EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
CAREER EDUCATION CORPORATION,
XXXXXX ACQUISITION CORP.
and
XXXXXXX EDUCATION GROUP, INC.
Dated
March 26, 2003
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.........................................................1
ARTICLE 2 THE MERGER.........................................................10
2.1 The Merger.......................................................10
2.2 Effective Time; Filing of Certificate of Merger..................11
2.3 Articles of Incorporation........................................11
2.4 Bylaws...........................................................11
2.5 Directors and Officers...........................................11
2.6 Tax Consequences.................................................11
2.7 Additional Actions...............................................11
2.8 Time and Place of Closing........................................12
ARTICLE 3 CONVERSION OF SECURITIES; EXCHANGE OF SECURITIES...................12
3.1 Merger Consideration.............................................12
3.2 Exchange of Certificates.........................................13
3.3 Stock Transfer Books.............................................16
3.4 Existing Options of the Company..................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................18
4.1 Organization; Business...........................................18
4.2 Capitalization...................................................18
4.3 Authorization; Enforceability....................................19
4.4 No Violation or Conflict.........................................20
4.5 SEC Reports......................................................20
4.6 Company Financial Statements; Liabilities........................21
4.7 Absence of Certain Changes.......................................21
4.8 Title to Assets..................................................23
4.9 Real Estate......................................................23
4.10 Intangible Assets...............................................23
4.11 Contract Matters................................................24
4.12 Insurance.......................................................26
4.13 Litigation......................................................26
4.14 Taxes...........................................................26
4.15 Employee Benefits...............................................28
4.16 Environmental Protection........................................29
4.17 Labor and Employment Matters....................................30
4.18 Unlawful Payments and Contributions.............................30
4.19 Existing Permits, Pending Reviews and Violations of Law.........31
4.20 Regulatory Matters..............................................31
4.21 Financial Assistance Programs...................................36
4.22 Transactions with Affiliates....................................37
4.23 Vote Required...................................................37
4.24 Board Approval..................................................37
4.25 Restrictions on Business Activities.............................37
4.26 Change of Control Payments......................................37
4.27 Governmental Approvals..........................................38
4.28 Educational Agency Approval.....................................38
4.29 Registration Statement; Proxy Statement/Prospectus..............38
4.30 Tax Treatment...................................................38
4.31 Opinion of Financial Advisor....................................38
4.32 Brokers' and Finders' Fees......................................39
4.33 No Pending Acquisitions.........................................39
4.34 Takeover Laws...................................................39
4.35 Affiliate Agreements............................................39
4.36 Voting Agreement................................................39
4.37 Disclosure......................................................39
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............40
5.1 Organization; Business...........................................40
5.2 Capitalization...................................................40
5.3 Authorization; Enforceability....................................40
5.4 No Violation or Conflict.........................................41
5.5 SEC Reports......................................................41
5.6 Parent Financial Statements......................................42
5.7 Governmental Approvals...........................................43
5.8 Registration Statement; Proxy Statement/Prospectus...............43
5.9 Tax Treatment....................................................43
5.10 Operations of Merger Sub........................................43
5.11 Absence of Certain Changes......................................43
5.12 Litigation......................................................44
5.13 Existing Permits and Violations of Law..........................44
5.14 Revenue Thresholds..............................................45
5.15 Control Matters.................................................45
5.16 Educational Agency Approval.....................................46
5.17 Brokers' and Finders' Fees......................................46
5.18 Disclosure......................................................46
ARTICLE 6 COVENANTS AND AGREEMENTS...........................................46
6.1 Conduct of Business by the Company...............................46
6.2 Conduct of Business by Parent....................................49
6.3 Access...........................................................49
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6.4 Meeting of Stockholders..........................................50
6.5 Registration Statement; Proxy Statement/Prospectus...............50
6.6 Blue Sky Laws....................................................51
6.7 Listing..........................................................51
6.8 SEC Actions......................................................52
6.9 Accountants' "Comfort" Letters...................................52
6.10 Additional Reports..............................................52
6.11 Confidentiality Agreements......................................52
6.12 Regulatory and Other Approvals..................................52
6.13 No Solicitation.................................................54
6.14 Public Announcements............................................56
6.15 Expenses........................................................56
6.16 Certain Benefit Plans...........................................57
6.17 Indemnification.................................................58
6.18 Takeover Law....................................................59
6.19 Notification of Certain Matters.................................59
6.20 Disclosure Letter Supplements...................................59
6.21 Tax-Free Reorganization Treatment...............................60
6.22 Exemption from Liability under Section 16(b)....................60
6.23 Real Estate Deliveries..........................................60
6.24 Reasonable Efforts..............................................61
6.25 Affiliate Agreements............................................61
6.26 No Rights Triggered.............................................61
6.27 Shareholder Litigation..........................................61
6.28 Operational Matters.............................................61
ARTICLE 7 CONDITIONS TO THE MERGER...........................................62
7.1 Conditions to Each Party's Obligation to Effect the Merger.......62
7.2 Conditions to the Company's Obligation to Effect the Merger......63
7.3 Conditions to Parent's and Merger Sub's Obligation to Effect the
Merger...........................................................64
ARTICLE 8 TERMINATION, WAIVER AND AMENDMENT..................................67
8.1 Termination......................................................67
8.2 Effect of Termination............................................69
8.3 Termination Fee..................................................69
ARTICLE 9 MISCELLANEOUS......................................................70
9.1 No Survival of Representations and Warranties....................70
9.2 Entire Agreement.................................................70
9.3 Amendment........................................................70
9.4 Extension; Waiver................................................71
9.5 Governing Law....................................................71
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9.6 Assignment; Binding Effect.......................................71
9.7 Notices..........................................................71
9.8 Counterparts; Headings...........................................72
9.9 Interpretation...................................................72
9.10 Specific Performance............................................72
9.11 No Reliance.....................................................72
9.12 Exhibits and Disclosure Letters.................................73
9.13 No Third Party Beneficiary......................................73
9.14 Severability....................................................73
9.15 Other Remedies..................................................73
9.16 Rules of Construction...........................................73
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EXHIBITS
Exhibit 1-A Company Officers
Exhibit 1-B Parent Officers
Exhibit 4.35 Form of Company Affiliate Agreement
Exhibit 4.36 Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated March 26, 2003 (the "Agreement"),
is by and among Career Education Corporation, a Delaware corporation ("Parent"),
Xxxxxx Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Xxxxxxx Education Group, Inc., a Florida corporation
(the "Company").
INTRODUCTION
The Boards of Directors of Parent, Merger Sub and the Company have approved
and deem it advisable and in the best interests of their respective stockholders
to consummate the merger of the Company with and into Merger Sub upon the terms
and subject to the conditions set forth herein.
Parent, Merger Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
prescribe various conditions to the Merger.
In consideration of the mutual covenants, representations, warranties and
agreements contained herein, and intending to be legally bound hereby, Parent,
Merger Sub and the Company agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, and in addition to the other terms defined
herein, the following terms shall have the meanings specified:
"1986 Plan" shall have the meaning set forth in Section 4.2(b).
"1992 Plan" shall have the meaning set forth in Section 4.2(b).
"1996 Plan" shall have the meaning set forth in Section 4.2(b).
"Accrediting Body" shall mean any entity or organization, whether
governmental, governmental-chartered, private or quasi-private, whether
foreign or domestic, which engages in the granting or withholding of
accreditation of private post secondary schools or specific educational
programs in accordance with standards and requirements relating to the
performance, operations, financial condition and/or academic standards of
such schools, including the North Central Association of Colleges and
Schools, the Accrediting Council for Independent Colleges and Schools, the
Accrediting Bureau of Health Education Schools, the Commission on
Accreditation of Allied Health Education Programs, the Accreditation Board
for Engineering and Technology, the Joint Review Committee on Education in
Radiologic Technology and the Missouri State Board of Nursing.
"Acquisition Proposal" shall have the meaning set forth in Section 6.13(a).
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise, and in
any event and without limitation of the previous sentence, any Person
beneficially owning ten percent (10%) or more of the voting securities of a
second Person shall be deemed to control that person.
"Affiliate Letter" shall have the meaning set forth in Section 4.35.
"Agreement" shall have the meaning set forth in the Preamble.
"AMEX" shall mean the American Stock Exchange.
"Antitrust Laws" shall have the meaning set forth in Section 7.1(a).
"Average Share Value" shall have the meaning set forth in Section 3.1(c).
"Campus" shall have the meaning set forth in Section 4.20(g)(1).
"Closing" shall have the meaning set forth in Section 2.8.
"Closing Date" shall have the meaning set forth in Section 2.8.
"COBRA" shall have the meaning set forth in Section 4.15(e).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collar" shall have the meaning set forth in Section 3.1(c).
"Company" shall have the meaning set forth in the Preamble.
"Company Benefit Plan" shall have the meaning set forth in Section 4.15(c).
"Company Common Stock" shall mean shares of common stock, no par value per
share, of the Company.
"Company Disclosure Letter" shall have the meaning set forth in Article 4.
"Company Financial Statements" shall mean the audited Consolidated Balance
Sheets, Consolidated Statements of Operations, Consolidated Statements of
Changes in Stockholders' Equity and Consolidated Statements of Cash Flows of the
Company, and the related notes thereto, for each of the Company's fiscal years
ended on March 31, 2000, 2001 and 2002, and the unaudited Condensed Consolidated
Balance Sheet, Condensed Consolidated Statement of Operations and Condensed
Consolidated Statement of Cash Flow of the Company, and the related notes
thereto, for the nine-month period ended December 31, 2002, as each of which is
included in the Company SEC Documents.
2
"Company Insiders" shall have the meaning set forth in Section 6.22(c).
"Company Option Plans" shall have the meaning set forth in Section 4.2(b).
"Company SEC Documents" shall have the meaning set forth in Section 4.5.
"Company Stock Certificates" shall have the meaning set forth in Section
3.2(a).
"Confidentiality Agreements" shall have the meaning set forth in Section
4.33.
"Consents" shall have the meaning set forth in Section 6.12(b).
"Constituent Corporations" shall mean the Company and Merger Sub.
"Continuing Employees" shall have the meaning set forth in Section 6.16(b).
"DOE" shall mean the U.S. Department of Education.
"Educational Agency" shall mean any Person, entity or organization, whether
governmental, government chartered, tribal, private, or quasi-private, that
engages in granting or withholding Educational Approvals for or regulates
private post-secondary schools in accordance with standards relating to the
performance, operation, financial condition, and/or academic standards of such
schools, including, without limitation, any Accrediting Body, the Colorado
Commission on Higher Education, the Georgia Nonpublic Postsecondary Education
Commission, the Georgia Student Finance Commission, the Georgia Department of
Veterans Affairs, the Commonwealth of Pennsylvania Department of Education, the
Pennsylvania State Board of Private Licensed Schools, the Pennsylvania Higher
Education Assistance Agency, the Maryland Higher Education Commission, the
Florida Commission for Independent Education, the Florida Department of Veterans
Affairs, the Florida Department of Education, the Texas Workforce Commission,
the Texas Guaranteed Student Loan Corporation, the Ohio State Board of Career
Colleges and Schools, the Ohio Board of Regents, the New York State Education
Department, Bureau of Proprietary School Supervision, the New York State Higher
Education Services, the State of New York Division of Veterans' Affairs, the
Missouri Coordinating Board for Higher Education, the Missouri State Board of
Nursing, the Illinois State Board of Education, the Illinois Student Assistance
Commission, the New Jersey Department of Education, the State of New Jersey
Office of Student Financial Assistance, the State of New Jersey Department of
Military and Veterans Affairs, the Massachusetts Department of Education, the
Massachusetts Board of Higher Education Veterans' State Approving Agency, the
DOE and any student loan guaranty agency.
3
"Educational Approval" shall mean any license, permit, authorization,
certification, accreditation, or similar approval issued by any Educational
Agency.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Effective Time Share Value" shall have the meaning set forth in Section
3.1(c).
"Environmental Laws" shall mean any federal, state or local statute, Law,
rule, ordinance, code, policy, rule of common law and regulations relating to
pollution or protection of human health (including those parts of OSHA relating
to Hazardous Materials) or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
including, without limitation, Laws and regulations relating to Environmental
Releases or threatened Environmental Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as in effect
from time to time.
"Environmental Release" shall mean any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water or groundwater.
"Equipment" shall mean all machinery, equipment, boilers, furniture,
fixtures, motor vehicles, furnishings, parts, tools, office equipment, computers
and other items of tangible personal property owned or used by the relevant
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations thereunder.
"ERISA Affiliate" shall have the meaning set forth in Section 4.15(c).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange/Paying Agent" shall have the meaning set forth in Section 3.2(a).
"Exchange/Payment Fund" shall have the meaning set forth in Section 3.2(a).
"Exchange Ratio" shall have the meaning set forth in Section 3.1(c).
4
"Existing Insurance Policies" shall mean all of the insurance policies
currently in effect and owned by the relevant Person.
"Existing Options" shall mean any of the following relating to any capital
stock or other equity interest of the relevant Person, and as described in
Section 4.2(b) of the Company Disclosure Letter: (a) options or warrants
(whether vested or not) to purchase or other rights (including registration
rights), agreements, arrangements or commitments of any character to which such
relevant Person is a party relating to the issued or unissued capital stock or
other equity or phantom equity interests of such relevant Person to grant, issue
or sell any shares of the capital stock or other equity or phantom equity
interests of such relevant Person, by sale, lease, license or otherwise; (b)
rights convertible or exchangeable into or rights to subscribe for or purchase
any shares of the capital stock or other equity or phantom equity interests of
such relevant Person; (c) contracts to which such relevant Person is a party
with respect to any right to purchase, put or call for any shares of the capital
stock or other equity or phantom equity interests of such relevant Person; or
(d) stock appreciation rights, limited stock appreciation rights, performance
shares or restricted stock of such relevant Person.
"Existing Permits" shall mean those permits, licenses, accreditations,
certificates, approvals, qualifications, authorizations, and registrations
required by Law, including any Educational Approval, which the relevant Person
has or holds.
"Family" shall have the meaning set forth in Section 4.22.
"FBCA" shall mean the Florida Business Corporation Act.
"Financial Advisor" shall mean Xxxx Xxxxx Xxxx Xxxxxx, Incorporated.
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Entity" shall mean any federal, state, local or foreign
court, arbitral tribunal, administrative agency or commission or other
governmental or regulatory authority or administrative agency or commission,
including any Educational Agency.
"Hazardous Materials" shall mean: (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls above permissible
regulated levels and radon gas; (b) any chemicals, materials or substances which
are now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or words
of similar import, under any Environmental Law; and (c) any other chemical,
material, substance or waste, exposure to which as of the date hereof is
prohibited, limited or regulated by any governmental authority.
5
"HIPAA" shall have the meaning set forth in Section 4.15(e).
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Indemnified Liabilities" shall have the meaning set forth in Section
6.17(a).
"Indemnified Party(ies)" shall have the meaning set forth in Section
6.17(a).
"Institution" shall mean a main campus and its additional locations or
branches, identified by a single Office of Postsecondary Identification (OEID)
number by DOE.
"Intangible Assets" shall mean any and all (a) inventions (whether
patentable or unpatentable and whether or not reduced to practice), improvements
thereto, and United States and foreign patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof; (b)
trade names, trade dress, logos, corporate names, Internet domain names,
trademarks, and service marks and all registration applications, registrations
and renewals in connection therewith, and all goodwill associated therewith; (c)
copyrightable works and copyrights and all registration applications,
registrations, and renewals in connection therewith and all derivations and
combinations thereof; (d) computer software and databases (including data and
related documentation); (e) trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals); (f) curricula,
course materials, instructional video tapes, tape recordings and visual aids;
and (g) copies and tangible embodiments of the foregoing (in whatever form or
medium).
"IRS" shall have the meaning set forth in Section 4.15(a).
"Knowledge" shall mean the actual knowledge after reasonable inquiry of the
officers listed on Exhibit 1-A with respect to the Company and of the officers
listed on Exhibit 1-B with respect to Parent.
"Law" shall mean any federal, state, local or foreign governmental law,
rule, regulation or requirement, including any rules, regulations and orders
promulgated thereunder and any orders, decrees, consents or judgments of any
Governmental Entity and courts having the force of law, other than any
Environmental Laws.
"Leases" shall have the meaning set forth in Section 4.9(b).
"Letter of Transmittal" shall have the meaning set forth in Section 3.2(b).
6
"Lien" shall mean, with respect to any asset (real, personal or mixed): (a)
any mortgage, pledge, lien, easement, or any other form of security interest,
whether imposed by Law or by contract; and (b) the interest of a vendor or
lessor under any conditional sale agreement, financing lease or other title
retention agreement relating to such asset.
"Material Adverse Effect" means any effect, change, event, circumstance or
condition which when considered with all other effects, changes, events,
circumstances or conditions has materially and adversely affected or could
reasonably be expected to materially and adversely affect the results of
operations, financial condition, assets, liabilities, business or prospects of
Parent or the Company, in each case including its respective Subsidiaries
together with it taken as a whole, as the case may be; provided, the parties
acknowledge that certain effects, changes, events, circumstances or conditions
that constitute a Material Adverse Impact may also impact the prospects of the
Company in such a manner as to have or constitute a Material Adverse Effect on
the Company (which by example, without limitation, may be a regulatory or
accrediting violation at a School that has or constitutes a Material Adverse
Effect on the Company); provided further, however, that "Material Adverse
Effect" shall not include any effect, change, event, circumstance or condition
arising out of or attributable to general economic conditions or events,
circumstances, changes or effects affecting the securities markets or the
post-secondary education industry generally. Any reference in this Agreement to
"have a Material Adverse Effect" shall also be read to "have or constitute a
Material Adverse Effect".
"Material Adverse Impact" means any effect, change, event, circumstance or
condition which when considered with all other effects, changes, events,
circumstances or conditions has materially and adversely affected or could
reasonably be expected to materially and adversely affect the results of
operations, financial condition, assets, liabilities, business or prospects of
an individual School of the Company; provided, however, that "Material Adverse
Impact" shall not include any effect, change, event, circumstance or condition
arising out of or attributable to general economic conditions or events,
circumstances, changes or effects affecting the securities markets or the
post-secondary education industry generally. Any reference in this Agreement to
"have a Material Adverse Impact" shall also be read to "have or constitute a
Material Adverse Impact".
"Material Contract" shall have the meaning set forth in Section 4.11(a).
"Material Existing Permits" shall have the meaning set forth in Section
4.19.
"Merger" shall have the meaning set forth in Section 2.1.
"Merger Consideration" shall have the meaning set forth in Section 3.2(c).
"Merger Sub" shall have the meaning set forth in the Preamble.
7
"Option Cancellation and Termination Acknowledgement" shall have the
meaning set forth in Section 3.4(a).
"Parent" shall have the meaning set forth in the Preamble.
"Parent Common Stock" shall mean shares of common stock, par value $0.01
per share, of Parent and the associated rights under the Parent Rights Plan.
"Parent Disclosure Letter" shall have the meaning set forth in Article 5.
"Parent Financial Statements" shall mean the audited Consolidated Balance
Sheets, Consolidated Statement of Income, Consolidated Cash Flows and
Consolidated Statement of Stockholders' Equity of Parent, and the related notes
thereto, for each of the fiscal years ended on December 31, 2000, 2001 and 2002,
as each of which is included in the Parent SEC Documents.
"Parent Plans" shall have the meaning set forth in Section 6.16(b).
"Parent Rights Plan" shall mean the Rights Agreement dated as of May 28,
2002, between Parent and Computershare Investor Services, LLC.
"Parent SEC Documents" shall have the meaning set forth in Section 5.5.
"Parent Stock Certificates" shall have the meaning set forth in Section
3.2(a).
"Party" shall mean each of Parent, Merger Sub and the Company.
"Permitted Liens" shall have the meaning set forth in Section 4.8.
"Per Option Merger Consideration" shall have the meaning set forth in
Section 3.4(a).
"Per Share Merger Consideration" shall have the meaning set forth in
Section 3.1(c).
"Per Share Stock Consideration Value" shall have the meaning set forth in
Section 3.1(c).
"Person" shall mean a natural person, corporation, limited liability
company, association, joint stock company, trust, partnership, governmental
entity, agency or branch or department thereof, or any other legal entity.
"Pfenniger Option" shall have the meaning set forth in Section 4.2(b).
"Policy Guidelines" shall have the meaning set forth in Section 4.20(f)(1).
8
"Proxy Statement/Prospectus" shall have the meaning set forth in Section
6.5(a).
"Registered Intangible Assets" shall have the meaning set forth in Section
4.10.
"Registration Statement" shall have the meaning set forth in Section 4.29.
"Regulator" shall mean any federal, state or local administrative agency or
commission, or other governmental or regulatory authority or administrative
agency or commission, including any Educational Agency.
"Rental Real Estate" shall have the meaning set forth in Section 4.9(b).
"Returns" shall have the meaning set forth in Section 4.14(a).
"School" shall mean any school location regulated as such by the DOE, any
Educational Agency or other Governmental Entity and owned or operated by the
Company or any of its Subsidiaries or Parent or any of its Subsidiaries, as
applicable.
"SEC" shall mean the Securities and Exchange Commission.
"Section 16 Information" shall have the meaning set forth in Section
6.22(b).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Special Meeting" shall have the meaning set forth in Section 6.4.
"Stock Market" shall mean the Nasdaq National Market.
"Stockholders" shall mean all Persons owning any shares of Company Common
Stock.
