and absolute discretion with the results of its review of, and its other due
diligence investigations with respect to, the business, operations, affairs,
prospects, properties, assets, existing and potential liabilities,
obligations, profits or condition (financial or otherwise) of the Seller, the
Business and the Institution (including, without limitation, investigation of
the projected 1996 student loan cohort default rate on FFELP loans).
7.15. Delivery of Good Standing Certificates; Corporate Resolutions. The
Buyer shall have received certificates of good standing with respect to the
Seller issued by Delaware and New Jersey and any other jurisdiction in which
the Seller conducts business. The Buyer shall have received copies of the
resolutions of the Boards of Directors and stockholders of the Seller
approving the sale of the Assets and the other transactions contemplated
herein, certified by an appropriate corporate officer. The Seller shall have
furnished the Buyer with such certificates of the officers of the Seller and
others to evidence compliance with the conditions set forth in this Section 7
as may be reasonably requested by the Buyer
7.16. Employee Benefit Plans. The Buyer shall have received evidence,
in form satisfactory to the Buyer, that the covenants with respect to
termination of the Seller's 401(k) Plan have occurred or will occur (to the
extent such actions must occur after the Closing).
7.17. Release Agreements. The Buyer shall have received a duly
executed release agreement from each of the officers and directors of the
Seller (in the form attached hereto as Annex II).
7.18. Escrow Agreement. The Seller and the Seller's Shareholders shall
have delivered to the Buyer a duly executed Escrow Agreement, in form and
substance reasonably satisfactory to the Buyer.
8. CONDITIONS TO THE SELLER'S OBLIGATIONS
All obligations of the Seller under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Closing
Date is scheduled to occur, of each of the following conditions, any one or
more of which may be waived in writing by the Seller.
8.1. Representations and Warranties True at the Closing Date. All of
the representations and warranties of the Buyer contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of such date, except to the extent affected by the transactions
contemplated hereby, and at the Closing Date, the Buyer shall have delivered
to the Seller a certificate to such effect signed by the President and the
Chief Financial Officer of the Buyer.
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8.2. Buyer's Performance. All of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by
the Buyer on or before the Closing Date shall have been duly complied with,
performed or satisfied and at the Closing Date the Buyer shall have delivered
to the Seller a certificate to such effect signed by the President and the
Chief Financial Officer of the Buyer.
8.3. Authority. All action required to be taken by, or on the part of,
the Buyer to authorize the execution, delivery and performance of this
Agreement by the Buyer and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors of
the Buyer.
8.4. No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
the transactions or limiting or restricting the conduct or operation of the
business of the Seller following the transactions shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending. There shall be no action, suit, claim or
proceeding of any nature pending or threatened, against the Buyer or the
Seller, their respective properties or any of their officers or directors,
that could have a material adverse effect on the Assets.
8.5. HSR. No investigation, action, or proceeding shall have been
commenced by the FTC, the Antitrust Division or any other governmental
authority challenging or seeking to enjoin the consummation of the
transactions contemplated by this Agreement and neither the Buyer nor the
Seller shall have been notified of a present intention by the FTC, the
Antitrust Division or any other governmental authority to commence, or
recommend the commencement of, such an investigation, action, or proceeding.
All waiting periods applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall have expired.
8.6. Escrow Agreement. The Buyer shall have delivered to the Seller
and the Seller's Shareholders an executed Escrow Agreement, in form and
substance reasonably satisfactory to the Seller.
8.7. Buyer Release. At the Closing, the Buyer shall release the Seller
from all claims, asserted or unasserted, arising from infringement of
trademark or tradename rights to the names "CLC" or "Computer Learning
Centers" in a form reasonably satisfactory to the Seller.
8.8. Opinion of Buyer's Counsel. The Sellers shall have been furnished
an opinion of counsel to the Buyer, dated the date of the Closing Date, that
(i) this Agreement is duly authorized and enforceable against the Buyer, (ii)
CLC is duly organized and (iii) the CLC Shares will be legally issued, fully
paid and non-assessable.
8.9. Dorras Agreement. Dorras shall have received from the Buyer a
duly executed
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agreement, in form attached hereto as Annex III.
9. REGISTRATION RIGHTS.
The Seller shall have the following registration rights with respect to
the CLC Shares issued to them hereunder:
9.1. Registration Rights for CLC Shares; Filing of Registration
Statement. The Buyer shall utilize reasonable best efforts to cause, within
thirty (30) days following the Closing Date, a registration statement to be
filed under the Securities Act of 1933 (the "Securities Act") or an existing
registration statement to be amended for the purpose of registering the CLC
Shares for resale on a continuous basis from time to time by a Holder thereof
(the "Registration Statement"). For purposes of this Section, a person is
deemed to be a "Holder" of CLC Shares whenever such person or entity is the
record owner of CLC Shares. Thereafter, Buyer will use reasonable best
efforts to have the Registration Statement become effective and cause the CLC
Shares to be registered under the Securities Act, and registered, qualified
or exempted under the state securities laws of such jurisdictions as any
Holder reasonably requests, as soon as is reasonably practicable.
9.2. Expenses of Registration. All expenses incident to the Buyer's
performance of or compliance with this Section 9, including, without
limitation, all registration and filing fees (including all expenses incident
to filing with Nasdaq or any other exchange), fees and expenses of complying
with securities and blue sky laws, printing and copying expenses, fees and
expenses of the Buyer's counsel and accountants, the fees and disbursements
of all independent public accountants (including the expenses of any audit
and/or "cold comfort" letter), and any other fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities
shall be paid by the Buyer; provided, however, that all underwriting
discounts and selling commission applicable to CLC Shares to be registered
and fees and disbursements of counsel for the Seller or the Seller's
Shareholders shall be borne by the Seller or the Seller's Shareholders.
9.3. Furnishing of Documents. The Buyer shall furnish to the Holders
such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holders may reasonably request in order to facilitate the
offering of the CLC Shares.
9.4. Amendments and Supplements. The Buyer shall prepare and promptly
file with the Commission and promptly notify the Holders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the CLC Shares are required to
be delivered under the Securities Act, any event shall have occurred as a
result of which any such prospectus or any
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other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Buyer shall also advise the Holders promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose
and promptly use its reasonable best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
If, after a Registration Statement becomes effective, the Holders desire that
the Registration Statement be amended or the Buyer advises the Holders that
the Buyer considers it appropriate that the Registration Statement (and all
other registration statements of the Buyer then effective and outstanding) be
amended, the Holders shall suspend any further sales of the CLC Shares until
the Buyer advises the Holders that the Registration Statement has been
amended.
9.5. Duration. The Buyer shall maintain the effectiveness of the
Registration Statement until such time as the Buyer reasonably determines
that the Holders will be eligible to sell all of the CLC Shares then owned by
the Holders without the need for continued registration of the shares, in the
three month period immediately preceding the termination of the effectiveness
of the Registration Statement. The Buyer's obligations contained in Sections
9.1, 9.3 and 9.4 shall terminate on the first anniversary of the Closing
Date. Notwithstanding the foregoing, the Buyer may delay filing a
Registration Statement, and may withhold efforts to cause the Registration
Statement to become effective, if the Board of Directors of the Buyer in its
good faith judgment, determines that any registration of CLC Shares should
not be made or continued because it would materially interfere with any
material financing, acquisition, corporate reorganization or merger or other
material transaction involving the Buyer or any of its subsidiaries (a "Valid
Business Reason"), (x) the Buyer may postpone filing a Registration Statement
until such Valid Business Reason no longer exists, but in no event for more
than ninety (90) days and (y) in case a registration statement has been
filed, the Buyer may cause such registration statement to be withdrawn and
its effectiveness terminated or may postpone amending or supplementing such
registration statement until such Valid Business Reason no longer exists, but
in no event for more than ninety (90) days (such period of postponement or
withdrawal under sub clause (x) or (y) above, the "Postponement Period"); and
the Buyer shall give written notice of its determination to postpone or
withdraw a registration statement and of the fact that the Valid Business
Reason for such postponement or withdrawal no longer exists, in each case
promptly after the occurrence thereof; provided, however, the Buyer shall not
be permitted to postpone or withdraw a registration statement within ninety
(90) days after the expiration of any Postponement Period. The Seller agrees
that, upon receipt of any notice from the Buyer that the Buyer has determined
to postpone or withdraw any registration statement, the Seller will
discontinue any disposition of CLC Shares pursuant to such registration
statement and, if so directed by the Buyer, will deliver to the Buyer (at the
Buyer's expense) all copies, other than permanent file copies, then in such
Seller's possession of the prospectus covering such CLC Shares that was in
effect at the time of receipt of such notice. If the Buyer shall give any
notice of withdrawal or postponement of a registration statement, the Buyer
shall, at such time as the Valid Business Reason that caused such withdrawal
or postponement no
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longer exists (but in no event later than three months after the date of the
postponement or withdrawal), use its reasonable best efforts to effect the
registration under the Securities Act of CLC Shares covered by the withdrawn
or postponed registration statement in accordance with Section 9.1.
9.6. Further Information. If the CLC Shares owned by a Holder are
included in any registration, such Holder shall furnish the Buyer such
information regarding itself as the Buyer may reasonably request and as shall
be required in connection with any registration, qualification or compliance
referred to in this Agreement.
9.7. Indemnification.
(a) The Buyer will indemnify and hold harmless the Holders and
each person, if any, who controls a Holder within the meaning of the
Securities Act, from and against any and all losses, damages, liabilities,
costs and expenses to which the Holders or any such controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities, costs or expenses are caused by any untrue
statement of any material fact contained in the Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that, the Buyer will not be liable in any such case to the extent
that any such loss, claim, damage, liability, cost or expense arises out of
or is based upon an untrue statement or omission so made in conformity with
information furnished by or on behalf of any Holder or such controlling
person in writing specifically for use in the preparation thereof.
(b) Each of the Holders, jointly and severally, will indemnify and
hold harmless the Buyer and each person, if any, who controls the Buyer
within the meaning of the Securities Act, from and against any and all
losses, damages, liabilities, costs and expenses to which the Buyer or any
such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, to the extent that such untrue statement or omission
was so made in reliance upon and in strict conformity with written
information furnished by or on behalf of any Holder specifically for use in
the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of said
paragraph
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(a) or (b), promptly notify the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will not
relieve it from any liability which it may have hereunder unless the
indemnifying party has been materially prejudiced thereby nor will such
failure to so notify the indemnifying party relieve it from any liability
which it may have to any indemnified party otherwise than hereunder. In case
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the
indemnified party and the indemnifying party and there is a conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless: (i) the indemnified party shall have employed counsel
in accordance with the provisions of the preceding sentence; (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action; or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) In the event any of the CLC Shares are sold by any Holder or
Holders in an underwritten public offering consented to by the Buyer, the
Buyer shall provide indemnification to the underwriters of such offering and
any person controlling any such underwriter on behalf of the Holder or
Holders making the offering; provided, however, that the Buyer shall not be
required to consent to any such underwriting or to provide such
indemnification in respect of the matters described in the proviso to the
first sentence of Section 9.7(a).
9.8. Additional Rights. If, prior to the expiration of the resale
restrictions set forth in 12.3, the Buyer shall notify the Seller that a
Postponement Period has been initiated by the Buyer as a result of a proposed
public offering of its Common Stock on a primary basis on Form S-3 (the
"Postponement Period Public Offering"), then concurrently with such notice
the Buyer shall offer to include the CLC Shares in Postponement Period Public
Offering. Within seven (7) days of the Buyer's notice, the Seller shall
notify the Buyer of the number of CLC Shares (if any) that the Seller desires
to include in the Postponement Period Public Offering, and the Buyer shall
use its reasonable best efforts to cause such CLC Shares to be included in
the Postponement Period Public Offering. If the managing underwriter of such
offering shall advise the Buyer that, in its view, the number of securities
requested to be included in such registration exceeds the largest number that
can be sold in an orderly manner in such offering within a price range
acceptable to the Buyer, the Buyer shall include in such registration: (i)
first, all CLC Common Stock that the Buyer proposes
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to register for its own account; (ii) second, all CLC Common Stock requested
to be registered by any shareholder(s) of the Company who have exercised
their demand registration rights under registration rights agreements with
the Company; (iii) third, all CLC Common Stock requested to be registered by
any shareholders of the Company, other than the Seller or the Seller's
Shareholders, who have exercised their piggyback registration rights with
respect to such offering, in order of the priority that such registration
rights were granted; and (iv) fourth, the CLC Shares requested by the Seller
to include in such offering.
10. TERMINATION
10.1. Termination. Notwithstanding anything herein or elsewhere to the
contrary, this Agreement may be terminated and the transactions contemplated
hereunder abandoned:
(a) by the Buyer:
(i) if the Closing Date shall not have taken place on or
prior to February 14, 1998;
(ii) at any time prior to the Closing Date if:
(x) a material condition to the Buyer's performance
under this Agreement or a covenant of the Seller contained herein shall not
be fulfilled on or before the Closing Date or on such other date specified
for the fulfillment of such covenant or condition;
(y) a material default or breach of this Agreement shall
be made by the Seller; or
(z) the Buyer is not satisfied with the results of its
review of, and due diligence investigation with respect to, the Business.
(b) by the Seller:
(i) if the Closing Date shall not have taken place on or prior
to February 14, 1998;
(ii) at any time prior to the Closing Date if:
(x) a material condition to the Seller's performance
under this Agreement or a covenant of the Buyer contained herein shall not be
fulfilled on or before the Closing Date or on such other date specified for
the fulfillment of such covenant or condition; or
(y) a material default or breach of this Agreement shall
be made by the Buyer.
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10.2. Additional Right of Buyer to Terminate. No later than fifteen
(15) days after execution of this Agreement, Buyer and/or Buyer's
representative shall meet with officials from ED's Initial Participation
Branch ("IPB") to inform IPB of this Agreement and determine whether IPB
reasonably anticipates that Buyer will be able to obtain Certification for
the Institution subsequent to the Closing Date. If, on the basis of the
above-described meeting, Buyer reasonably believes that Buyer will not be
able to obtain Certification for the Institution under the Buyer's ownership
at any time or in a timely manner, then notwithstanding any other provision
of this Agreement to the contrary, Buyer may elect to terminate this
Agreement by notice to the Seller given not more than fifteen (15) days
subsequent to the initial meeting with ED, including in such notice the basis
for the belief upon which the election is taken. The Buyer may withdraw its
election if, subsequent to the giving of notice, it is satisfied that the
basis cited in the notice has been satisfactorily resolved, the determination
of Buyer to be dispositive.
10.3. Effect of Termination. In the event of the termination of this
Agreement pursuant to either Section 10.1 or Section 10.2, this Agreement
shall forthwith become void, and there shall be no liability or obligation on
the part of any party hereto; provided, however, (i) the provisions of this
Section 10.3, and Sections 6.4 (with respect to confidential information of
the other party) and 14.7 shall remain in full force and effect and survive
any termination of this Agreement.
11. INDEMNITY
11.1. Indemnification by Seller and Seller's Shareholders. The Seller
and the Seller's Shareholders, jointly and severally, covenant and agree to
indemnify, defend, protect and hold harmless Buyer and its officers,
directors, employees, stockholders (other than the Seller or the Seller's
Shareholders), assigns, successors and affiliates (individually, an
"Indemnified Party" and collectively, "Indemnified Parties") from, against
and in respect of any and all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages) and costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements of every kind, nature and description) (collectively,
"Damages") suffered, sustained, incurred or paid by the Indemnified Parties
in connection with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Seller's Shareholders
or the Seller set forth in this Agreement or any schedule or certificate,
delivered by or on behalf of any Seller's Shareholders or the Seller in
connection herewith; (ii) any nonfulfillment of any covenant or agreement by
the Seller or Seller's Shareholders under this Agreement or in any document
furnished or to be furnished by the Seller or the Seller's Shareholders in
connection herewith; (iii) the business, operations or assets of the Seller
prior to the Closing Date or the actions or omissions of the Seller's
directors, officers, shareholders, employees or agents prior to the Closing
Date, other than Damages arising from
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matters expressly disclosed in the Financial Statements, this Agreement or
the schedules to this Agreement; (iv) any environmental issues or any
Environmental and Safety Requirements; (v) any claim by any employee or
former employee of the Seller or the Institution relating to employment on or
before the Closing Date; (vi) any claim by any party arising under the bulk
transfer provisions of any applicable law; (vii) any claim relating to Taxes;
(viii) any Excluded Liability; (ix) the specific litigation matters set forth
on Schedule 4.15; (x) any Title IV Program or other Financial Assistance
liabilities related to the operation of the Institution prior to Closing;
(xi) the use by the Seller or the Institution of any Intellectual Property in
violation of the terms of any agreement pursuant to which it is licensed or
which violates or infringes upon the asserted rights of others; and (xii) any
and all Damages incident to any of the foregoing or to the enforcement of
this Section 11.1.
11.2. Indemnification by Buyer. Buyer shall defend, indemnify and hold
harmless the Seller, their officers, directors, employees, agents, and
shareholders, their successors and assigns, and each of them (hereinafter
collectively called "Seller's Indemnitees") against and in respect of any and
all Damages suffered or incurred by any Seller's Indemnitee by reason of, or
arising out of: (i) any misrepresentation, breach of warranty or breach or
non-fulfillment of any agreement of Buyer contained in this Agreement; (ii)
any nonfulfillment of any covenant or agreement by the Buyer under this
Agreement or in any document furnished or to be furnished by the buyer in
connection herewith or (iii) Buyer's failure to pay or perform the Assumed
Liabilities.
11.3. Limitation. The indemnification obligations for Damages under
this Section 11 of (i) the Seller shall be limited to an aggregate amount
equal to the Purchase Price, (ii) Dorras shall be limited to 66.67% of the
Purchase Price, (iii) Proto shall be limited to 16.67% of the Purchase Price
and (iv) Coutts shall be limited to 16.67% of the Purchase Price.
Notwithstanding Section 11.1 hereof, the Seller's Shareholders'
indemnification obligations shall be several, but not joint, to the extent
that Damages paid to the Buyer hereunder exceed $2,500,000 (including any
amounts paid for Damages pursuant to the Escrow Agreement in Section 2.7).
The Seller and the Seller's Shareholders shall not be liable to the Buyer
with respect to any claim with respect to breaches of representations and
warranties unless the aggregate amount of all Damages exceeds $50,000, but if
the amount of Damages exceeds $50,000, then indemnification shall be made by
the Seller and the Seller's Shareholders hereunder to the fullest extent of
such Damages, including the first $50,000 thereof. The indemnification
obligations under this Section 11 of the Buyer shall be limited to an
aggregate amount equal to the Purchase Price. The Buyer shall not be liable
to the Seller or the Seller's Shareholders with respect to any claim with
respect to breaches of representations and warranties unless the aggregate
amount of all Damages exceeds $50,000, but if the amount of Damages exceeds
$50,000, then indemnification shall be made by the Buyer to the full extent
of such Damages, including the first $50,000 thereof.
11.4. Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Seller, the Seller's
Shareholders and Buyer in or pursuant to this Agreement or in any document
delivered pursuant hereto shall be
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deemed to have been made on the date of this Agreement (except as otherwise
provided herein) and, if a Closing occurs, as of the Closing Date. The
covenants of the Seller, the Seller's Shareholder and the Buyer shall survive
the Closing in accordance with their terms. The representations and
warranties of the Seller, the Seller's Shareholders and the Buyer will
survive the Closing and will remain in effect until, and will expire upon,
the date that is the later of clause (a) or (b) of this Section 11.4:
(a) (i) with respect to claims relating to or arising out of
specifically identified liabilities set forth on Schedule 11.4 (to be
provided by Buyer prior to the Closing, which shall not include any
liabilities assumed pursuant to Section 2.3(c)): (A) the date that is six
(6) months after the expiration of the longest applicable federal or state
statute of limitation (including extensions thereof), or (B) if there is no
applicable statute of limitation, (x) ten (10) years after the Closing Date
if the Claim is related to the cost of investigating, containing, removing,
or remediating a release of Hazardous Material into the environment, or (y)
five (5) years after the Closing Date for any other Claim covered by clause
(a)(i)(B) of this Section 11.4;
(ii) with respect to claims other than those specified in
clause (a)(i) that are of a nature and of sufficient materiality typically
expected to be encountered in the audit process, the earlier of (x) on the
completion of the first independent audit of financial statements containing
combined operations of Buyer and the Seller (the "First Audit") or (y) twelve
(12) months after the Closing Date (the "First Anniversary"); or
(iii) with respect to all claims other than those referred to
in clause (a) (i) or (ii) of this Section 11.4, the First Anniversary; or
(b) the final resolution of claims or demands pending as of the
relevant dates described in clause (a) of this Section 11.4 (such claims
referred to as "Pending Claims").
11.5. Indemnification Procedures. All claims or demands for
indemnification under this Section 11 ("Claims") shall be asserted and
resolved as follows:
(a) In the event that any Indemnified Party or a Seller's Indemnity
(collectively for this Section 11.5 an "Indemnified Party") has a Claim
against any party obligated to provide indemnification pursuant to Sections
11.1 or 11.2 hereof (the "Indemnifying Party") which does not involve a
Claim being asserted against or sought to be collected by a third party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying
Party of such Claim, specifying the nature of such Claim and the amount or
the estimated amount thereof to the extent then feasible (the "Claim
Notice"). If the Indemnifying Party does not notify the Indemnified Party
within fifteen (15) days after the date of delivery of the Claim Notice that
the Indemnifying Party disputes such Claim, with a detailed statement of the
basis of such position, the amount of such Claim shall be conclusively deemed
a liability of the Indemnifying Party hereunder. In case an objection is made
in writing in accordance with this Section 11.5, the Indemnified Party shall
either: (i) respond in a written statement to the
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objection within fifteen (15) days and, for sixty (60) days thereafter,
attempt in good faith to agree upon the rights of the respective parties with
respect to each of such Claims (and, if the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties); or (ii) if Buyer reasonably believes that the Claim at issue is
governed by the time limitation set forth in Section 11.4(a)(ii) or (iii),
then Buyer may, in its sole discretion, submit the resolution of the Claim to
expedited, binding arbitration pursuant to Section 11.8.
(i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against
an Indemnified Party by a third party (a "Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party.
The Indemnifying Party shall have fifteen (15) days from the date of delivery
of the Claim Notice to notify the Indemnified Party (A) whether the
Indemnifying Party disputes liability to the Indemnified Party hereunder with
respect to the Third Party Claim, and, if so, the basis for such a dispute,
and (B) if such party does not dispute liability, whether or not the
Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend against the Third Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated) to file any motion, answer or
other pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's interests.
(ii) In the event that Indemnifying Party timely notifies the
Indemnified Party and irrevocably acknowledges in writing the Indemnifying
Party's obligation to indemnify with respect to the Third Party Claim and the
Indemnifying Party desires to control the defense of the Third Party Claim,
the Indemnifying Party shall have the right to defend the Indemnified Party
against such Third Party Claim, provided that, unless the Indemnified Party
otherwise agrees in writing, the Indemnifying Party may not settle any Third
Party Claim (in whole or in part) if such settlement does not include a
complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such
defense or settlement the Indemnified Party may do so at its sole cost and
expense. If the Indemnifying Party elects not to defend the Indemnified Party
against a Third Party Claim, whether by failure of such party to give the
Indemnified Party timely notice as provided herein or otherwise, then the
Indemnified Party, without waiving any rights against such party, may settle
or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an
ongoing basis, all indemnifiable costs and expenses of the Indemnified Party
with respect thereto, including interest from the date such costs and
expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Indemnifying Party, any Third Party Claim seeks material prospective relief
which could have an adverse effect on any Indemnified Party or any
subsidiary, the Indemnified Party shall have the right to control or assume
(as the case may be) the defense of any such Third Party Claim and the amount
of any judgment or settlement and the reasonable costs and expenses of
defense shall be included as part of the indemnification
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obligations of the Indemnifying Party hereunder. If the Indemnified Party
elects to exercise such right, the Indemnifying Party shall have the right to
participate in, but not control, the defense of such Third Party Claim at the
sole cost and expense of the Indemnifying Party.
(b) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to
believe that such Claim may be made.
(c) Subject to the provisions of Section 11.4, the Indemnified
Party's failure to give reasonably prompt notice as required by this Section
11.5 of any actual, threatened or possible claim or demand which may give
rise to a right of indemnification hereunder shall not relieve the
Indemnifying Party of any liability which the Indemnifying Party may have to
the Indemnified Party unless the failure to give such notice materially and
adversely prejudiced the Indemnifying Party.
(d) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of
any indemnification obligation under this Section 11, provided that no
Indemnified Party shall be obligated to continue pursuing any payment
pursuant to the terms of any insurance policy.
(e) With respect to any claims for Damages arising as a result of
a breach of a representation in Section 4.22, after any payment of Damages
for noncollectibility of an account receivable, the Buyer shall promptly
convey to the Seller all rights, title and interest to such account
receivable.
11.6. Remedies. Except as provided in Section 9.7, the indemnification
provided in this Section 11, subject to the limitations set forth herein,
shall be the exclusive remedy available to the Buyer, the Seller or the
Seller's Shareholders for Damages; provided, however, that nothing in this
Section 11.6 or elsewhere in this Agreement shall prevent the Buyer, the
Seller or the Seller's Shareholders from bringing an action based upon fraud
and/or deceit; provided, further, that nothing in this Section 11.6 or
elsewhere in the Agreement shall prevent the Buyer from bringing an action to
compel specific performance of any non-monetary obligation of the Seller or
the Seller's Shareholders hereunder.
11.7. Right to Set Off. Prior to seeking payment for Damages directly
from the Seller or the Seller's Shareholders for Claims pursuant to this
Section 11, Buyer shall first attempt to seek set off against the Escrowed
Shares, amounts finally determined under Section 11.5 to be owed to Buyer by
the Seller or the Seller's Shareholders under Section 11.1 hereof. For
purposes of the preceding sentence, the CLC Shares held as Escrowed Shares
shall be valued at the Purchase Share Price.
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11.8. Arbitration.
(a) Claims submitted to arbitration under this Section 11.8
("Arbitrated Disputes") shall be resolved by binding arbitration administered
by the American Arbitration Association ("AAA") in Baltimore, Maryland and,
except as expressly provided in this Agreement, shall be conducted in
accordance with the Expedited Procedures under the Commercial Arbitration
Rules of the AAA, as such rules may be amended from time to time (the
"Rules"). The hearing locale shall be Baltimore, Maryland. A single,
neutral arbitrator (the "Arbitrator") shall be appointed by the AAA, within
five (5) days after an Arbitrated Dispute is submitted for arbitration under
this Section 11.8, to preside over the arbitration and resolve the Arbitrated
Dispute. The Arbitrator shall be selected from the AAA's Commercial Panel,
and shall be qualified to practice law in at least one jurisdiction in the
United States and have expertise in the interpretation of commercial
contracts. The parties shall have three (3) days to object in writing to
the appointment of the Arbitrator, the sole basis for such objection being an
actual conflict of interest. The AAA, in its sole discretion, shall determine
within three (3) days the validity of any objection to the appointment of the
Arbitrator based on an actual conflict of interest.
(b) The Arbitrator's decision (the "Decision") shall be binding,
and the prevailing party may enforce the Decision in any court of competent
jurisdiction.
(c) The parties shall use their best efforts to cooperate with
each other in causing the arbitration to be held in as efficient and
expeditious a manner as practicable, including but not limited to, providing
such documents and making available such of their personnel as the Arbitrator
may request, so that the Decision may be reached timely. The Arbitrator
shall take into account the parties' stated goal of expedited proceedings in
determining whether to authorize discovery and, if so, the scope of
permissible discovery and other hearing and pre-hearing procedures.
(d) The authority of the Arbitrator shall be limited to deciding
liability for, and the proper amount of, a Claim, and the Arbitrator shall
have no authority to award punitive damages. The Arbitrator shall have such
powers and establish such procedures as are provided for in the Rules, so
long as such powers and procedures are consistent with this Section 11.8 and
are necessary to resolve the Arbitrated Dispute within the time periods
specified in this Agreement. The Arbitrator shall render a Decision within
thirty (30) days after being appointed to serve as Arbitrator (or such
shorter period of time, to the extent reasonable or practicable, as may be
appropriate to conform to the expiration of indemnities set forth in Section
11.4(a)(ii) or (iii)), unless the parties otherwise agree in writing or the
Arbitrator makes a finding that a party has carried the burden of showing
good cause for a longer period; provided, however, that in no event may the
Arbitrator, without the consent of both the Seller's Shareholders and Buyer,
extend the time for rendering a Decision or otherwise delay a Decision to a
date that is later than the First Anniversary.
12. SECURITIES LAW MATTERS.
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The parties agree as follows with respect to the sale or other disposition
after the Closing Date of the CLC Shares:
12.1. Disposition of Shares. The Seller and the Seller's Shareholders
represent and warrant that the CLC Shares being acquired by them hereunder
are being acquired and will be acquired for their own respective accounts and
will not be sold or otherwise disposed of, except pursuant to: (a) an
exemption from the registration requirements under the Securities Act, which
does not require the filing by the Buyer with the Commission of any
registration statement, offering circular or other document, in which case,
the Seller or the Seller's Shareholders shall first supply to the Buyer an
opinion of counsel (which counsel and opinions shall be satisfactory to the
Buyer) that such exception is available; or (b) an effective registration
statement filed by the Buyer with the Commission under the Securities Act
(including any registration statement filed pursuant to Section 9).
12.2. Trading in CLC Common Stock. Except as otherwise expressly
consented to by the Buyer, from the date of this Agreement until the Closing
Date, the Seller and the Seller's Shareholders (and any Affiliates thereof)
will not directly or indirectly purchase or sell (including short sales) any
shares of CLC Common Stock (or derivative securities) in any transaction
effected on the Nasdaq Stock Market, or otherwise.
12.3. Agreement to Retain Shares. The Seller agrees not to transfer,
sell, or otherwise dispose of or direct or cause the sale, transfer or other
disposition of, or reduce the Seller's risk relative to, any of the CLC
Shares or CLC Common Stock held by the Seller or on the Seller's behalf,
whether owned on the date hereof or after acquired, within the 30 days prior
to the Closing Date. The Seller further agrees not to transfer, sell or
otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, or reduce the Seller's risk relative to, any CLC Common Stock
held by the Seller or on the Seller's behalf or received by the Seller or on
the Seller's behalf in or as a result of this Agreement or otherwise, until
after the date the Buyer shall have publicly released a report in the form of
a quarterly earnings report, registration statement filed with the
Commission, a report filed with the Commission of Form 10-K, 10-Q or 8-K or
any other public filing, statement or public announcement which included the
combined financial results (including combined sales and net income) of the
Buyer and the Assets for a period of at least 30 days of combined operations
of the Buyer and the Assets following the Closing Date.
12.4. Legend. The certificates representing the CLC Shares shall bear
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER
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THE ACT, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE
WITH RESPECT THERETO, OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH THE SECURITIES
AND EXCHANGE COMMISSION'S ACCOUNTING SERIES RELEASES 130 AND 135.
The Buyer may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
13. COVENANT NOT TO COMPETE
13.1. Non-Competition. For a period of three (3) years after the
Closing Date, neither the Seller nor Seller's Shareholders shall directly or
indirectly:
(a) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than two percent
(2%) of the total outstanding stock of a publicly held company) own, manage,
operate, join, control, be employed by, or participate in the ownership,
management, operation or control of any Competing Enterprise (as defined in
Section 13.2 of this Agreement);
(b) recruit, solicit or induce, or attempt to induce, any employee
or employees of the Buyer to terminate their employment with, or otherwise
cease their relationship with, the Buyer;
(c) solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the clients, customers or accounts,
or prospective clients, customers or accounts, of the Buyer; or
(d) publish any statement or make any statement (under
circumstances reasonably likely to become public) critical of the Buyer, or
in any way adversely affecting or otherwise maligning the reputation of the
Buyer or any of its Affiliates.
13.2. Competing Enterprise. For purposes of Section 13.1 of this
Agreement, the term "Competing Enterprise" shall mean any person,
corporation, partnership or other entity engaged in business within
twenty-five (25) miles of any of the Buyer's facilities, now existing or
existing during the period in Section 13.1, and engaged in any business (i)
described in the Buyer's Annual Report to Stockholders or in its Annual
Report on Form 10-K for the Buyer's most recent fiscal year, in which the
Buyer and its
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Affiliates has engaged or is then engaged or (ii) under consideration by the
Buyer and its Affiliates as of the date hereof. The phrase "engaged in any
business" includes the conduct of business in any respect, including, without
limitation, sales presentations, entering into contracts, and the billing or
receipt of payment, services or goods, and in regard to any person,
including, without limitation, the United States federal government, and any
state government, and any department or agency thereof. Neither Section
13.1(a) nor Section 13.1(c) shall be deemed to prohibit cross-market
advertising which is not designed to compete with the Buyer's facilities
within the markets defined above.
13.3. Enforceability. If any restriction set forth in Section 13.1 of
this Agreement is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall then
be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
13.4. Essential Elements. It is understood by the parties hereto that
the covenants contained in this Section 13 are essential elements of this
Agreement and that, but for the agreement of the Seller and Seller's
Shareholders to comply with such covenants, the Buyer would not have agreed
to enter into this Agreement. The Seller and Seller's Shareholders and the
Buyer have independently consulted with their respective counsel and have
been advised concerning the reasonableness and propriety of such covenants
with specific regard to the nature of the business conducted by the Buyer.
The Seller and Seller's Shareholders hereby agrees that all covenants
contained in this Section 13 are reasonable and valid and waives all defenses
to the strict enforcement hereof by the Buyer.
13.5. Exceptions. Notwithstanding any provision of this Section 13:
(a) the restrictions set forth in Section 13.1(a) shall be limited
as follows: (i) the Seller's Shareholders may own, manage, operate, join,
control, be employed by, or participate in the ownership, management,
operation or control of (x) a Competing Enterprise provided that such
Competing Enterprise only conducts business within twenty-five (25) miles of
Hartford, CT and/or within two (2) miles of Fairfield, CT and (y) the Florida
Career Institute ("FCI"), provided, that, FCI only conducts business in
Lakeland, FL and/or Orlando, FL and that FCI shall only offer the curriculum
currently offered by FCI as certified by the State of Florida and as set
forth on Schedule 13.5(a) hereof; and (ii) with respect to Coutts such
restrictions shall only survive for a period of eighteen (18) months after
the Closing Date, except with respect to any Competing Enterprise within the
State of New Jersey, which shall continue for a period of three (3) years
after the Closing Date; and
(b) the limitations set forth in Section 13.1(a), (b) and, (c)
shall not apply to Proto solely in his capacity as an officer of Whitman
Education Group, Inc. ("Whitman") or its successors or wholly owned
subsidiaries, provided, however, that such limitation shall terminate upon
Proto's termination or resignation as a full-time officer and employee of
Whitman,
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provided, further, that Proto may, at all times, own up to 5% of the
outstanding capital stock of Whitman.
14. MISCELLANEOUS
14.1. Successors, Assigns and Third Parties. This Agreement shall inure
to the benefit of and be binding upon Seller and its respective successors
and assigns; provided, however, that Seller may not make any assignment of
this Agreement or any interest herein without the prior written consent of
Buyer. This Agreement or any of the severable rights and obligations inuring
to the benefit or to be performed by Buyer hereunder may be assigned by Buyer
to a third party, in whole or in part; provided, however, that the Buyer
shall remain responsible for its obligations hereunder. Except as provided
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person, firm or corporation, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.2. Governing Law. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the internal
substantive laws of the State of Delaware, disregarding principles of
conflict of laws and the like.
14.3. Specific Enforcement. All of the parties hereto acknowledge that
the parties will be irreparably damaged in the event that this Agreement is
not specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any of the parties hereto, the
other parties shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without showing any actual damage, or a
decree for specific performance, in accordance with the provisions hereof.
14.4. Severability. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant and/or
provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement shall remain
in full force and effect; provided, however that if such unlawful clause is
so material to the party for whose benefit the clause was originally included
so that such party would not have entered into this Agreement without such
unlawful clause, the severability of such clause shall be arbitrated pursuant
to Section 11.8 hereof.
14.5. Notices. Except as otherwise expressly provided herein, any
notice, consent, or other communication required or permitted to be given
hereunder shall be in writing, delivered by hand delivery, by certified mail
or by a national overnight delivery service and shall be deemed to have been
given when received, and shall be addressed as follows:
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(a) If to Buyer:
Computer Learning Centers, Inc.
11350 Random Hills Road, Suite 240
Fairfax, VA 22030
Attention: Charles L. Cosgrove
with a copy to:
Tucker, Flyer & Lewis
1615 L Street NW
Washington, DC 20036-5601
Attention: Jack L. Lewis
Lawrence T. Yanowitch
(b) If to Seller of to Seller's Shareholders:
Graeme Dorras
642 Victoria Terrace
Paramus, New Jersey 07652
with a copy to:
Harwood Lloyd
130 Main Street
Hackensack, NJ 07601
Attention: Maurice L. Stone
or at such other address or addresses as the party addressed may from time to
time designate in writing. Any communication dispatched by telegram or telex
shall be confirmed by letter.
14.6. Public Announcements. Buyer and the Seller shall agree with each
other as to the form and substance of any press release related to this
Agreement or the transactions contemplated hereby, and shall consult with
each other as to the form and substance of other public disclosures related
thereto; provided, however, that nothing contained herein shall prohibit any
party hereto from making any disclosure required by applicable laws or
regulations, after notice to the other party with the opportunity to comment
to the extent that delay of the disclosure is permitted under such laws or
regulations.
14.7. Expenses. The Buyer shall pay the fees, expenses and
disbursements incurred by the Buyer and its agents, representatives,
accountants and counsel in connection with the negotiation, execution and
consummation of this Agreement. The Seller's Shareholders shall pay the
fees, expenses and disbursements incurred by the Seller
57
<PAGE>
or the Seller's Shareholders and their agents, representatives, accountants
and counsel in connection with the negotiation, execution and consummation of
this Agreement. Notwithstanding the previous sentence, if the transactions
contemplated by this Agreement are consummated, the Buyer shall pay the
actual fees, expenses and disbursements of the Seller, and its accountants
and counsel incurred in connection with the negotiation, execution and
consummation of this Agreement (the "Transaction Expenses") to the extent
that the amount of the Transaction Expenses has been identified as of the
Closing Date and notice thereof has been given to the Buyer (the "Closing
Date Transaction Expenses"); provided, however, that the Closing Date
Transaction Expenses shall not be greater than One hundred Thousand Dollars
($100,000).
14.8. Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee or partner of any party hereto or
any other person or entity.
14.9. Mutual Drafting. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not
be construed for or against any party hereto. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement,
with the opportunity to seek advice as to its legal rights from such counsel.
Each party further represents that it is being independently advised as to
the Tax or securities consequences of the transactions contemplated by this
Agreement and is not relying on any representation or statements made by the
other party as to such Tax and securities consequences.
14.10. Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in
writing signed on behalf of each of the parties hereto. Any extension or
waiver by any party of any provision hereto shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
14.11. Miscellaneous. Unless the context clearly indicates otherwise,
where appropriate the singular shall include the plural and the masculine
shall include the feminine or neuter, and vice versa, to the extent necessary
to give the terms defined herein and/or the terms otherwise used in this
Agreement the proper meanings. Words such as "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Agreement as a whole
and not to any particular Section or subsection of this Agreement. Whenever
the word "including" is used herein, it shall be deemed to be followed by the
words "without limitation." The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute the same agreement. This
Agreement and any document
58
<PAGE>
or schedule required hereby may be signed by facsimile signature which shall be
considered legally binding for all purposes.
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
affixed to this Agreement as of the date first above written.
SELLER
Markerdowne Corporation,
a Delaware corporation
By: /s/ Graeme Dorras
--------------------------------
Name: Graeme Dorras
Title: President
SELLER'S SHAREHOLDERS
/s/ Graeme Dorras
-----------------------------------------
Name: Graeme Dorras
/a/ Randy Proto
-----------------------------------------
Name: Randy Proto
/s/ Chris Coutts
-----------------------------------------
Name: Chris Coutts
BUYER
Computer Learning Centers, Inc.,
a Delaware corporation
By: /s/ Charles L. Cosgrove
-----------------------------------------
Name: Charles L. Cosgrove
Title: VP-CFO
60
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Annex I
Price Waterhouse
February 17, 1998
The Board of Directors
Computer Learning Centers, Inc.
