EXHIBIT 10.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into on the 30th day
of June, 2005, by and among EVCI Career Colleges Holding Corp., a Delaware
corporation (the "Purchaser"), Technical Career Institutes, Inc., a New York
corporation (the "Company"), East Coast Training Services of Delaware, Inc., a
Delaware corporation ("ECTS"), East Coast Capital Corp., a Delaware corporation
("ECC"), and North American Training Services, Inc., a Delaware corporation
("NATS"). ECTS, ECC and NATS are sometimes individually, a "Seller" and
collectively, the "Sellers."
RECITALS:
A. The Company is engaged in the business of operating a New York
City-based proprietary technical college (the "Institute") that offers two-year
associate degrees and shorter certificate programs in a variety of technical
fields centered on computers, telecommunications and electronics (the
"Business").
B. ECTS owns all the issued and outstanding shares of the capital stock
of the Company (collectively, the "Shares"). ECC owns all of the issued and
outstanding shares of the capital stock of ECTS. NATS owns all of the issued and
outstanding shares of the capital stock of ECC except for 18,333.333 shares of
ECC's Cumulative Preferred Stock owned by DCSNA.
C. The Purchaser desires to purchase from ECTS and ECTS desires to sell
to the Purchaser all of the Shares pursuant to and upon the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
DEFINITIONS; CONSTRUCTION
The capitalized terms used herein shall have the meanings assigned to
them in Schedule 1 or referenced in Schedule 1 to Sections, the introductory
paragraph or Recitals of this Agreement. This Agreement and all other documents
executed in connection herewith shall be governed by the rules of construction
set forth in Schedule 1.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of the Shares. Subject to the provisions of this
Agreement, at the Closing, ECTS shall sell and transfer the Shares to the
Purchaser, and the Purchaser shall purchase all right, title and interest in and
to the Shares from ECTS free and clear of all Encumbrances.
2.2 The Purchase Price. The aggregate purchase price to be paid to ECTS
by the Purchaser at the Closing for all of the Shares shall be Sixteen Million
Dollars ($16,000,000) in cash, subject to adjustment as set forth in Sections
2.4, 2.5 and 2.6 (as adjusted, the "Purchase Price").
2.3 Payment of the Purchase Price. The Purchaser shall pay the Purchase
Price as follows:
(a) Escrow. At the Closing, the Purchaser shall deliver the
Escrow Deposit to the Escrow Agent by wire transfer of immediately available
funds to an account designated in writing by the Escrow Agent as security for
the indemnification obligations of the Sellers. The Escrow Deposit remaining in
escrow shall be released to Sellers on the second anniversary of the Closing
Date, subject to and in accordance with the provisions of an escrow agreement to
be entered into at the Closing among the Purchaser, each Seller and the Escrow
Agent substantially in the form of Exhibit A attached hereto (the "Escrow
Agreement").
(b) Retention Escrow Amount. Sellers jointly and severally
agree to pay 50% of the Company's liability for Separation Payments under the
Retention Agreements, up to a maximum aggregate amount not to exceed $200,000.
At the Closing, the Purchaser shall deliver the Retention Escrow Amount to the
Escrow Agent by wire transfer of immediately available funds to an account
designated in writing by the Escrow Agent. The Retention Escrow Amount shall be
the sole source of reimbursement from the Sellers to the Purchaser, payable in
accordance with the Escrow Agreement, for any liability the Company may have
post-Closing for Separation Payments under the Retention Agreements, and the
Purchaser hereby agrees that it and the Company shall have no recourse against
any Seller (other than against the Retention Escrow Amount) with respect to any
such liability. Notwithstanding the foregoing, Sellers' obligation to reimburse
Purchaser for Separation Payments under this provision and the Escrow Agreement
shall be limited to 50% of the Company's aggregate liability for Separation
Payments and in no event shall such reimbursement exceed an amount equal to the
Retention Escrow Amount. The Retention Escrow Amount remaining in escrow shall
be released to the Sellers on the second anniversary of the Closing Date,
subject to and in accordance with the provisions of the Escrow Agreement. ECC
hereby acknowledges and agrees that it shall be solely responsible for payment
of the one-time special bonus of $100,000 that is payable to Xxxxx Xxxxxxx under
Section 3(a) of her Retention Agreement.
(c) Balance of Purchase Price. At the Closing, the Purchaser
will pay to ECTS the balance (after deducting the Escrow Deposit and the
Retention Escrow Amount) of the Purchase Price (the "Closing Purchase Price
Payment"), subject to adjustment pursuant to the provisions of Sections 2.4, 2.5
and 2.6 below. The Purchaser will pay the Closing Purchase Price Payment by wire
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transfer of immediately available funds to an account of and designated by ECTS
in written instructions delivered by ECTS to the Purchaser no less than two days
prior to the Closing Date.
(d) Allocation to Non-Competition Agreements. Three Hundred
Thousand Dollars ($300,000) of the Purchase Price shall be allocated to the
ECTS, ECC and NATS non-compete agreements set forth in Article 10 ($100,000 to
each agreement).
2.4 Current Ratio Purchase Price Adjustment.
(a) Not later than three Business Days prior to the Closing
Date, the Company shall provide to the Purchaser an estimated unaudited
statement of the current assets and current liabilities of the Company, as of
the Closing Date, that, except as provided in the definition of Closing Current
Ratio, has been prepared in accordance with GAAP consistent with past practice
of the Company, including following the same accounting principles, practices,
procedures, policies and methods with consistent classifications, judgments, and
valuation and estimation methodologies that were employed in preparing the
Financial Statements (the "Estimated Closing Statement"), together with accounts
receivable and accounts payable aging schedules, an unearned tuition schedule
and a schedule of prepaid advertising in support of the Estimated Closing
Statement. The Estimated Closing Statement shall be calculated on the basis set
forth on Schedule 2.4(a) attached hereto.
(b) Based on the Estimated Closing Statement, the Closing
Purchase Price Payment shall be either (i) if the Closing Current Ratio is
greater than 1:1, increased, dollar for dollar, by the amount, if any, by which
the total current assets exceed the amount of total current liabilities (an
"Estimated Surplus"), or (ii) if the Closing Current Ratio is less than 1:1,
decreased, dollar for dollar, by the amount, if any, by which the total current
liabilities exceed the total current assets (an "Estimated Deficiency"). For
purposes of this Article 2, any Estimated Deficiency or Actual Deficiency (as
defined below) shall be expressed as a positive number.
2.5 Required Closing Current Ratio Adjustment.
(a) Within 15 Business Days after the Closing Date, the
Purchaser shall cause the Company to deliver to the Sellers normal month-end
closing financial information for the period ending on the Closing Date. Not
later than 45 days after the Closing Date, the Purchaser shall provide to the
Sellers a draft statement of the current assets and current liabilities of the
Company (which may be unaudited) as of the Closing Date that has been prepared
in accordance with GAAP in a manner consistent with the Company's past practice,
including following the same accounting principles, practices, procedures,
policies and methods with consistent classifications, judgments, and valuation
and estimation methodologies that were employed by the Company in preparing the
Financial Statements (the "Proposed Final Closing Statement"), together with an
accounts receivable and accounts payable aging schedule, an unearned tuition
schedule and a schedule of prepaid advertising in support thereof. Upon the
Sellers' receipt of the Proposed Final Closing Statement, and during the period
of any dispute within the contemplation of this Section 2.5, the Purchaser shall
cause the Company to (i) provide the Sellers and the Sellers' authorized
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representatives with full access to the books, records, facilities and employees
of the Company that are relevant to the preparation of the Proposed Final
Closing Statement, provided that such access shall be granted only during normal
business hours and upon reasonable prior notice and shall be coordinated through
a representative designated by Purchaser and (ii) cooperate fully with the
Sellers and the Sellers' authorized representatives for purposes of reviewing
the calculations and valuations employed in the preparation of the Proposed
Final Closing Statement. The Sellers may provide the Purchaser with a written
objection to the Proposed Final Closing Statement not later than 15 Business
Days after the Sellers' receipt thereof. If the Sellers do not timely provide
any objections, then the Proposed Final Closing Statement shall be the "Final
Closing Statement." If the Sellers' objection is timely and is disputed by the
Purchaser, then the Sellers and the Purchaser will negotiate in good faith to
resolve such dispute as expeditiously as possible. If such dispute is not
finally settled within 15 Business Days (or such longer period as the parties
may agree) after the Purchaser's receipt of the Sellers' objection, such dispute
will be finally settled in accordance with Section 2.6. After resolving such
dispute, the Proposed Final Closing Statement as finally agreed upon or settled
upon pursuant to Section 2.6 shall be the "Final Closing Statement."
(b) Based on the Final Closing Statement, the Closing Purchase
Price Payment, as adjusted pursuant to Section 2.4, shall be further adjusted as
follows:
(i) If the Closing Current Ratio (as set forth on the
Final Closing Statement as finally agreed upon or settled pursuant to Section
2.6) is less than 1:1 (an "Actual Deficiency") and (x) there was no Estimated
Deficiency or (y) there was an Estimated Deficiency and the Actual Deficiency
exceeds the Estimated Deficiency, the Sellers shall, within three calendar days
following the determination of the Final Closing Statement, and based upon such
final determination, pay to the Purchaser the Section 2.5(b)(i) Adjustment. As
used herein, the "Section 2.5(b)(i) Adjustment" means (A) if there was no
Estimated Deficiency, the sum of the Actual Deficiency and any Estimated Surplus
or (B) if there was an Estimated Deficiency and the Actual Deficiency exceeds
such Estimated Deficiency, the amount of such excess.
(ii) If there is an Actual Deficiency and there was
an Estimated Deficiency that exceeds
the Actual Deficiency, the Purchaser shall, within three calendar days following
the determination of the Final Closing Statement, and based upon such final
determination, pay to the Sellers the amount of such excess.
(iii) If the Closing Current Ratio (as set forth on
the Final Closing Statement as finally agreed upon or settled pursuant to
Section 2.6) is greater than 1:1 (an "Actual Surplus") and (x) there was no
Estimated Surplus or (y) there was an Estimated Surplus and the Actual Surplus
exceeds the Estimated Surplus, the Purchaser shall, within three calendar days
following the determination of the Final Closing Statement, and based upon such
final determination, pay to the Sellers the Section 2.5(b)(iii) Adjustment. As
used herein, the "Section 2.5(b)(iii) Adjustment" means (A) if there was no
Estimated Surplus, the sum of the Actual Surplus and any Estimated Deficiency or
(B) if there was an Estimated Surplus and the Actual Surplus exceeds such
Estimated Surplus, the amount of such excess.
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(iv) If there is an Actual Surplus and there was an Estimated
Surplus that exceeds the Actual Surplus, the Sellers shall, within three
calendar days following the determination of the Final Closing Statement, and
based upon such final determination, pay to the Purchaser the amount of such
excess.
(c) Payment of the adjustment amount determined pursuant to
Section 2.5 (b) shall be made to the party entitled thereto by wire transfer to
an account of and designated by such party.
2.6 Dispute Resolution Procedures. If after 15 Business Days (or such
longer period as the parties may agree) following the date on which any Seller
gives the Purchaser notice of its objection under Section 2.5(a), still remains
in dispute, then the Neutral Accounting Firm shall resolve such dispute(s). As
used herein, "Neutral Accounting Firm" means a firm of nationally or regionally
recognized independent public accountants selected by the Purchaser and the
Sellers, which shall, at the time of its engagement, not have performed auditing
or other services for any of the parties to this Agreement or their Affiliates
during the past two years and not be engaged to perform such auditing or other
services in the foreseeable future. If the parties are unable to agree on the
Neutral Accounting Firm, then each of the Sellers and the Purchaser shall have
the right to request that the American Arbitration Association appoint the
Neutral Accounting Firm who shall, at the time of its engagement, (i) not have
had a material relationship with the Sellers, the Purchaser or any of their
respective Affiliates within the past two years and (ii) not be engaged to
perform such auditing or other services in the future other than pursuant to
this Section 2.6. Each party agrees to execute, if requested by the Neutral
Accounting Firm, a reasonable engagement letter, including customary
indemnities. All fees and expenses relating to the work, if any, to be performed
by the Neutral Accounting Firm shall be borne pro rata as between the Sellers on
the one hand and the Purchaser on the other, in inverse proportion to the
allocation of the dollar amount of the amounts remaining in dispute between the
Purchaser and the Sellers made by the Neutral Accounting Firm such that the
prevailing party pays the lesser proportion of the fees and expenses. The
Purchaser and the Sellers shall each make their complete submission to the
Neutral Accounting Firm within 10 Business Days following the expiration of the
15 Business Days (or such longer period as the parties may agree) referred to
above in this Section 2.6. The failure of any party to make any submission prior
to the expiration of such 10 Business Day period shall be deemed a waiver of
such party's right to make a submission. The Neutral Accounting Firm's
determination of the Final Closing Statement and Closing Current Ratio (i) shall
be made within 10 Business Days following the date on which the dispute is
submitted, (ii) shall be set forth in a written statement delivered to the
Sellers and the Purchaser, and (iii) shall be final, binding and conclusive. THE
SELLERS AND THE PURCHASER WAIVE THEIR RESPECTIVE RIGHTS TO CONTEST SUCH
DETERMINATION THROUGH ANY PROCEEDING. In the event a party does not comply with
the procedure and time requirements contained herein, the Neutral Accounting
Firm will render a decision based solely on the evidence it has which was timely
filed by either of the parties.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SELLERS
The Company and each Seller, jointly and severally, hereby makes the
following representations and warranties to the Purchaser, subject to any
exceptions set forth in the schedules hereto.
3.1 Authority of each Seller and the Company. The Company and each
Seller has full corporate power and authority to execute and deliver this
Agreement and the documents contemplated hereby, to consummate the Contemplated
Transactions and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by each Seller and the Company
hereunder and thereunder. This Agreement is the legal, valid and binding
obligation of each Seller and the Company and is enforceable against each of
them in accordance with its terms.
3.2 Organization and Good Standing. The Company and each Seller is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its organization, with full corporate power and authority
to conduct the Business as it is now being conducted and to own, lease or
operate the properties and assets that it purports to own, lease or operate. The
Company is not qualified and authorized to conduct the Business in any other
state where such qualification is required by Law. True and complete copies of
the Organizational Documents of the Company, as are currently in effect, have
been delivered or made available to the Purchaser by the Company.
3.3 No Conflict.
(a) Except as set forth on Schedule 3.3(a) and Schedule
5.1(d), neither the execution, delivery or performance of this Agreement nor the
consummation of any of the Contemplated Transactions by the Company or any
Seller will:
(i) contravene, conflict with or result in a
violation of: (A) any provision of the Organizational Documents of the Company;
or (B) any resolution adopted by the board of directors or the stockholders of
the Company or any Seller;
(ii) breach any Law or Order to which any Seller or
the Company, or any of the material assets owned, leased or used by the Company,
may be subject;
(iii) contravene, conflict with or result in a
violation or breach of any of the terms or requirements of, or directly give any
Governmental Authority or Educational Agency the right to revoke, withdraw,
suspend, cancel, terminate or materially modify, any Educational Approval or
material Permit that is held by the Company or that otherwise relates to the
Business or any of the material assets owned, leased or used by the Company;
(iv) materially breach, violate or result in a
material default under any provision of, or give any Person the right to declare
a material default or exercise any material remedy under, or to accelerate the
maturity or performance of, or payment under, or to cancel, terminate or modify,
any material Company Contract including without limitation the Campus Leases; or
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(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned, leased or used by
the Company.
(b) Except as set forth on Schedule 3.3(b), the Company is not
required to give any notice to or obtain any Consent or Permit from any other
Person in connection with its execution, delivery and performance of this
Agreement or its consummation of any of the Contemplated Transactions other than
those that have been given or obtained.
3.4 Capitalization; Title to Shares. The authorized capital stock of
the Company consists solely of 200 shares of Common Stock, all of which shares
are issued and outstanding and constitute the Shares. Except as set forth on
Schedule 3.4, ECTS owns and holds all of the record and beneficial interest in
the Shares, free and clear of all Encumbrances and no legend or other reference
to any purported Encumbrance appears upon any certificate representing any of
the Shares. All of the Shares have been duly authorized and validly issued and
are fully paid and nonassessable. Except as set forth on Schedule 3.4 and for
this Agreement, there are no Contracts relating to the issuance, sale, voting or
transfer of the Shares or in any way restricting ECTS from exercising any of its
rights to any of the foregoing. None of the Shares were issued in violation of
any Law, including without limitation the Securities Act of 1933, as amended or
any state law governing the issuance and/or sale of securities. Except as set
forth on Schedule 3.4 and for this Agreement, there are no outstanding rights,
options, warrants, or convertible securities of any kind entitling any Person to
purchase or acquire any shares of capital stock or any other securities of the
Company or agreements of any kind entitling any Person to purchase, acquire or
otherwise receive any shares of capital stock or any other securities of the
Company, including, without limitation, preemptive rights, rights to acquire
capital stock contingent upon the payment of money, passage of time or other
contingency. At the Closing, ECTS shall transfer to the Purchaser valid title to
the Shares free and clear of all Encumbrances.
3.5 Subsidiaries; Investments. Except as set forth on Schedule 3.5, the
Company does not have any subsidiary and/or any direct or indirect equity
ownership interest or other investment in any other Person.
3.6 Assets. The Company has valid title to, or a valid leasehold
interest in, the assets used by it, located on its premises and shown on the
Balance Sheet or acquired after the Balance Sheet Date, free and clear of all
Encumbrances other than Permitted Encumbrances, except for properties and assets
disposed of in the Ordinary Course of Business since the Balance Sheet Date.
3.7 Campus Properties; Campus Leases. Except as set forth on Schedule
3.7, other than the Campus Properties, there is no real property that has been
owned or leased by the Company in the last three years. The Campus Leases are
the only Company Contracts governing the Company's lease and possession of the
Campus Properties. To the Knowledge of the Company and each Seller, there are no
setoffs, counterclaims or disputes existing or asserted with respect to the
Campus Properties. Except as set forth in the definition thereof, the Campus
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Leases have not been amended, modified or restated. The Campus Leases are in
full force and effect. Neither the Company nor, to the Knowledge of the Company
or any Seller, any other party to the Campus Leases is in material default
thereunder. To the Knowledge of the Company and each Seller, there exists no
condition or circumstance which with notice or the lapse of time would
constitute a default under any Campus Lease by the Company. To the Knowledge of
the Company and each Seller, no party to a Campus Lease has exercised any right
to terminate such Campus Lease. The Company has delivered to the Purchaser a
correct and complete copy of each Campus Lease and all amendments and
modifications thereto and restatements thereof. The Company has not assigned,
subleased, or otherwise transferred any of its rights in or under any Campus
Lease. All of the Company's material operations are conducted at and all of the
material tangible assets used in connection with such operations are located at
the Campus Properties.
3.8 Condition and Sufficiency of Assets. The Campus Properties, the
equipment and other assets owned, leased or licensed by the Company are in the
aggregate all of the assets necessary to operate the Business in the Ordinary
Course of Business as presently conducted. There are no material assets or
properties used in the operation of the Business and owned by any Person other
than the Company that are not leased or licensed to the Company under valid,
current leases or license arrangements. The material assets of the Company are
adequate for the purposes for which such assets are currently used or are held
for use, and are in operating condition (subject to normal wear and tear).
3.9 Company Contracts.
(a) Set forth on Schedule 3.9 is a correct and complete list
of each Company Contract in effect as of the date of this Agreement, except for
the Campus Leases:
(i) that involves the performance of services or
delivery of goods or materials by or to the Company of an aggregate annual
amount or value in excess of $25,000, including Student Contracts, or group of
similar Company Contracts having an aggregate annual amount or value in excess
of $50,000;
(ii) affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any personal property, except
personal property leases and licenses, installment and conditional sales
agreements having a value per item or aggregate annual payments of less than
$25,000 or group of similar Company Contracts having aggregate annual payments
of more than $50,000;
(iii) affecting the ownership of, licensing of,
assignment of or right to use any material patents, trademarks, trade names,
service marks, copyrights, or other material intellectual property including
Company Contracts with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any Confidential
Information;
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(iv) involving a sharing of profits, losses, costs,
taxes or liabilities by the Company with any other Person including, without
limitation, any material joint venture, partnership, or shareholders agreement;
(v) containing any agreement or covenant to not
compete that restricts the operation of the Business as presently conducted;
(vi) containing any agreement (including without
limitation agreements as to employment or compensation) or Contract that
involves an aggregate amount or value in excess of $25,000 by and between the
Company and any Seller, any Related Person of the Company or any Seller, any
current (or, if executory, any former) employee, officer or director of the
Company or any Related Person in their respective individual capacities;
(vii) containing or constituting any collective
bargaining agreement or other contract with a labor union, other than the Union
Contracts;
(viii) under which any money has been borrowed or
loaned and any principal or interest remains outstanding or any note, bond,
indenture, or other evidence of Debt has been issued, directly or indirectly
guaranteed or assumed (other than endorsements for the purposes of collection in
the Ordinary Course of Business), and any principal and interest thereon remains
outstanding or any lien (other than Permitted Encumbrances) exists to secure
repayment thereof, in each case in excess of $25,000; or
(ix) under which the Company is obligated or liable
as guarantor, surety, co-signer or endorser or co-maker in respect of the
obligations of any other Person except as endorser or maker of checks endorsed
or made in the Ordinary Course of Business.