"Student Financial Assistance Programs" shall mean those programs of
federal student financial assistance administered pursuant to Title IV and its
implementing regulations, as well as any state or other government-sponsored
student assistance programs.
"Subsidiary" shall mean any entity, at least 50% of the outstanding equity
of which (or any class or classes, however designated, having ordinary voting
power for the election of members of the board of directors of such entity)
shall at the time be owned by the relevant Person directly or through one or
more Persons which are themselves Subsidiaries.
9
"Superior Proposal" shall have the meaning set forth in Section 6.13(b).
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Takeover Laws" shall have the meaning set forth in Section 4.34.
"Tax" or "Taxes" shall mean any and all federal, state, local and foreign,
taxes, assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and alternative or add-on
minimum, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, social security, excise and property taxes, together with
all interest, penalties and additions imposed with respect to such amounts,
whether disputed or not, and including any liability for taxes of any other
Person.
"Tax Agreement" shall mean any agreement to which any Party or any
Subsidiary of any Party is a party under which such Party or such Subsidiary
could reasonably be expected to be liable to another Person under such agreement
in respect of Taxes payable by such other Person to any taxing authority or
other Person.
"Third Party' shall have the meaning set forth in Section 6.13(b).
"Title IV" shall mean Subchapter IV of the Higher Education Act of 1965, as
amended, 20 U.S.C.A. ss.1070 et seq. and any amendments or successor statutes
thereto.
"Title IV Program" shall mean any program of student financial assistance
administered pursuant to Title IV.
"Voting Agreement" shall have the meaning set forth in Section 4.36.
ARTICLE 2
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement and in accordance with FBCA, at the Effective Time, the Company
shall be merged with and into Merger Sub (the "Merger"), the separate corporate
existence of the Company shall cease and Merger Sub shall (a) be the surviving
corporation in the Merger (in such capacity, the "Surviving Corporation"); (b)
succeed to and assume all the rights and obligations of the Company in
accordance with FBCA; and (c) continue its corporate existence under the laws of
the State of Florida. The Merger shall be pursuant to the provisions of, and
shall be with the effect provided in FBCA. In accordance with FBCA, all of the
rights, privileges, property, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all of the debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
10
2.2 Effective Time; Filing of Certificate of Merger. Subject to the terms
of this Agreement, on the Closing Date (as hereinafter defined) the Parties
shall cause the Merger to be consummated by filing properly executed Articles of
Merger or other appropriate documents with the Secretary of State of the State
of Florida in accordance with the provisions of FBCA. The Merger shall become
effective at 5:00 p.m., Eastern Time, on the date of filing of the Articles of
Merger with the Secretary of State of the State of Florida or at such later date
or time as Merger Sub and the Company shall agree and specify in the Articles of
Merger (the "Effective Time").
2.3 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time, until thereafter amended in accordance with its terms and FBCA.
2.4 Bylaws. At the Effective Time, the Bylaws of the Surviving Corporation
shall be the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time, until thereafter amended in accordance with their terms and
FBCA.
2.5 Directors and Officers. At the Effective Time, the directors and the
officers of Merger Sub immediately prior to the Effective Time shall be the
initial directors and officers of the Surviving Corporation. Each director and
officer of the Surviving Corporation shall hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation until his or
her death, resignation or removal or a successor is duly elected or appointed
and qualified.
2.6 Tax Consequences. It is intended that the Merger shall qualify as a
"reorganization" under Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for purposes of Section 354 of the Code.
2.7 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any further assignments or assurances in law or any
other acts are necessary or desirable (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, title to and possession of any
property or right of either Constituent Corporation acquired or to be acquired
by reason of, or as a result of, the Merger, or (b) otherwise to carry out the
purposes of this Agreement, then, subject to the terms and conditions of this
Agreement, each such Constituent Corporation and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully authorized in the
name of either Constituent Corporation to take any and all such action.
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2.8 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place (a) at the offices of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxx
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx on a date and at a time to be
specified by the parties, which shall be no later than the second business day
following satisfaction or waiver of all of the conditions set forth in Article
7, or (b) at such other place, at such other time or on such other date as the
parties may mutually agree (the date of the Closing is hereinafter sometimes
referred to as the "Closing Date"). The Closing shall be deemed to be effective
concurrently with the Effective Time. All proceedings to be taken and all
documents to be executed at the Closing shall be deemed to have been taken,
delivered, executed and filed simultaneously and simultaneously with the
Effective Time, and no proceeding shall be deemed taken nor documents deemed
executed or delivered until all have been taken, delivered, executed and filed.
ARTICLE 3
CONVERSION OF SECURITIES; EXCHANGE OF SECURITIES
3.1 Merger Consideration. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, Merger Sub, the Company or the
holders of any of the following securities:
(a) Each issued and outstanding share of common stock, par value $0.01
per share, of Merger Sub immediately prior to the Effective Time shall
remain outstanding and unchanged following the Effective Time as shares of
common stock of the Surviving Corporation.
(b) Each share of Company Common Stock owned by the Company, Parent,
Merger Sub, or any Subsidiary of Parent or of the Company immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof and no stock of Parent, cash or other consideration
shall be delivered in exchange therefor.
(c) Subject to the other provisions of this Section 3.1, each share of
Company Common Stock that is issued and outstanding immediately prior to
the Effective Time (excluding any shares of Company Common Stock canceled
pursuant to Section 3.1(b)), shall by virtue of the Merger and without any
action on the part of the holder thereof become and be converted into the
right to receive the following (the "Per Share Merger Consideration"): (1)
$6.00 in cash without interest and (2) the number (the "Exchange Ratio") of
shares of Parent Common Stock determined by dividing $8.25 (the "Per Share
Stock Consideration Value") by the average closing price of the Parent
Common Stock as quoted on the Stock Market (as reported in the Wall Street
Journal, Midwest Edition) for the twenty (20) trading days (the "Average
Share Value") ending on and including the trading day two (2) trading days
prior to the day of the Effective Time (the "Effective Time Share Value").
Notwithstanding the foregoing, for purposes of calculating the Exchange
Ratio, if the Effective Time Share Value is calculated to be less than
$44.00 but greater than or equal to $37.00, then the Per Share Stock
Consideration Value will be reduced by $0.10 per dollar below $44.00,
subject to proportionate adjustment for fractions of a dollar, and if the
Effective Time Share Value is calculated to be more than $58.00 but less
than or equal to $65.00, then the Per Share Stock Consideration Value will
be increased by $0.10 per dollar above $58.00, subject to proportionate
adjustment for fractions of a dollar; provided, however, subject to the
provisions of Section 8.1(c)(2) and 8.1(d)(6) hereof, notwithstanding the
foregoing, for purposes of calculating the Exchange Ratio, if the Effective
Time Share Value is less than $37.00, the Exchange Ratio shall be fixed at
0.204 and if the Effective Time Share Value is more than $65.00, the
Exchange Ratio shall be fixed at 0.138 (collectively, the "Collar"). No
fractional shares of Parent Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 3.2(e). For
purposes of this Agreement, all calculations made with respect to Parent
Common Stock shall be rounded to the nearest one thousandth of a share.
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(d) At the Effective Time, holders of Company Common Stock shall cease
to be, and shall have no rights as, Stockholders, other than to receive any
dividend or other distribution with respect to such Company Common Stock
with a record date occurring on or before the Effective Time (permitted
under Section 6.1 hereof) and the consideration provided under this Article
3. After the Effective Time, there shall be no transfers on the stock
transfer books of the Company of shares of Company Common Stock.
(e) If, during or after determination of the Exchange Ratio but prior
to or simultaneously with the Effective Time, the outstanding shares of
Parent Common Stock shall have been changed into a different number of
shares, by reason of any reclassification, stock dividend, stock split or
combination of shares (or if during such period a record date with respect
to any of the foregoing should occur), the Exchange Ratio shall be
correspondingly adjusted to reflect such reclassification, stock dividend,
stock split or combination of shares.
3.2 Exchange of Certificates.
(a) At or prior to the Effective Time, Parent shall deposit, or shall
cause to be deposited, with Computershare Trust Company of New York, or
such other bank or trust company designated by the Company and who is
reasonably satisfactory to Parent (the "Exchange/Paying Agent") for the
benefit of the holders of certificates representing the shares of Company
Common Stock ("Company Stock Certificates") for exchange and payment in
accordance with this Article 3, through the Exchange/Paying Agent, (1)
certificates representing the shares of Parent Common Stock ("Parent Stock
Certificates"), (2) cash, equal to the amount payable to holders of Company
Common Stock pursuant to Section 3.1 and the amount payable to holders of
Existing Options to acquire Company Stock pursuant to Section 3.4 and (3)
an estimated amount of cash to be paid in lieu of fractional shares (such
cash and such Parent Stock Certificates, together with any dividends or
distributions with respect thereto (without any interest thereon), being
hereinafter referred to as the "Exchange/Payment Fund") to be paid pursuant
to this Article 3 in exchange for outstanding shares of Company Common
Stock. The Exchange/Payment Fund shall not be used for any other purpose.
The Exchange/Paying Agent shall invest any cash included in the
Exchange/Payment Fund, as directed by Parent, on a daily basis; provided,
however, that all such investments shall be in (1) obligations of, or
guaranteed by, the United States of America having a maturity of three (3)
months or less, (2) commercial paper obligations receiving the highest
rating from either Xxxxx'x Investors Services, Inc. or Standard and Poor's
Corporation or (3) certificates of deposit of federally insured commercial
banks with capital exceeding $1.0 billion having a maturity of three (3)
months or less. Any interest and other income resulting from such
investments shall be paid to Parent. Any losses resulting from such
investments shall be the sole responsibility of Parent and shall not in any
way limit Parent's obligations to holders of Company Stock Certificates.
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(b) Prior to or upon the Effective Time, Parent will instruct the
Exchange/Paying Agent to mail as soon as reasonably practicable after the
Effective Time, but in no event later than five (5) business days after the
Exchange/Paying Agent receives an electronic copy of the Company's stock
records as of the Effective Time, suitable for the Exchange/Paying Agent's
use, from the Company's transfer agent, to each holder of record of Company
Stock Certificates who has not previously surrendered his or her Company
Stock Certificates (other than holders of any shares of Company Common
Stock cancelled pursuant to Section 3.1(b)): (1) a letter of transmittal
reasonably acceptable to the Company (which shall specify that delivery
shall be effected, and risk of loss and title to such holder's Company
Stock Certificates shall pass, only upon proper delivery of the Company
Stock Certificates to the Exchange/Paying Agent and shall be in such form
and have such other provisions as to which Parent and the Company may
agree) and (2) instructions reasonably acceptable to the Company for use in
effecting the surrender of the Company Stock Certificates in exchange for
Parent Stock Certificates and cash in accordance with Section 3.1
(collectively, the "Letter of Transmittal").
(c) Upon the later of the Effective Time and the surrender of a
Company Stock Certificate for cancellation (or the affidavits and
indemnification regarding the loss or destruction of such certificates
reasonably acceptable to Parent) to the Exchange/Paying Agent together with
the Letter of Transmittal, duly executed, and such other customary
documents as may be required pursuant thereto, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor, and
the Exchange/Paying Agent shall deliver in accordance with the Letter of
Transmittal: (1) Parent Stock Certificates representing that number of
whole shares of Parent Common Stock which such holder has the right to
receive in respect of the shares of Company Common Stock formerly evidenced
by such Company Stock Certificate in accordance with Section 3.1, (2) cash
which such holder has the right to receive in respect of the shares of
Company Common Stock formerly evidenced by such Company Stock Certificate
in accordance with Section 3.1 and (3) cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section
3.2(e) (the shares of Parent Common Stock and cash described in clauses
(1), (2) and (3) being collectively referred to as the "Merger
Consideration"), and the Company Stock Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of the
Company, a certificate evidencing the proper number of shares of Parent
Common Stock and/or cash may be issued and/or paid in accordance with this
Article 3 to a transferee if the Company Stock Certificate evidencing such
shares is presented to the Exchange/Paying Agent, accompanied by all
documents reasonably required to evidence and effect such transfer and by
evidence reasonably acceptable to the Exchange/Paying Agent that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 3.2, each Company Stock Certificate shall be
deemed at any time after the Effective Time to evidence only the right to
receive upon such surrender the Merger Consideration together with any
dividends or other distributions declared or paid on shares of Parent
Common Stock after the Effective Time.
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(d) All shares of Parent Common Stock issued and cash paid upon the
surrender for exchange of Company Stock Certificates in accordance with the
terms of this Article 3 shall be deemed to have been issued and paid,
respectively, in full satisfaction of all rights pertaining to the shares
of Company Common Stock theretofore represented by such Company Stock
Certificates.
(e) Subject to this Section 3.2(e), no certificates or scrip
evidencing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of Company Stock Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Parent. In lieu of any such fractional
shares, each holder of shares of Company Common Stock, upon surrender of a
Company Stock Certificate for exchange pursuant to this Section 3.2, shall
be paid an amount in cash (without interest), rounded up to the nearest
cent, determined by multiplying (1) the Effective Time Share Value by (2)
the fractional interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Common Stock then held of
record by such holder). The Exchange/Paying Agent shall promptly pay such
amounts to such holders of Company Stock Certificates subject to, and in
accordance with, the terms of Section 3.2(c). Any payment received by a
holder of shares of Company Common Stock with respect to fractional share
interests is merely intended to provide a mechanical rounding off of, and
is not separately bargained for, consideration. Notwithstanding the
foregoing, if more than one Company Stock Certificate shall be surrendered
for the account of the same holder, the number of shares of Parent Common
Stock to be issued to such holder in exchange for the Company Stock
Certificates which have been surrendered shall be computed on the basis of
the aggregate number of shares represented by all of the Company Stock
Certificates surrendered for the account of such holder.
(f) Any portion of the Exchange/Payment Fund which remains
undistributed to the holders of the Company Stock Certificates for twelve
(12) months after the Effective Time shall be delivered by the
Exchange/Paying Agent to Parent, upon demand, and any holders of Company
Stock Certificates who have not theretofore complied with this Article 3
shall thereafter look only to Parent for payment of their claim for the
Merger Consideration.
(g) None of Parent, the Company, Merger Sub or the Exchange/Paying
Agent shall be liable to any Person in respect of any shares of Parent
Common Stock or cash from the Exchange/Payment Fund in each case delivered
to a public official pursuant to any applicable abandoned property, escheat
or similar law. If any Company Stock Certificate shall not have been
surrendered prior to seven (7) years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration
and any cash payable to the holder of such Company Stock Certificate
pursuant to Section 3.2(e) would otherwise escheat to, or become the
property of, any Governmental Entity), any such Merger Consideration shall,
to the extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
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(h) Parent and Merger Sub shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock or Existing Options of the Company
such amounts as Parent or Merger Sub is required to deduct and withhold
with respect to the making of such payment under the Code or any provision
of Tax Law. To the extent that amounts are so withheld by Parent or Merger
Sub, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock or Existing Options of the Company in respect of which such deduction
and withholding was made by Parent or Merger Sub.
(i) If any Company Stock Certificate shall have been lost, stolen or
destroyed, upon the making of a customary affidavit of that fact by the
Person claiming such Company Stock Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by
such Person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made
against it with respect to such Company Stock Certificate, the
Exchange/Paying Agent will issue in exchange for such lost, stolen or
destroyed Company Stock Certificate the Merger Consideration, pursuant to
this Article 3.
(j) In the event this Agreement is terminated without the occurrence
of the Effective Time, Parent shall, or shall cause the Exchange/Paying
Agent to, return promptly, but, in any event, within three (3) business
days after such termination, any Company Stock Certificates theretofore
submitted or delivered to the Exchange/Paying Agent, without charge to the
Person who submitted such Company Stock Certificates.
3.3 Stock Transfer Books. After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Stock Certificates are presented to the Surviving Corporation or the
Exchange/Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Article 3, except as otherwise required by Law.
3.4 Existing Options of the Company.
(a) Prior to the Closing Date, the Company shall take all actions necessary
under and legally permissible in accordance with the terms of the 1996 Plan and
the Pfenniger Option (and use its commercially reasonable efforts with respect
to the 1986 Plan and 1992 Plan), including without limitation, satisfying any
applicable notice requirements, so that each Existing Option to purchase Company
Common Stock granted by the Company which is outstanding at the Effective Time,
whether vested or unvested, shall be cancelled effective at and as of the
Effective Time, without any payment therefor except as otherwise provided for
herein. In consideration for the cancellation of each Existing Option to
purchase Company Common Stock, the holder of each such Existing Option to
purchase Company Common Stock will be entitled to receive from Parent, promptly
after the Closing, cash equal to the product of (1) the positive difference, if
any, of the Per Share Merger Consideration, expressed in terms of cash (with the
portion of the Per Share Merger Consideration payable in Parent Common Stock
being first determined in accordance with Section 3.1(c) including the Collar,
but then valued at the actual Effective Time Share Value, without regard to the
16
Collar) less the exercise price of each such Existing Option, multiplied by (2)
the total number of shares of Company Common Stock (whether vested or unvested)
covered by such Existing Option to purchase Company Common Stock (the "Per
Option Merger Consideration"), net of any withholding obligations; provided,
however, that prior to payment of the Per Option Merger Consideration to a
holder of an Existing Option to purchase Company Common Stock, such holder must
have (i) delivered such Existing Option to Purchase Company Common Stock (or a
duly executed affidavit of loss in a form reasonably acceptable to Parent) and
(ii) duly authorized, executed and delivered to the Exchange/Paying Agent an
acknowledgment of cancellation and termination or such other document necessary,
or customarily required, in a form which shall be reasonably satisfactory to
Parent and the Company, indicating such holder's acknowledgment that, except for
such holder's rights to receive the consideration set forth in this Section
3.4(a), any and all claims with respect to any Existing Option to purchase
Company Common Stock shall be fully released and terminated (the "Option
Cancellation and Termination Acknowledgment"). Prior to or upon the Effective
Time, Parent shall instruct the Exchange/Paying Agent to mail as soon as
reasonably practicable after the Effective Time, but in no event later than five
(5) business days after the Exchange/Paying Agent receives an electronic copy of
the Company's option records as of the Effective Time, suitable for the
Exchange/Paying Agent's use, to each Existing Option holder who has not
previously exercised his or her Existing Option to purchase Company Common
Stock: (1) a letter of transmittal reasonably acceptable to the Company (which
shall specify that delivery shall be effected only upon proper delivery of (i)
the Existing Option to purchase Company Common Stock (or a duly executed
affidavit of loss in a form reasonably acceptable to Parent) and (ii) the duly
executed Option Cancellation and Termination Acknowledgement, to the
Exchange/Paying Agent and shall be in such form and have such other provisions
as to which Parent and the Company may agree) and (2) instructions reasonably
acceptable to the Company for use in effecting the surrender, cancellation and
termination of the Existing Option to purchase Company Common Stock in exchange
for cash in accordance with this Section 3.4(a).
(b) As of the Effective Time, all Company Option Plans shall terminate
and all rights under any provision of any other plan, program or
arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any of its Subsidiaries
shall be cancelled. At and after the Effective Time, no Person shall have
any right under the Company Option Plans or any other plan, program or
arrangement with respect to equity securities of Parent, the Surviving
Corporation or any of their respective subsidiaries (other than as set
forth in Section 3.4(a) above). Without prejudice to the rights of the
holders of Existing Options to purchase Company Common Stock to receive the
consideration set forth in Section 3.4(a) above, the Company shall take all
such actions necessary under the 1996 Plan and the Pfenniger Option (and
use its commercially reasonable efforts with respect to the 1986 Plan and
1992 Plan) to terminate each such Company Option Plan with respect to
Existing Options as of the Effective Time.
17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject only to the exceptions specifically disclosed in writing in the
disclosure letter dated as of the date hereof, certified by a duly authorized
officer, in his capacity as such, of the Company and delivered to Parent by the
Company pursuant to, and as an integral part of, this Agreement (the "Company
Disclosure Letter"), which specifically identifies the Section and subsection
numbers hereof to which the disclosures pertain, as follows:
4.1 Organization; Business.
(a) Organization. The Company and each of its Subsidiaries is a corporation
duly and validly organized and existing under the Laws of the jurisdiction of
its incorporation and is qualified to do business as a foreign corporation and
in good standing in the jurisdictions where the ownership or leasing of property
or the conduct of its business requires qualification as a foreign corporation,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect on the Company. The Company has made available to
Parent true and complete copies of the charters and bylaws, each amended to the
date hereof, of the Company and each of its Subsidiaries.
(b) Powers. The Company and each of its Subsidiaries has all requisite
corporate power and authority to carry on its business as it is now conducted
and to own, lease and operate its current assets and properties.
4.2 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company consists
solely of 100,000,000 shares of Company Common Stock, of which 14,423,553 shares
were issued and outstanding as of March 24, 2003. All of the outstanding capital
stock of the Company is duly authorized, validly issued, fully paid and
nonassessable and was not issued in violation of any preemptive rights.
(b) Options. As of the date hereof, the Company had reserved (1) 2,945,800
shares of Company Common Stock for issuance under the Xxxxxxx Education Group,
Inc. 1996 Stock Option Plan (the "1996 Plan"), under which as of March 24, 2003
options were outstanding for 2,574,737 shares of Company Common Stock, (2)
1,188,432 shares of Company Common Stock for issuance under the Xxxxxxx
Education Group, Inc. 1992 Incentive Stock Option Plan (the "1992 Plan"), under
which as of March 24, 2003 options were outstanding for 707,339 shares of
Company Common Stock and (3) 623,000 shares of Company Common Stock for issuance
under the Xxxxxxx Education Group, Inc. 1986 Directors and Consultants Stock
Option Plan (the "1986 Plan"), under which as of March 24, 2003 options were
outstanding for 290,000 shares of Company Common Stock. The Company has also
issued an option for 185,000 shares of Company Common Stock to Xxxxxxx X.
