Exhibit 10.66
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of December 17, 2002 (this
"AGREEMENT"), is entered into by and among Corinthian Colleges, Inc., a Delaware
corporation, ("BUYER"), Learning Tree University, Inc., a California nonprofit
public benefit corporation (hereinafter "LTU"), LTU Extension, Inc., a
California corporation (hereinafter "LTUX" and referred to herein collectively
with LTU as the "SELLERS" and individually as a "SELLER"), and Xxxxxxx Xxxxx
(referred to herein as "XXXXX").
BACKGROUND
A. LTU owns and operates two institutions of higher education known
as Learning Tree University located in Chatsworth and Costa Mesa, California,
which provide courses in information technology, business and management,
design, education, health and recreation, language and psychology and writing,
and offer online courses, and sell textbooks and other course-related materials
(hereinafter collectively referred to as the "SCHOOLS," and individually, as a
"SCHOOL"). LTUX provides management oversight and administrative services to LTU
in connection with LTU's operation of the Schools.
B. Buyer desires to buy, through the payment of cash and the
assumption of certain liabilities of Sellers, and Sellers desires to sell,
substantially all of the assets and properties owned by Sellers and used in the
business of the Schools, upon the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the mutual covenants contained in this Agreement
and intending to be legally bound hereby, the parties hereto agree as follows:
-1-
ARTICLE I. SALE AND PURCHASE OF ASSETS
SECTION 1.01 PURCHASED ASSETS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, Sellers hereby agrees to sell, assign, convey,
transfer and deliver to Buyer at the Closing (as defined herein), and Buyer
hereby agrees to purchase from Sellers, all of the Sellers' right, title and
interest in, to and under all of the business, properties, assets, goodwill,
rights and claims and property owned by Sellers and used in the business of the
Schools of the types set forth below (the "PURCHASED ASSETS"), free and clear of
all mortgages, pledges, liens, claims, restrictions, encumbrances and security
interests of any kind or nature except for the "Permitted Exceptions" (as such
term is defined in Section 5.07(c)), and except for the Excluded Assets (as
defined in Section 1.02 hereof):
(a) ACCOUNTS RECEIVABLE. All of Sellers' accounts receivable, notes
receivable and other receivables (and causes of action related to
any of the foregoing) ("ACCOUNTS RECEIVABLE");
(b) INVENTORY. All of Sellers' inventory, including without limitation,
textbooks, course materials and supplies;
(c) PROPERTY, PLANT AND EQUIPMENT. All of Sellers' property, plant and
equipment, including, without limitation, computer hardware,
printers, other data processing equipment, other machinery and
equipment, furniture, fixtures, leasehold improvements, furnishings,
classroom equipment and other tangible personal property used at the
Schools and/or owned by the Sellers;
(d) RECORDS. All of Sellers' records related to or used in connection
with the operation of the Schools or pertaining to the Purchased
Assets, including, without limitation, all student records, ledgers,
financial statements and records, operating data, correspondence,
employment records, placement records, marketing materials,
information and data, mailing lists and copies of all documents and
other information and data filed by Sellers with any state, federal
or local government authority or any guaranty or accrediting agency,
whether on computer disk, in paper form or otherwise;
(e) CONTRACTS AND LEASES. All of the rights of Sellers under contracts,
purchase orders and leases applicable to the Schools to which any
Seller is a party entered into in the course of Sellers' business,
including, without limitation, those identified as Material Assumed
Contracts in Schedule 5.08;
(f) INTELLECTUAL PROPERTY. All rights of Sellers with respect to
patents, trademarks, service marks, logos, licenses and copyrights
(whether or not registered) and all applications and registrations
therefor, owned or licensed by Sellers, and all rights of Sellers
with respect to computer programs and software, including those
described in Schedule 5.09;
(g) WARRANTY RIGHTS. All rights of Sellers relating to or arising out of
express or implied warranties, representations or guarantees from
suppliers with respect to any of the Purchased Assets, and all
causes of action arising therefrom;
(h) PREPAID EXPENSES AND REFUNDABLE DEPOSITS. All of Sellers' prepaid
security, vendor, utility and other deposits and expenses;
(i) PERMITS. To the extent transferable, Sellers' licenses, permits,
certifications, approvals and other governmental and regulatory
authorizations required under all laws, rules and regulations
applicable to or affecting the Schools, including those described in
Schedule 5.05(a);
-2-
(j) GOODWILL AND OTHER INTANGIBLES. All of the goodwill and going
concern value of the Schools and all other intangibles used in
connection with the Schools;
(k) CURRICULUM MATERIALS. All rights of Sellers with respect to
Curriculum used in connection with the educational programs of the
Schools, whether proprietary or licensed from third parties
(including all periodic updates to the curriculum as developed or
used by Sellers or any such third parties); and
(l) OTHER ASSETS. All other assets and property of any kind, wherever
located, which is owned, leased or licensed by Sellers and used in
the business of the Schools (other than the Excluded Assets),
including, without limitation, promotional and marketing materials.
SECTION 1.02 EXCLUDED ASSETS. The Excluded Assets shall not be conveyed
hereunder. The "EXCLUDED ASSETS" means:
(a) CASH. All of Sellers' cash or cash equivalents, certificates of
deposit and marketable securities on hand at the Closing and
Sellers' bank accounts relating thereto; and
(b) OTHER ASSETS. Such other assets as are identified on Schedule
1.02(b) attached hereto.
ARTICLE II. CONSIDERATION
SECTION 2.01 PURCHASE PRICE. The purchase price payable to Sellers in connection
with the transfer to Buyer of the Purchased Assets shall be (i) the cash
consideration referred to in Section 2.02, plus (ii) the assumption of
liabilities of Sellers referred to in Section 2.03, plus (iii) the possibility
of additional Earn-Out Consideration (as defined below) as set forth in Section
2.08 (collectively, the "PURCHASE PRICE").
SECTION 2.02 CASH CONSIDERATION. The cash consideration portion of the Purchase
Price (the "CASH PORTION") shall be Three Million Three Hundred Thousand Dollars
($3,300,000.00) (of which $3,275,000 shall be payable to LTU and $25,000 shall
be payable to LTUX subject to the terms and conditions set forth below), subject
to subsequent decrease pursuant to the Post-Closing Purchase Price Adjustment
and payable as follows, by wire transfer of immediately available funds to each
of the Sellers in the amounts set forth below and to the account number(s)
designated by the Sellers on Schedule 2.02: (A) within two (2) business days of
the date of this Agreement, Buyer shall pay to LTU the sum of Six Hundred
Thousand Dollars ($600,000) as a good faith deposit securing Buyer's obligations
hereunder (the "Deposit"), which Deposit shall be credited against Buyer's
obligations to pay the Cash Portion (LTU's and Buyer's rights and obligations
regarding the Deposit if the Closing fails to occur are set forth in Article
IV), and (B) at the Closing, Buyer shall pay to LTU One Million, Thirty-seven
Thousand Five Hundred Dollars ($1,037,500.00), and Buyer shall pay to LTUX
Twelve Thousand Five Hundred Dollars ($12,500) (collectively, the "CLOSING
PAYMENTS"), (C) three (3) business days following the final determination of the
Post-Closing Purchase Price Adjustment in accordance with Section 2.06, Buyer
shall pay to LTU an amount equal to (x) One Million, Three Hundred Ten Thousand
Dollars ($1,310,000.00), MINUS (y) LTU's pro rata (as such term is defined
below) portion of the Post-Closing Purchase Price Adjustment , and Buyer shall
pay to LTUX an amount equal to (x) Ten Thousand Dollars ($10,000.00), MINUS (y)
LTUX's pro rata share of the Post-Closing Purchase Price Adjustment
(collectively, the "SECOND PAYMENTS"), and (D) on August 31, 2004, Buyer shall
pay to LTU Three Hundred Twenty-seven Thousand Five Hundred Dollars ($327,500),
MINUS LTU's pro rata share of the amount of any of Buyer's Losses claimed under
Sections 9.12 and 9.14 that remain unpaid as of such time, and Buyer shall pay
to LTUX Two Thousand Five Hundred Dollars ($2,500), MINUS LTUX's pro rata share
of the amount of any of Buyer's Losses claimed under Sections 9.12 and 9.14 that
remain unpaid as of such time. For purposes hereof, the term
-3-
"PRO RATA" shall mean pro rata among Sellers in accordance with the following
percentages: ninety-nine and two-tenths percent (99.2%) to LTU and eight tenths
(0.8%) to LTUX.
SECTION 2.03 OBLIGATIONS AND LIABILITIES TO BE ASSUMED. Upon the terms and
subject to the conditions contained herein, at the Closing, Buyer shall, by an
instrument of assumption to be executed and delivered at the Closing
substantially in the form of Exhibit A hereto (the "ASSIGNMENT AND ASSUMPTION
AGREEMENT"), assume only the following liabilities (the "ASSUMED LIABILITIES")
of Sellers and the Schools: (i) current trade accounts payable (except to the
extent such accounts payable relate to liabilities of the types described in
clauses (i) through (viii) in Section 2.04 below), (ii) other current
liabilities consisting solely of (A) accrued expenses (except to the extent such
accrued expenses relate to liabilities of the types described in clauses (i)
through (viii) in Section 2.04 below), and (B) pre-collected tuition, (iii) all
liabilities related to capital lease obligations (including current portion) of
the Sellers as of the Closing Date, (iv) the Schools' teach-out obligation with
respect to students enrolled as of the Closing Date, and (v) obligations arising
under written contracts in connection with the operation of the Schools (the
"Assumed Contracts"); provided, however, that none of the obligations of either
LTU or LTUX under that certain management agreement between LTU and LTUX shall
be assumed by Buyer. The terms "current liabilities" and "current trade accounts
payable" shall mean, for the purposes of this Agreement, those obligations whose
liquidation is reasonably expected to be required within one (1) calendar year.
SECTION 2.04 EXCLUDED LIABILITIES. Buyer shall not assume, or otherwise be
responsible for, any liabilities or obligations (whether actual or contingent,
matured or unmatured, liquidated or unliquidated, or known or unknown)
(collectively, the "EXCLUDED LIABILITIES") of Sellers, any other owner or
operator of the Schools prior to the Closing Date, or any Affiliate of any of
the foregoing, other than those liabilities and obligations which have been
specifically assumed by Buyer pursuant to Section 2.03. The "Excluded
Liabilities" shall include, without limitation, any liabilities or obligations
to the extent that they relate to, are connected with, are based upon or arise
out of the following: (i) regulatory liabilities imposed by the U.S. Department
of Education (the "DOE") and/or all regulatory and licensing agencies with
regulatory authority over the Sellers and/or the Schools for periods prior to
the Closing Date, (ii) liabilities relating to employees of Sellers and the
Schools for periods prior to the Closing Date (including, without limitation,
salary, bonuses, payroll taxes payable, accrued vacation liability or other
compensation or benefits), (iii) liabilities with respect to accounts payable
incurred on or before the Closing Date that are set forth on Schedule 2.04, (iv)
Tax liabilities of Sellers or Xxxxx (including, without limitation, sales and
income tax liabilities in connection with this Agreement), (v) liabilities with
respect to the claims referenced on Schedule 5.13 hereto, (vi) liabilities
associated with any lines of credit or other long-term debt of Sellers
(including current portion), (vii) any intercompany payables or debt to any
parent or stockholder of any of the Sellers (whether to Xxxxx or any Affiliate
of Sellers or Xxxxx) and (viii) any other liability or obligation which has not
been specifically assumed by Buyer pursuant to Section 2.03.
SECTION 2.05 ALLOCATION OF PURCHASE PRICE. Buyer and Sellers agree that the
Purchase Price shall be allocated among the Purchased Assets in accordance with
the allocation set forth in Schedule 2.05 attached hereto. Buyer and Sellers
agree that each will report the federal, state and local income Tax and other
Tax consequences of the purchase and sale contemplated hereby in a manner
consistent with such allocation set forth in Schedule 2.05 and that neither will
take any position inconsistent therewith upon examination of any Tax return, in
any refund claim, in any litigation or otherwise. For the purposes of this
Agreement, the term "TAX" or "TAXES" means any foreign, federal, state, county
or local income, sales and use, excise, franchise, real and personal property,
transfer, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, severance or withholding tax or
-4-
charge imposed by any governmental entity, and any interest and penalties (civil
or criminal) related thereto or to the nonpayment thereof.