We have been furnished with a copy of the Asset Purchase Agreement between
Computer Learning Centers, Inc. and Markerdowne Corporation (referred to herein
as the "Sellers"), dated as of December 31, 1997. Under the caption "Accounting
and Tax Treatment, " the agreement states that such acquisition will be
accounted for on the "pooling of interests" method under the requirements of
Opinion No. 16 (Business Combinations) of thc Accounting Principles Board of the
American Institute of Certified Public Accountants (APB No.16), as amended by
Statements of the Financial Accounting Standards Board, and the related
interpretations of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the rules and regulations of the U.S.
Securities and Exchange Commission.
At your request, we have read the Asset Purchase Agreement referred to above and
have had discussions with officials of Computer Learning Centers, Inc.
responsible for financial and accounting matters as to the specific conditions
which must be met for pooling of interests accounting to be appropriate. We have
also reviewed a letter to us prepared by Computer Learning Centers, Inc. that
addresses specific conditions that must be met to account for a business
combination as a pooling of interests and a letter from Steven F. Landau, that
is included as Exhibit 1, that the Sellers would meet all of the conditions with
regard to the pooling of interests accounting treatment as it relates to the
Sellers and the transaction contemplated by the Asset Purchase Agreement
referred to above.
Based upon discussions with officials responsible for financial and accounting
matters, and information furnished to us as of the date of this letter, we
concur with management's conclusion that, as of this date, no conditions exist
that would preclude Computer Learning Centers, Inc.'s accounting for the merger
with the Sellers as a pooling of interests. This concurrence with management's
conclusion is based on our belief that the criteria for such accounting
treatment specified by APB No.16, which can be assessed at this time, have been
met.
All of the conditions to be met for pooling of interests accounting cannot be
finally assessed until after the passage of two years from the consummation date
of the merger, as certain of the conditions for pooling of interests accounting
address transactions occurring within such period of time. SEC Accounting Series
Release No.135, as amended by Staff Accounting Bulletins Nos. 65 and 76,
requires that in a pooling of interests, no affiliate of either combining
company in the business combination may reduce its risk relative to its common
shareholder position within the period beginning 30 days prior to consummation
of a business combination and ending when financial results covering at least 30
days of combined operations have been published. At the date of this letter,
financial results covering at least 30 days of combined operations have not been
published. Management of Computer Learning Centers, Inc. has informed us that it
will not agree to any actions that would violate any of the required conditions.
Our conclusion expressed in the preceding paragraph is based on facts and
conditions known to Computer Learning Centers, Inc. at the date of this letter.
Should such facts and circumstances change, our conclusion may change.
Our judgment as to the appropriateness of pooling of interests accounting is
based solely on the facts provided to us by Computer Learning Centers, Inc. and
the Seller's independent accountants, Steven F. Landau; should those facts
change, our conclusion may change.
This letter is solely for your information and is not to be distributed to
anyone who is not a member of management of Computer Learning Centers, Inc., the
Sellers, the Seller's independent accountants, or the respective Companies'
legal counsel without our prior written approval, nor should this letter be
referred to for any purpose, including, but not limited to, the registration,
purchase, or sale of securities, nor is it to be filed with or referred to, in
whole or in part' in a registration statement or any other document, except that
reference may be made to it in the agreement included in the registration
statement as a condition precedent to the closing of the transaction.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
61
<PAGE>
RELEASE AGREEMENT
RELEASE AGREEMENT dated as of February 17, 1998 (the "Agreement"), by and
between Computer Learning Centers, Inc., a Delaware corporation (the "Company"),
and the undersigned, individually and as an officer and/or director of
Markerdowne Corporation, a Delaware corporation ("Markerdowne").
WHEREAS, pursuant to Section 7.17 of that certain Asset Purchase Agreement
dated as of December 31, 1997 by and among the Company, Markerdowne, Graeme
Dorras, Randy Proto and Chris Coutts (the "Purchase Agreement") and except as
set forth herein, the undersigned desires to release the Company, now and for
all time, from any and all claims against or liabilities of the Company which
arose or existed prior thereto or which may arise or exist at any time
thereafter, whether known or unknown as of the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Release. Effective as of the date hereof, the undersigned,
individually and in his or her capacity as an officer and/or director of
Markerdowne, hereby voluntarily, knowingly and willingly remises, releases,
acquits, satisfies and forever discharges the Company and each of its
predecessors, successors, past, present and future assigns, agents, attorneys,
directors, officers, employees, representatives, parents and subsidiaries, and
each of their respective heirs, executors, administrators, successors and
assigns, of and from any and all manner of charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, costs, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, judgments, executions,
variances, trespasses, losses, debts and expenses (including attorneys' fees and
costs actually incurred) and demands of any kind or nature whatsoever, whether
known or unknown, asserted or unasserted, suspected or unsuspected, whether in
law or equity, of any nature whatsoever by reason of any matter, cause or thing
whatsoever which, from the beginning of the world, up to and including the date
hereof, exist, have existed, or may arise from any matter whatsoever occurring
other than matters directly relating to and arising under performance of the
terms and conditions set forth in the Purchase Agreement.
2. Further Assurances. The undersigned agrees to use his or her best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the release contemplated by this Agreement.
3. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the provisions contemplated herein,
and no modification hereof shall be effective unless in writing and signed by
the party against whom or which it is sought to be enforced. Except as
otherwise provided in the Purchase Agreement, this Agreement supersedes all
prior understandings, negotiations and agreements relating to the transactions
62
<PAGE>
contemplated herein. The parties further agree that they are acting fully and
freely upon their own review and knowledge and voluntarily are executing this
Agreement of their own free will and with advice of counsel.
4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto.
5. Miscellaneous. In the event any provision of this Agreement shall be
held invalid or unenforceable by a Court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof.
63
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
COMPUTER LEARNING CENTERS, INC., a
Delaware corporation
By: /s/ Charles Cosgrove
---------------------------------
By: Charles Cosgrove
Title: Vice President and Chief
Financial Officer
/s/ Valerie Dorras
---------------------------------
Name: Valerie Dorras
64
<PAGE>
Annex III
Form of Dorras Agreement
[CLC Letterhead]
[Date]
Mr. Graeme Dorras
Markerdowne Corporation
642 Victoria Terrace
Paramus, New Jersey 07652
Re: Non-Compete Payment
Dear Graeme:
Reference is made to the Asset Purchase Agreement (the "Agreement")
dated December 31, 1997 by and among Computer Learning Centers, Inc., a
Delaware corporation ("CLC"), Markerdowne Corporation, a Delaware
corporation, Randy Proto, Chris Coutts and you. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement. As further consideration for your agreement not to compete with,
or solicit employees or students of or from, CLC, as set forth in Section 13
of the Agreement, upon the Closing CLC will pay to you [$600,000]. CLC
agrees and understands that all payments to be made hereunder to you shall be
paid without giving effect to any right to indemnification under the
Agreement and CLC shall not be entitled to any refund of any amounts paid
pursuant to this letter agreement.
Kindly indicate your acknowledgement of the foregoing terms by executing
this letter in the space provided.
Very truly yours,
Computer Learning Centers, Inc.,
a Delaware corporation
By: /s/ Charles L. Cosgrove
---------------------------------
Charles L. Cosgrove,
Vice President and CFO
ACKNOWLEDGED:
/s/ Graeme Dorras
- --------------------------
Graeme Dorras
65
<PAGE>
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this "Amendment") is
entered into as of February 13, 1998 by and among Computer Learning Centers,
Inc., a Delaware corporation, Markerdowne Corporation, a Delaware
corporation, Graeme Dorras, Randy Proto and Chris Coutts.
WHEREAS, the parties hereto have entered into an Asset Purchase
Agreement dated as of December 31, 1997 (the "Purchase Agreement"); and
WHEREAS, the parties hereto have determined to amend the Purchase
Agreement in accordance with the provisions set forth herein pursuant to
Section 14.10 thereof in order to reflect the 2:1 split of CLC Common Stock
which occurred on January 8, 1998 and the adjustment to the Purchase Price.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Capitalized terms used and not defined herein shall have such meanings
as set forth in the Purchase Agreement.
2. Section 2.5 of the Purchase Agreement is hereby amended by deleting
the Purchase Price set forth therein and inserting in lieu thereof: $12,325,982.
3. Section 2.5 of the Purchase Agreement is further amended by deleting
the number of shares of CLC Common Stock payable to Seller as the Purchase Price
set forth therein and inserting in lieu thereof: 510,287.
4. Section 2.7 of the Purchase Agreement is amended by deleting the
number of Escrowed Shares set forth therein and inserting in lieu thereof:
51,029.
5. As modified hereby, the Purchase Agreement and its terms and
provisions are hereby ratified and confirmed for all purposes and in all
respects.
6. This Amendment may be executed in any number of counterparts, which
may be by facsimile, all of which counterparts taken together shall constitute
one and the same instrument.
7. To the extent, if any, that a provision of this Amendment conflicts
with or differs from any provision of the Purchase Agreement, such provision of
this Amendment shall prevail and govern for all purposes and in all respects.
8. Each party hereto has all requisite corporate power and authority to
enter into this Amendment and consummate the transactions contemplated by the
Purchase Agreement (as
66
<PAGE>
amended by this Amendment). The execution and delivery of this Amendment
have been authorized by all necessary corporate actions on the part of each
of the parties. This Amendment has been executed and delivered by each party
hereto and constitutes a valid and binding agreement enforceable against each
such party in accordance with its terms. This Amendment constitutes the
entire agreement among the parties hereto regarding the subject matter hereof
and supersedes all prior agreements and understandings, both written and
oral. This Amendment shall be binding upon and inure to the benefit of each
party hereto, and nothing in this Amendment, express or implied, is intended
to or shall confer upon any third party any right, benefit or remedy of any
nature whatsoever under or by reason of this Amendment. If any term or other
provision of this Amendment is invalid, illegal or incapable of being
enforced, all other provisions of this Amendment shall nevertheless remain in
full force and effect.
67
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
SELLER
Markerdowne Corporation,
a Delaware corporation
By: /s/ Graeme Dorras
---------------------------
Name: Graeme Dorras
Title: President
SELLER'S SHAREHOLDERS
/s/ Graeme Dorras
------------------------------
Name: Graeme Dorras
/s/ Randy Proto
------------------------------
Name: Randy Proto
/s/ Chris Coutts
------------------------------
Name: Chris Coutts
BUYER
Computer Learning Centers, Inc.,
a Delaware corporation
By: /s/ Charles L. Cosgrove
---------------------------
Name: Charles L. Cosgrove
Title: VP-CFO
68
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Exhibit 99.2
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
DATED FEBRUARY 20, 1998
AMONG COMPUTER LEARNING CENTERS, INC.,
COMPUTER LEARNING CENTERS OF QUEBEC, INC.
DELTA COLLEGE INC.,
ROGER MATTE, RICHARD MATTE, MARIE-JOSE MATTE,
DOMINIQUE MATTE, JOHANNE MATTE, SUZANNE MATTE AND
DOLMEN (1994) INC.
69
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
------
<S> <C>
1. THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . .81
1.1 Purchase and Sale of Purchased Shares. . . . . . . . 81
2. CONSIDERATION FOR TRANSFER. . . . . . . . . . . . . . . . .81
2.1 Purchase Price for the Purchased Shares. . . . . . . 81
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . 81
2.3 Payment. . . . . . . . . . . . . . . . . . . . . . . 82
2.4 Capitalization of CLCQ . . . . . . . . . . . . . . . 82
2.5 Rights and obligations of CLC and holders of
Dividend Access Shares . . . . . . . . . . . . . . . 83
2.5.1 CLC Liquidation Call Rights. . . . . . . . . . 83
2.5.2 CLC Redemption Call Right. . . . . . . . . . . 84
2.5.3 CLC Retraction Call Right. . . . . . . . . . . 86
2.5.4 Withholding Rights . . . . . . . . . . . . . . 87
2.5.5 Stockholder Put Right. . . . . . . . . . . . . 88
2.5.6 Support Agreement. . . . . . . . . . . . . . . 90
2.6 Certain Information With Respect to the Capital
Stock of the Company . . . . . . . . . . . . . . . . 90
2.7 Section 85 Elections . . . . . . . . . . . . . . . . 90
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . .90
3.1 Actions taken at Closing . . . . . . . . . . . . . . 90
4. DELIVERY OF SHARES. . . . . . . . . . . . . . . . . . . . .91
4.1 Deliveries at Closing. . . . . . . . . . . . . . . . 91
4.1.1 Deliveries by Stockholders . . . . . . . . 91
4.2 Deliveries at Closing Date . . . . . . . . . . . . . 91
4.2.1 Deliveries by CLCQ . . . . . . . . . . . . 91
4.2.2 Deliveries by CLC. . . . . . . . . . . . . 91
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . .91
5.1 Representations and Warranties of the Company and
the Stockholders . . . . . . . . . . . . . . . . . . 91
5.2 Due Organization . . . . . . . . . . . . . . . . . . 91
5.3 Authorization. . . . . . . . . . . . . . . . . . . . 92
5.4 Capital of the Company . . . . . . . . . . . . . . . 92
5.5 Transactions in Capital Stock. . . . . . . . . . . . 92
5.6 No Bonus Shares. . . . . . . . . . . . . . . . . . . 92
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . 92
5.8 Predecessor Status . . . . . . . . . . . . . . . . . 93
70
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5.9 Spin-off by the Company. . . . . . . . . . . . . . . 93
5.10 Financial Statements . . . . . . . . . . . . . . . . 93
5.11 Liabilities and Obligations. . . . . . . . . . . . . 93
5.12 Accounts and Notes Receivable. . . . . . . . . . . . 94
5.13 Permits and Intangibles. . . . . . . . . . . . . . . 95
5.14 Environmental Compliance . . . . . . . . . . . . . . 96
5.15 Immovable and Movable Property . . . . . . . . . . . 98
5.16 Material Contracts and Commitments . . . . . . . . . 98
5.17 Compliance with Programs . . . . . . . . . . . . . . 99
5.18 Leasehold Property . . . . . . . . . . . . . . . . . 99
5.19 Insurance. . . . . . . . . . . . . . . . . . . . . . 100
5.20 Compensation; Employment Agreements; No Collective
Bargaining Agreement . . . . . . . . . . . . . . . . 100
5.21 Employee Plans . . . . . . . . . . . . . . . . . . . 100
5.22 Intentionally Deleted. . . . . . . . . . . . . . . . 103
5.23 Pooling of Interest. . . . . . . . . . . . . . . . . 103
5.24 Conformity with Law; Litigation. . . . . . . . . . . 103
5.25 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 104
5.26 No Violations. . . . . . . . . . . . . . . . . . . . 105
5.27 Government Contracts . . . . . . . . . . . . . . . . 106
5.28 Absence of Changes . . . . . . . . . . . . . . . . . 106
5.29 Deposit Accounts, Powers of Attorney . . . . . . . . 107
5.30 Validity of Obligations. . . . . . . . . . . . . . . 107
5.31 Other Payments . . . . . . . . . . . . . . . . . . . 108
5.32 Transactions with Directors, Officers and
Affiliates . . . . . . . . . . . . . . . . . . . . . 108
5.33 Paid-up Capital. . . . . . . . . . . . . . . . . . . 108
5.34 Location; Place of Business. . . . . . . . . . . . . 108
5.35 Stand Alone. . . . . . . . . . . . . . . . . . . . . 109
5.36 Intentionally Deleted. . . . . . . . . . . . . . . . 109
5.37 Disclosure . . . . . . . . . . . . . . . . . . . . . 109
5.38 Representations and Warranties of the Stockholder. . 109
5.39 Authority; Ownership . . . . . . . . . . . . . . . . 109
5.40 Pre-emptive Rights . . . . . . . . . . . . . . . . . 109
5.41 Residence. . . . . . . . . . . . . . . . . . . . . . 109
5.42 No Broker. . . . . . . . . . . . . . . . . . . . . . 109
6. REPRESENTATIONS OF CLC AND CLCQ. . . . . . . . . . . . . . 110
6.1 Due Organization . . . . . . . . . . . . . . . . . . 110
6.2 CLC Stock. . . . . . . . . . . . . . . . . . . . . . 110
6.3 Validity of Obligations. . . . . . . . . . . . . . . 110
6.4 Authorization. . . . . . . . . . . . . . . . . . . . 110
6.5 No Conflicts . . . . . . . . . . . . . . . . . . . . 110
6.6 Conformity with Law; Litigation. . . . . . . . . . . 111
6.7 Disclosure . . . . . . . . . . . . . . . . . . . . . 111
71
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7. COVENANTS PRIOR TO CLOSING . . . . . . . . . . . . . . . . 112
7.1 Intentionally Deleted. . . . . . . . . . . . . . . . 112
7.2 Conduct of Business Pending Closing. . . . . . . . . 112
7.3 Prohibited Activities. . . . . . . . . . . . . . . . 113
7.4 No Shop. . . . . . . . . . . . . . . . . . . . . . . 114
7.5 Notice to Bargaining Agents. . . . . . . . . . . . . 115
7.6 Notification of Certain Matters. . . . . . . . . . . 115
7.7 Intentionally Deleted. . . . . . . . . . . . . . . . 115
7.8 Cooperation in Preparation of Registration
Statement. . . . . . . . . . . . . . . . . . . . . . 116
7.9 Examination of Current Financial Statements. . . . . 116
7.10 Accounting Treatment . . . . . . . . . . . . . . . . 116
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS
AND THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 117
8.1 Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . 117
8.2 Satisfaction. . . . . . . . . . . . . . . . . . . . . 117
8.3 Consents and Approvals. . . . . . . . . . . . . . . . 117
8.4 Good Standing Certificates. . . . . . . . . . . . . . 117
8.5 No Material Adverse Change. . . . . . . . . . . . . . 117
8.6 Support Agreement . . . . . . . . . . . . . . . . . . 118
8.7 Secretary's Certificate . . . . . . . . . . . . . . . 118
8.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . 118
8.9 No Litigation . . . . . . . . . . . . . . . . . . . . 118
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLC AND CLCQ. . . . 118
9.1 Representations and Warranties; Performance of
Obligations. . . . . . . . . . . . . . . . . . . . . 118
9.2 No Litigation. . . . . . . . . . . . . . . . . . . . 119
9.3 Examination of Final Financial Statements. . . . . . 119
9.4 No Material Adverse Effect . . . . . . . . . . . . . 119
9.5 Stockholders' Release. . . . . . . . . . . . . . . . 119
9.6 Satisfaction . . . . . . . . . . . . . . . . . . . . 119
9.7 Termination of Related Party Agreements. . . . . . . 119
9.8 Opinion of Counsel . . . . . . . . . . . . . . . . . 119
9.9 Consents and Approvals . . . . . . . . . . . . . . . 119
9.10 Good Standing Certificates . . . . . . . . . . . . . 120
9.11 Intentionally Deleted. . . . . . . . . . . . . . . . 120
9.12 Repayment of Indebtedness. . . . . . . . . . . . . . 120
9.13 Insurance. . . . . . . . . . . . . . . . . . . . . . 120
9.14 Voting Trust Agreement . . . . . . . . . . . . . . . 120
9.15 Secretary's Certificate. . . . . . . . . . . . . . . 120
9.16 Securities Laws. . . . . . . . . . . . . . . . . . . 120
9.17 Pooling Letters. . . . . . . . . . . . . . . . . . . 120
9.18 Acknowledgement of Pooling Restrictions and
Receipt of Commission Filings. . . . . . . . . . . . 121
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9.19 Intentionally deleted. . . . . . . . . . . . . . . . 121
9.20 Intentionally deleted. . . . . . . . . . . . . . . . 121
9.21 Intentionally deleted. . . . . . . . . . . . . . . . 121
9.22 Discharge of Liens . . . . . . . . . . . . . . . . . 121
10. COVENANTS OF CLC, THE COMPANY AND THE STOCKHOLDERS
AFTER CLOSING. . . . . . . . . . . . . . . . . . . . . . . 121
10.1 Preparation and Filing of Tax Returns; Record
Retention. . . . . . . . . . . . . . . . . . . . . . 121
10.2 Cooperation for Litigation . . . . . . . . . . . . . 122
10.3 Affiliate Indebtedness . . . . . . . . . . . . . . . 122
10.4 Additional Dividend Access Shares. . . . . . . . . . 122
11. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 123
11.1 General Indemnification by the Stockholders. . . . . 123
11.2 Indemnification by CLC . . . . . . . . . . . . . . . 123
11.3 Third Person Claims. . . . . . . . . . . . . . . . . 123
11.4 Limitations on Indemnification . . . . . . . . . . . 125
11.5 Specific Contingencies . . . . . . . . . . . . . . . 125
11.6 No Recourse by Stockholders. . . . . . . . . . . . . 125
11.7 Payment of Indemnity.. . . . . . . . . . . . . . . . 125
12. INTENTIONALLY DELETED. . . . . . . . . . . . . . . . . . . 126
12.1 . . . . . . . . . . . . . . . . . . . . . . . . . . 126
13. NON-COMPETITION. . . . . . . . . . . . . . . . . . . . . . 127
13.1 Prohibited Activities. . . . . . . . . . . . . . . . 127
13.2 Damages. . . . . . . . . . . . . . . . . . . . . . . 127
13.3 Reasonable Restraint . . . . . . . . . . . . . . . . 128
13.4 Severability; Reformation. . . . . . . . . . . . . . 128
13.5 Independent Covenant . . . . . . . . . . . . . . . . 128
13.6 Materiality. . . . . . . . . . . . . . . . . . . . . 128
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . 128
14.1 Stockholders . . . . . . . . . . . . . . . . . . . . 128
14.2 Damages. . . . . . . . . . . . . . . . . . . . . . . 129
14.3 Survival . . . . . . . . . . . . . . . . . . . . . . 129
15. TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . 130
15.1 Disposition of Shares. . . . . . . . . . . . . . . . 130
15.2 Agreement to Retain Shares . . . . . . . . . . . . . 130
15.3 Trading in CLC Stock . . . . . . . . . . . . . . . . 130
15.4 Legend . . . . . . . . . . . . . . . . . . . . . . . 130
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16. FEDERAL SECURITIES ACT REPRESENTATIONS . . . . . . . . . . 131
16.1 No Registration. . . . . . . . . . . . . . . . . . . 131
16.2 Compliance with Law. . . . . . . . . . . . . . . . . 131
17. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . 131
17.1 Registration Rights for CLC Stock; Filing of
Registration Statement . . . . . . . . . . . . . . . 131
17.2 Expenses of Registration . . . . . . . . . . . . . . 132
17.3 Furnishing of Documents. . . . . . . . . . . . . . . 132
17.4 Amendments and Supplements . . . . . . . . . . . . . 132
17.5 Duration . . . . . . . . . . . . . . . . . . . . . . 133
17.6 Further Information. . . . . . . . . . . . . . . . . 133
17.7 Indemnification. . . . . . . . . . . . . . . . . . . 134
17.8 Rule 144 . . . . . . . . . . . . . . . . . . . . . . 135
18. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . 136
18.1 Cooperation. . . . . . . . . . . . . . . . . . . . . 136
18.2 Successors and Assigns . . . . . . . . . . . . . . . 136
18.3 Entire Agreement . . . . . . . . . . . . . . . . . . 136
18.4 Counterparts . . . . . . . . . . . . . . . . . . . . 136
18.5 Expenses . . . . . . . . . . . . . . . . . . . . . . 137
18.6 Notices. . . . . . . . . . . . . . . . . . . . . . . 138
18.7 Public Announcements . . . . . . . . . . . . . . . . 138
18.8 Governing Law. . . . . . . . . . . . . . . . . . . . 138
18.9 Survival of Representations and Warranties . . . . . 138
18.10 Exercise of Rights and Remedies. . . . . . . . . . . 138
18.11 Time . . . . . . . . . . . . . . . . . . . . . . . . 138
18.12 Reformation and Severability . . . . . . . . . . . . 138
18.13 Remedies Cumulative. . . . . . . . . . . . . . . . . 139
18.14 Captions . . . . . . . . . . . . . . . . . . . . . . 139
18.15 Currency . . . . . . . . . . . . . . . . . . . . . . 139
18.16 Language . . . . . . . . . . . . . . . . . . . . . . 139
18.17 Formal Date. . . . . . . . . . . . . . . . . . . . . 139
</TABLE>
ANNEXES
Annex I Form of Voting Trust Agreement
Annex II Dividend Access Share Provisions
Annex III Form of Support Agreement
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Annex IV Capital Stock and Stock Ownership of the Company
SCHEDULES
Schedule 2.6 Authorized capital of Company
Schedule 5.2 Qualifications to Do Business
Schedule 5.4 Exceptions re Capital Stock of Company
Schedule 5.5 Transactions in Capital Stock; Options &
Warrants to Acquire Capital Stock
Schedule 5.6 Stock Issued Pursuant to Awards, Grants and
Bonuses
Schedule 5.7 Subsidiaries; Capitalization of Subsidiaries
Schedule 5.8 Names of Predecessor Companies
Schedule 5.9 Sales or Spin-offs of Significant Assets
Schedule 5.10 Initial Financial Statements
Schedule 5.11 Significant Liabilities and Obligations
Schedule 5.12 Accounts and Notes Receivable
Schedule 5.13.1 Licenses, Franchises, Permits and other
Governmental Authorizations
Schedule 5.13.2 Intellectual Property
Schedule 5.13.3 Permits and Intangibles
Schedule 5.14 Environmental Compliance
Schedule 5.15 Immovable and Real Property, Significant
Movable and Personal Property and Leases
Schedule 5.16 Significant Customers and Material Contracts
Schedule 5.17 Students Financial Assistance, Grants or
Loans
Schedule 5.18 Immovable and Real Property and Title Reports
and Policies
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Schedule 5.19 Insurance Policies and Claims
Schedule 5.20 Officers, Directors and Key Employees,
Employment Agreements; Compensation
Schedule 5.21 Employee Benefit Plans
Schedule 5.24 Conformity with Law; Litigation
Schedule 5.25 Tax Returns and Examinations; Federal, State,
Local and Foreign Income Tax Returns Filed;
Aggregate Tax Losses
Schedule 5.26 Violations of Charter Documents and Material
Defaults
Schedule 5.27 Governmental Contracts Subject to Price
Redetermination or Renegotiation
Schedule 5.28 Changes Since Balance Sheet Date
Schedule 5.29 Deposit Accounts; Powers of Attorney
Schedule 5.32 Transactions with Directors or Officers
Schedule 5.34 Location; Place of Business
Schedule 5.39 Encumbrances on the Company Stock
Schedule 6.1 Certificate of Incorporation and By-laws of
CLC
Schedule 7.2 Exceptions to Conducting Business in the
Ordinary Course Between Date of Agreement
and Closing Date
Schedule 7.3 Prohibited Activities
Schedule 7.9 Final Financial Statements
Schedule 9.7 Termination of Related Party Agreements
Schedule 9.17 Pooling Letter
Schedule 9.22 Discharge of Liens
Schedule 11.5 Retained Liabilities
Schedule 13.1 Exceptions to Prohibited Activities
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<PAGE>
AMENDED AND RESTATED
SHARE PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of the 20th day of
February, 1998, by and among Computer Learning Centers, Inc., a Delaware
corporation ("CLC"), Computer Learning Centers of Quebec, Inc., a Quebec
company ("CLCQ"), Delta College Inc., a Quebec corporation ("Delta"), (Delta
hereinafter sometimes called the "Company"), Roger Matte, Richard Matte,
Marie-Jose Matte, Dominique Matte, Johanne Matte, Suzanne Matte and Dolmen
(1994) Inc. (collectively, the "Stockholders").
WHEREAS CLCQ, a wholly-owned subsidiary of CLC, has been
incorporated solely for the purpose of completing the transactions set forth
herein;
WHEREAS the Stockholders own all the issued and outstanding shares
in the capital of Delta;
WHEREAS CLC desires that CLCQ acquire on the date hereof all of the
shares in the capital of Delta which are issued and outstanding on the date
hereof (the shares of Delta to be so purchased being hereinafter referred to
as the "Purchased Shares");
WHEREAS each Stockholder desires to sell to CLCQ all of the
Purchased Shares owned beneficially and of record by such Stockholder as
hereinafter provided, such transaction sometimes being herein called the
"Acquisition";
WHEREAS, for accounting purposes, it is intended that the
Acquisition shall be accounted for as a pooling of interests business
combination; and
WHEREAS, unless the context otherwise indicates, capitalized terms
used in this Agreement, including the Schedules and Annexes hereto, and not
otherwise defined shall have the following meanings:
"Acquired Parties" has the meaning set forth in Section 5.25.
"Acquisition" has the meaning set forth in the preamble to this Agreement.
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"Affiliate" and "Affiliates" have the meaning set forth in Section 5.9.
"Balance Sheet Date" has the meaning set forth in Section 5.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in Virginia.
"Canadian Plans" has the meaning set forth in Section 5.21.
"Charter Documents" shall mean the Articles of Incorporation, as amended
of Delta, and the Company's Subsidiaries, if any, and the By-laws of Delta
and the Company's Subsidiaries, if any.
"Claim Amount" has the meaning set forth in Section 11.3.
"CLC" has the meaning set forth in the preamble to this Agreement.
"CLC Material Adverse Effect" has the meaning set forth in Section 6.1.
"CLC Stock" has the meaning set forth in Section 2.6
"CLCQ" has the meaning set forth in the preamble to this Agreement.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" has the meaning set forth in Section 2.5.4.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company's Financial Statements" has the meaning set forth in Section
5.10.
"Company's Subsidiaries" means all of the subsidiaries of the Company.
"Delta Stock" has the meaning set forth in Section 2.6.
"Dividend Access Shares" has the meaning set forth in Section 2.4.
"Dividend Access Share Provisions" has the meaning set forth in Section
2.4.
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"Environmental Claims" has the meaning set forth in Section 5.14.
"Environmental Law" has the meaning set forth in Section 5.14.
"Expiration Date" has the meaning set forth in Section 5.
"Financial Aid" has the meaning set forth in Section 5.17.
"Indemnification Threshold" has the meaning set forth in Section 11.4.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"Intellectual Property" has the meaning set forth in Section 5.13.
"Liens" shall mean (i) all hypothecs, mortgages, pledges, privileges,
liens, security interests, transfers of property in stock, charges,
servitudes, easements, reserves, leases, occupation rights, encroachments,
restrictive covenants, title defects and other encumbrances or rights of
others of any nature howsoever arising and (ii) all actions, claims or
demands of any nature whatsoever or howsoever arising; and "Lien" shall mean
any one of them;
"Liquidation Call Purchase Price" has the meaning set forth in Section
2.5.1.1.
"Liquidation Call Right" has the meaning set forth in Section 2.5.1.1.
"Liquidation Date" has the meaning set forth in the Dividend Access
Share Provisions.
"Material Adverse Effect" has the meaning set forth in Section 5.2.
"Material Contracts" has the meaning set forth in Section 5.16.
"Prohibited Activities" has the meaning set forth in Section 13.1.
"Proprietary Rights" has the meaning set forth in Section 5.13.
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchased Shares" has the meaning set forth in the preamble to this
Agreement.
"Put Closing Date" has the meaning set forth in Section 2.5.5.2.
"Put Exercise Date" has the meaning set forth in Section 2.5.5.2.
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"Put Purchase Price" has the meaning set forth in Section 2.5.5.1.
"Put Right" has the meaning set forth in Section 2.5.5.1.
"Put Trigger Event" has the meaning set forth in Section 2.5.5.4.
"Redemption Call Purchase Price" has the meaning set forth in Section
2.5.1.1.
"Redemption Call Right" has the meaning set forth in Section 2.5.1.1.
"Regulated Substance" has the meaning set forth in Section 5.14.
"Releases" has the meaning set forth in Section 5.14.
"Relevant Group" has the meaning set forth in Section 5.25.
"Returns" has the meaning set forth in Section 5.25.
"Retraction Call Purchase Price" has the meaning set forth in Section
2.5.3.1.
"Retraction Call Right" has the meaning set forth in Section 2.5.3.1.
"Right of Retraction" has the meaning set forth in Section 2.4.
"SEC" shall mean the Securities and Exchange Commission.
"Support Agreement" has the meaning set forth in Section 2.5.6.
"Stockholders" has the meaning set forth in the preamble to this
Agreement.
"Tax" or "Taxes" has the meaning set forth in Section 5.25.
"Taxing Authority" has the meaning set forth in Section 5.25.
"Third Person" has the meaning set forth in Section 11.3.
"Territory" has the meaning set forth in Section 13.1.
"Voting Trust Agreement" has the meaning set forth in Section 2.3.
"1933 Act" shall mean the Securities Act of 1933, as amended.
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"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE ACQUISITION
1.1 Purchase and Sale of Purchased Shares. On the terms, provisions
and conditions set forth herein, and in reliance upon the warranties and
representations contained herein, CLCQ hereby purchases, and the Stockholders
hereby sell, transfer and assign to CLCQ on the Closing Date, all of the
Purchased Shares, free and clear of all Liens.
2. CONSIDERATION FOR TRANSFER
2.1 Purchase Price for the Purchased Shares. The aggregate purchase
price for the Purchased Shares (the "Purchase Price") is equal to the amount
of US$12,321,384.90.
2.2 Purchase Price. The Purchase Price shall be payable in such number
of Dividend Access Shares as is determined by dividing the Purchase Price by
US$23.705 (rounded upwards to the next highest whole number). Such number of
Dividend Access Shares shall be delivered to each of the Stockholders in such
proportions and numbers set forth below:
<TABLE>
<CAPTION>
NAME NUMBER PROPORTION
------------------ ------- -------------
<S> <C> <C>
Roger Matte 24,490 4,71%
Richard Matte 14,082 2,71%
Marie-Jose Matte 14,082 2,71%
Dominique Matte 14,082 2,71%
Johanne Matte 14,082 2,71%
Suzanne Matte 24,487 4,71%
Dolmen (1994) Inc. 414,475 79,74%
</TABLE>
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No fractional shares shall be issued and adjustments in the number of
shares shall be determined by the Stockholders.
The parties recognize and agree that, due to the fact that the Dividend
Access Shares will not be registered stock and the shares of CLC Stock
exchangeable theor are not currently registered stock, and due to the
restrictions in Sections 15, 16 and 17 of this Agreement, the shares of CLC
Stock to be received by the Stockholders upon exchange of their Dividend
Access Shares will have a fair market value significantly less than their
current trading price.
2.3 Payment. The Purchase Price is being paid, subject to the terms and
conditions hereof, to the Stockholders on the Closing Date.
CLC and the Stockholders shall, concurrently herewith, enter into a
voting trust agreement (the "Voting Trust Agreement") in the form annexed
hereto as Annex I whereby CLC has agreed to issue such number of shares of
CLC Stock as equals the number of Dividend Access Shares indicated in Section
2.2 above to a trustee (the "Trustee") appointed under the Voting Trust
Agreement to be held in trust and provide the Stockholders with voting rights
in CLC after receipt thereof on the Closing Date; the Stockholders
acknowledge and agree that the certificate representing such CLC stock shall
be issued in the name of and delivered to the said Trustee as provided herein.
2.4 Capitalization of CLCQ. The Articles of Incorporation of CLCQ
provide for authorized capital consisting of (i) a class of voting common
shares (all of the issued and outstanding shares of which shall initially be
held by CLC) and (ii) a class of non-voting preferred shares (the "Dividend
Access Shares") having the rights, privileges, restrictions and conditions
set forth in Annex II (the "Dividend Access Share Provisions"), each share of
which shall (A) entitle the holder thereof to dividend rights equal to the
per share dividend rights of CLC Stock, (B) subject to the Liquidation Call
Right, entitle the holder on liquidation of CLCQ to receive in exchange for
each Dividend Access Share one share of CLC Stock as provided in Section
2.5.1.1, (C) subject to the Retraction Call Right, entitle the holder, at his
election at any time and from time to time for a period commencing on the
Closing Date and ending on the 5th anniversary of the Closing Date, upon 30
days' written notice given by such holder to CLCQ, to require CLCQ to redeem
any or all Dividend Access Shares and to exchange the same, on a share for
share basis, for shares of CLC Stock (the "Right of Retraction") and (D)
subject to the Redemption Call Right, entitle CLCQ to redeem on the
"Automatic Redemption Date", as defined in the Dividend Access Share
Provisions, the outstanding Dividend Access Shares and to exchange the same,
on a share-for-share basis, for shares of CLC Stock. The board of directors
of CLCQ consists of two nominees of CLC. Mr. Roger Matte shall be appointed
a director of CLCQ on the Closing Date and Mr. Roger Matte shall cease to be
a director of CLCQ and shall resign as same at such time as no outstanding
Dividend Access Shares are held by any Stockholder.
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2.5 Rights and obligations of CLC and holders of Dividend Access Shares.
2.5.1 CLC Liquidation Call Rights
2.5.1.1 CLC shall have the overriding right (the "Liquidation
Call Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of CLCQ pursuant to
Article 5 of the Dividend Access Share Provisions, to purchase
all but not less than all of the Dividend Access Shares held by
each such holder which shall be satisfied in full by causing to
be delivered to such holder one share of CLC Stock plus an amount
equivalent to the full amount of all declared and unpaid
dividends on such Dividend Access Share and all dividends
declared on CLC Stock which have not been declared on such
Dividend Access Share in accordance with Section 3.1 of the
Dividend Access Share Provisions (collectively the "Liquidation
Call Purchase Price"), provided that if the record date for any
such declared and unpaid dividends occurs on or after the
Liquidation Date, the Liquidation Call Purchase Price shall not
include such additional amount equivalent to such dividends. In
the event of the exercise of the Liquidation Call Right by CLC,
each holder shall be obligated to sell all the Dividend Access
Shares held by the holder to CLC on the Liquidation Date on
payment by CLC to the holder of the Liquidation Call Purchase
Price for each such Dividend Access Share;
2.5.1.2 To exercise the Liquidation Call Right, CLC must notify
CLCQ and the Stockholders of CLC's intention to exercise such
right at least 20 days before the Liquidation Date in the case of
a voluntary liquidation, dissolution or winding up of CLCQ and at
least five Business Days before the Liquidation Date in the case
of an involuntary liquidation, dissolution or winding up of CLCQ.
CLCQ or an authorized agent will notify the holders of Dividend
Access Shares as to whether or not CLC has exercised the
Liquidation Call Right forthwith after the expiry of the period
during which the same may be exercised by CLC. If CLC exercises
the Liquidation Call Right, on the Liquidation Date, CLC will
purchase and the holders will sell all of the Dividend Access
Shares then outstanding for a price per Dividend Access Share
equal to the Liquidation Call Purchase Price.
2.5.1.3. For the purposes of completing the purchase of the
Dividend Access Shares pursuant to the Liquidation Call Right,
CLC shall deposit with CLCQ or an authorized agent, prior to the
Liquidation Date, certificates representing the aggregate number
of shares of CLC Stock deliverable by CLC in payment of the
Liquidation Call Purchase Price and a cheque or cheques in the
amount of the
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remaining portion, if any, of the total Liquidation Call Purchase
Price. Provided that the total Liquidation Call Purchase Price
has been so deposited with CLCQ or an authorized agent, on and
after the Liquidation Date the rights of each holder of Dividend
Access Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase Price
payable by CLC upon presentation and surrender by the holder of
certificates representing the Dividend Access Shares held by such
holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the
shares of CLC Stock delivered to it. Upon surrender to CLCQ or
an authorized agent of a certificate or certificates representing
Dividend Access Shares, together with such other documents and
instruments as may be required to effect a transfer of Dividend
Access Shares under the applicable corporate law and the by-laws
of CLCQ and such additional documents and instruments as CLCQ or
the authorized agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and CLCQ or the authorized agent on
behalf of CLC shall deliver to such holder, certificates
representing the shares of CLC Stock to which the holder is
entitled and a cheque or cheques of CLC payable at par and in
U.S. dollars at any branch of the bankers of CLC or of CLCQ in
Canada in payment of the remaining portion, if any, of the total
Liquidation Call Purchase Price. If CLC does not exercise the
Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Dividend Access Shares will
be entitled to receive in exchange therefor the liquidation price
otherwise payable by CLCQ in connection with the liquidation,
dissolution or winding-up of CLCQ pursuant to Article 5 of the
Dividend Access Share Provisions.