Xxxxxxxxx, Xx. (the "Pfenniger Option"). The 1996 Plan, 1992 Plan, 1986 Plan and
the Pfenniger Option are collectively referred to herein as the "Company Option
Plans." Except as set forth in the Company Option Plans or in Section 4.2(b) of
18
the Company Disclosure Letter, the Company is not party to or bound by any
obligation to accelerate the vesting of any Existing Option. All shares of
Company Common Stock subject to issuance pursuant to the Company Option Plans,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable. Section 4.2(b) of the Company Disclosure Letter includes a
list for each outstanding option as of March 24, 2003 and will include a list as
of the Effective Time to reflect exercises between March 24, 2003 and the
Effective Time, of the following: (1) the name of the holder of such option, (2)
the number of shares subject to such option and (3) the exercise price of such
option. No options have been granted under the Company Option Plans between
March 24, 2003 and the date hereof. Except as listed in Section 4.2(b) of the
Company Disclosure Letter, there are no options, warrants, conversion rights or
other rights to subscribe for or purchase, or other contracts with respect to,
any capital stock of the Company to which the Company is a party and there are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights granted by the Company. To the Knowledge of the
Company, except for the Voting Agreement there are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
(c) Subsidiaries; Investments. Section 4.2(c) of the Company Disclosure
Letter contains a true and complete list of the Company's Subsidiaries and the
capitalization and current ownership of each such Subsidiary. Except as set
forth in Section 4.2(c) of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries owns (directly or indirectly) any equity or similar
interest in, or any interest convertible into or exercisable or exchangeable for
any interest in, any Person.
(d) Voting Debt. As of the date of this Agreement, (1) no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
under ordinary circumstances are issued or outstanding and (2) there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company.
(e) Listings. The Company Common Stock is listed on the AMEX. Except as set
forth in the preceding sentence, the Company's securities are not listed or
quoted for trading on any U.S. domestic or foreign securities exchange.
4.3 Authorization; Enforceability.
The execution, delivery and performance by the Company of this Agreement
are, subject to the terms hereof, within the corporate power and authority of
the Company and, subject to the provisions hereof, have been duly authorized by
the Board of Directors of the Company. Except for (a) the approval of
Stockholders as required by Law and the Company's Articles of Incorporation, as
described in Section 4.23 hereof and (b) the filing of Articles of Merger and
other appropriate documents as required by Law and as described in Section 2.2
hereof, no other corporate proceeding or action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the Merger and the other transactions
contemplated hereby. Assuming that such documents have been or will be duly and
19
validly executed and delivered by or on behalf of the respective other party
thereto, which party has the power to enter into and perform its obligations,
this Agreement is, and the other documents and instruments required by this
Agreement to be executed and delivered by the Company will be, when executed and
delivered by the Company, the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws generally affecting the
rights of creditors and subject to general equity principles.
4.4 No Violation or Conflict.
Subject to the receipt of the clearance or expiration or termination of the
waiting period described in Section 7.1(a) and the approvals described in
Section 7.1(b), the execution and delivery of this Agreement by the Company and
all documents and instruments required by this Agreement to be executed and
delivered by the Company do not, and the consummation by the Company of the
Merger and the other transactions contemplated hereby and the Company's
compliance with the provisions hereof will not, (a) result in any violation of
any provision of the Articles of Incorporation or Bylaws of the Company or the
charter or bylaws of any of the Company's Subsidiaries, (b) except as set forth
in Section 4.4 of the Company Disclosure Letter, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, any contract of the Company or its
Subsidiaries, or result in the creation of any Lien upon any of the properties
or assets of the Company or its Subsidiaries other than Permitted Liens, (c)
except as set forth in Section 4.4 of the Company Disclosure Letter, violate any
Existing Permits of the Company or its Subsidiaries or the Schools or any Law
applicable to the Company or its Subsidiaries or the Schools or their properties
or assets, or (d) violate any standard or requirement of any Educational Agency
of any of the Schools of the Company or its Subsidiaries, with the exception of
the requirements of the Educational Agencies listed in Section 4.4 of the
Company Disclosure Letter to seek approval or interim approval prior to the
Closing, and other than, in the case of clauses (b), (c) and (d), any such
violations, defaults, rights, losses or Liens that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company or could not reasonably be expected to affect adversely the ability
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement.
4.5 SEC Reports.
The Company has filed with the SEC all forms, reports, schedules,
statements and other documents required to be filed by it since January 1, 2000,
under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended prior to the date
hereof, as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules included
therein, (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, at such time of filing. Except as set forth on Section 4.5 of the
Company Disclosure Letter, as of the date hereof, there are no amendments or
20
modifications to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act or the
Exchange Act or any other agreements, documents or other instruments, which have
not yet been filed with the SEC but which are or will be required to be filed by
the Company. To the Knowledge of the Company, (x) there exist no outstanding SEC
comments with respect to any of the Company SEC Documents and (y) there are no
SEC inquiries or investigations, other inquiries or investigations by any
Governmental Entity or internal investigations pending or threatened, in each
case regarding any accounting practices of the Company or any of its
Subsidiaries.
4.6 Company Financial Statements; Liabilities.
(a) Company Financial Statements. The Company Financial Statements comply
in all material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto),
except that the unaudited Company Financial Statements do not reflect normal
year-end adjustments and other adjustments described therein and do not contain
footnote disclosure of the type associated with audited financial statements
(none of which, if reflected or contained, would indicate a Material Adverse
Effect on the Company). The Company Financial Statements fairly present in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of the date set forth on each of such Company Financial
Statements and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the periods indicated on each of the Company
Financial Statements.
(b) Liabilities. Except (1) for normal or ordinary recurring liabilities
incurred in the ordinary course of business consistent with past practice, (2)
for liabilities incurred in connection with this Agreement or (3) for
liabilities set forth on the December 31, 2002 balance sheet, including the
notes thereto, included in the Company Financial Statements, since December 31,
2002, the Company has not incurred any liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise) that either (i) would be
required to be reflected or reserved against in a balance sheet of the Company
prepared in accordance with GAAP as applied in preparing the March 31, 2002
balance sheet included in the Company Financial Statements, or (ii) could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
4.7 Absence of Certain Changes.
Since December 31, 2002, the Company has conducted its business in a manner
consistent with past practice and there has not been any:
(a) Material Adverse Effect experienced by the Company;
(b) transactions by the Company or its Subsidiaries outside the ordinary
course of business of the Company or its Subsidiaries, except for the
transactions contemplated by this Agreement;
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(c) declaration or payment of any dividend or any distribution in respect
of the capital stock of the Company or its Subsidiaries (other than
distributions to the Company) or any direct or indirect redemption, purchase or
other acquisition of any such stock by the Company;
(d) payments to any Stockholder, except pursuant to arrangements described
in the Company SEC Documents filed prior to the date of this Agreement pursuant
to Item 404 of Regulation S-K of the SEC or in connection with transactions in
the ordinary course of business upon commercially reasonable terms consistent
with past practice of the Company;
(e) sale, lease to any third party, transfer or assignment of material
assets, tangible or intangible, of the Company or its Subsidiaries other than in
the ordinary course of business consistent with past practice upon terms no less
favorable to the Company than those that could be obtained in an arm's-length
transaction and other than the disposition of obsolete or unusable property;
(f) except as set forth in Section 4.7(f) of the Company Disclosure Letter,
capital expenditure (or series of related capital expenditures) by the Company
or its Subsidiaries either involving more than $250,000 or outside the ordinary
course of business;
(g) material damage, destruction, or loss (whether or not covered by
insurance) from fire or other casualty to the tangible property of the Company
or its Subsidiaries;
(h) material increase in the base salary of any officer or employee of the
Company or its Subsidiaries, or adoption, amendment, modification or termination
of any bonus, profit-sharing, incentive, severance, change-of-control or other
similar plan for the benefit of any of directors, officers or employees of the
Company or its Subsidiaries except as consistent with past practices;
(i) change by the Company or any of its Subsidiaries in their respective
accounting methods, principles or practices, except as required by the rules and
regulations of the SEC or GAAP;
(j) revaluation by the Company or any of its Subsidiaries of any of their
assets, including, without limitation, writing down the value of deferred tax
assets or writing off notes or accounts receivable other than in the ordinary
course of business in amounts that are not, individually or in the aggregate,
material to the business;
(k) labor dispute or charge of unfair labor practice which could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company, or to the Knowledge of the Company, any activity or proceeding
by a labor union or representative thereof to organize any employee of the
Company or any of its Subsidiaries or any campaign being conducted to solicit
authorization from employees to be represented by such labor union;
(l) action or event that would have required the consent of Parent pursuant
to Section 6.1 had such action or event occurred after the date of this
Agreement; or
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(m) binding commitment or promise, whether binding or not, to enter into
any binding commitment relating to any of the foregoing entered into by the
Company or its Subsidiaries.
4.8 Title to Assets.
Each of the Company and its Subsidiaries has valid title to its tangible
assets necessary for the conduct of its business, free and clear of any and all
Liens, except (a) as reflected on the Company balance sheet as of December 31,
2002, included in the Company Financial Statements, (b) Liens for Taxes not yet
due and payable, (c) statutory Liens securing payments not yet due and (d) Liens
and encumbrances set forth in Section 4.8 of the Company Disclosure Letter
(collectively, "Permitted Liens").
4.9 Real Estate.
(a) Owned Real Estate. Neither the Company nor any of its Subsidiaries owns
any real property.
(b) Rental Real Estate. Section 4.9(b) of the Company Disclosure Letter
lists all real property that is leased to, used or occupied by the Company or
its Subsidiaries in connection with their business but not owned by the Company
or its Subsidiaries (the "Rental Real Estate") and the leases, subleases and
agreements pertaining to such Rental Real Estate (the "Leases"), correct and
complete copies of which have been made available to the Parent. Assuming that
the Leases have been duly and validly executed and delivered by or on behalf of
the respective other party thereto, which party has the power to enter into and
perform its obligations thereunder, the Leases are legal, valid, binding,
enforceable and in full force and effect, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws generally affecting the rights of creditors and subject to general
equity principles. Except for the Leases, there are no leases, subleases,
licenses, concessions, or other agreements to which the Company or its
Subsidiaries is a party, whether written or oral, granting to any Person the
right of use or occupancy of any portion of the Rental Real Estate. Subject to
obtaining the necessary consents set forth in Section 4.9(b) of the Company
Disclosure Letter, the transactions contemplated hereby will not affect the
validity, enforceability or continuity of any of the Leases.
4.10 Intangible Assets.
(a) The Company and each of its Subsidiaries owns all right, title and
interest in, or possesses valid licenses or other rights to use, all material
Intangible Assets necessary to conduct its business as now conducted, free and
clear of any Liens (other than Permitted Liens) and without obligation to pay
any royalties or other fees with respect thereto; (b) there are no claims,
demands or proceedings instituted, pending, or, to the Knowledge of the Company,
threatened in writing by any Person contesting or challenging the right of the
Company or its Subsidiaries to use any of their material Intangible Assets; (c)
each trademark registration, service xxxx registration, Internet domain name
registration, copyright registration and patent (collectively, "Registered
Intangible Assets") which is owned by the Company or one or more of its
Subsidiaries has been maintained in good standing; and any such material
Registered Intangible Assets licensed to the Company or its Subsidiaries have,
to the Company's Knowledge, been maintained in good standing; (d) to the
23
Knowledge of the Company, no Person is infringing or otherwise violating the
Intangible Assets of the Company or any of its Subsidiaries; (e) neither the
Company nor any of its Subsidiaries is using any material Intangible Assets of
any other Person without such Person's license, permission or consent; (f)
neither the Company nor any of its Subsidiaries has infringed or otherwise
violated, or is infringing or otherwise violating, any material Intangible
Assets of any other Persons; (g) neither the Company nor any of its Subsidiaries
is in material violation or in material default of any license or other
agreement granting rights in respect of any Intangible Assets, including any
licenses for use of software; and (h) the consummation of the Merger and the
other transactions contemplated by this Agreement in accordance with the terms
hereof will not impair materially the validity, enforceability, ownership or
right of the Company or its Subsidiaries to use its Intangible Assets.
4.11 Contract Matters.
(a) Agreements, Contracts and Commitments. Except as set forth in the
Exhibits to the Company SEC Documents filed prior to the date of this Agreement
or as set forth in Section 4.11 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party to, nor are their assets bound
by, any Material Contract. For purposes of this Agreement, "Material Contract"
means:
(1) any collective bargaining agreements;
(2) any employment or consulting agreement, contract or binding
commitment providing for future compensation or payments in
excess of $75,000 in any year not terminable by the Company or
its Subsidiaries on thirty (30) days notice without liability,
except to the extent general principles of wrongful termination
or other employment law may limit the Company's or Subsidiary's
ability to terminate employees at will;
(3) any agreement of indemnification or guaranty not entered into in
the ordinary course of business with any party in excess of
$125,000 individually or in the aggregate, and any agreement of
indemnification or guaranty between the Company or its
Subsidiaries and any of their officers, directors or employees,
irrespective of the amount of such agreement or guaranty;
(4) any agreement, contract or binding commitment, with the exception
of the Educational Approvals, containing any covenant directly or
indirectly limiting the freedom of the Company or its
Subsidiaries to engage in any line of business, compete with any
person, or sell any product, or which, following the consummation
of the Merger, would so limit Parent or the Surviving
Corporation;
(5) any agreement, contract or binding commitment relating to the
disposition or acquisition of material assets not in the ordinary
course of business or any ownership interest in any corporation,
partnership, joint venture or other business enterprise;
24
(6) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the
borrowing of money or extension of credit (other than extensions
of credit in the ordinary course of business from vendors);
(7) any Leases;
(8) other than in connection with the Merger and other transactions
contemplated by this Agreement, any other agreement, contract or
binding commitment which involves payment by the Company or its
Subsidiaries of $125,000 or more in the aggregate or which cannot
be terminated on thirty (30) days notice without cost or expense
to the Company or its Subsidiaries;
(9) any agreements to register the Company's securities; or
(10) any other agreements, contracts or binding commitments which are
material to the Company or the operation of its business.
The numerical thresholds set forth in this Section 4.11(a) shall not be
deemed in any respects to define materiality for other purposes of this
Agreement. The Company has provided or made available to Parent true and
complete copies of all Material Contracts as amended to date.
(b) Performance of Contracts. Each of the Material Contracts of the Company
and its Subsidiaries and all or substantially all of the student enrollment
agreements entered into by or on behalf of any of the Schools are in full force
and effect and, assuming that such Material Contracts have been duly and validly
executed and delivered by or on behalf of the respective other party thereto,
which party has the power to enter into and perform its obligations thereunder,
constitute the legal and binding obligation of the Company or its Subsidiaries
and, to the Knowledge of the Company, constitute the legal and binding
obligation of the other parties thereto, in each case except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws generally affecting the rights of creditors and
subject to general equity principles. There are, as of the date hereof, no
existing material breaches or material defaults by the Company or its
Subsidiaries under any such Material Contract or all or substantially all of the
student enrollment agreements, and, to the Knowledge of the Company, no event
has occurred which, with the passage of time or the giving of notice or both,
could be expected to constitute such a breach or default and, as of the Closing
Date, there shall not be any breaches or defaults by the Company or its
Subsidiaries under any such Material Contract or all or substantially all of the
student enrollment agreements which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company.
25
4.12 Insurance.
Except as set forth in Section 4.12 of the Company Disclosure Letter, all
Existing Insurance Policies of the Company and its Subsidiaries are currently in
full force and effect, and neither the Company nor any of its Subsidiaries has
received written notice of cancellation or termination of, or material premium
increase with respect to, any such Existing Insurance Policy in effect on the
date hereof or within the past three years.
4.13 Litigation.
Except as set forth on Section 4.13 of the Company Disclosure Letter, (a)
there are no actions, suits, claims, litigation, or proceedings pending or, to
the Knowledge of the Company, threatened in writing against the Company or its
Subsidiaries that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company; (b) there are no such
actions, suits or proceedings pending or, to the Knowledge of the Company,
threatened in writing, against the Company or its Subsidiaries which question
the legality or validity of the Merger and the other transactions contemplated
by this Agreement; and (c) to the Knowledge of the Company, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity or Accrediting Body against the Company, its Subsidiaries or
Schools that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company has made
available to Parent or its counsel true and complete copies of all
correspondence prepared by its counsel for the Company's auditors in connection
with the last three (3) completed audits of the audited Company Financial
Statements and any such correspondence since the date of the last such audit.
4.14 Taxes.
Except as set forth in Section 4.14 of the Company Disclosure Letter:
(a) The Company and each of its Subsidiaries has timely filed all federal,
state, local and foreign returns, information statements and reports relating to
Taxes ("Returns") required by applicable Tax Law to be filed by the Company and
each of the Subsidiaries (taking into account any extension of time provided for
under applicable Tax Law) and such Returns are complete, true and correct in all
material respects. All Taxes owed by the Company or any of its Subsidiaries to a
taxing authority, or for which the Company or any of its Subsidiaries is liable,
whether to a taxing authority or to other Persons or entities under a Tax
Agreement, as of the date hereof, have been paid and, as of the Effective Time,
will have been paid. The Company has made proper accruals for Taxes on the
Company Financial Statements to cover any Tax Liability of the Company and each
of its Subsidiaries including any deferred tax liability, determined in
accordance with GAAP, consistently applied, through the date of the Company
Financial Statements. No issue has been raised in any prior tax audit of the
Company or its Subsidiaries which, by application of the same or similar
principles, could reasonably be expected, upon a future tax audit of the Company
or its Subsidiaries to result in a proposed deficiency for any period.
(b) The Company and each of its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid and complied with all reporting
and record maintenance requirements in connection with any amounts paid or
owning to any employee, independent contractor, creditor, stockholder, or other
third party.
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(c) There is no Tax deficiency outstanding, proposed or assessed against
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries executed, requested or is the beneficiary of any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No Tax audit or other examination of the Company or any of its
Subsidiaries is presently in progress, nor, to the Knowledge of the Company, has
the Company or any of its Subsidiaries been notified in writing of any request
for such Tax audit or other examination.
(e) Neither the Company nor any of its Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(f) Neither the Company nor any of its Subsidiaries is a party to (1) any
agreement with a party other than the Company or any of its Subsidiaries
providing for the allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Return which Return
includes or included the Company or any Subsidiary or (2) any Tax Agreement
other than any Tax Agreement described in clause (1).
(g) Neither the Company nor any of its Subsidiaries (1) has been a member
of an affiliated group within the meaning of Section 1504(a) of the Code (or any
similar group defined under a corresponding or similar provision of state, local
or foreign law) (other than the group the common parent of which was the
Company), (2) has any liability for Taxes of any Person (other than any of the
Company and its Subsidiaries) under Treasury Regulation ss.1.1502-6 (or any
similar provision of state, local, or foreign Law), as a transferee or
successor, by contract or otherwise or (3) has been a member of any partnership,
limited liability company, joint venture or any other entity treated as a
partnership for federal income tax purposes.
(h) Neither the Company nor any of its Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (1) change in method of accounting for a taxable period (or
portion thereof) ending on or prior to the Closing Date; (2) "closing agreement"
as described in Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign Tax law) executed on or prior to the
Closing Date; (3) intercompany transactions or any excess loss account described
in Treasury Regulations under Section 1502 of the Code (or any corresponding or
similar provision of state, local or foreign Tax law); (4) installment sale or
open transaction disposition made on or prior to the Closing Date; or (5)
prepaid amount received on or prior to the Closing Date.
(i) The Company is not, has not at any time been and will not be at the
Effective Time, a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
27
(j) The Company has not made any payments, is not obligated to make any
payments and is not a party to any agreement that could obligate it to make any
payments, that will not be deductible under Sections 280G or 162(m) of the Code
or similar foreign law applicable to the operation of the Company's business.
(k) No claim has ever been made by an authority in any jurisdiction where
any of the Company or its Subsidiaries, as the case may be, do not file Returns
that it is or may be subject to taxation by that jurisdiction.
(l) There are no Liens for Taxes (other than Taxes not yet due and payable)
upon the assets of the Company or any of its Subsidiaries.
(m) Each of Company and its Subsidiaries has disclosed on its federal
Returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code or corresponding or similar provision of state, local or foreign law.
(n) Neither the Company nor any of its Subsidiaries has distributed stock
of another Person, or had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Sections 355 or 361 of the Code.