(b) The Company has delivered or made available to the
Purchaser correct and complete copies of each Company Contract set forth on
Schedule 3.9. Except as set forth in Schedule 3.9, as of the date of this
Agreement (i) each Company Contract identified thereon is in full force and
effect and is valid and enforceable against the Company in accordance with its
terms, (ii) the Company is in compliance with all material terms and
requirements of each such Company Contract, (iii) to the Knowledge of the
Company, each other Person that has any material obligation or liability under
any such Company Contract is in compliance with all material terms and
requirements of such Company Contract and (iii) to the Knowledge of the Company
and each Seller, there exists no condition or circumstance which with notice or
lapse of time would constitute a material default thereunder by the Company.
3.10 Intellectual Property.
(a) Set forth on Schedule 3.10 is a correct and complete list
as of the date of this Agreement of all copyrights, patents, invention
disclosures, trademarks, trade names, fictitious names, service marks, web site
addresses and domain names that are material to the Company's business as
currently conducted, including without limitation, the names "Technical Career
Institutes" and "Technical Career Institute" and "TCI" (collectively, the
"Intellectual Property"), whether registered or established by common law, and
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all applications therefor that are pending, which are owned or licensed by the
Company or used in the operation of the Business. Schedule 3.10 sets forth a
correct and complete list, as of the date of this Agreement, of all material
licenses, agreements requiring royalty payments and other agreements which
permit third parties to use any of the Intellectual Property. The Company has
delivered or made available or shall, at least 10 Business Days prior to the
Closing Date, cause to be delivered or made available to the Purchaser correct
and complete copies of all material registrations, applications, licenses and
agreements in effect as of such date with respect to the Intellectual Property.
Except as set forth in Schedule 3.10, the Company is the sole and exclusive
owner of the Intellectual Property, free and clear of any and all Encumbrances
(other than Permitted Encumbrances), agreements, licenses and sublicenses
whatsoever. To the Knowledge of the Company no items of Intellectual Property
are subject to any outstanding Order that would materially adversely affect the
value or utilization thereof. The Company will provide written notice to the
Purchaser of any Intellectual Property that is material to the operation of the
Business which is obtained or developed by the Company between the date hereof
and the Closing.
(b) The Company owns free and clear of all Encumbrances (other
than Permitted Encumbrances)or has valid rights to use the Curricula necessary
to operate the Business in the Ordinary Course of Business as presently
conducted.
3.11 Intellectual Property of Third Parties. Except as set forth on
Schedule 3.11, the Company has not received any written charge, complaint,
claim, demand or notice alleging that the Intellectual Property or Curricula
interferes, infringes, was misappropriated from, or violates the right of any
third party (including any claim that the Company must license or refrain from
using any intellectual property rights of any third party). To the Knowledge of
the Company, the operation of the Business as currently conducted does not
interfere with, infringe upon, misappropriate or otherwise come into conflict
with, any currently existing intellectual property rights of third parties.
3.12 Financial Statements and Information.
(a) The Company has delivered to the Purchaser correct and
complete copies of (i) the audited balance sheets of the Company as of September
30, 2002, 2003, and 2004 together with the statements of income, changes in
shareholders' equity and cash flow for the Fiscal Years then ended and the notes
thereto and the reports thereon of the Company's independent certified public
accountants including without limitation any report of such accountants required
by the DOE with respect to such Fiscal Years (the "Audited Financial
Statements") and (ii) the unaudited balance sheet of the Company as of March 31,
2005 (the "Balance Sheet") and the unaudited consolidated statement of income of
the Company for the three month period ended March 31, 2005 (the "Interim Income
Statement" and, together with the Interim Balance Sheet, the "Interim Financial
Statements"). The Audited Financial Statements and the Interim Financial
Statements are sometimes referred to herein, collectively, as the "Financial
Statements". The Financial Statements: (i) fairly present in all material
respects the Company's financial position, results of operations, and changes in
shareholders' equity and cash flows as of the respective dates and for the
respective periods stated above; (ii) accurately and completely reflect the
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books and records of the Company in all material respects; and (iii) have been
prepared in accordance with GAAP applied consistently throughout the periods
involved except, in the case of the Audited Financial Statements, as otherwise
stated in the footnotes or the audit opinion related thereto and, in the case of
the Interim Financial Statements, except for year-end adjustments and the
absence of footnotes.
(b) Schedule 3.12(b) accurately sets forth the principal and
interest owing by NATS under its promissory note in favor of DCSNA (the "NATS
Note"). The NATS Note is a bona fide obligation and the principal and interest
reflected as outstanding as of June 30, 2005 on Schedule 3.12(b) remains
outstanding.
3.13 Taxes.
(a) The Company has filed or caused to be filed on a timely
basis (taking into account all applicable extension periods) all tax returns,
reports, statements, or estimates, including information returns ("Tax Returns")
that were required to be filed by it pursuant to applicable Laws, except where
such failure is not reasonably likely to have a Material Adverse Effect. All
such Tax Returns were correct and complete in all material respects. All taxes
reflected on such Tax Returns as due and payable have been paid, provided that
to the extent such Taxes have not been paid, adequate reserves have been
provided for in the Financial Statements. Except as are listed on Schedule
3.13(a), for taxable periods ending on or after September 30, 2001, none of the
Company's federal or state income Tax Returns have been audited by the IRS or
the State of New York and, to the Knowledge of the Company, (i) no such audits
are pending and (ii) the Company has not received written notice of future
audits. The Company has not waived any statute of limitations in respect of any
Tax Returns or agreed to any extension of time with respect to the assessment of
Taxes. The Company has not given any waiver or extensions (or is or would be
subject to a waiver or extension given by any Seller) of any statute of
limitations relating to the payment of Taxes.
(b) There are no material proposed reassessments of any of the
assets of the Company that would affect the Taxes of the Company after the
Closing Date, provided, however, that any real property subject to a lease is
reassessed periodically. There are no material Tax liens on any assets of the
Company, other than liens for current Taxes not yet due and payable.
(c) Schedule 3.13(c) lists all federal, state, and local
income Tax Returns filed with respect to the Company for taxable periods ended
on or after September 30, 2001, except where such failure to provide such Tax
Return is not reasonably likely to have a Material Adverse Effect. The Company
has been a member of an affiliated group filing a consolidated federal income
Tax Return and has delivered all consolidated federal income Tax Returns for
taxable periods ending on or after September 30, 2001. The Company is a party to
a tax allocation agreement.
(d) The Company will not be required to include any item of
income in taxable income for any taxable period (or portion thereof) ending
after the Closing Date as a result of any installment sale made on or prior to
the Closing Date or any prepaid amount received on or prior to the Closing Date.
11
3.14 No Undisclosed Liabilities. The Company has no material
Liabilities of a kind required to be set forth on a balance sheet of the Company
prepared in accordance with GAAP except: (a) those reflected or reserved against
on the Balance Sheet in the amounts shown thereon, (b) those reflected on
Schedule 3.14, or (c) those that have arisen in the Ordinary Course of Business
after the Balance Sheet Date, none of which, individually or in the aggregate,
has or will have a Material Adverse Effect.
3.15 Environmental Matters.
(a) The Company is and at all times has been, in compliance in
all material respects with and has not been and is not in material violation of
or incurred a material liability under any applicable Environmental Law; neither
the Company nor any Seller has any Knowledge, (including, without limitation,
because any of them received any actual or threatened Order or, notice) of any
actual or potential material violation or material failure to comply with any
Environmental Law or of any actual or threatened material obligation to
undertake or bear the cost of any Environmental, Health and Safety Liabilities
with respect to the Campus Properties.
(b) Neither the Company nor any Seller has any Knowledge of
Hazardous Materials present or Hazardous Activity conducted or Hazardous
Materials released on or in the Campus Properties.
(c) The Company has delivered or made available to the
Purchaser true and complete copies and results of any material reports, studies,
analyses, tests or monitoring possessed or initiated by the Company or any
Seller pertaining to Hazardous Materials or Hazardous Activities in, on or under
the Campus Properties, or concerning compliance by the Company, with
Environmental Laws, including without limitation, any and all Phase I
environmental reports prepared on or after January 1, 2000, in the possession of
the Company or any Seller.
(d) There has been no past, and there is no pending or
contemplated, material claim by the Company under any Environmental Law based on
actions of others that may have impacted on the Campus Properties and the
Company has not entered into any material agreement with any Person regarding
any environmental law, remedial action or other environmental liability or
expense.
3.16 Permits. Set forth on Schedule 3.16 is a correct and complete list
of all Permits used by the Company in the operation of the Business. Such
Permits constitute all Permits necessary for the operation of the Business as
currently conducted, except for any Permits which the failure to hold would not,
individually or in the aggregate, have a Material Adverse Effect. All such
Permits held by the Company are valid and subsisting and in full force and
effect. All applications required to have been filed for the renewal of such
Permits have been timely filed. To the Knowledge of the Company and each Seller
no event has occurred or circumstance exists that would (with or without notice
or lapse of time) result in or constitute grounds for revocation of any such
Permit or refusal to grant any renewal thereof.
12
3.17 Compliance with Laws. Except as set forth on Schedule 3.17 and for
(i) Environmental Law compliance (which is addressed in Section 3.15), (ii)
compliance with accreditation, state education licensing, federal Title IV
eligibility and certification, recruitment, admissions, and student aid funding
matters (which are addressed in Section 3.18) and (iii) compliance with laws
relating to Taxes (which is addressed in Section 3.13), as to all of which no
representation or warranty is made in this Section 3.17, as of the date of this
Agreement:
(a) the Company is in compliance with all Laws applicable to
the operation of the Business except for noncompliance which would not have a
Material Adverse Effect; and
(b) neither the Company nor any Seller has received any
written notice alleging (or any written notice of any investigation related to)
any material violation by the Company or any Seller of any Law applicable to the
operation of the Business, which notice has not been fully and completely
resolved as of the date of this Agreement.
3.18 Compliance with Educational Agencies; Educational Approvals.
(a) Except as set forth on Schedule 3.18(a), the Campus
Properties are and have been the only addresses at which the Company has offered
educational instruction or otherwise operated since October 1, 2000.
(b) Set forth on Schedule 3.18(b) is a correct and complete
list of all current Educational Approvals issued to, or entered into by, the
Company since October 1, 2000, including, without limitation, all Program
Participation Agreement(s) by and between the Company and the DOE, the dates of
issuance and expiration of each such Educational Approval, and the name and
address of each Educational Agency that issued any such Educational Approval.
Each such Educational Approval is in full force and effect. The Educational
Approvals as listed on Schedule 3.18(b) constitute all of the Educational
Approvals necessary for the Company to operate the Business as it is currently
operated. Neither the Company nor any Seller has received written or oral notice
that any Educational Approval will not be renewed, and, to each Seller's
Knowledge, there is no basis for any such non-renewal. The Company has made
available to the Purchaser correct and complete copies of all Educational
Approvals that have been issued to it.
(c) Set forth on Schedule 3.18(c) is a correct and complete
list, of every funding program, including governmental, institutional or private
programs, pursuant to which financial assistance, grants or loans have been
provided to any students enrolled with the Institute since October 1, 2000
("Financial Assistance Programs").
(d) Since October 1, 2000, the Company and each Seller have
possessed without interruption, all material requisite Educational Approvals to
operate at the Campus Properties and any other location at which Company has
offered educational instruction, including without limitation, offering
educational programs via distance education, student marketing or recruiting
activities and externships, internships and consortium agreements.
13
(e) Except as disclosed on Schedule 3.18(e), since October 1,
2000, the Company has been eligible, and fully certified by the DOE, to
participate in the Title IV Programs, including, without limitation, grants,
loans and work study programs, with respect to educational instruction offered
by it at the Campus Properties and any other location at which the Company has
offered educational instruction, and the Company is, and has been, a party to,
and, in material compliance with, a valid and effective Program Participation
Agreement with the DOE and neither the Company nor any Seller has received
written or oral notice of any fine, limitation, suspension or termination
Proceeding, or has been subject to any other action or Proceeding by the DOE
that could reasonably be expected to result in the suspension, limitation or
termination of such certification or eligibility or liability or fine.
(f) Except as disclosed on Schedule 3.18(f), since October 1,
2000, the Company and each Seller have been in material compliance with all
applicable Laws pertaining to the Company's participation in and administration
of Financial Assistance Programs, including compliance with all requirements
relating to the reporting of ownership and control matters and, to each Seller's
Knowledge, there are no facts, circumstances, or omissions that could reasonably
be expected to result in or constitute grounds for revocation or non-renewal of
any Educational Approval or in a finding of material non-compliance with regard
to any such Law.
(g) (i) Except as disclosed on Schedule 3.18(g)(i), since
October 1, 2000, each educational program offered by the Company for which the
Company provided or provides Financial Assistance Program funding, including
programs involving externships, internships or consortium agreements, was and is
an eligible program and in material compliance with all applicable rules,
regulations and requirements, including without limitation, the requirements of
TAP and 34 C.F.R. ss. 668.8, and the Company has been in material compliance
with the requirement to properly measure the length of such educational program
for purposes of disbursing Title IV Program funding to students enrolled in each
such program.
(ii) The Company has not had more than 90 percent of
its revenues derived from Title IV Programs as measured under the "90/10 Rule,"
codified at 34 C.F.R. ss. 600.5(a)(8), for any of its Fiscal Years ended on or
after September 30, 2000.
(iii) Except as set forth on Schedule 3.18(g)(iii),
for each Fiscal Year ended on or after October 1, 2000, the Company has
materially satisfied all standards of financial responsibility and
administrative capability, in accordance with 34 C.F.R. Part 668, Subpart L and
ss. 668.16, respectively. Except as set forth on Schedule 3.18(g)(iii), since
October 1, 2000, the Company has not been required by DOE to post a letter of
credit or other form of surety, including a letter of credit for late refunds.
(iv) At no time since October 1, 2000, has the
Company been placed on the reimbursement or cash monitoring payment methods of
Title IV Program funding.
(h) Except as set forth on Schedule 3.18(h), since October 1,
2000, the Company has not received any written or oral notice of, and there is
not any currently unresolved investigation, review, audit, compliance review or
14
site visit relating to the Company's participation in and administration of TAP,
Title IV Programs or other Financial Assistance Programs or its compliance with
the requirements of any other Educational Agency. The Company has made available
to the Purchaser correct and complete copies of all annual federal financial aid
compliance audits and audited financial statements filed with the DOE pursuant
to 34 C.F.R. ss. 668.23 for Fiscal Years 2001, 2002, 2003 and 2004 and any draft
or final investigative reports, program reviews, audits or compliance reviews
received from any other Educational Agency since October 1, 2000.
(i) Except as set forth on Schedule 3.18(i), the Company is
not on probation, warning or reporting status with any Educational Agency nor,
since October 1, 2000, has the Company been subject to or received notice of any
Proceeding by any Educational Agency (i) to revoke, withdraw, deny, suspend,
condition, refuse to renew or limit any Educational Approval, (ii) alleging any
material violation by the Company or any Seller of any Law or term or condition
of any Educational Approval or the failure to hold any required Educational
Approval; or (iii) refusing to approve any application.
(j) Except as set forth on Schedule 3.18(j), neither the
Company nor any Seller has provided or contracted with any Person or entity that
provided any commission, bonus or other incentive payment based directly or
indirectly on success in securing enrollments (including testing personnel) to
any Persons or entities engaged in any student recruiting or admissions
activities or in making decisions regarding the awarding of student financial
aid to any student.
(k) Since October 1, 2000, all student financial aid grants
and loans, disbursements and refunds in connection with Financial Assistance
Programs, and the record keeping related thereto, have been completed in
material compliance with all Educational Agency requirements, and there are no
material deficiencies in respect thereto. Except as disclosed in prior audits or
compliance reviews, to the Knowledge of the Company and the Sellers, no student
has been funded prior to the date for which such student was eligible for
funding or in any amount other than the amount such student was eligible to
receive, and student records conform in all material respects to all relevant
Educational Agency requirements. All required reports and surveys have been
accurately prepared and timely filed with the applicable Educational Agencies.
(l) Neither the Company nor any Seller, nor any Person that
exercises Substantial Control over the Company or the Business, nor any member
of such Person's Family, alone or together, (i) owes, or (ii) exercises or
exercised Substantial Control over another postsecondary educational institution
or third-party servicer that owes a liability for a violation of a Title IV
Program requirement that is not being repaid in accordance with an agreement
with DOE.
(m) Neither the Company nor any Seller, nor any Person that
has the power to exercise Substantial Control over the Company or the Business,
has filed for relief in bankruptcy or had entered against it an order for relief
in bankruptcy.
15
(n) Neither the Company nor any Seller, nor the Company's
chief executive officer designated on the Company's Program Participation
Agreement with the DOE has pled guilty to, pled nolo contendere to, or been
found guilty of, a crime involving the acquisition, use or expenditure of funds
under the Title IV Programs or been judicially determined to have committed
fraud involving funds under the Title IV Programs.
(o) Neither the Company nor any Seller has employed in a
capacity involving administration of funds under Financial Assistance Programs
or the receipt of funds under those programs, any individual who has been
convicted of, or has pled nolo contendere or guilty to, or been debarred or
entered into a settlement regarding, a crime involving the acquisition, use or
expenditure of federal, state or local government funds, or has been
administratively or judicially determined to have committed fraud or any other
material violation of law involving federal, state or local government funds.
(p) All disallowances, refunds or returns due to be paid to
any students prior to the Closing Date pursuant to any Educational Agency
requirements have been, or will be, paid in full by the Company in all material
respects.
(q) Schedule 3.18(q) lists the official published cohort
default rates, calculated by the DOE for the cohort years ended September 30,
2000, 2001 and 2002. The Company's Xxxxxxx Loan cohort default rates for the
most recent three fiscal years are set forth on Schedule 3.18(q).
(r) There are no surety bonds or other forms of security that
the Company has filed or been required to file since October 1, 2000, with any
Educational Agency with respect to its state authorization, federal eligibility
recruiter permits or other matters.
(s) The Company has made available to the Purchaser correct
and complete copies of all correspondence (excluding general correspondence
routinely sent to or received from any Educational Agency) received from or sent
by or on behalf of the Company to any Educational Agency to the extent such
correspondence was sent or received since January 1, 2000, or relates to any
issue which remains pending, and relates to (i) any notice that any Educational
Approval is not in full force and effect or that an event has occurred which
constitutes or, with the giving of notice or the passage of time or both, would
constitute a breach or violation thereunder; (ii) any notice that the Company or
any Seller has violated or is violating any legal requirement, regulation, rule
or standard of an Educational Agency; (iii) any audits, program reviews,
investigations or site visits conducted by the DOE or any other Educational
Agency; (iv) any notice of any intent to limit, suspend, terminate, revoke,
cancel, not renew or condition any Educational Approval; (v) any request or
requirement to post a letter of credit or other form of security with any
Educational Agency; (vi) any notice of an intent to provisionally certify the
eligibility of the Company to participate in the Title IV Programs; (vii) the
placement or removal of the Company on or from the reimbursement or cash
monitoring method of payment under Title IV Programs; (viii) any change in the
address at which the Company offers educational instruction or any change in the
educational programs offered by the Company; (ix) the DOE's Integrated
Postsecondary Education Data System and SED's Higher Education Data System.
16
(t) Except as set forth on Schedule 3.18(t), the Company has
made available to the Purchaser correct and complete copies of all student
complaints, including related correspondence, that it has received from any
current or former student, or received from any Educational Agency in relation
to any student complaint, or sent by or on behalf of the Company in regard to
any student complaint, since October 1, 2000. To the Knowledge of the Company
there are no unresolved material student complaints received from any current or
former student against the Company.
(u) Except as set forth on Schedule 3.18(u), to the Knowledge
of the Company, there are no facts or circumstances concerning the Company, any
Affiliate of the Company, or any Person that exercises substantial control over
the Company or any Affiliate of the Company (as the term "substantial control"
is defined in 34 C.F.R. ss. 668.174(c)(3)) that could result in the denial or
delay in issuance of, or in the imposition of any condition materially adverse
to the Purchaser in any Educational Approval to be issued in connection with the
consummation of the transactions contemplated under this Agreement, including
without limitation any of the Required Closing Consents.
