EXHIBIT 2.5
MASTER ASSET PURCHASE AGREEMENT
BETWEEN
CORINTHIAN COLLEGES, INC.
AS BUYER,
AND
XXXXXXXX COLLEGES, INC.
AND CERTAIN OF ITS SUBSIDIARIES
AS SELLING PARTIES
DATED AS OF OCTOBER 17, 1996
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I SALE AND PURCHASE OF ASSETS................................ 1
1.1 Purchased Assets to be Transferred......................... 1
1.1.1 Intellectual Property............................... 2
1.1.2 Goodwill............................................ 2
1.1.3 Curriculum.......................................... 2
1.1.4 Promotional Material................................ 2
1.1.5 Other Intangible Assets............................. 2
1.2 Excluded Assets............................................ 2
1.3 Timing of Transfer of Purchased Assets..................... 2
ARTICLE II CONSIDERATION.............................................. 3
2.1 Purchase Price............................................. 3
2.2 Cash Consideration......................................... 3
2.2.1 Tier I.............................................. 3
2.2.2 Tier II............................................. 3
2.2.3 ................................................... 3
2.2.4 Adjustment of Final Payment......................... 6
2.3 Obligations and Liabilities to be Assumed.................. 6
2.4 Excluded Liabilities....................................... 7
2.5 Allocation of Purchase Price............................... 7
2.6 Excise and Property Taxes.................................. 7
2.7 Employees.................................................. 7
2.8 Use of "Xxxxxxxx Colleges, Inc." Name Marked on Inventories 8
2.9 No Option or Right to Offset............................... 8
ARTICLE III CLOSING.................................................... 8
3.1 Tier I Closing............................................. 8
3.2 Tier II Closing............................................ 8
3.3 Deliveries by Selling Parties at each Tier Closing......... 8
3.4 Deliveries by Selling Parties at the Tier I Closing Only... 9
3.5 Deliveries by Buyer at each Tier Closing................... 10
3.6 Deliveries by Buyer at the Tier I Closing Only............. 10
3.7 Delivery by Buyer at the Tier II Closing Only.............. 11
ARTICLE IV TERMINATION................................................ 11
4.1 Termination................................................ 11
i
Page
----
4.2 Effect of Termination..................................... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLING
PARTIES................................................... 12
5.1 Corporate Power........................................... 12
5.2 Capacity; Authorization; Binding Effect................... 12
5.3 No Conflicts.............................................. 12
5.4 Title to the Purchased Assets............................. 13
5.5 Tradenames; Confidential Information...................... 13
5.6 Insurance................................................. 13
5.7 Absence of Certain Changes................................ 14
5.8 Solvency.................................................. 14
5.9 Delivery of Documents..................................... 14
5.10 Disclosure................................................ 15
5.11 Incorporation by Reference................................ 15
5.12 Survival of Representations and Warranties................ 15
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................... 15
6.1 Incorporation; Authority.................................. 15
6.2 Due Authorization; Binding Agreement...................... 15
6.3 No Violation or Conflict.................................. 16
6.4 No Undisclosed Liabilities................................ 16
6.5 Consents and Approvals.................................... 16
6.6 Disclosure................................................ 16
6.7 Capitalization............................................ 16
6.8 Survival of Representations and Warranties................ 17
ARTICLE VII COVENANTS................................................. 17
7.1 Covenants of the Selling Parties Pending Tier II Closing.. 17
7.2 Support Services Covenants................................ 18
7.3 Covenants of Buyer Pending Tier II Closing................ 18
7.4 Closing and Post-Closing Covenants........................ 18
7.4.1 Further Assurances................................. 18
7.4.2 Mutual Cooperation................................. 18
7.4.3 Access to Employees................................ 18
7.5 Access and Maintenance of Records......................... 19
7.6 Coordination of Agreements................................ 19
7.7 Guaranty ................................................. 20
7.8 Limitation on Dividends................................... 20
ii
Page
----
ARTICLE VIII CONDITIONS 20
8.1 Conditions Precedent to Obligations of Buyer................. 20
8.3 Conditions Precedent to Obligations of Buyer at the Tier II
Closing...................................................... 21
8.4 Conditions Precedent to Obligations of Selling Parties....... 21
ARTICLE IX MISCELLANEOUS................................................ 23
9.1 Binding Effect............................................... 23
9.2 Notices...................................................... 23
9.3 Entire Agreement............................................. 24
9.4 Risk of Loss or Damage; Insurance............................ 25
9.5 Waiver....................................................... 25
9.6 Governing Law................................................ 25
9.7 Headings..................................................... 25
9.8 Counterparts................................................. 25
9.9 Severability................................................. 25
9.10 Time is of the Essence....................................... 25
9.11 Brokers or Finders........................................... 25
9.12 Indemnification by........................................... 26
9.13 Indemnification by Buyer..................................... 26
9.14 Procedure for Indemnification................................ 27
9.14.1....................................................... 27
9.14.2....................................................... 27
9.14.3 ...................................................... 27
9.14.4 Indemnification Floor................................ 28
9.14.5 Payments from Escrow................................. 28
9.14.6 Maximum Liabilities.................................. 28