SECTION 2.06 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(A) Sellers and Xxxxx agree that immediately following the Closing
on the Closing Date, the consolidated financial condition of Sellers
shall have a "NET WORKING CAPITAL" (as defined below) of no less
than $1.00, in each case calculated in accordance with generally
accepted accounting principles ("GAAP"), applied on a basis
consistent with the Buyer's historical accounting practices. Such
amounts shall be determined and such requirements calculated based
upon the Consolidated Closing Balance Sheet described in Section
2.07. If the Sellers' Net Working Capital immediately following the
Closing on the Closing Date is less than $1.00, then the Purchase
Price shall be reduced, dollar-for-dollar, by an amount equal to the
smallest amount of cash which would be required to bring such
requirement into compliance with the Net Working Capital target set
forth in this Section 2.06.
(B) Any reduction in the Purchase Price under subsection (A) of this
Section 2.06 is referred to herein as the "POST-CLOSING PURCHASE
PRICE ADJUSTMENT." If the Post-Closing Purchase Price Adjustment
results in a decrease in the Purchase Price which is less than the
aggregate amount of the Second Payments, then the amount of the
Second Payments to be paid by Buyer to Sellers in accordance with
Section 2.02(B) shall be reduced by the amount of the Post-Closing
Purchase Price Adjustment, as set forth therein. If the Post-Closing
Purchase Price Adjustment is greater than the aggregate amount of
the Second Payments, then Buyer shall not be required to make the
Second Payments to Sellers in accordance with Section 2.02(B), and
Seller shall pay pro rata to Buyer, within three (3) business days
following the final determination of the Post-Closing Purchase Price
Adjustment by wire transfer of immediately available funds to the
account number designated by Buyer, the amount by which the
Post-Closing Purchase Price Adjustment exceeds the Second Payment.
(C) For purposes of this Agreement, "NET WORKING CAPITAL" shall mean
the sum of (A) all current Purchased Assets of the Sellers as
reflected on the Consolidated Closing Balance Sheet, minus the sum
of (B) all current Assumed Liabilities of the Sellers as reflected
on the Consolidated Closing Balance Sheet.
SECTION 2.07 POST-CLOSING AUDIT; DETERMINATION OF CONSOLIDATED CLOSING BALANCE
SHEET.
(A) Within five (5) business days of the Closing Date, the Sellers
shall deliver to Buyer true and correct copies of all financial
books and records of the Sellers necessary for Buyer to prepare a
consolidated balance sheet of both Sellers dated as of the Closing
Date. Within thirty (30) business days after receipt of such books
and records from the Sellers, Buyer shall prepare (in accordance
with the procedures set forth in Section 2.07(B) below), have
audited (at Buyer's expense), and deliver to the Sellers a
consolidated balance sheet reflecting all of the Purchased Assets
and Assumed Liabilities of the Sellers dated as of the Closing Date
(the "CONSOLIDATED CLOSING BALANCE SHEET"), from which Buyer shall
compute the Net Equity and the Net Working Capital as of the Closing
Date (which computations shall be set forth on, or attached to, the
Consolidated Closing Balance Sheet).
(B) The Consolidated Closing Balance Sheet shall be prepared in
accordance with GAAP, applied on a basis consistent with Buyer's
past accounting practices, and audited by Xxxxxx & Associates
("ALMICH") in accordance with Generally Accepted Auditing Standards
("GAAS")
-5-
(the "POST-CLOSING AUDIT"). Upon receipt of the Consolidated Closing
Balance Sheet prepared by Buyer, Sellers shall have thirty (30) days
in which to review it and either accept it or identify objections to
it by written notice to Buyer. If, within thirty (30) days following
delivery of the Consolidated Closing Balance Sheet to Sellers,
Sellers have not given notice to Buyer of objections to the
Consolidated Closing Balance Sheet (or of the related computation of
Net Working Capital) (such notice shall be in writing and must
contain a statement of the basis of Sellers' objections in
reasonable detail), then the calculation of Net Working Capital as
determined from the Consolidated Closing Balance Sheet shall be used
in computing the Post-Closing Purchase Price Adjustment, if any. If
exceptions or objections are noted by Sellers, Buyer, Sellers and
their respective accountants shall meet to resolve the dispute. If
such dispute has not been fully resolved within fifteen (15)
business days after Sellers gave notice of an objection, then the
issues remaining in dispute shall be submitted to one of the "Big
Four" accounting firms with which neither Sellers nor the Buyer has
a prior business relationship (the "ACCOUNTANTS") for resolution. If
the issues are submitted to the Accountants for resolution: (i)
Buyer and Sellers will furnish to the Accountants such work papers
and other documents and information relating to the disputed issues
as the Accountants may reasonably request and are available to such
party (or its accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants;
(ii) the determination by the Accountants, as set forth in a written
notice delivered to the parties within fifteen (15) business days
following submission of the dispute to the Accountants, will be
binding and conclusive on the parties; and (iii) Buyer, on the one
hand, and Sellers, on the other hand, will each bear 50% of the fees
of the Accountants for such determination. The Net Equity and the
Net Working Capital for all purposes of this Agreement shall be as
determined in accordance with this Section 2.07.
SECTION 2.08 EARN-OUT CONSIDERATION. Subject to the terms and conditions set
forth in this Section 2.08, Buyer shall pay to LTU additional cash consideration
as part of the Purchase Price, in an amount up to Two Million Dollars
($2,000,000) (the "EARN-OUT CONSIDERATION"), as follows:
(a) NEW DIVISION. Following the Closing (as defined below), Buyer shall
create a new operating division consisting solely of the Purchased
Assets and the Assumed Liabilities as used in the operation of the
Schools prior to the Closing (the "NEW DIVISION").
(b) CALENDAR YEAR 2003. If the New Division achieves an amount of EBITDA
in the calendar year ending December 31, 2003 equal to at least the
2003 EBITDA Target (as hereinafter defined), then Buyer shall pay to
LTU, by wire transfer of immediately available funds to the same
account number set forth next to LTU's name on Schedule 2.02 (or as
otherwise instructed in writing by LTU), One Million Dollars
($1,000,000) (the "2003 EARN-OUT PAYMENT"); provided, however, that
if the New Division does not achieve the 2003 EBITDA Target, but
does achieve EBITDA of no less than negative $217,000 (the "EBITDA
FLOOR") (i.e., an EBITDA loss which is no worse than such amount),
then the 2003 Earn-Out Payment shall be One Hundred Thousand Dollars
($100,000), plus a proration amount so that for each full Thirty
Thousand Dollars ($30,000) of EBITDA achieved above the EBITDA
Floor, LTU shall receive an additional One Hundred Thousand Dollars
($100,000) or ten percent (10%) of the 2003 Earn-Out Payment. The
following chart illustrates the amounts of the 2003 Earn-Out Payment
at each relevant 10 percent (10%) threshold of New Division EBITDA:
-6-
NEW DIVISION'S 2003 EBITDA 2003 EARN-OUT PAYMENT
-------------------------- ---------------------
($217,001) or worse Zero Earn-Out Payment
($217,000) to ($187,001) $100,000
($187,000) to ($157,001) $200,000
($157,000) to ($127,001) $300,000
($127,000) to ($97,001) $400,000
($97,000) to ($67,001) $500,000
($67,000) to ($37,001) $600,000
($37,000) to ($7,001) $700,000
($7,000) to $22,999) $800,000
$23,000 to $52,999 $900,000
$53,000 or better $1,000,000
(c) CALENDAR YEAR 2004. If the New Division achieves an amount of EBITDA in
the calendar year ending December 31, 2004 of at least the 2004 EBITDA
Target (as hereinafter defined), then the Buyer shall pay to LTU, by wire
transfer of immediately available funds to the same account number set
forth next to LTU's name on Schedule 2.02 (or as otherwise instructed in
writing by LTU), One Million Dollars ($1,000,000) (the "2004 EARN-OUT
PAYMENT"); provided, however, that if the New Division does not achieve
the 2004 EBITDA Target, but does achieve positive EBITDA of a lesser
amount for such calendar year, then the 2004 Earn-Out Payment shall be
prorated so that for each full Sixty-Four Thousand Dollars ($64,000) of
EBITDA achieved, LTU shall receive One Hundred Thousand Dollars ($100,000)
or ten percent (10%) of the 2004 Earn-Out Payment. The following chart
illustrates the amounts of the 2004 Earn-Out Payment at each relevant 10
percent (10%) threshold of New Division EBITDA:
NEW DIVISION'S 2004 EBITDA 2004 EARN-OUT PAYMENT
-------------------------- ---------------------
$63,999 or less Zero Earn-Out Payment
$64,000 to $127,999 $100,000
$128,000 to $191,999 $200,000
$192,000 to $255,999 $300,000
$256,000 to $319,999 $400,000
$320,000 to $383,999 $500,000
$384,000 to $447,999 $600,000
$448,000 to $511,999 $700,000
$512,000 to $575,999 $800,000
$576,000 to $639,999 $900,000
$640,000 or more $1,000,000
-7-
(d) DEFINITIONS.
(i) For purposes of this Agreement, the "2003 EBITDA TARGET" shall
mean Fifty-Three Thousand Dollars ($53,000), and the "2004
EBITDA TARGET" shall mean Six Hundred Forty Thousand Dollars
($640,000).
(ii) For purposes of this Agreement, the term "EBITDA" shall mean
the consolidated net income of the New Division for the period
indicated, plus (A) interest expense, (B) income tax expense,
(C) depreciation expense, (D) amortization expense, and (E)
any "non-recurring expense" mutually agreed to in advance in
writing by both Buyer and LTU (provided that the writing
evidencing such agreement is signed by an authorized
representative of both LTU and Buyer, describes the
"non-recurring expense" in reasonable detail and refers
specifically to this Section 2.08(d)(ii)), each for the New
Division for the same period. In the event of any controversy
regarding the determination of EBITDA, EBITDA shall be
determined in accordance with the past practices of Buyer as
evidenced by Buyer's audited financial statements for its most
recently ended fiscal year.
(e) FINANCIAL INFORMATION; DISPUTES.
(i) For so long as payments are required to be made under this
Section 2.08, Buyer shall deliver to LTU, as soon as available
and in any event within 90 days after the end of each of the
calendar years ending December 31, 2003 and December 31, 2004,
(A) an internally prepared balance sheet of the New Division
as of such December 31, (B) an internally prepared statement
of income and an internally prepared statement of cash flows
of the New Division for such calendar year, and (C) together
with Buyer's computation of the New Division's EBITDA for such
period. In determining "EBITDA" for the New Division for
purposes of this Section 2.08, (i) no "burden" shall be
deducted for any employee benefits and employer paid taxes
related to instructors of the Learning Tree Division for all
periods prior to Xxxxx 0, 0000, (xx) the "burden" of employee
benefits and employer paid taxes related to instructors of the
Learning Tree Division for all periods from and after April 1,
2003 shall equal 12.52% of all such instructors' gross
compensation, and (iii) the "burden" of employee benefits and
employer paid taxes for all other employees of the Learning
Tree Division shall equal 21.0% of all such other employees'
gross compensation. In determining "EBITDA" for the New
Division for purposes of this Section 2.08, (with the
exception of the provision for benefits of Learning Tree
Division employees as set forth in the preceding sentence) no
costs or expenses incurred by Buyer at its "Corporate
Headquarters" shall be charged against the New Division's
consolidated net income unless such costs or expenses relate
solely to the operations of the New Division. By way of
illustration only, if one or more of Buyer's employees were
used to create budgets for the New Division, no portion of the
salary or "burden" associated with such employee would be
-8-
included in the operating expenses of the New Division unless
such employee were employed solely and exclusively, on a full
time basis, for the New Division. Additionally, for purposes
of calculating "EBITDA" of the New Division, the portion of
Xxxxx'x compensation which consists of "bonus" shall not be
included as operating expenses of the New Division (provided,
however, that all other components of Xxxxx'x compensation
shall be included in the New Division's operating expenses).
For purposes of this Section 2.08, the term "Corporate
Headquarters" shall mean any location operated by the Buyer in
which no students or other customers of Buyer receive goods or
services.
(ii) The financial statements to be provided to LTU pursuant to
this Section 2.08 shall be prepared in accordance with GAAP,
applied on a basis consistent with the Buyer's past practices.