3.19 Insurance. Schedule 3.19 lists all fire, theft, casualty, health,
life, accident, automobile, liability, products liability, title and other
policies of insurance maintained by the Company, including policy limits and
expiration dates. All such policies are in full force and effect. The Company
has made available to the Purchaser a true and complete copy of each such
insurance policy. All premiums due thereon have been paid, and the Company has
not received any written notice of cancellation with respect thereto. Except as
set forth on Schedule 3.19, there are no pending material Proceedings arising
out of, based upon or with respect to any of such policies of insurance and to
the Company's Knowledge, no basis for any such Proceeding exists. The Company is
not in material default of its obligations under any such policies.
3.20 No Changes. Since the Balance Sheet Date, the Company has
conducted the Business in the Ordinary Course of Business. Without limiting the
generality of the foregoing sentence and except as set forth on Schedule 3.20 or
as contemplated by this Agreement, since the Balance Sheet Date, there has not
been any:
(a) change in the Business which has had a Material Adverse
Effect;
(b) damage or destruction to any, or all, of the assets of the
Company in excess of $50,000;
(c) change in the size or composition of the work force of the
Company by more than ten percent (10%);
(d) material capital expenditures or other asset acquisition
or expenditure in excess of $50,000 in the aggregate;
(e) creation of any Encumbrance (other than a Permitted
Encumbrance) on any of the assets of the Company;
17
(f) increase in the salaries, wages or bonuses of any
management employee of the Company except for increases in the Ordinary Course
of Business;
(g) payment or distribution by the Company to, or other
Company transaction with, any shareholder of the Company or Related Person of a
shareholder;
(h) disposition of any asset of the Company with a value in
excess of $25,000 otherwise than in the Ordinary Course of Business;
(i) payment, prepayment or discharge of any liability other
than in the Ordinary Course of Business;
(j) creation or termination of any material agreement, right
or liability of the Company not in the Ordinary Course of Business; or
(k) contract or commitment to do any of the foregoing.
3.21 [Intentionally Omitted.]
3.22 Proceedings.
(a) Except for ordinary course union grievances and as set
forth on Schedule 3.22, there are no Proceedings pending or, to the Knowledge of
the Company or any Seller, threatened against the Company, at law or in equity,
including any Proceeding by or before any Governmental Authority or Educational
Agency, and, to the Knowledge of the Company and the Sellers, there is no basis
for any such Proceeding, except any Proceeding that would not, individually or
in the aggregate, reasonably be expected to result in material damages or that
seeks injunctive relief;
(b) there are no outstanding material Orders against the
Company; and
(c) except as set forth on Schedule 3.22, the Company has no
pending, and is not threatening, any material Proceeding against any third
party.
3.23 Employee Matters; Benefit Plans.
(a) The Company has delivered or made available to the
Purchaser, a correct and complete list of the names, positions and compensation
of each of the present directors, officers and non-Union employees of the
Company together with their current annual rates of salary and bonus and a
summary description of agreements for commissions or additional compensation and
other like benefits, if any, payable to such individuals, including severance
benefits; except as set forth on Schedule 3.23(a), neither the Company nor any
Seller has received notice from any employee of the Company that such employee
intends to terminate his or her employment with the Company within the next
sixty (60) days;
(b) except as set forth on Schedule 3.23(b), all of the
Company's employees may be terminated at will without any liability or
obligation of the Company except for compensation earned prior to such
termination and owed pursuant to the terms of their employment prior to such
18
termination; neither the Company nor any Seller has any Knowledge of any basis
for, any material claim against the Company by any employee or agent of the
Company as a result of the Company's execution, delivery or performance of this
Agreement;
(c) set forth on Schedule 3.23(c) is a list of each Benefit
Plan that is maintained and operated by or on behalf of the Company or in which
the Company is a contributing employer; the form and operation of each Benefit
Plan currently or at any time maintained or operated by or on behalf of the
Company is and at all times has been in material compliance with the IRC, ERISA
and all other applicable Laws; any such Benefit Plan that purports to be a
"qualified plan" under Section 401(a) of the IRC has been determined to be so
qualified by the IRS and, to the Company's and each Seller's Knowledge, nothing
has occurred that would cause the loss of such qualification; since December 31,
1996, the Company and any entity of a "controlled group" within the meaning of
Section 412(n)(6)(B) of the IRC in which the Company has been a member has not
maintained, operated, caused to be maintained or operated on its behalf, or
contributed to a Benefit Plan which (i) is a "defined benefit plan" within the
meaning of Section 3(35) of ERISA or a "multiemployer benefit plan" as defined
in Section 3(37) of ERISA, (ii) provides post-retirement health or death benefit
coverage (other than as required under Part 6 of Subtitle B of Title I of ERISA
or Section 4980B of the IRC or similar state law), (iii) is a plan described in
Section 413(a) or 413(c) of the IRC or Section 3(40) of ERISA or (iv) is subject
to the minimum funding requirements of Section 412 of the IRC; no suit, actions
or other litigation have been brought or, to the Knowledge of the Company or any
Seller, threatened against or with respect to any Benefit Plan and, to the
Knowledge of the Company and the Sellers, there are no facts or circumstances
known to the Company or any Seller that would reasonably be expected to give
rise to any such suit, action or other litigation that would result,
individually or in the aggregate, in a material liability to the Company.
3.24 Labor Relations.
(a) Except as set forth on Schedule 3.24(a), the Company is
not a party to any collective bargaining agreement.
(b) Except as set forth on Schedule 3.24(b), the Company is
not engaged in any material unfair labor practice and the Company is not (and
has not been within the past three years) a party to, involved in, or threatened
by, any material labor dispute or unfair labor practice charge and no material
strike, labor dispute, slow down or stoppage is pending or threatened against
the Company.
(c) Except as set forth on Schedule 3.24(c), the Company has
complied in all material respects with Laws relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes, and
occupational safety and health, or any other applicable material employment
Laws, and the Company has not received any written notice alleging that it has
failed to comply in any material respect with any such Laws.
(d) There are no pending or, to the Knowledge of the Company
and each Seller, threatened challenges, investigations or audits of the
Company's employment policies or procedures by any Governmental Authority; there
19
are no proceedings, complaints, claims or charges outstanding or, to the
Knowledge of the Company and the Sellers, threatened, and there are not any
orders, decisions, directions or convictions currently registered or
outstanding, against the Company, relating to the alleged violation of any Law
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, the United States Department of
Labor, the Internal Revenue Service or any other Governmental Authority, or
other labor or employment dispute against the Company other than any such
alleged violation of Law or dispute which would not have a Material Adverse
Effect.
3.25 No Related Person Liabilities. Except as set forth on
Schedule 3.25 hereto, the Company does not have any Liability, whether pursuant
to any Company Contract or otherwise, to any Seller or any Related Person of any
Seller.
3.26 Books and Records; Bank Accounts. The books of account, minute
books, stock record books, and other records of the Company, electronic or
otherwise, have been, to the Knowledge of the Company, maintained in accordance
with sound business practices on a basis consistent with prior years.
3.26 Accounts Receivable. All accounts receivable of the Company as
reflected on the Balance Sheet are bona fide receivables that have arisen in the
Ordinary Course of Business.
3.27. Student Enrollment.
(a) The information delivered or made available by the Company
to the Purchaser regarding full-time equivalent student enrollments at the
Institute by semester for matriculated students or clock hours for other
students by semester for the Institute's fall semester 2001 through fall
semester 2004, is correct and complete in all material respects.
(b) The information delivered or made available by the Company
to the Purchaser regarding the number of students majoring in each of the
programs offered by the Institute, by semester from fall 2001 through fall 2004,
is correct and complete in all material respects.
3.28. Banking Facilities, Cash. The Company has delivered or made
available to the Purchaser a correct and complete list of:
(a) each bank, savings and loan, brokerage or
similar financial institution in which the Company has an account or safety
deposit box and numbers of the accounts or safety deposit boxes maintained by
the Company thereat;
(b) the names of all signatories authorized to draw
on each such account or to have access to any such safety deposit box facility
together with a description of the authority (and conditions thereof, if any) of
each such signatory with respect thereto; and
(c) the cash, securities and other property on
deposit or maintained in a brokerage account at or invested through each such
financial institution as of the date of this Agreement.
20
3.29. Powers of Attorney. Except as set forth on Schedule 3.29 hereto,
the Company does not have any general or special powers of attorney outstanding
(whether as grantor or grantee thereof).
3.30. No Brokers. Except for SunTrust Xxxxxxxx Xxxxxxxx, whose fees
and commissions shall be paid by the Sellers, neither the Company nor any
Seller, or any Related Person of the Company or any Seller, has employed or made
any agreement with any third Person which obligates the Company to pay any
finder's fee, brokerage fees or commission or similar payment in connection with
the transactions contemplated hereby.
3.31 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement (including the
schedules and exhibits hereto), none of the Sellers nor the Company nor any of
their respective agents, Affiliates, officers, directors, employees, agents,
representatives, nor any other Person, makes or shall be deemed to make any
representation or warranty to Purchaser, express or implied, at law or in
equity, on behalf of the Sellers or the Company, and the Sellers and the Company
hereby disclaim any such representation or warranty whether by the Sellers, the
Company, or any of their respective agents, Affiliates, officers, directors,
employees, agents or representatives or any other Person, notwithstanding the
delivery or disclosure to the Purchaser or any of its officers, directors,
employees, agents or representatives or any other Person of any documentation or
other information by the Sellers, the Company or any of their respective agents,
Affiliates, officers, directors, employees, agents or representatives or any
other Person with respect to any one or more of the foregoing. The Purchaser
hereby acknowledges and agrees that, except to the extent specifically set forth
in this Agreement (including the schedules and exhibits hereto), the Purchaser
is purchasing the Company on an "as is, where is" basis.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company and each Seller as
follows:
4.1 Authority of Purchaser. The Purchaser has full right, power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, to consummate the Contemplated Transactions and to perform and comply
with all of the terms, covenants and conditions to be performed and complied
with by the Purchaser hereunder and thereunder. This Agreement has been duly and
validly executed and delivered by the Purchaser and constitutes a legal, valid
and binding obligation of the Purchaser and is enforceable against it in
accordance with its terms.
4.2 Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, with full power and authority to conduct its business as it is now
being conducted and to own, lease and operate its properties and assets.
4.3 No Conflict or Violation.
21
(a) The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions, and compliance by the Purchaser
with the provisions hereof will not: (i) result in a violation of or a conflict
with any provision of the Organizational Documents of the Purchaser or any
resolution of the board of directors or stockholders of the Purchaser; (ii)
result in a violation of any applicable Law, Order or the material terms and
conditions of any Permit or educational approval, accreditation or authorization
to which the Purchaser, or any of the assets owned, leased or used by the
Purchaser, may be subject; (iii) directly give any Governmental Authority or
Educational Agency the right to revoke, withdraw, suspend, cancel, terminate or
materially modify, any material Permit or educational approval, accreditation or
authorization that is held by the Purchaser or that otherwise relates to any of
the material assets owned, leased or used by the Purchaser; (iv) materially
breach, violate or result in a material default under any provision of, or give
any Person the right to declare a material default or exercise any material
remedy under, or to accelerate the maturity or performance of, or payment under,
or to cancel, terminate or modify, any material Contract of the Purchaser; and
(v) result in any Person having the right to enjoin, rescind or otherwise
prevent or impede the Contemplated Transactions or to obtain damages from the
Company or any Seller or to obtain any other judicial or administrative relief
as a result of any transaction carried out in accordance with the provisions of
this Agreement. The Purchaser has complied and will comply with all obligations
imposed upon it by the National Labor Relations Board, the Equal Employment
Opportunity Commission and any other comparable Governmental Authority
including, but not limited to, any duty to bargain with the Union.
(b) The Purchaser is not required to give any notice to or
obtain any Consent or Permit from any Person in connection with its execution ,
delivery and performance of this Agreement or its consummation of any of the
Contemplated Transactions.
4.4 Educational Approvals. To the Knowledge of the Purchaser, there are
no facts or circumstances concerning the Purchaser, any Affiliate of the
Purchaser, or any Person that exercises substantial control over the Purchaser
or any Affiliate of the Purchaser (as the term "substantial control" is defined
in 34 C.F.R. ss. 668.174(c)(3)) that could result in the denial or delay in
issuance of, (a) the Pre-Acquisition Notice or any of the other Required Closing
Consents or (b) the imposition of any condition materially adverse to the
Purchaser in any Educational Approval to be issued in connection with the
consummation of the transactions contemplated under this Agreement, except the
open program review being conducted by the DOE of academic years 2002/2003,
2003/2004 and 2004/2005 of Interboro Institute, Inc.
4.5 Proceedings. There is no Proceeding pending nor, to the Knowledge
of the Purchaser, threatened which challenges the validity of this Agreement or
the Contemplated Transactions or otherwise seeks to prevent, directly or
indirectly, the consummation of such transactions, nor, to the Knowledge of the
Purchaser, is there a valid basis for any such Proceeding.
4.6 Absence of Changes. Since September 30, 2004 there has been no
material adverse change in the condition (financial or otherwise), assets,
liabilities, business, results of operations, licenses, permits, franchises or
affairs of the Purchaser or material adverse affect on the ability of the
Purchaser to effect the Closing or perform any of their obligations contemplated
hereby.
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4.7 Acquisition of Stock for Investment. The Purchaser is acquiring the
Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling such Shares. The Purchaser agrees that such Shares may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act of 1933, as amended, except
pursuant to an exemption from registration available under such Act, and without
compliance with foreign securities laws, in each case, to the extent applicable.
The Purchaser (i) is able to bear the economic risk of holding the Shares for an
indefinite period, (ii) can afford to suffer the complete loss of its investment
in such shares, and (iii) has knowledge and experience in financial and business
matters such that it is capable of evaluating the risks of the investment in
such shares.
4.8 Financing. The Purchaser has available all funds necessary to
consummate the Contemplated Transactions. In no event shall the receipt or
availability of any funds or financing by the Purchaser or any Related Person or
any other financing or other transactions be a condition to any of the
Purchaser's obligations hereunder.
4.9 No Brokers. Neither the Purchaser nor any Related Person of the
Purchaser has employed or made any agreement with any third Person which
obligates any Person other than the Purchaser to pay any finder's fee, brokerage
fees or commission or similar payment in connection with the transactions
contemplated hereby.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of Purchaser. The
Purchaser's obligation to consummate the Contemplated Transactions is subject to
the satisfaction in full, unless expressly waived in writing by the Purchaser,
of each of the following conditions on or prior to the Closing Date:
(a) Representations and Warranties. Each of the
representations and warranties of the Company and/or the Sellers contained
herein (i) that are qualified by materiality or Material Adverse Effect shall be
true and correct as of the Closing Date as though made on and as of the Closing
Date (except in the case of any representation and warranty that by its terms is
made as of a date specified therein, which shall be accurate as of such date)
and (ii) that are not qualified by materiality or Material Adverse Effect shall
be true and correct in all material respects as of the Closing Date as though
made on and as of the Closing Date (except in the case of any representation and
warranty that by its terms is made as of a date specified therein, which shall
be accurate as of such date) except, with respect to clauses (i) and (ii) above,
where the failure of any one or more of such representations and warranties to
be so true and correct would not, individually or in the aggregate, have a
Material Adverse Effect;
(b) Covenants. The Company and each Seller shall each have
performed and complied with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing except where the failure to so perform would not,
individually or in the aggregate, have a Material Adverse Effect;
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(c) Proceedings. No Order or any Law shall be in effect that
would, and no Proceeding by any Person shall be threatened or pending wherein an
unfavorable Order would (i) prevent the consummation of the Contemplated
Transactions or (ii) materially adversely affect the right of Purchaser to own
or operate the Business.
(d) Required Consents. All Permits, Consents and Educational
Approvals listed on Schedule 5.1(d) shall have been obtained (the "Required
Closing Consents");
(e) Closing Deliveries. The Company and/or each Seller, as
appropriate, shall have delivered to the Purchaser the Closing Deliveries set
forth in Section 6.2; and
(f) Side Letter. The condition precedent set forth in the
letter agreement dated as of the date hereof in the form of Exhibit B attached
hereto among the Company, the Sellers and the Purchaser shall have been
satisfied.
5.2 Conditions Precedent to Obligations of the Company and each Seller.
The Company's and each Seller's obligation to consummate the Contemplated
Transactions are subject to the satisfaction in full, unless expressly waived in
writing by the Company and each Seller, of each of the following conditions on
or prior to the Closing Date:
(a) Representations and Warranties. Each of the
representations and warranties of the Purchaser contained herein (i) that are
qualified by materiality shall be true and correct as of the Closing Date as
though made on and as of the Closing Date (except in the case of any
representation and warranty that by its terms is made as of a date specified
therein, which shall be accurate as of such date) and (ii) that are not
qualified by materiality shall be true and correct in all material respects as
of the Closing Date as though made on and as of the Closing Date (except in the
case of any representation and warranty that by its terms is made as of a date
specified therein, which shall be accurate as of such date);
(b) Covenants. The Purchaser shall have performed and complied
with all agreements, covenants, obligations and conditions required by this
Agreement to be performed or complied with by the Purchaser prior to or at the
Closing;
(c) Proceedings. No Order or any Law shall be in effect that
would, and no Proceeding by any Person shall be threatened or pending wherein an
unfavorable Order would prevent the consummation of the Contemplated
Transactions; and
(d) Closing Deliveries. The Purchaser shall have delivered to
each Seller and/or the Company the Closing Deliveries set forth in Section 6.3.
5.3 Commercially Reasonable Efforts. Subject to the limitations set
forth in Schedule 5.3, the Company and each Seller shall use commercially
reasonable efforts to satisfy each of the conditions for Closing by the
Purchaser set forth in Section 5.1 and the Purchaser shall use commercially
reasonable efforts to satisfy each of the conditions for Closing by the Company
and each Seller set forth in Section 5.2.
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ARTICLE 6
CLOSING; CLOSING DELIVERIES
6.1 Closing. The closing of the Contemplated Transactions (the
"Closing") shall occur at the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP,
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 at 10:00 a.m., New York time (i) if the
conditions set forth in Article 5 (other than those conditions that by their
nature are to be satisfied or waived at the Closing, but subject to the
satisfaction or waiver of those conditions) shall have been satisfied or waived
at that time, on September 1, 2005, or (ii) if such conditions have not been
satisfied or waived at such time, on the first Business Day after the conditions
set forth in Article 5 are satisfied or waived (other than those conditions that
by their nature are to be satisfied or waived at the Closing, but subject to the
satisfaction or waiver of those conditions), or at such other place, time or
date as the Purchaser, the Company and the Sellers shall agree in writing. The
date on which the Closing occurs is the "Closing Date."
6.2 Closing Deliveries by the Company and each Seller. At or prior to
the Closing, the Company and/or each Seller shall deliver to the Purchaser the
following, fully executed, if applicable:
(a) certificates representing the Shares, accompanied by duly
executed stock powers, sufficient to transfer to the Purchaser all of ECTS's
right, title and interest in and to the Shares;
(b) the Escrow Agreement;
(c) a certificate of the secretary of the Company, dated as of
the Closing Date, in the form of Exhibit C, certifying: (i) there have been no
amendments to the certificate of incorporation of the Company since May 16,
2005; (ii) that the bylaws attached to the secretary's certificate are the
complete and correct bylaws of the Company; and (iii) the incumbency and
signatures of the officers of the Company executing this Agreement or any
documents contemplated hereby and (iv) that attached to the secretary's
certificate are true copies of the duly adopted resolutions of the board of
directors of the Company;
(d) true copies of the duly adopted resolutions of the
respective boards of directors of each of the Sellers authorizing the execution,
delivery and performance of this Agreement and the documents contemplated
hereby, and the consummation of the Contemplated Transactions;
(e) a certificate of existence or equivalent issued by the
Secretary of the State of New York with respect to the Company, dated no earlier
than 30 days prior to the Closing Date;
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(f) a copy of the certificate of incorporation of the Company,
certified as of a date no earlier than 30 days prior to the Closing Date, by the
Secretary of State of New York;
(g) a certificate, dated as of the Closing Date, of the Acting
President and Chief Financial Officer of the Company stating that all of the
conditions precedent to the Purchaser's obligations for Closing set forth in
Section 5.1 that have not been waived by the Purchaser have been satisfied;
(h) payoff letters from each lender of the Sellers to which
the Sellers owe any Funded Debt, the repayment of which is secured by an
Encumbrance on the Shares, dated as of the Closing Date (the "Payoff
Letter(s)"), confirming the aggregate amount of principal, accrued interest
and/or other fees or amounts owed by the Sellers in respect thereof through and
including the Closing Date, as well as agreeing to terminate such Encumbrance
(and any related Encumbrance on the assets of the Company) by providing such
releases and termination statements as are customarily provided upon receipt of
payment of such amount;
(i) irrevocable disbursement instructions executed by each
Seller directing the Purchaser to pay the amount(s), and in accordance with the
instructions, set forth in the Payoff Letter, which amount(s) shall be disbursed
by the Purchaser from the Closing Purchase Price Payment;
(j) releases and Uniform Commercial Code termination
statements, executed by the appropriate secured party and in a form appropriate
for recording and filing, that are sufficient to release all Encumbrances (other
than Permitted Encumbrances) against any of the assets owned, leased and/or used
by the Company;
(k) a release executed by each Seller, North American Training
Centers, Inc., AEA and DCSNA in the form attached hereto as Exhibit D;
(l) duly signed resignations, effective immediately upon the
Closing, of all directors and officers of the Company (except for any persons
designated by the Purchaser prior to the Closing Date to remain in office); and
(m) written evidence that notice of the sale of the Shares
contemplated hereunder has been provided to the landlord under the Net Lease
dated as of December 19, 1997, between Overtime Properties LLC and the Company
relating to 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX., as amended by the First
Amendment Lease made as of the 1st day of October, 2002.