9.14.7 Definition........................................... 28
9.14.8 Indemnification Time Limit........................... 29
9.14.9 Definition........................................... 29
9.15 Exclusive Remedy............................................. 29
9.16 Limitation................................................... 29
9.17 No Double Indemnification.................................... 29
9.18 Dispute Resolution and Arbitration........................... 30
9.18.1 Negotiation Between Executives....................... 30
9.18.2 Arbitration.......................................... 30
9.19 Third Party Beneficiaries.................................... 30
9.20 Bulk Transfers............................................... 30
9.21 Expenses..................................................... 31
iii
SCHEDULES
---------
SCHEDULE 2.5 Allocation of Purchase Price Among the Purchased Assets
--------
SCHEDULE 2.7 Employees
--------
SCHEDULE 5.3 No Conflicts
--------
SCHEDULE 5.4 Permitted Exceptions
--------
SCHEDULE 5.5 Intellectual Property
--------
SCHEDULE 5.6 Insurance
--------
SCHEDULE 5.7 Absence of Certain Changes
--------
SCHEDULE 6.5 Consents and Approvals
--------
iv
EXHIBITS
--------
EXHIBIT A List of Subsidiaries of Xxxxxxxx
-------
EXHIBIT B Bid Prices
-------
EXHIBIT C Assignment and Assumption Agreement
-------
EXHIBIT D Xxxx of Sale
-------
EXHIBIT E-1 Buyer's Officers' Certificate
-------
EXHIBIT E-2 Sellers' Officers' Certificate
-------
EXHIBIT F-1 Form of Opinion of Buyer's Counsel
-------
EXHIBIT F-2 Form of Opinion of Sellers' Counsel
-------
EXHIBIT G Trademark License Agreement
-------
EXHIBIT H Tier I Escrow Agreement
-------
EXHIBIT I Support Services Agreement
-------
EXHIBIT J Real Property Agreement
-------
EXHIBIT K Value Prices
-------
EXHIBIT L Interim Note
-------
EXHIBIT M Escrow Funding Note
-------
EXHIBIT N Guaranty
-------
v
MASTER ASSET PURCHASE AGREEMENT
This Master Asset Purchase Agreement, dated as of October 17, 1996
(the "Agreement"), is entered into by and among Corinthian Colleges, Inc., a
Delaware corporation ("Buyer"), on the one hand, and Xxxxxxxx Colleges, Inc., a
Mississippi corporation ("Xxxxxxxx"), and certain subsidiaries of Xxxxxxxx as
identified on EXHIBIT A (the "Sellers" and, together with Xxxxxxxx, the "Selling
-------
Parties"), on the other hand.
P R E A M B L E :
WHEREAS, Sellers own, operate and administer, among other things,
those certain post-secondary, vocational training schools listed on EXHIBIT B
-------
attached hereto and made a part hereof by this reference (the "Schools");
WHEREAS, for purposes of this Agreement, the parties have separated
the Schools into two groups, designated as the "Tier I Schools" and the "Tier II
Schools" as specified on EXHIBIT B;
-------
WHEREAS, Buyer desires to buy, through the payment of cash, the
assumption of liabilities of the Selling Parties and other valuable
consideration, and the Selling Parties desire to sell, all intangible assets and
certain other assets and property owned by the Selling Parties and used directly
in the business of the Schools, and certain related assets as specified herein,
upon the terms and conditions hereinafter set forth; and
WHEREAS, concurrently herewith, affiliates of Buyer, namely, Xxxxxx
Colleges, Inc., a Delaware corporation ("Xxxxxx"), Xxxxxx Business Group, Inc.,
a Delaware corporation ("Xxxxxx Group"), and Florida Metropolitan University,
Inc., a Florida corporation ("FMU"), and the Selling Parties are entering into
that certain Schools Acquisition Agreement (the "Secondary Agreement"), pursuant
to which Buyer or its affiliates is purchasing all of the tangible assets and
property and certain other assets owned by the Selling Parties used directly in
the business of the Schools specified therein;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained in this Agreement and intending to be legally bound hereby,
agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Purchased Assets to be Transferred. Subject to the terms and
----------------------------------
conditions of this Agreement, the Selling Parties hereby agree to sell, assign,
convey, transfer and deliver to Buyer and Buyer hereby agrees to assume the
Assumed Liabilities (as defined in Section 2.3 below) from the Selling Parties
and to purchase from the Selling Parties all of the Selling Parties' right,
title and interest in and to the following assets (the "Purchased Assets"),
subject to all existing mortgages, pledges, liens, claims, restrictions,
encumbrances, options, rights and
1
security interests of any kind or nature, including the Permitted Exceptions (as
defined in Section 5.4 below), and except for the Excluded Assets (as defined in
Section 1.2 below):
1.1.1 Intellectual Property. All patents, trademarks, service
---------------------
marks, licenses and copyrights (whether or not registered) and all applications
and registrations therefor, owned by the Selling Parties and used directly in
connection with the operation of the Schools, and all computer programs and
software owned by the Selling Parties and used directly in the operation of the
Schools, including those described in SCHEDULE 5.5 (the "Intellectual
--------
Property"), but excluding the name "Xxxxxxxx" or "Xxxxxxxx Colleges" and any
derivatives thereof, and any trademarks, tradenames, logotypes or servicemarks
related thereto and any trademarks, tradenames, logotypes or servicemarks
licensed to Buyer in accordance with the Trademark License Agreement (as defined
in Section 3.4.1 below);
1.1.2 Goodwill. All of the goodwill and going concern value of
--------
the Selling Parties related exclusively to the Schools;
1.1.3 Curriculum. Copies of all curricula both owned and/or
----------
licensed by the Selling Parties (and which the Selling Parties have a right to
transfer) and currently being taught or which has been taught in the two most
recent academic years at the Schools and, with respect to any such curricula
licensed by the Selling Parties, the right to use, on a royalty free basis, all
such curricula (in accordance with the terms of the applicable license);
1.1.4 Promotional Material. All of Xxxxxxxx' right, title and
--------------------
interest in and to the promotional and marketing materials related exclusively
to the Schools; and
1.1.5 Other Intangible Assets. All other intangible assets
-----------------------
of the Sellers used exclusively by the Schools not covered in the foregoing
provisions of this Section 1.1.