Upon receipt of the financial statements prepared by Buyer,
LTU shall have thirty (30) days in which to review them and
either accept them or identify objections to them by written
notice to Buyer. If, within thirty (30) days following receipt
of the financial statements by LTU, LTU has not given notice
to Buyer of objections to the financial statements (or of the
related computation of the New Division's EBITDA) (such notice
shall be in writing and must contain a statement of the basis
of LTU's objections in reasonable detail), then the
calculation of the New Division's EBITDA as determined from
the financial statements shall be used in computing the 2003
or 0000 Xxxx-Xxx Payment, as applicable. If exceptions or
objections are noted by LTU, Buyer, LTU and their respective
accountants shall meet to resolve the dispute. If such dispute
has not been fully resolved within fifteen (15) business days
after LTU gave notice of an objection, then the issues
remaining in dispute shall be submitted to the Accountants for
resolution. If the issues are submitted to the Accountants for
resolution: (i) Buyer and LTU will furnish to the Accountants
such work papers and other documents and information relating
to the disputed issues as the Accountants may reasonably
request and are available to such party (or its accountants),
and will be afforded the opportunity to present to the
Accountants any material relating to the determination and to
discuss the determination with the Accountants; (ii) the
determination by the Accountants, as set forth in a written
notice delivered to the parties within fifteen (15) business
days following submission of the dispute to the Accountants,
will be binding and conclusive on the parties; and (iii)
Buyer, on the one hand, and LTU, on the other hand, will each
bear 50% of the fees of the Accountants for such
determination. EBITDA for all purposes of this Agreement shall
be as determined in accordance with this Section 2.08.
(f) PAYMENT
Within five (5) business days of final determination of the New
Division's EBITDA for each relevant calendar year in the manner set
forth above, Buyer shall pay to LTU, by check or wire transfer of
same day funds, an amount equal to the relevant Earn-Out Payment for
such calendar year.
ARTICLE III. CLOSING
SECTION 3.01 CLOSING. Consummation of the purchase and sale of the Purchased
Assets contemplated hereby is referred to herein as the "CLOSING," and the date
on which the Closing takes place is referred to herein as the "CLOSING DATE."
The Closing shall take place, as soon as practicable following satisfaction or
waiver of all conditions precedent to the parties' obligations to close, at the
offices of Buyer at 0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx.
Delivery of documents at the Closing may be accomplished by facsimile, to be
followed by delivery of originals by overnight courier of national reputation on
the day after the Closing. The Closing shall be effective at 12:01 a.m. on the
Closing
-9-
Date. Notwithstanding anything to the contrary, the parties hereby agree that
for legal and accounting purposes following the Closing they will treat the
Closing Date as having occurred on January 1, 2003.
SECTION 3.02 DELIVERIES BY SELLERS AND XXXXX AT CLOSING. At the Closing, Sellers
and Xxxxx shall deliver or cause to be delivered to Buyer the following:
(a) Certified resolutions of Sellers' Boards of Directors and, if
required by applicable law, Sellers' stockholders or members, as
applicable, authorizing the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
herein;
(b) a Duly executed Xxxx of Sale substantially in the form of Exhibit B
hereto (the "XXXX OF SALE") and such other instruments of conveyance
as shall, in the opinion of Buyer and its counsel, be necessary to
vest in Buyer title to the Purchased Assets;
(c) a Duly executed Assignment and Assumption Agreement;
(d) An officers' certificate signed by the President and the Chief
Financial Officer of each of the Sellers, or such other officers
reasonably acceptable to Buyer, certifying (i) as to the
representations, warranties and covenants of Sellers made herein as
provided in Sections 8.01(a) and 8.01(c), and (ii) as to the absence
of a material adverse change as provided in Section 8.01(b);
(e) [intentionally omitted];
(f) Duly executed Assignment, Assumption and Amendment of Lease
agreements for each of the Leased Facilities in Costa Mesa and
Chatsworth, California in substantially the forms attached hereto as
Exhibit C (the "LEASE ASSIGNMENTS");
(g) A Non-Competition Agreement in substantially the form attached
hereto as Exhibit D (the "NON-COMPETITION AGREEMENT"), executed by
Sellers and Xxxxx;
(h) Any third party consents required or reasonably requested by Buyer
in order to complete the transactions contemplated by this
Agreement;
(i) A full and complete release of all liens against the property or
assets of the Sellers held by any creditor of the Sellers, except
for the "Permitted Exceptions" (as defined in Section 5.07);
(j) An Employment Agreement in the substantially the form attached
hereto as Exhibit E (the "EMPLOYMENT AGREEMENT"), executed by Xxxxx,
regarding the employment of Xxxxx by the Buyer following the Closing
Date;
(k) Evidence satisfactory to Buyer that all debts incurred through the
Closing Date relating to the School, including lender and other
payables, regulatory fines, repayment, refunds, and all known
obligations or liens (other than Assumed Liabilities) have been
satisfied and paid in full or will be satisfied and paid in full
from the Cash Consideration immediately after the Closing; except
for (i) any debts listed on Schedule 2.04, (ii) any amounts payable
to Xxxxx, and (iii) any amounts payable by LTU or LTUX to the other;
and
(l) Any other documents reasonably requested by Buyer and its counsel to
effectuate the transactions contemplated hereby.
-10-
SECTION 3.03 DELIVERIES BY BUYER AT CLOSING. At the Closing, Buyer shall deliver
or cause to be delivered the following:
(a) The Closing Payments to the Sellers;
(b) Certified resolutions of the Board of Directors of Buyer authorizing
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein;
(c) A duly executed Assignment and Assumption Agreement;
(d) A duly executed Lease Assignments for each of the Third Party Leased
Facilities;
(e) A duly executed Non-Competition Agreement;
(f) A duly executed Employment Agreement; and
(g) Any other documents reasonably necessary to effectuate the
transactions contemplated hereby.
ARTICLE IV. TERMINATION
SECTION 4.01 TERMINATION. This Agreement may be terminated only as follows and
in each case only by written notice:
(a) At any time prior to the Closing by mutual written consent of Xxxxx,
Sellers and Buyer;
(b) Prior to the Closing, by Buyer if Sellers or Xxxxx shall be in
breach of any covenant, undertaking, representation or warranty
contained herein, which breach either (a) materially misrepresents
the business, operations or financial condition of the Sellers as of
the date hereof, (b) causes a material adverse change in the
business, operations or financial condition of the Schools or (c)
prohibits the satisfaction of a condition to the Closing that if
waived and not cured would result in a cost or expense to Buyer of
an amount equal to or greater than $10,000; or
(c) If the Closing has not occurred by 11:59 p.m., Pacific Time, on
January 7, 2003, by Sellers and Xxxxx (acting together) or by Buyer,
by notice to all other parties, at any time thereafter and before
the Closing; provided, however, that no party shall be entitled to
terminate this Agreement pursuant to this Section 4.01(c) if such
party's material breach of this Agreement has prevented the
consummation of the transactions contemplated hereby.
SECTION 4.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Sellers in accordance with the applicable
provisions above, this Agreement shall forthwith terminate upon notice thereof
duly given in accordance with the provisions hereof, and there shall be no
liability of any nature on the part of either Buyer, Sellers or Xxxxx (or their
respective officers or directors, if applicable) to the other, except for
liabilities arising from a breach of this Agreement prior to such termination;
provided, however, that Sellers' and Xxxxx'x obligations under the last sentence
of Section 5.19 shall survive the termination of this Agreement; provided
further, however, that the obligations of the parties pursuant to that certain
letter agreement regarding confidentiality and nondisclosure dated as of July 9,
2002, shall survive the termination of this Agreement under Section 4.01; and
provided further, however, that the maximum amount of damages for which Sellers,
on the one hand, or Buyer, on the other hand, shall be liable for breach of this
Agreement prior to termination shall be Six Hundred Thousand Dollars
($600,000.00) (inclusive of the retention of the Deposit by LTU if LTU is
entitled to keep the Deposit pursuant to the penultimate sentence of this
Section 4.02). Notwithstanding the
-11-
foregoing, in the event of a termination of this Agreement, no party shall be
liable to any other party for any punitive or exemplary damages. Upon the
termination of this Agreement, LTU shall return the Deposit to Buyer within five
(5) business days; provided, however, that if Sellers and Xxxxx terminate this
Agreement pursuant to Section 4.01(c) following the failure of the Closing to
occur on or before 11:59 p.m., Pacific Time, on January 7, 2003, which failure
was caused exclusively by either (A) the failure or refusal of Buyer to
consummate the Closing, or (B) the failure to occur of a condition to Closing
which was solely in the control of Buyer, then (1) LTU shall be entitled to keep
the full amount of the Deposit as liquidated damages under applicable California
law and (2) the parties agree that it would be impracticable and difficult to
fix the actual damages that LTU would sustain, and that the Deposit is a
reasonable estimate of the amount of those actual damages, based upon the
circumstances existing on the effective date of this Agreement. For purposes of
the immediately preceding sentence only (i.e., determining whether the failure
to occur of a condition to Closing was solely in the control of Buyer) and LTU's
right to keep the Deposit following termination of the Agreement by Sellers and
Xxxxx pursuant to Section 4.01(c) (but not for purposes of determining whether
Buyer is otherwise obligated to consummate the Closing), the deliveries required
by Sellers pursuant to Sections 3.02(h) and 3.02(l) shall be deemed to have been
given, and the Conditions to Closing set forth in Sections 8.01(b), 8.01(g) and
8.01(i) shall be deemed satisfied or waived, as of the date of this Agreement.
Any retention of the Deposit by LTU is not intended as a forfeiture or penalty
within the meaning of California Civil Code Sections 3275 or 3369.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE XXXXX
As a material inducement to Buyer to enter into this Agreement, to
purchase the Purchased Assets and to assume the Assumed Liabilities, each of the
Sellers and the Xxxxx, jointly and severally, hereby make the representations
and warranties set forth in this Article V (a) as of the date hereof and (b) as
of the Closing Date.
SECTION 5.01 ORGANIZATION AND CORPORATE POWER. Sellers are corporations, duly
organized, validly existing and in good standing under the laws of the states
set forth next to such entities' names in the introductory paragraph of this
Agreement, the jurisdiction in which each is incorporated. Sellers have all
requisite power and authority to own and operate their respective properties, to
carry on their respective businesses as now conducted, to enter into this
Agreement and to consummate the transactions contemplated hereunder. Sellers are
duly qualified to do business in each jurisdiction in which the failure to be so
qualified would have an adverse effect on the operation of such entities or the
Schools. True and correct copies of Sellers' articles of incorporation and
bylaws have been furnished to Buyer and reflect all amendments made thereto at
any time prior to the date of this Agreement and the Closing Date.
SECTION 5.02 CAPACITY; AUTHORIZATION; BINDING EFFECT. Sellers have the power,
legal capacity and authority to execute, deliver and perform this Agreement and
each other document being executed in connection herewith to which it is a
party. Sellers have the power, legal capacity and authority to transfer, convey
and deliver the Purchased Assets, free and clear of all liens, claims,
encumbrances, options, rights and restrictions, except as otherwise disclosed in
Schedule 5.07(c). All corporate and other proceedings required to be taken by or
on the part of Sellers, including all action required to be taken by the
directors or stockholders of Sellers, to authorize Sellers to enter into and
carry out this Agreement and the related documents contemplated herein, have
been duly and properly taken. This Agreement has been, and each of the related
documents will be at Closing, duly executed and delivered by Sellers and
constitute, or will when delivered constitute, the valid and binding obligations
of Sellers, enforceable against Sellers in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies
-12-
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
SECTION 5.03 OWNERSHIP OF SCHOOLS. The Schools are owned and operated by LTU
directly in the manner set forth in the Background of this Agreement, and no
other Person has any ownership interest in the Schools. No other Person has any
right, option, subscription or other arrangement to purchase or otherwise
acquire any interest in the Schools. For purposes of this Agreement, the term
"PERSON" shall include any individual, corporation, partnership, joint venture,
trust, unincorporated association or government or any agency or political
subdivisions thereof.
SECTION 5.04 NO CONFLICTS. The execution, delivery and performance of this
Agreement and each other document being executed by Sellers and Xxxxx in
connection herewith, and the consummation by Sellers and Xxxxx of the
transactions contemplated hereby and thereby will not: (a) violate any
provisions of law applicable to Sellers; (b) with or without the giving of
notice or the passage of time, or both, conflict with or result in the breach of
any provision of the articles of incorporation or bylaws of Sellers, or any
instrument, license, agreement or commitment to which Sellers are a party or by
which any of their respective assets or properties is bound, including the
Material Assumed Contracts (as defined in Section 5.08 hereof); (c) constitute a
violation of any order, judgment or decree to which Sellers is a party or by
which any of its assets or properties is bound; or (d) require any approval of,
or filing or registration with, any governmental entity or regulatory authority
other than those set forth or described on Schedule 5.04 or Schedule 6.03
attached hereto.