2.5.2 CLC Redemption Call Right
2.5.2.1 CLC shall have the overriding right (the "Redemption Call
Right"), in the event of and notwithstanding the proposed
redemption of Dividend Access Shares by CLCQ pursuant to Article
7 of the Dividend Access Share Provisions, to purchase from all
but not less than all of the holders of Dividend Access Shares to
be redeemed on the "Automatic Redemption Date" (as defined in
Section 1.1 of the Dividend Access Share Provisions) all but not
less than all of the Dividend Access Shares held by each such
holder that are otherwise to be redeemed which shall be satisfied
in full by causing to be delivered to such holder one share of
CLC Stock plus an amount equivalent to the full amount of all
declared and unpaid dividends on such Dividend Access Share and
all dividends declared on CLC Stock that have not been declared
on such Dividend Access Share in accordance with Section 3.1
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of the Dividend Access Share Provisions (collectively the
"Redemption Call Purchase Price"), provided that if the record
date for any such declared and unpaid dividends occurs on or
after the Automatic Redemption Date, the Redemption Call Purchase
Price shall not include such additional amount equivalent to such
dividends. In the event of the exercise of the Redemption Call
Right by CLC, each holder shall be obligated to sell all the
Dividend Access Shares held by the holder and otherwise to be
redeemed to CLC on the Automatic Redemption Date on payment by
CLC to the holder of the Redemption Call Purchase Price for each
such Dividend Access Share.
2.5.2.2 To exercise the Redemption Call Right, CLC must notify
CLCQ and the Stockholders of CLC's intention to exercise such
right at least 15 days before the Automatic Redemption Date.
CLCQ or an authorized agent will notify the holders of the
Dividend Access Shares as to whether or not CLC has exercised the
Redemption Call Right forthwith after the expiry of the period
during which the same may be exercised by CLC. If CLC exercises
the Redemption Call Right, on the Automatic Redemption Date CLC
will purchase and the holders will sell all of the Dividend
Access Shares to be otherwise redeemed for a price per Dividend
Access Share equal to the Redemption Call Purchase Price.
2.5.2.3 For the purposes of completing the purchase of Dividend
Access Shares pursuant to the Redemption Call Right, CLC shall
deposit with CLCQ or an authorized agent prior to the Automatic
Redemption Date, certificates representing the aggregate number
of shares of CLC Stock deliverable by CLC in payment of the
Redemption Call Purchase Price and a cheque or cheques in the
amount of the remaining portion, if any, of the total Redemption
Call Purchase Price. Provided that the total Redemption Call
Purchase Price has been so deposited with CLCQ or an
authorized agent, on and after the Automatic Redemption Date the
rights of each holder of Dividend Access Shares so purchased will
be limited to receiving such holder's proportionate part of the
Redemption Call Purchase Price payable by CLC upon presentation
and surrender by the holder of certificates representing the
Dividend Access Shares purchased by CLC from such holder and the
holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes (including for purposes of
dividend entitlement, if any) to be the holder of the shares of
CLC Stock delivered to such holder. Upon surrender to CLCQ or an
authorized agent of a certificate or certificates representing
Dividend Access Shares, together with such other documents and
instruments as may be required to effect a transfer of Dividend
Access Shares under the applicable corporate law and the by-laws
of CLCQ and such additional documents and instruments as CLCQ or
the
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authorized agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and CLCQ or the authorized agent on
behalf of CLC shall deliver to such holder, certificates
representing the shares of CLC Stock to which the holder is
entitled and a cheque or cheques of CLC payable at par and in
U.S. dollars at any branch of the bankers of CLC or of CLCQ in
Canada in payment of the remaining portion, if any, of the total
Redemption Call Purchase Price. If CLC does not exercise the
Redemption Call Right in the manner described above, on the
Automatic Redemption Date, the holders of the Dividend Access
Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by CLCQ in connection with the
redemption of Dividend Access Shares pursuant to Article 7 of the
Dividend Access Share Provisions.
2.5.3 CLC Retraction Call Right
2.5.3.1 CLC shall have the overriding right (the "Retraction
Call Right"), notwithstanding the proposed retraction of Dividend
Access Shares by a Stockholder pursuant to Article 6 of the
Dividend Access Share Provisions, to purchase from the holder
having exercised the right to cause CLCQ to redeem on the
"Retraction Date" (as defined in Section 6.1 of the Dividend
Access Share Provisions) all but not less than all of the
Dividend Access Shares held by each such holder that are
otherwise to be redeemed which shall be satisfied in full by
causing to be delivered to such holder one share of CLC Stock
plus an amount equivalent to the full amount of all declared and
unpaid dividends on such Dividend Access Share and all dividends
declared on CLC Stock that have not been declared on such
Dividend Access Share in accordance with Section 3.1 of the
Dividend Access Share Provisions (collectively the "Retraction
Call Purchase Price"), provided that if the record date for any
such declared and unpaid dividends occurs on or after the
Retraction Date, the Retraction Call Purchase Price shall not
include such additional amount equivalent to such dividends. In
the event of the exercise of the Retraction Call Right by CLC,
each holder shall be obligated to sell all the Dividend Access
Shares held by the holder and otherwise to be redeemed to CLC on
the Retraction Date on payment by CLC to the holder of the
Retraction Call Purchase Price for each such Dividend Access
Share.
2.5.3.2 Upon receipt by CLCQ of a "Retraction Request" (as
defined in Section 6.1 of the Dividend Access Share Provisions),
CLCQ shall immediately notify CLC thereof. To exercise the
Retraction Call Right, CLC must notify CLCQ and the relevant
Stockholder of CLC's intention to exercise such right within 10
Business Days of notification by CLCQ to CLC of the receipt by
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CLCQ of a Retraction Request. CLCQ or an authorized agent will
notify the holders of the Dividend Access Shares as to whether or
not CLC has exercised the Retraction Call Right forthwith after
the expiry of the period during which the same may be exercised
by CLC. If CLC exercises the Retraction Call Right, on the
Retraction Date CLC will purchase and the holders will sell all
of the Dividend Access Shares to be otherwise redeemed for a
price per Dividend Access Share equal to the Retraction Call
Purchase Price.
2.5.3.3 For the purposes of completing the purchase of Dividend
Access Shares pursuant to the Retraction Call Right, CLC shall
deposit with CLCQ or an authorized agent prior to the Retraction
Date, certificates representing the aggregate number of shares of
CLC Stock deliverable by CLC in payment of the Retraction Call
Purchase Price and a cheque or cheques in the amount of the
remaining portion, if any, of the total Retraction Call Purchase
Price. Provided that the total Retraction Call Purchase Price has
been so deposited with CLCQ or an authorized agent, on and after
the Retraction Date the rights of each holder of Dividend Access
Shares so purchased will be limited to receiving such holder's
proportionate part of the Retraction Call Purchase Price payable
by CLC upon presentation and surrender by the holder of
certificates representing the Dividend Access Shares purchased by
CLC from such holder and the holder shall on and after the
Retraction Date be considered and deemed for all purposes
(including for purposes of dividend entitlement, if any) to be
the holder of the shares of CLC Stock delivered to such holder.
Upon surrender to CLCQ or an authorized agent of a certificate or
certificates representing Dividend Access Shares, together with
such other documents and instruments as may be required to effect
a transfer of Dividend Access Shares under the applicable
corporate law and the by-laws of CLCQ and such additional
documents and instruments as CLCQ or the authorized agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and CLCQ or the authorized agent on behalf of CLC shall deliver
to such holder, certificates representing the shares of CLC Stock
to which the holder is entitled and a cheque or cheques of CLC
payable at par and in U.S. dollars at any branch of the bankers
of CLC or of CLCQ in Canada in payment of the remaining portion,
if any, of the total Retraction Call Purchase Price. If CLC does
not exercise the Retraction Call Right in the manner described
above, on the Retraction Date, the holders of the Dividend Access
Shares will be entitled to receive in exchange therefor the
retraction price otherwise payable by CLCQ in connection with the
retraction of Dividend Access Shares pursuant to Article 6 of the
Dividend Access Share Provisions.
2.5.4 Withholding Rights. CLC and CLCQ shall be entitled to
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deduct and withhold from the consideration otherwise payable to
any holder of Dividend Access Shares, including any dividend
payments in respect of the Dividend Access Shares, such amount as
CLC or CLCQ is required to deduct and withhold with respect to
such payment under the United States Internal Revenue Code of
1986, as amended (the "Code"), the Income Tax Act (Canada), as
amended, or any provision of state, federal, provincial, local or
foreign tax law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes hereof as
having been paid to the holder of Dividend Access Shares in
respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so
required or permitted to be deducted or withheld from any payment
to a holder exceeds the cash portion of the consideration
otherwise payable to the holder, CLC and CLCQ, upon at least 10
days prior written notice to such holder, are hereby authorized
to sell or otherwise dispose of at fair market value such portion
of such non-cash consideration otherwise payable to the holder as
is necessary to provide sufficient funds to CLC or CLCQ, as the
case may be, in order to enable it to comply with such deduction
or withholding requirement and CLC or CLCQ, as the case may be,
shall give an accounting to the holder with respect thereof and
any balance of such proceeds of sale.
2.5.5 Stockholder Put Right
2.5.5.1 Each Stockholder holding Dividend Access Shares
shall have the right (the "Put Right"), in the event of
and notwithstanding the occurrence of a Put Trigger Event
to require CLC to purchase all but not less than all of
the Dividend Access Shares held by each such holder which
shall be satisfied in full by causing to be delivered to
such holder one share of CLC Stock, plus an amount
equivalent to the full amount of all dividends declared
and unpaid on such Dividend Access Share and all
dividends declared on CLC Stock which have not been
declared on such Dividend Access Share in accordance with
the Dividend Access Share Provisions (collectively the
"Put Purchase Price"), provided that if the record date
for any such declared and unpaid dividends occurs on or
after the last Business Day prior to the Put Closing
Date, the Put Purchase Price shall not include such
additional amount equivalent to such dividends. In the
event of the exercise of the Put Right by a Stockholder,
CLC shall be obliged to purchase all the Dividend Access
Shares held by the holder.
2.5.5.2 To exercise the Put Right, a holder of Dividend
Access Shares must notify CLC of such holder's intention
to exercise such right no later than 10 Business Days
after the occurrence of a Put Trigger Event (the "Put
Exercise Date"). If a holder exercises the Put Right, CLC
will purchase and such holder will sell all of the
Dividend Access Shares then held by such holder for a
price per Dividend Access Share
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equal to the Put Purchase Price. The closing of the
transaction resulting from the exercise of a Put Right
shall occur on the 10th Business Day following the Put
Exercise Date (the "Put Closing Date").
2.5.5.3 For the purposes of completing the purchase of
the Dividend Access Shares pursuant to the Put Right, CLC
shall deposit with CLCQ or an authorized agent, prior to
the Put Closing Date, certificates representing the
aggregate number of shares of CLC Stock deliverable by
CLC in payment of the Put Purchase Price and a cheque or
cheques in the amount of the remaining portion, if any,
of the total Put Purchase Price. Provided that the total
Put Purchase Price has been so deposited with CLCQ or an
authorized agent, on and after the Put Closing Date the
rights of each holder of Dividend Access Shares will be
limited to receiving such holder's proportionate part of
the total Put Purchase Price payable by CLC upon
presentation and surrender by the holder of certificates
representing the Dividend Access Shares held by such
holder and the holder shall on and after the Put Closing
Date be considered and deemed for all purposes to be the
holder of the shares of CLC Stock delivered to it. Upon
surrender to CLCQ or an authorized agent of a certificate
or certificates representing Dividend Access Shares,
together with such other documents and instruments as
may be required to effect a transfer of Dividend Access
Shares under the applicable corporate law and the by-laws
of CLCQ and such additional documents and instruments as
CLCQ or the authorized agent may reasonably require, the
holder of such surrendered certificate or certificates
shall be entitled to receive in exchange therefor, and
CLCQ or the authorized agent on behalf of CLC shall
deliver to such holder, certificates representing the
shares of CLC Stock to which the holder is entitled and a
cheque or cheques of CLC payable at par and in U.S.
dollars at any branch of the bankers of CLC or of CLCQ in
Canada in payment of the remaining portion, if any, of
the total Put Purchase Price.
2.5.5.4 For purposes of this Section 2.5.5, "Put
Trigger Event" shall mean:
(a) the insolvency or bankruptcy of CLCQ or the
making by CLCQ of an assignment for the benefit of
creditors or the making by CLCQ of a proposal
pursuant to any bankruptcy or debtor relief
legislation for the benefit of its creditors or the
filing by CLCQ of a notice of intention to file a
proposal or the making or authorization by CLCQ of
any bankruptcy proceeding, petition or application
to any tribunal for the appointment of a receiver
or trustee for its or for any substantial part of
its property;
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(b) the insolvency or bankruptcy of CLC or the
making by CLC of an assignment for the benefit of
creditors or the making by CLC of a proposal
pursuant to any bankruptcy or debtor relief
legislation for the benefit of its creditors or the
filing by CLC of a notice of intention to file a
proposal or the making or authorization by CLC of
any bankruptcy proceeding, petition or application
to any tribunal for the appointment of a receiver
or trustee for its or for any substantial part of
its property;
(c) the failure by CLCQ to pay dividends otherwise
payable on Dividend Access Shares if such failure
is not cured within 10 Business Days of a written
request therefor; or
(d) the failure by CLCQ to purchase from a
Stockholder having exercised his or her right to
cause CLCQ to redeem on the Retraction Date all of
the Dividend Access Shares held by such Stockholder
that are required by such Stockholder to be
redeemed.
2.5.6. Support Agreement. CLC shall, concurrently herewith,
enter into a support agreement on Closing with CLCQ (the "Support
Agreement") in the form annexed hereto as Annex III.
2.6 Certain Information With Respect to the Capital Stock of the
Company. The authorized capital of Delta is as set forth on Schedule 2.6
hereto, which share capital is collectively referred to as the "Delta Stock".
2.7 Section 85 Elections. CLCQ and the Stockholders agree to jointly
elect in prescribed form and within the prescribed time elections under
subsection 85(1) of the Income Tax Act (Canada) and relevant provisions of
any applicable provincial legislation at the respective amounts selected by
each Stockholder to be the proceeds of disposition and the cost of the
Purchased Shares sold hereunder.
3. CLOSING
3.1 Actions taken at Closing. Upon the terms and subject to the
conditions set forth herein, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take on the date thereof, and such date
shall be referred to as the "Closing Date".
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4. DELIVERY OF SHARES
4.1 Deliveries at Closing
4.1.1 Deliveries by Stockholders. On the Closing Date, the
Stockholders shall deliver to CLCQ certificates representing the
Purchased Shares, duly endorsed for transfer in favour of CLCQ.
4.2 Deliveries at Closing Date
4.2.1 Deliveries by CLCQ. On the Closing Date, CLCQ shall
deliver to each Stockholder certificates representing Dividend
Access Shares, the whole in amounts as provided at Section 2.2, but
subject to such withholding obligations imposed by law, if any.
4.2.2 Deliveries by CLC. On the Closing Date, CLC shall
deliver to the Trustee appointed under the Voting Trust Agreement a
certificate representing the number of CLC Stock as provided in
Section 2.3.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
5.1 Representations and Warranties of the Company and the Stockholders.
For purposes of this Section 5, the term "Company" shall mean and refer to
Delta and/or each of its subsidiaries, if any. The Stockholders solidarily
(without benefit of division or discussion) represent and warrant that all of
the following representations and warranties in this Section 5 are true at
the date of this Agreement and that such representations and warranties shall
survive until one (1) year after the Closing Date (which date is hereinafter
called the "Expiration Date").
5.2 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as disclosed on Schedule 5.2 or (ii) where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or
otherwise), of the Company taken as a whole (a "Material Adverse Effect").
Schedule 5.2 contains a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation
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(certified by the Secretary or Assistant Secretary of the Company and by the
appropriate governmental authority of the jurisdiction of incorporation of
the Company) and By-laws (certified by the Secretary or Assistant Secretary
of the Company), each as amended, of the Company shall be delivered to CLC
and CLCQ at Closing. Except as set forth on Schedule 5.2, the minute books
of the Company, as heretofore made available to CLC, are true, correct and
complete in all material respects.
5.3 Authorization. (i) The representatives of the Company executing
this Agreement have the authority to enter into and bind the Company to the
terms of this Agreement and (ii) the Company has the corporate power and
authority to enter into this Agreement and the Acquisition.
5.4 Capital of the Company. The authorized share capital of the
Company is as set forth on Schedule 6. The Purchased Shares represent all of
the issued and outstanding shares of the share capital of Delta and are owned
beneficially and of record by the Stockholders and in the amounts set forth
in Annex IV and further, except as set forth on Schedule 5.4, are owned free
and clear of all Liens. All of the issued and outstanding shares in the
share capital of the Company have been duly authorized and validly issued,
are fully paid and non-assessable, and further, such shares were offered,
issued, sold and delivered by the Company in compliance with all applicable
laws concerning the issuance of securities. None of such shares were issued
in violation of the pre-emptive rights of any past or present shareholder of
the Company.
5.5 Transactions in Capital Stock. Except as set forth on Schedule
5.5, the Company has not acquired any of its stock (including any stock of
any of the Company's Subsidiaries) since July 1, 1995. Except as set forth
in Schedule 5.5, no option, warrant, call, conversion right or commitment of
any kind exists which obligates the Company to issue any of its authorized
but unissued capital stock. Except as set forth on Schedule 5.5, the Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. Except as set forth on
Schedule 5.5 there has been no transaction changing the equity ownership of
the Company in contemplation of the transactions described in this Agreement.
5.6 No Bonus Shares. Except as set forth in Schedule 5.6, during the
period commencing on the third (3rd) year prior to the date hereof, none of
the shares of Delta Stock was issued for less than the fair market value
thereof at the time of issuance or was issued in exchange for consideration
other than cash.
5.7 Subsidiaries. Schedule 5.7 attached hereto lists the name of the
Company's Subsidiaries and sets forth the number and class of the authorized
share capital of the Company's Subsidiaries and the number of shares of the
Company's Subsidiaries which are issued and outstanding, all of which shares
(except as set forth on Schedule 5.7) are owned, beneficially and of record,
by Delta, free and clear of all Liens. All of the issued and outstanding
shares in the
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share capital of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable, and further, such shares were
offered, issued, sold and delivered by each Subsidiary in compliance with all
applicable laws concerning the issuance of securities. None of such shares
were issued in violation of the pre-emptive rights of any past shareholder of
a Subsidiary. Except as set forth in Schedule 5.7, the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity nor is the
Company, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
5.8 Predecessor Status. Set forth in Schedule 5.8 is a listing of all
names of all predecessor companies of the Company for the past five years,
including the names of any entities from whom the Company previously acquired
material assets outside the ordinary course of business. Except as disclosed
in Schedule 5.8, the Company has not been a subsidiary or division of another
corporation.
5.9 Spin-off by the Company. Except as set forth on Schedule 5.9,
there has not been any sale, spin-off or split-up of material assets of the
Company or any other person or entity that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company ("Affiliates") other than in the ordinary course of
business within the preceding two years.
5.10 Financial Statements. Attached hereto as Schedule 5.10 are copies
of the following financial statements of Delta (the "Company's Financial
Statements"): Balance Sheets as of June 30, 1997 and 1996 as well as for the
four (4)-month period ended October 31, 1997 and Statements of Income,
Statements of Changes in Financial Position and Retained Earnings for each of
the years in the three (3)-year period ended June 30, 1997 and for the four
(4)-month period ended October 31, 1997 (October 31, 1997 being hereinafter
referred to as the "Balance Sheet Date"). Such Balance Sheets as of June 30,
1997 and 1996 and the Statements of Income, Statements of Changes in
Financial Position and Retained Earnings for each of the years in the
three-year period ended June 30, 1997 have been reviewed and prepared (on a
review engagement basis) in accordance with Canadian generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted). Except as set forth on Schedule 5.10, such
Balance Sheets as of October 31, 1997 and June 30, 1997 present fairly the
financial position of Delta as of the dates indicated thereon, and such
Statements of Income, and Statements of Changes in Financial Position and
Retained Earnings present fairly the results of their respective operations
for the periods indicated thereon.
5.11 Liabilities and Obligations. The Company has delivered to CLC a
complete and accurate list set forth on Schedule 5.11, of all liabilities of
the Company of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise (i) which are
reflected on the balance sheet of the Company at the Balance Sheet Date, and
(ii) which were incurred after the Balance Sheet Date and were incurred other
than in the ordinary course of the Company's business or which exceed $25,000
(indicating which ones
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were incurred other than in the ordinary course of business). The
liabilities which are not reflected on the balance sheet at the Balance Sheet
Date do not exceed in the aggregate $25,000. As of the Closing Date,
liabilities owing to Affiliates and to persons acting not at arm's length
with the Company, excluding amounts owed to Dolmen (1994) Inc., are
$733,943.18. Except as set forth on Schedule 5.11, each liability of the
Company was incurred by the Company in the ordinary course of its business.
Except as set forth on Schedule 5.11 or in the notes to the Company's
Financial Statements, the Company, as of the date hereof, has no term or
funded debt to banks or Affiliates. Schedule 5.11 also indicates all
personal guarantees of the Stockholders on the Company's debt. The Company
also has delivered to CLC on Schedule 5.11, in the case of those liabilities
which are contingent, a reasonable estimate of the maximum amount which may
be payable. For each such contingent liability, the Company has provided to
CLC the following information:
5.11.1 a summary description of the liability together with the
following:
5.11.1.1 copies of all relevant documentation relating
thereto;
5.11.1.2 amounts claimed and any other action or relief
sought; and
5.11.1.3 name of claimant and all other parties to the
claim, suit or proceeding, if any;
5.11.2 the name of each court or agency before which such claim,
suit or proceeding is pending, if any;
5.11.3 the date such claim, suit or proceeding was instituted; and
5.11.4 a reasonable best estimate by the Company of the maximum
amount, if any, which is likely to become payable with respect to
each such liability. If no estimate is provided, the Company's
reasonable estimate shall for purposes of this Agreement be deemed
to be zero.
5.12 Accounts and Notes Receivable. The Company has delivered to CLC
an accurate list set forth on Schedule 5.12, of the accounts and notes
receivable of the Company, as of November 30, 1997 (or such later date as is
requested by CLC hereafter), including any such amounts which are not
reflected in the balance sheet as of the Balance Sheet Date, and including
receivables from and advances to employees and the Stockholders. The
Company, on Schedule 5.12, has provided CLC with an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the most
current practical date. The Company provided CLC with an aging of all
accounts and notes receivable as of the Balance Sheet Date showing amounts
due in 30 day aging categories. Except to the extent reflected on Schedule
5.12, such accounts and notes and the accounts and notes existing on the
Closing Date are and shall be fully collectible in the ordinary course of
business, net of such reserves as are consistent with the reserves reflected
in the balance sheet as of the Balance Sheet Date and were originated in the
ordinary course of business.
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5.13 Permits and Intangibles
5.13.1 The Company has delivered to CLC an accurate list set
forth on Schedule 5.13.1, of all material licenses, franchises,
permits (including from the Minister of Education) and other
governmental authorizations including permits, registrations
(including motor vehicle registrations and current registrations),
licenses, franchises, certificates and other related licenses owned
or held by the Company, copies of which have been provided to CLC,
if requested. The licenses, franchises, permits and other
governmental authorizations listed on Schedule 5.13.1 are valid,
and neither the Company nor any of the Company's Subsidiaries has
received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit
or other governmental authorization. The Company holds all
licenses, franchises, permits and other government authorizations,
the absence of which would have a Material Adverse Effect. The
Company has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth
in applicable permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the
foregoing, except where such non-compliance or violation would not
have a Material Adverse Effect. Except as specifically provided in
Schedule 5.13.1, the transactions contemplated by this Agreement
will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company
by, any such licenses, franchises, permits or government
authorizations.
5.13.2 The Company's material patents, patent registrations,
patent applications, trademarks, service marks, trademark and
service mark registrations and applications therefor, copyrights,
copyright registrations, copyright applications, trade names and
corporate names (the "Intellectual Property") are listed in
Schedule 5.13.2. Except as disclosed in Schedule 5.13.2, (i) the
Company owns and possesses all right, title and interest in the
Intellectual Property and permits, licenses or other agreements to
or from third parties regarding the Intellectual Property and (ii)
the Company owns and possesses all right, title and interest in its
technology, inventions, computer software and programs, data and
documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, other intellectual
property and proprietary information or rights; and permits,
licenses or other agreements to or from third parties regarding the
foregoing including, without limitation, such number of such
permits, licenses or other agreements as are required pursuant to
the terms of same to operate the business of the Company in a
manner consistent with past practices (collectively with the
Intellectual Property, the "Proprietary Rights"). The transactions
contemplated by this Agreement will have no Material Adverse Effect
on the Company's right, title and interest in the Proprietary
Rights.
5.13.3 Except as disclosed on Schedule 5.13.3, no claim by any
third party contesting the validity, enforceability, use or
ownership of any Proprietary Right has been made, is currently
pending or is threatened. The Company has not received any notice
of, nor is it aware of any fact which indicates a likelihood of,
any infringement or misappropriation by, or conflict with, any
third party with
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respect to any of the Proprietary Rights. The Company has not, to
its knowledge, infringed, misappropriated or otherwise conflicted
with any rights of any third parties, nor is the Company aware of
any infringement, misappropriation or conflict which will occur as
a result of the continued operation of the businesses of the
Company as now conducted.
5.14 Environmental Compliance
5.14.1 The Company is in compliance with all applicable
Environmental Laws except where non-compliance with applicable
Environmental Laws would not have a Material Adverse Effect.
Except as set forth in Schedule 5.14, the Company has not received
notice that it is in violation of, nor has it been subject to any
Environmental Claim pursuant to applicable Environmental Laws
either now or any time during the past five years that individually
or in the aggregate would have a Material Adverse Effect.
5.14.2 Except those set forth on Schedule 5.14, there are no
facts or circumstances that the Company reasonably believes could
form the basis of any Environmental Claim against the Company that
individually or in the aggregate would have a Material Adverse
Effect.
5.14.3 The Company has all material permits, approvals,
authorizations, licenses and consents under applicable
Environmental Laws to operate lawfully the businesses which it
currently conducts. More specifically, but without limitation, the
Company hereby represents and confirms that it does not require a
Certificate of Authorization with respect to the collection,
storage and disposal of the liquid and solid wastes generated by
its production activities nor a permit from the Montreal Urban
Community pursuant to applicable regulations or by-laws relating to
wastewater discharges.
5.14.4 None of the real property currently owned, used and/or
occupied by the Company is currently being used and, to the
Stockholders' or the Company's knowledge without investigation, has
ever been used to generate, manufacture, transport, treat, store,
handle, dispose of or transfer Regulated Substances, except as
listed in Schedule 5.14 and, except for quantities used or stored
at such property in compliance with applicable Environmental Laws
and required in connection with the normal operations and
maintenance of such property; and, to the Stockholders' or the
Company's knowledge, without investigation, there have been no
Releases at, from, in or on, any property ever owned or operated by
the Company, except as permitted by applicable Environmental Laws.
5.14.5 Promptly upon learning thereof, the Company will advise
CLC of any facts or circumstances known to the Company that it
reasonably believes could form the basis of any Environmental Claim
against the Company that individually or in the aggregate would
have a Material Adverse Effect. There has been no
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written communication during the past three years between the Company and
any federal, provincial, state or local environmental agency.
5.14.6 For purposes of this Agreement,
5.14.6.1 "Regulated Substance" includes any substance, whether
waste, liquid, gaseous or solid matter, fuel, micro-organism,
ray, odour, radiation, energy, vector, plasma and organic or
inorganic matter, which is or is deemed to be, alone or in any
combination, hazardous, hazardous waste, toxic, a pollutant, a
deleterious substance, a contaminant or a source of pollution or
contamination under any applicable Environmental Law, whether or
not such substance is defined as hazardous under the applicable
Environmental Laws.
5.14.6.2 "Environmental Law" means any and all applicable
Canadian federal, provincial, municipal or local statute, law,
rule, regulation, ordinance, code, civil law or rule of common
law (together in this subsection 5.14.6.2 (ii) referred to as
"Laws") pertaining to the environment, health and safety matters
or conditions, Regulated Substances, pollution or protection of
the environment, including, without limitation, Laws relating to
(1) on site or off-site contamination; (2) occupational health
and safety; (3) chemical substances or products, (4) Release of
pollutants, contaminants, chemicals or other industrial, toxic or
radioactive substances or Regulated Substances into the
environment; (5) the manufacture, processing, distribution, use,
treatment, storage, transport, packaging, labelling, sale,
recycling, disposal, destruction, incineration, burial,
advertising, display or handling of Regulated Substances; and (6)
any preventive measures, remedial actions and notifications in
connection with the foregoing.
5.14.6.3 "Environmental Claims" means administrative, regulatory
or judicial actions, suits, demands, demand letters, orders,
claims, liens, notices of non-compliance or violation,
investigations or proceedings relating in any way to any
applicable Environmental Law or any permit, authorization,
approval or license issued under any such Environmental Law
(hereafter "Claims"), including (a) Claims by governmental or
regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
applicable Environmental Laws, and (b) Claims by any third party
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Regulated
Substances or arising from alleged injury or threat or injury to
health, safety or the environment.
5.14.6.4 "Releases" means releases, spills, leaks, pumps, pours,
emittances, discharges, injections, escapes, leaches, disposals
or dumps.
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5.15 Immovable and Movable Property. The Company has delivered to CLC
an accurate list set forth on Schedule 5.15, of all immovable and real
property, all personal and movable property included (or that will be
included) in "depreciable plant, property and equipment" on the balance sheet
of the Company and all other personal and movable property of the Company
with a value in excess of $2,500 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date. The Company has delivered to CLC
true, complete and correct copies of leases for immovables and real
properties on which are situated buildings, warehouses, workshops, garages
and other structures used in the operation of the businesses of the Company
and leases for equipment (including computer equipment) in excess of $1,500
and including an indication as to which assets are currently owned, or were
formerly owned, by Stockholders or business or personal affiliates of the
Company or Stockholders. Schedule 5.15 also contains the name and address of
each tenant or subtenant to which the Company has let or sublet an owned or
leased building or any part thereof, the date and the expiration date of each
such lease or sublease. All leases set forth on Schedule 5.15 are in full
force and effect and constitute valid and binding agreements on the Company,
and to the best knowledge of the Company, constitute valid and binding
agreements on the other parties thereto (and their successors thereto) in
accordance with their respective terms. On Closing, the Company shall
deliver estoppel certificates signed by each of the Company's landlords
certifying same, and further, that there exists no defaults under or pursuant
to the leases. Except as shown on Schedule 5.15, all of the trucks and other
material machinery and equipment of the Company listed on Schedule 5.15 are
in good working order and condition, ordinary wear and tear excepted. All
fixed assets used by the Company that are material to the operation of its
businesses are either owned by the Company or leased under an agreement
indicated on Schedule 5.15. Except as set forth on Schedule 5.15 and except
for liens described in Section 7.3.6, there are no Liens against the
Company's immovable or real and movable or personal properties.
The Company also has indicated on Schedule 5.15 a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any immovables and
real property or existing business, with respect to which management of the
Company has made any expenditure in the two-year period prior to the date of
this Agreement in excess of $2,500, or which if pursued by the Company would
require additional expenditures of capital in excess of $2,500.
5.16 Material Contracts and Commitments. The Company has delivered to
CLC an accurate list, which is set forth on Schedule 5.16, of all material
contracts, commitments and similar agreements to which the Company is a party
or by which it or any of its properties are bound, including, but not limited
to, contracts with significant customers, joint venture or partnership
agreements, contracts with any labour organizations, loan agreements,
indemnity or guaranty agreements, hypothecs, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements, contracts
restricting the Company from doing business in any areas or in any way
limiting competition, contracts which call for aggregate payments by the
Company in excess of $2,500 and which are not terminable without cost or
liability on notice of 45 days or less, contracts requiring the Company to
perform services for others over a period in excess of 90 days from the date
of such contract and all commitments to enter into any such contracts, leases
or obligations ("Material Contracts") (a) as of the Balance Sheet Date and
(b) entered into since the Balance Sheet Date, and in each case has delivered
true, complete and correct
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copies of such agreements to CLC. Except to the extent set forth on Schedule
5.16, the Company has complied with all material commitments and obligations
pertaining to any Material Contract, and is not in default under any Material
Contract and agreement and no notice of default has been received.
5.17 Compliance with Programs. Schedule 5.17 lists all agreements and
accreditations between the Company and any governmental unit, agency, body or
instrumentality relating to any forms of student financial assistance, grants
or loans (the "Financial Aid"). Each of such agreements and accreditations
listed in Schedule 5.17 is in full force and effect, is a valid, binding and
enforceable obligation by or against the respective Company and the other
parties thereto and no event has occurred which constitutes or, with the
giving of notice or the passage of time, or both, would constitute, a default
or breach thereunder. The Company has delivered or caused to be delivered to
CLC correct and complete copies of each contract or agreement listed in
Schedule 5.17 and all amendments thereto.
Schedule 5.17 also lists each program pursuant to which Financial
Aid is provided to or on behalf of the Company or the Company's students.
Except as set forth on Schedule 5.17, to the best of the Company's
knowledge and the Stockholders' knowledge (i) there exists no set of facts
which could have an adverse effect on the ability of the Company to renew
permits and obtain certification and accreditation under the ownership of CLC
and (ii) the change of control of Delta following the Acquisition will not
entitle the Minister of Education nor any federal or other provincial
governmental authority, unit, agency, body or instrumentality relating to
Financial Aid to revoke the permits or accreditations currently held by the
Company.
The Company has previously delivered to CLC true and complete
copies of all correspondence received from or sent by or on behalf of the
Company from or to the Minister of Education, the Commission consultative de
l enseignement prive or any other governmental or regulatory authority having
jurisdiction over the provision, funding or approval of Financial Aid for the
past three years, including without limitation, (i) any documentation
relating to the agreements listed on Schedule 5.17, (ii) any documentation
relating to any audits or reviews conducted by the Minister of Education, the
Commission consultative de l enseignement prive or any accreditation body or
other regulatory authority, (iii) notices or correspondence concerning the
qualification of the Company for the receipt of the Financial Aid, and (iv)
notices or correspondence indicating an intention to limit, suspend or
terminate the provision of Financial Aid to the Company.
Except as set forth on Schedule 5.17, the Company has complied and
is in compliance with any and all applicable laws, regulations and
requirements relating to the Financial Aid. Without limiting the generality
of the foregoing, except as otherwise described in Schedule 5.17, the Company
is in compliance with applicable statutes and regulations governing record
keeping and student file maintenance and information disclosure requirements
to students and others in connection with the Financial Aid.
5.18 Leasehold Property. The Company does not own any immovables or
real
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property. To the extent that the Company is responsible under the
applicable lease or at law for such compliance, the immovables or real
property leased by the Company (the "Properties") and every improvement,
building or structure located thereon (the "Improvements") are in full
compliance with all applicable building, zoning, subdivision, environmental
and other land use and similar laws (collectively, the "Real Property Laws"),
and the Company has not received any notice of violation or claimed violation
of any Real Property Law and such Properties and Improvements and, to the
best of the Stockholders' and the Company's knowledge, their continued use,
occupancy and operation as currently used, occupied and operated, do not
constitute a non-conforming use under any Real Property Law.
5.19 Insurance. The Company has delivered to CLC an accurate list set
forth on Schedule 5.19, as of the Balance Sheet Date of all insurance
policies carried by the Company and has delivered to CLC an accurate list
(attached to Schedule 5.19) of all insurance claims received for the past
three policy years. Also attached to Schedule 5.19 are true, complete and
correct copies of all policies currently in effect. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant
to all of its contracts and other agreements and pursuant to applicable law.
Such insurance policies are currently in full force and effect and shall
remain in full force and effect through the Closing Date. No insurance
carried by the Company has ever been cancelled and the Company has ever been
denied coverage.
5.20 Compensation; Employment Agreements; No Collective Bargaining
Agreement.
5.20.1 The Company has delivered to CLC an accurate list set
forth on Schedule 5.20, showing all officers, directors and
employees of the Company, listing their salary, seniority, age,
position and length of service, as well as all employment
agreements or other written agreements or arrangements including,
without limitation, any confidentiality, non-competition,
severance, termination or golden parachute agreements with such
officers, directors and key employees and the rate of compensation
(and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The Company has
provided to CLC true, complete and correct copies of any employment
agreements, confidentiality agreements, non-competition agreements,
severance, termination or golden parachute agreements or other
written agreements or arrangements for persons listed on Schedule
5.20. Since the Balance Sheet Date there have been no increases in
the compensation payable or any special bonuses to any officer,
director or key employee, except as listed on Schedule 5.20.
5.20.2 Except as set forth in Schedule 5.20, the Company has not
been the subject of any election in respect of union representation
of employees and are not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any
arrangement with any labour union. Except as set forth on Schedule
5.20, no employees of the Company are represented by any labour
union or covered by any collective bargaining agreement and no
campaign to establish such representation has, to the best of the
Stockholders' and the
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Company's knowledge, ever occurred or is in progress. There is no
pending or, to the Company's knowledge, threatened labour dispute
involving the Company and any group of its employees, no pending
grievances or arbitration proceedings nor has the Company
experienced any labour interruptions over the past three years and
the Company considers its relationship with employees to be good.
5.20.3 Except as set forth on Schedule 5.20, there are no
written employment contracts with any employees, nor any employee
manuals which in any way promise continued employment, nor any
other oral or written guarantees of continued employment.
5.2l Employee Plans
5.21.1 Schedule 5.21 lists all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, severance,
pension, profit sharing, deferred compensation, stock compensation,
stock purchase, retirement, hospitalization insurance, medical,
dental, legal, disability and similar plans or arrangements or
practices relating to the employees or former employees of the
Company which are currently maintained or were maintained at any
time in the last four years (the "Canadian Plans").
5.21.2 All of the Canadian Plans are and have been established,
registered, qualified, invested and administered, in all respects,
in accordance with all laws, regulations, orders or other
legislative, administrative or judicial promulgations applicable to
the Canadian Plans ("Applicable Employee Benefit Laws"). No fact
or circumstance exists that could adversely affect the tax-exempt
status of any Canadian Plan.
5.21.3 All obligations regarding the Canadian Plans have been
satisfied, there are no outstanding defaults or violations by any
party to any Canadian Plan and no taxes, penalties or fees are
owing or exigible under any of the Canadian Plans.
5.21.4 The Company may unilaterally amend or terminate, in whole
or in part, each Canadian Plan and take contribution holidays under
or withdraw surplus from each Canadian Plan, subject only to
approvals required by Applicable Employee Benefit Laws.
5.21.5 No Canadian Plan, nor any related trust or other funding
medium thereunder, is, to the knowledge of the Company, subject to
any pending investigation, examination or other proceeding, action
or claim initiated by any governmental agency or instrumentality,
or by any other party (other than routine claims for benefits), and
there exists no state of facts which after notice or lapse of time
or both could reasonably be expected to give rise to any such
investigation, examination or other proceeding, action or claim or
to affect the registration of any Canadian Plan required to be
registered.
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5.21.6 All contributions or premiums required to be made by the
Company under the terms of each Canadian Plan or by Applicable
Employee Benefit Laws have been made in a timely fashion in
accordance with Applicable Employee Benefit Laws and the terms of
the Canadian Plans, and the Company does not have any liability
(other than liabilities accruing after the Closing Date) with
respect to any of the Canadian Plans. Contributions or premiums
will be paid by the Company on an accrual basis for the period up
to the Closing Date even though not otherwise required to be made
until a later date.
5.21.7 No amendments have been made to any Canadian Plan since
July 1, 1995, no improvements to any Canadian Plan have been
promised and no amendments or improvements to any Canadian Plan
will be made or promised prior to the Closing Date.
5.21.8 There have been no improper withdrawals, applications or
transfers of assets from any Canadian Plan or the trusts or other
funding media relating thereto, and neither the Company, nor any of
its agents, has been in breach of any fiduciary obligation with
respect to the administration of the Canadian Plans or the trusts
of other funding media relating thereto.