1.2 Excluded Assets. The Excluded Assets shall not be conveyed
---------------
hereunder. The "Excluded Assets" are all assets of the Selling Parties not sold
in accordance with Section 1.1, above, including, but not limited to, all assets
being transferred to Buyer or its affiliates pursuant to the Secondary Agreement
and any assets of the Selling Parties not included in the Purchased Assets as
defined hereunder or as defined in the Secondary Agreement.
1.3 Timing of Transfer of Purchased Assets. The Purchased Assets
--------------------------------------
related to the Tier I Schools shall be purchased, and the Assumed Liabilities
related to the Tier I Schools shall be assumed, at the Tier I Closing (as
defined in Section 3.1 below); the Purchased Assets related to the Tier II
Schools shall be purchased, and the Assumed Liabilities related to the Tier II
Schools shall be assumed, at the Tier II Closing (as defined in Section 3.2
below).
2
ARTICLE II
CONSIDERATION
2.1 Purchase Price. In consideration of the sale of the Purchased
--------------
Assets by the Selling Parties to the Buyer, the Buyer shall pay the Purchase
Price (as hereinafter defined) to Xxxxxxxx for itself and/or as agent for the
Sellers or any other parties as designated by Xxxxxxxx (in such capacities, the
"Xxxxxxxx Payee"), in the manner and at the times set forth below, subject to
adjustment as hereinafter set forth, and assume the Assumed Liabilities pursuant
to the Assignment and Assumption Agreement (as hereinafter defined).
2.2 Cash Consideration. The Purchase Price shall be equal to the sum
------------------
of the Tier I Payment, the Tier II Payment and the Final Payment, subject to
adjustment as set forth herein and in the escrow agreements, payable as follows:
2.2.1 Tier I. At the Tier I Closing, Buyer shall pay to the
------
Xxxxxxxx Payee in cash by wire transfer of immediately available funds
$14,000,000 (the "Tier I Payment").
2.2.2 Tier II. At the Tier II Closing, Buyer shall pay to the
-------
Xxxxxxxx Payee in cash by wire transfer of immediately available funds an amount
calculated in accordance with Section 8.3 hereof (the "Tier II Payment");
provided, however, thirteen and one-third percent (13 1/3%) of such Tier II
Payment (the "Tier II Escrow Amount") shall be paid and held in escrow pursuant
to the terms of an escrow agreement in form and substance reasonably
satisfactory to the parties hereto (the "Tier II Escrow Agreement").
2.2.3
(a) Final Payment. On the earlier of (i) the last date
-------------
on which: (1) the U.S. Department of Education ("ED") has certified all of the
Tier I Schools as eligible to participate in the programs of student financial
assistance administered pursuant to Title IV of the Higher Education Act of 1965
as amended ("Title IV"); and (2) some or all of the guaranty agencies which
guarantee Federal Family Education Loan ("FFEL") program loans for the Schools
resume such activities such that any combination of Schools with an aggregate
value of $17,600,000 (based on the Tier I Bid Prices set forth in EXHIBIT B) are
-------
able to receive FFEL program funds; or (ii) 60 days after the Tier I Closing
(the "Final Payment Date"), Buyer shall pay $4,000,000 (the "Final Payment") as
follows: (y) $1,100,000 ("Payment Amount") to the Xxxxxxxx Payee pursuant to the
terms of the Interim Note attached hereto as EXHIBIT L, and (z) subject to
-------
Section 2.2.4, $2,900,000 of the Final Payment (the "Tier I Escrow Amount")
shall be paid in accordance with the terms of the Escrow Funding Note attached
hereto as EXHIBIT M ("Escrow Funding Note"). Pursuant to the terms of the Escrow
-------
Funding Note, the Tier I Escrow Amount shall be paid and held in escrow pursuant
to the terms thereof and of the escrow agreement in the form attached hereto as
EXHIBIT H and to be executed by the parties at the Tier I Closing (the "Tier I
-------
Escrow Agreement"). The Final Payment shall be paid in accordance with the
provisions of this Section 2.2.3(a) without any right or option of offset by
Buyer against any amounts which Buyer claims are owed to it hereunder, under the
Secondary Agreement, the Real
3
Property Agreement, any note issued pursuant hereto or thereto or any other
agreement, certificate, instrument or document related hereto or thereto or
otherwise by the Selling Parties as of the Final Payment Date.
(b) Escrow. The Tier I Escrow Agreement shall provide for
------
the distribution of escrow funds in the following amounts and upon the following
occurrences:
(i) $800,000 of the escrow funds, together with all
interest earned since the Tier I Closing Date on that amount, shall be disbursed
to the Xxxxxxxx Payee upon completion and filing with ED of compliance audits
for each of the Tier I Schools covering the period July 1, 1995 through June 30,
1996, as required by the provisions of 34 C.F.R. (SEC.) 668.23, which Buyer
agrees to seek to file not later than 120 days but shall file no later than 150
days following the Tier I Closing Date; provided, however, if such compliance
audits reflect potential liabilities in excess of $10,000 for any Tier I School,
Buyer shall provide the Selling Parties with the opportunity to review and
comment on a draft of such audits prior to the filing thereof and shall
cooperate in good faith with the Selling Parties to incorporate any comments the
Selling Parties may have with respect to such audits. In the event that any such
compliance audits establish a claim for indemnification under Section 9.12 of
this Agreement, the escrow agent will continue to retain an amount sufficient to
satisfy such claims up to $800,000 of the escrow funds, which retained amount
shall be released to the Xxxxxxxx Payee, together with all interest earned on
such funds since the Tier I Closing Date, upon resolution of the compliance
audits and payment of any such claim, if any, by Selling Parties once such
indemnification claim is Definitively Resolved. At the option of the Xxxxxxxx
Payee, the Xxxxxxxx Payee may execute an instruction in accordance with the Tier
I Escrow Agreement directing the escrow agent to pay to the applicable creditors
that amount of the funds in the escrow account necessary to satisfy the
liabilities of the Selling Parties with respect to such compliance audits
(together with all interest earned since the Tier I Closing Date on the funds so
released) and to release to the Xxxxxxxx Payee the difference between such
amount and $800,000 of the funds in the escrow account, together with all
interest earned since the Tier I Closing Date on the funds so released to the
Xxxxxxxx Payee.