6.3 Closing Deliveries by the Purchaser. At or prior to the Closing,
the Purchaser will deliver to the Company and each Seller the following, fully
executed, if applicable:
(a) the Purchase Price (subject to the provisions of Article 2
and Section 6.2(i) hereof);
(b) a certificate, dated as of the Closing Date, of the Chief
Executive Officer of the Purchaser stating that all of the conditions precedent
to the Company's and each Seller's obligations for Closing set forth in Section
5.2 that have not been waived by the Company and each Seller have been satisfied
and that the representations and warranties of the Purchaser are true and
correct as of the Closing Date;
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(c) the Escrow Agreement;
(d) a certificate of the secretary of the Purchaser, dated as
of Closing Date, in form and substance satisfactory to the Purchaser,
certifying: (i) that attached to the secretary's certificate are true copies of
the duly adopted resolutions of the board of directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement and the
documents contemplated hereby, and consummation of the Contemplated
Transactions; and (ii) that attached to the secretary's certificate is a
complete and correct original copy of the incumbency and signatures of the
officers of the Purchaser executing this Agreement or any document contemplated
hereby.
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 Certain Covenants of All Parties Prior to Closing.
(a) Confidentiality. Each party hereto will maintain any
Confidential Information that it may receive from any other party hereto
confidential and will not disclose such Confidential Information to any Person
without the prior written consent of the party originally furnishing such
Confidential Information. However, a party (the "Disclosing Party") may disclose
such Confidential Information: (A) to legal counsel and other professional
advisors of the Disclosing Party (but only if they have been informed of the
confidential nature of such Confidential Information and agree to be bound by
the terms of this Section); (B) to any Governmental Authority or Educational
Agency having jurisdiction over the Disclosing Party; and (C) as required by Law
or legal process or in connection with any Proceeding to which the Disclosing
Party is a party or is otherwise subject, but, in each such event, the
Disclosing Party shall, as promptly as reasonably practical after such
disclosure is required, inform the party originally furnishing such Confidential
Information.
(b) Publicity; Announcements. From the date hereof through and
including the Closing Date, no party to this Agreement will issue, cause or
permit the publication by any of their respective Related Persons, agents or
representatives, any press release or other announcement with respect to this
Agreement or the Contemplated Transactions except: (i) with the consent of the
other parties hereto (which will not be unreasonably withheld or delayed); or
(ii) as required by applicable Law (including, without limitation, any
applicable securities Law). Neither the Company nor any Seller will, without the
prior consent of the Purchaser, make any announcements to employees of the
Company with respect to the Contemplated Transactions and, at such time as an
announcement to the employees is made, the Purchaser will be allowed to
participate in such announcement. It is hereby acknowledged that the parties
will discuss the Contemplated Transactions with their respective financial and
legal advisors and such discussions will not be deemed to violate the provisions
of this Section 7.1(b).
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(c) Cooperation. The Purchaser, the Company and each Seller
shall cooperate fully with each other and their respective counsel and
accountants and shall use commercially reasonable efforts in connection with and
to effect any actions required to be taken as part of their respective
obligations under this Agreement including, without limitation, actions required
to be taken to satisfy the conditions for Closing set forth in Article 5.
(d) No Inconsistent Action. No party will take any action
inconsistent with its respective obligations under this Agreement or any of the
Contemplated Transactions.
7.2 Covenants of the Company and each Seller Prior to Closing. The
Company and each Seller, jointly and severally, covenants and agrees that during
the period from the date hereof until Closing, except with the prior written
consent of the Purchaser:
(a) Non-Solicitation. Unless and until such time as this
Agreement is terminated pursuant to Article 9, the Company and each Seller will
not, and will cause each officer, director and agent of the Company and each
Seller not to, directly or indirectly: (i) submit, solicit, initiate, encourage
or discuss any proposal or offer from any Person relating to any: (A) sale of
all or any portion of the assets of the Company or a sublease or assignment of
any lease to which the Company is a party; (B) sale of any of the Shares or the
issuance of any additional shares of, or options on other rights to acquire
stock of the Company; (C) reorganization, dissolution or recapitalization of the
Company; (D) merger or consolidation involving the Company; or (E) any similar
transaction or business combination involving the Company and/or the Business;
(ii) enter into any agreement or commitment related to any such transaction; or
(iii) furnish any information with respect to or assist or participate in or
facilitate in any other manner any effort to attempt by any Person to do or seek
any of the foregoing. The Company and each Seller will notify the Purchaser
promptly if any Person makes any proposal, offer, inquiry or contact with
respect to any of the foregoing.
(b) Access. The Company shall afford to the Purchaser through
the Purchaser's officers, attorneys, accountants and authorized representatives
and Affiliates, reasonable access to the properties, books and records of the
Company on reasonable advance notice during normal business hours consistent
with applicable Law. All requests for access to the properties, books and
records of the Company shall be made to such representatives of the Company that
the Company shall designate, who shall be solely responsible for coordinating
all such requests and all access permitted hereunder.
(c) Educational Approval Covenants of the Purchaser. The
Purchaser shall have primary responsibility for obtaining all necessary
Educational Approvals contemplated by Section 5.1(d). The Company shall use
commercially reasonable efforts to cooperate with the Purchaser to obtain such
approvals. The Purchaser agrees to (i) provide to the Company and its counsel
reasonable advance notice of the scheduling and content of, and opportunity for
consultation regarding, any notices, applications, meetings, or teleconferences
scheduled, made, convened, or submitted in reference to any Educational Approval
prior to the Closing; (ii) allow the Company to take part in any meeting or
teleconference with any Educational Agency that occurs prior to the Closing to
discuss the status of any Educational Approval; (iii) take all commercially
reasonable steps promptly to file the applications or notices necessary to
obtain the Educational Approvals listed on Schedule 5.1(d), and to file any
supplementary information that an Educational Agency may subsequently request;
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(iv) submit to the DOE a Pre-Acquisition Review Application within ten (10) days
of the date of this Agreement, including without limitation the audited
financial statements described in 34 C.F.R. ss. 600.20(g)(2)(iv), and to file
any supplementary information that the DOE may request; and (v) provide prompt
notice and copies to the Company of all applications as filed with, or any
notice received from, any Educational Agency with respect to any Educational
Approval prior to the Closing, including any written or verbal communication
from an Educational Agency indicating any deficiency in any application or any
question that the Educational Agency may not approve the change of ownership or
may attach conditions to such approval. The Purchaser shall be responsible for
submitting to the DOE within the timeframe set forth at 34 C.F.R. ss.
600.20(h)(2)(iii) a "same day" balance sheet or balance sheets showing the
financial position of the Company and any other entity requested by the DOE, as
of the Closing Date. Except as contemplated above in this Section 7.2(c), the
Company shall not communicate with any Educational Agency or representative
thereof with respect to obtaining the Educational Approvals contemplated by
Section 5.1(d), without first notifying and consulting with Purchaser to the
same extent as Purchaser is required to notify and consult with the Company as
described above in this Section 7.2(c). Each of Purchaser and the Company shall
be permitted to respond to unsolicited communications from regulatory
authorities as to immaterial matters without complying with the prior notice and
consultation procedures described above.
(d) Ordinary Course. Except as otherwise contemplated by this
Agreement, listed on Schedules 3.20 and 7.2(d) or required by Law, (A) the
Company shall carry on the operation of the Business only in the Ordinary Course
of Business and (B) unless otherwise consented to in writing by the Purchaser,
the Company and the Sellers covenant that the Company shall:
(i) without making any commitment on the Purchaser's
behalf, preserve intact in all material respects its current business
organization except for changes in the Ordinary Course of Business;
(ii) not hire, terminate the employment of or
materially alter the job duties of any management personnel except in the
Ordinary Course of Business, provided, that any management personnel hired must
be terminable at will without any liability or obligation of the Company except
for compensation earned prior to such termination and owed pursuant to the terms
of their employment prior to such termination and the Company will promptly
notify the Purchaser of any such hiring;
(iii) comply in all material respects with all Laws
and contractual obligations applicable to the operations of the Business;
(iv) continue in full force and effect the insurance
coverage under the policies set forth in Schedule 3.19 except for changes in the
Ordinary Course of Business;
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(v) except as required to comply with applicable
Laws, not amend, modify or terminate any Benefit Plan in any material respect,
and except as required under the provisions of any Benefit Plan, by Law or in
the Ordinary Course of Business, not make any contributions to or with respect
to any Benefit Plan;
(vi) maintain all books and records of the Company in
the Ordinary Course of Business;
(vii) not incur any Debt and not grant any
Encumbrance (other than Permitted Encumbrances) in or on any of its assets
except in the Ordinary Course of Business;
(viii) not engage in any activity or transaction
during the term of this Agreement which is described in Section 3.20;
(ix) consistent with past practice, maintain and keep
its assets and properties, including without limitation the Campus Properties,
in substantially the same condition as exists of the date of this Agreement,
normal wear and tear excepted;
(x) not materially deviate from the marketing
expenditures budgeted for new student enrollments for the period from October 1,
2004 through April 30, 2005, as such budgeted marketing expenditures are set
forth on Schedule 7.2(d)(x) hereto; and
(xi) not enter into any Company Contract of the kind
described in Section 3.9(a) or the second sentence of Section 3.10 other than
any such Company Contract that is in the Ordinary Course of Business, and
provide prompt notice to the Purchaser of any such Company Contract entered into
after the date hereof together with a copy thereof;
provided, however, nothing herein shall prohibit or restrict the Company in: (A)
making dividends or other distributions or repaying debt to any shareholder of
the Company or Related Person of the Company and (B) paying, on behalf of the
Sellers, legal and accounting fees contemplated under Section 10.9; in each case
on or before ten calendar days prior to the Closing Date provided such
dividends, distributions, debt repayments or payments of fees do not have the
effect of causing the Closing Current Ratio to fall below 1:1, and provided
further, that such dividends, distributions, debt repayments or payments of fees
do not impair the Company's ability to fund its normal operations through the
Closing Date.
(e) Employees. Neither the Company nor any Seller shall do
anything to dissuade any employee from continuing employment with the Company
after the Closing.
(f) Real Estate. The Company will use its commercially
reasonable efforts to assist the Purchaser with respect to the Purchaser's
efforts to obtain (i) estoppel certificates from landlords with respect to the
Campus Leases and (ii) a leasehold title insurance policy to insure the
Company's leasehold interest in the Campus Properties. Notwithstanding the
foregoing, the Company shall not have any obligation to pay any fee or make any
financial or other accommodation to any third party for the purpose of obtaining
any such estoppel certificate or leasehold title insurance policy, or any costs
and expenses of any third party resulting from the process of obtaining such
estoppel certificate or leasehold title insurance policy.
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7.3 Tax Matters.
(a) Responsibility for Filing Tax Returns. For any taxable
period of the Company that ends on or before the Closing Date (and ends on
September 30, 2005), the Sellers shall timely prepare, or cause to be prepared,
and the Purchaser or the Seller, as appropriate, shall timely file with the
appropriate authorities all Tax Returns required to be filed including, without
limitation, the consolidated Tax Return of NATS and subsidiaries for the year
ending September 30, 2005, and all such Tax Returns shall be accurate and
complete in all material respects. The Sellers shall furnish each such Tax
Return to the Purchaser for its review at least thirty (30) days prior to the
due date for filing such Tax Return and shall consult in good faith with the
Purchaser regarding any comments the Purchaser may have with respect to such Tax
Return. Any Tax Returns required by Law to be filed by the Purchaser or the
Company shall be furnished by the Sellers to the Purchaser or the Company, as
the case may be, for signature and filing at least five (5) days prior to the
due date for filing such Tax Returns and the Purchaser or the Company, as the
case may be, shall promptly sign and timely file any such Tax Return.
(b) Cooperation on Tax Matters.
(i) The Purchaser and the Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with any audit, litigation or other proceeding with respect to Taxes
(the "Tax Proceedings"). Such cooperation shall be at the expense of the party
requesting such cooperation. Such cooperation shall include the retention and
(upon the other party's request) the provision of records and information that
are reasonably relevant to any such Tax Proceedings and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Purchaser and the Sellers
agree (A) to retain all books and records with respect to Tax matters pertinent
to the Company in their possession until the expiration of the statute of
limitations including extensions thereof, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Purchaser or
the Sellers, as the case may be, shall allow the other party to take possession
of such books and records; and
(ii) The Purchaser and the Sellers agree, upon
request to use their best efforts to obtain any certificate or other document
from any Governmental Body or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) Certain Taxes and Fees. All transfer, documentary, sales,
use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and
interest) incurred in connection with consummation of the transactions
contemplated by this Agreement (collectively, "Transfer Taxes") shall be paid by
the Purchaser when due, and the Purchaser will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such Taxes,
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fees and charges and the Purchaser will indemnify and hold harmless the Sellers
for the imposition of any such Taxes. If required by applicable Law, the Sellers
will, and will cause their respective Affiliates to, join in the execution of
any such Tax Returns and other documentation.
(d) Refunds and Credits. Any refunds or credits of Taxes of
the Company for any taxable period ending on or before the Closing Date shall be
for the account of the Sellers and its Affiliates. Any refunds or credits of the
Company for any taxable period beginning after the Closing Date shall be for the
account of the Purchaser and its Affiliates. Any refunds or credits of Taxes of
the Company for any period beginning before and ending after the Closing Date
shall be apportioned between the Sellers and the Purchaser based on an interim
closing of the books method (taking into account taxes that accrue over a period
of time on a daily basis). The Purchaser shall, if the Sellers reasonably
request and at the Sellers' expense cause the Company to file for and obtain any
refunds or credits, to which the Sellers are entitled under this Section 7.3(d)
and which is otherwise permitted under the terms of this Agreement. Any request
for any refund or credit for the pre-closing Tax period of or with respect to
the Company and which is otherwise permitted under the terms of this Agreement
shall be prepared in accordance with the past practice for the underlying Tax
Return, shall not include any change in any method of accounting and shall not
include any Tax election that is inconsistent with past practice.
(e) Purchaser Activity On and After the Closing Date. The
Purchaser shall not with respect to any taxable period ending on or prior to the
Closing Date, file any amended Tax Return with respect to the Company. The
Purchaser shall not, (A) with respect to any taxable period beginning after the
Closing Date, take any position with respect to Taxes of the Company that would
have the effect of shifting income from a taxable period beginning after the
Closing Date to a taxable period ending on or before the Closing Date or (B)
with respect to any Tax period, take any position with respect to Taxes of the
Company that is inconsistent with the form of the transaction as provided in
this Agreement.
(f) Section 338(h)(10) Election.
(i) Subject to Section 7.3(f)(ii), the parties hereto
agree that they will jointly make a timely and irrevocable election pursuant to
Section 338(h)(10) of the IRC (and, if permissible, under any applicable state
or local Tax laws) with respect to Purchaser's purchase of the Shares
(collectively, the "Section 338(h)(10) Election"). The Purchaser and ECTS and
their respective Affiliates shall report the transactions consistent with such
Section 338(h)(10) Election and shall take no position contrary thereto unless
and to the extent required to do so pursuant to a final determination by the IRS
or other applicable taxing authority.
(ii) ECTS shall prepare, or cause to be prepared, all
forms, attachments and schedules necessary to effectuate the Section 338(h)(10)
Election (including Internal Revenue Service Forms 8023 and 8883 and any similar
forms under applicable state or local income tax laws (collectively, the
"Section 338 Forms")). The parties shall execute and deliver Section 338 Forms
at the Closing, which shall be final and binding on the parties without further
adjustment. The Purchaser and ECTS shall file such Section 338 Forms with the
applicable taxing authority. Notwithstanding the foregoing, the Purchaser shall
prepare and provide to the Sellers within thirty (30) days after the Closing, a
schedule allocating the Purchase Price among the assets of the Company. Such
32
schedule shall be prepared in good faith and in accordance with applicable
provisions of the IRC. Unless the Sellers object to the Purchaser's allocation
schedule within ten (10) days after receipt thereof, such schedule shall become
final and, absent a final determination by a Governmental Authority to the
contrary, shall be binding upon the Sellers and the Purchaser for all federal,
state and local Tax purposes. If Sellers object to the Purchaser's allocation
within ten (10) days of receipt, then the final allocation shall be determined
in accordance with the dispute resolution procedures set forth in Section 2.6 of
this Agreement. Any objection by the Sellers to the Purchaser's allocation
schedule shall be made in good faith and based on the applicable provisions of
the IRC.
7.4 Seller Access After the Closing. From and after the Closing Date,
the Purchaser and the Company shall make available to each Seller for inspection
and or copying the books and records of the Company made prior to the Closing;
provided, however, that such access shall be granted only during normal business
hours and upon the reasonable request of any Seller in connection with any
Proceeding relating to the Business or this Agreement that could result in any
Seller incurring Damages, and shall be subject to the prior approval of the
Purchaser, shall be conducted only by those Persons approved in advance by the
Purchaser, such approvals not to be unreasonably withheld or delayed, and shall
be conducted only at such times and in such manner as reasonably directed by the
Purchaser.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival.
(a) Except as provided below in this Section 8.1(a) and in
Section 11.3, all representations, warranties, covenants and agreements of each
party hereto in this Agreement and/or any agreement delivered pursuant to this
Agreement shall survive the Closing for a period of 18 months beginning on the
Closing Date. Those covenants and agreements that contemplate or may involve
actions to be taken or obligations in effect after the Closing shall survive in
accordance with their terms. However, (i) the representations and warranties
contained in Sections 3.1, 3.4, 3.13 and 3.23(c) shall survive the Closing until
the sixth anniversary of the Closing Date, (ii) the covenants and agreements
contained in Section 7.3 and any claim for fraud shall survive the Closing until
the expiration of the applicable statute of limitations, including any period of
equitable tolling found applicable by any court or other adjudicative body
having jurisdiction over the subject claim for breach thereof and (iii) the
representations and warranties contained in Section 3.18 shall survive the
Closing until the second anniversary of the Closing Date. Notwithstanding any of
the foregoing, if any notice of claim is given under Section 8.4 and contains
the information specified in Section 8.4(a)(i) and (ii), with respect to any
representation and warranty during the period the subject representation and
warranty survives, then such representation and warranty shall continue to
survive until the final resolution of such claim in accordance with the
procedures set forth herein.
33
(b) The representations, warranties, covenants and agreements
of the Company will terminate at the Closing.
(c) Except as otherwise expressly provided herein, including
without limitation Section 3.17, the representations and warranties set forth in
this Agreement are considered to be cumulative, and any limitation or
qualification set forth on any one representation and warranty in this Agreement
shall not limit or qualify any other representation and warranty in this
Agreement.
(d) All representations, warranties, covenants and agreements
of each party hereto in this Agreement shall survive as provided in this Section
8.1 regardless of any investigation made at any time by, or any Knowledge of,
any party.
8.2 Indemnification and Payment of Damages by the Sellers. Each Seller
hereby unconditionally, irrevocably and absolutely agrees to pay in full,
protect, defend, indemnify and hold harmless the Purchaser and its Affiliates
and each of their respective directors, officers, employees and agents
(collectively, the "Purchaser Indemnified Persons"), from any and all demands,
claims, actions or causes of action, assessments, losses, damages, deficiencies,
liabilities, costs and expenses, including reasonable attorneys' fees, interest,
penalties, and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Damages"), in each case,
arising out of, or caused by:
(a) any breach of any representation or warranty made by any
Seller or the Company in this Agreement or in any agreement delivered by any
Seller or the Company pursuant to this Agreement (disregarding for this purpose
any materiality or Material Adverse Effect qualification contained therein); or
(b) any breach of any covenant or agreement of any Seller or
the Company to be fulfilled prior or subsequent to the Closing pursuant to this
Agreement or any agreement delivered by any Seller or the Company pursuant to
this Agreement.