5.21.9 Subject to approvals under Applicable Employee Benefit
Laws, the Company may merge or consolidate any Canadian Plan or the
assets transferred from any Canadian Plan with any other
arrangement, plan or fund.
5.21.10 The Company has furnished to CLC true, correct and
complete copies of all the Canadian Plans, attached in Schedule
5.21, as amended as of the date hereof together with all related
documentation including, without limitation, funding agreements,
actuarial reports, funding and financial information returns and
statements, all professional opinions (whether or not internally
prepared) with respect to each Canadian Plan, all material internal
memoranda concerning the Canadian Plans, copies of material
correspondence with all regulatory authorities with respect to each
Canadian Plan and plan summaries, booklets and personnel manuals.
No material changes have occurred to the Canadian Plans or are
expected to occur which would affect the actuarial reports or
financial statements required to be provided to CLC and CLCQ
pursuant to this provision.
5.21.11 Each Canadian Plan which is a funded plan is fully funded
as of the Closing Date on both a going concern and a solvency basis
pursuant to the actuarial assumptions and methodology utilized in
the most recent actuarial valuation therefor.
5.21.12 None of the Canadian Plans enjoys any special tax status
under Applicable Employee Benefit Laws, nor have any advance tax
rulings been sought or received in respect of the Canadian Plans.
5.21.13 All employee data necessary to administer each Canadian Plan
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has been provided by the Company to CLC and CLCQ and is true and
correct as at the Closing Date.
5.21.14 No insurance policy or any other contract or agreement
affecting any Canadian Plan requires or permits a retroactive
increase in contributions, premiums or payments due thereunder.
The level of insurance reserves under each insured Canadian Plan is
reasonable and sufficient to provide for all incurred but
unreported claims.
5.21.15 Except as disclosed in Schedule 5.21, none of the
Canadian Plans provides benefits to retired employees or to the
beneficiaries or dependents of retired employees.
5.22 Intentionally Deleted
5.23 Pooling of Interest. To the best of the Stockholders' and the
Company's knowledge, after due inquiry, there have been no transactions or
events between or with respect to the Stockholders or the Company which
would, and the ownership structure and attributes of the Company and the
Stockholders would not, prevent the transaction contemplated hereby, when
consummated, from being considered as a pooling of interests business
combination in accordance with U.S. generally accepted accounting principals
("U.S. GAAP") and the criteria of Accounting Principals Board Opinion No. 16
and the regulations of the SEC.
5.24 Conformity with Law; Litigation
5.24.1 Except to the extent set forth on Schedule 5.24, the
Company is not in violation of any law or regulation or any order
of any court or federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them which would
have a Material Adverse Effect. The Company has conducted and is
conducting its business in compliance with the requirements,
standards and conditions set forth in applicable federal,
provincial, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation
of any of the foregoing which would have a Material Adverse Effect.
5.24.2 Except to the extent set forth in Schedule \n AR5.11 or
Schedule 5.24, the Company is not a party to any litigation and
there are no claims, actions, suits or proceedings, pending or, to
the knowledge of the Company, threatened, against or affecting the
Company, at law or in equity, or before or by any federal,
provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over it which would have a Material Adverse Effect,
and no notice of any such claim, action, suit or proceeding,
whether pending or threatened, has been received. The Company is
not subject to any existing judgments which would have a Material
Adverse Effect, or which could adversely affect the Company's or
the Stockholders' ability
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to effectuate the transactions contemplated hereby; nor has the
Company received any written inquiry from any agency of the
federal, provincial or any state or local government about the
transactions contemplated herein, or about any violation or
possible violation of any law, regulation or ordinance affecting
its business.
5.25 Taxes. Except as set forth in Schedule 5.25:
5.25.1 All Returns required to have been filed by or with
respect to the Company and any affiliated, combined, consolidated,
unitary or similar group of which the Company is or was a member (a
"Relevant Group") with any Taxing Authority have been duly filed,
and each such Return correctly and completely reflects the income,
franchise or other Tax liability and all other information required
to be reported thereon. All Taxes (whether or not shown on any
Return) owed by the Company and any member of a Relevant Group
(collectively, the "Acquired Parties") have been paid if due, or
provision has been made for the payment thereof, if not yet due.
The provisions for Taxes due by the Company and its Subsidiaries
(as opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in the
Company's Financial Statements are sufficient for all unpaid Taxes,
being current Taxes, not yet due and payable, of such Acquired
Party. The Company does not have any liability, obligation or
commitment for the payment of Taxes except as provided in such
financial statements. No Acquired Party is a party to any current
agreement extending the time within which to file any Return. No
claim has ever been made by any Taxing Authority in a jurisdiction
in which an Acquired Party does not file Returns that it is or may
be subject to taxation by that jurisdiction. No Acquired Party has
waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to any Tax assessment or
deficiency. No Acquired Party has filed any objection which
remains outstanding with respect to any assessment or reassessment
of Taxes.
5.25.2 Each Acquired Party has withheld and paid all Taxes
required to have been adequately and properly withheld and paid in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. No Acquired Party
expects any Taxing Authority to assess any additional Taxes against
or in respect of it for any past period except as may have been
accrued and reflected as a reserve in the Company's Financial
Statements. There is no dispute or claim concerning any Tax
liability of any Acquired Party either (i) claimed or raised by any
Taxing Authority or (ii) otherwise known to any Acquired Party. No
issues have been raised in any examination by any Taxing Authority
with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Schedule 5.25
attached hereto lists all federal, state, local and foreign income
Tax Returns filed by or with respect to any Acquired Party for all
taxable periods ended on or after June 30, 1994, indicates those
Returns, if any, that have been audited, and indicates those
Returns that
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currently are the subject of audit. Each Acquired Party has
delivered to CLCQ and CLC complete and correct copies of all
federal, state, local and foreign income Tax Returns filed by, and
all Tax examination reports and statements of deficiencies assessed
against or agreed to by, such Acquired Party since June 30, 1994.
No Acquired Party has received any refund of Taxes to which it is
not entitled.
5.25.3 No Acquired Party is a party to any Tax allocation or
sharing agreement.
5.25.4 No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and
legally binding agreement with a Taxing Authority relating to Taxes.
5.25.5 Delta is a registrant within the meaning of Part IX of
the Excise Tax Act (Canada) and Chapter VIII of An Act Respecting
the Quebec Sales Tax and its registration numbers are as follows:
Federal: 106019821RT
Quebec: 1002660594
5.25.6 For purposes of this Agreement, the following definitions
shall apply:
5.25.6.1 "Returns" means any returns, reports or
statements (including any information returns) required
to be filed for purposes of a particular Tax.
5.25.6.2 "Tax" or "Taxes" means all United States or
Canadian federal, provincial, state, local or foreign net
or gross income, gross receipts, net proceeds, sales,
use, ad valorem, value added, franchise, bank shares,
withholding, payroll, employment, excise, property, deed,
stamp, alternative or add-on minimum, environmental or
other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect
thereto.
5.25.6.3 "Taxing Authority" means any governmental
agency, board, bureau, body, department or authority of
any United States or Canadian federal, provincial, state
or local jurisdiction or any foreign jurisdiction, having
or purporting to exercise jurisdiction with respect to
any Tax.
5.26 No Violations. Neither the Company nor any other party thereto
is (i) in violation of any Charter Document or (ii) in default under any
Material Contract or material lease, instrument, agreement, license, or
permit to which it is a party or by which its properties are bound
(collectively, the "Material Documents"); and, except as set forth in the
Schedules
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and documents attached to this Agreement, (a) the rights and benefits of the
Company under the Material Documents will not be materially and adversely
affected by the transactions contemplated hereby and (b) the execution of
this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a material default under, any of
the terms or provisions of the Material Documents or the Charter Documents.
Except as set forth on Schedule 5.26, none of the Material Documents requires
notice to, or the consent or approval of, any governmental agency or other
third party to any of the transactions contemplated hereby to remain in full
force and effect or give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
5.27 Government Contracts. Except as set forth on Schedule 5.27, the
Company is not now a party to any governmental contracts subject to
unilateral price re-determination or renegotiation by the party other than
the Company.
5.28 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.28 there has not been with respect to the Company:
5.28.1 any event or circumstance (either singly or in the
aggregate) which would constitute a Material Adverse Effect;
5.28.2 any change in its authorized capital, or in its
securities outstanding, or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
5.28.3 any declaration or payment of any dividend or
distribution in respect of its capital stock or any direct or
indirect redemption, purchase or other acquisition of any of its
capital stock;
5.28.4 any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by it
to any of its respective officers, directors, stockholders,
employees, consultants or agents, except for ordinary and customary
bonuses and salary increases for employees in accordance with past
practice;
5.28.5 any work interruptions, labour grievances or claims
filed, or any similar event or condition of any character that
would have a Material Adverse Effect;
5.28.6 any distribution, sale or transfer, or any agreement to
sell or transfer, any material assets, property or rights of any of
its respective businesses to any person, including, without
limitation, the Stockholders and their affiliates;
5.28.7 any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to it, including without
limitation any indebtedness or obligation of any Stockholders or
any affiliate thereof, provided that it may negotiate and adjust
bills in the course of good faith disputes with customers in a
manner
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consistent with past practice, provided, further, that such
adjustments shall not be deemed to be included in Schedule 5.11
unless specifically listed thereon;
5.28.8 any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of
its assets, property or rights or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
5.28.9 any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of business;
5.28.10 any waiver of any of its material rights or claims;
5.28.11 any cancellation or termination of a Material Contract;
5.28.12 any other distribution of property or assets by the Company
outside the ordinary course of business; or
5.28.13 any transaction by it outside the ordinary course of its
businesses.
5.29 Deposit Accounts, Powers of Attorney. The Company has delivered
to CLC an accurate list set forth on Schedule 5.29, as of the date of this
Agreement, of:
5.29.1 the name of each financial institution in which the Company
has accounts or safe deposit boxes;
5.29.2 the names in which the accounts or boxes are held;
5.29.3 the type of account and account number; and
5.29.4 the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.29 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and description of the terms of such power.
5.30 Validity of Obligations. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors and
the Stockholders of the Company and this Agreement has been duly and validly
authorized by all necessary corporate action and, assuming due authorization,
execution and delivery by CLC and CLCQ, is a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights generally or the availability of
equitable remedies.
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5.31 Other Payments. The Stockholders have no knowledge, and the
Stockholders have no reason to believe, that any funds or assets of the
Company have been used for illegal purposes; or there has been an
accumulation or use of the Company's funds without being properly accounted
for in the respective books and records of the Company; or that any material
payments by or on behalf of the Company have not been duly and properly
recorded and accounted for in its books and records; or that any false or
artificial entries have been made in the books and records of the Company for
any reason.
5.32 Transactions with Directors, Officers and Affiliates. Except as
listed on Schedule 5.32 annexed hereto, there have been no transactions since
January 1, 1995 between the Company and any of its directors, officers,
stockholders or affiliates or any of their Family Members (as defined below)
involving $5,000 or more; except for any transaction with such persons solely
in such capacities or as employees. Each transaction set forth on Schedule
5.32 has been on reasonable commercial terms which could have been obtained
at the time from bona fide third parties. To the best knowledge of the
Company, since January 1, 1995, none of the officers or directors of the
Company or any spouse or Family Member (as defined below) of any of such
persons, has been a director, officer or consultant of, or owns directly or
indirectly any interest in, any firm, corporation, association or business
enterprise which during such period has been a significant supplier, customer
or sales agent of the Company or has competed with or been engaged in any
business of the kind being conducted by the Company except as disclosed on
Schedule 5.32 annexed hereto. Except as disclosed on Schedule 5.32, no
Family Member (which includes all relatives and their spouses in a
relationship of first cousins or closer) of any Stockholder, officer or
director of the Company is currently an employee or consultant receiving
payments from the Company or otherwise on the payroll of the Company or has
any material claim whatsoever against or owes any amount to the Company,
except for claims in the ordinary course of business such as for accrued
vacation pay and accrued benefits under employee benefit plans.
5.33 Paid-up Capital. The paid-up capital for Tax purposes of each
Purchased Share and of each issued and outstanding share in the capital or a
Subsidiary is no less than their stated capital for corporate purposes.
5.34 Location; Place of Business. Other than (i) vehicles used in the
normal course of business and (ii) account receivables, the Company does not
hold directly or indirectly any of its immovables or real property (including
all leasehold interests) or movable or personal property anywhere other than
at the locations set forth in Schedule 5.34.
All immovables or real property and tangible movable or personal
property having an acquisition cost (either per unit or in the aggregate for
a category of such property) of $10,000 or more owned by the Company are
located at the locations set forth in Schedule 5.34.
The locations from or in which the Company conducts and has, during
the preceding five years, conducted their business are set out in Schedule
5.34 and, save as therein specified, the Company has not, during the said
five years, conducted any business from or in any other location.
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5.35 Stand Alone. No part of the business of the Company is conducted
through any person or entity other than Delta, and Delta has all assets,
tangible and intangible, corporeal and incorporeal, rights, permits and
licenses necessary or desirable to operate and conduct the business currently
conducted by it in the manner conducted since January 1, 1992. Without
limiting the generality of the foregoing, all right, title and interest in
the name "Point Sys" shall have been transferred to Delta prior to the
Closing Date.
5.36 Intentionally Deleted
5.37 Disclosure. This Agreement, the Schedules and Annexes hereto, and
the certificates and other documents furnished by the Company and the
Stockholders to CLC pursuant hereto, taken as a whole, do not, and as to any
representation or warranty made to the knowledge of the Company or the
Stockholders, such representations and warranties, to the Company's
knowledge, do not, as of their respective dates contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
5.38 Representations and Warranties of the Stockholders. The
Stockholders solidarily represent and warrant (without the benefit of
division or discussion) that the representations and warranties set forth
below are true as of the date of this Agreement.
5.39 Authority; Ownership. Each Stockholder has the full legal right,
power and authority to enter into this Agreement and this Agreement has been
duly executed and delivered and is the legal and binding obligation of such
Stockholder, enforceable against him or her in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or similar
laws, affecting creditors' rights generally or the availability of equitable
remedies. Each Stockholder owns beneficially and of record all of the shares
of the Stock identified on Annex IV as being owned by such Stockholder, and,
except as set forth on Schedule 5.39 hereof, such Stock is owned free and
clear of all Liens.
5.40 Pre-emptive Rights. Each Stockholder does not have, or hereby
waives any pre-emptive or other right to acquire shares of Company Stock or
CLC Stock, that such Stockholder has or may have had other than rights of any
Stockholder to acquire CLC Stock pursuant to (i) this Agreement or (ii) any
stock option hereinafter granted by CLC.
5.41 Residence. Each Stockholder other than Marie-Josee Matte is not a
"non resident of Canada" within the meaning of the Income Tax Act (Canada).
5.42 No Broker. The Company and each Stockholder or any of its or his
respective employees or agents has not employed or incurred any liability to
any broker, finder or agent for any brokerage fee, finder's fee, commissions
or other amounts with respect to this Agreement or any transaction
contemplated hereby.
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6. REPRESENTATIONS OF CLC AND CLCQ
CLC and CLCQ solidarily (without benefit of division or discussion)
represent and warrant that all of the following representations and
warranties are true at the date of this Agreement and that such
representations and warranties shall survive until one (1) year after the
Closing Date.
6.1 Due Organization. CLC and CLCQ are each duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and CLC and CLCQ are duly authorized and qualified under all
applicable laws, regulations, and ordinances of public authorities to carry
on their respective businesses in the places and in the manner as now
conducted except for where the failure to be so authorized or qualified would
not have a material adverse effect on the business, operations, affairs,
properties, assets or condition (financial or otherwise), of CLC or CLCQ, as
the case may be (a "CLC Material Adverse Effect"). Copies of the Certificate
of Incorporation (certified by a Secretary or an Assistant Secretary of CLC
and CLCQ) and the By-laws (certified by a Secretary or an Assistant Secretary
of CLC and CLCQ), of CLC and CLCQ shall be delivered to the Stockholders on
the Closing Date.
6.2 CLC Stock. The Dividend Access Shares to be delivered to the
Stockholders at the Closing Date and the CLC Stock to be delivered to the
Trustee pursuant to the Voting Trusting Agreement shall constitute valid and
legally issued shares of CLCQ and CLC, respectively, fully paid and
non-assessable. The shares of the CLC Stock and the Dividend Access Shares
to be issued to the Stockholders pursuant to this Agreement will not be
registered under the 1933 Act.
6.3 Validity of Obligations. The execution and delivery of this
Agreement by CLC and the performance by each of CLC and CLCQ of the
transactions contemplated herein have been duly and validly authorized by the
respective Boards of Directors of CLC and CLCQ, and at the date hereof, this
Agreement has been duly and validly authorized by all necessary corporate
action, duly executed and delivered and is a legal, valid and binding
obligation of CLC and CLCQ, enforceable against CLC and CLCQ in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws, affecting creditors' rights generally or the availability of
equitable remedies.
6.4 Authorization. The representatives of CLC and CLCQ, respectively,
executing this Agreement have the corporate authority to enter into and bind
CLC and CLCQ, respectively, to the terms of this Agreement. CLC and CLCQ have
the corporate right, power and authority to enter into this Agreement and the
Acquisition.
6.5 No Conflicts. The execution, delivery and performance of this
Agreement, the
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consummation of any transactions herein referred to or contemplated by and
the fulfilment of the terms hereof and thereof do not:
6.5.1 conflict with or result in a breach or violation of the
Certificate of Incorporation or By-laws of either CLC or CLCQ;
6.5.2 materially conflict with, or result in a material default
(or would constitute a default but for any requirement of notice or
lapse of time or both) (A) under any document, agreement or other
instrument to which either CLC or CLCQ is a party, or result in the
creation or imposition of any lien, charge or encumbrance on any of
CLC's or CLCQ's properties or (B) pursuant to any judgment, order
or decree to which CLC or CLCQ is bound or any of their respective
property is subject; or
6.5.3 result in termination or any impairment of any material
permit, license, franchise, contractual right or other
authorization of CLC or CLCQ.
6.6 Conformity with Law; Litigation.
6.6.1 CLC is not in violation of any law or regulation or any
order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it which would adversely
affect its business, operations, properties, assets and conditions
or CLC's ability to effectuate the Acquisition. CLC has conducted
and is conducting its business in compliance with the requirements,
standards and conditions set forth in applicable federal,
provincial, state and local statutes, ordinances, orders,
approvals, variances, rules and regulations and is not in violation
of any of the foregoing which would adversely affect its business,
operations, properties, assets and conditions or CLC's ability to
effectuate the Acquisition.
6.6.2 CLC is not a party to any litigation and there are no
claims, actions, suits or proceedings, pending or, to the knowledge
of CLC, threatened against or affecting CLC, at law or in equity,
or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over it which would adversely affect its
business, operations, properties, assets and conditions or CLC's
ability to effectuate the Acquisition. CLC is not subject to any
existing judgments which would adversely affect its business,
operations, properties, assets and conditions or CLC's ability to
effectuate the Acquisition, or which could adversely affect its
business, operations, properties, assets and conditions or CLC's
ability to effectuate the transactions contemplated hereby.
6.7 Disclosure. This Agreement, the Schedules and Annexes hereto, and
the certificates and other documents furnished by CLC and CLCQ to the Company
and the Stockholders, taken as a whole, do not, and as to any representation
or warranty made to the knowledge of CLC and CLCQ, such representations and
warranties, to CLC's and CLCQ's
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knowledge, do not, as of their respective dates contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
7. COVENANTS PRIOR TO CLOSING
7.1 Intentionally Deleted
7.2 Conduct of Business Pending Closing. Since December 6, 1997, the
Company (including the Company's Subsidiaries) has, except as set forth on
Schedule 7.2:
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7.2.1 carried on its businesses in substantially the same
manner as it has heretofore and has not introduced any material new
method of management, operation or accounting;
7.2.2 maintained its properties and facilities, including those
held under leases, in as good working order and condition as at
December 6, 1997, ordinary wear and tear excepted;
7.2.3 performed all of its obligations under agreements
relating to or affecting its assets, properties or rights;
7.2.4 kept in full force and effect present insurance policies
or other comparable insurance coverage;
7.2.5 used reasonable commercial efforts to maintain and
preserve its business organization intact, retained its present
employees and maintained its relationships with suppliers,
customers and others having business relations with the Company
(including the Company's Subsidiaries);
7.2.6 maintained compliance with all material permits, laws,
rules and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar governmental
authorities and maintained its Proprietary Rights; and
7.2.7 maintained present debt and lease instruments and has not
entered into new or amended debt or lease instruments over $10,000,
without the knowledge and consent of CLC.
However, during the said period, the Company was entitled to utilize
cash flow that was in excess of that which it required for its normal course
operations, to reduce the Dolmen Indebtedness. The Company was not permitted
to borrow or otherwise incur any debt or liability, directly or indirectly,
in order to reduce the Dolmen Indebtedness.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3,
between December 6, 1997 and the Closing Date, the Company (including the
Company's Subsidiaries) has not, without the prior written consent of CLC:
7.3.1 made any change in its Certificate of Incorporation or
By-laws;
7.3.2 issued any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind;
7.3.3 declared or paid any dividend, or made any distribution
in respect of its stock whether now or hereafter outstanding, or
purchased, redeemed or otherwise acquired or
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retired for value any shares of its stock;
7.3.4 entered into any contract or commitment or incurred or
agreed to incur any liability or make any capital expenditures,
except if it was in the normal course of business (consistent with
past practice) and involved an amount not in excess of $20,000,
including contracts to provide services to customers;
7.3.5 increased the compensation payable or to become payable
to any officer, director, Stockholder, employee or agent, or made
any bonus or management fee payment to any such person, except
ordinary and customary bonuses or salary increases to employees
consistent with past practice or created any new bonus plan or
other benefit plan for the benefit of any officer, director,
Stockholder, employee or agent;
7.3.6 created, assumed or permitted to exist any Lien upon any
assets or properties whether now owned or hereafter acquired,
except (1) liens set forth on Schedule 5.15 hereto, or (2) liens
for taxes either not yet due or material men's, mechanics',
workers', repairmen's, employees' or other like liens arising in
the ordinary course of business;
7.3.7 sold, assigned, leased or otherwise transferred or
disposed of any property or equipment except in the normal course
of business;
7.3.8 negotiated for the acquisition of any business or the
start-up of any new business and has caused the Stockholders not to
acquire or negotiate for the acquisition of any new business or
start up any new business;
7.3.9 merged, amalgamated or consolidated or agreed to merge,
amalgamate or consolidate with or into any other corporation or
business entity;
7.3.10 waived any material rights or claims of the Company,
provided that the Company may have negotiated and adjusted bills in
the course of good faith disputes with customers in a manner
consistent with past practice, provided, further, that such
adjustments are not deemed to be included in Schedule 5.11 unless
specifically listed thereon;
7.3.11 breached or amended or terminated any Material Contract,
or material permit, license or other right of the Company; or
7.3.12 entered into any other transaction outside the ordinary
course of its business or prohibited hereunder.
7.4 No Shop. The Stockholders, the Company, the Company's Subsidiaries
and any
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agent, officer, director or any representative of any of the foregoing
represent and warrant, that during the period commencing on December 6, 1997
and ending on the Closing Date, the Stockholders, the Company, the Company's
Subsidiaries and any agent, officer, director or any representative of any of
the foregoing have negotiated exclusively with CLC and CLCQ and have not
during such period, directly or indirectly:
7.4.1 solicited or initiated the submission of proposals or
offers from any person for,
7.4.2 participated in any discussions pertaining to, or
7.4.3 furnished any information to any person other than CLC
relating to,
the sale or other transfer of shares of capital stock of the Company, any
securities of the Company convertible into capital stock of the Company, any
acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or any option or right to acquire any of the
foregoing, or a merger, amalgamation, consolidation or business combination
of the Company.
7.5 Notice to Bargaining Agents. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement
under applicable collective bargaining agreements, if any, and has provided
CLC with proof that any required notice has been given.
7.6 Notification of Certain Matters. The Stockholders and the Company
have given prompt notice to CLC of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the Company or the Stockholders contained
herein to be untrue or inaccurate in any material respect at Closing and (ii)
any material failure of any Stockholder or the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by such person or entity hereunder. CLC and CLCQ have given prompt notice to
the Company of (i) the occurrence or non-occurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of CLC or CLCQ contained herein to be untrue or
inaccurate in any material respect at Closing and (ii) any material failure
of CLC or CLCQ to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder. The delivery of any notice
pursuant to this Section 7.6 shall not be deemed to (i) modify the
representations or warranties hereunder of the party delivering such notice,
which notification may only be made pursuant to Section 7.7, (ii) modify the
conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.7 Intentionally Deleted
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7.8 Cooperation in Preparation of Registration Statement. The Company
and the Stockholders shall furnish or cause to be furnished to CLC all of the
information concerning the Company or the Stockholders reasonably requested
by CLC.
7.9 Examination of Current Financial Statements. The Company has
provided prior to the Closing Date, the unaudited balance sheet of the
Company as of November 30, 1997 or the most recent date available, and any
subsequent months ending prior to the Closing Date and the unaudited
statement of income, statements of changes in financial position and retained
earnings of the Company, interim monthly statements for any subsequent
periods ending prior to the Closing Date, if any, disclosing no material
adverse change in the financial condition of the Company or the results of
its operations from the financial statements as of the Balance Sheet Date.
Such balance sheets and/or financial statements, which shall be deemed to be
Company's Financial Statements (as described in Section 5.10) and in respect
of which the Company and the Stockholders (except as provided in Schedule
I7.9) shall be deemed to make the representations and warranties set forth in
Section 5.10, shall be prepared in accordance with Canadian generally
accepted accounting principals applied on a consistent basis throughout the
periods indicated.
7.10 Accounting Treatment. The Stockholders, the Company, CLC and CLCQ
shall each use their best efforts to cause the Acquisition to be accounted
for as a pooling of interests. Each of such parties shall use their best
efforts to prevent its Affiliates (as defined in Section 5.9 hereof) from
taking any action that could preclude the transactions contemplated hereby
from receiving pooling of interests accounting treatment in accordance with
U.S. GAAP.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on the Closing Date of all of the following conditions. As of the
Closing Date, all conditions not satisfied shall be deemed to have been
waived by the Company and the Stockholders unless such parties have notified
CLC in writing to the contrary, except that no such waiver shall be deemed to
affect the survival of the representations and warranties of CLC and CLCQ
contained in Section 6 hereof.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of CLC and CLCQ contained in Section 6 are
true and correct in all material respects as of the Closing Date (except with
respect to any such representations and warranties which relate specifically
to an earlier date, which shall be true and correct in all material respects
as of such earlier date), and each and all of the terms, covenants and
conditions of this Agreement to be complied with and performed by CLC and
CLCQ on or before the Closing Date have been duly complied with and performed
in all material respects.
8.2 Satisfaction. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other
related legal matters shall be satisfactory to the Company and its counsel.
8.3 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein have been obtained and made and no action or
proceeding has been instituted or threatened to restrain or prohibit the
Acquisition and no governmental agency or body has taken any other action or
made any request of the Company as a result of which the Company deems it
inadvisable to proceed with the transaction hereunder.
8.4 Good Standing Certificates. CLC and CLCQ have delivered,
concurrently herewith, to the Company and the Stockholders a certificate,
dated as of a date no later than ten days prior to the Closing Date, duly
issued by the appropriate governmental authority in CLC's and CLCQ's
respective jurisdiction of incorporation and, unless waived by the
Stockholders, in each jurisdiction in which CLC and CLCQ are authorized and
carry on the business, showing that each of CLC and CLCQ is in good standing
and (in the case of CLC only) authorized to do business and that all state
franchise and/or income tax returns and taxes for CLC, for all periods prior
to the Closing have been filed and paid.
8.5 No Material Adverse Change. No event or circumstance has
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occurred which would constitute a CLC Material Adverse Effect.
8.6 Support Agreement. CLC has, concurrently herewith, entered into
the Support Agreement.
8.7 Secretary's Certificate. The Stockholders have received a
certificate or certificates dated the Closing Date and signed by the
Secretary or an Assistant Secretary of CLC and CLCQ, certifying the
resolutions of the Boards of Directors of CLC and CLCQ, respectively.
8.8 Opinion of Counsel. The Stockholders have received, concurrently
herewith, an opinion from counsel to CLCQ and CLC, dated the Closing Date, in
form and substance satisfactory to the Stockholders.
8.9 No Litigation. No action or proceeding before a court or any other
governmental agency or body has been instituted or threatened to restrain or
prohibit the Acquisition and no governmental agency or body has taken any
other action or made any request of the Company or the Stockholders as a
result of which the Company and the Stockholders deem it inadvisable to
proceed with the transactions hereunder.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLC AND CLCQ
The obligations of CLC and CLCQ with respect to actions to be taken
on the Closing Date are subject to the satisfaction or waiver on the Closing
Date of all of the following conditions. As of the Closing Date, all
conditions not satisfied shall be deemed to have been waived by CLC and CLCQ
unless such parties have notified the Company and Stockholders in writing to
the contrary, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of the Company and the
Stockholders in Section 5 hereof.
9.1 Representations and Warranties; Performance of Obligations. All
the representations and warranties of the Stockholders and the Company
contained in this Agreement are true and correct in all material respects as
of the Closing Date (except with respect to any such representations and
warranties which relate specifically to an earlier date, which shall be true
and correct in all material respects as of such earlier date), and each and
all of the terms, covenants and conditions of this Agreement to be complied
with or performed by the Stockholders and the Company on or before the
Closing have been duly performed or complied with in all material respects.
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9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body has been instituted or threatened to restrain or
prohibit the Acquisition and no governmental agency or body has taken any
other action or made any request of CLC as a result of which the management
of CLC deems it inadvisable to proceed with the transactions hereunder.
9.3 Examination of Final Financial Statements. CLC shall have
sufficient time to review the unaudited balance sheets of the Company for the
period ended November 30, 1997 or the most recent period available, and the
unaudited statement of income, statements of changes in financial position
and retained earnings for the same period, disclosing no material adverse
change in the financial condition of the Company or the results of their
operations from the financial statements as of the Balance Sheet Date.
9.4 No Material Adverse Effect. No event or circumstance has occurred
which constitutes a Material Adverse Effect.
9.5 Stockholders' Release. The Stockholders have delivered to CLC
immediately prior to the Closing Date an instrument dated the Closing Date to
be released on the Closing Date releasing the Company from any and all claims
of the Stockholders against the Company and any and all obligations of the
Company to the Stockholders except for continuing obligations to Roger Matte
relating to his employment, if any, with the Company.
9.6 Satisfaction. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall be satisfactory
to CLC and its counsel.
9.7 Termination of Related Party Agreements. All existing agreements
between the Company and the Stockholders or business or personal affiliates
of the Company or the Stockholders have been cancelled, and any stockholder
agreements, voting agreements, voting trusts, options, or warrants relating
to the Company or Company Stock, and any employment agreements between the
Company and any employee listed on Schedule 9.7, have been terminated. In
addition, the Company has been released as guarantor on all real estate loans
and other lending arrangements or obligations which were guaranteed for the
benefit of any of the Stockholders or any other third party.
9.8 Opinion of Counsel. CLC and CLCQ have received, concurrently
herewith, an opinion from counsel to the Company and the Stockholders, dated
the Closing Date, in form and substance satisfactory to CLC and CLCQ.
9.9 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein have been obtained and made and no action or
proceeding has been
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instituted or threatened to restrain or prohibit the Acquisition and no
governmental agency or body has taken any other action or made any request of
CLC as a result of which CLC deems it inadvisable to proceed with the
transactions hereunder.
9.10 Good Standing Certificates. The Company has delivered to CLC,
concurrently herewith, a certificate, dated as of a date no later than ten
days prior to the Closing Date, duly issued by the appropriate governmental
authority in the Company's jurisdiction of incorporation and, unless waived
by CLC, in each jurisdiction in which the Company is authorized to do
business, showing the Company is in good standing and authorized to do
business.
9.11 Intentionally Deleted
9.12 Repayment of Indebtedness. The Stockholders have repaid the
Company (including the Company's Subsidiaries) in full all amounts owing by
the Stockholders to the Company (including the Company's Subsidiaries).
9.13 Insurance. CLC has been named as an additional named insured on
all of the Company's insurance policies.
9.14 Voting Trust Agreement. The Stockholders and the trustee appointed
thereunder have, concurrently herewith, entered into the Voting Trust
Agreement.
9.15 Secretary's Certificate. CLC has received a certificate dated the
Closing Date and signed by the Secretary or an Assistant Secretary of the
Company and Dolmen (1994) Inc., certifying the resolutions of the
Shareholders and the Board of Directors, as applicable.
9.16 Securities Laws. CLC has received all necessary consents and
otherwise complied with any U.S. Federal or state securities or "blue sky"
laws applicable to the issuance of the CLC Stock, in connection with the
transactions contemplated hereby.
9.17 Pooling Letters. CLC has received, concurrently herewith, from
Ernst & Young, as independent chartered accountants for the Company, a
letter acceptable to CLC and substantially in the form and substance of the
letter annexed hereto as Schedule 9.17, confirming that, to their knowledge
after due and diligent inquiry of management, there have been no transactions
or events with respect to the Company which would, and the ownership
structure and attributes of the Company and the Stockholders would not,
proscribe the transactions contemplated hereby, when consummated, from being
considered as a pooling of interests business combination. CLC has received,
concurrently herewith, from Price Waterhouse LLP, a letter confirming that
the transactions contemplated hereby, when consummated, can properly be
accounted for as a pooling of interests combination in accordance with U.S.
GAAP and the criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the SEC.
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9.18 Acknowledgement of Pooling Restrictions and Receipt of Commission
Filings. The Stockholders have delivered, concurrently herewith, to CLC a
letter agreement acknowledging his or her status as an Affiliate of the
Company, his or her agreement to comply with the "pooling of interests"
restrictions, and his or her receipt of SEC filings of CLC, in form and
substance satisfactory to the Company.
9.19 Intentionally deleted
9.20 Intentionally deleted
9.21 Intentionally deleted
9.22 Discharge of Liens. All of the Liens identified on Schedule 9.22
have been released and discharged and the registrations thereof have been
radiated at the appropriate registry offices.
10. COVENANTS OF CLC, THE COMPANY AND THE STOCKHOLDERS AFTER CLOSING
10.1 Preparation and Filing of Tax Returns; Record Retention
10.1.1 Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request
in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or
in conducting any audit or other proceeding in respect of Taxes.
Such cooperation and information shall include providing copies of
all relevant portions of Returns, together with relevant
accompanying schedules and work papers, relevant documents relating
to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its
employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so
provided.
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10.1.2 CLC, CLCQ and the Stockholders shall (i) cause the
Company to, retain all Tax returns, schedules, work papers and all
material records or other documents relating to Tax matters of the
Company (including the Company's Subsidiaries) for the first
taxable year or other taxable period ending after the Closing Date
and for all prior taxable years or other taxable periods until the
later of (a) seven years after the later of filing or the due date
of the Tax Return with respect to a taxable year or (b) the
expiration of all applicable statutes of limitation, and (ii)
provide the other party with any record or information (including,
to the extent a party has such power, making employees available to
such other party for reasonable periods of time) which may be
relevant to any Tax matters. Neither CLC nor CLCQ shall destroy or
dispose of or allow the destruction or disposition of any books,
records or files relating to the business, properties, assets or
operations of the Company (including the Company's Subsidiaries) to
the extent that they pertain to the operations of the Company
(including the Company's Subsidiaries) on or prior to the Closing
Date, without first having offered in writing to deliver such
books, records and files to each of the Stockholders. CLC and CLCQ
shall be entitled to dispose of the books, records and files
described in such notice if none of the Stockholders requests
copies of such books, records and files within 60 days after
receipt of the notice described in the preceding sentence.
10.2 Cooperation for Litigation. Each party hereto shall provide to
each of the other parties hereto such cooperation, assistance and information
as may be necessary or desirable in contesting, negotiating or otherwise
dealing with any claim, demand or litigations which arises from facts,
situations, circumstances or any matter which arose and/or existed prior to
the Closing Date.
10.3 Affiliate Indebtedness. CLC shall cause the Company to repay the
amounts due to Affiliates within 30 days of the Closing Date.
10.4 Additional Dividend Access Shares. CLCQ will not issue any
Dividend Access Shares to any person other than a Stockholder while any
outstanding Dividend Access Shares are held by any Stockholder without their
consent.
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11. INDEMNIFICATION
The Stockholders, CLC and CLCQ each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by the Stockholders. The Stockholders
covenant and agree that they, solidarily, without benefit of division or
discussion will indemnify, defend, protect and hold harmless CLC, CLCQ and
the Company at all times until (A) the Expiration Date as defined in Section
5 above, in the case of an event described in (i) and (ii) of this Section
11.1 below (B) 180 days after the last date on which the relevant taxing
authority is entitled to assess or reassess the Company (including the
Company's Subsidiaries) in the case of events described in (iii) of this
Section 11.1 below and (C) 180 days after the date of expiration of any
applicable statute of limitations period in the case of an event described in
(iv) of this Section 11.1 below, from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by CLC, CLCQ or the
Company as a result of or arising from (i) any breach of the representations
and warranties of the Stockholders or the Company set forth herein or on the
Schedules or certificates delivered in connection herewith, (ii) any non
fulfilment of any covenant or agreement on the part of the Stockholders or
the Company under this Agreement, (iii) any liability of the Company arising
from, in connection with or pursuant to any of the matters or items listed in
Section 2 of Schedule 11.5 hereto, (iv) any liability of the Company arising
from, in connection with or pursuant to any of the matters or items listed in
Sections 1 and 3 of Schedule 11.5 hereto.
11.2 Indemnification by CLC. CLC covenants and agrees that it will
indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the Closing Date until (A) the Expiration Date as defined in
Section 5 above, in the case of an event described in (i) and (ii) of this
Section 11.2 below, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses
of investigation) incurred by the Stockholders as a result of or arising from
(i) any breach by CLC or CLCQ of their representations and warranties set
forth herein or on the Schedules or certificates attached hereto, (ii) any
non-fulfilment of any covenant or agreement on the part of CLC or CLCQ under
this Agreement.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim
by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect
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thereto being made against any party obligated to provide indemnification
pursuant to Section 11.1, 11.2 or 11.5 hereof (hereinafter the "Indemnifying
Party"), give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding. Such notice shall state the
nature and the basis of such claim and a reasonable estimate of the amount
thereof (the "Claim Amount"). The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter
so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any
criminal proceeding without the consent of the Indemnified Party. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party
shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that
are in the Indemnified Party's possession or control. All Indemnified
Parties shall use the same counsel, which shall be the counsel selected by
the Indemnifying Party, provided that if such counsel shall have a conflict
of interest that prevents such counsel from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying
Party shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such
asserted liability, except to the extent such participation is requested by
the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expense
and out-of-pocket expenses. If the Indemnifying Party desires to accept a
final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the
Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying Party
for any additional costs of defense which it subsequently incurs with respect
to such claim and all additional costs of settlement or judgment. If the
Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails
diligently to pursue such defense, the Indemnified Party may undertake such
defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim
without the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed. All settlements hereunder shall
effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section 11, provided that no
Indemnifying Party shall be obligated to seek any payment pursuant to the
terms of any insurance policy.
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11.4 Limitations on Indemnification
11.4.1 Notwithstanding any other term of this Agreement, neither
Roger Matte, Suzanne Matte and Dolmen (1994) Inc. on the one hand
or CLC and CLCQ on the other, shall have any liability under this
Section AS11 to make any payments in excess of the Purchase Price
set forth in Section 2.1., and neither Richard Matte, Marie-Josee
Matte, Dominique Matte and Johanne Matte shall have any liability
under this Section 11 to make any payments in excess of an
amount equal to the number of Dividend Access Shares received by
each such Stockholder pursuant to Section AA2.2 multiplied by
US$23.705.
11.4.2 CLC, CLCQ and the Company and the other persons or entities
entitled to be indemnified pursuant to Section 11.1 shall not
assert any claim for indemnification hereunder against the
Stockholders until such time as, and solely to the extent that, the
aggregate of all claims which such persons may have against the
Stockholders exceeds $50,000 (the "Indemnification Threshold"), and
then only for the amount of such claims exceeding the
Indemnification Threshold. The Stockholders shall not assert any
claim for indemnification hereunder against CLC or CLCQ until such
time as, and solely to the extent that, the aggregate of all claims
which the Stockholders have against CLC or CLCQ shall exceed the
Indemnification Threshold, and then only for the amount of such
claims exceeding the Indemnification Threshold.