(ii) the difference between $800,000 of the escrow funds
less the amount of the Final TFC Payment (as defined below) (the "Reduced
Release Amount"), together with all interest earned since the Tier I Closing
Date on that amount, shall be released to the Xxxxxxxx Payee on the second (2d)
anniversary of the Tier I Closing Date; provided, however, the escrow agent will
continue to retain an amount therefrom sufficient to satisfy any indemnification
claims under Section 9.12 which have been noticed in accordance with Section
9.14 of this Agreement up to the Reduced Release Amount of the escrow funds,
which retained amount shall be released, together with all interest earned on
such funds since the Tier I Closing Date, upon resolution of the pending
indemnification claims and payment of any liability amounts owed by Selling
Parties once such claim is Definitively Resolved. At the option of the Xxxxxxxx
Payee, the Xxxxxxxx Payee may execute an instruction in accordance with the Tier
I Escrow Agreement directing the escrow agent to pay to the applicable
creditor(s), up to the amount of Reduced Release Amount, that amount of the
funds in the escrow account necessary to satisfy the resolved indemnification
claims and to release to the Xxxxxxxx Payee the difference
4
between such amount and the Reduced Release Amount in the escrow account, in
each case, together with all interest earned since the Tier I Closing Date on
the funds so released, to such creditor(s) and to the Selling Parties, as
applicable.
(iii) $800,000 of the escrow funds, together with all
interest earned since the Tier I Closing Date on that amount, shall be released
to the Xxxxxxxx Payee on the earlier of the following ("Release Date"): (1)
conduct of a program review by ED with respect to at least nine (9) of the
Schools pursuant to which ED does not assert Title IV liabilities in an
aggregate amount in excess of $800,000, for periods prior to the Tier I Closing
Date; or (2) the second (2d) anniversary of the Tier I Closing Date; provided,
however, the escrow agent will continue to retain an amount sufficient to
satisfy any indemnification claims under Section 9.12 which have been noticed in
accordance with Section 9.14 of this Agreement prior to the Release Date up to
$800,000 of the escrow funds, which retained amount shall be released to the
Xxxxxxxx Payee, together with all interest earned on such funds since the Tier I
Closing Date, upon resolution of the pending indemnification claims and payment
of any liability amounts owed by Selling Parties in connection therewith once
such claims are Definitively Resolved (as defined herein). At the option of the
Xxxxxxxx Payee, the Xxxxxxxx Payee may execute an instruction in accordance with
the Tier I Escrow Agreement directing the escrow agent to pay to the applicable
creditor(s) that amount of the funds in the escrow account necessary to satisfy
the resolved indemnification claims and to release to the Xxxxxxxx Payee the
difference between such amount and $800,000 of the funds in the escrow account,
in each case, together with all interest earned since the Tier I Closing Date on
the funds so released to creditors and to the Selling Parties, as applicable.
(iv) Buyer shall receive a reduction to the Purchase
Price equal to 40% of the Bid Price for any Florida School as listed on EXHIBIT
-------
B ("CDR Adjustment Amount") if any such School's official cohort default rate
for FY 1995 and FY 1996 exceeds 25%, up to an aggregate maximum CDR Adjustment
Amount of $1,000,000 for all such Schools, upon the following conditions: After
the Tier I Closing, in the event that Buyer receives notice that the official FY
1995 cohort default rate for any Florida School listed on EXHIBIT B is greater
-------
than 25%, (a) if the aggregate CDR Adjustment Amount is greater than $500,000,
the escrow agent will retain the CDR Adjustment Amount up to an aggregate
maximum amount of $1,000,000 for all such Schools, and (b) if the aggregate CDR
Adjustment Amount is less than $500,000, the escrow agent will release to the
Xxxxxxxx Payee the difference between $500,000 and the CDR Adjustment Amount, if
any. In the event that any Florida School in respect of which the escrow agent
is retaining the CDR Adjustment Amount receives notice that the official FY 1996
cohort default rate for such School is greater than 25%, then the escrow agent
will pay the CDR Adjustment Amount with respect to such School to the Buyer, in
accordance with the provisions of the Tier I Escrow Agreement and will release
to the Xxxxxxxx Payee the difference between the CDR Adjustment Amount retained
and the amount so released to Buyer. If, however, any Florida School in respect
of which the escrow agent is retaining the CDR Adjustment Amount receives notice
that the official FY 1996 cohort default rate for such School is less than 25%,
the escrow agent will pay such CDR Adjustment Amount to the Xxxxxxxx Payee;
provided, however, that the aggregate amount so paid to the Xxxxxxxx Payee will
not exceed $500,000. Notwithstanding the foregoing, in the event that all of
the Florida Schools listed on
5
EXHIBIT B have received notice of their pre-publication cohort default rate for
-------
FY 1995 and one or more of such Schools' pre-publication cohort default rates
for FY 1995 is less than 12%, the escrow agent shall pay the Xxxxxxxx Payee the
lesser of (A) $500,000 or (B) the amount equal to the potential CDR Adjustment
Amount for such School or Schools with pre-publication cohort default rates less
than 12%; provided, however, that the Selling Parties will be required to repay
that amount to Buyer in the event that Buyer receives notice that the official
cohort default rate for FY 1995 for such School or Schools is greater than 25%.