4.15 Employee Benefits.
(a) Section 4.15(a) of the Company Disclosure Letter contains a list of
each Company Benefit Plan (as hereinafter defined) maintained by the Company or
any of its Subsidiaries. With respect to each Company Benefit Plan, the Company
has delivered to Parent prior to the date hereof, a true and correct copy of (1)
such Company Benefit Plan and all amendments thereto, (2) each trust agreement,
insurance contract or administration agreement relating to such Company Benefit
Plan, (3) the most recent summary plan description for each Company Benefit Plan
for which a summary plan description is required, (4) the most recent annual
report (Form 5500) filed with the IRS, (5) the most recent determination letter,
if any, issued by the IRS with respect to any Company Benefit Plan intended to
be qualified under section 401(a) of the Code, (6) any request for a
determination currently pending before the IRS and (7) all correspondence with
the Internal Revenue Service ("IRS"), the Department of Labor or the Pension
Benefit Guaranty Corporation relating to any outstanding controversy. Except as
set forth on Section 4.15(a) of the Company Disclosure Letter, each Company
Benefit Plan complies in all material respects with ERISA, the Code and all
other applicable statutes and governmental rules and regulations. At no time has
the Company or any of its ERISA Affiliates (as hereinafter defined) been
required to contribute to, or otherwise had any liability (including potential
liability) with respect to, a plan subject to Title IV of ERISA, a plan subject
to the funding requirements of Section 412 of the Code or a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA). Except as set forth in Section
4.15(a) of the Company Disclosure Letter, all IRS Forms 5500 with respect to the
Company Benefit Plans have been timely filed, or will be filed as provided in
Section 4.15(a) of the Company Disclosure Letter and the Company will comply
with the understandings set forth therein.
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(b) There are no actions, suits or claims pending or, to the Knowledge of
the Company, threatened (other than routine claims for benefits) with respect to
any Company Benefit Plan. No prohibited transactions described in Section 406 of
ERISA or Section 4975 of the Code have occurred with respect to any Company
Benefit Plan except those for which an exemption under Section 408 of ERISA
applies. All Company Benefit Plans that are intended to be qualified under
Section 401(a) of the Code are the subject of either a favorable determination
letter issued by the IRS or operate under a prototype arrangement with respect
to which the IRS issued a favorable opinion letter, and there is no reason why,
to the Company's Knowledge, any Company Benefit Plan is not so qualified in
operation. Neither the Company nor any of its ERISA Affiliates has any liability
or obligation under any welfare plan to provide life insurance or medical
benefits after termination of employment to any employee or dependent other than
as required by Part 6 of Title I of ERISA, Section 4980B of the Code or
applicable state Law.
(c) As used herein, (1) "Company Benefit Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA), a "welfare plan" (as defined in Section 3(1)
of ERISA), or any bonus, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, severance, death benefit, insurance or other plan, arrangement or
understanding, in each case established, maintained or contributed to by the
Company, any of its Subsidiaries or any of its ERISA Affiliates within the last
six (6) years and (2) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is or within the last six
(6) years was under common control or would be or have been considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated thereunder or pursuant to Section 4001(b)
of ERISA and the regulations thereunder.
(d) Section 4.15(d) of the Company Disclosure Letter contains a list of all
(1) severance and employment agreements with officers and employees of the
Company and its Subsidiaries and each ERISA Affiliate, (2) severance plans,
programs and policies of the Company and its Subsidiaries with or relating to
its employees and (3) plans, programs, agreements and other arrangements of the
Company and its Subsidiaries with or relating to its employees which contain
change of control or similar provisions. The Company has provided to Parent a
true and complete copy of each of the foregoing. Each such plan is designed so
that the limit described in Code Section 280G of the Code will not apply to
payment made under the plan.
(e) The Company has complied in all material respects with all of its
obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the Health Insurance Portability and Accountability Act of 1996
("HIPAA"), and will not incur any material liability in connection with benefit
continuation rights under COBRA with respect to its employees or former
employees or any other employees. No Plan is funded through a "welfare benefit
fund" as described in Section 419(e) of the Code.
4.16 Environmental Protection.
The Company and each of its Subsidiaries: (a) is in compliance in all material
respects with applicable Environmental Laws; and (b) has not received any
communication (written or oral), from a Governmental Entity or third party that
alleges that the Company or any of its Subsidiaries is not in compliance in any
material respect with applicable Environmental Laws.
29
4.17 Labor and Employment Matters.
(a) Wage Claims. There are no material claims pending before a court or
administrative agency or, to the Knowledge of the Company, threatened in
writing, against the Company or any of its Subsidiaries (whether under Law,
under any employee agreement or otherwise) by any present or former employee of
the Company or any of its Subsidiaries on account of or for: (1) overtime pay,
other than overtime pay for the current payroll period; (2) wages or salaries,
other than wages or salaries for the current payroll period; or (3) vacations,
sick leave, time off or pay in lieu of vacation or time off, other than
vacation, sick leave or time off (or pay in lieu thereof) earned in the period
immediately preceding the date of this Agreement or incurred in the ordinary
course of business.
(b) Labor or Employment Disputes. Except as set forth in Section 4.13 of
the Company Disclosure Letter: (1) there are no material claims pending before a
court or administrative agency or, to the Knowledge of the Company, threatened
in writing, by any Person against the Company or any of its Subsidiaries arising
out of any statute, ordinance or regulation relating to unfair labor practices,
discrimination, employment practices or occupational or safety and health
standards; (2) there is no pending, nor has the Company or any of its
Subsidiaries experienced any, dispute over labor, strike or organized work
stoppage; and (3) to the Knowledge of the Company, there is no dispute over
labor, strike or organized work stoppage that has been threatened in writing
against the Company or any of its Subsidiaries. The Company and its Subsidiaries
have on file a complete, executed I-9 form for each of their employees.
(c) Union Matters. (1) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement; (2) to the Knowledge of the
Company, no bona fide union organizing activities are in process or have been
proposed or threatened involving any employees of the Company or any of its
Subsidiaries; and (3) no petitions have been filed or, to the Knowledge of the
Company, have been threatened in writing, or proposed to be filed, for union
organization or representation of employees of the Company or any of its
Subsidiaries not presently organized.
4.18 Unlawful Payments and Contributions.
Neither the Company, any Subsidiary of the Company nor any of their
respective directors, officers, employees or agents has, with respect to the
businesses of the Company or its Subsidiaries, (a) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (b) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee; (c) violated
or is in violation of any provision of the Foreign Corrupt Practices Act of
1977, as amended; or (d) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any person or entity.
30
4.19 Existing Permits, Pending Reviews and Violations of Law.
To the Knowledge of the Company, the Company, each of its Subsidiaries and
each of the Schools has and has had since July 1, 1997, all licenses, permits,
accreditations, certificates, approvals, exemptions, orders, franchises,
qualifications, permissions, agreements and governmental authorizations required
by Law or by any Educational Agency and required for the conduct of the business
of the Company, its Subsidiaries and the Schools as currently conducted, except
where such failure to hold such license, permit, accreditation, certificate,
approval, exemption, order, franchise, qualification, permission, agreement or
governmental authorization has not had and could not reasonably be expected to
have a Material Adverse Impact (the "Material Existing Permits"). No action or
proceeding is pending or, to the Knowledge of the Company, threatened that is
reasonably likely to result in a revocation, non-renewal, termination,
suspension or other material impairment of any Material Existing Permit of the
Company, its Subsidiaries or the Schools, and, to the Company's Knowledge, there
is no basis for non-renewal of any Material Existing Permit. (For purposes of
Section 7.3(a) of this Agreement, however, "Material Existing Permit" in the
immediately preceding sentence shall be defined by substituting "Material
Adverse Effect on the Company" for "Material Adverse Impact" in the definition
of "Material Existing Permit.") To the Knowledge of the Company, the business of
the Company, its Subsidiaries and the Schools is not being and has not, since
July 1, 1997, been conducted in violation of any applicable Law or Educational
Agency standard, except as set forth on Section 4.19 of the Company Disclosure
Letter, or except in the case that such violation could not reasonably be
expected to have a Material Adverse Impact. Except as set forth in Section 4.19
of the Company Disclosure Letter, to the Knowledge of the Company, no
Governmental Entity or Educational Agency has indicated to the Company, any
Subsidiary of the Company or any School an intention to conduct an investigation
or review with respect to the Company, any Subsidiary of the Company or any
School, except in the case that (a) such review has been closed or (b) such
review is a routine review pursuant to recertification before the DOE,
reaffirmation of accreditation or state license renewal, which review could not
reasonably be expected to have a Material Adverse Impact. To the Knowledge of
the Company, since July 1, 1997, the Company, each of its Subsidiaries and each
School has filed all reports, documents, information, applications and returns
required to have been filed by it in order to remain in substantial compliance
with the Material Existing Permits, except for such violations that could not
reasonably be expected to have a Material Adverse Impact or result in the
revocation, non-renewal, termination, suspension or other material impairment of
any Material Existing Permit of the Company, its Subsidiaries or its Schools.
4.20 Regulatory Matters.
(a) Revenue Thresholds. For the fiscal years ended March 31, 2003, March
31, 2002, March 31, 2001, March 31, 2000, March 31, 1999 and for the first
quarter of the 2003-2004 fiscal year ending June 30, 2003, and for the second
quarter of the 2003-2004 fiscal year ending September 30, 2003, each Institution
has had, or with respect to the fiscal year ending March 31, 2003, and the first
and second quarters of the 2003-2004 fiscal year, will have, no more than ninety
percent (90%) of its revenues derived from the Title IV Programs or pursuant to
the Title IV Programs as determined in accordance with 34 C.F.R. ss. 600.5(d).
Each Institution has not had more than eighty-five percent (85%) of its revenues
so derived for any of the two (2) fiscal years prior to the fiscal year ended
March 31, 1999.
31
(b) Educational Approval Matters. To the Knowledge of the Company, each
School has, and for the five (5) years prior to the date hereof had, all
Educational Approvals required to conduct the business of such School as then
conducted, except where failure to hold such Educational Approvals has not had
and could not reasonably be expected to have a Material Adverse Impact. Section
4.20(b) of the Company Disclosure Letter lists all such Educational Approvals
for each Institution and School. The Company has provided to Parent correct and
complete copies of all Educational Approvals listed on Section 4.20(b) of the
Company Disclosure Letter. Each Institution is certified by the DOE as an
eligible institution under Title IV and is a party to, and in material
compliance with, a valid program participation agreement with the DOE with
respect to the operations of such Institution. To the Knowledge of the Company,
since July 1, 1997, except as set forth in Section 4.20(b) of the Company
Disclosure Letter, neither the Company nor any School has received any notice
from any Educational Agency alleging a violation of a legal requirement, rule or
regulation of the DOE or any Educational Agency or any standard of any
Accrediting Body in respect of such School, including with respect to
recruitment, sales and marketing activities, or the terms of any program
participation agreement to which such School or the Company is or was a party
that has not as of the date hereof been cured or remedied (including that no
obligations or liabilities are continuing with respect to such violation) in all
material respects as required by the DOE, such Educational Agency or such
Accrediting Body, as applicable, or that could reasonably be expected to have a
Material Adverse Impact. Section 4.20(b) of the Company Disclosure Letter
contains a list of any such notice received and a description of the
dispositions of such notice. Except as set forth in Section 4.20(b) to the
Company Disclosure Letter, to the Knowledge of the Company, there is no pending
investigation, audit or review of the Company's or any School's Student
Financial Assistance Programs or any review of any Educational Approval of any
School by any Governmental Entity or Accrediting Body, except in the case of a
routine review pursuant to recertification before DOE, reaffirmation of
accreditation or state license renewal, which review could not reasonably be
expected to have a Material Adverse Impact.
(c) Cohort Default Rate. Section 4.20(c) of the Company Disclosure Letter
sets forth (1) the official, published cohort default rate for Federal Family
Education Loan Program loans or Federal Direct Loan Program loans for each
Institution, for the federal fiscal years ending September 30, 1998, September
30, 1999 and September 30, 2000; (2) the draft cohort default rates for Federal
Family Education Loan Program loans or Federal Direct Loan Program loans for
each Institution for the federal fiscal year ended September 30, 2001; and (3)
the official cohort default rates on Federal Xxxxxxx Loans for award years
1999-2001 for each Institution which participates in such loan program. Such
schedule is materially accurate in all respects.
32
(d) Student Recruiting. Since July 1, 1997, no admissions representative,
agent or any other person or entity engaged, by means of contract, employment or
otherwise, in any student recruiting or admission activities or in making
decisions regarding the awarding of Title IV Program funds for or on behalf of
the Company, any Institution, or any School has been paid, provided or
contracted for any commission, bonus or other incentive payment based directly
or indirectly on success in securing enrollments or financial aid based on a
policy or practice of the Company, any Institution, or any School that is in
material contravention of Title IV.
(e) Control Matters. To the Knowledge of the Company, except as set forth
in Section 4.20(e) of the Company Disclosure Letter, since July 1, 1997, no
person who exercises substantial control over the Company or any Institution (as
the term "substantial control" is defined at 34 C.F.R. ss.600.30) exercised
substantial control over another postsecondary educational institution other
than the Company (whether or not participating in the Title IV Programs) or any
third party servicer (as that term is defined at 34 C.F.R. ss.668.2) prior to or
at the time they were employed by the Company. To the Knowledge of the Company,
no person who has for any period since July 1, 1997, exercised substantial
control over the Company or any Institution (as the term "substantial control"
is defined at 34 C.F.R. ss.600.30) or any member or members of that person's
family, alone or together, exercised, prior to or concurrent with their position
of substantial control with the Company or any Institution, substantial control
over an institution other than the Company or a third-party servicer that owes a
liability for a violation of any requirement of the Title IV Programs. To the
Knowledge of the Company, since July 1, 1997, no Institution nor any person who
exercises substantial control over the Company or any Institution (as the term
"substantial control" is defined at 34 C.F.R. ss.600.30) has pled guilty to, has
pled nolo contendere to, or has been found guilty of, a crime involving the
acquisition, use or expenditure of funds under the Title IV Programs or has been
judicially determined to have committed fraud involving funds under the Title IV
Programs. To the Knowledge of the Company, since July 1, 1997, neither the
Company nor any Institution nor any Affiliate of the Company or any Institution
that has the power, by contract or ownership interest, to direct or cause the
direction of the management of policies of any Institution, has filed for relief
in bankruptcy or has entered against it an order for relief in bankruptcy.
Neither the Company nor any Institution knowlingly employs, and, since July 1,
1997 has knowingly employed, any individual or entity in a capacity that
involves the administration or receipt of funds under the Title IV Programs, or
knowingly contracted with any institution or third-party servicer, which has
been terminated under the Higher Education Act of 1965, as amended, for a reason
involving the acquisition, use or expenditure of federal, state or local
government funds, or has been convicted of, or has pled nolo contendere or
guilty to, a crime involving the acquisition, use or expenditure of federal,
state or local government funds, or has been administratively or judicially
determined to have committed fraud or any other material violation of law
involving federal, state or local government funds. No institution not then a
School or Affiliate of the Company (whether or not participating in the Title IV
Programs) or any third-party servicer (as that term is defined at 34 C.F.R.
668.2) is, or since July 1, 1997 has been, administered commonly, jointly or in
conjunction with the Company or any School, and no other institution or
organization not then a School or Affiliate of the Company has provided
educational services on behalf of the Company or any School, except for
instruction provided under clinical affiliations. Neither the Company, any
Campus nor any School provides, or since July 1, 1997, has provided, any Title
IV eligible educational instruction on behalf of any other institution or
organization of any sort.
33
(f) Recruitment; Admissions Procedures; Attendance Reports.
(1) The Company has provided to Parent or will provide to Parent upon
request, accurate copies of all policy manuals and other material
statements of procedures or instructions currently in effect relating to
(A) recruitment of students for each School, including procedures for
assisting in the application by prospective students for direct or indirect
funding under Student Financial Assistance Programs; (B) admissions
procedures, including any descriptions of procedures for insuring
compliance with Law or Accrediting Body requirements and standards
applicable to such procedures; (C) procedures for encouraging and verifying
attendance, minimum required attendance policies, and other relevant
criteria relating to course performance requirements and completion and (D)
procedures for processing, disbursing and returning Student Financial
Assistance Program Funds (collectively, the "Policy Guidelines").
(2) To the Knowledge of the Company, the operations of the Company and
each School have been conducted in accordance with the Policy Guidelines
and all relevant standards and requirements imposed by applicable
Accrediting Bodies, and other agencies administering any Student Financial
Assistance Programs in which the Company or any School participates, except
for such failures to comply that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Impact.
(3) Since July 1, 1997, the Company, its Subsidiaries and its Schools
have submitted all reports, audits, and other information, whether periodic
in nature or pursuant to specific requests, for the Company and each School
to all Educational Agencies, Governmental Entities or other entities with
which such filings are required in order to be in compliance in all
material respects with (A) applicable accreditation standards and
requirements, (B) legal requirements governing programs pursuant to which
such School or its students receive student financial assistance, and (C)
all articulation agreements between the Company or such School and degree
granting colleges and universities in effect as of the date hereof.
(4) Except as set forth in section 4.20(f)(4) of the Company
Disclosure Letter, since July 1, 1997, all or substantially all grants and
loans pursuant to any Student Financial Assistance Program have been
calculated and made by the Company and its Schools in material compliance
with Laws and all disbursements and record keeping relating thereto have
been completed by the Company and the Schools, in material compliance with
Law, and there are no material deficiencies in respect thereto.
34
(g) Educational Approvals.
(1) Each School currently offers educational instruction at the sites,
buildings and facilities listed on Part I of Section 4.20(g)(1) of the
Company Disclosure Letter, except that the Company does not list any sites
at which its students participate in clinical affiliations. Part II of
Section 4.20(g)(1) of the Company Disclosure Letter includes a correct and
complete list of the full address of any site, building, or facility of any
sort other than as listed on Part I of Section 4.20(g)(1) of the Company
Disclosure Letter at which either the Company or any School since July 1,
1997 has offered fifty percent (50%) or more of an educational program for
which students received Title IV Program assistance, and the dates during
which such educational program was provided at each such site, building, or
facility. For purposes of this Agreement, the sites, buildings and
facilities listed on Section 4.20(g)(1) of the Company Disclosure Letter
will be referred to individually as a "Campus" and collectively as
"Campuses." Except as set forth in Section 4.20(g)(1) of the Company
Disclosure Letter, the Company, its Subsidiaries and its Schools do not
provide and since July 1, 1997, have not provided fifty percent (50%) or
more of any educational program for which students received Title IV
Program assistance to any student at any site, building, or facility other
than at the Campuses.
(2) Section 4.20(g)(2) of the Company Disclosure Letter is a complete
and correct list of each eligible institution as defined by the DOE
operated by the Company and its Subsidiaries since July 1, 1997, with each
Campus identified as a main campus or additional location, as applicable,
and with applicable Office of Postsecondary Education Identification
Numbers.
(3) The Company, its Subsidiaries and its Schools have received and
maintained without interruption all necessary Educational Approvals for
each School's and Campus' operations and receipt of all Student Financial
Assistance Program funds since July 1, 1997, except where such interruption
could not reasonably be expected to have a Material Adverse Effect on the
Company.
(4) The Company, its Subsidiaries and its Schools have received and
maintained without interruption since July 1, 1997, all necessary
Educational Approvals for each School and Campus to offer each educational
program the School or Campus has offered and offers, and to offer Student
Financial Assistance Program funds to the students enrolled in each such
educational program, except where such interruption could not reasonably be
expected to have a Material Adverse Effect on the Company.
(h) Delivery of Documents. The Company has provided to Parent true and
complete copies of all material correspondence (excluding general correspondence
routinely sent to or received from the DOE or any Accrediting Body) received
from or sent by or on behalf of the Company or any School to the DOE, any
Educational Agency or any Accrediting Body to the extent such correspondence (1)
was sent or received within the past three (3) years or prior thereto if such
correspondence relates to any issue which remains pending, and (2) relates to
35
(A) any audits, program reviews, investigations or site visits conducted by the
DOE, any state licensing agency or any guaranty agency reviewing compliance by
the Company or any School with the statutory, regulatory or other requirements
of the Title IV Programs; (B) any written notice of an intent to limit, suspend,
terminate, revoke, cancel, not renew or condition any Educational Approval of
the Company or any School; (C) any written notice of an intent or threatened
intent to condition the provision of Title IV Program funds to the Company or
any School on the posting of a letter of credit or other surety in favor of the
DOE or any documentation reflecting that such letter of credit is or was posted;
(D) any written notice of an intent to provisionally certify the eligibility of
any School to participate in the Title IV Programs or a copy of such a
Provisional Program Participation Agreement; (E) the placement or removal of any
School on or from the reimbursement or cash monitoring method of payment under
the Title IV Programs and (F) any matter or proceeding disclosed in Section
4.19, 4.20 or 4.21 of the Company Disclosure Letter.
(i) The Company has provided or made available the financial
statements submitted to the DOE on behalf of the Schools.
4.21 Financial Assistance Programs.
(a) Section 4.21(a) of the Company Disclosure Letter lists each
Student Financial Assistance Program pursuant to which student financial
assistance, grants or loans are provided to or on behalf of any School's
students.
(b) To the Knowledge of the Company, since July 1, 1997, the Company
and each of the Schools have been and are in material compliance with any
and all Laws relating to any form of Student Financial Assistance Program
funds, except where failure to so comply would not have a Material Adverse
Impact.
(c) Each Institution or the Company, as measured by DOE, had a
"composite score" of at least 1.5 for its most recent fiscal year, as
calculated in accordance with 34 C.F.R. ss. 668.172. Except as set forth in
Section 4.21(c) of the Company Disclosure Letter, the Institutions are and
have been financially responsible in accordance with the provisions of 34
C.F.R. xx.xx. 668.171-175 and any predecessor regulations for the last five
(5) years.
(d) Except as set forth in Section 4.21(d) of the Company Disclosure
Letter, since July 1, 1997, neither the Company nor any Institution or
School, as applicable, has received notice from the DOE or any other
Educational Agency that either the Company or any School or Institution, as
applicable, lacked financial responsibility or administrative capability
for any period under the Law or standards in effect in such period.