11.5 Specific Contingencies. Notwithstanding the provisions of Section
11.4 above, the Stockholders shall indemnify, defend and hold harmless CLC,
CLCQ and the Company for any and all liabilities or costs arising out of the
matters listed on Schedule 11.5, up to the Purchase Price.
11.6 No Recourse by Stockholders. The Stockholders agree and covenant
that, once Closing has occurred and the Acquisition is completed as provided
in this Agreement, they shall have no recourse whatsoever against the Company
(including the Company's Subsidiaries) to recover any amounts paid by the
Stockholders as a result of any liability under this Section 11.
11.7 Payment of Indemnity. Payment of any indemnity by a Stockholder
hereunder shall be satisfied by returning to CLC or CLCQ such number of
Dividend Access Shares and/or CLC Stock exchangeable therefor, free and clear
of all Liens, which is equal to the indemnity payable, divided by US$23.705.
In the event that a Stockholder does not have a sufficient number of Dividend
Access Shares and/or CLC Stock to satisfy the entire indemnity payable, the
indemnity, or any balance thereof, shall be satisfied in cash.
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12. INTENTIONALLY DELETED
12.1
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13. NON-COMPETITION
13.1 Prohibited Activities. Except as set forth on Schedule 13.1, the
Stockholders will not, for a period of three (3) years following the Closing
Date or, if any Stockholder becomes an employee or director of CLC, the
Company or one of their subsidiaries for a period of three (3) years
following the termination of such relationship as an employee or director of
CLC, the Company or their subsidiaries (whichever period is longer), for any
reason whatsoever, directly or indirectly, for themselves or on behalf of or
in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
13.1.1 engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a
sales representative, in any business selling any products or
services similar to those presently sold and in direct competition
with CLC or the Company or any of the subsidiaries of either
thereof, in or within one hundred (100) miles of Calgary, Edmonton,
Montreal, Ottawa, Toronto and Vancouver and within fifty (50) miles
of where CLC or the Company or any of their respective subsidiaries
now or may at any time hereafter conduct business (the "Territory");
13.1.2 call upon any person who is, at that time, within the
Territory, an employee of CLC or the Company (including the
subsidiaries thereof) in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the
employ of CLC or the Company (including the subsidiaries of either
thereof), provided that any Stockholder shall be permitted to call
upon and hire any member of his or her immediate family.
In determining whether any of the Prohibited Activities have
occurred, such determination shall be made with respect to the business and
locations of CLC and the Company, including the subsidiaries of either
thereof, subsequent to the Acquisition and the effectiveness of the
Registration Statement.
13.2 Damages. Because of the difficulty of measuring economic losses to
CLC and the Company as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to CLC
and the Company for which they would have no other adequate remedy, each
Stockholder agrees that the foregoing covenant may be enforced by
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CLC or the Company in the event of breach by such Stockholder, by injunctions
and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on
the Stockholders in light of the activities and business of CLC or the
Company (including the subsidiaries thereof) on the date of the execution of
this Agreement and the current expansion plans of CLC to the cities
identified in Section 13.1.1.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and this Agreement shall thereby be
reformed.
13.5 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any
Stockholder against CLC or the Company (including the subsidiaries thereof),
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by CLC or the Company of such covenants. It is
specifically agreed that the period of three (3) years stated at the
beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be
computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 13. The
covenants contained in this Section 13 shall not be affected by any breach of
any other provision hereof by any party hereto and shall have no effect if
the transactions contemplated by this Agreement are not consummated.
13.6 Materiality. The Company and the Stockholders hereby agree that
this covenant is a material and substantial part of this transaction.
14. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 Stockholders. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access
to certain confidential information of the Company and/or CLC, such as lists
of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company's, and/or CLC's respective
businesses. The Stockholders agree that they will not disclose such
confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of CLC, (b) following the Closing Date, such information may
be disclosed by the Stockholders as is required in the course of performing
their duties for CLC, and (c) to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 14.1; provided, further, that confidential information shall
not include (i) such information which
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becomes known to the public generally through no fault of the Stockholders,
(ii) information required to be disclosed by law or the order of any
governmental authority under control of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholders
shall, if possible, give prior written notice thereof to CLC and provide CLC
with the opportunity to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party and the Stockholders
provide the same prior disclosure set forth in clause (ii) above. In the
event of a breach or threatened breach by any of the Stockholders of the
provisions of this section, CLC shall be entitled to an injunction
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
CLC from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 14.1, and
because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree
that, in the event of a breach by the Stockholders of the foregoing covenant,
the covenant may be enforced against the Stockholders by injunctions and
restraining orders.
14.3 Survival. The obligations of the parties under this Section 14
shall
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survive the termination of this Agreement.
15. TRANSFER RESTRICTIONS
The parties agree as follows with respect to the sale or other
disposition after the Closing Date of the CLC Stock:
15.1 Disposition of Shares. The Stockholders represent and warrant that
the CLC Stock being acquired by them hereunder are being acquired and will be
acquired for their own respective accounts and will not be sold or otherwise
disposed of, except pursuant to: (a) an exemption from the registration
requirements under the 1933 Act, which does not require the filing by CLC
with the Commission of any registration statement, offering circular or other
document, in which case, the Stockholders shall first supply to CLC an
opinion of counsel (which counsel and opinions shall be satisfactory to CLC)
that such exception is available; or (b) an effective registration statement
filed by CLC with the Commission under the 1933 Act. In connection with any
opinion delivered pursuant to Section 15.1(a), CLC shall, if requested,
certify to its transfer agent the matters set forth in Rule 144(c) under the
1933 Act.
15.2 Agreement to Retain Shares. The Stockholders agree not to
transfer, sell, or otherwise dispose of or direct or cause the sale, transfer
or other disposition of, or reduce the Stockholders' risk relative to, any of
the CLC Stock held by the Stockholders or on the Stockholders' behalf,
whether owned on the date hereof or after acquired, within the 30 days prior
to the Closing Date. The Stockholders further agree not to transfer, sell or
otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, or reduce the Stockholders' risk relative to, any CLC Stock
held by the Stockholders or on the Stockholders' behalf or received by the
Stockholders or on the Stockholders' behalf in or as a result of this
Agreement or otherwise, until after the date CLC shall have publicly released
a report in the form of a quarterly earnings report, registration statement
filed with the Commission, a report filed with the Commission of Form 10-K,
10-Q or 8-K or any other public filing, statement or public announcement
which included the combined financial results (including combined sales and
net income) of CLC and the Assets for a period of at least 30 days of
combined operations of CLC and the Assets following the Closing Date.
15.3 Trading in CLC Stock. Except as otherwise expressly consented to
by CLC, from December 6, 1997 until the Closing Date, the Stockholders (and
any Affiliates thereof) have not directly or indirectly purchased or sold
(including short sales) any shares of CLC Stock in any transaction effected
on the Nasdaq Stock Market, or otherwise.
15.4 Legend. The certificates representing the CLC Stock shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE
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SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR IN ACCORDANCE WITH
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH
THE SECURITIES AND EXCHANGE COMMISSION'S ACCOUNTING SERIES RELEASES 130
AND 135.
CLC may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 No Registration. The Stockholders acknowledge that they are
acquiring CLC Stock solely for their own account and as an investment and not
with a view to any distribution or resale thereof within the meaning of the
1933 Act that the shares of CLC Stock to be delivered to the Stockholders
upon exchange of the Dividend Access Shares have not been and may not be
registered under the 1933 Act and therefore may not be resold without
compliance with the 1933 Act. The CLC Stock to be acquired by such
Stockholders pursuant to this Agreement is being acquired solely for their
own respective accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
16.2 Compliance with Law. The Stockholders covenant, warrant and
represent that none of the shares of CLC Stock to be issued to such
Stockholders will be offered, sold, assigned, exchanged, pledged,
hypothecated, transferred, encumbered, distributed or otherwise disposed of
except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC as well as the Securities
Act (Quebec) and the regulations, rules and policies thereunder. All the
certificates representing the shares of CLC Stock to be issued to the
Stockholders (or their permitted assigns) shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAW.
17. REGISTRATION RIGHTS
The Stockholders shall have the following registration rights with
respect to the CLC Stock issued to them hereunder:
17.1 Registration Rights for CLC Stock; Filing of Registration
Statement. CLC
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shall utilize reasonable best efforts to cause, as soon as practicable
following the Closing Date, a registration statement, on Form S-1, Form S-2
or Form S-3 (or an equivalent general registration form then in effect), (the
"Registration Statement") to be filed under the 1933 Act, for the purpose of
registering CLC Stock for resale on a continuous basis from time to time by
the Stockholders, provided, that such Registration Statement shall be filed
no later than 30 days after the Closing Date. Thereafter CLC will use
reasonable best efforts to have the Registration Statement become effective
and cause the CLC Stock to be registered under the 1933 Act, and registered,
qualified or exempted under the state securities laws of such jurisdictions
as the Stockholders reasonably request, as soon as is reasonably practicable.
17.2 Expenses of Registration. All expenses incident to CLC's
performance of or compliance with this Section DA17, including, without
limitation, all registration and filing fees (including all expenses incident
to filing with Nasdaq or any other exchange), fees and expenses of complying
with securities and blue sky laws, printing and copying expenses, fees and
expenses of CLC's counsel and accountants, the fees and disbursements of all
independent public accountants (including the expenses of any audit and/or
"cold comfort" letter), and any other fees and disbursements of underwriters,
if any, customarily paid by issuers or sellers of securities shall be paid by
CLC; provided, however, that all underwriting discounts and selling
commission applicable to the CLC Stock to be registered and fees and
disbursements of counsel for the Stockholders shall be borne by the
Stockholders.
17.3 Furnishing of Documents. CLC shall furnish to the Stockholders
such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents, including a preliminary prospectus, as the Stockholders may
reasonably request in order to facilitate the offering of the CLC Stock. The
Registration Statement and any final prospectus contained therein shall
comply as to form with the 1933 Act.
17.4 Amendments and Supplements. CLC shall prepare and promptly file
with the Commission and promptly notify the Stockholders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the CLC Stock is required to be
delivered under the 1933 Act, any event shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. CLC shall also
advise the Stockholders promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or the initiation
or threatening of any proceeding for that purpose and promptly use its
reasonable best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued. If, after a
Registration Statement becomes effective, the Stockholders desire that the
Registration Statement be amended or CLC advises the Stockholders that CLC
considers it appropriate that the Registration Statement (and all other
registration statements of CLC then effective and outstanding) be amended,
the Stockholders shall suspend any further sales of CLC Stock until CLC
advises the Stockholders that the Registration Statement has been amended.
CLC shall file, and use reasonable best efforts to
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cause to become effective any such amendment as soon as reasonably
practicable.
17.5 Duration. CLC shall maintain the effectiveness of the Registration
Statement until the earlier to occur of (i) such time as CLC reasonably
determines that the Stockholders were eligible to sell all of the CLC Stock
then owned by the Stockholders pursuant to Rule 144 under the 1933 Act in the
three month period immediately preceding the termination of the effectiveness
of the Registration Statement or (ii) two (2) years from the Closing Date.
CLC's obligations contained in Sections 17.1, 17.3 and 17.4 shall
terminate on the earlier to occur of (i) and (ii) of this Section 17.5.
Notwithstanding any provision of this Section 17 to the contrary, if the
Board of Directors of CLC in its good faith judgment, determines that any
registration of CLC Stock should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other material transaction involving CLC or any
of its subsidiaries (a "Valid Business Reason"), (x) CLC may postpone filing
the Registration Statement until such Valid Business Reason no longer exists,
but in no event for more than three months and (y) in case the Registration
Statement has been filed, (1) CLC may withhold efforts to cause the
Registration Statement to become effective, (2) CLC may cause the
Registration Statement to be withdrawn and its effectiveness terminated or
(3) CLC may postpone amending or supplementing such registration statement
until such Valid Business Reason no longer exists, but in no event for more
than three months (such period of postponement or withdrawal under subclause
(x) or (y) above, the "Postponement Period"); and CLC shall give written
notice of its determination to postpone or withdraw a registration statement,
or an amendment or supplement thereto, and of the fact that the Valid
Business Reason for such postponement or withdrawal no longer exists, in each
case promptly after the occurrence thereof; provided, however, CLC shall not
be permitted to postpone or withdraw a registration statement within 90 days
after the expiration of any Postponement Period; provided, further, that CLC
shall not postpone or withdraw the Registration Statement if CLC does not
postpone or withdraw all other resale registration statements, which are
effective at such time, or which are effective during the Postponement Period
(if any). The Stockholders agree that, upon receipt of any notice from CLC
that CLC has determined to postpone or withdraw any registration statement,
the Stockholders will discontinue any disposition of CLC Stock pursuant to
such registration statement and, if so directed by CLC, will deliver to CLC
(at CLC's expense) all copies, other than permanent file copies, then in such
Stockholders' possession of the prospectus covering such CLC Stock that was
in effect at the time of receipt of such notice. If CLC shall give any
notice of withdrawal or postponement of a registration statement, or an
amendment or supplement thereto, CLC shall, at such time as the Valid
Business Reason that caused such withdrawal or postponement no longer exists
(but in no event later than three months after the date of the postponement
or withdrawal), use its reasonable best efforts to effect the registration or
file any required amendment or supplement thereto as soon as reasonably
practicable under the 1933 Act of CLC Stock covered by the withdrawn or
postponed registration statement in accordance with Section 17.1.
17.6 Further Information. The Stockholders shall furnish CLC such
information regarding the Stockholders as CLC may reasonably request and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
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17.7 Indemnification
(a) CLC will indemnify and hold harmless the Stockholders, any
underwriter (as that term is defined in the 1933 Act) for the Stockholders
and each person, if any, who controls the Stockholders or underwriter within
the meaning of the 1933 Act, from and against any and all losses, damages,
liabilities, costs and expenses to which the Stockholders or any such
controlling person may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages, liabilities, costs or expenses are
caused by (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or (ii)
any violation by CLC of any federal, state or common law, rule or regulation
applicable to CLC and relating to action required of or infraction by CLC in
connection with any such registration; provided, however, that, CLC will not
be liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of any Holder or such
controlling person in writing specifically for use in connection with such
registration; provided, further, that the indemnification provisions set
forth in this Section 17.7(a) shall not apply to amounts paid in
settlement of any such loss, damage or liability if such settlement is
effected without the consent of CLC, which consent shall not unreasonably
withheld.
(b) Each of the Stockholders, on a solidary basis, will indemnify
and hold harmless CLC and each person, if any, who controls CLC within the
meaning of the 1933 Act, from and against any and all losses, damages,
liabilities, costs and expenses to which CLC or any such controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon (i) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances under
which they were made, not misleading, to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written information
furnished by or on behalf of any Holder specifically for use in connection
with such registration or (ii) any violation by the Stockholders of any
federal, state or common law, rule or regulation applicable to the
Stockholders and relating to action required of or inaction by the
Stockholders in connection with any such registration; provided, that in no
event shall any indemnity under this Section 17.7(b) exceed the gross
proceeds obtained from the sale of CLC Stock; provided, further, that the
indemnification provisions set forth in this Section 17.7(b) shall not
apply to amounts paid in settlement of any such loss, damage or liability if
such settlement is effected without the consent of the indemnifying
Stockholders, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section of notice of the
commencement of any action involving the
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subject matter of the foregoing indemnity provisions, such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof; but the omission to so notify
the indemnifying party will not relieve it from any liability which it may
have hereunder unless the indemnifying party has been materially prejudiced
thereby nor will such failure to so notify the indemnifying party relieve it
from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, if the defendants in any action include
both the indemnified party and the indemnifying party and there is a conflict
of interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless: (i) the indemnified party shall have employed counsel
in accordance with the provisions of the preceding sentence; (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action; or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 17.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, lability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact, relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
17.8 Rule 144. CLC covenants that (i) so long as it remains subject to
the reporting provisions of the 1934 Act, it will timely file the reports
required to be filed by it under the 1933 Act or the 1934 Act (including, but
not limited to, the reports under Sections 13 and 15(d) of the 1934 Act
referred to in subparagraph (c)(1) of Rule 144 under the 1933 Act) and (ii)
will take such further action as any Holder may reasonably request, all to
the extent required from time to time to enable such Holder to sell CLC Stock
without registration under
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the 1933 Act subject to Section AB15 hereof and within the limitations of
the exemptions provided by (A) Rules 144 and 145 under the 1933 Act, as such
Rules may be amended from time to time, or (B) any similar rule or regulation
hereafter adopted by the Commission. Upon the requests of any Holder, CLC
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
18. GENERAL
18.1 Cooperation. The Company, Stockholders, CLC and CLCQ shall each
deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as have been reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The Company will cooperate and use its
reasonable efforts to have the present officers, directors and employees of
the Company cooperate with CLC on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
Return filing obligations, actions, proceedings, arrangements or disputes of
any nature with respect to matters pertaining to all periods prior to the
Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of CLC, and the heirs and legal representatives of the
Stockholders, except that CLC may assign the rights of CLCQ to another wholly
owned subsidiary of CLC.
18.3 Entire Agreement. This Agreement (including the Schedules,
exhibits and Annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Stockholders, the Company, CLCQ and CLC and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and this Agreement
and the Annexes hereto may be modified or amended only by a written
instrument executed by the Stockholders, the Company, CLCQ and CLC, acting
through their respective officers, duly authorized by their respective Boards
of Directors. Any disclosure made on any Schedule delivered pursuant hereto
shall be deemed to have been disclosed for purposes of any other Schedule
required hereby.
18.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. Each party
agrees to be bound by facsimile signatures.
18.5 Expenses. Except as otherwise specifically provided herein, CLC
shall bear all expenses (including, without limitation, legal fees and
expenses) incurred on its behalf and on behalf of CLCQ in connection with the
transactions contemplated hereby. The Stockholders shall bear all expenses
(including, without limitation, legal fees and expenses) incurred on their
behalf and on behalf of Delta in connection with the transactions
contemplated
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hereby.
18.6 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in
United States or Canadian mail, addressed to the party to be notified,
postage prepaid and registered or certified with return receipt requested, or
by use of an independent third party commercial delivery service for same day
or next day delivery, or by delivering the same in person to an officer or
agent of such party. Notice by mail shall be deemed effective on the fourth
business day after its deposit with the United States Postal Service, or the
Canadian Postal Service, as the case may be, notice by same day courier shall
be deemed effective on the day of deposit with the delivery service and
notice by next day delivery service shall be deemed effective on the day
following the deposit with the delivery service.
18.6.1 If to CLC, CLCQ or the Company, addressed to them at:
Computer Learning Centers, Inc.
11350 Random Hills Road
Suite 240
Fairfax, Virginia 22030
Attention: Mr. Charles Cosgrove
Telecopier No.: (703) 359-8225
with copies in all cases to:
Goodman Phillips & Vineberg
1501 McGill College Avenue
26th Floor
Montreal, Quebec
H3A 3N9
Attention: Mtre. Hillel W. Rosen
Telecopier No.: (514) 841-6499
18.6.2 If to the Stockholders, addressed to them at:
c/o Mr. Roger Matte
6150 Du Boise Avenue
Apt. G10
Montreal, Quebec
H3S 2V2
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with copies to:
Mackenzie Gervais, S.E.N.C.
Place Mercantile
770 Sherbrooke Street West
Suite 1300
Montreal, Quebec
Attention: Mtre. Andre Dufour
Telecopier No.: (514) 288-7389
or to such other address or counsel as any party hereto shall specify
pursuant to this Section 18.6 from time to time.
18.7 Public Announcements. The Stockholders, the Company, CLC and CLCQ
shall agree with each other as to the form and substance of any press release
related to this Agreement and the transactions contemplated hereby, and shall
consult with each other as to the form and substance of other public
disclosure related thereto; provided however, that nothing contained herein
shall prohibit any party hereto from making any disclosure required by
applicable laws and regulations, after notice to the other party with the
opportunity to comment to the extent that delay of the disclosure is
permitted under such laws or regulations.
18.8 Governing Law. This Agreement shall be governed by and interpreted
and construed in accordance with the laws of the Province of Quebec and the
laws of Canada applicable therein and shall be treated in all respects as a
Quebec contract.
18.9 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties made herein, or in
writing delivered pursuant to the provisions of this Agreement shall survive
the consummation of the transactions contemplated hereby and any examination
on behalf of the parties until the dates provided in Sections 11.1 and 11.2.
18.10 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall
it be construed as a waiver of or acquiescence in any such breach or default,
or of any similar breach or default occurring later; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or
default occurring before or after that waiver.
18.11 Time. Time is of the essence with respect to this Agreement.
18.12 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to
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be valid, legal and enforceable but so as to most nearly retain the intent of
the parties, and if such modification is not possible, such provision shall
be severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.14 Captions. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof.
18.15 Currency. Except as specifically indicated, all dollar amounts
herein shall be in lawful currency of Canada.
18.16 Language. The parties acknowledge that they have requested that
this Agreement and all ancillary documents be drawn up in the English
language only. Les parties reconnaissent avoir exige que cette convention
ainsi que tous les documents y afferents soient rediges en anglais seulement.
18.17 Formal Date. This Agreement shall bear formal date of February 20,
1998, notwithstanding the actual date of its execution.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreements as
of the day and year first above written.
COMPUTER LEARNING CENTERS, INC.
--------------------------------
Per: /s/ Charles L. Cosgrove
COMPUTER LEARNING CENTERS OF
QUEBEC, INC.
--------------------------------
Per: /s/ Roger Matte
DELTA COLLEGE INC.
--------------------------------
Per:
/s/ Roger Matte
------------------------------------
ROGER MATTE
/s/ Richard Matte
------------------------------------
RICHARD MATTE
/s/ Marie-Josee Matte
------------------------------------
MARIE-JOSEE MATTE
/s/ Dominique Matte
------------------------------------
DOMINIQUE MATTE
/s/ Johanne Matte
------------------------------------
JOHANNE MATTE
/s/ Suzanne Matte
------------------------------------
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<PAGE>
SUZANNE MATTE
-------------------------------
DOLMEN (1994) INC.
Per: /s/ Roger Matte
141
<PAGE>
ANNEX IV
DELTA COLLEGE INC.
SHAREHOLDERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Shareholders Class Number Paid-up Adjusted % % Fair
Capital cost voting participating Market
base Value
$ $ $
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dolmen (1994) Inc. "C" 100 100 - - 100 Participation
Richard Matte "H" 25 25 - - - 475,000
Marie-Josee Matte "H" 25 25 - - - 475,000
Dominique Matte "H" 25 25 - - - 475,000
Johanne Matte "H" 25 25 - - - 475,000
Roger Matte "B" 1,000,000 100 - 100 - 100
Roger Matte "H" 50 50 - - - 826,013
Suzanne Matte "H" 50 50 - - - 826,013
</TABLE>
142
<PAGE>
SCHEDULE 9.17
POOLING LETTER
143
<PAGE>
SCHEDULE 9.22
LIENS TO BE DISCHARGED
1. Conventional Hypothec without delivery registered on June 19, 1996 under
number 96-0072884-001
Creditor: Dolmen (1994) Inc.
Debtor: College Delta Inc.
2. Conventional Hypothec without delivery registered on December 15, 1994 under
number 94-0161414-002
Creditor: Trust General du Canada
Debtor: College Delta Inc.
3. Conventional Hypothec without delivery registered on December 15, 1994 under
number 94-0161414-0001
Creditor: Trust General du Canada
Debtor: College Delta Inc.
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<PAGE>
SCHEDULE 11.5
RETAINED LIABILITIES
1. Claim by Informatech Inc. against Delta College Inc. as set forth in the
demand letter of Holmested & Associes dated October 23, 1997.
145
<PAGE>
LEGENDE DES CIBLES ET REFERENCES
TARGETS AND REFERENCES
(A lusage de la secretaire seulement - For secretary's use only)
As at 9 February 1998
A = 5.25
B = 5.9
C = 5.10
D = 5.21
E = 11.3
F = 6.1
G = 2.6
H = 3
I = 2.5.4
J = 2.4
K = 5.14
L = 5
M = 11.4
N = 5.13
O = 2.5.1.1
P = 5.2
Q = 5.16
R = 2.5.1.3
S = 13.1
T = 2.1
U = 2.5.5.2
V = 2.5.5.1
W = 2.5.5.4
X = 2.5.3.1
Y = 2.5.6
Z = 2.3
AA = 2.2
AB = 15
AC = 16
AD = 2.5.5
AE = ?
AF = 5.1
AG = 7.7
AH = 5.35
AI = 5.41
AJ = 5.39
AK = 5.42
AL = 11.1
AM = 5.4
AN = 5.5
AO = 5.6
AP = 5.7
AQ = 5.8
AR = 5.11
AS = 11
AT = 14
AU = 5.14.6.2
AV = 7.3.6
AW = ?
AX = 7.8
AY = 7.6
AZ = 8
BA = 9
BB = 8.1
BC = 9.1
BD = 6
BE = 9.4
BF = 11.2
BG = 11.5
BH = 12.1
BI = ?
BJ = 18.5
BK = 13
BL = ?
BM = 14.1
BN = ?
BO = ?
BP = 5.13.3
BQ = 16.2
BR = 18.6
BS = 5.12
BT = 5.13.1
BU = 5.13.2
BV = 5.15
BW = 5.18
BX = 5.19
BY = 5.20
BZ = 5.24
CA = 5.26
CB = 5.27
CC = 5.28
CD = 5.29
CE = 5.32
CF = 5.34
CG = 7.2
CH = 7.3
CI = 7.9
CJ = 8.7
CK = 9.7
CL = ?
CM = 5.3
CN = 5.33
CO = ?
CP = 5.17
CQ = ?
CR = 5.34
CS = 9.20
CT = 6.6
CU = 9.22
CV = 9.21
CW = 9.17
CX = ?
CY = ?
CZ = 13.1.1
DA = 17
DB = 17.1
DC = 17.3
DD = 17.4
DE = 17.7
DF = 17.7.0..(a)
DG = 17.7.0..(b)
146
<PAGE>
DH = ?
DI = ?
DJ = ?
DK = ?
DL = ?
DM = ?
DN = ?
DO = ?
DP = ?
DQ = 15.1
DR = ?
DS = ?
DT = ?
DU = ?
DV = ?
DW = 17.5
DX = ?
DY = ?
DZ = ?
147
<PAGE>
ANNEX I TO SHARE PURCHASE AGREEMENT
VOTING TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the day of , 199 .
BETWEEN: COMPUTER LEARNING CENTERS, INC., a corporation
subsisting under the laws of the State of Delaware
(hereinafter referred to as "CLC");
AND: DELTA COLLEGE INC. a Quebec corporation ("Delta");
AND: ROGER MATTE, and RICHARD MATTE and MARIE-JOSEE
MATTE and DOMINIQUE MATTE and JOHANNE MATTE and
SUZANNE MATTE and DOLMEN (1994) INC.;
(hereinafter referred to individually as a
"Stockholder" and collectively as the
"Stockholders")
AND: [MONTREAL TRUST COMPANY], a trust company existing
under the laws of Canada (the "Trustee").
WHEREAS CLC, through , a wholly-owned subsidiary ("Newco"), has
purchased from the Stockholders all the issued and outstanding shares of
Delta by way of a Share Purchase Agreement (as hereinafter defined);
WHEREAS Newco has issued, in consideration for said purchase,
non-voting shares in the capital of Newco (the "Dividend Access Shares") to
the Stockholders as set forth in Schedule attached;
WHEREAS CLC, Newco, and the Stockholders agreed that on Closing (as
defined in the Share Purchase Agreement), CLC would issue of its common
stock (the "Voting Shares") to the Trustee to be held in trust by the Trustee
to provide to the Stockholders voting rights in CLC;
148
<PAGE>
WHEREAS the parties desire to make appropriate provision for and to
establish a procedure whereby voting rights attached to the CLC Common Stock
shall be exercisable by the Trustee for and on behalf of the Stockholders and
whereby the CLC Common Stock may be redeemed by CLC;
AND WHEREAS these recitals and any statements of fact in this
voting trust agreement are made by CLC and the Stockholders and not by the
Trustee;
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this voting trust agreement and for other good
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
Article 1
Definitions and Interpretation
1.1 Definitions. In this voting trust agreement, unless something in
the subject matter or content is inconsistent therewith:
"Board of Directors" means the board of directors of Newco.
"Business Day" means a day other than a Saturday, a Sunday or a day when
banks are not open for business in Virginia.
"CLC Board of Directors" means the board of directors of CLC.
"CLC Common Stock" means the shares of Common Stock of CLC, no par
value, having voting rights of one vote per share, and any other securities
into which such shares may be changed or for which such shares may be
exchanged (whether or not CLC shall be the issuer of such other securities)
or any other consideration which may be received by the holders of such
shares, pursuant to a recapitalization, reconstruction, reorganization or
reclassification of, or amalgamation, merger, liquidation or similar
transaction, affecting such shares.
"CLC Meeting" has the meaning set out in section 0 hereof.
"CLC Vote" has the meaning set out in section 0 hereof;
"Corporate Law" means the , as amended.
"Dividend Access Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Dividend Access Shares, the
whole as provided for in the Articles of Incorporation of Newco.
149
<PAGE>
"Dividend Access Shares" has the meaning set out in the recitals hereto.
"Indemnified Parties" has the meaning ascribed thereto in section 0 hereof.
"Liquidation Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"List" has the meaning set out in section 0 hereof.
"Newco" means , a company.
"Officer's Certificate" means, with respect to CLC or Newco, as the case
may be, a certificate signed by any one of the Chairman of the Board, the
Vice-Chairman of the Board, the President or any Vice-President of CLC or
Newco, as the case may be.
"Put Right" has the meaning ascribed thereto in the Share Purchase
Agreement.
"Redemption Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Retraction Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Right of Retraction" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Share Purchase Agreement" means the share purchase agreement dated as
of December 6, 1997 among CLC, the Stockholders and Delta College Inc.
"Stockholder Votes" has the meaning set out in section 0 hereof.
"Stockholders" means Roger Matte, Richard Matte, Marie-Josee Matte,
Dominique Matte, Johanne Matte, Suzanne Matte and Dolmen (1994) Inc. and
their respective successors and assigns.
"Transfer Agent" means any person as may from time to time be the
registrar and transfer agent for the Dividend Access Shares.
"Trust" means the trust created by this voting trust agreement.
"Trust Property" means the Voting Shares, any other securities and any
money or other property which may be held by the Trustee from time to time
pursuant to this voting trust agreement.
"Trustee" means [Montreal Trust Company] and, subject to the provisions
of
150
<PAGE>
Article 7 hereof, includes any successor Trustee or permitted assigns.
"Voting Rights" means the voting rights attached to the Voting Shares.
1.2 Interpretation Not Affected by Headings, etc. The division of this
voting trust agreement into articles and sections and the insertion of
headings are for reference purposes only and shall not affect the
interpretation of this voting trust agreement. Unless otherwise indicated,
any reference in this voting trust agreement to an article or section refers
to the specified article or section of this voting trust agreement.
1.3 Number, Gender and Persons. In this voting trust agreement, unless
the context otherwise requires, words importing the singular number include
the plural and vice versa, words importing any gender include all genders and
words importing persons include individuals, corporations, partnerships,
companies, associations, trusts, unincorporated organizations, governmental
bodies and other legal or business entities of any kind.
1.4 Date for Any Action. If any date on which any action is required
to be taken under this voting trust agreement is not a Business Day, such
action shall be required to be taken on the next succeeding Business Day.
1.5 Payments. All payments to be made hereunder will be made without
interest and less any tax required by law to be deducted and withheld.
Article 2
Trust
2.1 Establishment of Trust. The purpose of this voting trust agreement
is to create the Trust for the benefit of the Stockholders and CLC, as herein
provided. The Trustee will hold the Voting Shares in order to enable the
Trustee to exercise the Voting Rights and will hold the other rights granted
in or resulting from the Trustee being a party to this voting trust agreement
in order to enable the Trustee to exercise or enforce such rights, in each
case as trustee for and on behalf of the Stockholders or CLC, as the case may
be, as provided in this voting trust agreement.
Article 3
Voting Shares
3.1 Issue and Ownership of the Voting Shares. Simultaneously with the
execution and delivery of this voting trust agreement, CLC will issue to and
deposit with the Trustee the Voting Shares to be hereafter held of record by
the Trustee as trustee for and on behalf of, and for the use and benefit of,
the Stockholders, in accordance with the provisions of this voting trust
agreement. During the term of the Trust and subject to the
151
<PAGE>
terms and conditions of this voting trust agreement, the Trustee shall
possess and be vested with full legal ownership of the Voting Shares and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Voting Shares, provided that the Trustee shall:
(a) hold the Voting Shares and the legal title thereto as Trustee
solely for the use and benefit of the Stockholders in accordance with
the provisions of this voting trust agreement; and
(b) except as specifically authorized by this voting trust agreement,
have no power or authority to sell, transfer, vote or otherwise deal
in or with the Voting Shares and the Voting Shares shall not be used
or disposed of by the Trustee for any purpose other than the purposes
for which the Trust is created pursuant to this voting trust
agreement.
3.2 Voting Rights. The Trustee, as the holder of record of the Voting
Shares, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Shares, on any matter,
question or proposition whatsoever that may come before the stockholders of
CLC at a CLC Meeting or upon a CLC Vote. The Voting Rights shall be and
remain vested in and exercised by the Trustee. Subject to section hereof,
the Trustee shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 3 from Stockholders entitled
to instruct the Trustee as to the voting thereof at the time at which the CLC
Meeting is held or the CLC Vote occurs. To the extent that no instructions
are received from a Stockholder with respect to the Voting Rights to which
such Stockholder is entitled, the Trustee shall not exercise or permit the
exercise of the Voting Rights relating to the Dividend Access Shares held by
such Stockholder who did not provide the Trustee with instructions as
aforesaid.
3.3 Number of Votes. With respect to all meetings of stockholders of
CLC at which holders of shares of CLC Common Stock are entitled to vote (a
"CLC Meeting"), and with respect to any other circumstance in which the
holders of CLC Common Stock are entitled to vote (a "CLC Vote") each
Stockholder shall be entitled to instruct the Trustee to cast and exercise,
in the manner instructed, one vote for each Dividend Access Share owned of
record by such Stockholder on the record date established by CLC or by
applicable law for such CLC Meeting, and/or such CLC Vote as the case may be
(the "Stockholder Votes") in respect of each matter, question or proposition
to be voted on at such CLC Meeting.
3.4 Mailings to Stockholders. With respect to each CLC Meeting, and/or
CLC Vote the Trustee will mail or cause to be mailed (or otherwise
communicate in the same manner that CLC utilizes in communications to holders
of CLC Common Stock, CLC agreeing to advise the Trustee in writing of such
method and subject to the Trustee's ability to provide this method of
communication) to each of the Stockholders named in the List on the same day
as the initial mailing or notice (or other communication) with respect
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<PAGE>
thereto is received by the Trustee from CLC:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of CLC;
(b) a statement that such Stockholder is entitled, subject to the
provisions of section 0 hereof, to instruct the Trustee as to the
exercise of the Stockholder Votes with respect to such CLC Meeting
and|or CLC Vote, or, pursuant and subject to section 0 hereof, to
attend such CLC Meeting and to exercise personally the Stockholder
Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Stockholder or its designee to exercise
personally such holder's Stockholder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of CLC to exercise such Stockholder Votes;
(d) a statement that if no such instructions are received from the
Stockholder, the Stockholder Votes to which such Stockholder is
entitled will not be exercised;
(e) a form of direction whereby the Stockholder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of (A) the time and date by which such instructions
must be received by the Trustee in order to be binding upon it, which
in the case of a CLC Meeting shall not be later than the close of
business on the second Business Day prior to such meeting, and (B) the
method for revoking or amending such instructions.
The materials referred to above are to be provided by CLC to the
Trustee. For the purpose of determining Stockholder Votes to which a
Stockholder is entitled in respect of any such CLC Meeting or CLC Vote, the
number of Dividend Access Shares owned of record by the Stockholder shall be
determined at the close of business on the record date established by CLC or
by applicable law for purposes of determining stockholders entitled to vote
at such CLC Meeting or CLC Vote. CLC will notify the Trustee in writing of
any decision of the CLC Board of Directors with respect to the calling of any
such CLC Meeting or CLC Vote and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event in sufficient
time to enable the Trustee to perform its obligations contemplated by this
section 0.
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3.5 Copies of Stockholder Information. CLC will deliver to the Trustee
copies of all proxy materials (including notices of CLC Meetings but
excluding proxies to vote shares of CLC Common Stock), information
statements, reports (including without limitation all interim and annual
financial statements) and other written communications that are to be
distributed from time to time to holders of CLC Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Stockholder at the same time as such materials are first
sent to holders of CLC Common Stock. The Trustee will mail or otherwise send
to each Stockholder, at the expense of CLC, copies of all such materials (and
all materials specifically directed to the Stockholders or to the Trustee for
the benefit of the Stockholders by CLC) received by the Trustee from CLC at
the same time as such materials are first sent to holders of CLC Common
Stock. The Trustee will make copies of all such materials available for
inspection by any Stockholder at the Trustee's principal office in the city
of Montreal and Toronto.
3.6 Other Materials. Immediately after receipt by CLC or any
stockholder of CLC of any material sent or given generally to the holders of
CLC Common Stock by or on behalf of a third party, including without
limitation, dissident proxy and information circulars (and related
information and materials) and tender and exchange offer circulars (and
related information and materials), CLC shall use its best efforts to obtain
and deliver to the Trustee copies thereof in sufficient quantities so as to
enable the Trustee to forward such materials (unless the same has been
provided directly to Stockholders by such third party) to each Stockholder as
soon as practicable thereafter. As soon as practicable after receipt
thereof, the Trustee will mail or otherwise send to each Stockholder, at the
expense of CLC, copies of all such materials received by the Trustee from
CLC. The Trustee will also make copies of all such materials available for
inspection by any Stockholder at the Trustee's principal office in the city
of Montreal and Toronto.
3.7 List of Persons Entitled to Vote. CLC shall, (a) prior to each
annual, general and special CLC Meeting, (b) prior to each CLC Vote and (c)
forthwith upon each request made at any time by the Trustee or the
Stockholders in writing, cause Newco to prepare or cause to be prepared a
list (the "List") of the names and addresses of the Stockholders arranged in
alphabetical order and showing the number of Dividend Access Shares held of
record by each such Stockholder, in each case at the close of business on the
date specified by the Trustee or the Stockholders in such request or, in the
case of a List prepared in connection with a CLC Meeting or a CLC Vote, at
the close of business on the record date established by CLC or pursuant to
applicable law for determining the holders of CLC Common Stock entitled to
receive notice of and/or to vote at such CLC Meeting or in connection with
such CLC Vote. Each such List shall be delivered to the Trustee promptly
after receipt by Newco of such request or the record date for such meeting
and, in any event, within sufficient time as to enable the Trustee to perform
its obligations under this voting trust agreement. CLC agrees to give Newco
written notice (with a copy to the Trustee) of the calling of any CLC Meeting
or the holding of any CLC Vote, together with the record dates therefor,
sufficiently prior to the date of the calling of such meeting so as to enable
Newco to comply with CLC's requests under this section 0.
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3.8 Entitlement to Direct Votes. Any Stockholder named in a List
prepared in connection with any CLC Meeting or CLC Vote will be entitled (a)
to instruct the Trustee in the manner described in section 0 hereof with
respect to the exercise of the Stockholder Votes to which such Stockholder is
entitled or (b) to attend (in the case of a CLC Meeting) such meeting
personally and to exercise thereat as the proxy of the Trustee, the
Stockholder Votes to which such Stockholder is entitled except, in each case,
to the extent that such Stockholder has transferred, upon exercise of
exchange rights relating thereto, the ownership of any Dividend Access Shares
in respect of which such Stockholder is entitled to Stockholder Votes after
the close of business on the record date for such meeting.
3.9 Voting by Trustee, and Attendance of Trustee Representative, at CLC
Meeting.