In the event that the official cohort default rate for 1995 for any Florida
School listed on EXHIBIT B is greater than 25% and such School receives notice
-------
that its pre-publication cohort default rate for FY 1996 is less than 12%, an
amount equal to the potential CDR Adjustment Amount for that School will be
released to the Xxxxxxxx Payee; provided, however, that the amount so paid to
the Xxxxxxxx' Payee shall not exceed the amount equal to (y) $500,000 less (z)
the aggregate amount previously released to the Xxxxxxxx Payee under this
Section 2.2.3(b)(iv) and, provided, further that the Selling Parties will be
required to repay that amount to Buyer in the event that Buyer receives notice
that the official cohort default rate for FY 1996 for that School is greater
than 25%.
(v) On the second (2d) anniversary of the Tier I Closing
Date, the Final TFC Payment shall be released to Buyer from the Escrow Amount.
For purposes of this Section 2.2.3(b)(v) only, if the Final TFC Payment exceeds
the amount of escrow funds remaining in the Escrow Account at such second (2d)
anniversary, Buyer shall have full recourse to collect from Xxxxxxxx the amount
of such excess. The term "Final TFC Payment" means an amount equal to one-half
(1/2) of the difference between (y) the TFC Adjustment (as defined in Section
2.8(c) of the Secondary Agreement) less (z) $800,000.
2.2.4 Adjustment of Final Payment. If under Section 6(f) of the
---------------------------
on or before the thirtieth day after the Tier I Closing by reason of the failure
of any condition within the control of the Selling Parties, including, without
limitation, any failure by Selling Parties to give good and marketable title to
the real estate to be sold to Buyer in accordance with the Real Property
Agreement, (1) the Tier I Escrow Amount shall be reduced to $2,100,000, thereby
canceling $800,000 of the principal amount of the Escrow Funding Note and
adjusting the amount of the Final Payment to $3,200,000, (2) notwithstanding
Section 2.2.3 above, on the Final Payment Date the principal amount of the
Escrow Funding Note, as so reduced, plus all accrued interest thereon, if any,
shall be paid to the Escrow Agent and held in escrow pursuant to the Escrow
Agreement in complete satisfaction of the Escrow Funding Note, and (3) no
amounts shall be released to the Xxxxxxxx Payee from escrow pursuant to
subparagraph (iii) of Section 2.2.3(b).
2.3 Obligations and Liabilities to be Assumed. Upon each of the Tier I
-----------------------------------------
Closing and the Tier II Closing (each, a "Tier Closing"), with respect to the
applicable Schools, Buyer shall, by an appropriate instrument of assumption to
be executed and delivered at each Tier Closing substantially in the form of
EXHIBIT C hereto (the "Assignment and Assumption Agreement"), assume and agree
-------
to perform, pay or discharge, when due, to the extent not theretofore performed,
paid or discharged, all of the following obligations, commitments and
liabilities of Xxxxxxxx relating to or arising from the Tier I Schools or Tier
II Schools, as
6
applicable (collectively, the "Assumed Liabilities"): (i) with respect to the
Intellectual Property; and (ii) otherwise arising directly from the Purchased
Assets.
2.4 Excluded Liabilities. No obligations and liabilities of the
--------------------
Selling Parties other than the Assumed Liabilities (collectively, the "Excluded
Liabilities") and the Assumed Liabilities as defined under the Secondary
Agreement will be assumed by Buyer or its affiliates pursuant to this Agreement
or the Secondary Agreement.
2.5 Allocation of Purchase Price. Buyer and the Selling Parties
----------------------------
agree that the Purchase Price shall be allocated among the Purchased Assets in
accordance with the allocation set forth in SCHEDULE 2.5 attached hereto. Buyer
--------
and the Selling Parties agree that each will report the federal, state and local
income tax and other tax consequences of the purchase and sale contemplated
hereby in a manner consistent with such allocation and that neither will take
any position inconsistent therewith upon examination of any tax return, in any
refund claim, in any litigation, or otherwise; provided that in the reasonable
opinion of the Selling Parties, Buyer's allocation complies with Section 1060
of the Internal Revenue Code of 1986, as amended (the "IRC"), and relevant
Treasury regulations thereunder and Buyer has provided information required
pursuant to Section 1060(b) of the IRC and other relevant authority in written
form reasonably satisfactory to the Selling Parties on or before November 30,
1996. Buyer agrees to provide to the Selling Parties specific allocations of
the Purchase Price to intangible personal property within ten (10) business days
of the Tier I Closing or Tier II Closing, as applicable, together with a
certificate of the Selling Parties representing that the allocation to
intangible personal property constitutes Buyer's representation regarding the
fair market value of such intangible personal property and that Buyer will use
such allocation for all financial reporting and will not take any position
inconsistent with such allocation upon examination of any tax return, in any
refund claim, in litigation or otherwise.
2.6 Excise and Property Taxes. Selling Parties shall prepare and
-------------------------
file all required sales and use tax returns reporting the sale of the Purchased
Assets. Buyer shall pay seventy-five percent (75%), and the Selling Parties
shall pay twenty-five percent (25%) of all sales and use taxes arising out of
the transfer of the Purchased Assets. Each of Buyer and the Selling Parties
shall pay its respective portion, prorated as of the applicable Tier Closing, of
state and local personal property taxes related to the Purchased Assets.