(e) Except as set forth in Section 4.21(e) of the Company Disclosure
Letter, since July 1, 1997, neither the Company nor any Institution or
School, as applicable, have received notice of a request by any Educational
Agency or other Governmental Entity that any Institution, School or Campus
post a letter of credit or other form of surety for any reason, including
any request for a letter of credit based on late refunds pursuant to 34
C.F.R. ss. 668.173, 34 C.F.R. ss. 668.15 or any predecessor regulation.
36
4.22 Transactions with Affiliates.
Except as set forth in the Company SEC Documents as disclosed under the
caption "Certain Relationships and Related Transactions" in its Proxy Statement
on Schedule 14A, dated July 15, 2002 or in Section 4.22 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any transactions with any director, executive officer or other Affiliates or any
member of such person's "Family" (as defined below) of a type that would be
required to be disclosed in the Company SEC Documents pursuant to Item 404 of
Regulation S-K of the SEC, and neither the Company nor any of its Subsidiaries
has any existing binding commitments to engage in any such transactions with any
of such persons in the future. For purposes of this definition, the "Family" of
an individual includes (a) such individual, (b) the individual's spouse,
siblings, or ancestors, (c) any lineal descendant of such individual, or their
siblings, or ancestors, or (d) a trust for the benefit of the foregoing.
4.23 Vote Required.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote with respect to the
Merger is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger and this Agreement.
4.24 Board Approval.
The Board of Directors of the Company has, on or prior to the date hereof,
unanimously approved this Agreement, the Merger and the other transactions
contemplated hereby and has determined to recommend to Stockholders that they
approve the Merger.
4.25 Restrictions on Business Activities.
To the Knowledge of the Company, except as set forth in Section 4.25 of the
Company Disclosure Letter, there is no judgment, injunction, order or decree
binding upon the Company or its Subsidiaries or their properties (including,
without limitation, their Intangible Assets) which has or could reasonably be
expected to have the effect or prohibiting of materially impairing the conduct
of any business by the Company or any of its Subsidiaries.
4.26 Change of Control Payments.
Except as set forth in any Company Option Plan or in Section 4.26 of the
Company Disclosure Letter, and except as contemplated by this Agreement, neither
the execution and delivery of this Agreement nor the consummation of the Merger
and other transactions contemplated hereby will: (a) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director, officer or employee
of the Company or its Subsidiaries from the Company or its Subsidiaries or
Parent or the Surviving Corporation, under any Company Benefit Plan or
otherwise, (b) materially increase any benefits otherwise payable under any
Company Benefit Plan, (c) result in the acceleration of the time of payment or
vesting of any such benefits, (d) create a right to receive payments upon a
subsequent termination of employment, (e) result in the acceleration of the time
of payment of any of the Company's accounts payable or (f) result in a "change
in control" under, require the consent from or the giving of notice to a third
party pursuant to, or accelerate the rights under, any contract to which the
Company or its Subsidiaries is a party.
37
4.27 Governmental Approvals.
No permission, approval, determination, consent or waiver by, or any
declaration, filing or registration with, any Governmental Entity or Educational
Agency is required by the Company in connection with the execution and delivery
of this Agreement by the Company, the consummation by the Company of the Merger
or the other transactions contemplated by this Agreement or the Surviving
Corporation's ability to continue to conduct the business of the Company
consistent with the Company's historical ordinary course of business except for:
(a) the approvals or filings in connection with (1) the HSR Act as described in
Section 7.1(a), (2) the Securities Act, including, without limitation, filing of
the Proxy Statement/Prospectus with the SEC, (3) the Exchange Act, (4) the
securities and blue sky Laws of various states, (5) the rules and regulations of
the Stock Market and AMEX, (6) the rules and regulations of the DOE and (7) the
rules and regulations of the Educational Agencies listed in Section 4.27 of the
Company Disclosure Letter; (b) the filing of the Articles of Merger as described
in this Agreement; and (c) such permissions, approvals, determinations,
consents, waivers, declarations, filings, or registrations that, if not obtained
could not, individually or in the aggregate, have a Material Adverse Effect on
the Company or materially impair the Company's ability to consummate the Merger
and the other transactions contemplated hereby.
4.28 Educational Agency Approval.
To the Company's Knowledge, there exists no fact or circumstance
attributable to the Company, any Subsidiary or any School which could reasonably
be expected to have a negative impact on Parent's ability to obtain any
authorization, consent or similar approval from the DOE or any other
Governmental Entity or Accrediting Body whose authorization, consent or similar
approval is contemplated in connection with this Agreement, including, without
limitation, any authorization, consent or similar approval which must be
obtained preceding or following the Closing from the DOE or any Educational
Agency in order to continue the operations of the Schools as presently
conducted.
4.29 Registration Statement; Proxy Statement/Prospectus.
The information supplied by the Company for inclusion in the Parent's
registration statement on Form S-4, which shall include the Proxy
Statement/Prospectus, pursuant to which the issuance of the shares of Parent
Common Stock to be issued to Stockholders in the Merger will be registered under
the Securities Act (the "Registration Statement"), shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements included therein not misleading.
4.30 Tax Treatment.
The Company has no Knowledge of any reason why the Merger will, and has not
taken or agreed to take any action that could cause the Merger to, fail to
qualify as a "reorganization" under Section 368(a) of the Code.
4.31 Opinion of Financial Advisor.
The Company has received the written opinion of the Financial Advisor, to
the effect that, as of March 26, 2003, the Merger Consideration to be received
by the Stockholders, based upon and subject to the assumptions and limitations
set forth in such opinion, is fair to the Stockholders from a financial point of
view. The Company shall promptly after the date hereof deliver a copy of such
opinion to Parent.
38
4.32 Brokers' and Finders' Fees.
Except for fees to be paid to the Financial Advisor, the Company has not
incurred any brokers', finders' or any similar fee in connection with the
transactions contemplated by this Agreement. The Company has previously
delivered a true and complete copy of the agreement with the Financial Advisor
to the Parent.
4.33 No Pending Acquisitions.
Except for this Agreement and the Confidentiality Agreements dated June 26,
2002 and March 17, 2003 between Parent and the Company (together, the
"Confidentiality Agreements"), neither the Company nor its Subsidiaries is a
party to or bound by any agreement, undertaking or commitment with respect to
the acquisition of the capital stock or assets of another Person.
4.34 Takeover Laws.
The Company has taken all action required to be taken by it in order to
exempt this Agreement, the Merger and the Voting Agreement (as defined below)
and the other transactions contemplated hereby and under the Voting Agreement
from, and this Agreement, the Merger and the Voting Agreement and the
transactions contemplated hereby and under the Voting Agreement are exempt from,
the requirements of any and all "moratorium," "control share," "fair price,"
"affiliate transaction," "control transaction," "business combination" or other
anti-takeover Laws and regulations of the State of Florida (including, without
limitation, Sections 607.0901 and 607.0902 of the FBCA) or of any other State
(collectively, "Takeover Laws").
4.35 Affiliate Agreements.
Section 4.35 of the Company Disclosure Letter sets forth each Stockholder
that is or is reasonably likely to be, as of the date hereof, deemed to be an
Affiliate of the Company, and the Company has delivered to Parent executed
agreements, dated as of the date hereof, in the form attached hereto as Exhibit
4.35 (an "Affiliate Letter") for each such Person.
4.36 Voting Agreement.
The Company has delivered to Parent, a voting agreement, in the form
attached as Exhibit 4.36 hereto from each of Xxxxxx Xxxxx, M.D., Frost-Nevada
Investments Trust, Xxxxxxx Xxxxxxxxx, Xx. and Xxxxxxxx Xxxxxxxxx (the "Voting
Agreement"). The Board of Directors of the Company has, on or prior to the date
hereof, unanimously approved the Voting Agreement and the transactions
contemplated thereby.
4.37 Disclosure.
No representation or warranty by the Company in this Agreement and no
statement contained in the Company Disclosure Letter or any certificate or
document delivered by the Company to Parent pursuant to this Agreement, contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements herein or therein not misleading when taken together in
light of the circumstances in which they were made.
39
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject only to
the exceptions specifically disclosed in writing in the disclosure letter dated
as of the date hereof, certified by a duly authorized officer of Parent, in his
capacity as such, and delivered to the Company by Parent pursuant to, and as an
integral part of, this Agreement (the "Parent Disclosure Letter"), which
specifically identifies the Section and subsection numbers hereof to which the
disclosures pertain, as follows:
5.1 Organization; Business.
(a) Organization. Each of Parent and Merger Sub is a corporation duly and
validly organized and existing under the Laws of the jurisdiction of its
incorporation and is qualified to do business as a foreign corporation and in
good standing in the jurisdictions where the ownership or leasing of property or
the conduct of its business requires qualification as a foreign corporation by
Parent except where the failure to so qualify could not reasonably be expected
to have a Material Adverse Effect on Parent.
(b) Powers. Each of Parent and Merger Sub has all requisite corporate power
and authority to carry on its business as it is now conducted and to own, lease,
and operate its current assets and properties.
5.2 Capitalization.
(a) Capital Stock. The authorized capital stock of Parent consists of (1)
150,000,000 shares of Parent Common Stock, of which 46,265,312 shares are issued
and outstanding as of March 24, 2003 and (2) 1,000,000 shares of preferred
stock, par value $0.01 per share, of which no shares are issued and outstanding
as of the date hereof. The Company has reserved 10,000 shares of Series A
Preferred Stock for issuance in connection with the Parent Rights Plan. The
authorized capital stock of Merger Sub consists of 1,000 shares of common stock,
par value $0.01 per share, of which 100 are issued and outstanding and held by
Parent.
(b) Listings. Parent Common Stock is listed for trading on the Stock
Market. Except as set forth in the preceding sentence, Parent's securities are
not listed or quoted, for trading on any U.S. domestic or foreign securities
exchange.
(c) Validly Issued. The shares of Parent Common Stock to be issued pursuant
to the Merger have been duly authorized and, upon issuance, will be validly
issued, fully paid and non-assessable.
5.3 Authorization; Enforceability.
The execution, delivery and performance by Parent and Merger Sub of this
Agreement are within the corporate power and authority of each of Parent and
Merger Sub and, subject to the provisions hereof, have been duly authorized by
the Board of Directors of each of Parent and Merger Sub. Except for the filing
of the Articles of Merger, no other corporate proceeding or action on the part
of Parent and Merger Sub (including, without limitation, the approval of any
class of security holder of Parent) is necessary to authorize the execution and
40
delivery by Parent and Merger Sub of this Agreement and the consummation by
Parent and Merger Sub of the Merger and the other transactions contemplated
hereby. Assuming that such documents have been or will be duly and validly
executed and delivered by or on behalf of the respective other party thereto,
which party has the power to enter into and perform its obligations thereunder,
this Agreement is, and the other documents and instruments required by this
Agreement to be executed and delivered by Parent and Merger Sub will be, when
executed and delivered by Parent and Merger Sub, the valid and binding
obligations of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with their respective terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws generally affecting the rights of creditors and subject to general
equity principles.
5.4 No Violation or Conflict.
Subject to the receipt of the clearance or expiration or termination of the
waiting period described in Section 7.1(a) and the approvals described in
Section 7.1(b), the execution and delivery of this Agreement by Parent and
Merger Sub and all documents and instruments required by this Agreement to be
executed and delivered by Parent or Merger Sub do not, and the consummation by
Parent and Merger Sub of the Merger and the other transactions contemplated
hereby and Parent's and Merger Sub's compliance with the provisions hereof will
not, (a) result in any violation of any provision of the Certificate of
Incorporation or Bylaws of Parent or any of its Subsidiaries, (b) result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, any contract of the
Parent or its Subsidiaries, or result in the creation of any Lien upon any of
the properties or assets of parent or its Subsidiaries other than Permitted
Liens, (c) violate any Existing Permits of Parent or its Subsidiaries or the
Schools or any Law applicable to Parent or its Subsidiaries or the Schools or
their properties or assets, or (d) violate any standard or requirement of any
Educational Agency of any of the Schools of Parent or its Subsidiaries, other
than, in the case of clauses (b), (c) and (d), any such violations, defaults,
rights, losses or Liens that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Parent or could not
reasonably be expected to affect adversely the ability of Parent to consummate
the Merger and the other transactions contemplated by this Agreement.
5.5 SEC Reports.
Parent has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it since January 1, 2000 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the "Parent SEC Documents"). As of their
respective dates or, if amended prior to the date hereof, as of the date of the
last such amendment, the Parent SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, at such time of filing. As of the
date hereof, there are no amendments or modifications to agreements, documents
or other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act or any other agreements,
documents or other instruments, which have not yet been filed with the SEC but
which are or will be required to be filed by Parent. Except as set forth in
41
Section 5.5 of the Parent Disclosure Letter, to the Knowledge of Parent (x)
there exist no outstanding SEC comments with respect to any of the Parent SEC
Documents and (y) there are no SEC inquiries or investigations, other inquiries
or investigations by any Governmental Entity or internal investigations pending
or threatened, in each case regarding any accounting practices of Parent or any
of its Subsidiaries.
5.6 Parent Financial Statements.
(a) Parent Financial Statements. The Parent Financial Statements comply in
all material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto).
The Parent Financial Statements fairly present in all material respects the
consolidated financial condition of Parent and its Subsidiaries as of the date
set forth on each of such Parent Financial Statements and the consolidated
results of operations and cash flows of Parent and its Subsidiaries for the
periods indicated on each of the Parent Financial Statements.
(b) Liabilities. Except (1) for normal or ordinary recurring liabilities
incurred in the ordinary course of business consistent with past practice, (2)
for liabilities incurred in connection with this Agreement or (3) for
liabilities set forth on the December 31, 2002 balance sheet, including the
notes thereto, included in the Parent Financial Statements, since December 31,
2002, the Parent has not incurred any liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise) that either (A) would be
required to be reflected or reserved against in a balance sheet of the Parent,
prepared in accordance with GAAP as applied in preparing the December 31, 2002
balance sheet included in the Parent Financial Statements, or (B) could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent.
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5.7 Governmental Approvals.
No permission, approval, determination, consent or waiver by, or any
declaration, filing or registration with, any Governmental Entity or Educational
Agency is required by Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the Merger or the other transactions contemplated by
this Agreement, except for: (a) the approvals or filings in connection with the
(1) HSR Act as described in Section 7.1(a), (2) the Securities Act (including,
without limitation, filing of the Proxy Statement/Prospectus with the SEC), (3)
the Exchange Act (including, without limitation, filing a Current Report on Form
8-K with the SEC), (4) the securities and blue sky Laws of various states, (5)
the rules and regulations of the Stock Market, (6) the rules and regulations of
the DOE and (7) the rules and regulations of the Educational Agencies listed in
Section 5.7 of the Parent Disclosure Letter; (b) the filing of the Articles of
Merger as described in this Agreement; and (c) such permissions, approvals,
determinations, consents, waivers, declarations, filings, or registrations that,
if not obtained could not, individually or in the aggregate, have a Material
Adverse Effect on Parent, or materially impair Parent's or Merger Sub's ability
to consummate the Merger and the other transactions contemplated hereby.
5.8 Registration Statement; Proxy Statement/Prospectus.
The information supplied by Parent for inclusion in the Registration
Statement, shall not at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements included
therein not misleading.
5.9 Tax Treatment.
Parent has no Knowledge of any reason why the Merger will, and has not
taken or agreed to take any action that could cause the Merger to, fail to
qualify as a "reorganization" under Section 368(a) of the Code.
5.10 Operations of Merger Sub.
Merger Sub is a direct, wholly-owned subsidiary of Parent, was formed
solely for the purpose of engaging in the Merger and the other transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
5.11 Absence of Certain Changes.
Since December 31, 2002, Parent has conducted its business in a manner
consistent with past practice and there has not been any:
(a) Material Adverse Effect experienced by the Parent;
(b) transactions by the Parent or its Subsidiaries outside the
ordinary course of business of the Parent or its Subsidiaries which could
reasonably be expected to result in a Material Adverse Effect on Parent,
except for the transactions disclosed in the Parent SEC Documents or
contemplated by this Agreement or acquisitions for which the total
consideration paid by Parent did not exceed $300,000,000;
43
(c) declaration or payment of any dividend or any distribution in
respect of the capital stock of the Parent or any direct or indirect
redemption, purchase or other acquisition of any such stock by the Parent;
(d) payments to any stockholder of Parent, except pursuant to
arrangements disclosed in the Parent SEC Reports or in connection with
transactions in the ordinary course of business upon commercially
reasonable terms consistent with past practice of the Parent;
(e) material change by the Parent or any of its Subsidiaries their
respective accounting methods, principles or practices applied in
preparation of the Parent Financial Statements, except as required by the
rules and regulations of the SEC or GAAP; or
(f) binding commitment or promise, whether binding or not, to enter
into any binding commitment relating to any of the foregoing entered into
by the Parent or its Subsidiaries.
5.12 Litigation.
Except as set forth in Section 5.12 of the Parent Disclosure Letter:, (a)
there are no actions, suits, claims, litigation, or proceedings pending or, to
the Knowledge of Parent, threatened in writing against Parent or its
Subsidiaries that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent; (b) there are no actions, suits
or proceedings pending or, to the Knowledge of the Parent, threatened in
writing, against the Parent or its Subsidiaries which question the legality or
validity of the Merger and the other transactions contemplated by this
Agreement; and (c) to the Knowledge of Parent, there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity or
Accrediting Body against Parent, its Subsidiaries or their Schools that could be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Parent.
5.13 Existing Permits and Violations of Law.
Parent, each of its Subsidiaries and each of its Schools has and has had
since July 1, 1997, all licenses, permits, accreditations, certificates,
approvals, exemptions, orders, franchises, qualifications, permissions,
agreements and governmental authorizations required by Law or by any Educational
Agency and material to the business of Parent on a consolidated basis together
with its Subsidiaries and its Schools. No action or proceeding is pending or, to
the Knowledge of Parent, threatened that is reasonably likely to result in a
revocation, non-renewal, termination, suspension or other material impairment of
any Existing Permits which are material to the business of Parent on a
consolidated basis together with its Subsidiaries and its Schools, and, to
Parent's Knowledge, there is no basis which could be reasonably expected to
cause non-renewal of any such material Existing Permit. The business of Parent,
its Subsidiaries and its Schools is not being and has not, since July 1, 1997,
been conducted in violation of any applicable Law or Educational Agency
requirement or Accrediting Body standard, except as set forth on Section 5.13 of
the Parent Disclosure Letter, or except in the case that such violation could
not be reasonably expected to have a Material Adverse Effect on Parent. No
Educational Agency or Governmental Entity currently is conducting an
investigation of Parent, any of its Subsidiaries or any of its Schools, and no
Educational Agency or Governmental Entity has indicated in writing to Parent,
44
any of its Subsidiaries or any of its Schools an intention to conduct an
investigation or review with respect to Parent, any of its Subsidiaries or any
School, except in the case that (a) such review has been closed, (b) such review
is described in Section 5.13 of the Parent Disclosure Letter, or (c) such review
is a routine review, pursuant to recertification before DOE, reaffirmation of
accreditation or state license renewal, which review could not reasonably be
expected to have a Material Adverse Effect on Parent.
5.14 Revenue Thresholds.
For the fiscal year ended December 31, 2002, each Parent Institution had no
more than ninety percent (90%) of its revenues derived from the Title IV
Programs or pursuant to the Title IV Programs as determined in accordance with
34 C.F.R. ss. 600.5(d).
5.15 Control Matters.
To the Knowledge of Parent, since July 1, 1997, no person who exercises
substantial control over Parent or any Institution (as the term "substantial
control" is defined at 34 C.F.R. ss.600.30) exercised substantial control over
another postsecondary educational institution other than Parent or any
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. ss.668.2) prior to or at
the time they were employed by Parent or any Institution. To the Knowledge of
Parent, no person who has for any period since July 1, 1997, exercised
substantial control over Parent or any Institution (as the term "substantial
control" is defined at 34 C.F.R. ss.600.30) or any member or members of that
person's family, alone or together, exercised, prior to or concurrent with their
position of substantial control with Parent or any Institution, substantial
control over an institution other than Parent or any Institution or a
third-party servicer (prior to or during the period such person exercised
substantial control over Parent or any Institution) that owes a liability for a
violation of any requirement of the Title IV Programs. To the Knowledge of
Parent, since July 1, 1997, no Institution nor any person who exercises
substantial control over Parent or any Institution (as the term "substantial
control" is defined at 34 C.F.R. ss.600.30) has pled guilty to, has pled nolo
contendere to, or has been found guilty of, a crime involving the acquisition,
use or expenditure of funds under the Title IV Programs or has been judicially
determined to have committed fraud involving funds under the Title IV Programs.