(a) In connection with each CLC Meeting, the Trustee shall exercise,
either in person or by proxy, in accordance with the instructions
received from a Stockholder pursuant to section 0 hereof, the
Stockholder Votes as to which such Stockholder is entitled to direct
the vote (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Stockholder prior to the time and
date fixed by it for receipt of such instructions in the notice given
by the Trustee to the Stockholder pursuant to section 0 hereof.
(b) The Trustee shall cause such representatives as are empowered by
it to sign and deliver, on behalf of the Trustee, proxies for Voting
Rights enabling a Stockholder to attend each CLC Meeting. Upon
submission by a Stockholder (or its designee) of identification
satisfactory to the Trustee's representatives, and at the
Stockholder's request, such representatives shall sign and deliver to
such Stockholder (or its designee) a proxy to exercise personally the
Stockholder Votes as to which such Stockholder is otherwise entitled
hereunder to direct the vote, if such Stockholder either (i) has not
previously given the Trustee instructions pursuant to section 0 hereof
in respect of such meeting, or (ii) submits to the Trustee's
representatives written revocation of any such previous instructions.
At such meeting, the Stockholder exercising such Stockholder Votes
shall have the same rights as the Trustee to speak at the meeting in
respect of any matter, question or proposition, to vote by way of
ballot at the meeting in respect of any matter, question or
proposition and to vote at such meeting by way of a show of hands in
respect of any matter, question or proposition.
3.10 Distribution of Written Materials. Any written materials to be
distributed by the Trustee to the Stockholders pursuant to this voting trust
agreement shall be
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delivered or sent by mail (or otherwise communicated in the same manner as
CLC utilizes in communications to holders of CLC Common Stock and CLC shall
advise the Trustee accordingly) to each Stockholder at its address as shown
on the books of Newco. CLC shall cause Newco to provide or cause to be
provided to the Trustee for this purpose, on a timely basis and without
charge or other expense:
(a) current lists of the Stockholders; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this voting trust agreement.
The materials referred to above are to be provided by CLC to the
Trustee, but shall be subject to review and comment by the Trustee.
3.11 Termination of Voting Rights. All the rights of a Stockholder with
respect to the Stockholder Votes exercisable in respect of the Dividend
Access Shares held by such Stockholder, including the right to instruct the
Trustee as to the voting of or to vote personally such Stockholder Votes,
shall be surrendered by the Stockholder to CLC and such Stockholder Votes and
the Voting Rights represented thereby shall cease immediately upon the
delivery by such Stockholder to Newco or CLC of the certificates representing
such Dividend Access Shares in connection with the exercise by the
Stockholder of the Right of Retraction, the Put Right or any other right of
exchange provided in the Dividend Access Share Provisions or the exercise by
CLC of the Liquidation Call Right, the Redemption Call Right or the
Retraction Call Right (unless in any case Newco or CLC shall not have
delivered the requisite shares of CLC Common Stock and cheque, if any,
deliverable in exchange therefor to the Transfer Agent, if any, or the
Stockholders, as the case may be).
3.12 Distributions and Release of Trust Property. The Trustee shall
hold all Trust Property and shall at the request of the CLC release and
deliver all or any part of the Trust Property to CLC provided that the
Trustee shall refuse to release and deliver to CLC such Trust Property if, as
a result of such release and delivery, the Trustee would no longer hold
sufficient Voting Shares to permit the Trustee to exercise Voting Rights on
behalf of all Stockholders. CLC may direct that any Trust Property released
be returned to CLC or delivered to a third party.
3.13 Safekeeping of Certificate. The certificate representing the
Voting Shares shall at all times be held in safe keeping by the Trustee or
its agent.
3.14 Substitution of Trust Property. CLC shall have the right at any
time to deliver to the Trustee additional CLC Common Stock or any other class
of shares of CLC in substitution for the Voting Shares provided that the
Trustee at all times holds sufficient Voting Shares to permit the Trustee to
exercise Voting Rights on behalf of all Stockholders. Upon receipt and
delivery to CLC by the Trustee of any shares delivered by CLC in substitution
for Voting Shares, the Trustee shall deliver to CLC the appropriate
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number of Voting Shares.
3.15 Number of Votes. Each of the Stockholders shall, at all times,
have a sufficient number of Voting Rights equal to the number of Dividend
Access Shares held by each such Stockholder.
Article 4
Concerning the Trustee
4.1 Powers and Duties of the Trustee. The rights, powers and
authorities of the Trustee under this voting trust agreement, in its capacity
as Trustee of the Trust, shall be limited to:
(a) receipt and deposit of the Voting Shares from CLC as Trustee for
and on behalf of the Stockholders in accordance with the provisions of
this voting trust agreement;
(b) granting proxies and distributing materials to Stockholders as
provided in this voting trust agreement;
(c) voting the Stockholder Votes on behalf of the Stockholders in
accordance with the provisions of this voting trust agreement;
(d) holding record title to the Voting Shares;
(e) endorsing and remitting the certificate representing a Voting
Shares upon redemption thereof in accordance with their provisions;
(f) taking action at the direction of a Stockholder or CLC, as the
case may be, to enforce the obligations of CLC or a Stockholder, as
the case may be, under this voting trust agreement; and
(g) taking such other actions and doing such other things as are
specifically provided in this voting trust agreement.
In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers and
authorities not in conflict with any of the provisions of this voting trust
agreement as the Trustee, acting in good faith and in the reasonable exercise
of its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons. For greater certainty, the Trustee shall have only those duties as
are set out specifically in this voting trust agreement. The Trustee in
exercising its rights, powers, duties and authorities hereunder shall act
honestly and in good faith with a
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view to the best interests of the Stockholders or of CLC, as the case may be,
and shall exercise the care, diligence and skill that a reasonably prudent
Trustee would exercise in comparable circumstances. The Trustee shall not be
bound to give any notice or do or take any act, action or proceeding by
virtue of the powers conferred on it hereby unless and until it shall be
specifically required to do so under the terms hereof; nor shall the Trustee
be required to take any notice of, or to do or to take any act, action or
proceeding as a result of any default or breach of any provision hereunder,
unless and until notified in writing of such default or breach, which notice
shall distinctly specify the default or breach desired to be brought to the
attention of the Trustee and in the absence of such notice the Trustee may
for all purposes of this voting trust agreement conclusively assume that no
default or breach has been made in the observance or performance of any of
the representations, warranties, covenants, agreements or conditions
contained herein.
4.2 No Conflicts of Interest. The Trustee represents to CLC and the
Stockholders that at the date of execution and delivery of this voting trust
agreement, there exists no conflict of interest in the role of the Trustee as
a fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within 90 days after it becomes aware that such a conflict of
interest exists, either eliminate such conflict of interest or resign in the
manner and with the effect specified in Article 7 hereof. If,
notwithstanding the foregoing provisions of this section 0, the Trustee has
such a conflict of interest, the validity and enforceability of this voting
trust agreement shall not be affected in any manner whatsoever by reason only
of the existence of such conflict of interest. If the Trustee contravenes
the foregoing provisions of this section 0, any interested party may apply to
a court in a jurisdiction in which the Trustee has an office for an order
that the Trustee be replaced as Trustee hereunder. For greater certainty, it
is hereby provided that the Trustee shall not be in conflict of interest by
reason only of acting for and on behalf of both the Stockholders and CLC
pursuant to this voting trust agreement.
4.3 Dealings with Transfer Agents, Registrars, etc. The Stockholders
and CLC irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent registrar
or transfer agent, of the Dividend Access Shares and CLC Common Stock;
and
(b) requisition, from time to time, from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this voting trust
agreement.
4.4 Indemnification Prior to the Certain Actions by Trustee. The
Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this voting trust agreement as Trustee for and on
behalf of the Stockholders at the request,
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order or direction of any Stockholder upon such Stockholder furnishing to the
Trustee reasonable funding, security and indemnity against the costs,
expenses and liabilities that may be incurred by the Trustee therein or
thereby, provided that no Stockholder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the
exercise by the Trustee of any of its rights, duties, powers and authorities
with respect to the Voting Shares pursuant to Article 3 hereof, subject to
the provisions of section 0 hereof. None of the provisions contained in this
voting trust agreement shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the exercise of any of its
rights, powers, duties or authorities unless given funds, furnished security
and indemnified as aforesaid.
4.5 Actions by Stockholders. No Stockholder shall have the right to
institute any action, suit or proceeding or to exercise any other remedy
authorized by this voting trust agreement for the purpose of enforcing any of
its rights or for the execution of any trust or power hereunder unless the
Stockholder has requested the Trustee to take or institute such action, suit
or proceeding and furnished the Trustee with the funding, security and
indemnity referred to in section 0 hereof and the Trustee shall have failed
to act within a reasonable time thereafter. In such case, but not otherwise,
a Stockholder shall be entitled to take proceedings in any court of competent
jurisdiction such as the Trustee might have taken; it being understood and
intended that no one or more Stockholders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby created by any
such action, or to enforce any right hereunder or under the Voting Rights
except subject to the conditions and in the manner herein provided, and that
all powers and trusts hereunder shall be exercised and all proceedings at law
shall be instituted, had and maintained by the Trustee, except only as herein
provided, and in any event for the equal benefit of all Stockholders.
4.6 Reliance upon Declarations. The Trustee shall not be considered to
be in contravention of any of its rights, powers, duties and authorities
hereunder if, when required, it acts and relies in good faith upon lists,
mailing labels, notices, statutory declarations, certificates, opinions,
reports or other papers or documents furnished pursuant to the provisions
hereof or required by the Trustee to be furnished to it in the exercise of
its rights, powers, duties and authorities hereunder and such lists, mailing
labels, notices, statutory declarations, certificates, opinions, reports or
other papers or documents comply with the provisions of section 0 hereof, if
applicable, and with any other applicable provisions of this voting trust
agreement. The Trustee shall not be responsible in any manner whatever for
the sufficiency, correctness, genuineness or validity of any such aforesaid
documents or declarations relied upon or for the form or execution of such
instrument, or for the identity or authority or right of any person or party
executing same.
4.7 Evidence and Authority to Trustee. CLC shall furnish to the
Trustee evidence of compliance with the conditions provided for in this
voting trust agreement relating to any action or step required or permitted
to be taken by Newco and/or CLC or the Trustee under this voting trust
agreement or as a result of any obligation imposed
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under this trust agreement, including, without limitation, in respect of the
Voting Rights, the voting redemption of the Voting Shares and the taking of
any other action to be taken by the Trustee at the request of or on the
application of the Stockholders and/or CLC forthwith if and when:
(a) such evidence is required by any other section of this voting
trust agreement to be furnished to the Trustee in accordance with the
terms of this section 0; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this voting trust agreement, gives the Stockholders
and/or CLC written notice requiring it to furnish such evidence in
relation to any particular action or obligation specified in such
notice.
In the case of CLC, such evidence shall consist of an Officer's
Certificate of CLC or a statutory declaration or a certificate made by
persons entitled to sign an Officer's Certificate stating that any such
condition has been complied with in accordance with the terms of this voting
trust agreement.
4.8 Experts, Advisers and Agents. The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert,
whether retained by the Trustee or by Newco and/or CLC or otherwise,
and may employ such assistants as may be necessary to the proper
determination and discharge of its powers and duties and determination
of its rights hereunder and may pay proper and reasonable compensation
for all such legal and other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its powers and
duties hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable
remuneration for all services performed by it) in the discharge of the
trusts hereof and compensation for all disbursements, costs and
expenses made or incurred by it in the determination and discharge of
its duties hereunder and in the management of the Trust.
4.9 Investment of Money Held by Trustee. Unless otherwise provided in
this voting trust agreement, any money held by or on behalf of the Trustee
which under the terms of this voting trust agreement may or ought to be
invested or which may be on deposit with the Trustee or which may be in the
hands of the Trustee may be invested and reinvested in the name or under the
control of the Trustee in securities in which, under the laws of the Province
of Ontario, trustees are authorized to invest trust money,
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provided that such securities are stated to mature within two years after
their purchase by the Trustee. Pending the investment of any money as herein
before provided, such money may be deposited in the name of the Trustee in
any chartered bank in Canada or in the deposit department of the Trustee or
any other loan or trust company authorized to accept deposits under the laws
of Canada or any province thereof at the rate of interest then current on
similar deposits.
4.10 Trustee Not Required to Give Security. The Trustee shall not be
required to give any bond or security in respect of the execution of the
trusts, rights, duties, powers and authorities of this voting trust agreement
or otherwise in respect of these premises.
4.11 Trustee Not Bound to Act on Request. Except, as in this voting
trust agreement otherwise specifically provided, the Trustee shall not be
bound to act in accordance with any direction or request of CLC or of the
directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to
the Trustee, and the Trustee shall be empowered to act and rely upon any such
copy purporting to be authenticated and believed by the Trustee to be genuine.
4.12 Authority to Carry on Business. The Trustee represents to the
Stockholders and CLC that at the date of execution and delivery by it of this
voting trust agreement it is authorized to carry on the business of a trust
company in the Province of Ontario but if, notwithstanding the provisions of
this section 0, it ceases to be so authorized to carry on business, the
validity and enforceability of this voting trust agreement and the Voting
Rights and the other rights granted in or resulting from the Trustee being a
party to this voting trust agreement shall not be affected in any manner
whatsoever by reason only of such event but the Trustee shall, within 90 days
after ceasing to be authorized to carry on the business of a trust company in
the Province of Ontario, either become so authorized or resign in the manner
and with the effect specified in Article 7 hereof.
4.13 Conflicting Claims. If conflicting claims or demands are made or
asserted with respect to any interest of any Stockholder in any Dividend
Access Shares, including any disagreement between the heirs, representatives,
successors or assigns succeeding to all or any part of the interest of any
Stockholder in any Dividend Access Shares resulting in conflicting claims or
demands being made in connection with such interest, then the Trustee shall
be entitled, at its sole discretion, to refuse to recognize or to comply with
any such claim or demand. In so refusing, the Trustee may elect not to
exercise any Voting Rights or other rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with
any such conflicting claims or demands. The Trustee shall be entitled to
continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights or other rights subject to such conflicting claims or demands
have been
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adjudicated by a final judgment of a court of competent jurisdiction;
or
(b) all differences with respect to the Voting Rights or other rights
subject to such conflicting claims or demands have been conclusively
settled by a valid written agreement binding on all such adverse
claimants, and the Trustee shall have been furnished with an executed
copy of such agreement.
If the Trustee elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its discretion require
such claimant to furnish such surety bond or other security satisfactory to
the Trustee as it shall deem appropriate fully to indemnify it as between all
conflicting claims or demands.
4.14 Acceptance of Trust. The Trustee hereby accepts the Trust created
and provided for by and in this voting trust agreement and agrees to perform
the same upon the terms and conditions herein set forth and to hold all
rights, privileges and benefits conferred hereby and by law in trust for CLC
and the various persons who shall from time to time be Stockholders, subject
to all the terms and conditions herein set forth.
Article 5
Compensation
5.1 Fees and Expenses of the Trustee. The Stockholders agree to pay to
the Trustee for all of the services rendered by it under this voting trust
agreement the compensation set forth in Schedule 5.1 annexed hereto and will
reimburse the Trustee for all reasonable expenses (including but not limited
to taxes, compensation paid to experts, agents and advisors and travel
expenses) and disbursements, including the cost and expense of any suit or
litigation of any character and any proceedings before any governmental
agency reasonably incurred by the Trustee in connection with its rights and
duties under this voting trust agreement; provided that the Stockholders
shall have no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or
with negligence or willful misconduct.
Article 6
Indemnification and Limitation of Liability
6.1 Indemnification of the Trustee. The Stockholders, on a solidary
basis, agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this voting trust agreement (collectively, the "Indemnified Parties")
against all claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal counsel)
which, without fraud, negligence, willful misconduct or bad faith
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on the part of such Indemnified Party, may be paid, incurred or suffered by
the Indemnified Party by reason of or as a result of the Trustee's acceptance
or administration of the Trust, its compliance with its duties set forth in
this voting trust agreement, or any written or oral instructions delivered to
the Trustee by CLC or a Stockholder pursuant hereto. In no case shall the
Stockholders be liable under this indemnity for any claim against any of the
Indemnified Parties if such claim is incurred or suffered by reason of or as
a result of the fraud, negligence, willful misconduct or bad faith of an
Indemnified Party and unless the Stockholders shall be notified by the
Trustee of the written assertion of a claim or of any action commenced
against the Indemnified Parties, promptly after any of the Indemnified
Parties shall have received any such written assertion of a claim or shall
have been served with a summon or other first legal process giving
information as to the nature and basis of the claim. Subject to (ii) below,
the Stockholders shall be entitled to participate at their own expense in the
defense and, if the Stockholders so elect at any time after receipt of such
notice, any of them may assume the defense of any suit brought to enforce any
such claim. The Trustee shall have the right to employ separate counsel in
any such suit and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of the Trustee unless: (i)
the employment of such counsel has been authorized by the Stockholders, such
authorization not to be unreasonably withheld; or (ii) the named parties to
any such suit include both the Trustee and the Stockholders and the Trustee
shall have been advised by counsel acceptable to the Stockholders and that
there may be one or more legal defences available to the Trustee that are
different from or in addition to those available to the Stockholders and that
an actual or potential conflict of interests exists (in which case the
Stockholders shall not have the right to assume the defense of such suit on
behalf of the Trustee but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee). Such indemnification shall survive the
resignation or removal of the Trustee and the termination of this voting
trust agreement.
6.2 Limitation of Liability. The Trustee shall not be held liable for
any loss incurred on any investment of funds pursuant to this voting trust
agreement, except to the extent that such loss is attributable to fraud,
negligence, willful misconduct or bad faith on the part of the Trustee.
Article 7
Change of Trustee
7.1 Resignation. The Trustee, or any Trustee hereafter appointed, may
at any time resign by giving written notice of such resignation to CLC and
the Stockholders specifying the date on which it desires to resign, provided
that such notice shall never be given less than 60 days before such desired
resignation date unless CLC otherwise agrees and provided further that such
resignation shall not take effect until the date of the appointment of a
successor Trustee and the acceptance of such appointment by the successor
Trustee. Upon receiving such notice of resignation, CLC and the Stockholders
shall promptly jointly appoint a successor Trustee by written instrument in
duplicate, one
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copy of which shall be delivered to the resigning Trustee and one copy to the
successor Trustee. Failing agreement by CLC and the Stockholders as to the
choice of a successor Trustee within ten days of the resignation of the
Trustee, or failing acceptance by a successor Trustee, a successor Trustee
may be appointed by an order of a court in any jurisdiction in which the
Trustee has offices upon application of one or more of the parties hereto.
7.2 Removal. The Trustee, or any Trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by
written instrument executed by CLC and the Stockholders, in duplicate, one
copy of which shall be delivered to the Trustee so removed and one copy to
the successor Trustee. Any successor Trustee shall be appointed in
accordance with the terms of Section 0.
7.3 Successor Trustee. Any successor Trustee appointed as provided
under this voting trust agreement shall execute, acknowledge and deliver to
CLC and to its predecessor Trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this voting trust agreement, with like
effect as if originally named as Trustee in this voting trust agreement.
However, on the written request of CLC or of the successor Trustee, the
Trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of this voting trust agreement, execute and
deliver an instrument transferring to such successor Trustee all the rights
and powers of the Trustee so ceasing to act. Upon the request of any such
successor Trustee, CLC and such predecessor Trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming
to such successor Trustee all such rights and powers.
7.4 Notice of Successor Trustee. Upon acceptance of appointment by a
successor Trustee as provided herein, CLC shall cause to be mailed notice of
the succession of such Trustee hereunder to each Stockholder specified in a
List. If CLC shall fail to cause such notice to be mailed within 10 days
after acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of CLC.
Article 8
Amendments and Supplemental Voting Trust Agreements
8.1 Amendments, Modifications, etc. This voting trust agreement may
not be amended or modified except by an agreement in writing executed by CLC,
the Trustee and the Stockholders.
8.2 Ministerial Amendments. Notwithstanding the provisions of section
0.1 hereof, CLC and the Trustee may in writing, at any time and from time to
time, without the
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approval of the Stockholders, amend or modify this voting trust agreement for
the purposes of:
(a) adding to the covenants of any or all of the parties hereto for
the protection of the Stockholders hereunder;
(b) making such amendments or modifications not inconsistent with
this voting trust agreement as may be necessary or desirable with
respect to matters or questions which, in the opinion of the CLC Board
of Directors and in the opinion of the Trustee and its counsel, having
in mind the best interests of the Stockholders as a whole, it may be
expedient to make, provided that the CLC Board of Directors and the
Trustee and its counsel shall be of the opinion that such amendments
and modifications will not be prejudicial to the interests of the
Stockholders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to CLC and the Trustee, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
Trustee and its counsel and the CLC Board of Directors shall be of the
opinion that such changes or corrections will not be prejudicial to
the interests of the Stockholders as a whole.
8.3 Changes in Capital of CLC and Newco. At all times after the
occurrence of any event, as a result of which either CLC Common Stock or the
Dividend Access Shares or both are in any way changed, this voting trust
agreement shall forthwith be amended and modified as necessary in order that
it shall apply with full force and effect, mutatis mutandis, to all new
securities into which CLC Common Stock or the Dividend Access Shares or both
are so changed and the parties hereto shall execute and deliver a
supplemental voting trust agreement giving effect to and evidencing such
necessary amendments and modifications.
8.4 Execution of Supplemental Voting Trust Agreements. No amendment to
or modification or waiver of any of the provisions of this voting trust
agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time CLC (when
authorized by a resolution of the CLC Board of Directors) and the Trustee
may, subject to the provisions of these presents, and they shall, when so
directed by these presents, execute and deliver by their proper officers,
voting trust agreements or other instruments supplemental hereto, which
thereafter shall form part hereof, for any one or more of the following
purposes:
(a) evidencing the succession of any successor Trustee in accordance
with the provisions of Article 7;
(b) making any additions to, deletions from or alterations of the
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provisions of this voting trust agreement or the Voting Rights which,
in the opinion of the Trustee and its counsel, will not be prejudicial
to the interests of the Stockholders as a whole or are in the opinion
of counsel to the Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions of
which apply to CLC, Newco, the Trustee or this voting trust agreement;
and
(c) for any other purposes not inconsistent with the provisions of
this voting trust agreement, including without limitation to make or
evidence any amendment or modification to this voting trust agreement
as contemplated hereby, provided that, in the opinion of the Trustee
and its counsel, the rights of the Trustee and the Stockholders as a
whole will not be prejudiced thereby.
Article 9
Termination
9.1 Term. The Trust created by this voting trust agreement shall
continue until the earliest to occur of the following events:
(a) no outstanding Dividend Access Shares are held by any
Stockholder; and
(b) CLC elects in writing to terminate the Trust and such termination
is approved in writing by all of the Stockholders.
9.2 Survival. It is agreed that the provisions of Articles 5 and 6
hereof shall survive any such termination of this voting trust agreement.
Article 10
Miscellaneous
10.1 Legended Share Certificates. CLC will cause Newco to cause each
certificate representing Dividend Access Shares to bear an appropriate legend
notifying the Stockholders of their right to instruct the Trustee with
respect to the exercise of the Voting Rights with respect to the Dividend
Access Shares held by a Stockholder.
10.2 Severability. If any provision of this voting trust agreement is
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this voting trust agreement shall not in
any way be affected or impaired thereby and this voting trust agreement shall
be carried out as nearly as possible in accordance with its original terms
and conditions.
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10.3 Enurement. This voting trust agreement shall be binding upon and
enure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.4 Notices to Parties. All notices and other communications between
the parties hereunder shall be in writing and shall be deemed to have been
given if delivered personally or by confirmed telecopy to the parties at the
following addresses (or at such other address for such party as shall be
specified in like notice);
(a) if to CLC or Newco at:
11350 Random Hills Road
Suite 240
Fairfax, Virginia
22030
Attention: Mr. Charles Cosgrove
Telecopier: (703) 359-8225
(b) if to the Trustee at:
with a copy to:
Goodman Phillips & Vineberg
1501 McGill College Avenue
26th Floor
Montreal, Quebec
H3A 3N9
Attention: Mtre. Hillel W. Rosen
Telecopier: (514) 841-6499
Any notice or other communication given personally shall be deemed
to have been given and received upon delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of
receipt thereof unless such day is not a Business Day in which case it shall
be deemed to have been given and received upon the immediately following
Business Day.
10.5 Notice of Stockholders. Any and all notices to be given and any
documents to be sent to any Stockholders may be given or sent to the address
of such holder shown on the register of holders of Dividend Access Shares in
any manner permitted by the Corporate Law from time to time in force in
respect of notices to
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shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such Act, the provisions of which Act shall
apply mutatis mutandis to notices or documents as aforesaid sent to such
holders.
10.6 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Stockholder by the Trustee or by CLC or by
such Stockholder to the Trustee or to CLC, the making of such payment or
sending of such document sent through the post shall be at the risk of CLC,
in the case of payments made or documents sent by the Trustee or CLC or the
Stockholder, in the case of payments made or documents sent by the
Stockholder.
10.7 Counterparts. This voting trust agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
10.8 Jurisdiction. This voting trust agreement shall be governed by,
construed and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.
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IN WITNESS WHEREOF, the parties hereto have caused this voting trust
agreement to be duly executed as of the date first above written.
COMPUTER LEARNING CENTERS, INC.
Per: /s/ Charles L. Cosgrove
Per: ___________________________
DELTA COLLEGE INC.
Per: /s/ Roger Matte
Per: ___________________________
/s/ Roger Matte
--------------------------------
ROGER MATTE
/s/ Richard Matte
----------------------------------
RICHARD MATTE
/s/ Marie-Josee Matte
----------------------------------
MARIE-JOSEE MATTE
/s/ Dominique Matte
----------------------------------
DOMINIQUE MATTE
/s/ Johanne Matte
----------------------------------
JOHANNE MATTE
/s/ Suzanne Matte
----------------------------------
SUZANNE MATTE
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DOLMEN (1994) INC.
Per: /s/ Roger Matte
------------------------------
Per: ______________________________
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VOTING TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 20th day of February, 1998.
BETWEEN: COMPUTER LEARNING CENTERS, INC., a corporation subsisting under
the laws of the State of Delaware (hereinafter referred to as
"CLC");
AND: ROGER MATTE, and RICHARD MATTE and MARIE-JOSE MATTE and
DOMINIQUE MATTE and JOHANNE MATTE and SUZANNE MATTE and DOLMEN
(1994) INC.;
(hereinafter referred to individually as "Stockholder" and
collectively as "Stockholders")
AND: MONTREAL TRUST COMPANY, a trust company existing under the laws
of Canada (the "Trustee").
WHEREAS CLC, through Computer Learning Centers of Quebec, Inc., a
wholly-owned subsidiary ("Newco"), has purchased from the Stockholders all the
issued and outstanding shares of Delta College Inc. by way of a Share Purchase
Agreement (as hereinafter defined);
WHEREAS Newco has issued, in consideration for said purchase, 519 780
non-voting shares in the capital of Newco (the "Dividend Access Shares") to the
Stockholders as set forth in Schedule A attached;
WHEREAS pursuant to an Agreement of Purchase and Sale executed on the
20th day of February, 1998 among Newco, Dolmen (1994) Inc. and Delta College
Inc., Dolmen (1994) Inc. received 28 628 Dividend Access Shares from Newco;
WHEREAS CLC, Newco, and the Stockholders agreed that on Closing (as
defined in the Share Purchase Agreement), CLC would issue 548,408 shares of its
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common stock (the "Voting Shares") to the Trustee to be held in trust by the
Trustee to provide to the Stockholders voting rights in CLC;
WHEREAS the parties desire to make appropriate provision for and to
establish a procedure whereby voting rights attached to the CLC Common Stock
shall be exercisable by the Trustee for and on behalf of the Stockholders and
whereby the CLC Common Stock may be redeemed by CLC;
AND WHEREAS these recitals and any statements of fact in this voting
trust agreement are made by CLC and the Stockholders and not by the Trustee;
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this voting trust agreement and for other good
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
Article 1
Definitions and Interpretation
1.1 Definitions. In this voting trust agreement, unless something in the
subject matter or content is inconsistent therewith:
"Board of Directors" means the board of directors of Newco.
"Business Day" means a day other than a Saturday, a Sunday or a day when
banks are not open for business in Virginia.
"CLC Board of Directors" means the board of directors of CLC.
"CLC Common Stock" means the shares of Common Stock of CLC, no par value,
having voting rights of one vote per share, and any other securities into which
such shares may be changed or for which such shares may be exchanged (whether or
not CLC shall be the issuer of such other securities) or any other consideration
which may be received by the holders of such shares, pursuant to a
recapitalization, reconstruction, reorganization or reclassification of, or
amalgamation, merger, liquidation or similar transaction, affecting such shares.
"CLC Meeting" has the meaning set out in section 0 hereof.
"CLC Vote" has the meaning set out in section 0 hereof;
"Corporate Law" means the Companies Act (Quebec), as amended.
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"Dividend Access Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Dividend Access Shares, the whole
as provided for in the Articles of Incorporation of Newco.
"Dividend Access Shares" has the meaning set out in the recitals hereto.
"Indemnified Parties" has the meaning ascribed thereto in section 0 hereof.
"Liquidation Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"List" has the meaning set out in section 0 hereof.
"Newco" means Computer Learning Centers of Quebec, Inc., a Quebec company.
"Officer's Certificate" means, with respect to CLC or Newco, as the case
may be, a certificate signed by any one of the Chairman of the Board, the
Vice-Chairman of the Board, the President or any Vice-President of CLC or Newco,
as the case may be.
"Put Right" has the meaning ascribed thereto in the Share Purchase
Agreement.
"Redemption Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Retraction Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Right of Retraction" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Share Purchase Agreement" means the Amended and Restated Share Purchase
Agreement bearing formal date February 20, 1998 among CLC, Newco, the
Stockholders and Delta College Inc.
"Stockholder Votes" has the meaning set out in section 0 hereof.
"Stockholders" means Roger Matte, Richard Matte, Marie-Josee Matte,
Dominique Matte, Johanne Matte, Suzanne Matte and Dolmen (1994) Inc. and their
respective successors and assigns.
"Transfer Agent" means any person as may from time to time be the registrar
and transfer agent for the Dividend Access Shares.
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"Trust" means the trust created by this voting trust agreement.
"Trust Property" means the Voting Shares, any other securities and any
money or other property which may be held by the Trustee from time to time
pursuant to this voting trust agreement.
"Trustee" means Montreal Trust Company and, subject to the provisions of
Article 7 hereof, includes any successor Trustee or permitted assigns.
"Voting Rights" means the voting rights attached to the Voting Shares.
1.2 Interpretation Not Affected by Headings, etc. The division of this
voting trust agreement into articles and sections and the insertion of headings
are for reference purposes only and shall not affect the interpretation of this
voting trust agreement. Unless otherwise indicated, any reference in this
voting trust agreement to an article or section refers to the specified article
or section of this voting trust agreement.
1.3 Number, Gender and Persons. In this voting trust agreement, unless
the context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, corporations, partnerships, companies,
associations, trusts, unincorporated organizations, governmental bodies and
other legal or business entities of any kind.
1.4 Date for Any Action. If any date on which any action is required to
be taken under this voting trust agreement is not a Business Day, such action
shall be required to be taken on the next succeeding Business Day.
1.5 Payments. All payments to be made hereunder will be made without
interest and less any tax required by law to be deducted and withheld.
Article 2
Trust
2.1 Establishment of Trust. The purpose of this voting trust agreement is
to create the Trust for the benefit of the Stockholders and CLC, as herein
provided. The Trustee will hold the Voting Shares in order to enable the
Trustee to exercise the Voting Rights and will hold the other rights granted in
or resulting from the Trustee being a party to this voting trust agreement in
order to enable the Trustee to exercise or enforce such rights, in each case as
trustee for and on behalf of the Stockholders or CLC, as the case may be, as
provided in this voting trust agreement.
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Article 3
Voting Shares
3.1 Issue and Ownership of the Voting Shares. Simultaneously with the
execution and delivery of this voting trust agreement, CLC will issue to and
deposit with the Trustee the Voting Shares (as evidenced by a copy of the share
certificate in respect of such shares attached hereto as Schedule 3.1) to be
hereafter held of record by the Trustee as trustee for and on behalf of, and for
the use and benefit of, the Stockholders, in accordance with the provisions of
this voting trust agreement. During the term of the Trust and subject to the
terms and conditions of this voting trust agreement, the Trustee shall possess
and be vested with full legal ownership of the Voting Shares and shall be
entitled to exercise all of the rights and powers of an owner with respect to
the Voting Shares, provided that the Trustee shall:
(a) hold the Voting Shares and the legal title thereto as Trustee
solely for the use and benefit of the Stockholders in accordance with
the provisions of this voting trust agreement; and
(b) except as specifically authorized by this voting trust agreement,
have no power or authority to sell, transfer, vote or otherwise deal
in or with the Voting Shares and the Voting Shares shall not be used
or disposed of by the Trustee for any purpose other than the purposes
for which the Trust is created pursuant to this voting trust
agreement.
3.2 Voting Rights. The Trustee, as the holder of record of the Voting
Shares, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Shares, on any matter,
question or proposition whatsoever that may come before the stockholders of CLC
at a CLC Meeting or upon a CLC Vote. The Voting Rights shall be and remain
vested in and exercised by the Trustee. Subject to section 0 hereof, the
Trustee shall exercise the Voting Rights only on the basis of instructions
received pursuant to this Article 0 from Stockholders entitled to instruct the
Trustee as to the voting thereof at the time at which the CLC Meeting is held or
the CLC Vote occurs. To the extent that no instructions are received from a
Stockholder with respect to the Voting Rights to which such Stockholder is
entitled, the Trustee shall not exercise or permit the exercise of the Voting
Rights relating to the Dividend Access Shares held by such Stockholder who did
not provide the Trustee with instructions as aforesaid.
3.3 Number of Votes. With respect to all meetings of stockholders of CLC
at which holders of shares of CLC Common Stock are entitled to vote (a "CLC
Meeting"), and with respect to any other circumstance in which the holders of
CLC Common Stock
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are entitled to vote (a "CLC Vote") each Stockholder shall be entitled to
instruct the Trustee to cast and exercise, in the manner instructed, one vote
for each Dividend Access Share owned of record by such Stockholder on the record
date established by CLC or by applicable law for such CLC Meeting, and/or such
CLC Vote as the case may be (the "Stockholder Votes") in respect of each matter,
question or proposition to be voted on at such CLC Meeting.
3.4 Mailings to Stockholders. With respect to each CLC Meeting, and/or
CLC Vote the Trustee will mail or cause to be mailed (or otherwise communicate
in the same manner that CLC utilizes in communications to holders of CLC Common
Stock, CLC agreeing to advise the Trustee in writing of such method and subject
to the Trustee's ability to provide this method of communication) to each of the
Stockholders named in the List on the same day as the initial mailing or notice
(or other communication) with respect thereto is received by the Trustee from
CLC:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of CLC;
(b) a statement that such Stockholder is entitled, subject to the
provisions of section 0 hereof, to instruct the Trustee as to the
exercise of the Stockholder Votes with respect to such CLC Meeting
and/or CLC Vote, or, pursuant and subject to section 0 hereof, to
attend such CLC Meeting and to exercise personally the Stockholder
Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Stockholder or its designee to exercise
personally such holder's Stockholder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of CLC to exercise such Stockholder Votes;
(d) a statement that if no such instructions are received from the
Stockholder, the Stockholder Votes to which such Stockholder is
entitled will not be exercised;
(e) a form of direction whereby the Stockholder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of (A) the time and date by which such instructions
must be received by the Trustee in order to be binding upon it, which
in the case
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of a CLC Meeting shall not be later than the close of business on the
second Business Day prior to such meeting, and (B) the method for
revoking or amending such instructions.
The materials referred to above are to be provided by CLC to the
Trustee. For the purpose of determining Stockholder Votes to which a
Stockholder is entitled in respect of any such CLC Meeting or CLC Vote, the
number of Dividend Access Shares owned of record by the Stockholder shall be
determined at the close of business on the record date established by CLC or by
applicable law for purposes of determining stockholders entitled to vote at such
CLC Meeting or CLC Vote. CLC will notify the Trustee in writing of any decision
of the CLC Board of Directors with respect to the calling of any such CLC
Meeting or CLC Vote and shall provide all necessary information and materials to
the Trustee in each case promptly and in any event in sufficient time to enable
the Trustee to perform its obligations contemplated by this section 0.
3.5 Copies of Stockholder Information. CLC will deliver to the Trustee
copies of all proxy materials (including notices of CLC Meetings but excluding
proxies to vote shares of CLC Common Stock), information statements, reports
(including without limitation all interim and annual financial statements) and
other written communications that are to be distributed from time to time to
holders of CLC Common Stock in sufficient quantities and in sufficient time so
as to enable the Trustee to send those materials to each Stockholder at the same
time as such materials are first sent to holders of CLC Common Stock. The
Trustee will mail or otherwise send to each Stockholder, at the expense of CLC,
copies of all such materials (and all materials specifically directed to the
Stockholders or to the Trustee for the benefit of the Stockholders by CLC)
received by the Trustee from CLC at the same time as such materials are first
sent to holders of CLC Common Stock. The Trustee will make copies of all such
materials available for inspection by any Stockholder at the Trustee's principal
office in the city of Montreal and Toronto.
3.6 Other Materials. Immediately after receipt by CLC or any stockholder
of CLC of any material sent or given generally to the holders of CLC Common
Stock by or on behalf of a third party, including without limitation, dissident
proxy and information circulars (and related information and materials) and
tender and exchange offer circulars (and related information and materials), CLC
shall use its best efforts to obtain and deliver to the Trustee copies thereof
in sufficient quantities so as to enable the Trustee to forward such materials
(unless the same has been provided directly to Stockholders by such third party)
to each Stockholder as soon as practicable thereafter. As soon as practicable
after receipt thereof, the Trustee will mail or otherwise send to each
Stockholder, at the expense of CLC, copies of all such materials received by the
Trustee from CLC. The Trustee will also make copies of all such materials
available for inspection by any Stockholder at the Trustee's principal office in
the city of Montreal and Toronto.
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3.7 List of Persons Entitled to Vote. CLC shall, (a) prior to each
annual, general and special CLC Meeting, (b) prior to each CLC Vote and
(c) forthwith upon each request made at any time by the Trustee or the
Stockholders in writing, cause Newco to prepare or cause to be prepared a list
(the "List") of the names and addresses of the Stockholders arranged in
alphabetical order and showing the number of Dividend Access Shares held of
record by each such Stockholder, in each case at the close of business on the
date specified by the Trustee or the Stockholders in such request or, in the
case of a List prepared in connection with a CLC Meeting or a CLC Vote, at the
close of business on the record date established by CLC or pursuant to
applicable law for determining the holders of CLC Common Stock entitled to
receive notice of and/or to vote at such CLC Meeting or in connection with such
CLC Vote. Each such List shall be delivered to the Trustee promptly after
receipt by Newco of such request or the record date for such meeting and, in any
event, within sufficient time as to enable the Trustee to perform its
obligations under this voting trust agreement. CLC agrees to give Newco written
notice (with a copy to the Trustee) of the calling of any CLC Meeting or the
holding of any CLC Vote, together with the record dates therefor, sufficiently
prior to the date of the calling of such meeting so as to enable Newco to comply
with CLC's requests under this section 0.
3.8 Entitlement to Direct Votes. Any Stockholder named in a List prepared
in connection with any CLC Meeting or CLC Vote will be entitled (a) to instruct
the Trustee in the manner described in section 0 hereof with respect to the
exercise of the Stockholder Votes to which such Stockholder is entitled or
(b) to attend (in the case of a CLC Meeting) such meeting personally and to
exercise thereat as the proxy of the Trustee, the Stockholder Votes to which
such Stockholder is entitled except, in each case, to the extent that such
Stockholder has transferred, upon exercise of exchange rights relating thereto,
the ownership of any Dividend Access Shares in respect of which such Stockholder
is entitled to Stockholder Votes after the close of business on the record date
for such meeting.
3.9 Voting by Trustee, and Attendance of Trustee Representative, at CLC
Meeting.