8.3 Indemnification By Purchaser. The Purchaser hereby unconditionally,
irrevocably and absolutely agrees to pay in full, protect, defend, indemnify and
hold harmless each Seller and its Affiliates and each of their respective
directors, officers, employees and agents from any and all Damages arising out
of, or caused by: (a) any breach of any representation or warranty made by the
Purchaser in this Agreement or in any agreement delivered by the Purchaser
pursuant to this Agreement (disregarding for this purpose any materiality or
Material Adverse Effect qualification contained therein); or (b) any breach of
any covenant or agreement of the Purchaser to be fulfilled prior or subsequent
to the Closing, pursuant to this Agreement or any agreement delivered by the
Purchaser pursuant to this Agreement.
8.4 Procedure for Indemnification.
The procedure for indemnification will be as follows:
34
(a) The party claiming indemnification ("Claimant") will
promptly give notice to the party from whom indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying: (i) the factual basis for such claim and (ii) the
amount of the claim. If the claim relates to a Proceeding filed by a third party
against Claimant, such notice will be given by Claimant within ten Business Days
after written notice of such Proceeding was given to Claimant. Claimant's
failure to give the Indemnifying Party such notice will not preclude Claimant
from obtaining indemnification from the Indemnifying Party unless Claimant's
failure has materially prejudiced the Indemnifying Party's ability to defend the
Proceeding, and then the Indemnifying Party's obligation will be reduced to the
extent of such prejudice.
(b) Following receipt of such notice from Claimant, the
Indemnifying Party will have 30 days to make such investigation of the claim as
the Indemnifying Party deems necessary or desirable. For the purposes of such
investigation, Claimant agrees to make available to the Indemnifying Party
and/or its authorized representatives the information relied upon by Claimant to
substantiate the claim. If Claimant and the Indemnifying Party agree at or prior
to the expiration of such thirty day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party will immediately pay to Claimant the full amount of the claim and any
other Damages relating thereto. If Claimant and the Indemnifying Party do not
agree within such 30 day period (or any mutually agreed upon extension thereof),
Claimant may seek appropriate legal remedy.
(c) (i) With respect to any claim by a third party as to which
Claimant asserts it is entitled to indemnification hereunder, the Indemnifying
Party will have the right, at its own expense, to participate in or at its
election to assume control of the settlement or defense of such claim with
counsel of its own choosing. The Indemnifying Party will conduct the settlement
negotiations or defense of the third party claim diligently from and after its
election to so assume control of the settlement or defense of any such claim.
(ii) Any provision of Section 8.4(c)(i) to the
contrary notwithstanding:
(A) No Seller will have right to assume
control of the defense of any claim as to which the Purchaser seeks
indemnification hereunder which (x) involves any Proceeding against the Company
by any Educational Agency or (y) which arises from any actual or alleged
violation by the Company of the terms or conditions of any Educational Approval
or any Law pertaining to participation in Title IV Programs or TAP,
accreditation, or state education licensing; and
(B) Claimant may retain separate co-counsel,
at its sole cost and expense, to participate in (and review in advance, comment
upon and approve the disposition of) the defense by a Seller of any such claim
by a third party; and a Seller may retain separate co-counsel, at its sole cost
and expense, to participate in (and review in advance, comment upon and approve
the disposition of) the defense by the Purchaser or the Company of a claim
referred to in the immediately preceding subsection (A).
35
(d) (i) If notice is given to an Indemnifying Party of the
commencement of any such third party claim (such notice specifying that the
Indemnifying Party has 30 days within which to respond) and the Indemnifying
Party does not, within 30 days after Claimant's notice is given, give notice to
the Claimant of its election to assume the defense of such third party claim,
the Indemnifying Party shall be liable for the fees and expenses of counsel
employed by Claimant and the Indemnifying Party will be bound by any
determination made in such Proceeding, subject to the limits of the Indemnifying
Party's indemnification obligations in this Agreement.
(ii) Regardless of which party assumes the defense of
any third party claim, no compromise
or settlement of such claim may be effected without the other party's consent,
which consent shall not be unreasonably withheld or delayed; provided, however,
that if the Indemnifying Party failed to give timely notice of its election to
assume the defense of such claim (as contemplated in the immediately preceding
subsection (i)) and the Indemnifying Party further fails to provide written
objection to a proposed compromise or settlement within ten Business Days after
Claimant's written notice of such proposed compromise or settlement is given,
Claimant may effect such compromise or settlement and the Indemnifying Party
shall be bound thereby.
(e) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(f) All amounts paid pursuant to this Article 8 by one party
to the other party shall be treated by such parties, for financial reporting and
Tax purposes, as adjustments to the Purchase Price.
8.5 Exclusive Remedy; Right to Setoff. (a) Except as provided in
Sections 10.12 and 11.4, the Purchaser and the Sellers acknowledge and agree
that the foregoing indemnification provisions in this Article 8 shall be the
exclusive remedy of the Purchaser and the Sellers with respect to any breach of
this Agreement or in connection with the Contemplated Transactions. The
provisions of this Article 8 shall not apply to any claim for breach of this
Agreement unless the Closing shall have occurred.
(b) Notwithstanding any provision to the contrary contained
herein, the Purchaser agrees that, so long as the Escrow Deposit held by the
Escrow Agent exceeds the aggregate amount of all unpaid indemnification claims
of the Purchaser Indemnified Persons, the sole recourse of the Purchaser
Indemnified Persons for such indemnification claims shall be to the Escrow
Deposit. In the event the Purchaser seeks recourse against the Escrow Deposit as
aforesaid, any payment to the Purchaser from the Escrow Deposit will be deemed
to have been made as of the Closing Date.
8.6 Limitation on Liability.
(a) Subject to subsections (b) and (c) immediately below, an
Indemnifying Party shall have no liability (for indemnification or otherwise)
unless and until the aggregate Damages exceeds $300,000 (the "Deductible"), at
36
which time such Indemnifying Party shall be liable to the extent the aggregate
amount of such Damages exceeds the Deductible, but an Indemnifying Party's
indemnification obligation(s) for such matters, in the aggregate, shall not
exceed the sum of Three Million Dollars ($3,000,000) (the "Indemnification
Cap").
(b) Notwithstanding anything to the contrary, but subject to
subsection (c) immediately below, the Deductible and the Indemnification Cap
shall not apply to any breach of Sections 3.1, 3.4, 3.13, and 3.23(c) hereof;
provided, however, an Indemnifying Party's indemnification obligation(s) for
such matters, in the aggregate, shall not exceed the Purchase Price.
(c) Any Damages of a Claimant in respect of an indemnified
claim hereunder shall be net of an amount equal to the present value amount of
any Tax benefit which will be realized by the Claimant (either through the
reduction of a Tax liability or the increase of a Tax loss or credit) which
would not have otherwise been realized but for such Damages for which indemnity
is sought pursuant to this Article 8 (a "Net Tax Benefit"). The present value
amount of the Net Tax Benefit shall be determined by: (i) using an aggregate of
the highest federal and state marginal Tax rates in effect on the date Damages
of the Claimant for which indemnity is sought pursuant to this Article 8 and
which give rise to the Net Tax Benefit adjustment are first incurred (the
"Relevant Date"), (ii) using a discount rate equal to the mid-term applicable
federal rate in effect on the Relevant Date, (iii) discounting back to the
Relevant Date and (iv) using reasonable assumptions regarding the date (or
dates) when and if such Net Tax Benefit will be realized.
(d) Each Claimant shall make commercially reasonable efforts
to mitigate any claim or liability that a Claimant asserts under this Article 8.
In the event that a Claimant shall fail to make such commercially reasonable
efforts to mitigate any claim or liability, then notwithstanding anything else
to the contrary contained herein, neither the Sellers nor the Purchaser, as the
case may be, shall be required to indemnify any Claimant for any Damages that
could reasonably be expected to have been avoided if the Claimant had made such
efforts.
8.7 Prevailing Party To Be Awarded Legal Fees. In the event of any
litigation between any Seller or the Company, on the one hand, and the
Purchaser, whether at law or in equity, arising out of this Agreement or the
transactions contemplated hereby, the party prevailing in such litigation shall
be entitled to receive, upon application to the appropriate court, its
reasonable legal fees and expenses incurred in connection therewith.
ARTICLE 9
TERMINATION
9.1 Termination and Abandonment. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual written consent
of the Purchaser, the Company and each Seller;
37
(b) by the Purchaser, if any of the conditions set forth in
Section 5.1 have not been complied with by the Company or any Seller on or
before September 29, 2005; provided, however, that such right to terminate shall
not be available to any party whose breach of this Agreement has been a reason
for such noncompliance; and, further provided, that if the Purchaser shall
terminate this Agreement based on the failure to obtain a Pre-Acquisition Notice
(as required by Section 5.1(d)), Purchaser shall immediately pay $250,000 to the
Company as a termination fee in the event such failure results from clause (z)
of the definition of Pre-Acquisition Notice in Schedule 1 not being satisfied;
(c) by the Sellers, if the conditions set forth in Section 5.2
have not been complied with by the Purchaser on or before September 29, 2005;
provided, however, that such right to terminate shall not be available to any
party whose breach of this Agreement has been a reason for such noncompliance;
(d) by the Sellers, if Purchaser's condition to closing set
forth in Section 5.1(f) has not been complied with (or irrevocably waived) by
the Purchaser on or before September 1, 2005; or
(e) by either the Purchaser, the Company or the Sellers if any
final and nonappealable Order or any Law shall be enacted or issued which
permanently restrains, enjoins or prohibits or makes illegal the consummation of
the Contemplated Transactions, upon notification of the non-terminating party by
the terminating party.
9.2 Effect of Termination. The right of each party to terminate this
Agreement under Section 9.1 is in addition to any other rights such party may
have under this Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is terminated
pursuant to Section 9.1, all further obligations of the parties under this
Agreement will terminate, except that the obligations set forth in Section
7.1(a) ("Confidentiality"); Section 7.1(b) ("Publicity; Announcements"); Article
8 ("Indemnification"); and Article 10 ("Miscellaneous") and all other covenants
and agreements which by their terms continue after the termination of this
Agreement shall survive; provided, however, that if this Agreement is terminated
by a party because of the breach of the Agreement by another party or because on
or more of the conditions to the terminating party's obligations under this
Agreement is not complied with as a result of the other party's breach of its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies arising from such breach will survive such termination
unimpaired.
ARTICLE 10
MISCELLANEOUS
10.1 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions of the
parties hereto, whether oral or written, with regard to such subject matter.
38
10.2 Amendment and Modification. No amendment, modification,
supplement, termination, consent or waiver of any provision of this Agreement,
nor consent to any departure therefrom, shall be effective unless in writing and
signed by the party against whom enforcement thereof is sought. Any waiver of
any provision of this Agreement and any consent to any departure from the terms
of any provision of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
10.3 Captions. Captions contained in this Agreement and any table of
contents preceding this Agreement have been inserted herein only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
10.4 Counterparts; Facsimile Execution. This Agreement may be executed
in any number of separate counterparts, all of which shall constitute one
Agreement. For purposes of this Agreement, a document (or signature page
thereto) signed and transmitted by facsimile shall be deemed an original
document.
10.5 Assignment. This Agreement and all the rights and powers granted
hereby shall bind and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement and the rights,
interests and obligations hereunder may not be assigned by any party hereto,
without the prior written consent of the other parties hereto and any such
attempted assignment without such prior written consent shall be void and of no
force and effect.
10.6 Exhibits and Schedules. All of the exhibits and schedules to this
Agreement are deemed incorporated herein by reference and, accordingly, all
references to this Agreement include such exhibits and schedules.
10.7 Further Assurances. The parties hereto shall execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purpose of this Agreement.
10.8 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial. (a)
This Agreement and the rights and obligations of the parties hereunder are to be
governed by and construed and interpreted in accordance with the Laws of the
State of New York applicable to contracts made and to be performed wholly within
New York, without regard to choice or conflict of laws rules.
(b) Each party hereto irrevocably submits to the jurisdiction
of any New York state or federal court in any Action arising out of or relating
to this Agreement, and hereby irrevocably agrees that all claims in respect of
such Action may be heard and determined in such New York state or federal court.
Each party hereto hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such Action. The parties further agree, to the extent permitted by Law, that
final and unappealable judgment against any of them in any Action contemplated
above shall be conclusive and may be enforced in any other jurisdiction within
or outside the United States by suit on the judgment, a certified copy of which
shall be conclusive evidence of the fact and amount of such judgment.
39
(c) Each party hereto waives, to the fullest extent permitted
by applicable Law, any right it may have to a trial by jury in respect of any
Action arising out of or relating to this Agreement. Each party hereto certifies
that it has been induced to enter into this Agreement or instrument by, among
other things, the mutual waivers and certifications set forth above in this
Section 10.8.
10.9 Costs and Expenses. Except as otherwise provided herein, all legal
and other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby are to be paid by the party incurring such
costs and expenses. Of such costs and expenses, the Sellers shall be deemed to
have incurred, and shall pay, all attorneys fees and other legal costs and
expenses of the Company and such Sellers, and the Company shall be deemed to
have incurred, and shall pay, all accounting fees and other accounting costs and
expenses of the Company. Notwithstanding anything to the contrary herein, at the
Closing Purchaser shall reimburse AEA for any amounts AEA pays toward the
non-refundable deposit associated with the procurement of a representation and
warranty insurance policy.
10.10 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
10.11 Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, made or delivered: (i) when delivered in person, (ii) three days
after deposited in the United States mail, first class postage prepaid, (iii) in
the case of overnight courier services, one Business Day after delivery to the
overnight courier service with payment provided, or (iv) in the case of
facsimile, when sent, verification received, in each case to the address or
facsimile number as follows:
40
If to the Purchaser:
EVCI Career Colleges Holding Corp.
0 Xxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx X. XxXxxxx
CEO and President
With copies to:
Xxxxxx X. Xxxxxxx, Esq.
EVCI Career Colleges Holding Corp.
0 Xxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Ritzert & Leyton, P.C.
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
If to the Company:
Technical Career Institutes, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000 x-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxxx
Acting President and CFO
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
41
If to the Sellers:
East Coast Training Services of Delaware, Inc.
x/x Xxxxx X. Xxxxxxx
XxX Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
East Coast Capital Corp.
c/o Xxxxx X. Xxxxxxx
FdG Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
North American Training Services, Inc.
x/x Xxxxx X. Xxxxxxx
XxX Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
AEA Investors LLC
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx
Chrysler Capital Company L.L.C.
000 Xxxxxxx 0, 0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Vice President
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
42
Any party may designate another address or facsimile number by notice
to the other parties in accordance with the terms of this Section.
10.12 Specific Performance and Injunctive Relief. The parties hereto
recognize that if any or all of them fail to perform, observe or discharge any
of their respective obligations under this Agreement, a remedy at law may not
provide adequate relief to the other parties hereto. Therefore, in addition to
any other remedy provided for in this Agreement or under applicable Law, any
party hereto may demand specific performance of this Agreement, and such party
will be entitled to temporary and permanent injunctive relief, in a court of
competent jurisdiction at any time when any of the other parties hereto fail to
comply with any of the provisions of this Agreement applicable to such party. To
the extent permitted by applicable Law, all parties hereto hereby irrevocably
waive any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such party's remedy of specific performance or injunctive
relief.
10.13 Third-Party Beneficiary. This Agreement is solely for the benefit
of the parties hereto and their respective successors and permitted assigns, and
no other Person has any right, benefit, priority or interest under, or because
of the existence of, this Agreement.
10.14 Middle States Commission on Higher Education. Notwithstanding any
provision of this Agreement to the contrary, the parties agree that any adverse
effect the Contemplated Transactions may have on the Company's accreditation
with the Middle States Commission on Higher Education shall not be deemed a
breach of any representation, warranty or covenant of any party under this
Agreement and shall not constitute the failure of any condition precedent to
Closing of any party under this Agreement.
ARTICLE 11
SELLERS' NON-COMPETE
11.1. Non-Compete. Each Seller severally agrees that it shall
not, from and after the Closing, until the fifth anniversary of the Closing
Date:
(a) directly or indirectly own, engage in, manage,
operate, join, control, or participate in the ownership, management, operation,
or control of, or be connected as a stockholder, partner, joint venturer,
member, beneficiary or otherwise with any Person which in any way is then
competing with the Company (i) within a 50 mile radius of the Institute or any
of its annexes, branches or extensions wherever located, or (ii) by delivering
courses by video conferencing or other distance learning services to any
geographic location where the Company delivers competitive courses ((i) and (ii)
being "Sellers Non-compete Area"), provided, however, that the Sellers may own,
directly or indirectly, securities of any entity traded on any national
securities exchange or listed on Nasdaq if all the Sellers do not, directly or
indirectly, own 3% or more of any class of equity securities, or securities
convertible into or exercisable or exchangeable for 3% or more of any class of
equity securities, of such entity;
43
(b) aid, abet or otherwise assist any business, or
other organization or entity in competing with the Company in Sellers
Non-compete Area;
(c) directly or indirectly request or advise any
present or future students or vendors of the Institute to cancel any contracts
with the Institute or curtail their dealings with the Institute;
(d) directly or indirectly request or advise any
present or future service provider or financial resource of the Institute or the
Company to withdraw, curtail, or cancel the furnishing of such service or
resource;
(e) directly or indirectly disclose or communicate to
any other Person, the names of any past, present or future students of the
Institute except to the extent required by law or judicial process;
(f) directly or indirectly induce or attempt to
influence any employee of the Institute or the Company to terminate his or her
employment.
11.2. Blue Penciling. In the event any provision of Section
11.1 as applied to any circumstances shall be adjudged by a Court to be invalid
or unenforceable, such invalidity shall in no way affect any other provision of
Section 11.1 or the application of any such provision in any other circumstance,
or the validity or enforceability of this Agreement. Each Seller and the
Purchaser intend the provisions of Section 11.1 to be enforced as written.
However, in the event any provision, or any part of this, is adjudged by a Court
to be unenforceable because of the duration of such provision or the area
covered thereby, each Seller and Purchaser agree that the Court making such
determination shall have the power to reduce the duration and/or area of such
provision, and/or to delete specific words or phrases (generally referred to as
blue penciling), and, in its reduced or blue penciled form, such provision shall
then be enforceable and shall be enforced.
11.3. Survival. The provisions of this Article 11 shall
survive the Closing until the expiration of the statue of limitations for breach
of contract under New York law in accordance with their terms.
11.4. No Limitation on Liability or Remedy. The provisions of
Section 8.5 and 8.6 shall not apply to breaches of this Article 11.
[Signature page follows]
44
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
The Purchaser:
EVCI CAREER COLLEGES HOLDING CORP.
By:/s/ Xx. Xxxx X. Xxxxxxxx
---------------------------
Name: Xx. Xxxx X. Xxxxxxxx
Title: Chairman
The Company:
TECHNICAL CAREER INSTITUTES, INC.
By:/s/ Xxxxxx Xxxx
---------------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
The Sellers:
EAST COAST TRAINING SERVICES OF DELAWARE, INC.
By:/s/ Xxxxxx Xxxx
---------------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
EAST COAST CAPITAL CORP.
By:/s/ Xxxxxx Xxxx
---------------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
NORTH AMERICAN TRAINING SERVICES, INC.
By:/s/ Xxxxxx Xxxx
---------------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
45
SCHEDULE 1
DEFINITIONS
"Action" means any action, claim, suit, litigation, proceeding, or
governmental investigation.
"Actual Deficiency" is defined in Section 2.5(b)(i).
"Actual Surplus" is defined in Section 2.5(b)(iii).
"AEA" means AEA Investors, Inc., a Delaware corporation.
"Affiliate" of a specified Person means a Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified.
"Agreement" means the Stock Purchase Agreement to which this schedule
of definitions is attached. References to the Agreement include this Schedule 1
and all exhibits and other schedules referred to therein.
"Audited Financial Statements" is defined in Section 3.12(a).
"Balance Sheet" is defined in Section 3.12(a).
"Balance Sheet Date" means March 31, 2005.
"Benefit Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, or whether for the benefit of a single individual or
more than one individual including, but not limited to, any "employee benefit
plan" within the meaning of Section 3(3) of ERISA.
"Business" is defined in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banks are permitted by Law to be closed in the City of New York,
N.Y.