SECTION 5.05 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. Except as disclosed in
Schedule 5.05, Sellers are not in violation of any law, regulation or
requirement of any governmental authority and Sellers do not have notice of any
such violation. Sellers currently maintain all licenses, accreditations,
certificates, permits, consents, authorizations and other governmental or
regulatory approvals (the "LICENSES AND PERMITS") necessary for Sellers to
conduct their respective businesses and the operations of the Schools as
presently being conducted, including, without limitation, all requisite
approvals for the educational and training programs currently offered from the
Schools' institutional accrediting agency and the states in which the Schools
operate. Sellers have duly filed all reports and returns required to be filed by
them with respect to the Schools with governmental authorities and accrediting
bodies and complied with all stipulations, conditions or other requirements that
they have imposed. The Licenses and Permits for the Schools are in full force
and effect, and no proceedings for the suspension or cancellation of any of them
is pending or threatened. No application made by Sellers for any Licenses and
Permits during the last five years has been denied. Schedule 5.05(a) attached
hereto is a true, correct and complete list of all Licenses and Permits held by
Sellers with respect to the Schools and the governmental authority or
accrediting body granting such Licenses and Permits. Sellers have delivered to
Buyer true and correct copies of all such Licenses and Permits. Sellers have
received no notice that any of the Licenses and Permits will not be renewed and,
to Sellers' knowledge, there is no basis for nonrenewal. The Schools are
accredited as set forth on Schedule 5.05(b) attached hereto, and are authorized
by the State of California to operate not-for-profit postsecondary educational
institutions. Sellers have not received any notice, not previously complied
with, in respect of any alleged violation of the rules or regulations of the
DOE, any state licensing body, or any applicable accrediting body in respect of
the Schools, including sales and marketing activities, or the terms of any
program participation agreement to which it is or was a party. If any such
notices have been received and complied with, Sellers have disclosed in writing
their receipt and disposition to Buyer prior to the execution of this Agreement.
Other than as set forth on Schedule 5.05(c) attached hereto, Sellers are not
aware of any investigation or review of the Schools' student financial aid
programs or any review of any School's state license or accreditation by any
Person.
-13-
SECTION 5.06 RECRUITMENT; ADMISSIONS PROCEDURES; ATTENDANCE; REPORTS. Schedule
5.06(a) attached hereto is a complete list of all policy manuals and other
statements of procedures or instruction relating to recruitment of students for
the Schools at any time during the three previous years, including (a)
procedures for assisting in the application by prospective students for direct
or indirect state financial assistance; (b) admissions procedures, including any
descriptions of procedures for insuring compliance with state or federal or
other appropriate standards or tests of eligibility; (c) procedures for
encouraging and verifying attendance, minimum required attendance policies, and
other relevant criteria relating to course completion and certification, and (d)
compensation of admissions representatives (collectively, the "POLICY
GUIDELINES"). Sellers have delivered to Buyer true, correct and complete copies
of all Policy Guidelines and all documents and other information disseminated to
students or prospective students. Sellers' operations with respect to the
Schools have been conducted in accordance with the Policy Guidelines and all
relevant standards imposed by applicable accrediting bodies, agencies
administering state or federal governmental programs in which Sellers
participate, and other applicable laws or regulations. Sellers have submitted
all reports, audits, and other information, whether periodic in nature or
pursuant to specific requests, including, without limitation, all annual
compliance audits and financial statements, for the Schools to all agencies or
other entities with which such filings are required relating to its compliance
with applicable accreditation standards governing its activities. Complete and
accurate records for all present and past students attending the Schools have
been maintained consistent with the operations of a school business. All forms
and records with respect to the Schools have been prepared, completed,
maintained and filed in accordance with all applicable federal and state laws
and regulations, and are true and correct. All financial aid grants and loans,
disbursements and record keeping relating thereto have been completed in
compliance with all federal and state requirements, and there are no
deficiencies in respect thereto. The Schools have complied with the legal
requirements that no student at the Schools be funded prior to the date for
which such student was eligible for funding. The records of each student at the
Schools conform in form and substance to all relevant regulatory requirements.
SECTION 5.07 TITLE TO AND CONDITION OF THE PURCHASED ASSETS.
(a) LEASED FACILITIES. Except as identified on Schedule 5.07(b), the
facilities described on Schedule 5.07(a) constitute the only real
property used in connection with the operation of the Schools by
Sellers (collectively, the "FACILITIES", and each individually a
"FACILITY"). Attached separately to Schedule 5.07(a) are all the
leases (together with all amendments thereto) for all Facilities
leased from parties that are not Affiliates of the Sellers or Xxxxx.
(b) LAWS AND REGULATIONS; RECORDS. Except as set forth on Schedule
5.07(b), all of Sellers' operations with respect to the Schools are
conducted at the Facilities, and all of the tangible Purchased
Assets and records relating to intangible Purchased Assets of the
Schools are located at the Facilities. Sellers are not under any
contractual or other legal obligation, and have not entered into any
commitment, to make capital improvements or alterations to the
Facilities, except as set forth on Schedule 5.07(b). The Facilities
are not subject to any zoning ordinance or other restrictions which
would prohibit the use and enjoyment of the Facilities in the manner
in which the Facilities are currently used and the Facilities are
not subject to any condemnation proceedings. Each Facility and
Sellers' use thereof is in compliance with all laws, including,
without limitation, the Americans with Disabilities Act.
(c) TITLE. Sellers own outright, and have good and marketable title to,
all of the Purchased Assets, free and clear of all liens, claims and
encumbrances, options, rights, and restrictions, other than as set
forth on Schedule 5.07(c) and Schedule 5.09. All liens, claims and
encumbrances, options, rights, and restrictions identified on
Section 5.07(c) shall be released on or prior to the Closing as
-14-
required pursuant to Section 3.02(i), except for such liens and
encumbrances as are specifically identified on Schedule 5.07 (c) as
the "Permitted Exceptions", which may remain following the Closing.
All leases for tangible personal property used by Sellers in
connection with the operation of the Schools (i) are valid and in
full force and effect, (ii) are enforceable in accordance with their
terms, and (iii) are capable of being assigned, and will in fact be
assigned to Buyer, upon the execution and delivery by Buyer and
Sellers of the Assignment and Assumption Agreement, other than as
set forth on Schedule 5.07(c) Neither Sellers nor any of the other
parties thereto is in default under any such lease, and no event,
act or omission has occurred which (with or without notice, the
passage of time or the happening or occurrence of any other event)
would result in a default thereunder, other than as set forth on
Schedule 5.07(c).
(d) CONDITION OF PURCHASED ASSETS. The tangible Purchased Assets and
properties of the Schools which are owned or leased by Sellers and
used in connection with the operation of the Schools are in
materially good operating condition, order and repair, useable in
the ordinary course of business consistent with past practice and
are sufficient and adequate for all current operations. Sellers have
not received notice of any violation of or default under any law,
ordinance, order, regulation or requirement relating to any of the
Purchased Assets which remains uncured or has not been resolved.
(e) TITLE; CONDITION AND QUALITY OF THE CURRICULUM. Sellers own
outright, and have good and marketable title to, the Curriculum used
in the Schools, free and clear of all encumbrances, and the
execution of this Agreement will vest good and marketable title to
the Curriculum in Buyer, free and clear of all encumbrances. No
employee or Affiliate of Sellers or Xxxxx or any other Person owns
or has any interest, directly or indirectly, in any part of the
Curriculum. Except as provided on Schedule 5.07(e), Sellers do not
use any part of the Curriculum by consent of any other Person and
are not required to and do not make any payments to others with
respect thereto. No component of the Curriculum infringes or
violates any copyright, patent, trade secret, trademark, service
xxxx, registration or other proprietary right of any other Person,
and Sellers' and Xxxxx'x past and current use of any part of the
Curriculum does not infringe upon or violate any such right. To the
knowledge of Xxxxx, neither Sellers nor Xxxxx have taken any action,
or failed to take any action, to cause any part of the Curriculum to
enter the public domain. The term "CURRICULUM," as used in this
Agreement, means the curriculum used in the educational programs of
the Schools in the form of computer programs, slide shows, texts,
films, videos or any other form or media, including, without
limitation, the following items: (1) course objectives, (2) lesson
plans, (3) exams, (4) class materials (including interactive or
computer-aided materials), (5) faculty notes, (6) course handouts,
(7) diagrams, (8) syllabi, (9) sample externship and placement
materials, (10) clinical checklists, (11) course and faculty
evaluation materials, (12) policy and procedure manuals, and (13)
other related materials. The Curriculum shall also include, without
limitation, (a) all copyrights, copyright applications, copyright
registrations and trade secrets relating to the above-listed items
and (b) Revisions. The term "REVISIONS," as used in this Agreement,
means all periodic updates or revisions to the Curriculum as
developed or used by Sellers during their respective periods of
operation of the Schools from the beginning of time through the
Closing Date.
SECTION 5.08 ASSUMED CONTRACTS. Schedule 5.08 attached hereto lists each Assumed
Contract of Sellers relating to the Sellers' operations of the Schools or to
which any of the Purchased Assets is subject or bound that individually, or
together as a series of related contracts involving the same party or parties,
or the successors to such party or parties which: (a) obligates Sellers or any
of their respective Affiliates to pay an amount of $10,000 or more, (b) has an
unexpired term as of the date of this Agreement in excess of six months, (c) was
not made in the ordinary course of business, or (d) is in any
-15-
way otherwise material to the operation of the Schools (the "MATERIAL ASSUMED
CONTRACTS"). Each Material Assumed Contract is valid and existing. The
applicable Seller has duly performed all of its obligations under the Material
Assumed Contracts to the extent that such obligations to perform have accrued,
other than as set forth on Schedule 5.08. Sellers have not received written
notice of any alleged breach or default, and no event which would (with the
passage of time, notice or both) constitute a material breach or default by
Sellers or any other party or obligor with respect thereto has occurred, other
than as set forth on Schedule 5.08. True and correct copies of the Material
Assumed Contracts, including all amendments and supplements thereto, are
attached to Schedule 5.08. Each of the Material Assumed Contracts is (i)
enforceable in accordance with its terms, and (ii) is capable of being assigned
to Buyer and will in fact be assigned to Buyer upon the execution and delivery
by Buyer and Sellers of the Assignment and Assumption Agreement, except as
identified on Schedule 5.08. For purposes of this Agreement, the term
"AFFILIATE" of any Person means any other Person who directly or indirectly
controls, is controlled by, or is under common control with such Person.
SECTION 5.09 TRADENAMES; CONFIDENTIAL INFORMATION. All tradenames, trademarks or
service marks and all forms, derivatives and graphic presentations thereof of
Sellers having any value to the operation of the Schools are set forth or
described on Schedule 5.09 attached hereto (collectively, the "TRADENAMES").
Sellers have the right to the use of each Tradename as an assumed business name
in the states in which such Tradename is used, and Schedule 5.09 lists all
registrations of each Tradename as a trademark, servicemark or assumed name.
Sellers have not licensed any other Person to use any Tradename. Except as set
forth on Schedule 5.09, Sellers have not been sued or threatened with suit for
infringement, violation or breach with respect to any Tradename, and no basis
exists for any such suit. Except as disclosed on Schedule 5.09, Sellers are not
on notice of any infringement, violation or breach of the Tradename by any other
Person. Except as set forth on Schedule 5.09, Sellers have the right to use and
license, free and clear of any claims or rights of any third party, all trade
secrets, customer lists, know-how, curricula and any other confidential
information required for or used in the operation of the Schools. Sellers are
not in any way making any unlawful or wrongful use of any trade secrets,
customer lists, know-how, curricula or any other confidential information of any
third party, including, without limitation, any former employer of any present
or past employee of Sellers.
SECTION 5.10 FINANCIAL STATEMENTS; INDEBTEDNESS. Attached hereto as Schedule
5.10(a) are the following financial statements of Sellers: (a) compiled Balance
Sheets for LTU at December 31, 2001, 2000 and 1999 and compiled Statements of
Revenue and Expenses and Statements of Cash Flows for LTU for the years ended
December 31, 2001, 2000 and 1999, together with the related notes thereto, (b)
internally prepared Balance Sheets for LTUX at March 31, 2002, 2001 and 2000 and
internally prepared Income Statements for LTUX for the years ended March 31,
2002, 2001 and 2000 (c) an internally prepared Balance Sheet for LTU at
September 30, 2002 and internally prepared Statement of Revenue and Expenses and
Statement of Cash Flows for LTU for the nine months ended September 30, 2002,
and (d) an internally-prepared Balance Sheet for LTUX at September 30, 2002 and
an internally prepared Income Statement for LTUX for the nine months ended
September 30, 2002 (collectively, the "FINANCIAL STATEMENTS"). The basis of
presentation of the Financial Statements is disclosed on Schedule 5.10(b)
attached hereto or in the notes thereto. Except as disclosed on Schedule
5.10(b), the balance sheets included in the Financial Statements present fairly
in accordance with GAAP the consolidated assets and liabilities of Sellers as of
the respective dates thereof, and the related statements of revenue and expenses
present fairly in accordance with GAAP the consolidated results of operations of
Sellers for the respective periods covered thereby. The Financial Statements (i)
have been prepared based upon the books and records of Sellers in a manner
consistent with Sellers' standard internal accounting practices, consistently
applied, and (ii) fairly present the consolidated financial position of Sellers
as of the dates of such Financial Statements and the consolidated results of
operations of Sellers for the periods covered by such Financial Statements.