(a) In connection with each CLC Meeting, the Trustee shall exercise,
either in person or by proxy, in accordance with the instructions
received from a Stockholder pursuant to section 0 hereof, the
Stockholder Votes as to which such Stockholder is entitled to direct
the vote (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Stockholder prior to the time and
date fixed by it for receipt of such instructions in the notice given
by the Trustee to the Stockholder pursuant to section 0 hereof.
(b) The Trustee shall cause such representatives as are empowered by
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it to sign and deliver, on behalf of the Trustee, proxies for Voting
Rights enabling a Stockholder to attend each CLC Meeting. Upon
submission by a Stockholder (or its designee) of identification
satisfactory to the Trustee's representatives, and at the
Stockholder's request, such representatives shall sign and deliver to
such Stockholder (or its designee) a proxy to exercise personally the
Stockholder Votes as to which such Stockholder is otherwise entitled
hereunder to direct the vote, if such Stockholder either (i) has not
previously given the Trustee instructions pursuant to section 0 hereof
in respect of such meeting, or (ii) submits to the Trustee's
representatives written revocation of any such previous instructions.
At such meeting, the Stockholder exercising such Stockholder Votes
shall have the same rights as the Trustee to speak at the meeting in
respect of any matter, question or proposition, to vote by way of
ballot at the meeting in respect of any matter, question or
proposition and to vote at such meeting by way of a show of hands in
respect of any matter, question or proposition.
3.10 Distribution of Written Materials. Any written materials to be
distributed by the Trustee to the Stockholders pursuant to this voting trust
agreement shall be delivered or sent by mail (or otherwise communicated in the
same manner as CLC utilizes in communications to holders of CLC Common Stock and
CLC shall advise the Trustee accordingly) to each Stockholder at its address as
shown on the books of Newco. CLC shall cause Newco to provide or cause to be
provided to the Trustee for this purpose, on a timely basis and without charge
or other expense:
(a) current lists of the Stockholders; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this voting trust agreement.
The materials referred to above are to be provided by CLC to the
Trustee, but shall be subject to review and comment by the Trustee.
3.11 Termination of Voting Rights. All the rights of a Stockholder with
respect to the Stockholder Votes exercisable in respect of the Dividend Access
Shares held by such Stockholder, including the right to instruct the Trustee as
to the voting of or to vote personally such Stockholder Votes, shall be
surrendered by the Stockholder to CLC and such Stockholder Votes and the Voting
Rights represented thereby shall cease immediately upon the delivery by such
Stockholder to Newco or CLC of the certificates representing such Dividend
Access Shares in connection with the exercise by the Stockholder of the Right of
Retraction, the Put Right or any other right of exchange provided in the
Dividend Access Share Provisions or the exercise by CLC of the Liquidation Call
Right, the Redemption Call Right or the Retraction Call Right (unless in
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any case Newco or CLC shall not have delivered the requisite shares of CLC
Common Stock and cheque, if any, deliverable in exchange therefor to the
Transfer Agent, if any, or the Stockholders, as the case may be).
3.12 Distributions and Release of Trust Property. The Trustee shall hold
all Trust Property and shall at the request of the CLC release and deliver all
or any part of the Trust Property to CLC provided that the Trustee shall refuse
to release and deliver to CLC such Trust Property if, as a result of such
release and delivery, the Trustee would no longer hold sufficient Voting Shares
to permit the Trustee to exercise Voting Rights on behalf of all Stockholders.
CLC may direct that any Trust Property released be returned to CLC or delivered
to a third party.
3.13 Safekeeping of Certificate. The certificate representing the Voting
Shares shall at all times be held in safe keeping by the Trustee or its agent.
3.14 Substitution of Trust Property. CLC shall have the right at any time
to deliver to the Trustee additional CLC Common Stock or any other class of
shares of CLC in substitution for the Voting Shares provided that the Trustee at
all times holds sufficient Voting Shares to permit the Trustee to exercise
Voting Rights on behalf of all Stockholders. Upon receipt and delivery to CLC
by the Trustee of any shares delivered by CLC in substitution for Voting Shares,
the Trustee shall deliver to CLC the appropriate number of Voting Shares.
3.15 Number of Votes. Each of the Stockholders shall, at all times, have a
sufficient number of Voting Rights equal to the number of Dividend Access Shares
held by each such Stockholder.
Article 4
Concerning the Trustee
4.1 Powers and Duties of the Trustee. The rights, powers and authorities
of the Trustee under this voting trust agreement, in its capacity as Trustee of
the Trust, shall be limited to:
(a) receipt and deposit of the Voting Shares from CLC as Trustee for
and on behalf of the Stockholders in accordance with the provisions of
this voting trust agreement;
(b) granting proxies and distributing materials to Stockholders as
provided in this voting trust agreement;
(c) voting the Stockholder Votes on behalf of the Stockholders in
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accordance with the provisions of this voting trust agreement;
(d) holding record title to the Voting Shares;
(e) endorsing and remitting the certificate representing the Voting
Shares upon redemption thereof in accordance with their provisions;
(f) taking action at the direction of a Stockholder or CLC, as the
case may be, to enforce the obligations of CLC or a Stockholder, as
the case may be, under this voting trust agreement; and
(g) taking such other actions and doing such other things as are
specifically provided in this voting trust agreement.
In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers and
authorities not in conflict with any of the provisions of this voting trust
agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons. For greater certainty, the Trustee shall have only those duties as are
set out specifically in this voting trust agreement. The Trustee in exercising
its rights, powers, duties and authorities hereunder shall act honestly and in
good faith with a view to the best interests of the Stockholders or of CLC, as
the case may be, and shall exercise the care, diligence and skill that a
reasonably prudent Trustee would exercise in comparable circumstances. The
Trustee shall not be bound to give any notice or do or take any act, action or
proceeding by virtue of the powers conferred on it hereby unless and until it
shall be specifically required to do so under the terms hereof; nor shall the
Trustee be required to take any notice of, or to do or to take any act, action
or proceeding as a result of any default or breach of any provision hereunder,
unless and until notified in writing of such default or breach, which notice
shall distinctly specify the default or breach desired to be brought to the
attention of the Trustee and in the absence of such notice the Trustee may for
all purposes of this voting trust agreement conclusively assume that no default
or breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein.
4.2 No Conflicts of Interest. The Trustee represents to CLC and the
Stockholders that at the date of execution and delivery of this voting trust
agreement, there exists no conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within 90 days after it becomes aware that such a conflict of
interest exists, either eliminate such conflict of interest or resign in the
manner and with the effect specified in Article 7 hereof. If, notwithstanding
the foregoing provisions of this section 0, the Trustee has such a conflict
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of interest, the validity and enforceability of this voting trust agreement
shall not be affected in any manner whatsoever by reason only of the existence
of such conflict of interest. If the Trustee contravenes the foregoing
provisions of this section 0, any interested party may apply to a court in a
jurisdiction in which the Trustee has an office for an order that the Trustee be
replaced as Trustee hereunder. For greater certainty, it is hereby provided
that the Trustee shall not be in conflict of interest by reason only of acting
for and on behalf of both the Stockholders and CLC pursuant to this voting trust
agreement.
4.3 Dealings with Transfer Agents, Registrars, etc. The Stockholders and
CLC irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent registrar
or transfer agent, of the Dividend Access Shares and CLC Common Stock;
and
(b) requisition, from time to time, from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this voting trust
agreement.
4.4 Indemnification Prior to the Certain Actions by Trustee. The
Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this voting trust agreement as Trustee for and on
behalf of the Stockholders at the request, order or direction of any
Stockholder upon such Stockholder furnishing to the Trustee reasonable
funding, security and indemnity against the costs, expenses and liabilities
that may be incurred by the Trustee therein or thereby, provided that no
Stockholder shall be obligated to furnish to the Trustee any such funding,
security or indemnity in connection with the exercise by the Trustee of any
of its rights, duties, powers and authorities with respect to the Voting
Shares pursuant to Article 3 hereof, subject to the provisions of section 0
hereof. None of the provisions contained in this voting trust agreement
shall require the Trustee to expend or risk its own funds or otherwise incur
financial liability in the exercise of any of its rights, powers, duties or
authorities unless given funds, furnished security and indemnified as
aforesaid.
4.5 Actions by Stockholders. No Stockholder shall have the right to
institute any action, suit or proceeding or to exercise any other remedy
authorized by this voting trust agreement for the purpose of enforcing any of
its rights or for the execution of any trust or power hereunder unless the
Stockholder has requested the Trustee to take or institute such action, suit or
proceeding and furnished the Trustee with the funding, security and indemnity
referred to in section 0 hereof and the Trustee shall have failed to act within
a reasonable time thereafter. In such case, but not otherwise, a Stockholder
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shall be entitled to take proceedings in any court of competent jurisdiction
such as the Trustee might have taken; it being understood and intended that no
one or more Stockholders shall have any right in any manner whatsoever to
affect, disturb or prejudice the rights hereby created by any such action, or to
enforce any right hereunder or under the Voting Rights except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Stockholders.
4.6 Reliance upon Declarations. The Trustee shall not be considered to be
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good faith upon lists, mailing labels,
notices, statutory declarations, certificates, opinions, reports or other papers
or documents furnished pursuant to the provisions hereof or required by the
Trustee to be furnished to it in the exercise of its rights, powers, duties and
authorities hereunder and such lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
comply with the provisions of section 0 hereof, if applicable, and with any
other applicable provisions of this voting trust agreement. The Trustee shall
not be responsible in any manner whatever for the sufficiency, correctness,
genuineness or validity of any such aforesaid documents or declarations relied
upon or for the form or execution of such instrument, or for the identity or
authority or right of any person or party executing same.
4.7 Evidence and Authority to Trustee. CLC shall furnish to the Trustee
evidence of compliance with the conditions provided for in this voting trust
agreement relating to any action or step required or permitted to be taken by
Newco and/or CLC or the Trustee under this voting trust agreement or as a result
of any obligation imposed under this trust agreement, including, without
limitation, in respect of the Voting Rights, the voting redemption of the Voting
Shares and the taking of any other action to be taken by the Trustee at the
request of or on the application of the Stockholders and/or CLC forthwith if and
when:
(a) such evidence is required by any other section of this voting
trust agreement to be furnished to the Trustee in accordance with the
terms of this section 0; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this voting trust agreement, gives the Stockholders
and/or CLC written notice requiring it to furnish such evidence in
relation to any particular action or obligation specified in such
notice.
In the case of CLC, such evidence shall consist of an Officer's
Certificate of CLC or a statutory declaration or a certificate made by persons
entitled to sign an
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Officer's Certificate stating that any such condition has been complied with in
accordance with the terms of this voting trust agreement.
4.8 Experts, Advisers and Agents. The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert,
whether retained by the Trustee or by Newco and/or CLC or otherwise,
and may employ such assistants as may be necessary to the proper
determination and discharge of its powers and duties and determination
of its rights hereunder and may pay proper and reasonable compensation
for all such legal and other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper determination and discharge of its powers and
duties hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable
remuneration for all services performed by it) in the discharge of the
trusts hereof and compensation for all disbursements, costs and
expenses made or incurred by it in the determination and discharge of
its duties hereunder and in the management of the Trust.
4.9 Investment of Money Held by Trustee. Unless otherwise provided in
this voting trust agreement, any money held by or on behalf of the Trustee which
under the terms of this voting trust agreement may or ought to be invested or
which may be on deposit with the Trustee or which may be in the hands of the
Trustee may be invested and reinvested in the name or under the control of the
Trustee in securities in which, under the laws of the Province of Ontario,
trustees are authorized to invest trust money, provided that such securities are
stated to mature within two years after their purchase by the Trustee. Pending
the investment of any money as herein before provided, such money may be
deposited in the name of the Trustee in any chartered bank in Canada or in the
deposit department of the Trustee or any other loan or trust company authorized
to accept deposits under the laws of Canada or any province thereof at the rate
of interest then current on similar deposits.
4.10 Trustee Not Required to Give Security. The Trustee shall not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this voting trust agreement or
otherwise in respect of these premises.
4.11 Trustee Not Bound to Act on Request. Except, as in this voting trust
agreement otherwise specifically provided, the Trustee shall not be bound to act
in accordance with any direction or request of CLC or of the directors thereof
until a duly
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authenticated copy of the instrument or resolution containing such direction or
request shall have been delivered to the Trustee, and the Trustee shall be
empowered to act and rely upon any such copy purporting to be authenticated and
believed by the Trustee to be genuine.
4.12 Authority to Carry on Business. The Trustee represents to the
Stockholders and CLC that at the date of execution and delivery by it of this
voting trust agreement it is authorized to carry on the business of a trust
company in the Province of Ontario but if, notwithstanding the provisions of
this section 0, it ceases to be so authorized to carry on business, the validity
and enforceability of this voting trust agreement and the Voting Rights and the
other rights granted in or resulting from the Trustee being a party to this
voting trust agreement shall not be affected in any manner whatsoever by reason
only of such event but the Trustee shall, within 90 days after ceasing to be
authorized to carry on the business of a trust company in the Province of
Ontario, either become so authorized or resign in the manner and with the effect
specified in Article 7 hereof.
4.13 Conflicting Claims. If conflicting claims or demands are made or
asserted with respect to any interest of any Stockholder in any Dividend Access
Shares, including any disagreement between the heirs, representatives,
successors or assigns succeeding to all or any part of the interest of any
Stockholder in any Dividend Access Shares resulting in conflicting claims or
demands being made in connection with such interest, then the Trustee shall be
entitled, at its sole discretion, to refuse to recognize or to comply with any
such claim or demand. In so refusing, the Trustee may elect not to exercise any
Voting Rights or other rights subject to such conflicting claims or demands and,
in so doing, the Trustee shall not be or become liable to any person on account
of such election or its failure or refusal to comply with any such conflicting
claims or demands. The Trustee shall be entitled to continue to refrain from
acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights or other rights subject to such conflicting claims or demands
have been adjudicated by a final judgment of a court of competent
jurisdiction; or
(b) all differences with respect to the Voting Rights or other rights
subject to such conflicting claims or demands have been conclusively
settled by a valid written agreement binding on all such adverse
claimants, and the Trustee shall have been furnished with an executed
copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate fully to indemnify it as between all
conflicting claims or demands.
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4.14 Acceptance of Trust. The Trustee hereby accepts the Trust created and
provided for by and in this voting trust agreement and agrees to perform the
same upon the terms and conditions herein set forth and to hold all rights,
privileges and benefits conferred hereby and by law in trust for CLC and the
various persons who shall from time to time be Stockholders, subject to all the
terms and conditions herein set forth.
Article 5
Compensation
5.1 Fees and Expenses of the Trustee. The Stockholders agree to pay to
the Trustee for all of the services rendered by it under this voting trust
agreement the compensation set forth in Schedule 5.1 annexed hereto and will
reimburse the Trustee for all reasonable expenses (including but not limited to
taxes, compensation paid to experts, agents and advisors and travel expenses)
and disbursements, including the cost and expense of any suit or litigation of
any character and any proceedings before any governmental agency reasonably
incurred by the Trustee in connection with its rights and duties under this
voting trust agreement; provided that the Stockholders shall have no obligation
to reimburse the Trustee for any expenses or disbursements paid, incurred or
suffered by the Trustee in any suit or litigation in which the Trustee is
determined to have acted in bad faith or with negligence or willful misconduct.
Article 6
Indemnification and Limitation of Liability
6.1 Indemnification of the Trustee. The Stockholders, on a joint and
several basis, agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this voting trust agreement (collectively, the "Indemnified Parties")
against all claims, losses, damages, costs, penalties, fines and reasonable
expenses (including reasonable expenses of the Trustee's legal counsel) which,
without fraud, negligence, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by
reason of or as a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this voting trust agreement,
or any written or oral instructions delivered to the Trustee by CLC or a
Stockholder pursuant hereto. In no case shall the Stockholders be liable under
this indemnity for any claim against any of the Indemnified Parties if such
claim is incurred or suffered by reason of or as a result of the fraud,
negligence, willful misconduct or bad faith of an Indemnified Party and unless
the Stockholders shall be notified by the Trustee of the written
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assertion of a claim or of any action commenced against the Indemnified Parties,
promptly after any of the Indemnified Parties shall have received any such
written assertion of a claim or shall have been served with a summon or other
first legal process giving information as to the nature and basis of the claim.
Subject to (ii) below, the Stockholders shall be entitled to participate at
their own expense in the defense and, if the Stockholders so elect at any time
after receipt of such notice, any of them may assume the defense of any suit
brought to enforce any such claim. The Trustee shall have the right to employ
separate counsel in any such suit and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of the Trustee unless:
(i) the employment of such counsel has been authorized by the Stockholders, such
authorization not to be unreasonably withheld; or (ii) the named parties to any
such suit include both the Trustee and the Stockholders and the Trustee shall
have been advised by counsel acceptable to the Stockholders and that there may
be one or more legal defences available to the Trustee that are different from
or in addition to those available to the Stockholders and that an actual or
potential conflict of interests exists (in which case the Stockholders shall not
have the right to assume the defense of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of counsel for the
Trustee). Such indemnification shall survive the resignation or removal of the
Trustee and the termination of this voting trust agreement.
6.2 Limitation of Liability. The Trustee shall not be held liable for any
loss incurred on any investment of funds pursuant to this voting trust
agreement, except to the extent that such loss is attributable to fraud,
negligence, willful misconduct or bad faith on the part of the Trustee.
Article 7
Change of Trustee
7.1 Resignation. The Trustee, or any Trustee hereafter appointed, may at
any time resign by giving written notice of such resignation to CLC and the
Stockholders specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless CLC otherwise agrees and provided further that such
resignation shall not take effect until the date of the appointment of a
successor Trustee and the acceptance of such appointment by the successor
Trustee. Upon receiving such notice of resignation, CLC and the Stockholders
shall promptly jointly appoint a successor Trustee by written instrument in
duplicate, one copy of which shall be delivered to the resigning Trustee and one
copy to the successor Trustee. Failing agreement by CLC and the Stockholders as
to the choice of a successor Trustee within ten days of the resignation of the
Trustee, or failing acceptance by a successor Trustee, a successor Trustee may
be appointed by an order of a court in any jurisdiction in which the Trustee has
offices upon application of one or more of the parties hereto.
7.2 Removal. The Trustee, or any Trustee hereafter appointed, may be
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removed with or without cause, at any time on 60 days' prior notice by written
instrument executed by CLC and the Stockholders, in duplicate, one copy of which
shall be delivered to the Trustee so removed and one copy to the successor
Trustee. Any successor Trustee shall be appointed in accordance with the terms
of Section 0.
7.3 Successor Trustee. Any successor Trustee appointed as provided under
this voting trust agreement shall execute, acknowledge and deliver to CLC and to
its predecessor Trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor under this voting trust agreement, with like effect as if originally
named as Trustee in this voting trust agreement. However, on the written
request of CLC or of the successor Trustee, the Trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of this
voting trust agreement, execute and deliver an instrument transferring to such
successor Trustee all the rights and powers of the Trustee so ceasing to act.
Upon the request of any such successor Trustee, CLC and such predecessor Trustee
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor Trustee all such rights and powers.
7.4 Notice of Successor Trustee. Upon acceptance of appointment by a
successor Trustee as provided herein, CLC shall cause to be mailed notice of the
succession of such Trustee hereunder to each Stockholder specified in a List.
If CLC shall fail to cause such notice to be mailed within 10 days after
acceptance of appointment by the successor Trustee, the successor Trustee shall
cause such notice to be mailed at the expense of CLC.
Article 8
Amendments and Supplemental Voting Trust Agreements
8.1 Amendments, Modifications, etc. This voting trust agreement may not
be amended or modified except by an agreement in writing executed by CLC, the
Trustee and the Stockholders.
8.2 Ministerial Amendments. Notwithstanding the provisions of section 0.1
hereof, CLC and the Trustee may in writing, at any time and from time to time,
without the approval of the Stockholders, amend or modify this voting trust
agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto for
the protection of the Stockholders hereunder;
(b) making such amendments or modifications not inconsistent with
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this voting trust agreement as may be necessary or desirable with
respect to matters or questions which, in the opinion of the CLC Board
of Directors and in the opinion of the Trustee and its counsel, having
in mind the best interests of the Stockholders as a whole, it may be
expedient to make, provided that the CLC Board of Directors and the
Trustee and its counsel shall be of the opinion that such amendments
and modifications will not be prejudicial to the interests of the
Stockholders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to CLC and the Trustee, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
Trustee and its counsel and the CLC Board of Directors shall be of the
opinion that such changes or corrections will not be prejudicial to
the interests of the Stockholders as a whole.
8.3 Changes in Capital of CLC and Newco. At all times after the
occurrence of any event, as a result of which either CLC Common Stock or the
Dividend Access Shares or both are in any way changed, this voting trust
agreement shall forthwith be amended and modified as necessary in order that it
shall apply with full force and effect, mutatis mutandis, to all new securities
into which CLC Common Stock or the Dividend Access Shares or both are so changed
and the parties hereto shall execute and deliver a supplemental voting trust
agreement giving effect to and evidencing such necessary amendments and
modifications.
8.4 Execution of Supplemental Voting Trust Agreements. No amendment to or
modification or waiver of any of the provisions of this voting trust agreement
otherwise permitted hereunder shall be effective unless made in writing and
signed by all of the parties hereto. From time to time CLC (when authorized by
a resolution of the CLC Board of Directors) and the Trustee may, subject to the
provisions of these presents, and they shall, when so directed by these
presents, execute and deliver by their proper officers, voting trust agreements
or other instruments supplemental hereto, which thereafter shall form part
hereof, for any one or more of the following purposes:
(a) evidencing the succession of any successor Trustee in accordance
with the provisions of Article 7;
(b) making any additions to, deletions from or alterations of the
provisions of this voting trust agreement or the Voting Rights which,
in the opinion of the Trustee and its counsel, will not be prejudicial
to the interests of the Stockholders as a whole or are in the opinion
of counsel to the Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions of
which apply to CLC, Newco, the
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Trustee or this voting trust agreement; and
(c) for any other purposes not inconsistent with the provisions of
this voting trust agreement, including without limitation to make or
evidence any amendment or modification to this voting trust agreement
as contemplated hereby, provided that, in the opinion of the Trustee
and its counsel, the rights of the Trustee and the Stockholders as a
whole will not be prejudiced thereby.
Article 9
Termination
9.1 Term. The Trust created by this voting trust agreement shall continue
until the earliest to occur of the following events:
(a) no outstanding Dividend Access Shares are held by any
Stockholder; and
(b) CLC elects in writing to terminate the Trust and such termination
is approved in writing by all of the Stockholders.
9.2 Survival. It is agreed that the provisions of Articles 5 and 6 hereof
shall survive any such termination of this voting trust agreement.
Article 10
Miscellaneous
10.1 Legended Share Certificates. CLC will cause Newco to cause each
certificate representing Dividend Access Shares to bear an appropriate legend
notifying the Stockholders of their right to instruct the Trustee with respect
to the exercise of the Voting Rights with respect to the Dividend Access Shares
held by a Stockholder.
10.2 Severability. If any provision of this voting trust agreement is held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remainder of this voting trust agreement shall not in any
way be affected or impaired thereby and this voting trust agreement shall be
carried out as nearly as possible in accordance with its original terms and
conditions.
10.3 Enurement. This voting trust agreement shall be binding upon and
enure to the benefit of the parties hereto and their respective successors and
permitted assigns.
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10.4 Notices to Parties. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice);
(a) if to CLC or Newco at:
11350 Random Hills Road
Suite 240
Fairfax, Virginia
22030
Attention: Mr. Charles L. Cosgrove
Telecopier: (703) 359-8225
with a copy to:
Goodman Phillips & Vineberg
1501 McGill College Avenue
26th Floor
Montreal, Quebec
H3A 3N9
Attention: Mtre. Hillel W. Rosen
Telecopier: (514) 841-6499
(b) if to the Trustee at:
Montreal Trust Company
1800 McGill College Avenue
5th Floor
Montreal, Quebec
H3A 3K9
Attention: Manager, Corporate Trust Services
Telecopier: (514) 982-7677
Any notice or other communication given personally shall be deemed to
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have been given and received upon delivery thereof and if given by telecopy
shall be deemed to have been given and received on the date of receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
10.5 Notice of Stockholders. Any and all notices to be given and any
documents to be sent to any Stockholders shall be given in any manner permitted
by the Corporate Law from time to time in force in respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such Act, the provisions of which Act shall
apply mutatis mutandis to notices or documents as aforesaid sent to such
holders. Any and all notices to be given and any documents to be sent to any
Stockholders shall be sent to the following address:
c/o Mr. Roger Matte
6150 Du Boise Avenue
Apt. G10
Montreal, Quebec
H3S 2V2
10.6 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Stockholder by the Trustee or by CLC or by such
Stockholder to the Trustee or to CLC, the making of such payment or sending of
such document sent through the post shall be at the risk of CLC, in the case of
payments made or documents sent by the Trustee or CLC or the Stockholder, in the
case of payments made or documents sent by the Stockholder.
10.7 Counterparts. This voting trust agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
10.8 Jurisdiction. This voting trust agreement shall be governed by,
construed and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.
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IN WITNESS WHEREOF, the parties hereto have caused this voting trust
agreement to be duly executed as of the date first above written.
COMPUTER LEARNING CENTERS, INC.
---------------------
Per:
/s/ Roger Matte
-------------------------------
ROGER MATTE
/s/ Richard Matte
-------------------------------
RICHARD MATTE
/s/ Marie-Josee Matte
-------------------------------
MARIE-JOSEE MATTE
/s/ Dominique Matte
-------------------------------
DOMINIQUE MATTE
/s/ Johanne Matte
-------------------------------
JOHANNE MATTE
/s/ Suzanne Matte
-------------------------------
SUZANNE MATTE
-------------------------------
DOLMEN (1994) INC.
-----------------------
Per: /s/ Roger Matte
MONTREAL TRUST COMPANY
-----------------------
Per: /s/ Carole Ghanime
-----------------------
Per: /s/ Guy L'esperance
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SCHEDULE 3.1
Copy of share certificate
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SCHEDULE 5.1
Initial Fee: $2500 plus applicable taxes
Annual Fee: $3000 plus applicable taxes
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ANNEX II TO SHARE PURCHASE AGREEMENT
PROVISIONS ATTACHING TO DIVIDEND ACCESS SHARES
The Dividend Access Shares in the capital of the Corporation shall
have the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Acquisition of Control" for purposes of these share provisions shall be
deemed to have occurred if:
(i) Any person, firm or corporation acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of CLC and
immediately after such acquisition, the acquirer has Beneficial Ownership of
voting securities representing 50% or more of the total voting power of all
the then-outstanding voting securities of CLC;
(ii) The stockholders of CLC shall approve a merger, consolidation,
recapitalization or reorganization of CLC or consummation of any such
transaction if stockholder approval is not sought or obtained, other than any
such transaction which would result in at least 75% of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being Beneficially Owned by holders of
outstanding voting securities of CLC immediately prior to the transaction,
with the voting power of each such continuing holder relative to such other
continuing holders being not altered substantially in the transaction; or
(iii) The stockholders of CLC shall approve a plan of complete
liquidation of CLC or an agreement for the sale or disposition by the
Corporation of all or a substantial portion of CLC's assets (i.e. 50% or more
in value of the total assets of CLC).
"Affiliate" of any person means any other person directly or indirectly
controlled by, or under common control of, that person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any person, means
the possession by another person, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that first mentioned
person, whether through the ownership of voting securities, by contract or
otherwise.
"Automatic Redemption Date" means the date for the automatic redemption by
the Corporation of Dividend Access Shares pursuant to Article 7 of these share
provisions, which date shall be [-], unless (a) such date shall be extended at
any time or from time to time to a specified later date by the Board of
Directors or (b) such date shall be accelerated at any time to a specified
earlier date by the Board of Directors (A) if at
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such time there are less than such number as represents 15% of the Dividend
Access Shares initially issued to the holders of Dividend Access Shares (other
than Dividend Access Shares held by CLC and its Affiliates and as such number of
shares may be adjusted as deemed appropriate by the Board of Directors to give
effect to any subdivision or consolidation of or stock dividend on the Dividend
Access Shares, any issue or distribution of rights to acquire Dividend Access
Shares or securities exchangeable for or convertible into Dividend Access
Shares, any issue or distribution of other securities or rights or evidences of
indebtedness or assets, or any other capital reorganization or other transaction
affecting the Dividend Access Shares), or (B) if at such time there is an
Acquisition of Control, in each case upon at least thirty (30) days' prior
written notice of any such extension or acceleration, as the case may be, to the
registered holders of the Dividend Access Shares, in which case the Automatic
Redemption Date shall be such later or earlier date.
"Automatic Redemption" has the meaning ascribed thereto in Section 7.1 of
these share provisions.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in Virginia.
"CLC" means Computer Learning Centers, Inc., a corporation organized and
existing under the laws of the State of Delaware, and any successor corporation.
"CLC Common Shares" mean the shares of common stock of CLC with a par value
of U.S.$0.01 per share, having voting rights of one vote per share, and any
other securities into which such shares may be changed.
"CLC Dividend Declaration Date" means the date on which the Board of
Directors of CLC declares any dividend on the CLC Common Shares.
"Common Shares" means the voting common shares of the Corporation.
"Corporate Law" means the Act.
"Corporation" means a corporation to be formed under the laws of the
Province of .
"Dividend Access Shares" mean the Dividend Access Shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein.
"Liquidation Amount" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
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"Liquidation Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Liquidation Date" has the meaning ascribed thereto in Section 5.1 of these
share provisions.
"Put Right" has the meaning ascribed thereto in the Share Purchase
Agreement.
"Redemption Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Redemption Call Purchase Price" has the meaning ascribed thereto in the
Share Purchase Agreement.
"Redemption Price" has the meaning ascribed thereto in Section 7.1 of these
share provisions.
"Retracted Shares" has the meaning ascribed thereto in Section 6.1(a) of
these share provisions.
"Retraction Call Right" has the meaning ascribed thereto in the Share
Purchase Agreement.
"Retraction Date" has the meaning ascribed thereto in Section 6.1(b) of
these share provisions.
"Retraction Price" has the meaning ascribed thereto in Section 6.1 of these
share provisions.
"Retraction Request" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"Share Purchase Agreement" means the share purchase agreement by and among
CLC, Delta College Inc. and the Stockholders named therein.
"Support Agreement" means the Support Agreement between CLC and the
Corporation and the Stockholders named therein.
ARTICLE 2
RANKING OF DIVIDEND ACCESS SHARES
2.1 The Dividend Access Shares shall be entitled to a preference, as
provided in Articles 3 and 5, over the Common Shares and any other shares
ranking junior to the Dividend Access Shares with respect to the payment of
dividends and the distribution of
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assets in the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding up
its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of a Dividend Access Share shall be entitled to receive and
the Board of Directors shall, subject to applicable law, on each CLC Dividend
Declaration Date, declare a dividend on each Dividend Access Share (a) in the
case of a cash dividend declared on the CLC Common Shares, in an amount in cash
(in U.S. dollars) for each Dividend Access Share equal to the cash dividend
declared on each CLC Common Share or (b) in the case of a stock dividend
declared on the CLC Common Shares to be paid in CLC Common Shares, in such
number of Dividend Access Shares for each Dividend Access Share as is equal to
the number of CLC Common Shares to be paid on each CLC Common Share or (c) in
the case of a dividend declared on the CLC Common Shares in property other than
cash or CLC Common Shares, in such type and amount of property for each Dividend
Access Share as is the same as or economically equivalent to (to be determined
by the Board of Directors as contemplated by Section 2.6 of the Support
Agreement) the type and amount of property declared as a dividend on each CLC
Common Share. Such dividends shall be paid out of money, assets or property of
the Corporation properly applicable to the payment of dividends, or out of
authorized but unissued shares of the Corporation. Any dividend which should
have been declared on the Dividend Access Shares pursuant to this Section 3.1
but was not so declared due to the provisions of applicable law shall be
declared and paid by the Corporation on a subsequent date or dates determined by
the Board of Directors.
3.2 Cheques of the Corporation payable at par and in U.S. dollars at any
branch of the bankers of the Corporation shall be issued in respect of any cash
dividends contemplated by Section 3.1(a) hereof and the sending of such a cheque
to each holder of a Dividend Access Share shall satisfy the cash dividend
represented thereby unless the cheque is not paid on presentation. Certificates
registered in the name of the registered holder of Dividend Access Shares shall
be issued or transferred in respect of any stock dividends contemplated by
Section 3.1(b) hereof and the sending of such a certificate to each holder of a
Dividend Access Share shall satisfy the stock dividend represented thereby. Such
other type and amount of property in respect of any dividends contemplated by
Section 3.1(c) hereof shall be issued, distributed or transferred by the
Corporation in such manner as it shall determine and the issuance, distribution
or transfer thereof by the Corporation to each holder of a Dividend Access Share
shall satisfy the dividend represented thereby. No holder of a Dividend Access
Share shall be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has not been duly
presented to the Corporation's bankers for payment or that otherwise remains
unclaimed for a period of three (3) years from the date on which such dividend
was payable.
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3.3 The record date for the determination of the holders of Dividend
Access Shares entitled to receive payment of, and the payment date for, any
dividend declared on the Dividend Access Shares under Section 3.1 hereof shall
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the CLC Common Shares provided, however, that
if such date is not a day when banks are open for business in Quebec, Canada, it
shall be the immediately following day when banks are open for business in
Quebec, Canada.
3.4 If on any payment date for any dividends declared on the Dividend
Access Shares under Section 3.1 hereof the dividends are not paid in full on all
of the Dividend Access Shares then outstanding, any such dividends that remain
unpaid shall be paid on a subsequent date or dates determined by the Board of
Directors on which the Corporation shall have sufficient moneys, assets or
property properly applicable to the payment of such dividends.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Dividend Access Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Dividend Access Shares given as specified in
Section 10.2 of these share provisions:
(a) pay any dividends on the Common Shares or any other shares
ranking junior to the Dividend Access Shares, other than stock
dividends payable in Common Shares or any such other shares ranking
junior to the Dividend Access Shares, as the case may be;
(b) redeem, or purchase or make any capital distribution in respect
of Common Shares or any other shares ranking junior to the Dividend
Access Shares;
(c) redeem or purchase any other shares of the Corporation ranking
equally with the Dividend Access Shares with respect to the payment of
dividends or on any liquidation distribution; or
(d) issue any other shares of the Corporation ranking superior to the
Dividend Access Shares with respect to the payment of dividends or on
any liquidation distribution.
The restrictions in Sections 4.1(a), 4.1(b) and 4.1(c) above shall not
apply if all dividends on the outstanding Dividend Access Shares corresponding
to dividends declared following the initial date of issue of Dividend Access
Shares on the CLC
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Common Shares shall have been declared on the Dividend Access Shares and paid in
full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, a holder of Dividend
Access Shares shall be entitled, subject to applicable law, to receive from the
Corporation in respect of each Dividend Access Share held by such holder on the
effective date (the "Liquidation Date") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
among the holders of the Common Shares or any other shares ranking junior to the
Dividend Access Shares one (1) CLC Common Share, plus an amount equivalent to
the full amount of all declared and unpaid dividends on each such Dividend
Access Share and all dividends declared on CLC Common Shares which have not been
declared on such Dividend Access Shares in accordance with section 3.1 of these
share provisions (collectively the "Liquidation Amount"), provided that if the
record date for any such declared and unpaid dividends occurs on or after the
Liquidation Date, the Liquidation Amount shall not include such additional
amount equivalent to such dividends.
5.2 On or after the Liquidation Date and subject to the exercise by CLC of
the Liquidation Call Right, the Corporation shall cause to be delivered to the
holders of the Dividend Access Shares the Liquidation Amount (less any tax
required to be deducted and withheld therefrom by the Corporation) for each such
Dividend Access Share upon presentation and surrender of the certificates
representing such Dividend Access Shares, together with such other documents and
instruments as may be required to effect a transfer of Dividend Access Shares
under the Corporate Law and the by-laws of the Corporation and such additional
documents and instruments as the Corporation may reasonably require, at any
office and in any manner whatsoever as may be specified by the Corporation by
notice to the holders of the Dividend Access Shares. Payment of the total
Liquidation Amount for such Dividend Access Shares shall be made by the
Corporation, or on behalf of the Corporation by an authorized agent, by delivery
to each holder at the address of the holder recorded in the securities register
of the Corporation or by holding for pick up by the holder at any office as may
be specified by the Corporation by notice to the holders of Dividend Access
Shares, certificates representing CLC Common Shares (which shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim, encumbrance, security interest or adverse claim) registered in the name
of the holder and a cheque of the Corporation payable at par and in U.S. dollars
at any branch of the bankers of the Corporation in respect of the amount
equivalent to the full amount of all declared and unpaid dividends and all
dividends declared on CLC Common Shares which have not been declared on such
Dividend Access Shares in accordance with Section 3.1 of these share provisions
comprising part of the total Liquidation Amount (less any tax required to be
deducted and withheld
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therefrom by the Corporation) without interest. On and after the Liquidation
Date, the hlders of the Dividend Access Shares shall cease to be holders of such
Dividend Access Shares and shall not be entitled to exercise any of the rights
of holders in respect thereof, other than the right to receive their
proportionate part of the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Dividend Access Shares shall not be made upon
presentation and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Dividend Access Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof with an authorized agent of the Corporation including, without
limitation, any chartered bank or trust company in Canada. Upon such deposit
being made, the rights of the holders of Dividend Access Shares after such
deposit shall be limited to receiving their proportionate part of the total
Liquidation Amount so deposited (less any tax required to be deducted and
withheld therefrom) without interest for such Dividend Access Shares against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. In the event such payment or
deposit of the total Liquidation Amount is made pursuant to the provisions of
this Section 5.2, the holders of the Dividend Access Shares shall thereafter be
considered and deemed for all purposes to be the holders of the CLC Common
Shares delivered to them. To the extent that the amount of tax required to be
deducted or withheld from any payment to a holder of Dividend Access Shares
exceeds the cash portion of such payment, the Corporation is hereby authorized
to sell or otherwise dispose of at fair market value such portion of the
property then payable to the holder as is necessary to provide sufficient funds
to the Corporation in order to enable it to comply with such deduction or
withholding requirement and the Corporation shall give an accounting to the
holder with respect thereto and any balance of such proceeds of sale.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Dividend Access Shares the Liquidation Amount per Dividend Access Share
pursuant to Section 5.1 of these share provisions, such holders shall not be
entitled to share in any further distribution of the assets of the Corporation.
ARTICLE 6
RETRACTION OF DIVIDEND ACCESS SHARES BY HOLDER
6.1 A holder of Dividend Access Shares shall be entitled at any time,
subject to applicable law and subject to the exercise by CLC of the Retraction
Call Right, to require the Corporation to redeem any or all of the Dividend
Access Shares registered in the name of such holder for one (1) CLC Common Share
for each Dividend Access Share presented and surrendered by the holder, plus an
amount equivalent to the full amount of all declared and unpaid dividends
thereon and all dividends declared on CLC Common Shares which have not been
declared on such Dividend Access Shares in accordance
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with section 3.1 of these share provisions (collectively the "Retraction
Price"), provided that if the record date for any such declared and unpaid
dividends occurs on or after the Retraction Date, the Retraction Price shall not
include such additional amount equivalent to such dividends. When not exercised
for all the Dividend Access Shares held by a holder, the right of retraction
provided herein may be exercised only with respect to an aggregate minimum
number of Dividend Access Shares to be redeemed equal to 10,000 shares. To
effect such retraction, the holder shall present and surrender, at the
registered office of the Corporation or at any other office and in any manner
whatsoever as may be specified by the Corporation by notice to the holders of
Dividend Access Shares, the certificate or certificates representing the
Dividend Access Shares which the holder desires to have the Corporation redeem,
together with such other documents and instruments as may be required to effect
a transfer of Dividend Access Shares under the Corporate Law and the by-laws of
the Corporation and such additional documents and instruments as the Corporation
may reasonably require, and together with a duly executed statement (the
"Retraction Request") in the form of Schedule A hereto or in such other form as
may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number
specified therein of the Dividend Access Shares represented by such
certificate or certificates (the "Retracted Shares") redeemed by the
Corporation;
(b) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than ten (10)
Business Days nor more than twenty (20) Business Days after the date
on which the Retraction Request is received by the Corporation and
further provided that, in the event that no such Business Day is
specified by the holder in the Retraction Request, the Retraction Date
shall be deemed to be the tenth Business Day after the date on which
the Retraction Request is received by the Corporation; and
(c) acknowledging the Retraction Call Right in favour of CLC.