"Campus Leases" means: (i) Net Lease, dated as of December 19, 1997,
between Overtime Properties LLC and Technical Career Institutes, Inc., as
amended by First Amendment of Lease made as of October 1, 2002 and (ii)
Agreement of Lease made as of October 11, 1994, between F.H.E.A. Associates and
Technical Career Institute, Inc. relating to 000 Xxxxxx Xxxxxx, Xxx Xxxx, XX, as
amended by the Second Modification and Extension of Lease Agreement made as of
the 15th day of April, 2005.
Sch. 1-1
"Campus Properties" means the premises leased by the Company pursuant
to the Campus Leases located at the parcels of real property commonly known as
(i) 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, X.X. and (ii) the sixth floor of 000 Xxxxxx
Xxxxxx, Xxx Xxxx, X.X.
"Cash Equivalents" means highly liquid debt instruments with maturities
of three months or less as determined in accordance with GAAP.
"Claimant" is defined in Section 8.4(a).
"Closing" is defined in Section 6.1.
"Closing Current Ratio" means the ratio of total current assets to
total current liabilities of the Company on the Closing Date, determined in
accordance with GAAP, and calculated on the basis set forth on Schedule 2.4(a)
hereof and consistent with the Company's past practice, including following the
same accounting principles, practices, procedures, policies and methods with
consistent classifications, judgments and valuation and estimation methodologies
that were employed by the Company in preparing the Financial Statements but
excluding prepaid advertising from current assets.
"Closing Date" is defined in Section 6.1.
"Closing Purchase Price Payment is defined in Section 2.3(c).
"Company" is defined in the introductory paragraph.
"Company Contract" means any Contract (a) under which the Company has
or may acquire any rights or benefits; (b) under which the Company has or may
become subject to any liability; or (c) by which the Company or any of the
assets owned or used by the Company is or may become bound, together with any
amendment thereof; provided, however, "Company Contract" shall not include any
Student Contract.
"Confidential Information" means (i) information not available to the
general public concerning the business and financial affairs with respect to a
party hereto, and (ii) analyses, compilations, forecasts, studies and other
documents prepared on the basis of such information by the parties or their
agents, representatives, any Related Person, employees or consultants.
"Consent" means any approval, consent, ratification, waiver or other
authorization (including any Permit or other authorization by a Governmental
Authority or Educational Agency).
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement.
Sch. 1-2
"Contract" means any agreement, contract, lease, license, obligation
(whether with respect to real or personal property), promise or undertaking
(whether written or oral and whether express or implied).
"Curricula" means the material course materials used in the educational
programs of the Institute, in any form or media. The Curricula shall also
include (1) all copyrights, copyright applications, copyright registrations and
trade secrets relating to the such materials, and (2) all material periodic
updates or revisions to such materials as developed.
"Damages" is defined in Section 8.2.
"DCSNA" means Chrysler Capital Corporation (n/k/a) DaimlerChrysler
Services North America LLC.
"Debt" of a Person means (i) Funded Debt; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all obligations of such Person to pay the deferred purchase price for property
or services; and (iv) all obligations or liabilities of others secured by an
Encumbrance (other than Permitted Encumbrances) on any asset owned by such
Person, whether or not such obligation or liability is assumed by such Person.
"Deductible" is defined in Section 8.6.
"Disclosing Party" is defined in Section 7.1(a).
"DOE" means the United States Department of Education and any successor
agency administering federal student Financial Assistance Programs.
"ECC" is defined in the introductory paragraph.
"ECTS" is defined in the introductory paragraph.
"Educational Agency" means any Person, entity or organization, whether
governmental, government chartered, private, quasi-private, for profit, or
not-for-profit, that engages in granting or withholding Educational Approvals
for, administers financial assistance to or for students of, or otherwise
regulates private post-secondary schools in accordance with standards relating
to the performance, operation, financial condition, or academic standards of
such schools, including, without limitation, DOE, the United States Veterans
Administration and State approving agencies for veteran's benefits, the
Immigration and Naturalization Service of the United States Department of
Justice, the Regents, any agency that guarantees federal student loans, SED and
HESC.
"Educational Approval" means any license, permit, consent, franchise,
approval, authorization, certification, agreement, or accreditation issued by
any Educational Agency to the Company including without limitation any Program
Participation Agreement.
Sch. 1-3
"Encumbrance" means any charge, claim, community property interest,
easement, equitable interest, lien, mortgage, option, pledge, security interest,
right of first refusal, right of way, servitude or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.
"Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins and wetlands), groundwater, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life and any other
environmental medium or natural resource.
"Environmental, Health and Safety Liabilities" means any cost, damages,
expense, liability, obligation or other responsibility arising from or under
Environmental Law or Law relating to occupational health and safety.
"Environmental Law" means any Law that requires or relates to:
(a) Advising appropriate authorities, employees and
the public of intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) Preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the Environment;
(c) Reducing the quantities, preventing the release
or minimizing the hazardous characteristics of wastes that are generated;
(d) Protecting resources, species or ecological
amenities;
(e) Reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil or other
potentially harmful substances;
(f) Cleaning up pollutants that have been released,
preventing the threat of release or paying the costs of such clean up or
prevention; or
(g) Making responsible parties pay private parties,
or groups of them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Escrow Agent" means HSBC Bank USA or such other escrow agent mutually
agreed upon by the parties hereto.
"Escrow Agreement" is defined in Section 2.3(a).
Sch. 1-4
"Escrow Deposit" means a sum equal to Three Million Dollars
($3,000,000) that is deposited with the Escrow Agent pursuant to Section 2.3(a)
and the Escrow Agreement.
"Estimated Closing Statement" is defined in Section 2.4(a).
"Estimated Deficiency" is defined in Section 2.4(b).
"Estimated Surplus" is defined in Section 2.4(b).
"Family" has the meaning set forth in 34 C.F.R. ss. 668.174(c)(4).
"Final Closing Statement" is defined in Section 2.5(a).
"Financial Assistance Programs" is defined in Section 3.18(c).
"Financial Statements" is defined in Section 3.12(a).
"Fiscal Year" means the accounting year of the Company, which is the
12 month period beginning on October 1 of a calendar year and ending on
September 30 of the subsequent calendar year.
"Funded Debt" of a Person means all (i) Liabilities for borrowed
money, including without limitation all outstanding principal thereof and
accrued interest and fees thereon and (ii) capitalized lease obligations of such
Person under any capitalized lease or lease of personal property.
"GAAP" means generally accepted accounting principles in the United
States set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the U.S. accounting profession.
"Governmental Authority" means any:
(a) Xxxxxx, xxxxx, xxxxxx, xxxx, xxxx, xxxxxxx,
xxxxxxxx or other jurisdiction of any nature;
(b) Federal, state, local, municipal, foreign or
other government;
(c) Governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official or
entity and any court or other tribunal);
(d) Multi-national organization or body; or
Sch. 1-5
(e) Body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature, but excluding any Educational Agency.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials.
"Hazardous Materials" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefore and asbestos or asbestos-containing materials.
"HESC" means the New York State Higher Education Services Corporation.
"Indemnifying Party" is defined in Section 8.4.
"Indemnification Cap" is defined in Section 8.6(a).
"Intellectual Property" is defined in Section 3.10.
"Institute" is defined in the Recitals.
"Interim Income Statements" is defined in Section 3.12(a).
"Interim Financial Statements" is defined in Section 3.12(a).
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
rules and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" with respect to an individual, means such individual is
actually aware of such fact or other matter. The Company will be deemed to have
Knowledge of a particular fact or other matter if Xxxxx Xxxxxxx, Xxxxx Xxxxxxx,
Xxxxx Bouabidi, Xx Xxxxxx, Xxx Xxxxxxx, Xxxx Xxxxxxxx or Xxxxxx Xxxxxxx has
Knowledge of such fact or other matter. The Purchaser and each Seller,
respectively, will be deemed to have Knowledge of a particular fact or other
matter if any of their directors or officers, respectively, has Knowledge of
such fact or other matter.
"Law(s)" means any statute or common law, rule(s), regulation(s) or
ordinance(s) of any federal, foreign, state or local Governmental Authority or
Educational Agency, including without limitation, any of the foregoing
pertaining to state education licensing, recruitment, admissions, and student
aid funding matters.
Sch. 1-6
"Liability" means, with respect to any Person, any Debt, liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise, pursuant to any Contract or otherwise and whether or not the same is
required pursuant to GAAP to be accrued on the financial statements of such
Person.
"Loan Agreement" means the Senior Term Loan Agreement dated as of
September 30, 1994, by and among ECC, AEA, NATS and DCSNA, together with the
ancillary documents and security agreements related thereto, as each may have
been amended, modified or supplemented from time to time.
"Material Adverse Effect" means (x) a material adverse change in the
business, operations or financial condition of the Company taken as a whole;
provided, however, that no change or effect arising out of or in connection with
or resulting from any of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute or contribute to a
Material Adverse Effect: (i) general economic conditions or changes therein;
(ii) financial market fluctuations or conditions; (iii) conditions affecting the
proprietary or technical education industries generally; or (iv) any change,
effect, circumstance or condition attributable to the execution, performance or
announcement of this Agreement or the transactions contemplated hereby; or (y) a
material adverse change or effect on the ability of the Sellers to consummate
the transactions contemplated hereby or to perform their obligations under this
Agreement.
"NATS" is defined in the introductory paragraph.
"NATS Note" is defined in Section 3.12(b).
"Net Tax Benefit" is defined in Section 8.6(d).
"Neutral Accounting Firm" is defined in Section 2.6.
"Order" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Authority or by any arbitrator.
"Ordinary Course of Business" with respect to an action taken by a
Person means such action is consistent in all material respects with the past
customs and practices of such Person in the ordinary and consistent conduct of
the business of such Person.
"Organizational Documents" mean: (i) the articles or certificate of
incorporation and the bylaws of a corporation; (ii) the partnership agreement
and any statement of partnership of a general partnership; (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (iv) the operating agreement and certificate or articles of
organization of a limited liability company; (v) any charter or similar document
adopted or filed in connection with the creation, formation or organization of a
Person; and (vi) any amendment to any of the foregoing.
Sch. 1-7
"Payoff Letter(s)" is defined in Section 6.2(h).
"Permit" means any approval, consent, license, permit, waiver or other
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Law, but excluding
any Educational Approval.
"Permitted Encumbrance" shall mean (a) any Encumbrance for Taxes which
are not yet due or which are being contested in good faith by appropriate
proceedings diligently prosecuted; (b) any carrier's, warehouseman's,
mechanic's, materialman's, repairman's, landlord's or any other statutory or
inchoate Encumbrance incidental to the ordinary conduct of the Business which
involves an obligation that is not past due or which is being contested in good
faith by appropriate proceedings diligently prosecuted; (c) any interest of a
governmental agency or instrumentality in any lawfully made pledge or deposit
under workers' compensation, unemployment insurance or other social security
statutes; (d) the liens evidenced by the financing statements listed on
Attachment A to this Schedule 1; (e) liens securing rental payments under
capital lease agreements; and (f) any Encumbrance granted pursuant to, or
created in connection with, the Loan Agreement.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Educational
Agency, Governmental Authority or other entity.
"Pre-Acquisition Notice" means written notice from DOE that the
Pre-Acquisition Review Application is (x) "materially complete," (y) that does
not contain any statement that the DOE sees any impediment to the issuance of a
TPPPA to the Purchaser following the Closing, and (z) that does not in the
Purchaser's reasonable discretion contain any unusual or burdensome conditions
or requirements which, individually or in the aggregate, could reasonably be
expected to materially adversely affect the business, financial condition or
results of operations of the Purchaser and its subsidiaries taken as a whole,
including, but not limited to, any requirement (i) to administer Title IV
Program funds on a reimbursement or cash monitoring basis or to post a letter of
credit or other financial security with DOE in an amount greater than 10 percent
(10%) of the institution's Title IV participation during the most recent fiscal
year or (ii) that would impose material restrictions or limitations on the
activities, including, growth, of any of the Purchaser, the Company and their
Affiliates.
"Pre-Acquisition Review Application" means an application to DOE filed
in a manner to be "materially complete" (as defined in 34 C.F.R. 600.20(g)), in
order for the DOE to conduct a pre-acquisition review of the Contemplated
Transactions.
"Proceeding" means any action, arbitration, audit, charge, claim,
complaint, hearing, investigation, litigation, proceeding, program review or
suit (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority, Educational Agency or arbitrator.
Sch. 1-8
"Program Participation Agreement" means a Program Participation
Agreement with DOE.
"Proposed Final Closing Statement" is defined in Section 2.5(a).
"Purchase Price" is defined in Section 2.2.
"Purchaser" is defined in the introductory paragraph.
"Purchaser Indemnified Persons" is defined in Section 8.2.
"Regents" means the New York State Board of Regents.
"Related Person" means, with respect to a particular individual, each
other member of such individual's Family; and, with respect to a specified
Person other than an individual, any Person over which such specified Person
exercises Substantial Control, who exercises Substantial Control over such
specified Person or is under common Substantial Control with such specified
Person.
"Release" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the Environment,
whether intentional or unintentional.
"Relevant Date" is defined in Section 8.6(d).
"Required Closing Consents" is defined in Section 5.1(d).
"Retention Agreements" means: (i) Retention Bonus Letter Agreement,
dated August 24, 2004, between the Company and Xxxxx Bouabidi; (ii) Retention
Bonus Letter Agreement, dated August 24, 2004, between the Company and Xxxxxx
Xxxxxx; (iii) Retention Bonus Letter Agreement, dated August 24, 2004, between
the Company and Xxxxxxxx Xxxxxxx; (iv) Retention Bonus Letter Agreement, dated
August 24, 2004, between the Company and Xxxxxx Xxxxxxx; (v) Retention Bonus
Letter Agreement, dated August 24, 2004, between the Company and Xxxxxxx
Xxxxxxxx; (vi) Retention Bonus Letter Agreement, dated August 24, 2004, between
the Company and Xxxxx Xxxxxxx; and (vii) Retention Bonus Letter Agreement, dated
August 24, 2004, between the Company and Xxxx Xxxxxxxxxxx.
"Retention Escrow Amount" means a sum equal to Two Hundred Thousand
Dollars ($200,000) that is deposited with the Escrow Agent pursuant to Section
2.3(b) and the Escrow Agreement.
"Section 2.5(b)(i) Adjustment" is defined in Section 2.5(b)(i).
"Section 2.5(b)(iii) Adjustment" is defined in Section 2.5(b)(iii).
Sch. 1-9
"SED" means the New York State Education Department.
"SED Consent" means the Purchaser's satisfaction after conducting its
due diligence, that the Regents will continue the registration of the
Institute's programs for a transitional period not to exceed two years following
the Closing.
"Seller" and "Sellers" are defined in the introductory paragraph.
"Separation Payments" means, with respect to any Retention Agreement,
the separation payments in the form of salary continuation as set forth in such
Retention Agreement.
"Student Contracts" means any enrollment contract between the Company
and a student pursuant to which the Company agrees to provide educational
services.
"Substantial Control" has the meaning set forth in 34 C.F.R.
668.174(c)(3).
"TAP" means the New York State Tuition Assistance Program.
"Tax" or "Taxes" means all taxes, charges, withholdings, fees, levies,
penalties, additions, interest or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, employment,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments, imposed by any Governmental
Authority, whether computed on a separate, consolidated, unitary, combined or
any other basis.
"Tax Proceedings" is defined in Section 7.3(b)(i).
"Tax Returns" is defined in Section 3.13(a).
"Title IV Programs" means the federal student financial assistance
programs authorized by Subchapter IV of the Higher Education Act of 1965, as
amended.
"Transfer Taxes" is defined in Section 7.3(c).
"TPPPA" means a temporary provisional program participation agreement,
issued by DOE pursuant to 34 C.F.R. 600.20(h).
"Union" means T.O.P. Local 2110, U.A.W., AFL-CIO.
"Unrestricted Purchase Price" means, as at any date of determination,
the sum of (a) the amount obtained by subtracting the Escrow Deposit from the
Purchase Price, plus (b) the aggregate amount released from the Escrow Deposit
to the Sellers in accordance with the Escrow Agreement (net of the Escrow
Agent's fees and expenses).
Sch. 1-10
Rules of Construction
For purposes of this Agreement and the other documents executed in
connection herewith, the following rules of construction will apply, unless
specifically indicated to the contrary: (i) wherever from the context it appears
appropriate, each term stated in either the singular or plural will include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender will include the masculine, the feminine and the neuter; (ii) the
term "or" is not exclusive; (iii) the terms "hereof," "herein," and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole (including all of the schedules, exhibits and
attachments hereto) and not to any particular provision of this Agreement; (iv)
the term "including" (or any form thereof) will not be limiting or exclusive
unless the context otherwise requires or unless otherwise specified; (v) all
references to any period of days shall be deemed to be to the relevant number of
calendar days unless otherwise specified; (vi) all references to statutes and
related regulations will include any amendments thereof and any successor
statutes and regulations; (vii) all references in this Agreement or in the
schedules to this Agreement to sections, schedules, exhibits and attachments
will refer to the corresponding sections, schedules, exhibits and attachments of
or to this Agreement; and (viii) all references to any instruments or
agreements, including references to any of the documents executed in connection
herewith, will include any and all modifications or amendments thereto and any
and all extensions or renewals thereof. It is understood and agreed that the
specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
schedules thereto is not intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact of the setting of such amounts or the fact of
the inclusion of any such item in the schedules in any dispute or controversy
between the parties as to whether any obligation, item or matter not described
herein or included in the schedule is or is not material for purposes of this
Agreement.
Sch. 1-11
EXHIBIT A
FORM OF ESCROW AGREEMENT
Exh. A-1
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Escrow Agreement"), dated as of ____________,
2005, by and among East Coast Training Services of Delaware, Inc., a Delaware
corporation ("ECTS"), East Coast Capital Corp. a Delaware corporation ("ECC"),
North American Training Services, Inc., a Delaware corporation ("NATS" and,
collectively with ECTS and ECC, the "Sellers"), EVCI Career Colleges Holding
Corp., a Delaware corporation (the "Purchaser"), and HSBC BANK USA, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States of America, as escrow agent (the "Escrow Agent").
Unless otherwise expressly provided in this Agreement, ECTS shall be deemed to
be acting on behalf of all of the Sellers.
W I T N E S S E T H:
-------------------
WHEREAS, the Purchaser, the Sellers, Technical Career Institutes, Inc.,
a New York corporation (the "Company"), AEA Investors, Inc., a Delaware
corporation, and Chrysler Capital Company L.L.C., a Delaware limited liability
company, have entered into a Stock Purchase Agreement dated as of _____________,
2005 (the "Purchase Agreement") pursuant to which, among other things, Purchaser
will purchase from ECTS all of the issued and outstanding shares of the capital
stock of the Company. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed thereto in the Purchase Agreement.
WHEREAS, pursuant to Section 2.3 of the Purchase Agreement, at the
Closing the Purchaser will deliver to the Escrow Agent by wire transfer of
immediately available funds a portion of the Purchase Price equal to (i)
$3,000,000 (the "Indemnification Escrow Amount") plus (ii) $200,000 (the
"Retention Escrow Amount" and, together with the Indemnification Escrow Amount,
the "Escrow Funds"), which funds that would have otherwise been paid by the
Purchaser to the Sellers are to be held in escrow by the Escrow Agent pursuant
hereto and released in accordance with the terms hereof for the purposes of (a)
in the case of the Indemnification Escrow Amount, funding indemnification
payments payable to the Purchaser Indemnified Persons following the Closing Date
under Article 8 of the Purchase Agreement and (b) in the case of the Retention
Escrow Amount, reimbursing the Purchaser for up to 50% of any liability the
Company may have following the Closing Date for Separation Payments under the
Retention Agreements, but in no event shall such reimbursement be in excess of
the Retention Escrow Amount.
WHEREAS, the Purchaser and each of the Sellers severally represents and
warrants to the Escrow Agent that it has not stated to any individual or entity
that the Escrow Agent's duties will include anything other than those duties
stated in this Escrow Agreement;
1
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
Section 1. Establishment of Escrow Account.
The Escrow Agent shall establish and maintain on behalf of the
Purchaser and the Sellers a non-interest bearing trust account (the "Escrow
Account") to which there shall be immediately credited and held amounts received
by the Escrow Agent from the Purchaser and the Sellers in accordance with
Section 2 hereof. The funds credited to the Escrow Account shall be applied and
disbursed only as provided herein and pursuant to the Purchase Agreement. The
Escrow Agent shall, to the extent required by law, segregate the funds credited
to the Escrow Account from its other funds held as an agent or in trust.
Section 2. Deposits to the Escrow Account; Investment.