Except as disclosed on Schedule 5.10(b), Sellers
-16-
have maintained the books and records of the Sellers in accordance with
applicable laws, rules and regulations and with GAAP and GAAS, and such books
and records are, and during the periods covered by the Financial Statements
were, materially correct and complete, fairly reflecting the consolidated
income, expenses, assets and liabilities of the Sellers. Except as set forth on
Schedule 5.10(b), on the date hereof, Sellers do not have any liabilities
required to be set forth in a balance sheet prepared in accordance with GAAP and
GAAS that were not included in the latest consolidated balance sheet included in
the Financial Statements. Except as provided in Schedule 5.10(c), Sellers are
not required to provide any letters of credit, guarantees or other financial
security arrangements in connection with any transactions, approvals or licenses
in the ordinary course of the Schools' business. As of the date hereof, Sellers
have no indebtedness, liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, other than:
1) those set forth or reserved against in the consolidated balance
sheet as of September 30, 2002, to the extent set forth, reserved
against or disclosed;
2) those incurred since September 30, 2002 in the ordinary course of
business of the Schools and consistent in nature with past practice,
and in an aggregate amount of not more than $20,000 greater than the
liabilities reflected on the consolidated balance sheet of the
Sellers as of September 30, 2002; and
3) those described in the Schedules attached hereto;
provided, however, that the parties mutually acknowledge and agree that any
liability of the Sellers which is included in the liabilities reflected on the
Consolidated Closing Balance Sheet shall be deemed to have been included in the
Schedules to this Agreement.
Except as set forth on Schedule 5.10(b), there exists no condition relating to
the Schools, whether absolute, accrued, contingent or otherwise, which could
have an adverse effect on the properties, business, Purchased Assets, results of
operations or condition (financial or otherwise) of the Sellers or the Schools
or which would prevent the operations of the Schools from being carried on in
the future in substantially the same manner as they are presently being
conducted. Except as set forth on Schedule 5.10(d) attached hereto, there are no
long-term fixed or contractual liabilities relating to the operation of the
Schools which are required to be assumed by Buyer in order to continue to
operate the Schools as presently operated by Sellers, the annual expense of
which are not reflected in the Financial Statements.
SECTION 5.11 RECEIVABLES. The Accounts Receivable, except to the extent of the
allowance for doubtful accounts set forth in the Financial Statements, are bona
fide receivables, arose out of arms' length transactions in the normal and usual
practices of Sellers, are recorded correctly on the books and records of
Sellers, and Sellers have no reason to believe that such Accounts Receivables
will not be collected in full in the ordinary course of business within the
ordinary time frame for such receivables. Such receivables are not subject to
any defense, counterclaim or setoff or discounts or credits not reflected in the
Financial Statements (other than tuition refund policies administered in
accordance with all applicable legal requirements and the applicable Policy
Guidelines, and as reflected in reserves or allowance for doubtful accounts
shown on the Financial Statements), and (A) no facts or circumstances exist
which would cause any of such Accounts Receivable to have to be written down or
written off, and (B) since the date of most recent Balance Sheet included in the
Financial Statements, Sellers have not discounted or sold any accounts
receivable or any portion thereof (either to the debtor(s) or in connection with
the sale of such receivables to a third party).
-17-
SECTION 5.12 INVENTORIES. Except as set forth in Schedule 5.12 attached hereto,
the only inventories maintained by Sellers in connection with the operation of
the Schools consist of supplies, books and program materials used in the
ordinary course of business of the Schools and that (i) are reflected on the
Financial Statements as "inventories", (ii) are reflected at cost (subject to
the following sentence), (iii) are usable in the ordinary and regular course of
business, (iv) are fit and sufficient for the purpose for which they were
purchased, and, (v) are in customary amounts appropriate to Sellers' operations
of the Schools. Except as set forth in Schedule 5.12 attached hereto, all excess
or obsolete items have been written down to net realizable value or written off.
SECTION 5.13 LITIGATION. Except as set forth in Schedule 5.13 attached hereto,
(i) there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the knowledge of Sellers, threatened against or affecting the
Schools or their respective operations at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality or
accrediting body pertaining to or affecting Sellers or the Schools, (ii) neither
Sellers, Xxxxx nor the Schools is the subject of any governmental investigations
or inquiries (including inquiries as to the qualification to hold or receive any
of the Licenses and Permits with respect to the Schools) and (iii) to the
knowledge of Sellers, there is no basis for any of the foregoing.
SECTION 5.14 INSURANCE. Schedule 5.14 attached hereto sets forth the insurance
coverages maintained by Sellers on the Facilities, the Purchased Assets and the
operations of the Schools, including all policies or binders of fire, extended
coverage, general and vehicular, fidelity and fiduciary liability, workers'
compensation, key-man life, general commercial liability and other insurance
held by Sellers and all binders for insurance to be purchased on or before
Closing, in order to replace policies expiring prior to the Closing or
otherwise. Such policies and binders are in full force and effect, and there is
no breach or default with respect to any provision contained in any such policy
or binder, and all premiums, to the extent due and payable, have been paid or
the liability therefor properly accrued. Except as set forth in Schedule 5.14
attached hereto, there are no claims pending or threatened under any of said
policies pertaining to the Schools or disputes with underwriters regarding
coverage under such policies pertaining to the Schools. Except as set forth on
Schedule 5.14, neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in the loss to Sellers of any of the insurance policies listed or impair
the rights of Sellers with respect to liabilities arising in connection with the
operation of the Schools prior to the Closing.
SECTION 5.15 ENVIRONMENTAL MATTERS. Sellers have not generated, transported,
stored, treated or disposed, nor have Sellers allowed or arranged for any third
persons to transport, store, treat or dispose, any hazardous substance to or at:
(a) any location other than a site lawfully permitted to receive such hazardous
substance for such purposes; or (b) any location designated for remedial action
pursuant to federal, state or local statute and relating to the environment or
waste disposal; nor have Sellers performed or arranged for or allowed by any
method or procedure such transportation or disposal in contravention of any laws
or regulations or in any other manner which may result in liability for
contamination or threat of contamination of the environment. No generation, use,
handling, storage, treatment, release, threat of release, discharge, spillage or
disposal of any hazardous substance, has occurred or is occurring at the
Facilities or any other facilities or properties owned or operated by the
Sellers in connection with their operation of the Schools. Sellers have not
received notification, nor are they aware of, any past or present failure by
Sellers to comply with any environmental laws, regulations, permits, franchises,
licenses or orders applicable to the Schools or its operations. Sellers have not
received any notification, nor are they aware of, any past or present failure to
comply with any environmental laws, regulations, permits, franchises, licenses
or orders applicable to their respective operations of the Schools which may
result in judicial, regulatory or other legal proceedings having a material
adverse impact on the operations of the Schools or result in the imposition of
any lien, claim,
-18-
assessment or other encumbrance against the Sellers or the Purchased Assets. To
the knowledge of Sellers or Xxxxx, the Facilities do not contain asbestos or
polychlorinated biphenyls or any underground storage tanks. Sellers acknowledge
that Buyer is not assuming any of Sellers' liabilities with respect to the
matters addressed in this Section 5.15 and that any liabilities of Sellers
related to the matters addressed herein are Excluded Liabilities.
SECTION 5.16 EMPLOYEE BENEFIT PLANS. Schedule 5.16 attached hereto sets forth a
complete accurate and detailed description of all of Sellers' employee welfare
and benefit plans ("PLANS"). Sellers acknowledge that Buyer is assuming none of
the Plans operated by Sellers. Sellers have never sponsored, administered or
contributed to any employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1976, as amended ("ERISA"), that
is subject to Title IV of ERISA. There are no accrued liabilities under any
Plans, programs or practices maintained on behalf of the employees of the
Schools which are not provided for on its books or in the Financial Statements
or which have not been fully provided for by contributions to such Plans,
programs or practices. As of the date hereof, Sellers do not maintain any
employee welfare benefit plans, as defined in Section 3(1) of ERISA, which
provide post-retirement benefits to former employees of the Schools and to
current employees of the Schools after their termination of employment
(including, without limitation, medical and life insurance benefits), other than
as may be required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and interpreted by regulations thereunder ("COBRA"). Sellers
shall provide any notices required under COBRA for events occurring on or prior
to the Closing Date and shall provide all benefits required pursuant to COBRA in
connection therewith.
SECTION 5.17 EMPLOYMENT MATTERS. Sellers are in compliance with all federal,
state and local laws, rules and regulations affecting employment and employment
practices with respect to the Schools, including terms and conditions of
employment, employment discrimination and wages and hours, and Sellers are not
engaged in any unfair labor practices with respect to employees of the Schools.
Except as listed on Schedule 5.17, there are no complaints against Sellers with
respect to employees of the Schools pending before the National Labor Relations
Board or any similar state or local labor agency. There are no labor strikes,
slow-downs or stoppages or other labor troubles pending or threatened with
respect to any employees of the Schools. No labor organization activities have
occurred with respect to employees of the Schools during the past three years.
There are no collective bargaining agreements binding on Sellers relating to the
operation of the Schools. No grievances have been asserted against Sellers with
respect to employees of the Schools and Sellers have not experienced any work
stoppage by their respective employees at the Schools during the last three
years.
SECTION 5.18 TAX MATTERS. Except as disclosed on Schedule 5.18, Sellers and
Xxxxx have completed and filed on or before the due dates thereof or within
applicable extension periods all returns for Taxes required to be filed with
respect to the operations of the Sellers and the Schools, and such returns are
true and correct. Sellers and/or Xxxxx, as applicable, have paid all Taxes shown
to be due and payable on such returns to the extent that the same have become
due and payable on or before the Closing. Neither Sellers nor Xxxxx is a party
to, nor expected to become a party to, any pending or threatened action or
proceeding, assessment or collection of Taxes by any governmental authority
relating to the operations of the Schools.
SECTION 5.19 BROKERS OR FINDERS. No agent, broker, investment banker or other
firm or person retained by Sellers or Xxxxx is or will be entitled to any
broker's or finder's fee or any similar commission or fee in connection with any
of the transactions contemplated by this Agreement, except for Pacific Gemini
Partners ("BROKER"), the responsibility for the payment of whose fee shall be
solely and exclusively that of Sellers and Xxxxx. Sellers and Xxxxx, jointly and
severally, agree to defend, indemnify and hold harmless Buyer and its Affiliates
from and against any and all claims arising in
-19-
connection with its or their discussions and/or use of the services of Broker or
any other finder or broker.
SECTION 5.20 ABSENCE OF CERTAIN CHANGES. Except as contemplated by this
Agreement or as set forth on Schedule 5.20 attached hereto, since September 30,
2002, there has not been, occurred or arisen with respect to the Schools:
(a) any sale, lease, transfer, abandonment or other disposition of any
right, title or interest in or to any of the properties or assets
used in connection with the operations of the Schools (tangible or
intangible), except for any single sale, lease, transfer or
abandonment of any asset or property valued at less than $5,000
which was conducted in the ordinary course of business;
(b) (i) any approval or action to put into effect any increase in any
compensation or benefits payable to any employee, agent or officer
of Sellers employed or providing services in connection with the
operation of the Schools or any payment, grant or accrual to or for
the benefit of any such employee, agent or officer of any bonus,
service award, percentage compensation or other benefit, (ii) any
adoption or amendment of any Plans, or any severance agreement or
employment contract to which any such employee, agent or officer of
Sellers is a party or (iii) any entering into of any employment,
deferred compensation or other agreements with respect to bonuses,
service awards, percentage compensation or other benefits with any
such employee, agent or officer;
(c) any materially adverse change in the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves
or operations of the Schools;
(d) any damage, destruction or loss to the assets, business or
operations of the Schools in excess of $10,000 in the aggregate ,
whether or not covered by insurance;
(e) any change in the business policies or practices of the Schools or a
failure to operate the business of the Schools in the ordinary
course with a view to (i) preserving such business intact, (ii)
retaining the services of the present officers, employees and agents
of Sellers employed or providing services in connection with the
operation of the Schools, and (iii) preserving the business
relationships of the Schools with, and the goodwill of, students,
sales representatives, suppliers, accrediting bodies, governmental
authorities and others;
(f) any agreement, whether in writing or otherwise, to take any action
described in this Section 5.20; or
(g) any withdrawal, revocation or denial of accreditation, or order to
show cause why accreditation should not be revoked, or any
revocation, termination or denial of license to operate, , for the
Schools, or any program offered by the Schools.