6.2 Subject to the exercise by CLC of the Retraction Call Right, upon
receipt by the Corporation in the manner specified in Section 6.1 hereof of a
certificate or certificates representing the number of Dividend Access Shares
which the holder desires to have the Corporation redeem, together with a duly
executed and completed Retraction Request, and provided that the Retraction
Request is not revoked by the holder in the manner specified in Section 6.6, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date. If only a part of the Dividend Access Shares
represented by any certificate are redeemed (or purchased by CLC pursuant to the
Retraction Call Right), a new certificate for the balance of such Dividend
Access Shares shall be issued to the holder at the expense of the Corporation.
6.3 On the Retraction Date and subject to the exercise by CLC of the
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Retraction Call Right, the Corporation shall cause to be delivered to the
relevant holder, at the address of the holder recorded in the securities
register of the Corporation or at the address specified in the holder's
Retraction Request or by holding for pick up by the holder at any office as may
be specified by the Corporation by notice to the holders of Dividend Access
Shares, by or on behalf of the Corporation, certificates representing the CLC
Common Shares (which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim, encumbrance,
security interest or adverse claim) registered in the name of the holder and a
cheque of the Corporation payable at par and in U.S. dollars at any branch of
the bankers of the Corporation in respect of the additional amount equivalent to
the full amount of all declared and unpaid dividends and all dividends declared
on CLC Common Shares which have not been declared on such Retracted Shares in
accordance with section 3.1 of these share provisions comprising part of the
total Retraction Price (less any tax required to be deducted and withheld
therefrom by the Corporation) and delivery of such certificates and cheque by or
on behalf of the Corporation, as the case may be, shall be deemed to be payment
of and shall satisfy and discharge all liability for the total Retraction Price,
to the extent that the same is represented by such share certificates and cheque
(less any tax required and in fact deducted and withheld therefrom and remitted
to the proper tax authority), unless such cheque is not paid on due
presentation. To the extent that the amount of tax required to be deducted or
withheld from any payment to a holder of Dividend Access Shares exceeds the cash
portion of such payment, the Corporation is hereby authorized to sell or
otherwise dispose of at fair market value such portion of the property then
payable to the holder as is necessary to provide sufficient funds to the
Corporation in order to enable it to comply with such deduction or withholding
requirement and shall give an accounting to the holder with respect thereto and
any balance of such proceeds of sale.
6.4 On and after the Retraction Date, the holder of the Retracted Shares
shall cease to be a holder of such Retracted Shares and shall not be entitled to
exercise any of the rights of a holder in respect thereof, other than the right
to receive his proportionate part of the total Retraction Price, unless payment
of the total Retraction Price shall not be made upon presentation and surrender
of certificates in accordance with the foregoing provisions, in which case the
rights of such holder shall remain unaffected until the total Retraction Price
has been paid in the manner hereinbefore provided. On and after the Retraction
Date, provided that presentation and surrender of certificates and payment of
the total Retraction Price has been made in accordance with the foregoing
provisions, the holder of the Retracted Shares so redeemed by the Corporation
shall thereafter be considered and deemed for all purposes to be a holder of the
CLC Common Shares delivered to it.
6.5 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
the Corporation believes that on any Retraction Date it would not be permitted
by any of such provisions to redeem
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the Retracted Shares tendered for redemption on such date, and provided that CLC
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares, the Corporation shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the maximum
number that may be so redeemed (rounded down to a whole number of shares) as
would not be contrary to such provisions and shall notify the holder at least
two (2) Business Days prior to the Retraction Date as to the number of Retracted
Shares which will not be redeemed by the Corporation. In any case in which the
redemption by the Corporation of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law, the Corporation shall redeem
Retracted Shares in accordance with Section 6.2 of these share provisions on a
pro rata basis and shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to Section 6.2 hereof.
6.6 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to CLC shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF DIVIDEND ACCESS SHARES BY THE CORPORATION
7.1 Subject to applicable law, and subject to the exercise by CLC of the
Redemption Call Right, the Corporation shall on the Automatic Redemption Date
redeem (the "Automatic Redemption") the whole of the then outstanding Dividend
Access Shares for one (1) CLC Common Share for each Dividend Access Share held
by such holder, plus an amount equivalent to the full amount of all declared and
unpaid dividends thereon and all dividends declared on CLC Common Shares which
have not been declared on such Dividend Access Shares in accordance with section
3.1 of these share provisions (collectively the "Redemption Price"), provided
that if the record date for any such declared and unpaid dividends occurs on or
after the Redemption Date, the Redemption Price shall not include such
additional amount equivalent to such dividends.
7.2 In any case of any redemption of Dividend Access Shares under this
Article 7, the Corporation shall, at least fifteen (15) days before the
Automatic Redemption Date, send or cause to be sent to each holder of Dividend
Access Shares to be redeemed a notice in writing of the redemption by the
Corporation or the purchase by CLC under the Redemption Call Right, as the case
may be, of the Dividend Access Shares held by such holder. Such notice shall set
out the formula for determining the Redemption Price or the Redemption Call
Purchase Price, as the case may be, the Redemption Date and, if applicable,
particulars of the Redemption Call Right. On the Automatic Redemption Date and
subject to the exercise by CLC of the Redemption Call
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Right, the Corporation shall cause to be delivered to the holders of the
Dividend Access Shares to be redeemed at the Redemption Price (less any tax
required to be deducted and withheld therefrom by the Corporation) for each such
Dividend Access Share upon presentation and surrender of the certificates
representing such Dividend Access Shares, together with such other documents and
instruments as may be required to effect a transfer of Dividend Access Shares
under the Corporate Law and the by-laws of the Corporation and such additional
documents and instruments as the Corporation may reasonably require, at any
office and in any manner whatsoever as may be specified by the Corporation in
such notice. Payment of the total Redemption Price for such Dividend Access
Shares shall be made by the Corporation, or on behalf of the Corporation by an
authorized agent, by delivery to each holder at the address of the holder
recorded in the securities register of the Corporation or by holding for pick up
by the holder at any office as may be specified by the Corporation in such
notice, certificates representing CLC Common Shares (which shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim, encumbrance, security interest or adverse claim) registered in the name
of the holder and a cheque of the Corporation payable at par in U.S. dollars at
any branch of the bankers of the Corporation in respect of the additional amount
equivalent to the full amount of all declared and unpaid dividends and all
dividends declared on CLC Common Shares which have not been declared on such
Dividend Access Shares in accordance with Section 3.1 of these share provisions
comprising part of the total Redemption Price (less any tax required to be
deducted and withheld therefrom by the Corporation) without interest. On and
after the Automatic Redemption Date, the holders of the Dividend Access Shares
called for redemption shall cease to be holders of such Dividend Access Shares
and shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Redemption Price, unless payment of the total Redemption Price for such Dividend
Access Shares shall not be made upon presentation and surrender of certificates
in accordance with the foregoing provisions, in which case the rights of the
holders shall remain unaffected until the total Redemption Price has been paid
in the manner hereinbefore provided. The Corporation shall have the right at any
time after the sending of notice of its intention to redeem Dividend Access
Shares as aforesaid to deposit or cause to be deposited the total Redemption
Price of the Dividend Access Shares so called for redemption, or of such of the
said Dividend Access Shares represented by certificates that have not at the
date of such deposit been surrendered by the holders thereof in connection with
such redemption, with an authorized agent of the Corporation including, without
limitation, any chartered bank or trust company in Canada named in such notice.
Upon the later of such deposit being made and the Automatic Redemption Date, the
Dividend Access Shares in rspect whereof such deposit shall have been made shall
be redeemed and the rights of the holders thereof after such deposit or
Automatic Redemption Date, as the case may be, shall be limited to receiving
their proportionate part of the total Redemption Price so deposited (less any
tax required to be deducted and withheld therefrom by the Corporation), without
interest for such Dividend Access Shares against presentation and surrender of
the said certificates held by them, respectively, in accordance with the
foregoing provisions. In the event such payment or deposit of the total
Redemption Price is made pursuant to the provisions of
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this Section 7.2, the holders of the Dividend Access Shares shall thereafter be
considered and deemed for all purposes to be holders of the CLC Common Shares
delivered to them. To the extent that the amount of tax required to be deducted
or withheld from any payment to a holder of Dividend Access Shares exceeds the
cash portion of such payment, the Corporation is hereby authorized to sell or
otherwise dispose of at fair market value such portion of the property then
payable to the holder as is necessary to provide sufficient funds to the
Corporation in order to enable it to comply with such deduction or withholding
requirement and shall give an accounting to the holder with respect thereto and
any balance of such proceeds of sale.
ARTICLE 8
PURCHASE FOR CANCELLATION
8.1 Subject to applicable law and the articles of the Corporation, the
Corporation may at any time and from time to time purchase for cancellation all
or any part of the outstanding Dividend Access Shares at any price by tender to
all the holders of record of Dividend Access Shares then outstanding at any
price per share together with an amount equal to all declared and unpaid
dividends thereon. If in response to an invitation for tenders under the
provisions of this Section 8.1, more Dividend Access Shares are tendered at a
price or prices acceptable to the Corporation than the Corporation is prepared
to purchase, the Dividend Access Shares to be purchased by the Corporation shall
be purchased as nearly as may be pro rata according to the number of shares
tendered by each holder who submits a tender to the Corporation, provided that
when shares are tendered at different prices, the pro rating shall be effected
(disregarding fractions) only with respect to the shares tendered at the price
at which more shares were tendered than the Corporation is prepared to purchase
after the Corporation has purchased all the shares tendered at lower prices. If
part only of the Dividend Access Shares represented by any certificate shall be
purchased, a new certificate for the balance of such shares shall be issued at
the expense of the Corporation.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions of Sections
10.1, 11.1 and 12.2, the holders of the Dividend Access Shares shall not be
entitled as such to receive notice of or to attend any meeting of the
shareholders of the Corporation or to vote at any such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Dividend
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Access Shares may be added to, changed or removed but only with the approval
of the holders of the Dividend Access Shares given as hereinafter specified.
10.2 Any approval given by the holders of the Dividend Access Shares to
add to, change or remove any right, privilege, restriction or condition
attaching to the Dividend Access Shares or any other matter requiring the
approval or consent of the holders of the Dividend Access Shares shall be
deemed to have been sufficiently given if it shall have been given in
accordance with applicable law subject to a minimum requirement that such
approval be evidenced by (i) a resolution passed by not less than two thirds
of the votes cast on such resolution by the holders of the Dividend Access
Shares, and (ii) a separate resolution passed by not less than 50% of the
votes cast on such separate resolution by the holders of Dividend Access
Shares other than CLC and its Affiliates, at separate meetings of holders of
Dividend Access Shares and holders of Dividend Access Shares other than CLC
and its Affiliates duly called and held in each case at which the holders of
at least 50% of the outstanding Dividend Access Shares (not including
Dividend Access Shares held by CLC or its Affiliates) at that time are
present or represented by proxy; provided that if at any such meeting the
holders of at least 50% of the outstanding Dividend Access Shares at that
time are not present or represented by proxy within one-half hour after the
time appointed for such meeting then the meeting shall be adjourned to such
date not less than ten (10) days thereafter and to such time and place as may
be designated by the Chairman of such meeting. At such adjourned meeting the
holders of Dividend Access Shares entitled to vote at the meeting and present
or represented by proxy thereat may transact the business for which the
meeting was originally called and a resolution passed thereat by the
affirmative vote of not less than two-thirds of the votes entitled to vote on
the resolution cast on such resolution at such meeting shall constitute the
approval or consent of the holders of the Dividend Access Shares or the
holders of Dividend Access Shares other than CL and its Affiliates, as the
case may be.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF CLC COMMON SHARES
11.1 (a) If CLC:
(i) issues or distributes CLC Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire CLC Common Shares) to the holders of all or substantially
all of the then outstanding CLC Common Shares by way of stock
dividend or other distribution, other than an issue of CLC Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire CLC Common Shares) to holders of CLC
Common Shares who exercise an option to receive dividends in CLC
Common Shares (or securities exchangeable for or convertible into
or carrying rights to acquire CLC Common Shares) in lieu of
receiving cash dividends;
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or
(ii) issues or distributes rights, options or warrants to the
holders of all or substantially all of the then outstanding CLC
Common Shares entitling them to subscribe for or to purchase CLC
Common Shares (or securities exchangeable for or convertible into
or carrying rights to acquire CLC Common Shares); or
(iii) issues or distributes to the holders of all or
substantially all of the then outstanding CLC Common Shares (A)
shares or securities of CLC of any class other than CLC Common
Shares (other than shares convertible into or exchangeable for or
carrying rights to acquire CLC Common Shares), (B) rights,
options or warrants other than those referred to in Section
11.1(a)(ii) above, (C) evidences of indebtedness of CLC or (D)
assets of CLC;
the Corporation will issue or distribute simultaneously to the holders
of the Dividend Access Shares, the economic equivalent on a per share
basis of such rights, options, securities, shares, evidences of
indebtedness or other assets, such economic equivalent to be
determined as provided in paragraph 2.6(d) of the Support Agreement..
(b) If CLC:
(i) subdivides, redivides or changes the then outstanding CLC
Common Shares into a greater number of CLC Common Shares; or
(ii) reduces, combines or consolidates or change the then
outstanding CLC Common Shares into a lesser number of CLC Common
Shares; or
(iii) reclassifies or otherwise changes the CLC Common Shares
or effects an amalgamation, merger, reorganization or other
transaction affecting the CLC Common Shares;
the Corporation will make the same or an economically equivalent
change simultaneously to, or in the rights of the holders of, the
Dividend Access Shares, such economic equivalent to be determined as
provided in paragraph 2.6 (d) of the Support Agreement. The Support
Agreement further provides in part that the foregoing provisions of
the Support Agreement shall not be changed without the approval of the
holders of the Dividend Access Shares given in accordance with Section
10.2 of these share provisions.
11.2 Pursuant to the Share Purchase Agreement, the initial holders of
Dividend
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Access Shares are given a Put Right to exchange their Dividend Access Shares for
CLC Common Shares upon the occurrence of certain circumstances.
ARTICLE 12
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
12.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by CLC with all provisions of the Support Agreement
as well as the Liquidation Call Right, the Redemption Call Right, the Retraction
Call Right and the Put Right contained in the Share Purchase Agreement
applicable to the Corporation and CLC, respectively, in accordance with the
respective terms thereof including, without limitation, taking all such actions
and doing all such things as shall be necessary or advisable to enforce to the
fullest extent possible for the direct benefit of the Corporation and the
holders of Dividend Access Shares all rights and benefits in favour of the
Corporation and such holders under or pursuant to such agreements.
12.2 The Corporation shall not propose, agree to or otherwise give effect
to any amendment to, or waiver or forgiveness of its rights or obligations
under, the Support Agreement, the Put Right, the Redemption Call Right and the
Retraction Call Right contained in the Share Purchase Agreement without the
approval of the holders of the Dividend Access Shares given in accordance with
Section 10.2 of these share provisions other than such amendments, waivers
and/or forgiveness as may be necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Dividend Access Shares thereunder; or
(b) making such provisions or modifications not inconsistent with
such agreement as may be necessary with respect to matters or
questions arising thereunder which, in the opinion of the Board of
Directors, it may be expedient to make, provided that the Board of
Directors shall be of the opinion, after consultation with counsel and
based on a legal opinion to be addressed to the holders of the
Dividend Access Shares, that such provisions and modifications will
not be prejudicial to the interests of the holders of the Dividend
Access Shares; or
(c) making such changes in or corrections to such agreement which, on
the advice of counsel to the Corporation, are required for the purpose
of curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error contained
therein, provided that the Board of Directors shall be of the opinion,
after consultation with counsel, that such changes or corrections will
not be prejudicial to the
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interests of the holders of the Dividend Access Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Dividend Access Shares shall contain
or have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the provisions of the Share Purchase Agreement
relating to the Liquidation Call Right, the Redemption Call Right, the
Retraction Call Right and the Put Right.
ARTICLE 14
NOTICES
14.1 Any notice, request or other communication to be given to CLC and/or
the Corporation by a holder of Dividend Access Shares shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by telecopy
or by delivery to:
(a) if to the Corporation at:
[-]
(b) if to CLC at:
[-]
together in all cases with a copy to,
[-]
- and -
[-]
- and -
[-]
Any such notice, request or other communication, if given by mail,
telecopy or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
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14.2 Any presentation and surrender by a holder of Dividend Access Shares
to the Corporation of certificates representing Dividend Access Shares in
connection with the liquidation, dissolution or winding up of the Corporation or
the retraction or redemption of Dividend Access Shares shall be made by
registered mail (postage prepaid) or by delivery to the Corporation at the above
address or to such other office as may be specified by the Corporation, in each
case addressed to the attention of the President of the Corporation unless
otherwise specified by the Corporation. Any such presentation and surrender of
certificates, if given by mail (postage prepaid) or by delivery, shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation. Any such presentation and surrender of certificates made by
registered mail shall be at the sole risk of the holder mailing the same.
14.3 Any notice, request or other communication to be given to a holder of
Dividend Access Shares by or on behalf of the Corporation shall be in writing
and shall be valid and effective if given by mail (postage prepaid) or by
delivery to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail (postage prepaid) or by
delivery, shall only be deemed to have been made and to be effective upon actual
receipt thereof by a holder of Dividend Access Shares. Accidental failure or
omission to give any notice, request or other communication to one or more
holders of Dividend Access Shares shall not invalidate or otherwise alter or
affect any action or proceeding to be taken by the Corporation pursuant thereto.
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SCHEDULE A
NOTICE OF RETRACTION
To the Corporation and Computer Learning Centers, Inc.
This notice is given pursuant to Article 6 of the Dividend Access
Share provisions (the "Share Provisions") attaching to the share(s) represented
by this certificate and all capitalized words and expressions used in this
notice which are defined in the Share Provisions have the meanings ascribed to
such words and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions (please
complete):
all share(s) represented by this certificate; or
_______ share(s) only (Minimum of - shares).
The undersigned hereby notifies the Corporation that the Retraction
Date shall be: ______________________
NOTE: The Retraction Date must be a Business Day and must not be less than
ten (10) Business Days nor more than twenty (20) Business Days after
the date upon which this notice is received by the Corporation. In the
event that no such Business Day is specified above, the Retraction
Date shall be deemed to be the tenth Business Day after the date on
which this notice is received by the Corporation.
The undersigned acknowledges the Retraction Call Right of Computer
Learning Centers, Inc. to purchase all but no less than all the Retracted Shares
from the undersigned and that this notice shall be deemed to be a revocable
offer by the undersigned to sell the Retracted Shares to Computer Learning
Centers, Inc. in accordance with the Retraction Call Right on the Retraction
Date for the Retraction Price. If Computer Learning Centers, Inc. determines
not to exercise the Retraction Call Right, the Corporation will notify the
undersigned of such fact as soon as possible. This notice of retraction, and
offer to sell the Retracted Shares to Computer Learning Centers, Inc., may be
revoked and withdrawn by the undersigned by notice in writing given to the
Corporation at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that the shares of CLC Stock to be issued
to the undersigned as a result hereof are subject to certain resale restrictions
as set forth in that certain purchase agreement dated December _____, 1997 by
and among Computer Learning Centers, Inc., Delta College Inc. and the
Stockholders named therein.
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The undersigned hereby represents and warrants to the Corporation and
Computer Learning Centers, Inc. that the undersigned has good title to, and
owns, the share(s) represented by this certificate to be acquired by the
Corporation or Computer Learning Centers, Inc., as the case may be, free and
clear of all liens, claims and encumbrances.
(Date) (Signature of Shareholder)
(Guarantee of Signature)
Please check box if the securities and any cheque(s) resulting from
the retraction or purchase of the Retracted Shares are to be held for pick-up by
the shareholder, in the case of securities, at any office as specified by the
Corporation from time to time and, in the case of any cheque(s), at the
principal payment office of [-] in Montreal, respectively, failing which the
securities and any cheque(s) will be mailed to the last address of the
shareholder as it appears on the register of the Corporation.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Corporation may require, must be deposited
with the Corporation. The securities and any cheque(s) resulting from
the retraction or purchase of the Retracted Shares will be issued and
registered in, and made payable to, respectively, the name of the
shareholder as it appears on the register of the Corporation and the
securities and cheque(s) resulting from such retraction or purchase
will be delivered to such shareholder as indicated above, unless the
form appearing immediately below is duly completed.
Name of Person in Whose Name Securities or Cheque(s) Are To Be
Registered, Issued or Delivered (please print)
Street Address or P.O. Box
Signature of Shareholder
City - Province Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the
remaining shares of the Corporation will be issued and registered in
the name of the shareholder as it appears on the register of the
Corporation, unless the share transfer power on the share certificate
is duly completed in respect of such shares.
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ANNEX III TO SHARE PURCHASE AGREEMENT
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 6th day of December, 1997.
B E T W E E N: COMPUTER LEARNING CENTERS, INC., a corporation
subsisting under the laws of the State of Delaware,
(hereinafter referred to as "CLC"),
AND: DELTA COLLEGE INC. a Quebec corporation
(hereinafter referred to as the "Company"),
AND: ROGER MATTE, and RICHARD MATTE and MARIE-JOSEE MATTE
and DOMINIQUE MATTE and JOHANNE MATTE and SUZANNE MATTE
and DOLMEN (1994) INC.
(hereinafter referred to as the "Stockholders").
WHEREAS pursuant to a share purchase agreement dated as of December 6,
1997, by and among CLC, Delta College Inc. and the Stockholders (such agreement
being hereinafter referred to as the "Purchase Agreement"), the parties agreed
that on the Closing Date (as such term is defined in the Purchase Agreement),
CLC and the Company would execute and deliver a Support Agreement substantially
in the form set forth in Annex III to the Purchase Agreement;
AND WHEREAS pursuant to the articles of incorporation of the Company
the capital of the Company was authorized to consist of (i) a class of voting
common shares (the "Common Shares") and (ii) a class of non-voting shares, the
provisions attaching thereto being set forth in Annex II to the Purchase
Agreement (the "Dividend Access Shares");
AND WHEREAS the above-mentioned articles of incorporation set forth
the rights, privileges, restrictions and conditions (collectively the "Share
Provisions")
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attaching to the Dividend Access Shares;
AND WHEREAS CLC is the registered and beneficial owner of all of the
issued and outstanding Common Shares of the Company;
AND WHEREAS the parties hereto desire to make appropriate provision
and to establish a procedure whereby CLC will take certain actions and make
certain payments and deliveries necessary to ensure that the Company will be
able to make certain payments and to deliver or cause to be delivered shares of
common stock of CLC ("CLC Common Shares") in satisfaction of the obligations of
the Company under the Share Provisions with respect to the payment and
satisfaction of dividends, Liquidation Amounts, Retraction Prices and Redemption
Prices, all in accordance with the Share Provisions;
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial capital letters
and not otherwise defined herein shall have the meaning ascribed thereto in the
Share Provisions, unless the context requires otherwise.
1.2 Interpretation not Affected by Headings, etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, etc. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 Date for any Action. In the event that any date on or by which any
action is required or permitted to be taken under this agreement is not a
Business Day, such action shall be required or permitted to be taken on or by
the next succeeding Business Day. For the purposes of this agreement, a
"Business Day" means any day other than a Saturday, Sunday or a day when banks
are not open for business in Virginia.
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ARTICLE 2
COVENANTS OF CLC AND THE COMPANY
2.1 Funding of the Company. So long as any Dividend Access Shares which
are registered in the name of holders other than CLC or any of its Affiliates
are outstanding, CLC will:
(a) not declare or pay any dividend on CLC Common Shares unless
(i) the Company will have sufficient assets, funds and other property
available to enable the due declaration and the due and punctual
payment in accordance with applicable law, of an equivalent dividend
on the Dividend Access Shares and (ii) the Company shall
simultaneously declare or pay, as the case may be, an equivalent
dividend on the Dividend Access Shares, in each case in accordance
with the Share Provisions;
(b) cause the Company to declare simultaneously with the declaration
of any dividend on CLC Common Shares an equivalent dividend on the
Dividend Access Shares and, when such dividend is paid on CLC Common
Shares, cause the Company to pay simultaneously therewith such
equivalent dividend on the Dividend Access Shares, in each case in
accordance with the Share Provisions;
(c) advise the Company sufficiently in advance of the declaration by
CLC of any dividend on CLC Common Shares and take all such other
actions as are necessary, in cooperation with the Company, to ensure
that the respective declaration date, record date and payment date for
a dividend on the Dividend Access Shares shall be the same as the
record date, declaration date and payment date for the corresponding
dividend on CLC Common Shares;
(d) take all such actions and do all such things as are necessary to
enable and permit the Company, in accordance with applicable law, to
pay and otherwise perform its obligations with respect to the
satisfaction of the Liquidation Amount in respect of each issued and
outstanding Dividend Access Share upon the liquidation, dissolution or
winding-up of the Company, including without limitation all such
actions and all such things as are necessary to enable and permit the
Company to cause to be delivered CLC Common Shares to the holders of
Dividend Access Shares in accordance with the provisions of Article 5
of the Share Provisions;
(e) take all such actions and do all such things as are necessary to
enable and permit the Company, in accordance with applicable law, to
pay and otherwise perform its obligations with respect to the
satisfaction of the Retraction Price and the Redemption Price,
including without limitation all such actions and all such things as
are necessary to enable and permit the
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Company to cause to be delivered CLC Common Shares to the holders of
Dividend Access Shares, upon the redemption of the Dividend Access
Shares in accordance with the provisions of Article 6 or Article 7 of
the Share Provisions, as the case may be; and
(f) generally take all such actions and do all such things as are
necessary to enable and permit the Company to have the financial
reserves required so that it does not become insolvent and to avoid
any liquidation or dissolution of the Company.
2.2 Reservation of CLC Common Shares. CLC hereby represents, warrants
and covenants that it has irrevocably reserved for issuance and will at all
times keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock such number of CLC Common Shares (or other
shares or securities into which CLC Common Shares may be reclassified or changed
as contemplated by section 2.6 hereof) (a) as is equal to the sum of (i) the
number of Dividend Access Shares issued and outstanding from time to time and
(ii) the number of Dividend Access Shares issuable upon the exercise of all
rights to acquire Dividend Access Shares outstanding from time to time and (b)
as are now and may hereafter be required to enable and permit the Company to
meet its obligations hereunder and under the Share Provisions.
2.3 Notification of Certain Events. In order to assist CLC to comply with
its obligations hereunder, the Company will give CLC notice of each of the
following events at the time set forth below (it being however agreed that
failure to give such notices shall not relieve CLC of any of its obligations
hereunder):
(a) in the event of any determination by the Board of Directors of
the Company to institute voluntary liquidation, dissolution or winding
up proceedings with respect to the Company or to effect any other
distribution of the assets of the Company among its shareholders for
the purpose of winding up its affairs, at least (sixty) 60 days prior
to the proposed effective date of such liquidation, dissolution,
winding up or other distribution; the Company hereby confirms that it
will not institute voluntary liquidation, dissolution or winding-up
proceedings or otherwise voluntarily distribute its assets before the
Automatic Redemption Date;
(b) immediately, upon the earlier of (i) receipt by the Company of
notice of, and (ii) the Company otherwise becoming aware of, any
threatened or instituted claim, suit, petition or other proceedings
with respect to the involuntary liquidation, dissolution or winding up
of the Company or to effect any other distribution of the assets of
the Company among its shareholders for the purpose of winding up its
affairs;
(c) immediately, upon receipt by the Company of a Retraction Request;
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(d) at least one hundred and thirty (130) days prior to any
accelerated Automatic Redemption Date (other than an accelerated
Automatic Redemption Date pursuant to an Acquisition of Control)
determined by the Board of Directors of the Company in accordance with
the Share Provisions; and
(e) as soon as practicable upon the issuance by the Company of any
Dividend Access Shares or rights to acquire Dividend Access Shares.
2.4 Delivery of CLC Common Shares. In furtherance of its obligations
under sections 2.1(d) and 2.1(e) hereof, upon notice from the Company of any
event which requires the Company to cause CLC Common Shares to be delivered to
any holder of Dividend Access Shares, CLC shall forthwith deliver the requisite
CLC Common Shares to or to the order of the former holder of the surrendered
Dividend Access Shares, as the Company shall direct. All such CLC Common Shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any Lien (as defined in the Purchase Agreement). In consideration of
the delivery of each such CLC Common Share by CLC, the Company shall issue to
CLC, or as CLC shall direct, such number of Common Shares of the Company as is
equal to the fair value of such CLC Common Shares.
2.5 Qualification of CLC Common Shares. It is agreed that the Dividend
Access Shares will not be registered under the Securities Act of 1933, as
amended, and the CLC Common Shares issuable in exchange thereof have not been
registered under the Securities Act of 1933, and will be registered in
accordance with the terms of the Purchase Agreement.
2.6 Economic Equivalence.
(a) CLC represents and warrants that if it:
(i) issues or distributes CLC Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire CLC Common Shares) to the holders of all or substantially
all of the then outstanding CLC Common Shares by way of stock
dividend or other distribution, other than an issue of CLC Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire CLC Common Shares) to holders of CLC
Common Shares who exercise an option to receive dividends in CLC
Common Shares (or securities exchangeable for or convertible into
or carrying rights to acquire CLC Common Shares) in lieu of
receiving cash dividends; or
(ii) issues or distributes rights, options or warrants to the
holders of all or substantially all of the then outstanding CLC
Common Shares entitling them to subscribe for or to purchase CLC
Common
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Shares (or securities exchangeable for or convertible into or
carrying rights to acquire CLC Common Shares); or
(iii) issues or distributes to the holders of all or
substantially all of the then outstanding CLC Common Shares (A)
shares or securities of CLC of any class other than CLC Common
Shares (other than shares convertible into or exchangeable for or
carrying rights to acquire CLC Common Shares), (B) rights,
options or warrants other than those referred to in section
2.6(a)(ii) above, (C) evidences of indebtedness of CLC or (D)
assets of CLC;
it will ensure that (i) the Company is able under applicable law
to issue or distribute the economic equivalent on a per share basis of
such rights, options, securities, shares, evidences of indebtedness or
other assets simultaneously to holders of the Dividend Access Shares,
and (ii) the Company shall issue or distribute such rights, options,
securities, shares, evidences of indebtedness or other assets or
economic equivalents simultaneously to holders of the Dividend Access
Shares;
(b) CLC represents and warrants that if it:
(i) subdivides, redivides or changes the then outstanding CLC
Common Shares into a greater number of CLC Common Shares; or
(ii) reduces, combines or consolidates or changes the then
outstanding CLC Common Shares into a lesser number of CLC Common
Shares; or
(iii) reclassifies or otherwise changes CLC Common Shares or
effects an amalgamation, merger, reorganization or other
transaction affecting CLC Common Shares;
it will cause its Common Shares to be voted in favour of any
resolution required to enable the Company under applicable law to
simultaneously make the same or an economically equivalent change to,
or in the rights of the holders of, the Dividend Access Shares;
(c) CLC will ensure that the record date for any event referred to in
section 2.6(a) or 2.6(b) above, or (if no record date is applicable
for such event) the effective date for any such event, is not less
than twenty (20) Business Days after the date on which such event is
declared or announced by CLC (with simultaneous notice thereof to be
given by CLC to the Company);
(d) the Board of Directors of the Company shall determine, in good
faith
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and in its sole discretion (with the assistance of such reputable
and qualified independent financial advisors and/or other experts as
the Board may require), economic equivalence for the purposes of any
event referred to in section 2.6(a) or 2.6(b) above and each such
determination shall be conclusive and binding on CLC. In making each
such determination, the following factors shall, without excluding
other factors determined by the Board to be relevant, be considered
by the Board of Directors of the Company:
(i) in the case of any stock dividend or other distribution
payable in CLC Common Shares, the number of such shares issued in
proportion to the number of CLC Common Shares previously
outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase CLC Common
Shares (or securities exchangeable for or convertible into or
carrying rights to acquire CLC Common Shares), the relationship
between the exercise price of each such right, option or warrant
and the current market value (as determined by the Board of
Directors of the Company in the manner above contemplated) of a
CLC Common Share;
(iii) in the case of the issuance or distribution of any
other form of property (including without limitation any shares
or securities of CLC of any class other than CLC Common Shares,
any rights, options or warrants other than those referred to in
section 2.6(d)(ii) above, any evidences of indebtedness of CLC or
any assets of CLC), the relationship between the fair market
value (as determined by the Board of Directors of the Company in
the manner above contemplated) of such property to be issued or
distributed with respect to each outstanding CLC Common Share and
the current market value (as determined by the Board of Directors
of the Company in the manner above contemplated) of a CLC Common
Share; and
(iv) in the case of any subdivision, redivision or change of
the then outstanding CLC Common Shares into a greater number of
CLC Common Shares or the reduction, combination or consolidation
or change of the then outstanding CLC Common Shares into a lesser
number of CLC Common Shares or any amalgamation, merger,
reorganization or other transaction affecting CLC Common Shares,
the effect thereof upon the then outstanding CLC Common Shares.
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For purposes of the foregoing determinations, the current market
value of any security listed and traded or quoted on a securities
exchange shall be the weighted average of the closing prices of such
security during a period of 30 consecutive trading days ending five
(5) trading days before the date of determination on the principal
securities exchange on which such securities are listed and traded or
quoted; provided, however, that if, in the opinion of the Board of
Directors of the Company, the public distribution or trading activity
of such securities during such period does not create a market which
reflects the fair value of such securities, then the current market
value thereof shall be determined by the Board of Directors of the
Company, in good faith and in its sole discretion (with the assistance
of such reputable and qualified independent financial advisors and/or
other experts as the board may require), and provided further that any
such determination by the board shall be conclusive and binding on
CLC.
2.7 CLC not to Vote Dividend Access Shares. CLC covenants and agrees that
it will not, and will cause its subsidiaries and Affiliates and their respective
assignees not to, exercise any voting rights which may be exercisable by holders
of Dividend Access Shares from time to time pursuant to the Share Provisions or
pursuant to the provisions of the NBCA (or any successor or other corporate
statute by which the Company may in the future be governed) with respect to any
Dividend Access Shares held by it or by its subsidiaries or Affiliates in
respect of any matter considered at any meeting of holders of Dividend Access
Shares.
2.8 Due Performance. On and after the Closing Date, CLC shall duly and
timely perform, and shall cause the Company to duly and timely perform, all of
its respective obligations provided for in the Purchase Agreement.
2.9 Voluntary Dissolution. CLC agrees not to cause or approve a voluntary
dissolution of the Company prior to the Automatic Redemption Date without the
prior consent in writing of all of the Stockholders.
ARTICLE 3
GENERAL
3.1 Term. This agreement shall come into force and be effective as of the
date hereof and shall terminate and be of no further force and effect upon the
date on which no Dividend Access Shares (or securities or rights convertible
into or exchangeable for or carrying rights to acquire Dividend Access Shares)
are held by any party other than CLC and any of its Affiliates (other than the
Stockholders who shall not for this purpose be considered Affiliates of CLC).
3.2 Changes in Capital of CLC and the Company. Notwithstanding the
provisions of section 3.4, at all times after the occurrence of any event
effected pursuant
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to section 2.6 or 2.7 hereof, as a result of which either CLC Common Shares or
the Dividend Access Shares or both are in any way changed, this agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, mutatis mutandis, to all new securities into which CLC
Common Shares or the Dividend Access Shares or both are so changed and the
parties hereto shall execute and deliver an agreement in writing giving effect
to and evidencing such necessary amendments and modifications.
3.3 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 Amendments, Modifications, etc. This agreement may not be amended or
modified except by an agreement in writing executed by the Company and CLC and
approved by the holders of the Dividend Access Shares in accordance with section
10.2 of the Share Provisions.
3.5 Amendments. Notwithstanding the provisions of section 3.4, the
parties to this agreement may in writing, at any time and from time to time,
without the approval of the holders of the Dividend Access Shares, amend or
modify this agreement for the purposes of:
(a) adding to the covenants of any of the parties for the protection
of the holders of the Dividend Access Shares;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary with respect to matters or
questions which, in the determination of the senior management of each
of the Company and CLC, it may be expedient to make, provided that
each such senior management shall be of the opinion that such
amendments or modifications will not be prejudicial to the interests
of the holders of the Dividend Access Shares; or
(c) making such changes or corrections which, on the advice of
counsel to the Company and CLC, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the
boards of directors of each of the Company and CLC shall be of the
opinion that such changes or corrections will not be prejudicial to
the interests of the holders of the Dividend Access Shares.
3.6 Meeting to Consider Amendments. The Company, at the request of CLC,
shall call a meeting or meetings of the holders of the Dividend Access Shares
for the purpose of considering any proposed amendment or modification requiring
approval
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pursuant to section 3.4 hereof. Any such meeting or meetings shall be called
and held in accordance with the by-laws of the Company, the Share Provisions and
all applicable laws.
3.7 Amendments only in Writing. No amendment to or modification or waiver
of any of the provisions of this agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by all of the parties hereto.
3.8 Enurement. This agreement shall be binding upon and enure to the
benefit of the parties hereto, to the holders of Dividend Access Shares and to
their respective successors and assigns.
3.9 Notices to Parties. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(a) if to CLC at:
-
(b) if to the Company at:
-
together in all cases with a copy to,
-
-and-
-
-and-
-
Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof and if given by telecopy
shall be deemed to have been given and received on the date of confirmed receipt
thereof unless such day is not a Business Day in which case it shall be deemed
to have been given and received upon the immediately following Business Day.
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3.10 Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.11 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Quebec and the laws of Canada
applicable therein.
3.12 Attornment. CLC agrees that any action or proceeding arising out of
or relating to this agreement may be instituted in the courts of Quebec, waives
any objection which it may have now or hereafter to the venue of any such action
or proceeding, irrevocably submits to the non-exclusive jurisdiction of the said
courts in any such action or proceeding, agrees to be bound by any judgment of
the said courts and not to seek, and hereby waives, any review of the merits of
any such judgment by the courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be duly executed as of the date first above written.
COMPUTER LEARNING CENTERS, INC.
Per: /s/ Charles L. Cosgrove
---------------------------------------
Per:
---------------------------------------
DELTA COLLEGE INC.
Per: /s/ Roger Matte
---------------------------------------
Per:
---------------------------------------
/s/ Roger Matte
--------------------------------------------
ROGER MATTE
/s/ Richard Matte
--------------------------------------------
RICHARD MATTE
225
<PAGE>
/s/ Marie-Josee Matte
--------------------------------------------
MARIE-JOSEE MATTE
/s/ Dominique Matte
--------------------------------------------
DOMINIQUE MATTE
/s/ Johanne Matte
--------------------------------------------
JOHANNE MATTE
/s/ Suzanne Matte
--------------------------------------------
SUZANNE MATTE
--------------------------------------------
DOLMEN (1994) INC.
Per: /s/ Roger Matte
---------------------------------------
Per:
---------------------------------------
226
<PAGE>
Exhibit 99.3
On February 23, 1998, Computer Learning Centers, Inc. ("CLC") announced
that on February 17, 1998 it had completed the acquisition of Markerdowne
Corporation d/b/a Computer Learning Centers Paramus ("CLC Paramus"), a
privately-held provider of information technology ("IT") education and
training based in Paramus, New Jersey. The acquisition which will be
accounted for as a pooling of interests, was completed by issuing 510,287
shares of CLC Common Stock. CLC Paramus had calendar 1997 annual revenues of
approximately $6.7 million and serves approximately 800 students.
227
<PAGE>
Exhibit 99.4
On February 23, 1998, CLC announced that on February 20, 1998 it had
completed the acquisition of Delta College, a Montreal, Quebec-based,
privately-held provider of IT education and training. The transaction was
completed by means of an exchange of shares of Delta College for 548,408 shares
of CLC Common Stock. Delta College reported revenues of approximately U.S. $6.7
million (CM $9.4 million) for its fiscal year ended June 30, 1997. Delta
College serves approximately 800 students at three locations: Delta
College--Montreal in downtown Montreal; Delta College--Laval located on the
north shore of Montreal; and Delta College--Brossard, located on Montreal's
south shore, which commenced classes in January 1998.
228