To the Knowledge of Parent, since July 1, 1997, neither Parent nor any
Institution nor any Affiliate of Parent or any Institution that has the power,
by contract or ownership interest, to direct or cause the direction of the
management of policies of any Institution, has filed for relief in bankruptcy or
has entered against it an order for relief in bankruptcy. Neither Parent nor any
Institution knowingly employs, and, since July 1, 1997 has knowingly employed,
any individual or entity in a capacity that involves the administration or
receipt of funds under the Title IV Programs, or knowingly contracted with any
institution or third-party servicer, which has been terminated under the Higher
Education Act of 1965, as amended, for a reason involving the acquisition, use
or expenditure of federal, state or local government funds, or has been
convicted of, or has pled nolo contendere or guilty to, a crime involving the
acquisition, use or expenditure of federal, state or local government funds, or
has been administratively or judicially determined to have committed fraud or
any other material violation of law involving federal, state or local government
funds. No Institution not then a School or Affiliate of Parent (whether or not
participating in the Title IV Programs) or any third-party servicer (as that
term is defined at 34 C.F.R. 668.2) is, or since July 1, 1997 has been,
45
administered commonly, jointly or in conjunction with Parent or any School, and
no other institution or organization not then a School or Affiliate of Parent
has provided educational services on behalf of Parent or any of its Schools,
except instruction provided under clinical affiliations. Neither Parent nor any
School provides, or since July 1, 1997, has provided, any Title IV eligible
educational instruction on behalf of any other institution or organization of
any sort.
5.16 Educational Agency Approval.
To Parent's Knowledge, there exists no fact or circumstance attributable to
Parent or Merger Sub or their Affiliates which could reasonably be expected to
have a negative impact on Parent's ability to obtain any authorization, consent
or similar approval from the DOE or any other Governmental Entity or Accrediting
Body whose authorization, consent or similar approval is contemplated in
connection with this Agreement, including, without limitation, any
authorization, consent or similar approval which must be obtained preceding or
following the Closing from the DOE or any Educational Agency in order to
continue the operations of the Schools as presently conducted.
5.17 Brokers' and Finders' Fees.
Neither Parent nor Merger Sub has incurred any brokers', finders' or any
similar fee in connection with the transactions contemplated by this Agreement.
5.18 Disclosure.
No representation or warranty by Parent in this Agreement and no statement
contained in the Parent Disclosure Letter or any certificate or document
delivered by Parent to the Company pursuant to this Agreement, contains any
untrue statement of a material fact or omits any material fact necessary to make
the statements herein or therein not misleading when taken together in light of
the circumstances in which they were made.
ARTICLE 6
COVENANTS AND AGREEMENTS
6.1 Conduct of Business by the Company.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms and the
Effective Time, the Company agrees, except as set forth in Section 6.1 of the
Company Disclosure Letter or to the extent that Parent shall otherwise consent
in writing, and to cause each of its Subsidiaries to, carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay timely its debts and Taxes, subject to good faith
disputes over such debts or Taxes, and on the same payment terms such debts and
taxes have historically been paid, to collect its receivables in the same manner
and on the same terms such receivables have historically been collected, to
timely pay or perform other material obligations when due, and to use all
commercially reasonable efforts consistent with past practices and policies to
preserve intact the Company's present business organizations, keep available the
services of its present officers and employees and preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others having
business dealings with the Company and its Subsidiaries, to the end that the
Company's goodwill and ongoing businesses be unimpaired at the Effective Time.
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The Company shall promptly notify Parent of any material event or occurrence not
in the ordinary course of business of the Company. Except as required by Law or
GAAP or the rules and regulations of AMEX or as expressly provided for by this
Agreement or as set forth in Section 6.1 of the Company Disclosure Letter, the
Company shall not, and shall cause its Subsidiaries not to, prior to the
Effective Time or earlier termination of this Agreement pursuant to its terms,
without the prior written consent of Parent:
(a) except as required by this Agreement or the Company Benefit Plans,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under the Company Benefit Plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) enter into any partnership agreements, joint development agreements or
strategic alliance agreements;
(c) increase the pay or other compensation or grant any severance or
termination pay (1) to any executive officer (other than for the CEO and CFO
normal pay increases for the Company's fiscal year commencing April 1, 2003 in
an amount not to exceed, in each case, five percent (5%) of the current
salaries, as determined by the Company's Compensation Committee), or director,
or (2) to any other employee, except payments made in connection with the
termination of employees who are not executive officers pursuant to written
agreements in effect or policies or practices existing, on the date hereof and
as disclosed in Section 4.26 of the Company Disclosure Letter or pay increases
that, in the aggregate, are consistent with the policies and practices in effect
during the Company's last fiscal year;
(d) adopt or amend (other than ministerial or administrative amendments)
any Company Benefit Plan, including, but not limited to (but without limiting
the generality of the foregoing), the adoption or amendment (other than
ministerial or administrative amendments) of any stock purchase or option plan
or the entering into of any employment contract not in the ordinary course of
business;
(e) transfer or license to any person or entity or otherwise extend,
materially amend or modify any rights to its material Intangible Assets;
(f) without first consulting with Parent, commence any litigation other
than (1) for the routine collection of bills, or (2) in such cases where the
Company in good faith determines that failure to commence suit could result in
the material impairment of a valuable aspect of the Company's business;
(g) declare or pay any dividends on or make any other distributions (other
than distributions to the Company), whether in cash, stock or property, in
respect of any of its capital stock, 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 capital stock of the
Company;
(h) redeem, repurchase or otherwise acquire, directly or indirectly,
recapitalize or reclassify any shares of its capital stock;
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(i) issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock of any class or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than the issuance
of shares of Company Common Stock pursuant to the exercise of Existing Options
to acquire Company stock options outstanding as of the date of this Agreement;
(j) cause, permit or propose any amendments to its Articles of
Incorporation or Bylaws, or amend any Material Contract;
(k) sell, lease to any third party, license to any third party, encumber or
otherwise dispose of any properties or assets which are material, individually
or in the aggregate, to its business, except in the ordinary course of business
consistent with past practice, or liquidate, in whole or in part;
(l) incur any indebtedness for borrowed money (in the aggregate) (other
than ordinary course trade payables or pursuant to existing credit facilities in
the ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities of the
Company or guarantee any debt securities of others;
(m) revalue any assets, including, without limitation writing down the
value of inventory, writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practice or as required by GAAP
or waiving any right of material value;
(n) pay, discharge or satisfy in an amount in excess of $100,000 (in any
one case) or $250,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), including,
without limitation, under any employment contract or with respect to any bonus
or special remuneration, other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities of the type reflected or reserved
against in the Company balance sheet dated as of December 31, 2002 included in
the Company Financial Statements, provided, however, that Parent shall not
unreasonably withhold or delay its consent to a request hereunder from Company
to act consistent with the Company's historical practices;
(o) make or change any election in respect of Taxes, adopt or change in any
respect any accounting method in respect of Taxes, file any amendment to a
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(p) make any material change to accounting policies or procedures, except
as may be required by GAAP or applicable Law;
(q) enter into any Material Contract other than in the usual, regular and
ordinary course of business consistent with past practices and policies or into
any transaction or agreement which would have been required to be disclosed
under Section 4.22 of the Company Disclosure Letter, or make a payment to any
Stockholder under any arrangement not disclosed in the Company SEC documents
identified in Section 4.22 hereof or Section 4.22 of the Company Disclosure
Letter as of the date hereof;
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(r) amend or terminate any of its Existing Insurance Policies, except if
such policies are concurrently replaced with comparable insurance policies;
(s) other than consistent with past practice, make any changes with respect
to the tuition, fees, program duration or curricula of any of the programs
offered by any School;
(t) hire, fire (other than for cause) or change the responsibilities or
work location of any employee or prospective employee whose annual compensation
is greater than $125,000 or whose employment cannot be terminated by it on
thirty (30) days notice without liability; provided, however, that Parent shall
not unreasonably withhold or delay its consent to any request by Company
hereunder;
(u) make any capital expenditure either involving more than $250,000,
individually (in which case Parent shall not unreasonably withhold or delay its
consent to a request hereunder from Company to act consistent with the Company's
current business plan provided to Parent prior to the date hereof), or outside
the Company's business plan or the ordinary course of business; or
(v) take, or agree in writing or otherwise to take, any of the actions
described above, or any other action which could cause or could be reasonably
likely to cause any of the conditions to the Merger, not to be satisfied.
6.2 Conduct of Business by Parent.
Except as expressly provided for by this Agreement, from and after the date
of this Agreement and until the earlier of the termination of this Agreement or
the Effective Time, Parent shall: (a) carry on its business in the usual,
regular and ordinary course substantially in the same manner as heretofore
carried on, (b) not knowingly do any act or omit to do any act that could result
in a breach of any representation, warranty or covenant of Parent set forth in
this Agreement, (c) not take any action that could reasonably be expected to
cause any of the conditions to the Merger not to be satisfied and (d) not enter
into any agreement, arrangement or understanding with respect to any of the
foregoing.
6.3 Access.
Subject to the provisions of the Confidentiality Agreements, from and after
the date of this Agreement and until the earlier of the termination of this
Agreement or the Effective Time, upon reasonable request, the Company shall
afford to Parent and Parent's agents, accountants, officers, employees,
attorneys and other authorized advisers and representatives reasonable access,
during normal business hours, to its properties, facilities, books, records,
financial statements and other documents and materials relating to its financial
condition, assets, liabilities and business. In addition and subject to the
terms and conditions of the Confidentiality Agreements, during such time period,
the Company shall confer and consult with representatives of Parent to report on
operational matters, financial matters and the general status of ongoing
business operations of the Company. From time to time after the date of this
49
Agreement and until the earlier of the termination of this Agreement or the
Effective Time the Company shall furnish promptly to Parent a copy of each
report, schedule and other document filed by the Company, or received by the
Company after the date of this Agreement pursuant to the requirements of federal
or state securities Laws promptly after such documents are available.
6.4 Meeting of Stockholders.
The Company shall, consistent with its Articles of Incorporation and
Bylaws, call and hold a special meeting of its stockholders, as promptly as
practicable after the effectiveness of the Registration Statement for the
purpose of voting upon the adoption or approval of this Agreement (the "Special
Meeting"), and shall use all commercially reasonable efforts to hold its Special
Meeting as soon as practicable after the date on which the Registration
Statement becomes effective. The Company shall, subject to the applicable
fiduciary duties of its directors, as determined by such directors in good faith
with the written advice of its independent counsel (who may be its regularly
engaged independent legal counsel), (a) use all commercially reasonable efforts
to solicit from the Stockholders proxies in favor of the adoption or approval,
as the case may be, of the Merger, (b) take all other action necessary or
advisable to secure the vote or consent of stockholders, as required by the FBCA
to obtain such adoption or approvals, and (c) include in the Proxy
Statement/Prospectus the recommendation of its Board of Directors in favor of
the Merger and not withdraw or adversely modify such recommendation, provided
that any failure of the Company to take any action required by this Section 6.4
because of the applicable fiduciary duties of its directors shall not effect the
requirement to hold the Special Meeting.
6.5 Registration Statement; Proxy Statement/Prospectus.
(a) As promptly as practicable after the date of this Agreement, the
Company shall supply Parent with the information pertaining to the Company
required by the Securities Act or the Exchange Act, as the case may be, for
inclusion or incorporation by reference in the Registration Statement and the
proxy statement relating to the meeting of the Stockholders to be held in
connection with the Merger (together with any amendments thereof or supplements
thereto, the "Proxy Statement/Prospectus"), which information shall not at the
time the Registration Statement is filed with the SEC, at the time it becomes
effective under the Securities Act, at the time the Proxy Statement/Prospectus
is mailed to Stockholders or at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, not
misleading. No representation is made by the Company with respect to statements
made in the Proxy Statement/Prospectus or the Registration Statement based on
information supplied by Parent or Merger Sub for inclusion or incorporation by
reference in such documents. If before the Effective Time, any event or
circumstance relating to the Company or any of its Subsidiaries, or their
respective officers or directors, should be discovered by the Company that
should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement/Prospectus, the Company shall promptly inform
Parent and shall make appropriate amendments or supplements to the Proxy
Statement/Prospectus.
(b) As promptly as practicable after the date of this Agreement, Parent
shall supply the Company with the information pertaining to Parent and Merger
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Sub required by the Securities Act or the Exchange Act, as the case may be, for
inclusion or incorporation by reference in the Registration Statement or the
Proxy Statement/Prospectus, which information shall not at the time the
Registration Statement is filed with the SEC, at the time it becomes effective
under the Securities Act, at the time the Proxy Statement/Prospectus is mailed
to Stockholders or at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading. No
representation is made by Parent with respect to statements made in the
Registration Statement or Proxy Statement/Prospectus based on information
supplied by the Company for inclusion or incorporation by reference in such
documents. If before the Effective Time, any event or circumstance relating to
Parent or any of its Subsidiaries, or their respective officers or directors,
should be discovered by Parent that should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement/Prospectus, Parent
shall promptly inform the Company and shall make appropriate amendments or
supplements to the Registration Statement or Proxy Statement/Prospectus.
(c) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy
Statement/Prospectus relating to the Company's Special Meeting. As promptly as
practicable after comments are received from the SEC on the preliminary proxy
materials and after the furnishing by the Company and Parent of all information
required or requested by the SEC to be contained therein, Parent shall prepare
and file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus shall be included as a prospectus, in connection with the
registration under the Securities Act of the shares of Parent Common Stock to be
issued to the Stockholders pursuant to the Merger. Parent shall use all
commercially reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable, and shall take any action required under
applicable federal or state securities Laws in connection with the issuance of
shares of Parent Common Stock pursuant to the Merger or the rules and
regulations of the Stock Market. The Company shall furnish all information
concerning the Company as Parent may reasonably request in connection with such
actions and the preparation of the Registration Statement. As promptly as
practicable after the Registration Statement becomes effective, the Company
shall mail the Proxy Statement/Prospectus to the Stockholders. Notwithstanding
anything to the contrary contained herein, neither the Proxy
Statement/Prospectus nor the Registration Statement nor any amendment or
supplement thereto shall be filed or mailed without the consent of both Parent
and the Company, which consent will not be unreasonably withheld.
6.6 Blue Sky Laws.
Parent shall take such steps as may be necessary to comply with the
securities and blue sky Laws of all jurisdictions which are applicable to the
issuance of Parent Common Stock pursuant hereto.
6.7 Listing.
Promptly after the date of this Agreement, Parent shall prepare and file an
application to list on the Stock Market the shares of Parent Common Stock
issuable, in connection with the Merger, and to obtain approval for the listing
of such shares of Parent Common Stock on the Stock Market prior to the Effective
Time, subject only to official notice of issuance.
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6.8 SEC Actions.
Parent will advise the Company, promptly after Parent receives notice
thereof, of the receipt of any comments by the SEC on the Registration
Statement, the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of Parent Common Stock for offering or sale in
any jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.9 Accountants' "Comfort" Letters.
The Company and Parent will each use their commercially reasonable efforts
to cause to be delivered to each other reasonable and customary letters from
their respective independent accountants, the first letter dated a date within
two (2) business days before the effective date of the Registration Statement
and the second letter dated a date within two (2)business days before the
Closing Date, in form and substance reasonably satisfactory to the recipient and
customary in scope and substance for comfort letters delivered by independent
accountants in connection with registration statements similar to the
Registration Statement.
6.10 Additional Reports.
In accordance with Section 6.3, the Company and Parent shall each furnish
to the other copies of any Company SEC Documents or Parent SEC Documents, as the
case may be, which it files with the SEC on or after the date hereof, and the
Company and Parent, as the case may be, represents and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state 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. Any unaudited consolidated interim
financial statements included in such reports (including any related notes and
schedules) will fairly present, in all material respects, the financial position
of the Company or Parent, as the case may be, as of the dates thereof and the
results of operations and changes in financial position or other information
included therein for the periods or as of the dates then ended, in each case in
accordance with such Party's past practice and GAAP consistently applied during
the periods involved (except as otherwise disclosed in the notes thereto and
subject, where appropriate, to normal year-end adjustments).
6.11 Confidentiality Agreements.
The Company and Parent agree that the Confidentiality Agreements remains in
full force and effect, unimpaired and unmodified by this Agreement, but shall at
the Effective Time be deemed to have terminated without further action by the
parties.
6.12 Regulatory and Other Approvals.
(a) The Company and Parent will (1) take all commercially reasonable
actions necessary to file as soon as practicable, notifications under the HSR
Act and the other Antitrust Laws with respect to the Merger, (2) comply at the
earliest practicable date with any request for additional information received
from the Federal Trade Commission or Antitrust Division of the Department of
Justice pursuant to the HSR Act or from any other Governmental Entity pursuant
to the other Antitrust Laws, and (3) request early termination of all applicable
waiting periods.
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(b) The Company and Parent will take all commercially reasonable steps
necessary, and proceed diligently and in good faith and use all commercially
reasonable efforts, as promptly as practicable to (1) solicit input from
Governmental Entities and Educational Agencies regarding the process of
obtaining Educational Agency and DOE approvals of the Merger, obtain all
Educational Agency and DOE approvals of the Merger, make all filings with and
give all notices to Governmental Entities and Accrediting Bodies, (2) provide
such other information and communications to such Governmental Entities and
Accrediting Bodies or other persons as such Governmental Entities and
Accrediting Bodies may request and (3) obtain all Educational Agency and DOE
approvals of the Merger, make all filings with and give all notices to
Governmental Entities and Accrediting Bodies and obtaining all licenses required
to consummate the Merger and other transactions contemplated hereby. Each Party
will promptly and regularly advise the other Parties concerning the occurrence
and status of any material discussions or other communications, whether oral or
written, with any Educational Agency, other Governmental Entity or other third
party with respect to any Educational Approval or other regulatory approval
which must be obtained either prior to or after Closing in order for Parent and
Merger Sub to operate the Schools and to participate in any Student Financial
Assistance Programs, including the Title IV Programs (the "Consents"), including
any difficulties or delays experienced in obtaining any Consent and of any
conditions proposed, considered, or requested for any Consent. Parent will
cooperate with the Company, and the Company shall cooperate with Parent, in
their respective efforts to obtain any Consents, but neither party will be
required (1) to make any expenditure or payment of funds or to give any other
consideration in order to obtain any Consent other than fees or expenses
incident to any applications as filings with respect thereto, or (2) to permit
any adverse and unduly burdensome changes in, or the imposition of any adverse
and unduly burdensome condition to, any Educational Approval as a condition to
obtaining any Consent. Parent may contact any Educational Agency or Governmental
Entity of the Company with respect to the proposed Merger after seven (7)
business days after the date hereof, in order to allow the Company to inform its
regulators of the proposed Merger, provided, however, that Parent shall make
such contacts for the sole purpose of facilitating its receipt of any Consents.
After that date, the Company and Parent will provide advance notice to allow the
other Party and its agents and representatives to participate in any meetings or
telephone calls initiated by such Party with any Educational Agency or
Governmental Entity with regard to any Consent with respect to which the parties
are experiencing any significant difficulty or delay in obtaining. Each Party
will promptly advise the other of any telephone calls initiated by any
Educational Agency or Governmental Entity with respect to any such Consent. The
Company and Parent will submit to the other Party for prior review each filing
proposed to be submitted to any Educational Agency or Governmental Entity
regarding the proposed Merger; provided, however, if the other Party does not
respond to the Party requesting review of the filing within three (3) business
days, the Party requesting such review may presume that the other Party has
approved and may proceed to submit such filing. The Company and Parent will use
commercially reasonable efforts to ensure that their respective appropriate
officers and employees shall be available to attend, as any Governmental Entity
may reasonably request, any scheduled hearings or meetings in connection with
obtaining any Consent.
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(c) Subject to the terms and conditions herein provided, the Company and
Parent will take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all reasonable efforts to obtain
all approvals required by any contract to consummate the transactions
contemplated hereby.
(d) The Company and Parent shall use all commercially reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental Entity
with respect to the transactions contemplated by this Agreement under the
Antitrust Laws, but neither Party will be required (1) to make any expenditure
or payment of funds or to give any other consideration in order to resolve any
such objections other than fees or expenses incident to any applications as
filings with respect thereto, or (2) to permit any adverse and unduly burdensome
changes in, or the imposition of any adverse and unduly burdensome condition to
resolving any such objections. In connection therewith, if any administrative or
judicial action or proceeding is instituted (or threatened in writing to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, and, if by mutual agreement, Parent and the
Company decide that litigation is in their best interests, each of Parent and
the Company shall cooperate and use all commercially reasonable efforts
vigorously to contest and resist any such action or proceedings and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents, or restricts consummation of any such transaction.
Each of Parent and the Company shall use all commercially reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to such
transactions as promptly as possible after the date of this Agreement. The
obligations of Parent under this Section 6.12 with respect to the Antitrust Laws
shall not require Parent to obtain or attempt to obtain any such waiver, permit,
consent, approval or authorization if obtaining such waiver, permit, consent,
approval or authorization would require disposition of any assets of Parent.