(a) The Escrow Funds to be deposited with the Escrow Agent
shall be transferred by wire transfer of immediately available funds to the
following account (or to such other account as the Escrow Agent shall notify the
Purchaser and ECTS in writing):
HSBC BANK USA, NATIONAL ASSOCIATION
ABA No.: 000-000-000
Account No.: 000-000-000
Attention: East Coast Capital Escrow Account
(b) The Escrow Agent shall confirm in writing to the Purchaser
and ECTS the deposit received by it pursuant to this Section 2 and the amount of
such deposit.
(c) The Escrow Agent shall, at the written direction of ECTS,
invest and reinvest the funds on deposit in the Escrow Account in the HSBC
Investors Money Market Fund (the "Fund") unless otherwise directed in writing by
ECTS and the Purchaser. The Purchaser and the Sellers hereby acknowledge receipt
of a copy of the Prospectus for the Fund. The earnings realized from investments
made from the Escrow Account will accrue for the benefit of the Sellers and
shall be released in accordance with the terms of Section 5(c). The Purchaser
will not be entitled to interest on any payment it may receive from the Escrow
Account. The Purchaser and the Sellers shall furnish the Escrow Agent upon
execution of this Escrow Agreement, and as subsequently required, all
appropriate U.S. tax forms and information in order for the Escrow Agent to
comply with U.S. tax regulations. The Escrow Agent shall not be liable for any
losses resulting from the sale or depreciation in the market value of any such
investments.
Section 3. Distributions of Indemnification Escrow Amount. The
Indemnification Escrow Amount on deposit in the Escrow Account shall be
withdrawn by the Escrow Agent and transferred pursuant to the Purchase Agreement
only in accordance with this Section 3.
(a) On each occasion on which the Purchaser determines in good
faith that it is entitled to payment of a claim for indemnification pursuant to
Article 8 of the Purchase Agreement, the Purchaser may deliver to ECTS and the
2
Escrow Agent a written request (a "Draw-Down Request") for the payment of such
amount. The Draw-Down Request shall set forth the amount requested and, in
reasonable detail, the specific factual basis for the determination that the
Purchaser is entitled to the payment of such amount.
(b) Within thirty (30) days after receipt by ECTS and the
Escrow Agent of a Draw-Down Request, ECTS may deliver to the Purchaser and the
Escrow Agent a written objection to all or any part of the Draw-Down Request (an
"Objection").
(c) If ECTS fails to deliver an Objection by the end of the
thirtieth (30th) day following the receipt by ECTS of a Draw-Down Request, the
Escrow Agent shall pay to the Purchaser out of the Indemnification Escrow Amount
on deposit in the Escrow Account an amount equal to the amount requested in the
Draw-Down Request. Any such payment shall be made on or before the fifth (5th)
Business Day following the expiration of such thirty (30) day period. The Escrow
Agent shall continue to hold any amounts remaining of the Indemnification Escrow
Amount on deposit in the Escrow Account following the payment of any Draw-Down
Request in accordance with the Purchase Agreement and the terms of this Escrow
Agreement.
(d) If ECTS delivers a timely Objection with respect to all or
any portion of a Draw-Down Request, the Escrow Agent shall not disburse, and
shall continue to hold in the Escrow Account, the amount of the Indemnification
Escrow Amount requested in the Draw-Down Request or the disputed portion
thereof, as the case may be, pending receipt of either (i) payment instructions
signed by the Purchaser and ECTS in the form of Exhibit A attached hereto,
specifying the amount of Indemnification Escrow Amount funds from the Escrow
Account to be released by the Escrow Agent in respect of such Draw-Down Request
("Payment Instructions") or (ii) a written notice from either the Purchaser or
ECTS of a final, non-appealable order from a court of competent jurisdiction,
along with a copy of the order (together, a "Judgment Notice"), pursuant to
which such court has determined whether and to what extent the Purchaser is
entitled to the amount requested in the Draw-Down Request. Upon receipt of
Payment Instructions or a Judgment Notice, as applicable, the Escrow Agent shall
thereafter act in accordance with Section 3(e) or 3(f) below, as applicable. Any
portion of a Draw-Down Request not covered by a timely Objection shall be paid
by the Escrow Agent to the Purchaser out of the Indemnification Escrow Amount on
deposit in the Escrow Account on or before the fifth (5th) Business Day
following the expiration of the thirty (30) day period referred to in Section
3(c).
(e) Upon receipt by the Escrow Agent of Payment Instructions,
if such Payment Instructions indicate that the Purchaser is entitled to payment
in respect of all or any portion of the Draw-Down Request, then the Escrow Agent
shall release and pay to the Purchaser the amount indicated in such Payment
Instructions from the Indemnification Escrow Amount on deposit in the Escrow
Account. Such payment shall be made on or before the fifth (5th) Business Day
following the date on which such Payment Instructions are received by the Escrow
Agent. If such Payment Instruction indicates that the Purchaser is not entitled
to all or any portion of the amount claimed in such Draw-Down Request (a
"Discharge Notice"), then the Escrow Agent shall continue to hold such amount as
part of the Indemnification Escrow Amount on deposit in the Escrow Account in
accordance with the terms of this Escrow Agreement until such amounts are to be
3
disbursed (i) in respect of another Draw-Down Request pursuant to Section 3(a),
3(c) or 3(d) or (ii) to ECTS pursuant to Section 3(h). The Escrow Agent shall be
entitled to rely, exclusively, on any Payment Instructions given by the
Purchaser and ECTS in relation to the release of funds from the Escrow Account.
(f) If the Escrow Agent has received a Judgment Notice with
respect to any Draw-Down Request, then the Escrow Agent shall release from the
Indemnification Escrow Amount on deposit in the Escrow Account and pay to the
Purchaser an amount equal to the amount due to the Purchaser, as indicated in
such Judgment Notice. Such payment will be made on or before the fifth (5th)
Business Day following the date on which the Escrow Agent received such Judgment
Notice. If such Judgment Notice indicates that the Purchaser is not entitled to
all or any portion of the amount claimed in the Draw-Down Request (a
"Determination Discharge"), then the Escrow Agent shall continue to hold the
amount of the Determination Discharge in accordance with the terms of this
Escrow Agreement until such amounts are disbursed (i) in respect of another
Draw-Down Request pursuant to Section 3(a), 3(c) or 3(d) or (ii) to ECTS
pursuant to Section 3(h).
(g) Contemporaneously with the disbursement of any
Indemnification Escrow Amount funds from the Escrow Account, the Escrow Agent
shall send a written statement to ECTS and the Purchaser stating the amount of
the disbursement and the amount of Indemnification Escrow Amount funds remaining
in the Escrow Account.
(h) On the date which is the second anniversary of the Closing
Date (the "Termination Date"), the Escrow Agent shall promptly pay to ECTS from
the Indemnification Escrow Amount on deposit in the Escrow Account, an amount
equal to the excess, if any, of (i) the remaining balance of the Indemnification
Escrow Amount on deposit in the Escrow Account over (ii) the Retained Amount (as
defined in Section 3(i)) as of the Termination Date. Thereafter, the Escrow
Agent shall release from the Escrow Account all or portions of the Retained
Amount either in accordance with Section 3(c) or as and when it receives Payment
Instructions, Discharge Notices, Judgment Notices or Determination Discharges,
as applicable, related to the Outstanding Claims (as defined in Section 3(i)).
Following the Termination Date, in the event that the Retained Amount at any
time exceeds the amount of all Outstanding Claims which have not been paid or
which are not subject to a Discharge Notice or Determination Discharge, the
Escrow Agent shall pay to ECTS within five (5) Business Days of ECTS' written
request for such payment, an amount equal to such excess. Notwithstanding any
provision hereof to the contrary, following the Termination Date, the Retained
Amount will not be released in payment of any claim or Draw-Down Request
delivered to the Escrow Agent or ECTS after the Termination Date, and the
Retained Amount will only be disbursed (i) to ECTS in accordance with this
Section 3(h) or (ii) to the Purchaser in payment of an Outstanding Claim in
accordance with Section 3(c), 3(e) or 3(f).
(i) In the event that the Escrow Agent shall have received on
or before the Termination Date one or more Draw-Down Requests any portion of
which has not been paid in accordance with Section 3(c) or Section 3(d) as of
the Termination Date, and as to which, on such date, the Escrow Agent has
4
neither received and fully acted upon Payment Instructions nor a Judgment
Notice, nor received a Discharge Notice or a Determination Discharge (any such
Draw-Down Request or portion thereof being referred to as an "Outstanding
Claim"), the Escrow Agent shall retain and continue to hold in accordance with
the terms hereof an amount equal to the total amount requested in all such
Outstanding Claims (the "Retained Amount").
Section 4. Distributions of Retention Escrow Amount . The Retention
Escrow Amount on deposit in the Escrow Account shall be withdrawn by the Escrow
Agent and transferred pursuant to the Purchase Agreement only in accordance with
this Section 4. For purposes of this Section 4, a "Quarter" shall mean the
successive three-month periods beginning on the Closing Date.
(a) Within ten (10) Business Days after the last day (a
"Separation Payment Reimbursement Date") of each Quarter through the second
anniversary of the Closing Date, the Purchaser may in good faith deliver to ECTS
and the Escrow Agent a written request (a "Separation Payment Reimbursement
Request") for reimbursement of up to 50% of any liability the Company has
incurred during such Quarter for Separation Payments under the Retention
Agreements, up to a maximum aggregate amount for all Quarters equal to the
Retention Escrow Amount. The Separation Payment Reimbursement Request shall set
forth the amount requested and, in reasonable detail, the specific factual basis
for the determination that the Purchaser is entitled to reimbursement for the
payment of such amount, including without limitation, the identity of the
terminated employee(s) and the Separation Payment(s) paid during the applicable
Quarter. Provided there are sufficient funds from the Retention Escrow Amount on
deposit, on the last Separation Payment Reimbursement Date coinciding with the
second anniversary of the Closing Date, the Purchaser may in good faith deliver
a Separation Payment Reimbursement Request that identifies Separation Payments
paid during the Quarter then-ending as well as any final Separation Payments
estimated to be paid during the next successive three-month period.
(b) Following the delivery of a Separation Payment
Reimbursement Request, the Purchaser shall provide ECTS and its representatives
reasonable access to the records and employees of the Company to the extent
necessary for the review of the Separation Payment Reimbursement Request and to
verify that each Person receiving (or expected to receive) a Separation Payment
was entitled (or will be entitled) to receive such Separation Payment in
accordance with such Person's Retention Agreement and shall cause the employees
of the Company to cooperate with ECTS and its representatives in connection with
such review and verification. Notwithstanding the foregoing, the Company may
change the terms of any Retention Agreement solely for purposes of accelerating
the payment schedule of any Separation Payment due and owing thereunder without
adversely affecting the Purchaser's right to receive reimbursement under this
Section 4 for 50% of the accelerated payments, up to a maximum aggregate amount
for all Quarters equal to the Retention Escrow Amount.
(c) If ECTS shall disagree with the Separation Payment
Reimbursement Request or the entitlement of any Person to the receipt of a
Separation Payment under the terms of such Person's Retention Agreement, it
shall deliver to the Purchaser and the Escrow Agent a written notice of such
disagreement to all or any part of the Separation Payment Reimbursement Request
(a "Reimbursement Disagreement"), setting forth in reasonable detail the
5
particulars of such disagreement, within thirty (30) days after its receipt of
the Separation Payment Reimbursement Request. Any portion of a Separation
Payment Reimbursement Request not covered by a timely Reimbursement Disagreement
shall be deemed to have been accepted by ECTS, and such portion shall be final,
binding and conclusive for all purposes hereunder. In the event that ECTS does
not provide a Reimbursement Disagreement within such thirty (30) day period,
ECTS shall be deemed to have accepted the Separation Payment Reimbursement
Request delivered by the Purchaser, which shall be final, binding and conclusive
for all purposes hereunder. In the event a Reimbursement Disagreement is timely
provided, the Purchaser and ECTS shall use commercially reasonable efforts for a
period of thirty (30) days (or such longer period as they may mutually agree) to
resolve any disagreements with respect to the Separation Payment Reimbursement
Request or the entitlement of any Person to the receipt of a Separation Payment
under the terms of such Person's Retention Agreement. If, at the end of such
period, they are unable to resolve any such disagreements, then such
disagreements will be finally settled in accordance with the dispute resolution
procedures set forth in Section 2.6 of the Purchase Agreement. The date on which
the amount of Separation Payments is finally determined in accordance with this
Section is hereinafter referred as to the "Separation Payment Determination
Date".
(d) Except as provided in Section 4(e) below, promptly
following a Separation Payment Determination Date, and in any event within five
(5) Business Days of a Separation Payment Determination Date, each of the
Purchaser and ECTS shall execute joint written instructions to the Escrow Agent
directing that the Escrow Agent pay to the Purchaser out of the Retention Escrow
Amount on deposit in the Escrow Account an amount equal to the Reimbursement
Amount. For purposes herein, the "Reimbursement Amount" shall mean the sum of
the Separation Payments as finally determined on an applicable Separation
Payment Determination Date.
(e) Promptly following the Separation Payment Determination
Date relating to the Quarter ending on the second anniversary of the Closing
Date, and in any event within five (5) Business Days of such Separation Payment
Determination Date, each of the Purchaser and ECTS shall execute joint written
instructions to the Escrow Agent directing that the Escrow Agent pay to (i) the
Purchaser out of the Retention Escrow Amount remaining on deposit in the Escrow
Account an amount equal to the Reimbursement Amount and (ii) ECTS all of the
remaining Retention Escrow Amount on deposit in the Escrow Account.
(f) In no event shall the Purchaser be entitled to payment
pursuant to this Section 4 of any amount in excess of the Retention Escrow
Amount.
Section 5. Escrow Account Distributions, Generally.
(a) Each of the Purchaser, on the one hand, and the Sellers,
on the other, agree that it will act in good faith when executing any Draw-Down
Request, Objection, Payment Instructions, Separation Payment Reimbursement
Request or Reimbursement Disagreement, as applicable, in accordance with the
terms of this Escrow Agreement and the Purchase Agreement. All funds distributed
from the Escrow Account to the Purchaser or ECTS shall be transferred by wire
transfer in immediately available funds to such account as the Purchaser or
ECTS, as the case may be, shall notify the Escrow Agent in writing.
6
(b) The Escrow Agent may not release any funds from the
Retention Escrow Amount on deposit in the Escrow Account in order to transfer
funds to the Purchaser in accordance with Section 3 (regardless of the
sufficiency of the Indemnification Escrow Amount to fund such transfers). The
Escrow Agent may not release any funds from the Indemnification Escrow Amount on
deposit in the Escrow Account in order to transfer funds to the Purchaser in
accordance with Section 4 (regardless of the sufficiency of the Retention Escrow
Amount to fund such transfers).
(c) Notwithstanding anything to the contrary herein, the
Escrow Agent is hereby authorised and directed to release to ECTS in check form
any income or earnings earned on the Escrow Funds within 5 Business Days of the
crediting of such income or earnings. Any income or earnings earned pursuant to
this Escrow Agreement shall be reported for federal, state and local tax
purposes as for the account of Sellers. All taxes with respect to such income or
earnings shall be paid by the Sellers.
Section 6. Termination of Escrow Account and Escrow Agreement. The
Escrow Account shall be deemed dissolved and this Escrow Agreement shall
terminate upon the written agreement of the parties hereto or upon transfer of
all amounts in the Escrow Account then in the possession of the Escrow Agent in
accordance with the terms of this Escrow Agreement.
Section 7. Escrow Agent.
(a) Each of the Purchaser and ECTS agrees to pay the Escrow
Agent one-half of its agreed-upon compensation, as set forth in the attached
Exhibit B, for its services as Escrow Agent hereunder promptly upon request
therefor, and to reimburse the Escrow Agent for one-half of all reasonable
expenses of or disbursements incurred by the Escrow Agent in the performance of
its duties hereunder, including the reasonable fees, expenses and disbursements
of counsel to the Escrow Agent.
(b) The Escrow Agent shall have a lien upon the Escrow Account
for any costs, expenses and fees owed by the Sellers that may arise hereunder
and may retain that portion of the Escrow Account equal to such unpaid amounts,
until all such costs, expenses and fees have been paid.
Section 8. Rights, Duties and Immunities of Escrow Agent. Acceptance by
the Escrow Agent of its duties under this Escrow Agreement is subject to the
following terms and conditions, which all parties to this Escrow Agreement
hereby agree shall govern and control the rights, duties and immunities of the
Escrow Agent.
(a) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Escrow Agreement or as
required by Law. Except for the Escrow Agent's own willful misconduct, bad faith
or gross negligence, the Escrow Agent shall not be liable except for the
performance of such duties and obligations as are specifically set out in this
7
Escrow Agreement or as required by Law. The Escrow Agent shall not be required
to inquire as to the performance or observation of any obligation, term or
condition under any agreement or arrangement by the Purchaser or the Sellers.
The Escrow Agent is not a party to, and is not bound by, any agreement,
including, but not limited to the Purchase Agreement, or other document out of
which this Escrow Agreement may arise. The Escrow Agent shall be under no
liability to any party hereto by reason of any failure on the part of any party
hereto or any maker, guarantor, endorser or other signatory of any document or
any other person to perform such person's obligations under any such document.
The Escrow Agent shall not be bound by any waiver, modification, termination or
rescission of this Escrow Agreement or any of the terms hereof, unless evidenced
by a writing delivered to the Escrow Agent signed by the proper party or parties
and, if the duties or rights of the Escrow Agent are affected, unless it shall
give its prior written consent thereto. This Escrow Agreement shall not be
deemed to create a fiduciary relationship between the parties hereto under state
or federal law.
(b) The Escrow Agent shall not be responsible in any manner
for the validity or sufficiency of this Escrow Agreement or of any property
delivered hereunder, or for the value or collectibility of any note, check or
other instrument, if any, so delivered, or for any representations made or
obligations assumed by any party other than the Escrow Agent. Nothing herein
contained shall be deemed to obligate the Escrow Agent to deliver any cash,
instruments, documents or any other property referred to herein, unless the same
shall have first been received by the Escrow Agent pursuant to this Escrow
Agreement.
(c) Each of the Purchaser, on the one hand, and the Sellers on
the other, severally agrees to reimburse and indemnify the Escrow Agent for, and
hold it harmless against, one-half of any loss, liability or expense, including
but not limited to reasonable counsel fees, incurred without gross negligence,
bad faith or willful misconduct on the part of the Escrow Agent arising out of
or in conjunction with its acceptance of, or the performance of its duties and
obligations under, this Escrow Agreement, as well as one-half of the reasonable
costs and expenses of defending against any claim or liability arising out of or
relating to this Escrow Agreement.
(d) The Purchaser and the Sellers have delivered to the Escrow
Agent a list and specimen signatures of authorized signatories, as set forth in
the attached Schedule A hereto, with respect to any notice, certificate,
instrument, demand, request, direction, instruction, waiver, receipt, consent or
other document or communication required or permitted to be furnished to the
Escrow Agent hereunder, and the Escrow Agent shall be entitled to rely on such
list and specimen signatures with respect to any party until a replacement is
furnished by such party to the Escrow agent. The Escrow Agent shall be fully
protected in acting on and relying upon any written notice direction, request,
waiver, consent, receipt or other paper or document which the Escrow Agent in
good faith believes to have been signed and presented by the proper party or
parties.
(e) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith or
for any mistake in act or Law, or for anything which it may do or refrain from
doing in connection herewith, except its own gross negligence, bad faith or
willful misconduct.
8
(f) The Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Escrow Agreement or its duties hereunder, and it shall incur
no liability and shall be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the advice or opinion
of such counsel.
(g) The parties hereto agree that should any dispute arise
with respect to the payment, ownership or right of possession of the Escrow
Funds or Escrow Account, the Escrow Agent is authorized and directed to retain
in its possession, without liability to anyone, except for its bad faith,
willful misconduct or gross negligence, all or any part of the Escrow Funds in
the Escrow Account until such dispute shall have been settled either by mutual
agreement by the parties concerned or by the final order, decree or judgment of
a court or other tribunal of competent jurisdiction in the United States of
America, and a notice executed by the parties to the dispute or their authorized
representatives shall have been delivered to the Escrow Agent setting forth the
resolution of the dispute. The Escrow Agent shall be under no duty whatsoever to
institute, defend or partake in such proceedings.
(h) The Escrow Agent shall not be accountable or liable for
any losses resulting from the sale or depreciation in the market value of such
investments thereof.
(i) The agreements set forth in this Section 8 shall survive
the resignation or removal of the Escrow Agent, the termination of this Escrow
Agreement and the payment of all amounts hereunder.