SECTION 5.21 DELIVERY OF DOCUMENTS. True and complete copies of all documents,
instruments, agreements and records of Sellers relating to the Purchased Assets,
the Assumed Liabilities, the representations and warranties of Sellers and the
Xxxxx contained in this Agreement and/or the operation of the Schools have been
delivered to Buyer or will be delivered to Buyer as of the Closing Date.
SECTION 5.22 ACCREDITING BODY AND GOVERNMENTAL APPROVALS. To the knowledge of
Sellers, there exist no facts or circumstances attributable to Sellers or the
Schools that would cause the DOE, or any other governmental authority or
accrediting body (including, without limitation, the Accrediting Counsel for
Continuing Education & Training (hereinafter, "ACCET")) whose authorization,
consent or similar
-20-
approval is required for the consummation of the transactions contemplated by
this Agreement or the operation of the Schools after the Closing Date, to refuse
to deliver such authorization, consent or similar approval.
SECTION 5.23 CAPITALIZATION AND VOTING RIGHTS. Xxxxx is the owner of all of the
issued and outstanding capital stock of LTUX in the amounts set forth on
Schedule 5.23, free and clear of any liens or encumbrances or other rights in
favor of any third party. Neither Xxxxx nor LTUX are a party or subject to any
agreement or understanding which affects or relates to the voting or giving of
written consents with respect to any security of LTUX. The membership of the
Board of Directors of LTU is set forth on the attached Schedule 5.23 and LTU has
no "members" as such term is defined in the California Corporations Code.
SECTION 5.24 CORPORATIONS CODE COMPLIANCE. Sellers have complied with, or
concurrently with the execution of this Agreement will comply with, all of the
requirements of the California Corporations Code, including, without limitation,
Sections 5910, 5911, 5912 and 5913 thereof, to the extent that such sections are
applicable to Sellers. Any and all filing made with the Attorney General of the
State of California have been and will be true and correct in all material
respects.
SECTION 5.25 DISCLOSURE. To the knowledge of Sellers, neither this Agreement nor
any of the schedules, exhibits, attachments, documents, certificates or other
items prepared or supplied to Buyer by or on behalf of Sellers and Xxxxx with
respect to the transactions contemplated hereby contains any untrue statement of
a material fact or omits to state a material fact necessary to make any such
other statements not misleading in light of the circumstances in which such
statements were made. There is no currently existing fact or circumstance of
which Xxxxx is aware which Xxxxx has not disclosed to Buyer in writing which has
had or is reasonably likely to have a material adverse effect upon the existing
or expected financial condition, operating results, assets, employee relations,
accreditation, reputation or business of the Schools.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Sellers and Xxxxx to enter into this
Agreement and to sell the Purchased Assets, Buyer hereby represents and warrants
that:
SECTION 6.01 ORGANIZATION AND CORPORATE POWER. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, the jurisdiction in which it is incorporated. Buyer has the corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereunder.
SECTION 6.02 CAPACITY; AUTHORIZATION; BINDING EFFECT. Buyer has the power, legal
capacity and authority to execute, deliver and perform this Agreement and each
other document being executed in connection herewith to which it is a party. All
corporate and other proceedings required to be taken by or on the part of Buyer
to authorize Buyer to enter into and carry out this Agreement and the related
documents contemplated herein, have been duly and properly taken. This Agreement
has been duly executed and delivered by Buyer and constitutes valid and binding
obligations of Buyer, enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
SECTION 6.03 NO CONFLICTS. The execution, delivery and performance of this
Agreement and each other document being executed by Buyer in connection
herewith, and the consummation by Buyer of the
-21-
transactions contemplated hereby and thereby will not: (a) violate any
provisions of law applicable to Buyer; (b) with or without the giving of notice
or the passage of time, or both, conflict with or result in the breach of any
provision of the articles of incorporation or bylaws of Buyer (as heretofore
amended), any instrument, license, agreement or commitment to which Buyer is a
party or by which any of its assets or properties is bound; (c) constitute a
violation of any order, judgment or decree to which Buyer is a party or by which
any of its assets or properties is bound; or (d) require any approval of, or
filing or registration with, any governmental entity or regulatory authority
other than those set forth or described on Schedule 5.04 attached hereto or
Schedule 6.03 attached hereto.
SECTION 6.04 BROKERS OR FINDERS. Buyer represents that no agent, broker,
investment banker or other firm or person retained by Buyer is entitled to any
broker's or finder's fee or any similar commission or fee in connection with any
of the transactions contemplated by this Agreement.
ARTICLE VII. COVENANTS
SECTION 7.01 COVENANTS OF SELLERS AND XXXXX PRIOR TO THE CLOSING. Sellers and
Xxxxx covenant and agree with Buyer that, from and after the date hereof and
until the earlier of the Closing Date or the termination of this Agreement
pursuant to Article IV hereof, Sellers and Xxxxx (i) shall use their best
efforts to attempt to fulfill or satisfy, or cause to be fulfilled or satisfied,
all of the conditions precedent to Sellers' and Buyer's obligations to
consummate and complete the sale provided herein and to take all other steps and
do all other things required to consummate this Agreement in accordance with its
terms (including, without limitation, making all appropriate regulatory filings
and taking all reasonable actions requested or required by the Attorney General
of the State of California and/or other applicable regulatory authorities), (ii)
shall not interfere with the performance by Buyer of its obligations under this
Agreement, (iii) shall not fail to pay any Taxes, assessments, governmental
charges or levies imposed upon it or its income, profits or assets or otherwise
required to be paid by it, (iv) shall not make any capital expenditure in excess
of $15,000 without Buyer's prior written consent, (v) shall not engage in any
sale or discount of Sellers' Accounts Receivable (whether by discount to the
debtors or by sale to any third party), (vi) shall promptly notify Buyer (A) of
any notice from any governmental or regulatory agency or authority, (B) of any
fact or circumstance which would make any representation or warranty set forth
herein untrue or inaccurate as of the Closing Date, or (C) any planned or
threatened labor dispute, organization efforts, strike or collective work
stoppage affecting the employees of Sellers and (vii) shall not take any action
that would cause Buyer to be unable to obtain good and marketable title to the
Purchased Assets to be transferred to Buyer at the Closing (including pledging
any of such assets as security for obligations of Xxxxx or Sellers). Until the
termination of this Agreement, Sellers and Xxxxx will not directly or indirectly
solicit, respond to or negotiate with or release any information relative to the
Sellers or the Schools to any potential buyer other than Buyer.
SECTION 7.02 COVENANTS OF BUYER PRIOR TO THE CLOSING. Buyer covenants and agrees
with Sellers that from and after the date hereof and until the earlier of the
Closing Date or the termination of this Agreement pursuant to Article IV hereof,
Buyer (i) shall use its best efforts to fulfill or satisfy, or to cause to be
fulfilled or satisfied, all of the conditions precedent to Sellers' and Buyer's
obligations to consummate and complete the sale provided herein and to take all
other steps and do all other things reasonably required to consummate this
Agreement in accordance with its terms (including, without limitation, providing
to Sellers' landlords all financial and other information reasonably requested
by such landlords to effectuate the assignment of Sellers' facility leases), and
(ii) shall not interfere with the performance by Sellers of its obligations
under this Agreement.
-22-
SECTION 7.03 CLOSING AND POST-CLOSING COVENANTS.
(a) FURTHER ASSURANCES. From time to time after the Closing, (i) Sellers
and Xxxxx will execute and deliver such instruments of conveyance,
sale or assignment as Buyer may reasonably request, to more
effectively vest, confirm or evidence Buyer's title to or rights in
any of the Purchased Assets and to otherwise carry out the purpose
and intent of this Agreement, and (ii) Buyer will execute and
deliver such instruments as Sellers may reasonably request to more
effectively assure the assignment to and assumption by Buyer of the
obligations and liabilities of Sellers to be assumed by Buyer
pursuant to this Agreement and to otherwise carry out the purpose
and intent of this Agreement.
(b) MUTUAL COOPERATION. The parties shall use reasonable efforts to
cooperate fully with each other and with their respective counsel
and accountants in connection with any steps required to be taken to
consummate the transactions contemplated hereby and transition
management and ownership of the Schools from Sellers to Buyer.
Before and after the Closing, Sellers and Xxxxx shall use their best
efforts to assist Buyer in obtaining any required accreditation
reasonably necessary for Buyer's operation of the Schools, including
furnishing Buyer such information and assistance as Buyer may
request in connection with its preparation of filings, submissions
or accreditation applications to any governmental agency in
connection with the transactions contemplated hereby.
(c) ACCESS TO EMPLOYEES. From and after the Closing, each of Buyer and
Sellers (the "REQUESTED PARTY") shall afford to the other party (the
"REQUESTING PARTY"), its officers, counsel, accountants and other
authorized representatives reasonable access to the Requested
Party's employees who formerly were or currently are employed by the
Requested Party, without cost to the Requesting Party (other than
payment of out-of-pocket costs not including personnel costs) and as
reasonably required by the Requesting Party in connection with (i)
any claim, action, litigation or other proceeding involving Sellers,
Buyer or the Schools, and (ii) the preparation of the Post-Closing
Audit. Each party shall use its best efforts to cause such employees
to cooperate with and assist the Requesting Party in its prosecution
or defense of such claims, actions, litigation and other
proceedings, which cooperation shall include, without limitation,
preparing and providing written and oral discovery and attending and
testifying at depositions, hearings, motions and trials, all as
necessary in the reasonable opinion of the Requesting Party or its
counsel. Any such access shall take place only during normal
business hours in such a manner as not to interfere unreasonably
with the operation of the business of the other party.
(d) SATISFACTION AND PAYMENT OF THE EXCLUDED LIABILITIES. Sellers and
Xxxxx shall pay and satisfy, or cause to be paid and satisfied, all
debts of Sellers incurred prior to the Closing Date relating to the
Schools that constitute the Excluded Liabilities, except for (i) any
debts listed on Schedule 2.04, (ii) any amounts payable to Xxxxx,
and (iii) any amounts payable by LTU or LTUX to the other.
(e) Attached hereto as Schedule 7.03(e) is a capital expenditures budget
for the existing Schools of the New Division for the calendar years
2003 and 2004 (the "Capital Expenditures Budget"). The Capital
Expenditures Budget has been prepared by Xxxxx and reflects Xxxxx'x
best estimate of all capital expenditures that will be reasonably
required by the New Division to meet the 2003 EBITDA Target and the
2004 EBITDA Target set forth above. Buyer has reviewed and approved
the Capital Expenditures Budget as of the date of this Agreement
based on the information in Buyer's possession at such time. The
parties mutually acknowledge and agree that Buyer has the right to
make any and all capital expenditure decisions for the New Division
-23-
as it deems reasonable and prudent, in its sole discretion, as of
the time such capital expenditures are made during calendar years
2003 and 2004.
SECTION 7.04 EXCISE AND PROPERTY TAXES. Sellers and Xxxxx shall pay all Taxes
arising out of the transfer of the Purchased Assets. Each of Buyer and Sellers
shall pay its respective portion, prorated as of the Closing, of state and local
real and personal property taxes of the business of the Schools.
SECTION 7.05 ADMINISTRATION IN ACCORDANCE WITH ACCREDITATIONS. From and after
the date of this Agreement through the Closing Date, Sellers, at Sellers' sole
cost and expense, shall administer and operate the Schools in accordance with
all federal and state laws, statutes, rules and regulations and in accordance
with all permits, accreditations, authorizations and agreements issued by or
entered into with any federal, state or local governmental or quasi-governmental
entity in any way regulating or otherwise relating to the administration and
operation of the Schools. Subject to the terms and provisions of this Agreement,
Buyer and Sellers shall work together cooperatively and in good faith to obtain
any and all approvals from the DOE, any state education regulatory authority and
any other governmental or quasi-governmental entity that may be necessary or
appropriate to vest in Buyer at the Closing the right and authority in all
material respects to administer and operate the Schools and to release Sellers
from further liability or obligations in connection with the administration or
operation of the Schools.