2.7 Employees. SCHEDULE 2.7 contains a list of employees at
--------- --------
Xxxxxxxx' headquarters to be offered employment by Buyer including each
employee's title, base salary and earned vacation time and sick leave as of
August 31, 1996. Buyer may, in its sole discretion, extend an offer of
employment to any of such employees (except for those employees whose employment
is severed or terminated in the ordinary course of business prior to the Tier I
Closing or the Tier II Closing, as applicable) from and after the Tier I Closing
or Tier II Closing, as applicable. Notwithstanding the foregoing, until the
later of the Tier II Closing or December 31, 1996, all of Buyer's offers of
employment to employees employed at Xxxxxxxx' headquarters must be approved in
advance by Xxxxxxxx. Buyer shall pay, perform and assume the Selling Parties'
obligations for vacation and sick pay benefits of employees hired by Buyer which
accrue prior to the date on which such employee becomes an employee of Buyer and
7
remain unpaid in the ordinary course of business on such date, and shall include
such employees in a medical plan which provides for a waiver of waiting time and
pre-existing conditions.
2.8 Use of "Xxxxxxxx Colleges, Inc." Name Marked on Inventories. In
-----------------------------------------------------------
recognition of the fact that certain of the Purchased Assets constituting
inventories may have imprinted or otherwise marked thereon the name "Xxxxxxxx
Colleges, Inc." or derivatives thereof, and trademarks and servicemarks relating
thereto and certain associated logotypes, the Selling Parties hereby agree that
Buyer may use and distribute such inventories until they have been exhausted and
hereby grant to Buyer a non-exclusive, royalty-free license to use such names,
trademarks, servicemarks and logotypes in connection therewith, pursuant to the
terms of the Trademark License Agreement.
2.9 No Option or Right to Offset. Buyer shall have no right or
----------------------------
option to offset any amounts which Buyer claims are owed to it under this
Agreement or under the Secondary Agreement, the Real Property Agreement, any
note issued pursuant hereto or thereto any other agreement, certificate,
instrument or document related hereto or thereto or otherwise by the Selling
Parties against any amounts which Buyer owes to the Selling Parties under this
Agreement or under the Secondary Agreement, the Real Property Agreement, any
note issued pursuant hereto or thereto, or any other agreement, certificate,
instrument or document related hereto or thereto, provided, however, that Buyer
may offset amounts it owes to the Xxxxxxxx Payee pursuant to the Escrow Funding
Note or the Interim Note if any of the Selling Parties owe Buyer any amount
pursuant to Section 2.8 of the Secondary Agreement.
ARTICLE III
CLOSING
3.1 Tier I Closing. The closing of the transactions related to the
--------------
Tier I Schools contemplated by this Agreement (the "Tier I Closing") will take
place at the offices of O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, simultaneously with the execution and
delivery of this Agreement (the "Tier I Closing Date"). The Tier I Closing
shall be effective as of 12:01 a.m. Central Standard Time on the Tier I Closing
Date.
3.2 Tier II Closing. Subject to the satisfaction of the conditions
---------------
precedent listed in Article VIII, the closing of the transactions related to the
Tier II Schools contemplated by this Agreement (the "Tier II Closing" and,
together with the Tier I Closing, the "Tier Closings") will take place at the
offices of O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000, on the last business day of the calendar month
immediately following the date which is sixty (60) days following Buyer's
receipt of an official written determination from ED of each Tier II School's
official 1994 cohort default rate ("CDR"), or within five (5) business days
after such later date as all the conditions to the Tier II Closing set forth in
Article VIII have been satisfied (the "Tier II Closing Date"), but in no event
later than December 31, 1996, subject to the provisions of this Agreement. The
Tier II Closing shall be effective as of 12:01 a.m. Central Standard Time on the
Tier II Closing Date.
8
3.3 Deliveries by Selling Parties at each Tier Closing. At each Tier
--------------------------------------------------
Closing, the Selling Parties shall deliver or cause to be delivered to Buyer the
following:
3.3.1 The following documents of transfer and assignment duly
executed by the Selling Parties relating to that portion of the Purchased Assets
to be conveyed to Buyer at such Tier Closing:
(i) Xxxx of Sale substantially in the form of EXHIBIT D
-------
hereto;
(ii) Assignment and Assumption Agreement substantially in
the form of EXHIBIT C hereto; and
-------
(iii) Such other instruments of conveyance as shall, in
the reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer
marketable title to that portion of the Purchased Assets to be conveyed to Buyer
at such Tier Closing.
3.3.2 Certified resolutions of the Boards of Directors and
shareholders of the Selling Parties authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein;
3.3.3 An opinion of Dow, Xxxxxx & Xxxxxxxxx, counsel to the
Selling Parties, in form and substance reasonably acceptable to Buyer containing
the opinions set forth on EXHIBIT F-2, along with usual and customary exceptions
-------
and qualifications;
3.3.4 An officers' certificate signed by the President and the
Chief Executive Officer of Xxxxxxxx, or such other officer reasonably acceptable
to Buyer, dated as of the date of such Tier Closing, in the form attached hereto
as EXHIBIT E-2; and
-------
3.3.5 The Tier I Escrow Agreement or the Tier II Escrow
Agreement, as applicable.
3.4 Deliveries by Selling Parties at the Tier I Closing Only. At the
--------------------------------------------------------
Tier I Closing only, the Selling Parties shall duly execute and deliver or cause
to be duly executed and delivered to Buyer the following:
3.4.1 A license agreement permitting the Buyer to use the name
"Xxxxxxxx" and the Xxxxxxxx Colleges, Inc. logo for a period of one year in the
form of that attached hereto as EXHIBIT G (the "Trademark License Agreement");
-------
3.4.2 A support services agreement in the form of EXHIBIT I
-------
obligating Xxxxxxxx to provide to Buyer certain administrative and computer
support services (the "Support Services Agreement") as set forth therein; and
3.4.3 A real estate purchase agreement in the form of that
attached hereto as EXHIBIT J ("Real Property Agreement") obligating Buyer or its
-------
designee to purchase
9
certain real estate owned by the Sellers (the consideration to be paid under the
Real Property Agreement is in addition to the Purchase Price payable for the
Purchased Assets hereunder).