6.13 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement or the Effective Time, the Company will not, and
will not permit its directors, officers, employees, investment bankers,
attorneys, accountants or other representatives, agents or Affiliates to,
directly or indirectly, (1) solicit, initiate, or knowingly encourage any
Acquisition Proposals or any inquiries or proposals that could reasonably be
expected to lead to any Acquisition Proposals, (2) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity in connection with, any Acquisition Proposal or (3) agree to, approve,
recommend or otherwise endorse or support any Acquisition Proposal. As used
herein, the term "Acquisition Proposal" shall mean any proposal relating to a
possible (1) merger, consolidation or similar transaction involving the Company
or any of its Subsidiaries, (2) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any assets
of the Company or any of its Subsidiaries representing, in the aggregate, ten
percent (10%) or more of the assets of the Company on a consolidated basis, (3)
issuance, sale or other disposition of (including by way of merger,
54
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase or securities convertible into, such
securities) representing ten percent (10%) or more of the votes attached to the
outstanding securities of the Company, (4) transaction with the Company in which
any person shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the right to acquire beneficial ownership, or
any "group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial ownership
of, ten percent (10%) or more of the outstanding shares of Company Common Stock,
(5) liquidation, dissolution, recapitalization or other similar type of
transaction with respect to the Company, or (6) transaction which is similar in
form, substance or purpose to any of the foregoing transactions; provided,
however, that the term "Acquisition Proposal" shall not include the Merger and
the transactions contemplated hereby or any proposal or modification thereof
submitted by Parent or any of its Affiliates. The Company will, and will direct
all its directors, officers, employees, investment bankers, attorneys,
accountants and other representatives, agents and Affiliates to, immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) Notwithstanding the provisions of Section 6.13(a) above, if a
corporation, limited liability company, limited liability partnership,
partnership, person or other entity or group other than Parent or any of its
Affiliates (a "Third Party") after the date of this Agreement submits to the
Company or its Board of Directors, not resulting from a breach of Section
6.13(a) above, an unsolicited, bona fide, written Acquisition Proposal, and the
Company's Board of Directors reasonably determines in good faith, after
consultation with outside legal counsel (which may include its regularly engaged
outside counsel) and any nationally recognized investment bank (which may
include the Financial Advisor), that such Acquisition Proposal will result in,
or upon further discussion with or due diligence by such Third Party could
reasonably be expected to constitute or result in, a Superior Proposal (as
defined below), then, in such case (1) the Company may (A) furnish information
about its business, to the Third Party under protection of an appropriate
confidentiality agreement on substantially the same terms as the Confidentiality
Agreements containing customary limitations on the use and disclosure of all
non-public written or oral information furnished to such Third Party, provided
that the Company contemporaneously furnishes to Parent all such non-public
information furnished to the Third Party and (B) negotiate and participate in
discussions and negotiations with such Third Party and (2) if the Company's
Board of Directors determines that such an Acquisition Proposal is a Superior
Proposal, the Company's Board of Directors may (but subject in all events to the
Company's obligation to hold the Special Meeting and allow the Stockholders to
vote on the Merger) withdraw or adversely modify its recommendation of the
Merger. For purposes of this Agreement, "Superior Proposal" means any
unsolicited, bona fide, written Acquisition Proposal for consideration
consisting of cash (not subject to a financing contingency) and/or securities,
and otherwise on terms which the Company's Board of Directors determines (based
on the written advice of a financial advisor of nationally recognized
reputation, including, without limitation, the Financial Advisor) are more
favorable to the Stockholders from a financial point of view than the Merger (or
other revised proposal submitted by Parent as contemplated above), after
consultation with its outside legal counsel (which may be its regularly engaged
outside legal counsel) and that the Third Party is reasonably likely to
consummate the Superior Proposal on substantially the terms proposed. Nothing
contained herein shall prohibit the Company from taking, and disclosing to its
shareholders, a position required by Rule 14d-9(e) under the Exchange Act.
55
(c) The Company will notify Parent immediately, and in any event within
twenty-four (24) hours, if (1) a bona fide Acquisition Proposal is made or is
modified in any respect (including any written material provided by the offeror
the principal terms and conditions of any such Acquisition Proposal or
modification thereto and the identity of the offeror) or (2) the Company
furnishes non-public information to, or enters into discussions or negotiations
with respect to an Acquisition Proposal with, any Third Party.
(d) In addition to the obligations of Company set forth in paragraph (a),
(b) and (c) of this Section 6.13, Company, as promptly as practicable, will
advise Parent orally and in writing of any request for information which Company
reasonably believes could lead to an Acquisition Proposal or of any Acquisition
Proposal, and the material terms and conditions of such request, Acquisition
Proposal or inquiry. The Company will keep Parent reasonably informed in all
material respects of the status of any such request, Acquisition Proposal or
inquiry. In addition to the foregoing, the Company will provide Parent with
prior or reasonably contemporaneous telephonic (promptly confirmed in writing)
or written notice of any meeting of the Company's Board of Directors (or any
committee thereof) at which the Company's Board of Directors is expected or
could reasonably be expected to consider an Acquisition Proposal, together with
a copy of the definitive documentation relating to such Acquisition Proposal to
the extent such documentation is then available (and otherwise provide such
definitive documentation as soon as available).
(e) It is understood and agreed that, without limitation of the Company's
obligations hereunder, any violation of this Section 6.13 by any director,
officer, Affiliate, investment bank, financial advisor, accountant, attorney or
other advisor or representative of the Company, whether or not such person or
entity is purporting to act on behalf of the Company, shall be deemed to be a
breach of this Section 6.13 by the Company.
6.14 Public Announcements.
Any public announcement made by or on behalf of either Parent or the
Company prior to the termination of this Agreement pursuant to Article 8 hereof
concerning this Agreement, the transactions described herein or any other aspect
of the dealings heretofore had or hereafter to be had between the Company and
Parent and their respective Affiliates must first be approved by the other party
(any such approval not to be unreasonably withheld), subject to either party's
obligations under applicable Law or Stock Market or AMEX listing requirements or
rules (but such party shall use its reasonable best efforts to consult with the
other party as to all such public announcements).
6.15 Expenses.
(a) Except as set forth in this Section 6.15 and Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.
56
(b) The Company and Parent each agree to pay one-half (1/2) of any
printing, mailing and filing expenses of the Proxy Statement/Prospectus and
pre-merger notification and report forms under the HSR Act.
(c) In connection with any claim, dispute, disagreement or other conflict
involving the enforcement of this Article 6 or Section 8.3, the parties agree
that the prevailing party shall be reimbursed by the other party for all
reasonable attorneys' fees and costs and expenses associated with such conflict.
6.16 Certain Benefit Plans.
(a) Promptly after the date of this Agreement, the Company's Board of
Directors shall adopt resolutions to discontinue (for any applicable period that
has not yet commenced) the distribution of Company Common Stock to any Company
Benefit Plan subject to Section 401(a) of the Code and to discontinue the
purchase of Company Common Stock under the Company's Employee Stock Purchase
Plan. Prior to the Closing Date, the Company's Board of Directors shall adopt a
resolution freezing and terminating each Company Benefit Plan that contains a
cash or deferred arrangement subject to Section 401(k) of the Code. The Company
shall provide written resolutions reasonably satisfactory to Parent authorizing
the foregoing. A copy of such resolutions shall be delivered to Parent prior to
the Closing Date. As soon as practical after the Closing, Parent may cause the
Surviving Corporation to file the terminated Company Benefit Plans with the IRS
for favorable determination letters and the Surviving Corporation shall take
such other steps as it deems necessary in its sole discretion with respect to
the terminated Company Benefit Plans. In connection with such terminations, the
Company is authorized and directed to make, prior to the Closing Date, any
matching contributions to any such 401(k) Plan in the amount or percentage
required or customarily awarded under the plan for the plan year of the Closing
Date and the previous plan year.
(b) From and after the date that active employees of the Company who are
covered under any Company Benefit Plan cease to be covered under such Plan
(herein called the "Continuing Employees"), Parent shall cause all Continuing
Employees to be eligible to participate in all applicable employee benefit plans
in which similarly situated employees of Parent and its Subsidiaries participate
(called "Parent Plans"), under the terms and conditions of the applicable Parent
Plans, except as provided herein. For purposes of any length of service
requirement, waiting periods, vesting periods or different benefits based on
length of service in any Parent Plans for which a Continuing Employee will be
eligible, the Parent shall ensure that service by such Continuing Employee with
the Company or any of its Subsidiaries shall be deemed to have been service with
the Parent or its Subsidiaries. Nothing contained in this Agreement shall confer
upon any Continuing Employee any right with respect to continued employment with
the Parent.
(c) Parent shall cause each applicable Parent Plan to grant credit to each
Continuing Employee for all service on or prior to the Closing Date with the
Company or any of its Subsidiaries, for purposes of eligibility, vesting,
benefit accrual, benefit calculations or allowances (including, without
limitation, entitlements to vacation, severance, sick days and other paid
leave).
57
6.17 Indemnification.
(a) The Company shall, and from and after the Effective Time, the Parent
shall, indemnify, defend and hold harmless (and advance expenses to) each Person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer or director of the Company (each
individually an "Indemnified Party" and, collectively, the "Indemnified
Parties") to the same extent such Persons are indemnified as of the date of this
Agreement by the Company pursuant to any agreements between such person and the
Company and the Company's Articles of Incorporation and Bylaws against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
and expenses), liabilities or judgments or amounts that are paid in settlement
with the approval of the Indemnifying Party (which shall not be unreasonably
withheld or delayed) as a result of or in connection with any threatened or
actual claim, action, suit, proceeding or investigation, whether criminal, civil
or administrative, based on or arising out of the fact that such person is or
was a director or officer of the Company or any of its Subsidiaries or out of or
in connection with activities in such capacity, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including all Indemnified Liabilities based on, or arising out
of, or pertaining to this Agreement or the transactions contemplated hereby.
Without limiting the generality or effect of the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties (whether arising before or after the Effective Time) and, in
the written opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, there may be a conflict of interest between
the position of the Company or Parent, as applicable, and an Indemnified Party,
the Indemnified Parties may retain counsel, which counsel shall be reasonably
satisfactory to the Company (or Parent after the Effective Time), and the
Company shall (or after the Effective Time, Parent will cause the Surviving
Corporation to) pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefore are received, provided,
however that (1) the Company and the Indemnified Parties will cooperate in the
defense of any such matter and (2) neither Parent, the Company nor the Surviving
Corporation shall be liable for any settlement effected without Parent's prior
written consent (which shall not be unreasonably withheld or delayed). Any
Indemnified Party wishing to claim indemnification under this Section 6.17, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify both Parent and the Company (or, after the Effective Time, the
Surviving Corporation) (but the failure to so notify shall not relieve a party
from any liability which it may have under this Section 6.17 except and only to
the extent such failure materially prejudices such party). An Indemnified Party
shall not be entitled to the indemnification rights provided for in this Section
6.17 with respect to any claim, action, suit, proceeding or investigation
against the Company brought by the Indemnified Party (other than a claim against
the Company for indemnification for matters brought by a party other than the
Indemnified Party and wrongfully denied by the Company).
58
(b) This Section 6.17 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns of
Parent and the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
(c) For a period of not less than six (6) years from the Effective Time,
Parent shall maintain in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its Subsidiaries (provided
that Parent may substitute therefor policies from a financially capable insurer
of at least the same coverage and amount containing terms and conditions which
are substantially no less advantageous, or in the event such coverage is
provided through Parent's insurer it may be on terms and conditions (other than
coverage and amounts) consistent with Parent's current coverage), or in lieu
thereof obtain single limit tail coverage for such period (which shall be
purchased by the Company immediately prior to Closing upon the request of
Parent), with respect to claims arising from facts or events which occurred
before the Effective Time.
6.18 Takeover Law.
Neither the Company, Parent nor Merger Sub shall take any action that would
cause the Merger or the other transactions contemplated by this Agreement and
the Voting Agreement to be subject to the requirements of any Takeover Law. If
any Takeover Law shall become applicable to the Merger or the other transactions
contemplated by this Agreement and the Voting Agreement, each of the Company and
Parent and their respective Boards of Directors shall grant such approvals and
take such actions as are necessary so that the Merger and the other transactions
contemplated by this Agreement and the Voting Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and the
Voting Agreement, and otherwise act to eliminate or minimize the effects of such
Takeover Law on the Merger and the other transactions contemplated by this
Agreement and the Voting Agreement.
6.19 Notification of Certain Matters.
Between the date of this Agreement and the Effective Time, each of the
Company and Parent will promptly notify the other in writing if such Party
becomes aware of any development, fact or condition that (a) is reasonably
likely, individually or with other existing developments, facts or conditions,
to result in a Material Adverse Effect with respect to such Party, or (b) causes
or constitutes a breach of any agreement or covenant under this Agreement
applicable to such Party, or of such Party's representations and warranties as
of the date of this Agreement, or if such Party becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. No such notice will constitute a cure of any such
breach.
6.20 Disclosure Letter Supplements.
From time to time prior to the Effective Time, each Party hereto will
promptly supplement, update or modify (by written notice to the other) its
respective Disclosure Letters delivered pursuant hereto with respect to any
matter hereafter arising which, if existing, occurring or known at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Letter or which is necessary to correct any information in such
Disclosure Letter which has been rendered inaccurate thereby. For the purpose of
determining satisfaction of the conditions set forth in Article 7 and subject to
Sections 7.2(a) and 7.3(a), no effect will be given to any supplement, update or
modification of the respective Disclosure Letters made or purported to be made
pursuant to this Section 6.20. No such supplement, update or modification to the
respective Disclosure Letter will constitute a cure of any breach of any
agreement, representation or covenant under this Agreement.
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6.21 Tax-Free Reorganization Treatment.
The Parties shall use their best efforts to cause the Merger to be treated
as a "reorganization" within the meaning of Section 368(a) of the Code and shall
not knowingly take or fail to take any action which action or failure to act
would jeopardize the qualification of the Merger as a "reorganization" within
the meaning of Section 368 of the Code. Without limiting the foregoing, each of
the Parties shall execute and deliver to counsel to each of the Parties such
representation letters as may be reasonably requested by such law firms in
connection with their delivery of opinions with respect to the transactions
contemplated hereby.
6.22 Exemption from Liability under Section 16(b).
(a) Provided that Company delivers to Parent the Section 16 Information (as
defined below) with respect to Company prior to the Effective Time, the Board of
Directors of Parent, or a committee of Non-Employee Directors thereof (as such
term is defined for purposes of Rule 16b-3(d) under the Exchange Act), will
adopt a resolution in advance of the Effective Time providing that the receipt
by Company Insiders of Parent Common Stock in exchange for shares of Company
Common Stock pursuant to the transactions contemplated hereby and to the extent
such securities are listed in the Section 16 Information, are intended to be
exempt from liability pursuant to Rule 16b-3 under the Exchange Act.
(b) "Section 16 Information" shall mean information accurate in all
respects regarding Company Insiders, the number of shares of Company Common
Stock or other Company equity securities deemed to be beneficially owned by each
Company Insider and expected to be exchanged for Parent Common Stock in
connection with the Merger.
(c) "Company Insiders" shall mean those officers and directors of Company
who are subject to the reporting requirements of Section 16(a) of the Exchange
Act who are listed in the Section 16 Information.
6.23 Real Estate Deliveries.
The Company shall use its good faith efforts in cooperating with Parent in
obtaining the following, in forms reasonably requested by Parent, with respect
to each of the Leases; provided, however, the Company shall not be required to
unreasonably burden its business operations in so cooperating: (a) an estoppel,
consent and amendment agreement from each of the landlords, joined by the tenant
thereof, and (b) a subordination, nondisturbance and attornment agreement from
each mortgagee or trustee under a deed of trust or underlying or ground lessor.
60
6.24 Reasonable Efforts.
So long as this Agreement has not been terminated, the Company, the Parent
and Merger Sub shall: (a) promptly make their respective filings (including,
without limitation, filings required pursuant to the Securities Act and the
Exchange Act), obtain waivers, consents, permits and approvals, and thereafter
make any other submissions required under all applicable Laws in order to
consummate the Merger and the other transactions contemplated hereby and (b) use
their respective reasonable best efforts to promptly take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate to consummate the Merger and the other transactions
contemplated by this Agreement.
6.25 Affiliate Agreements.
(a) Not later than the fifteenth (15th) day prior to the mailing of the
Proxy Statement/Prospectus, the Company shall deliver to Parent a schedule of
each Stockholder that is or is reasonably likely to be, as of such date, deemed
to be an Affiliate of the Company and who was not previously disclosed pursuant
to Section 4.36 or for whom the Company has not delivered an Affiliate Letter
pursuant to Section 4.36.
(b) The Company shall use its commercially reasonable efforts to cause each
Stockholder referred to in Section 6.25(a) who may be deemed to be an Affiliate
of the Company, to execute and deliver to the Parent on or before the date of
mailing of the Proxy Statement/Prospectus an Affiliate Letter.
6.26 No Rights Triggered.
Each of the Company and Parent shall use their respective reasonable best
efforts to ensure that the entering into of this Agreement and the consummation
of the transactions contemplated hereby and any other action or combination of
actions, or any other transactions contemplated hereby, do not and will not
result in the grant of any rights to any Person under the Parent Rights Plan or
under any agreement to which it or any of its Subsidiaries is a party.
6.27 Shareholder Litigation.
The Parties shall cooperate and consult with one another, to the fullest
extent possible, in connection with any stockholder litigation against any of
them or any of their respective directors or officers with respect to the
transactions contemplated by this Agreement. In furtherance of and without in
any way limiting the foregoing, each of the Parties shall use its respective
commercially reasonable efforts to prevail in such litigation so as to permit
the consummation of the transactions contemplated by this Agreement in the
manner contemplated by this Agreement. Notwithstanding the foregoing, the
Company shall not compromise or settle any litigation commenced against it or
its directors or officers relating to this Agreement or the transactions
contemplated hereby (including the Merger) without Parent's prior written
consent, which shall not be unreasonably withheld or delayed.
6.28 Operational Matters.
After the execution of this Agreement, the Company shall cooperate with the
Parent in developing post-Closing transition policies with respect to management
information systems, marketing, admissions, personnel, outsourcing, operations,
regulatory matters and accounting, including, without limitation, meeting
regularly (at such times as shall be mutually agreed upon by the Company and
Parent) with on-site transition teams of Parent with respect to marketing,
management information systems, regulatory matters and accounting. The Company
shall maintain its marketing expenditures to the extent set forth in the
Company's marketing budget attached hereto as Section 6.28 of the Company
Disclosure Letter.
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ARTICLE 7
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each Party to consummate and effect the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction prior to or at the Closing as hereinafter provided of the following
conditions, each of which may only be waived in writing in whole or in part by
mutual agreement of all of the Parties, to the extent permitted by Law:
(a) Clearance from the appropriate agencies, pursuant to the HSR Act, and
any Governmental Entity pursuant to any foreign statutes, rules, regulations,
orders or decrees that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade (together
with the HSR Act, the "Antitrust Laws"), shall have been obtained by the Company
and Parent or the waiting period thereby required shall have expired or been
terminated.
(b) This Agreement, the Merger and the transactions contemplated by this
Agreement shall, if necessary, have received the requisite approval and
authorization of the Stockholders in accordance with applicable Law and the
Articles of Incorporation and Bylaws of the Company.
(c) No Law shall have been enacted or promulgated by any Governmental
Entity which prohibits the consummation of the Merger; and there shall be no
order or injunction of a Governmental Entity in effect precluding consummation
of the Merger.
(d) The SEC shall have declared the Registration Statement effective. No
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall be in effect and no proceeding for that purpose, and no
similar proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC; and all requests for additional
information on the part of the SEC shall have been complied with to the
reasonable satisfaction of the parties hereto.
(e) No action, suit or proceeding shall be brought by and be pending before
any Regulator wherein an unfavorable judgment, order, decree, stipulation or
injunction would (1) prevent consummation of any of the transactions
contemplated by this Agreement, (2) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (3) unless waived
solely by Parent, affect adversely, in the sole reasonable judgment of Parent,
the right of Parent to own, operate or control any material portion of the
62
assets and operations of the Surviving Corporation and its Subsidiaries
following the Merger, except, that, Parent may not unilaterally waive the
condition set forth in this Section 7.1(e) if consummating the Merger following
such waiver could, in the reasonable opinion of the Company's counsel,
reasonably be expected to result in personal liability (other than de minimis
monetary liability) to a director, officer, employee or agent of the Company for
violation of any federal, state or local statute, regulation or rule, and no
such judgment, order, decree, stipulation or injunction shall be in effect.
7.2 Conditions to the Company's Obligation to Effect the Merger.
The obligations of the Company to consummate and effect the Merger and the other
transactions contemplated hereby are further subject to the fulfillment of the
following conditions, any of which may be waived only in writing in whole or
part by the Company:
(a) The representations and warranties of Parent and Merger Sub set forth
in this Agreement that are qualified by materiality or "Material Adverse Effect"
shall have been true and correct as of the date of this Agreement and shall be
true and correct as of the Effective Time as if made on and as of the Effective
Time, and the representations and warranties of Parent and Merger Sub contained
in this Agreement that are not so qualified shall have been true and correct in
all material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Effective Time as if made on and as
of the Effective Time except, in each case, for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct or true and correct in all material respects, as
applicable, as of such date).
(b) Each of Parent and Merger Sub shall have in all material respects
performed all obligations and complied with in all material respects all
covenants required by this Agreement to be performed or complied with by it at
or prior to the Effective Time.
(c) From the date of this Agreement to the Effective Time, there shall not
have been any event or development which results in a Material Adverse Effect
upon the business of the Parent.
(d) Each of Parent and Merger Sub shall have delivered to the Company a
certificate, dated the Effective Time and signed by their respective Chief
Executive Officers and Chief Financial Offices, certifying the satisfaction of
the conditions set forth in Sections 7.2(a), (b) and (c).
(e) Parent shall have delivered to the Company evidence reasonably
satisfactory to the Company that the shares of Parent Common Stock issuable to
the Stockholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the Stock Market upon official notice of issuance.
(f) The Company shall have received an opinion from Xxxxxxx Xxxxxx Xxxxxx
Xxxxxxxx Xxxxxxxx & Xxxxxxxxx, P.A., dated the Closing Date, based upon factual
representations of Parent and the Company, to the effect that the Merger will
63
constitute a reorganization for federal income tax purposes within the meaning
of Section 368(a) of the Code and no gain or loss will be recognized by the
Company or its Stockholders as a result of receipt of the Merger Consideration,
other than gain with respect to the receipt of the cash portion of the Merger
Consideration; provided, however, that if Xxxxxxx Xxxxxx Xxxxxx Xxxxxxxx
Xxxxxxxx & Xxxxxxxxx, P.A. does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to the Company if Xxxxxx
Xxxxxx Xxxxx Xxxxxxxx renders such opinion to the Company.