SECTION 7.06 ACCESS AND MAINTENANCE OF RECORDS. From and after the Closing, each
of Buyer and Sellers (the "REQUESTED PARTY") shall afford to the other party
(the "REQUESTING PARTY"), its officers, counsel, accountants and other
authorized representatives and regulatory authorities access to its properties,
books and records, including those maintained by its accountants, at any time
and from time to time upon reasonable notice from the Requesting Party, as
reasonably required by the Requesting Party in connection with (i) performance
by the Requesting Party of any of its obligations under the terms and conditions
of this Agreement, including, without limitation, any liability or obligation of
Sellers not assumed by Buyer pursuant to this Agreement, (ii) any claim, action,
litigation or other proceeding involving the Requesting Party or the Schools,
(iii) the Requesting Party's preparation of its financial statements and Tax
returns, (iv) any other essential business purpose of the Requesting Party. In
addition, the Requesting Party, at its expense, may make copies of any such
records as may be necessary or appropriate for the Requesting Party's use. Each
party shall maintain all such records in accordance with, and subject to all
restrictions imposed by, all laws, rules and regulations. Any such access shall
take place only during normal business hours in such a manner as not to
interfere unreasonably with the operation of the business of the other party.
SECTION 7.07 EMPLOYMENT MATTERS.
(a) Buyer and Sellers agree that Buyer has not assumed and shall not
assume any obligations to (or regarding the employment of) any
Persons previously or currently employed by Sellers. As of the close
of business on the day prior to the Closing Date, Sellers shall
terminate all of their respective employees employed at the Schools
in accordance with all applicable laws and, prior to the Closing,
shall provide any required notices in a timely manner in connection
therewith. All of Sellers' obligations for compensation, wages,
bonuses, severance pay, vacation time, pay in lieu of vacation,
sickness and accident benefits, leaves of absence, and similar
employee benefits accrued as of the Closing shall be paid by Sellers
as of the day prior to the Closing Date.
(b) Buyer may, at its option and in its sole and absolute discretion
(and consistent with its standard hiring and employment practices),
offer employment to any current or former employee of Sellers on
such terms and conditions as may be mutually agreed upon by Buyer
and such employees. Sellers shall use its best efforts to assist
Buyer in hiring any such employees with
-24-
respect to whom Buyer elects to offer employment. Sellers shall not
take any action, directly or indirectly, to prevent or discourage
any such employee from being employed by Buyer after the Closing
Date and shall not solicit, invite, induce or entice any such
employee to remain in the employ of Sellers or otherwise attempt to
retain the services of any such employee, except with the prior
written consent of Buyer.
(c) Notwithstanding any possible inferences to the contrary, neither
Sellers nor Buyer intends for this Section 7.07 to create any rights
or obligations except as between Sellers and Buyer, and no past,
present or future employees of Sellers or Buyer shall be treated as
third-party beneficiaries of this Section 7.07.
ARTICLE VIII. CONDITIONS TO CLOSING
SECTION 8.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligation of
Buyer to complete the purchase of Purchased Assets as provided for herein is
subject to the fulfillment or satisfaction on or before the Closing Date of each
of the conditions set forth below, any of which may be waived by Buyer in
writing.
(a) All representations and warranties of Sellers contained in this
Agreement or in any certificate or other document delivered to Buyer
pursuant hereto shall be accurate, complete, true and correct as of
the Closing Date with the same effect as though made at and as of
the Closing Date (except to the extent such representations and
warranties speak as of a particular date), and Buyer shall have
received a certificate signed by a duly authorized officer of
Sellers to such effect;
(b) There shall have been no material adverse change in the condition
(financial or otherwise), assets, liabilities (absolute, accrued,
contingent or otherwise), prospects, earning power, commercial
relationships, reserves, business or operations of the Sellers or
any of the Schools from and after the date of this Agreement;
(c) Sellers shall have performed all of the obligations, covenants and
agreements contained in this Agreement to be performed by Sellers on
or before the Closing Date, and Buyer shall have received a
certificate signed by a duly authorized officer of Sellers to such
effect;
(d) All instruments and documents required on Sellers' part to
effectuate and consummate the transactions contemplated hereby as of
the Closing, including all those deliveries described in Section
3.02, shall be delivered by Sellers and Xxxxx and shall be in form
and substance reasonably satisfactory to Buyer and its counsel;
(e) No law or order shall have been enacted, entered, issued,
promulgated or entered by any governmental entity which prohibits or
restricts the transactions contemplated hereby, and there shall not
have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any
of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions;
(f) Sellers and Buyer shall have obtained all required regulatory
approvals that are capable of being obtained prior to Closing,
including, but not limited to, all registrations, licenses, permits
and approvals required by any governmental entity or agency or other
regulatory body to operate the Schools in the State of California;
-25-
(g) Buyer shall be reasonably satisfied that, with respect to all
required regulatory approvals that are not capable of being obtained
prior to Closing, Buyer will be able to obtain all such other
required regulatory approvals within a reasonable time period after
the Closing Date without material expense or undue burden;
(h) The Schools shall have received all required accreditation approvals
and shall have received from all current accrediting agencies or
bodies which accredit the Schools (with the exception of ACCET, the
approval for which shall be obtained after the Closing) approval of
the change of ownership of the Schools, and shall not have received
from and after the date of this Agreement any "show cause" letter or
other notice which would tend to call into question the validity of
such accreditation or the ability of the Schools to maintain such
accreditation in good standing at any time after the Closing Date;
(i) All third party consents required by the transactions contemplated
hereby shall have been obtained (including, without limitation, all
necessary consents of other parties to the Material Assumed
Contracts);
(j) Buyer shall have received satisfactory evidence that all liens
(other than the Permitted Exceptions) on the Purchased Assets have
been terminated and completely released of record;
(k) Buyer shall have received from the landlords of the Facilities
executed estoppel certificates and consents to the Lease
Assignments;
(l) Buyer shall have received a certificate of the Secretary of LTU
setting forth (A) that the transactions contemplated by this
Agreement have been approved by the Board of LTU, that the notice
required by Section 5913 of the California Corporations Code has
been given, and (B) that the Attorney General for the State of
California has declined to object to such transactions during the
statutory review period therefor; and
(m) Seller shall have provided evidence satisfactory to Buyer that all
debts incurred through the Closing Date relating to the School,
including lender and other payables, regulatory fines, repayment,
refunds, and all known obligations or liens (other than Assumed
Liabilities) have been satisfied and paid in full or will be
satisfied and paid in full from the Cash Consideration immediately
after the Closing, except for (i) any debts listed on Schedule 2.04,
(ii) any amounts payable to Xxxxx, and (iii) any amounts payable by
LTU or LTUX to the other.
SECTION 8.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligation of
Sellers and Xxxxx to complete the sale of the Purchased Assets as provided for
herein is subject to the fulfillment or satisfaction on or before the Closing
Date of each of the conditions set forth below, any of which may be waived by
Sellers or Xxxxx in writing.
(a) All representations and warranties of Buyer contained in this
Agreement or in any certificate or other document delivered to
Sellers pursuant hereto shall be complete, true and correct in all
material respects as of the Closing Date, and Sellers shall have
received a certificate signed by a duly authorized officer of Buyer
to such effect;
(b) Buyer shall have performed all of the obligations, covenants and
agreements contained in this Agreement to be performed by Buyer on
or before the Closing Date, and Sellers shall have received a
certificate signed by a duly authorized officer of Buyer to such
effect;
-26-
(c) All instruments and documents reasonably required on Buyer's part to
effectuate and consummate the transactions contemplated hereby,
including those described in Section 3.03, shall be delivered by
Buyer and shall be in form and substance reasonably satisfactory to
Sellers and Xxxxx and their respective counsels;
(d) No law or order shall have been enacted, entered, issued,
promulgated or entered by any governmental entity which prohibits or
restricts the transactions contemplated hereby, and there shall not
have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any
of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions;
and
(e) The Sellers shall have complied with their obligation to give
appropriate notice under the California Corporations Code and the
Attorney General for the State of California shall have approved
such transaction or shall have declined to object to such
transactions during the statutory review period therefor.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01 BINDING EFFECT. All terms and provisions of this Agreement shall be
binding upon and shall inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement, nor the obligations of any party hereunder, shall be assignable or
transferable by any such party without the prior written consent of all parties
hereto, except that Buyer may assign its rights and obligations hereunder to an
Affiliate. No assignment of any right or delegation of any duty shall relieve
the assignor or delegator of any liabilities hereunder, except to the extent, if
any, so provided in a writing signed by the obligee(s).
SECTION 9.02 NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be given or made (a) by personal
delivery, (b) by a nationally recognized courier service for overnight delivery,
charges prepaid, or (c) by registered or certified mail, postage prepaid, return
receipt requested, in each case addressed
if to Buyer, at:
Corinthian Colleges, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx and Xxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
with each such notice to Buyer, a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
-27-
if to Sellers or the Xxxxx, at:
Learning Tree University, Inc.
LTU Extension, Inc.
Xxxxxxx Xxxxx
x/x Xxx Xxxxxxx
Xxxxxx Xxxxxx Xxxxx V
00000 Xxxxxx Xx.
Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
with each such notice to Sellers and/or Xxxxx, a copy to:
Xxxxx X. Xxxx
Xxxxxxx, Xxxxxxxx & Xxxx LLP
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
Facsimile: 805-446-1490
or at such other place as the party to whom such notice of communication is to
be addressed may have designated to the other parties by notice conforming to
this Section 9.02. Notices shall be deemed effective and received (i) on the
actual receipt in the case of hand delivery, (ii) on the next business day after
deposit in the case of notices by nationally recognized overnight courier
services, or (iii) on the third business day after the date of mailing in the
manner set forth herein. As used herein, notice to a party shall include
concurrent notice to that party's counsel as set forth herein.
SECTION 9.03 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations,
representations, warranties 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 hereof, except as
specifically set forth herein or therein. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
SECTION 9.04 NATURE AND SURVIVAL OF REPRESENTATIONS. The representations,
warranties, covenants and agreements of Buyer, Sellers and Xxxxx contained in
this Agreement, and all statements contained in this Agreement or any Exhibit or
Schedule hereto or any certificate or financial statement delivered pursuant to
this Agreement, shall be deemed to constitute representations, warranties,
covenants and agreements of the respective party delivering the same. All such
representations, warranties, covenants and agreements shall survive the Closing
for a period of three (3) years.
SECTION 9.05 RISK OF LOSS OR DAMAGE; INSURANCE. It is understood and agreed that
all right, title and interest in and to the Purchased Assets and all risk of
loss or damage thereto shall not pass from Sellers to Buyer unless and until the
Closing occurs whereupon all risk of loss or damage shall pass to Buyer. In the
event of a casualty or condemnation in respect of any of the Purchased Assets
prior to the Closing,
-28-
Buyer shall have the right, at its sole option, to elect either (a) to terminate
this Agreement or (b) to accept the insurance proceeds in respect of such
casualty or condemnation and proceed to close otherwise in accordance with the
terms and conditions of this Agreement. Sellers agree to maintain the insurance
currently carried with respect to the Purchased Assets until the Closing Date.
SECTION 9.06 WAIVER. No waiver shall be deemed to have been made by any party of
any of its rights hereunder unless the same shall be in writing and shall be
signed by the waiving party. Such a waiver, if any, shall be a waiver only in
respect to the specific instance involved and shall in no way impair the rights
of the waiving party or the obligations of any other party in any other respect
at any other time.
SECTION 9.07 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the substantive laws of the State of California without giving
effect to the principles of conflicts of law thereof.
SECTION 9.08 HEADINGS. The headings of the articles and sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
SECTION 9.09 COUNTERPARTS. This Agreement may be executed by the parties in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 9.10 SEVERABILITY. In the event that any one or more terms or provisions
hereof shall be held void or unenforceable by any court or arbitrator, all
remaining terms and provisions hereof shall remain in full force and effect.
SECTION 9.11 TIME IS OF THE ESSENCE. Sellers, Xxxxx and Buyer agree that time is
of the essence in connection with the implementation and performance by the
parties of all terms, conditions and obligations of this Agreement.