3.5 Deliveries by Buyer at each Tier Closing. At each Tier Closing,
----------------------------------------
Buyer shall deliver or cause to be delivered to the Selling Parties the
following duly executed documents:
3.5.1 The Assignment and Assumption Agreement substantially in
the form of EXHIBIT C hereto;
-------
3.5.2 Certified resolutions of the Board of Directors of Buyer
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein;
3.5.3 An opinion of O'Melveny & Xxxxx, counsel to the Buyer, in
form and substance reasonably acceptable to the Selling Parties containing the
opinions set forth on EXHIBIT F-1, along with usual and customary exceptions and
-------
qualifications;
3.5.4 An officers' certificate signed by the President of Buyer,
or such other officer reasonably acceptable to Selling Parties, dated as of the
date of such Tier Closing, in the form attached hereto as EXHIBIT E-1; and
-------
3.5.5 The Tier I Escrow Agreement or the Tier II Escrow
Agreement, as applicable.
3.6 Deliveries by Buyer at the Tier I Closing Only. At the Tier I
----------------------------------------------
Closing only, the Buyer shall deliver or cause to be delivered to the Xxxxxxxx
Payee the following:
3.6.1 The Tier I Payment by wire transfer of immediately
available funds payable to the Xxxxxxxx Payee in the amount of $14,000,000.
3.6.2 The following agreements duly executed by Buyer:
(i) The Trademark License Agreement;
(ii) The Support Services Agreement;
(iii) The Real Property Agreement;
(iv) The Promissory Note in the principal amount of
$1,100,000 substantially in the form attached hereto as EXHIBIT L ("Interim
-------
Note");
(v) The Escrow Funding Note; and
10
(vi) The Guaranty substantially in the form attached
hereto as EXHIBIT N, pursuant to which Buyer guarantees the obligations of
-------
Xxxxxx, Xxxxxx Group and FMU under the Secondary Agreement.
3.7 Delivery by Buyer at the Tier II Closing Only. At the Tier
---------------------------------------------
II Closing only, Buyer shall deliver or cause to be delivered (a) to the
Xxxxxxxx Payee the Tier II Payment (less the Tier II Escrow Amount), by wire
transfer of immediately available funds and (b) to the escrow agent pursuant to
the Tier II Escrow Agreement, the Tier II Escrow Amount, by wire transfer of
immediately available funds.
ARTICLE IV
TERMINATION
4.1 Termination. This Agreement may be terminated only as
-----------
follows and in each case only by written notice:
4.1.1 At any time by mutual written consent of the
Selling Parties and Buyer; and
4.1.2 With respect to the provisions of this Agreement
relating to the purchase of the Tier II Schools only, on December 31, 1996 by
either party if the Tier II Closing has not occurred.
4.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Buyer or the Selling Parties in accordance with Section 4.1
above, this Agreement shall forthwith terminate upon notice thereof duly given
in accordance with the provisions hereof, and there shall be no liability of any
nature on the part of either Buyer or the Selling Parties (or their respective
officers or directors) to the other; provided, however, that this Section 4.2 in
-------- -------
no way limits the obligations of the parties set forth in Sections 9.12, 9.13,
9.14, 9.15, 9.16, 9.17 and 9.18 hereof, which obligations shall survive the
termination. If this Agreement is terminated as provided in Section 4.1 above,
each of Buyer and the Selling Parties shall, and shall cause its respective
representatives to, either destroy or redeliver to such other party all
documents, work papers and other materials relating to the transactions
contemplated hereby or to the business or operations of the other party, whether
so obtained before or after the execution hereof, and all such information
received by Buyer or the Selling Parties, as the case may be, (other than
information which is in or becomes part of the public domain by publication or
otherwise through no fault of such party or which has heretofore been or is
hereafter filed or available as public information with any governmental
authority) shall be kept confidential, except as required by law. In addition,
each of Buyer and the Selling Parties shall cooperate in good faith following
termination of this Agreement to provide any information or documents reasonably
required by the other party in connection with preparation of such party's
financial statements and tax returns.
11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
As a material inducement to Buyer to enter into this Agreement,
to purchase the Purchased Assets and assume the Assumed Liabilities, the Selling
Parties hereby represent and warrant with respect to the Purchased Assets
related to the Tier I Schools as of the date hereof, that:
5.1 Corporate Power. The Selling Parties have all requisite
---------------
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereunder.
5.2 Capacity; Authorization; Binding Effect. Each of the Selling
---------------------------------------
Parties has the power, legal capacity and authority to execute, deliver and
perform this Agreement and each other document being executed in connection
herewith to which it is a party. Each of the Selling Parties has the power,
legal capacity and authority to transfer, convey and deliver the Purchased
Assets, free and clear of all liens, claims, encumbrances, options, rights and
restrictions, except for the Permitted Exceptions (as defined in Section 5.4
below). All corporate and other proceedings required to be taken by or on the
part of the Selling Parties, including all action required to be taken by the
directors or stockholders of the Selling Parties, to authorize the Selling
Parties to enter into and carry out this Agreement and the related documents
contemplated herein, have been duly and properly taken. This Agreement has been,
and each of the related documents will be at each Tier Closing, duly executed
and delivered by the Selling Parties and constitute, or will when delivered
constitute, the valid and binding obligations of the Selling Parties,
enforceable against the Selling Parties, in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity or otherwise).