(g) All consents, approvals, interim approvals, orders or authorizations
of, or registrations, declarations or filings with, any Governmental Entity or
Accrediting Body required by or with respect to the Company, Parent or any of
their respective subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the Merger and other transactions
contemplated hereby shall have been obtained or made, except for (1) approval
from the DOE, (2) approval or interim approval from any Educational Agency that,
under that agency's policies or standards, cannot be obtained prior to Closing
or (3) such other consents, approvals, orders, authorizations, registrations,
declarations, or filings of a type the failure of which to be obtained or made
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent or materially impair the Parent's or Merger
Sub's ability to consummate the Merger.
(h) All actions to be taken by Parent and Merger Sub in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Company and its counsel.
7.3 Conditions to Parent's and Merger Sub's Obligation to Effect the
Merger.
The obligations of Parent and Merger Sub to consummate and effect the Merger and
the other transactions contemplated hereby are further subject to the
fulfillment of the following conditions, any of which may be waived only in
writing in whole or part by Parent or Merger Sub:
(a) Except for the representations and warranties of the Company set forth
in Section 4.19, Sections 4.20(b), (e) and (f)(2) and Section 4.21(b) that are
qualified by reference to the Company's Knowledge and "Material Adverse Impact"
(i) the representations and warranties of the Company set forth in this
Agreement that are qualified by materiality or "Material Adverse Effect" shall
have been true and correct as of the date of this Agreement and shall be true
and correct as of the Effective Time as if made on and as of the Effective Time,
and (ii) the representations and warranties of the Company contained in this
Agreement that are not so qualified shall have been true and correct in all
material respects as of the date of this Agreement and shall be true and correct
in all material respects as of the Effective Time as if made on and as of the
Effective Time except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date). The representations and warranties of the Company set forth in
Section 4.19, Sections 4.20(b), (e) and (f)(2) and Section 4.21(b) that are
64
qualified by reference to the Company's Knowledge and "Material Adverse Impact"
shall have been true and correct in all respects as of the date of this
Agreement and shall be true and correct in all respects as of the Effective Time
(without taking into account any qualifications or exceptions for the Company's
Knowledge or "Material Adverse Impact") as if made on and as of the Effective
Time, except for such inaccuracies or breaches that in the aggregate do not have
or constitute a Material Adverse Effect on the Company.
(b) The Company shall have in all material respects performed all
obligations and complied in all material respects with all covenants required by
this Agreement to be performed or complied with by it at or prior to the
Effective Time.
(c) From the date of this Agreement to the Effective Time, there shall not
have been any event or development which results in a Material Adverse Effect
upon the business of the Company.
(d) The Company shall have delivered to Parent a certificate, dated the
Closing Date and signed by its Chief Executive Officer and Chief Financial
Officer, certifying the satisfaction of the conditions set forth in Sections
7.3(a), (b) and (c).
(e) Parent shall have received all written consents, approvals, interim
approvals, assignments, waivers, orders, authorizations or other certificates
reasonably necessary to provide for the continuation in full force and effect of
those Material Contracts set forth on Section 7.3(e) of the Parent Disclosure
Letter and all of the Existing Permits of the Company and for the Company to
consummate the Merger and other transactions contemplated hereby, including,
without limitation, the approval of applicable Educational Agencies, Accrediting
Bodies and Governmental Entities, except (1) approval from the DOE, (2) approval
from any Educational Agency that, under the agency's policies or standards,
cannot be obtained or, due to administrative preference, may be obtained solely
in interim form prior to Closing or (3) where the failure to receive such
consents, approvals, interim approvals, assignments, waivers, orders,
authorizations or certificates could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or could
not affect adversely the ability of the Surviving Corporation to continue to
conduct the business of the Company consistent with the Company's historical
ordinary course of business. Notwithstanding anything herein to the contrary, to
the extent that Parent receives an interim approval from any applicable
Educational Agency or Accrediting Body, such interim approval will not satisfy
this condition to closing if such interim approval is issued because there is
some substantive issue with respect to issuance of full approval as opposed to
being issued because it is such Educational Agency's or Accrediting Body's
normal practice or procedure or administrative preference. Parent shall have
received written or oral assurances from the Georgia Nonpublic Postsecondary
Education Commission, the Accrediting Bureau Of Health Education Schools, the
Missouri Coordinating Board for Higher Education, the Pennsylvania State Board
of Private Licensed Schools, and the Accrediting Council for Independent
Colleges and Schools, confirming that such Educational Agency does not believe
that any impediment exists with respect to issuance of the Educational Approvals
which Parent requires for its operation of the Company's Schools after the
Closing.
65
(f) Parent shall have received an opinion from Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
dated the Closing Date, based upon factual representations of Parent and the
Company, to the effect that the Merger will constitute a "reorganization" for
federal income tax purposes within the meaning of Section 368(a) of the Code and
no gain or loss will be recognized by Parent or its stockholders as a result of
the Merger; provided, however, that if Xxxxxx Xxxxxx Xxxxx Xxxxxxxx does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to the Parent if Xxxxxxx Xxxxxx Xxxxxx Xxxxxxxx Xxxxxxxx &
Xxxxxxxxx, P.A. renders such opinion to Parent.
(g) All actions to be taken by the Company in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Parent and its counsel.
(h) Parent shall have obtained a written statement from DOE providing,
without unduly burdensome limitations, that DOE does not see any impediment to
issuing a Temporary Program Participation Agreement with respect to each
Institution following the Closing.
(i) All consents, approvals, interim approvals, orders or authorizations
of, or registrations, declarations or filings with, any Governmental Entity or
Accrediting Body required by or with respect to the Company, Parent or any of
their respective subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the Merger and other transactions
contemplated hereby shall have been obtained or made, including, without
limitation, the Colorado Commission on Higher Education, the Florida Commission
for Independent Education, the Illinois State Board of Education, the Maryland
Higher Education Commission, the Massachusetts Department of Education, the New
Jersey Department of Education, the New York State Education Department, the
Bureau of Proprietary School Supervision, the Ohio State Board of Career
Colleges and Schools, the Texas Workforce Commission, and the North Central
Association of Colleges and Schools, except for (1) approval from the DOE, (2)
approval from any Educational Agency that, under the agency's policies or
standards, cannot be obtained prior to Closing or, due to administrative
preference, may be issued in interim form, provided that such interim approval
is not issued because there is some substantive issue with respect to issuance
of full approval as opposed to being issued because it is such Educational
Agency's or Accrediting Body's normal practice or procedure or administrative
preference at the time of issuance and (3) such other consents, approvals,
interim approvals, orders, authorizations, registrations, declarations, or
filings of a type the failure of which to be obtained or made could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or Parent or materially impair the Company's,
Parent's or Merger Sub's ability to consummate the Merger.
66
ARTICLE 8
TERMINATION, WAIVER AND AMENDMENT
8.1 Termination.
This Agreement may be terminated and the Merger and transactions
contemplated by this Agreement may be abandoned at any time prior to the
Effective Time (whether before or after the approval of this Agreement by the
Stockholders), as follows:
(a) by mutual written consent of the Company and Parent;
(b) by either of Parent or the Company:
(1) if the Stockholders do not approve the Merger by the
requisite vote at the Company's Special Meeting (including
any adjournment or postponement thereof) (provided, however,
the Company may not terminate pursuant to this Section
8.1(b)(1) unless following the Special Meeting it has given
Parent at least twenty-four (24) hours prior written notice
of Company's intention to terminate pursuant to this Section
8.1(b)(1));
(2) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use
their reasonable efforts to lift), which permanently
restrains, enjoins or otherwise prohibits consummation of
the Merger and such order, decree, ruling or other action
shall have become final and non-appealable;
(3) if there shall be any Law enacted, promulgated or issued and
deemed applicable to the Merger by any Governmental Entity
which would make consummation of the Merger illegal; or
(4) if the Merger shall not have been consummated by September
26, 2003; provided, however, that the right to terminate
this Agreement under this Section 8.1(b)(4) shall not be
available to any party whose failure, or whose Affiliate's
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date.
(c) by the Company if:
(1) Parent or Merger Sub shall have breached in any material
respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement,
which breach (A) cannot be or has not been cured, in all
material respects, within 20 business days after the giving
of written notice to Parent or Merger Sub, as applicable,
and (B) would result in the failure to satisfy a condition
set forth in Section 7.2; or
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(2) if the Average Share Value ending on and including the day
two (2) trading days before the Closing Date is less than
$37.00; provided, however, that the Company may not
terminate this Agreement pursuant to this Section 8.1(c)(2)
unless it gives Parent written notice no later than 12:00
Noon Eastern Time on the day prior to the Closing Date of
its intention to so terminate and, provided, further, that
in such case Parent shall have the right, exercisable in its
sole discretion by written notice delivered prior to 12:00
Noon Eastern Time on the Closing Date, to irrevocably agree
that, notwithstanding the provisions of the Collar, the
Exchange Ratio shall equal $7.55 divided by the Average
Share Value ending on and including the day two (2) trading
days before the Closing Date, in which case this Agreement
shall not be so terminated and the Company shall have no
further right to terminate this Agreement pursuant to this
Section 8.1(c)(2).
(d) by Parent if:
(1) the Company shall have breached in any material respect any
representation, warranty, covenant or other agreement
contained in this Agreement, which breach (A) cannot be or
has not been cured, in all material respects, within 20
business days after the giving of written notice to the
Company and (B) would result in the failure to satisfy a
condition set forth in Section 7.3;
(2) the Board of Directors of the Company (A) withholds or
withdraws its recommendation of the Merger or, (B) modifies
its recommendation of the Merger in a manner adverse to
Parent;
(3) a tender offer or exchange offer for ten percent (10%) or
more of the outstanding shares of Company Common Stock shall
have been commenced or a registration statement with respect
thereto shall have been filed (other than by Parent of an
affiliate thereof) and the Board of Directors of Company
shall, notwithstanding its obligations hereunder, have (A)
recommended that the Stockholders tender their shares in
such tender or exchange offer or (B) publicly announced its
intention to take no position with respect to such tender
offer;
(4) the Company is in material breach of any of the provisions
of Section 6.13;
(5) an Acquisition Proposal shall have been announced or
otherwise become publicly known and the Board of Directors
of Company shall have (A) failed to recommend against
acceptance of such by the Stockholders (including by taking
no position, or indicating its inability to take a position,
with respect to the acceptance by the Stockholders of an
Acquisition Proposal involving a tender offer or exchange
offer) or (B) failed to reconfirm, publicly, by means of a
press release or other comparable written disclosure, upon
written request of Parent, its approval and recommendation
of this Agreement and the transactions contemplated hereby,
in each case within ten (10) business days thereafter; or
68
(6) if the Average Share Value ending on and including the day
two (2) trading days before the Closing Date is more than
$65.00; provided, however, that Parent may not terminate
this Agreement pursuant to this Section 8.1(d)(6) unless it
gives the Company written notice no later than 12:00 Noon
Eastern Time on the day prior to the Closing Date of its
intention to so terminate and, provided, further, that in
such case the Company shall have the right, exercisable in
its sole discretion by written notice delivered prior to
12:00 Noon Eastern Time on the Closing Date, to irrevocably
agree that, notwithstanding the provisions of the Collar,
the Exchange Ratio shall equal $8.95 divided by the Average
Share Value ending on and including the day two (2) trading
days before the Closing Date, in which case this Agreement
shall not be so terminated and Parent shall have no further
right to terminate this Agreement pursuant to this Section
8.1(d)(6).
8.2 Effect of Termination.
In the event of termination of this Agreement pursuant to Section 8.1, this
Agreement shall become void and of no further force and effect, and there shall
be no liability or obligation on the part of Parent, Merger Sub, the Company or
their respective officers or directors under this Agreement except as set forth
in (a) the provisions of Section 6.3 relating to the obligations of the parties
to keep confidential and not to use certain information obtained from the other
party, and (b) the provisions of Sections 6.15 and 8.3 and Article 9.
8.3 Termination Fee.
(a) In the event that (1) (A) an Acquisition Proposal shall have been made
known to the Company or has been made directly to its Stockholders or any Person
has announced a bona fide intention (whether or not conditional and whether or
not withdrawn) to make an Acquisition Proposal, (B) thereafter this Agreement is
terminated by either Parent or the Company pursuant to Section 8.1(b)(1), by the
Company pursuant to Section 8.1(b)(4) or by Parent pursuant to Section 8.1(d)(1)
due to the (i) failure of any of the Company's representations and warranties to
be true and correct in all material respects as of the date hereof or (ii) the
Company's willful breach of any of its representations and warranties,
agreements or covenants after the date hereof, and (C) within twelve (12) months
after such termination, the Company or any of its Subsidiaries enters into any
agreement with respect to or approves for purposes of Section 607.0901 of the
FBCA, or consummates, an Acquisition Proposal (provided, that for purposes of
this clause (C) of this Section 8.3(a)(1), the term "Acquisition Proposal" shall
have the meaning assigned to such term in Section 6.13(a) hereof except that,
(i) each reference to "10% or more" shall be deemed to be a reference to "30% or
more;" (ii) such term shall not include a business combination transaction where
the Stockholders of the Company prior to such transaction hold securities
representing at least 65% of the outstanding voting power and at least 65% of
the equity of the Company in substantially the same proportion as they hold in
the Company prior to giving effect to the transaction; and (iii) such term shall
not include recapitalizations in which the Company receives no value); or (2)
this Agreement is terminated by Parent pursuant to Sections 8.1(d)(2), (3), (4)
or (5), then, provided that Parent is not then in material breach of this
Agreement, the Company shall pay to Parent the aggregate sum equal to
$10,000,000 plus Parent's costs and expenses incurred in connection with this
Agreement and the Merger (including, without limitation, fees of attorneys,
accountants and financial advisors and filing fees paid or payable), provided
such expense reimbursement shall not exceed $1,500,000. The Company shall pay,
by wire transfer of immediately available funds to an account designated by
Parent, the amounts required to be paid by the foregoing provisions of this
Section 8.3(a) within twenty-four (24) hours of Parent terminating this
Agreement pursuant to Section 8.3(a)(2) or the first occurrence of the events
described in clause (C) of Section 8.3(a)(1).
69
(b) The Company acknowledges that the agreements contained in this Section
8.3 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails to pay in a timely manner the amounts due
pursuant to this Section 8.3 and, in order to obtain such payment, Parent makes
a claim that results in a judgment against the Company for the amounts set forth
in this Section 8.3, the Company shall pay to Parent its reasonable costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the applicable amounts at the prime rate of Bank of
America, N.A. in effect on the date such payment was required to be made.
Payment of the fees or the reimbursement of expenses described in this Section
8.3 shall not be in lieu of damages incurred in the event of willful breach of
this Agreement. Absent a willful breach of this Agreement by the Company,
payment by the Company of the amounts required to be paid under this Section 8.3
shall be in lieu of damages and Parent's sole and exclusive remedy with respect
to the termination of the Agreement giving rise to such payment obligations.
ARTICLE 9
MISCELLANEOUS
9.1 No Survival of Representations and Warranties.
The representations and warranties made in this Agreement shall not survive
beyond the Effective Time. Notwithstanding the foregoing, the covenants and
agreements set forth in Sections 3.1, 3.2, 3.4, 6.15, 6.16, 6.17 and Article 9
shall survive the Effective Time indefinitely (except to the extent a shorter
period of time is explicitly specified therein).
9.2 Entire Agreement.
This Agreement and the documents referred to in, or contemplated by, this
Agreement, including the Company Disclosure Letter and the Parent Disclosure
Letter, constitute the entire agreement among the Parties pertaining to the
subject matter of this Agreement, and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions of the Parties, whether
oral or written, and there are no warranties, representations or other
agreements between the Parties in connection with the subject matter of this
Agreement, except as specifically set forth in this Agreement, it being
understood that the Confidentiality Agreements shall continue in full force and
effect until the Effective Time and shall survive termination of this Agreement.
9.3 Amendment.
This Agreement may be amended by the Parties hereto at any time only by
execution of an instrument in writing signed on behalf of each of the Parties
hereto.
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9.4 Extension; Waiver.
At any time prior to the Effective Time, any Party hereto may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other Parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such Party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such Party contained
herein. Any agreement on the part of a Party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
9.5 Governing Law.
Except to the extent required to be governed FBCA this Agreement shall be
governed and construed in accordance with the Laws of the State of Delaware,
regardless of the laws that might otherwise govern the applicable principles of
conflicts of laws.
9.6 Assignment; Binding Effect.
Neither this Agreement, nor any rights, obligations or interests hereunder,
may be assigned by any Party hereto, except with the prior written consent of
the other Parties hereto. Subject to the preceding sentence, this Agreement
shall be binding upon, and shall inure to the benefit of, the Parties hereto and
their respective successors and assigns. Merger Sub may however assign all its
rights and obligations hereunder to another wholly owned subsidiary of Parent.
9.7 Notices.
All communications or notices required or permitted by this Agreement shall
be in writing and shall be deemed to have been given at the earlier of the date
personally delivered or sent by telephonic facsimile transmission (with a copy
via other means specified herein) or one day after sending via nationally
recognized overnight courier or five (5) days after deposit in the United States
mail, certified or registered mail, postage prepaid, return receipt requested,
and addressed as follows, unless and until any of such parties notifies the
others in accordance with this Section 9.7 of a change of address:
If to the Company:
Xxxxxxx Education Group, Inc.
0000 Xxxxxxxx Xxxx., 0xx Xxxxx
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
71
With a copy to:
Xxxxxxx Xxxxxx Xxxxxx Xxxxxxxx Xxxxxxxx & Xxxxxxxxx, P.A.
Museum Tower, Suite 2200
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx XxxXxxxxx, Esq.
If to Parent or Merger Sub:
Career Education Corporation
0000 Xxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 X. Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
9.8 Counterparts; Headings.
This Agreement may be executed in several counterparts, each of which shall
be deemed an original, but such counterparts shall together constitute but one
and the same Agreement. The Article and Section headings in this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
9.9 Interpretation.
Unless the context requires otherwise, all words used in this Agreement in
the singular number shall extend to and include the plural, all words in the
plural number shall extend to and include the singular, and all words in any
gender shall extend to and include all genders. The Article and Section headings
in this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
9.10 Specific Performance.
The Parties agree that the assets and business of the Company as a going
concern constitute unique property and, accordingly, each Party shall be
entitled, at its option and in addition to any other remedies available as
herein provided, to the remedy of specific performance to effect the Merger as
provided in this Agreement.
9.11 No Reliance.
Except for the Parties to this Agreement and except as otherwise provided
in Sections 6.17 and 6.22: (a) no Person is entitled to rely on any of the
representations, warranties and agreements of the Parties contained in this
Agreement; and (b) the Parties assume no liability to any Person because of any
reliance on the representations, warranties and agreements of the Parties
contained in this Agreement.
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9.12 Exhibits and Disclosure Letters.
The Exhibits, Company Disclosure Letter and Parent Disclosure Letter are a
part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits, Company Disclosure Letter and Parent
Disclosure Letter shall be deemed references to such parts of this Agreement,
unless the context shall otherwise require.
9.13 No Third Party Beneficiary.
Except as provided pursuant to Sections 6.16, 6.17, 6.22 and 8.2 hereof,
the terms and provisions of this Agreement are intended solely for the benefit
of the Parties hereto and their respective successors and assigns and it is not
the intention of the Parties to confer third-party beneficiary rights upon any
other Person.
9.14 Severability.
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
Parties hereto. The Parties further agree to replace such voided or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such voided or unenforceable provision.
9.15 Other Remedies.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a Party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such Party, and the
exercise by a Party of any one remedy will not preclude the exercise of any
other remedy.
9.16 Rules of Construction.
The Parties agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
Party drafting such agreement or document.
[remainder of page intentionally left blank;
signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first written above.
CAREER EDUCATION CORPORATION
/s/ Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
XXXXXX ACQUISITION CORP.
/s/ Xxxxxxx Xxxxx
-----------------------------
Xxxxxxx Xxxxx
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
XXXXXXX EDUCATION GROUP, INC.
/s/ Xxxxxxx X. Xxxxxxxxx, Xx.
-----------------------------
Xxxxxxx X. Xxxxxxxxx, Xx.
Chief Executive Officer
74
Exhibit 1-A
Names Position
------ ---------
Xxxxxxx X. Xxxxxxxxx, Xx. Chief Executive Officer
Xxxxxxxx X. Xxxxxxxxx Vice President - Finance, Chief Financial
Officer, Secretary and Treasurer
Xxxxxx X. Xxxxxxxx Corporate Controller
Xxxxx X. Xxxxxxxx* President - Ultrasound Diagnostic School Division
Xxxxx X. X'Xxxxxxx* President - Colorado Technical University Division
* The duty of inquiry is limited solely to their respective division.
75
Exhibit 1-B
Names Position
------ ---------
Xxxx X. Xxxxxx President and Chief Executive Officer
Xxxxxxx X. Xxxxx Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Xxxx X. Xxxxxx Executive Vice President of Planning and
Development
Xxxx X. Xxxxx* Vice President - Student Finance and Regulatory
Affairs
* The duty of inquiry is limited solely to regulatory matters.
76