SECTION 9.12 INDEMNIFICATION BY SELLERS AND XXXXX. Sellers and Xxxxx, jointly
and severally, hereby agree to indemnify, defend and hold harmless Buyer and its
Affiliates and their respective officers, directors, stockholders, employees,
agents, successors and assigns (the "BUYER INDEMNITEES") from and against any
and all claims, liabilities, obligations, losses, costs, expenses (including,
without limitation, interest, penalties and attorneys' fees), fines, or damages
of any kind or nature (collectively "LOSSES"), as a result of, or based upon or
arising out of:
(a) any breach of, or any inaccuracy or misrepresentation in, any of the
representations or warranties made by Sellers or Xxxxx in this
Agreement or any other agreement, statement or certificate delivered
pursuant hereto;
(b) any breach of or violation by Sellers or Xxxxx of any of the
covenants made by Sellers and/or Xxxxx in this Agreement or any
other agreement, statement or certificate delivered pursuant hereto;
(c) any claim related to or arising out of Sellers' operation of the
Schools prior to the Closing Date that are asserted with respect to
any liabilities that are not Assumed Liabilities;
(d) any of the Excluded Liabilities (and/or Sellers' or Xxxxx'x failure
or refusal to discharge any obligation related to the Excluded
Liabilities);
(e) any of the matters disclosed on Schedule 5.13;
-29-
(f) any Tax payable by or on behalf of Sellers, Gould, or any of their
respective Affiliates, for any taxable period ending on or prior to
the Closing Date; and
(g) any actions, judgments, costs and expenses (including reasonable
attorneys' fees, expert witness fees and all other out-of-pocket
expenses incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened) incident to any
of the foregoing or the enforcement of this Section 9.12.
Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, the Sellers' and Xxxxx'x obligation to indemnify the Buyer Indemnitees
pursuant to Section this 9.12 is expressly subject to the following limitations:
(i) written notice containing a description of the specific nature of
such claimed Losses under this Section 9.12 shall have been given by
Buyer to Xxxxx and/or Sellers within three (3) years after the
Closing;
(ii) neither Sellers nor Xxxxx shall have any liability to Buyer under
Section 9.12(a) unless the Buyer Indemnitees' Losses collectively
aggregate to at least Fifty Thousand Dollars ($50,000) (the
"Threshold Amount") (in which case Xxxxx and Sellers shall be
jointly and severally liable for all such Losses without regard to
the Threshold Amount;
(iii) the aggregate liability of Xxxxx with respect to Losses incurred
pursuant to Section 9.12(a) shall in no event exceed (A) the
aggregate amount of all cash consideration actually received or
receivable by Sellers hereunder as the Purchase Price (including (i)
the Cash Portion (net of any Post-Closing Purchase Price
Adjustment), and (ii) the Earn-Out Consideration), minus (B) the
amount of cash actually paid by Sellers or Xxxxx to unaffiliated
third parties in connection with satisfying any Excluded Liabilities
(including all costs and expenses incurred by Sellers in the
negotiation and execution of this Agreement); and
(iv) the indemnification provided in this Section 9.12 shall be the sole
and exclusive remedy available to the Buyer Indemnitees for any
breach or inaccuracy of any representation or warranty set forth in
this Agreement or any certificate delivered pursuant to Article III
hereof or with respect to the transactions contemplated by this
Agreement; provided, however, that the limitations set forth in
items (i), (ii), (iii) and (iv) above shall not apply to Losses of
Buyer Indemnitees arising out of (A) fraud, or (B) the breach of any
representation or warranty contained herein if such representation
or warranty was made with actual knowledge that it contained an
untrue statement of material fact.
SECTION 9.13 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and hold
harmless Sellers, Xxxxx and their respective Affiliates from and against any and
all Losses arising out of or resulting from:
(a) any breach of, or any inaccuracy or misrepresentation in, any of the
representations or warranties made by Buyer in this Agreement or any
other agreement, statement or certificate delivered pursuant hereto;
(b) any breach of or violation by Buyer of any of the covenants made by
Buyer in this Agreement or any other agreement, statement or
certificate delivered pursuant hereto;
(c) all Losses arising out of or resulting from any claim or arising out
of operation of the Schools on or after the Closing Date;
-30-
(d) all Losses arising out of or resulting from the Assumed Liabilities
from the Sellers; and
(e) any actions, judgments, costs and expenses (including reasonable
attorneys' fees, expert witness fees and all other out-of-pocket
expenses incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened) incident to any
of the foregoing or the enforcement of this Section 9.13.
SECTION 9.14 INDEMNIFICATION OF THIRD PARTY CLAIMS; RIGHT TO SET-OFF. (a) The
provisions of this Section 9.14 shall govern any claim for indemnification of
Buyer pursuant to Section 9.12, or Sellers or Xxxxx pursuant to Section 9.13
(each such party an "INDEMNITEE"), against the party agreeing to provide
indemnification hereunder (the "INDEMNITOR"). The Indemnitee shall give notice
hereunder to the Indemnitor of claims as to which recovery may be sought against
the Indemnitor because of the indemnity in Section 9.12 or 9.13, and, if such
indemnity shall arise from the claim of a third party, the Indemnitee shall, if
requested, consent to the Indemnitor assuming the defense of any such claim;
provided that the Indemnitee shall not be required to permit the Indemnitor to
assume the defense of any third party claim (x) which, if not first paid,
discharged or otherwise complied with, would result in a material interruption
or cessation of the conduct of the business of the Indemnitee, or (y) if the
Indemnitee reasonably concludes that there may be a conflict of interest between
the Indemnitor, on the one hand, and the Indemnitee, on the other hand, in the
conduct of the defense of such action, or (z) which the Indemnitor makes any
claims or statements that the Indemnitee is entitled to anything less than
complete indemnification of all claims thereunder or for which the Indemnitor
fails or refuses to confirm its absolute and complete indemnification obligation
for Indemnitee. Failure by the Indemnitor to notify the Indemnitee of its
election to defend any such claim or action within 14 days of the date of notice
from the Indemnitee shall be deemed to constitute its consent to the
Indemnitee's assumption of such defense. If the Indemnitor assumes the defense
of such claim or litigation resulting therefrom, the obligations of the
Indemnitor hereunder as to such claim shall include taking all steps necessary
in the defense or settlement of such claim or litigation resulting therefrom
including the retention of counsel, which counsel must be to the Indemnitee's
reasonable satisfaction, and holding the Indemnitee harmless from and against
any and all Losses resulting from, arising out of, or incurred with respect to
any settlement approved by the Indemnitor or any judgment in connection with
such claim or litigation resulting therefrom. The Indemnitor shall not, in the
defense of such claim or litigation, (i) consent to the entry of any judgment
(other than a judgment of dismissal on the merits without costs) except with the
written consent of the Indemnitee, which consent shall not be unreasonably
withheld, or (ii) enter into any settlement (except with the written consent of
the Indemnitee, which consent shall not be unreasonably withheld), unless the
Indemnitee is released and held harmless from and against any and all Losses
resulting from, arising out of or incurred with respect to such judgment or
settlement. If the Indemnitor does not assume the defense of any such claim by a
third party or litigation resulting therefrom, the Indemnitee may defend against
such claim or litigation in such manner as it deems appropriate, and the
Indemnitee may settle such claim or litigation on such terms as it may deem
appropriate and the Indemnitor shall promptly reimburse the Indemnitee for the
amount of such settlement and for all Losses incurred by the Indemnitee in
connection with the defense against or settlement of such claim or litigation.
(b) Upon notice to Sellers, Buyer is hereby authorized at any time,
and from time to time, to set-off and apply any and all amounts owing by Buyer
to Sellers, whether under this Agreement or otherwise, against any and all of
the obligations of Sellers and/or Xxxxx to Buyer hereunder, including without
limitation Sellers' and Xxxxx'x obligations pursuant to Section 9.12 hereunder.
-31-
SECTION 9.15 DISPUTE RESOLUTION AND ARBITRATION.
(a) NEGOTIATION BETWEEN PARTIES. The parties shall attempt in good faith
to resolve any dispute arising out of or relating to this Agreement
promptly by negotiation between executives who have authority to
settle the controversy. Any party may give the other party written
notice of any dispute not resolved in the normal course of business.
Within 15 days after delivery of the notice the receiving party
shall submit to the other a written response. The notice and the
response shall include (i) a statement of each party's position and
a summary of arguments supporting that position, and (ii) the name
and title of the executive who represents that party and of any
other person who will accompany the executive. Within 10 days after
delivery of the disputing party's notice, the executives of both
parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to
resolve the dispute. All reasonable requests for information made by
one party to the other shall be honored. If the matter has not been
resolved within 45 days of the disputing party's notice, or if the
parties fail to meet within 10 days, either party may initiate
arbitration of the controversy or claim as provided hereinafter. All
negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of
all applicable rules of evidence.
(b) ARBITRATION. Any dispute arising out of or relating to this
Agreement or the breach, termination or the validity hereof, which
has not been resolved by the nonbinding meet and confer provisions
provided in Section 9.15(a) within 90 days of the initiation of such
procedure, shall be settled by arbitration in accordance with the
then-current Judicial Arbitration and Mediation Services (JAMS)
rules for arbitration of business disputes by a sole arbitrator who
shall be a former superior court or appellate court judge or justice
with significant experience in resolving business disputes. The
arbitration shall be governed by the rules of civil procedure in the
jurisdiction in which such arbitration proceeding is initiated, and
the parties intend this procedure to be specifically enforceable in
accordance with such provisions. Judgment upon the award rendered by
the arbitrator may be entered by any court having jurisdiction
thereof. The place of arbitration shall be Orange County,
California. The arbitrator may award equitable relief in those
circumstances where monetary damages would be inadequate. The
arbitrator shall be required to follow the applicable law as set
forth in the governing law section of this Agreement.
SECTION 9.16 THIRD PARTY BENEFICIARIES. This Agreement shall be binding upon, be
enforceable against, and inure to the benefit of the parties and their
respective successors and permitted assigns; otherwise, this Agreement shall
not, and shall not be deemed to, inure to the benefit of or be enforceable by
any third party.
SECTION 9.17 EXPENSES. Each party hereto shall bear its own expenses relating to
the transactions contemplated by this Agreement.
SECTION 9.18 REPRESENTATION BY COUNSEL. EACH PARTY HERETO REPRESENTS AND AGREES
WITH EACH OTHER THAT IT HAS BEEN REPRESENTED BY, OR HAD THE OPPORTUNITY TO BE
REPRESENTED BY, INDEPENDENT COUNSEL OF ITS OWN CHOOSING, AND THAT IT HAS HAD THE
FULL RIGHT AND OPPORTUNITY TO CONSULT WITH ITS RESPECTIVE ATTORNEY(S), THAT TO
THE EXTENT, IF ANY, THAT IT DESIRED, IT AVAILED ITSELF OF THIS RIGHT AND
OPPORTUNITY, THAT IT OR ITS AUTHORIZED OFFICERS (AS THE CASE MAY BE) HAVE
CAREFULLY READ AND FULLY UNDERSTAND THIS AGREEMENT IN ITS ENTIRETY AND HAVE HAD
IT FULLY EXPLAINED TO THEM BY SUCH PARTY'S RESPECTIVE COUNSEL, THAT EACH IS
FULLY AWARE OF THE CONTENTS THEREOF AND ITS MEANING, INTENT AND
-32-
LEGAL EFFECT, AND THAT IT OR ITS AUTHORIZED OFFICER (AS THE CASE MAY BE) IS
COMPETENT TO EXECUTE THIS AGREEMENT AND HAS EXECUTED THIS AGREEMENT FREE FROM
COERCION, DURESS OR UNDUE INFLUENCE. THIS AGREEMENT IS THE PRODUCT OF
NEGOTIATIONS BETWEEN THE PARTIES HERETO REPRESENTED BY COUNSEL AND ANY RULES OF
CONSTRUCTION RELATING TO INTERPRETATION AGAINST THE DRAFTER OF AN AGREEMENT
SHALL NOT APPLY TO THIS AGREEMENT AND ARE EXPRESSLY WAIVED. THE PROVISIONS OF
THIS AGREEMENT SHALL BE INTERPRETED IN A REASONABLE MANNER TO EFFECT THE
INTENTIONS OF THE PARTIES TO THIS AGREEMENT.
[SIGNATURES ON FOLLOWING PAGE]
-33-
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first above written.
"BUYER"
CORINTHIAN COLLEGES, INC.,
a Delaware corporation
By: ____________________________
Name: __________________________
Title: _________________________
"SELLERS"
LEARNING TREE UNIVERSITY, INC.,
a California nonprofit public benefit
corporation
By: ____________________________
Name: __________________________
Title: _________________________
LTU EXTENSION, INC.,
a California corporation
By: ____________________________
Name: __________________________
Title: _________________________
"XXXXX"
________________________________
XXXXXXX XXXXX
S - 1 (Asset Purchase Agreement)
ASSET PURCHASE AGREEMENT
CORINTHIAN/LEARNING TREE UNIVERSITY
LIST OF EXHIBITS
Exhibit Designation Exhibit Contents
------------------- ----------------
Exhibit A Assignment and Assumption Agreement
Exhibit B Xxxx of Sale
Exhibit C Assignment and Assumption of Lease Agreements
Exhibit D Non-Competition Agreement
Exhibit E Employment Agreement
A - 1 (Asset Purchase Agreement)