Section 9. Resignation of Escrow Agent. The Escrow Agent shall have the
right to resign upon 30 days written notice to the Purchaser and ECTS. In the
event of such resignation, the Purchaser and ECTS shall appoint a successor
escrow agent hereunder by delivering to the Escrow Agent a written notice of
such appointment. Upon receipt of such notice, the Escrow Agent shall deliver to
the designated successor escrow agent all money and other property held
hereunder and shall thereupon be released and discharged from any and all
further responsibilities whatsoever under this Escrow Agreement; provided,
however, that the Escrow Agent shall not be deprived of its compensation earned
prior to such time.
If no successor escrow agent shall have been designated by the
date specified in the Escrow Agent's notice, all obligations of the Escrow Agent
hereunder shall nevertheless cease and terminate. Its sole responsibility
thereafter shall be to keep safely all property then held by it and to deliver
the same to a person designated by the other parties hereto or in accordance
with the direction of a final order or judgment of a court of competent
jurisdiction.
By mutual agreement, the Purchaser and ECTS shall have the
right at any time upon not less than seven (7) Business Days written notice to
terminate their appointment of the Escrow Agent, or any successor escrow agent,
as Escrow Agent hereunder, provided, however, the Escrow Agent or any successor
escrow agent shall continue to act as the Escrow Agent until a successor is
appointed and qualified to act as the Escrow Agent.
9
Section 10. Notices. All claims, notices and other communications
hereunder to be effective shall be in writing and shall be deemed to have been
duly given when delivered by hand (which shall include delivery by Federal
Express or other nationally recognized, reputable overnight courier service that
issues a receipt or other confirmation of delivery), or 10 days after being sent
by registered or certified first class mail postage prepaid, or, in the case of
facsimile transmission, when received and telephonically confirmed, in each case
addressed to the parties at the addresses set below (or to such other person or
address as the parties shall have notified each other and the Escrow Agent in
writing, provided that notices of a change of address shall be effective only
upon receipt thereof). All claims, notices and other communications hereunder
shall be in the English language.
If to the Purchaser:
EVCI Career Colleges Holding Corp.
0 Xxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx X. XxXxxxx
CEO and President
General Counsel
With copies to:
Xxxxxx X. Xxxxxxx, Esq.
EVCI Career Colleges Holding Corp.
0 Xxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Ritzert & Leyton, P.C.
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
10
If to the Sellers:
East Coast Training Services, Inc.
x/x Xxxxx X. Xxxxxxx
XxX Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies to:
East Coast Capital Corp.
x/x Xxxxx X. Xxxxxxx
XxX Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
North American Training Services, Inc.
x/x Xxxxx X. Xxxxxxx
XxX Associates
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
AEA Investors LLC
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
11
If to the Escrow Agent:
HSBC BANK USA, NATIONAL ASSOCIATION
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Corporate Trust
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 11. Coordination. The Sellers hereby appoint ECTS as the
contact party for purposes of communicating with the other parties hereto
regarding this Escrow Agreement and ECTS shall be authorized to act on behalf of
the Sellers as to all matters pertaining to this Escrow Agreement.
Section 12. Binding Effect. This Escrow Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, successors and assigns.
Section 13. Amendments. This Escrow Agreement may be amended or
modified at any time or from time to time in writing executed by the parties to
this Escrow Agreement.
Section 14. Governing Law. This Escrow Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York
applicable to contracts to be performed entirely within the State of New York,
without reference to or application of rules or principles of conflicts of law.
Section 15. Interpretation. The headings of the sections contained in
this Escrow Agreement are solely for convenience or reference and shall not
affect the meaning or interpretation of this Escrow Agreement.
Section 16. Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 17. Consent to Jurisdiction. Each of the parties hereto hereby
irrevocably agrees that any action, suit or proceedings against any of them by
any of the other aforementioned parties with respect to this Escrow Agreement
shall be brought before the exclusive jurisdiction of the federal or state
courts located in the Borough of Manhattan in the State of New York, unless all
the parties hereto agree in writing to any other jurisdiction. Each of the
parties hereto hereby submits to such exclusive jurisdiction.
Section 18. Waiver of Jury Trial. Each party hereto waives, to the
fullest extent permitted by applicable Law, any right it may have to a trial by
jury in respect of any litigation arising out of or relating to this Escrow
Agreement.
12
Section 19. Severability. If any provisions of this Escrow Agreement
shall be declared by any court of competent jurisdiction illegal, void or
unenforceable, the other provisions shall not be affected, but shall remain in
full force and effect.
[Signature pages follow]
13
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date and the year first above written.
EVCI CAREER COLLEGES HOLDING CORP.
By:___________________________
Name: Xx. Xxxx X. XxXxxxx
Title: Chief Executive Officer and
President
EAST COAST TRAINING SERVICES OF
DELAWARE, INC.
By:___________________________
Name:
Title:
EAST COAST CAPITAL CORP.
By:___________________________
Name:
Title:
14
NORTH AMERICAN TRAINING SERVICES, INC.
By:___________________________
Name:
Title:
HSBC BANK USA, NATIONAL
ASSOCIATION, as Escrow Agent
By:___________________________
Name:
Title:
15
Exhibit A
[Date]
HSBC BANK USA, NATIONAL ASSOCIATION
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Corporate Trust
Dear Sirs:
Reference is made to that certain Escrow Agreement dated as of ______,
2005 (the "Escrow Agreement") by and among East Coast Training Services
of Delaware, Inc., a Delaware corporation ("ECTS"), East Coast Capital
Corp. a Delaware corporation ("ECC"), North American Training Services,
Inc., a Delaware corporation ("NATS" and collectively with ECTS and
ECC, the "Sellers"), EVCI Career Colleges Holding Corp., a Delaware
corporation (the "Purchaser"), and HSBC Bank, USA, National
Association, as escrow agent (the "Escrow Agent"). Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed
thereto in the Escrow Agreement
In connection with the Purchaser's Draw-Down Request dated
________________, and in accordance with the terms of Section 3 of the
Escrow Agreement, Purchaser and the Sellers hereby:
(i) direct the Escrow Agent to release to the Purchaser funds
from the Indemnification Escrow Amount on deposit in the Escrow Account
in the amount of $____________;
[(ii) instruct the Escrow Agent that Purchaser is not entitled
to the remaining balance of $__________ claimed in the Draw-Down
Request dated _______.]
The Escrow Agent may not release any funds from the Retention Escrow
Amount on deposit in the Escrow Account in order to satisfy these
payment instructions (regardless of the sufficiency of the
Indemnification Escrow Amount to fund these payment instructions).
[Signature page follows]
16
EVCI CAREER COLLEGES HOLDING CORP.
By:___________________________
Name: Xx. Xxxx X. XxXxxxx
Title: Chief Executive Officer and
President
EAST COAST TRAINING SERVICES OF
DELAWARE, INC.
By:___________________________
Name:
Title:
EAST COAST CAPITAL CORP.
By:___________________________
Name:
Title:
NORTH AMERICAN TRAINING SERVICES, INC.
By:___________________________
Name:
Title:
17
Exhibit B
HSBC [LOGO]
April 20, 2005
Schedule of Fees -
Escrow Agent
For
AEA Investors-Acquisition Escrow
Acceptance Fee- $ WAIVED
This one-time fee covers the acceptance of our appointment, review and
consideration of all supporting documents, meetings with transaction parties,
consultation with attorney, and establishment of procedures required to perform
the services required by the governing documents.
This fee is payable at closing
Administrative Fee-Escrow Agent $3,000 per annum or portion thereof
This fee covers the ordinary administrative and operational responsibilities of
HSBC Bank USA. This fee is payable at closing
Legal Fee At cost
Out of Pocket At cost
These are expenses incurred by us on behalf of the Client to effectively service
this account on a day-to-day basis. If required, these include but are not
limited to: accountant and counsel fees, postage, stationery, express mail,
telephone and facsimile charges. These expenses are charged at cost. A detailed
explanation for each item will be included on all billing statements.
Bid Conditions
The fees set forth above are subject to change as circumstances warrant. We
reserve the right to amend this Schedule of Fees or withdraw as the proposed
Agent pending review of the final documents and agreement with respect to the
duties, responsibilities and indemnification of the HSBC Bank USA. Any fees
charged for services not specifically set forth in this schedule will be
assessed in amounts commensurate with services rendered. If the transaction
should fail to close, we reserve the right to charge our legal counsel fees and
any out-of-pocket expenses.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
To help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify
and record information that identifies each person or entity that opens an
account.
What this means for you: If you open an account, we will ask for your name,
address, tax identification number, and other information that will allow us to
identify you. Additionally, we will take certain steps to verify your identity
through documents or by checking other sources.
Accepted and Approved
--------------------------------------------------------------------------------
(Name and Title)
--------------------------------------------------------------------------------
(Date)
18
Schedule A
The Escrow Agent is authorized to accept instructions signed or believed by the
Escrow Agent to be signed by the following on behalf of PURCHASER.
--------------------------------- -----------------------------
True Signature
--------------------------------- ------------------------------
True Signature
The Escrow Agent is authorized to accept instructions signed or believed by the
Escrow Agent to be signed by the following on behalf of SELLERS.
--------------------------------- -----------------------------
True Signature
--------------------------------- ------------------------------
True Signature
19
EXHIBIT B
LETTER AGREEMENT
EVCI Career Colleges Holding Corp. June 30, 2005
0 Xxx Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Side Letter Agreement
Ladies and Gentlemen:
Reference is made to the Stock Purchase Agreement dated June 30, 2005
(the "Purchase Agreement"), by and among EVCI Career Colleges Holding Corp. (the
"Purchaser"), Technical Career Institutes, Inc. (the "Company"), East Coast
Training Services of Delaware, Inc. ("ECTS"), East Coast Capital Corp. ("ECC")
and North American Training Services, Inc. ("NATS" and together with ECTS and
ECC, the "Sellers"). Capitalized terms used herein without definition shall have
the meanings set forth in the Purchase Agreement.
In consideration of good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
The condition precedent referred to in Section 5.1(f) of the Purchase
Agreement shall be as follows: The Union shall have entered into a letter
agreement with the Purchaser on or prior to the Closing Date substantially to
the effect that for a period of at least seven years the Union will not make any
attempt to unionize, or unionize, and will not represent, any employees of (i)
the Purchaser, (ii) any of its current Affiliates (other than the Company
including any additional campuses opened by the Company) and (iii) one possible
future Affiliate to be identified by the Purchaser to the Union (which possible
future Affiliate shall not be a party to any collective bargaining agreement
with the Union, be the object of a current organizing drive by the Union, or be
engaged in negotiations with respect to a possible collective bargaining
agreement with the Union), provided that, the Purchaser shall have agreed to
recognize the Union as the sole and exclusive bargaining agency for employees at
the Company and any additional campuses opened by the Company for the full term
of the letter agreement. Satisfaction of this condition, unless expressly waived
in writing by the Purchaser, is in addition to those enumerated in Section 5.1
of the Purchase Agreement.
This side letter agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard to
principles of choice or conflicts of law thereof. This side letter agreement may
be executed in any number of separate counterparts, all of which shall
constitute one instrument. For purposes of this side letter agreement, a
document (or signature page thereto) signed and transmitted by facsimile shall
be deemed an original document.
Please confirm your agreement with the foregoing by signing and
returning to the undersigned the duplicate copy of this letter enclosed
herewith.
Very truly yours,
Technical Career Institutes, Inc.
By /s/ Xxxxxx Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
East Coast Training Services of Delaware, Inc.
By /s/ Xxxxxx Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
East Coast Capital Corp.
By /s/ Xxxxxx Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
North American Training Services, Inc.
By /s/ Xxxxxx Xxxx
-----------------------
Name: Xxxxxx Xxxx
Title: Vice President and Assistant Treasurer
Confirmed and agreed to as of the date of this letter:
EVCI Career Colleges Holding Corp.
By Xx. Xxxx X. Xxxxxxxx
-----------------------
Name: Xx. Xxxx X. Xxxxxxxx
Title: Chairman
Exh. B-1
EXHIBIT C
FORM OF COMPANY'S SECRETARY'S CERTIFICATE
TECHNICAL CAREER INSTITUTES, INC.
SECRETARY'S CERTIFICATE AND INCUMBENCY
AND SPECIMEN SIGNATURE CERTIFICATE
I, Xxxxx Xxxxxxx, do hereby certify that I am the duly elected and acting
Assistant Secretary of Technical Career Institutes, Inc., a New York corporation
(the "Corporation"), and further certify in such capacity that:
1. Attached hereto as Exhibit A is a true copy of the resolutions duly adopted
by the Corporation's Board of Directors, which constitute all actions taken by
the Board of Directors with respect to the transactions contemplated by the
Stock Purchase Agreement dated as of June 30, 2005, by and among the
Corporation, EVCI Career Colleges Holding Corp., East Coast Training Services of
Delaware, Inc., East Coast Capital Corp. and North American Training Services,
Inc., and the other agreements related thereto.
2. Attached hereto as Exhibit B is a true copy of the Certificate of
Incorporation of the Corporation and all amendments thereto certified by the
Secretary of State of the State of New York on _______, 2005; such Certificate
of Incorporation has not been modified, rescinded, revoked or further amended
since ______, 2005.
3. Attached hereto as Exhibit C is a correct and complete copy of the Bylaws of
the Corporation.
4. Attached hereto as Exhibit D is a Certificate of Existence, dated _____,
2005, for the Corporation, issued by the Secretary of State of the State of New
York.
5. The following named persons are now holding the office set forth opposite
his/her name, and the signature of each such person, as set forth below, is
his/her genuine signature:
NAME OFFICE SIGNATURE
---- ------ ---------
Xxxxx X. Xxxxxxx Chairman of the Board and Director ______________________
Xxxxx Xxxxxxx Acting President, Chief Financial ______________________
Officer, Treasurer and Assistant
Secretary
Xxxxxxxxx X. Xxxxx Vice President and Secretary, ______________________
Director
Exh. C-1
NAME OFFICE SIGNATURE
---- ------ ---------
Xxxxxx Xxxx Vice President and Assistant ______________________
Treasurer, Director
[Signature page follows]
Exh. C-2
IN WITNESS WHEREOF, I have executed this certificate on behalf of the
Corporation on this ___ day of ________, 2005.
-----------------------------
Xxxxx Xxxxxxx
Assistant Secretary
Exh. C-3
EXHIBIT A
TO
SECRETARY'S CERTIFICATE AND
INCUMBENCY AND SPECIMEN
SIGNATURE CERTIFICATE
Board of Directors Resolutions
Exh. C-4
EXHIBIT B
TO
SECRETARY'S CERTIFICATE AND
INCUMBENCY AND SPECIMEN
SIGNATURE CERTIFICATE
Certificate of Incorporation
Exh. C-5
EXHIBIT C
TO
SECRETARY'S CERTIFICATE AND
INCUMBENCY AND SPECIMEN
SIGNATURE CERTIFICATE
Bylaws
Exh. C-6
EXHIBIT D
TO
SECRETARY'S CERTIFICATE AND
INCUMBENCY AND SPECIMEN
SIGNATURE CERTIFICATE
Certificate of Existence
Exh. C-7
EXHIBIT D
FORM OF RELEASE
This RELEASE (this "Release") is made on this _____ day of ________,
2005 by East Coast Training Services of Delaware, Inc. ("ECTS"), East Coast
Capital Corp. ("ECC"), North American Training Services, Inc. ("NATS" and
together with ECTS and ECC, the "Sellers"), AEA Investors Inc. ("AEA"), Chrysler
Capital Corporation (n/k/a) DaimlerChrysler Services North America LLC ("DCSNA"
and together with AEA, the "Lenders"), North American Training Centers, Inc.
("NATCI") and Technical Career Institutes, Inc. (the "Company"). Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Purchase Agreement (as defined below).
WHEREAS, the Company is a party to that certain Stock Purchase
Agreement dated June 30, 2005 (the "Purchase Agreement"), by and among EVCI
Career Colleges Holding Corp. (the "Purchaser"), the Sellers and the Company;
WHEREAS, (i) ECTS owns all of the issued and outstanding Shares, (ii)
ECC owns all of the issued and outstanding shares of the capital stock of ECTS
and (iii) NATS owns all of the issued and outstanding shares of the capital
stock of ECC except for 18,333.333 shares of ECC's Cumulative Preferred Stock
owned by DCSNA;
WHEREAS, the consummation of the transactions contemplated by the
Purchase Agreement is conditioned upon, among other things, a release of claims
executed by each Seller and Lender pursuant to Section 6.2(k) of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions herein set forth, the sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Release. Each Seller, each Lender and NATCI hereby expressly,
irrevocably, and unconditionally release, acquit, and forever discharge the
Company from any and all claims, causes of action, liabilities, losses, damages,
demands, actions, suits or promises whatsoever, whether known or unknown,
suspected or unsuspected, whether in law or equity (collectively, "Claims"),
that arise out of, or otherwise relate to, (x) the period prior to the Closing
Date and (y) the agreements, instruments and documents listed on Schedule 1
hereto to which the Company is a party or by which the Company is bound or to
which any of the Company's assets or properties is subject; provided, however,
this Section 1 shall not be deemed to release any Claims arising out of or
otherwise relating to the Purchase Agreement, the Escrow Agreement or any other
agreement executed and delivered pursuant to the Purchase Agreement.
2. No Admission. This Release and any negotiations, discussions or
proceedings in connection with it do not, and shall not, constitute, be
construed as, or be deemed to be an admission or concession of any liability or
wrongdoing whatsoever by the Company.
Exh. D-1
3. Governing Law. This Release shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard to
principles of choice or conflicts of law thereof.
4. Counterparts. This Release may be executed in any number of separate
counterparts, all of which shall constitute one instrument. For purposes of this
Release, a document (or signature page thereto) signed and transmitted by
facsimile shall be deemed an original document.
5. Headings. The section headings contained in this Release are for
convenience only and shall not affect the construction or interpretation of this
Release.
[Signature pages follow]
Exh. D-2
IN WITNESS WHEREOF, the parties have executed this Release as
of the date first above written.
TECHNICAL CAREER INSTITUTES, INC.
By:_____________________________
Name:
Title:
EAST COAST TRAINING SERVICES OF
DELAWARE, INC.
By:_____________________________
Name:
Title:
EAST COAST CAPITAL CORP.
By:_____________________________
Name:
Title:
NORTH AMERICAN TRAINING SERVICES, INC.
By:_____________________________
Name:
Title:
Exh. D-3
AEA INVESTORS INC.
By:_____________________________
Name:
Title:
CHRYSLER CAPITAL CORPORATION (N/K/A)
DAIMLERCHRYSLER SERVICES NORTH
AMERICA LLC.
By:_____________________________
Name:
Title:
NORTH AMERICAN TRAINING CENTERS, INC.
By:_____________________________
Name:
Title:
Xxx. X-0
Xxxxxxxx 0
Xxxxxx Xxxx Loan Agreement, dated as of September 30, 1994, among ECC, as
borrower and AEA Investors Inc., NATS and Chrysler Capital Corporation (n/k/a
)DaimlerChrysler Services North America LLC, as lenders, as amended by First
Amendment Agreement dated June 15, 1998, among ECC, ECTS, North American
Training Centers, Inc., the Company, AEA Investors Inc., NATS and Chrysler
Capital Corporation (n/k/a )DaimlerChrysler Services North America LLC, as
amended by Second Amendment Agreement dated October 10, 1999, among ECC, ECTS,
North American Training Centers, Inc., the Company, AEA Investors Inc., NATS and
Chrysler Capital Corporation (n/k/a )DaimlerChrysler Services North America LLC,
as amended by Third Amendment Agreement dated October 10, 2001, among ECC, ECTS,
North American Training Centers, Inc., the Company, AEA Investors Inc., NATS and
Chrysler Capital Corporation (n/k/a ) DaimlerChrysler Services North America
LLC, as amended by Fourth Amendment Agreement dated April 9, 2003 among ECC,
ECTS, North American Training Centers, Inc., the Company, AEA Investors Inc.,
NATS and Chrysler Capital Corporation (n/k/a ) DaimlerChrysler Services North
America LLC, as extended to October 31, 2004 via letter dated November 10, 2003,
as amended by Fifth Amendment Agreement dated April 1, 2005 among ECC, ECTS,
North American Training Centers, Inc., the Company, AEA Investors Inc., NATS and
Chrysler Capital Corporation (n/k/a )DaimlerChrysler Services North America LLC;
Second Pledge Agreement and Non-Recourse Guarantee by East Coast Training
Services of Delaware, Inc. of Technical Career Institutes, Inc. Stock dated as
of September 30, 1994; TCI Guarantee Agreement dated as of September 30, 1994;
Pledge Agreement of Technical Career Institutes, Inc. dated as of September 30,
1994; TCI Security Agreement dated as of September 30, 1994; ancillary documents
and related security agreements to Senior Term Loan Agreement.
Xxx. X-0