5.3 No Conflicts. Except as set forth on SCHEDULE 5.3, the
------------ --------
execution, delivery and performance of this Agreement and each other document
being executed by the Selling Parties in connection herewith, and the
consummation of the transactions contemplated hereby and thereby will not: (a)
violate any provisions of law applicable to the Selling Parties; (b) with or
without the giving of notice or the passage of time, or both, conflict with or
result in the breach of any provision of the articles of incorporation or bylaws
of the Selling Parties, any material instrument, license, agreement or
commitment to which a Selling Party is a party or by which any of its assets or
properties is bound, which breach might reasonably be expected to have a
material adverse effect on the Purchased Assets; (c) constitute a violation of
any order, judgment or decree to which a Selling Party is a party or by which
any of its assets or properties is bound; or (d) require any approval of, or
filing or registration with, any governmental entity or regulatory authority
other than those which will be effected by the Selling Parties prior to the Tier
I Closing.
12
5.4 Title to the Purchased Assets. The Selling Parties own
-----------------------------
outright, and have good and marketable title to, all of the Purchased Assets,
free and clear of all liens, claims and encumbrances, options, rights, and
restrictions, other than the Assumed Liabilities, liens for current taxes not
yet due and payable and as otherwise disclosed in SCHEDULE 5.4 hereto
--------
(collectively, the "Permitted Exceptions").
5.5 Tradenames; Confidential Information. All tradenames,
------------------------------------
trademarks or service marks and all forms, derivatives and graphic presentations
thereof of Selling Parties having any material value to the operation of any
Tier I School are set forth on SCHEDULE 5.5 attached hereto (collectively, the
--------
"Tradenames"). Selling Parties have the exclusive right to the use of each
Tradename as an assumed business name in the states in which such Tradename is
used, and SCHEDULE 5.5 sets forth all registrations of each Tradename as a
--------
trademark, servicemark or assumed name. Except for the Trademark License
Agreement and except as otherwise set forth on SCHEDULE 5.5, Selling Parties
--------
have not licensed any other person or entity to use any Tradename. Selling
Parties have not been sued or threatened with suit for infringement, violation
or breach with respect to any Tradename, and to the best of Selling Parties'
knowledge, no basis exists for any such suit. Except as disclosed on SCHEDULE
--------
5.5, Selling Parties are not on notice of any infringement, violation or breach
of the Tradename by any other person or entity. Except as otherwise set forth on
SCHEDULE 5.5, Selling Parties have the right to use and license, free and clear
--------
of any claims or rights of any third party, all trade secrets, customer lists,
know-how, curricula and any other confidential information required for or used
in the operation of any Tier I School. Selling Parties are not in any way making
any unlawful or wrongful use of any trade secrets, customer lists, know-how,
curricula or any other confidential information of any third party, including,
without limitation, any former employer of any present or past employee of
Selling Parties in connection with the operation of any Tier I School.
5.6 Insurance. SCHEDULE 5.6 attached hereto sets forth the
--------- --------
insurance coverages maintained by Sellers on the Purchased Assets including all
policies or binders of fire, extended coverage, general and vehicular, fidelity
and fiduciary liability, workers' compensation, key-man life and other insurance
held by Sellers and all binders for insurance to be purchased on or before the
date of the Tier I Closing, in order to replace policies expiring prior to the
date of the Tier I Closing. Such policies and binders are in full force and
effect, and, except as set forth on SCHEDULE 5.6, there is no material breach or
--------
default with respect to any provision contained in any such policy or binder,
and all premiums, to the extent due and payable, have been paid or the liability
therefor properly accrued. Except for amounts deductible under such policies of
insurance and except as otherwise set forth on SCHEDULE 5.6, Sellers are not and
--------
have not been, prior to the date hereof, subject to liability as a self-insurer
for the Tier I Schools. Except as set forth on SCHEDULE 5.6, there are no claims
--------
pending or threatened under any of said policies pertaining to any Tier I School
or disputes with underwriters regarding coverage under such policies pertaining
to any Tier I School. Except as set forth on SCHEDULE 5.6, to the best of
--------
Selling Parties' knowledge, the execution and delivery of this Agreement will
not result in the loss to Sellers of any of the insurance policies listed or
impair the rights of Sellers with respect to liabilities arising in connection
with the operation of any Tier I School prior to the Tier Closings. To the
extent that the Purchased Assets are of a type which are generally
13
insured, then such Purchased Assets are insurable. Within the five years prior
to the date hereof, Sellers have not been denied insurance for any Tier I
School, or been offered insurance for any Tier I School only at a commercially
prohibitive premium.
5.7 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement or as set forth on SCHEDULE 5.7 attached hereto, since August 31,
--------
1996, there has not been, occurred or arisen:
5.7.1 any sale, lease, transfer, abandonment or other
disposition of any right, title or interest in or to any of the properties
or assets of the Selling Parties used in connection with the operations of
any Tier I School (tangible or intangible), except in the ordinary course
of business;
5.7.2 any material adverse change in the financial
condition, assets, liabilities (absolute, accrued or contingent) reserves
or operations of any of the following (each a "Material Asset"): (i)
Orlando College - South; (ii) Tampa College - Main; (iii) Tampa College -
Pinellas; (iv) all Florida Schools listed on EXHIBIT B, taken as a whole,
-------
but not including the Schools listed in clauses (i)-(iii) above; or (v) all
Xxxxxx Schools and Xxxxxx Group Schools listed on EXHIBIT B, taken as a
-------
whole, or any one thereof;
5.7.3 any damage, destruction or loss, whether or not
covered by insurance, materially adverse to the Purchased Assets;
5.7.4 any change in any material respect in the business
policies or practices of any Tier I School or a failure to operate the
business of any Tier I School in the ordinary course with a view to
preserving such business intact, to retaining the services of the present
officers, employees and agents of Sellers employed or providing services in
connection with the operation of such Tier I School and with a view to
preserving the business relationships of such Tier I School with, and the
goodwill of, students, sales representatives, suppliers, accrediting
bodies, governmental authorities and others; or
5.7.5 any agreement, whether in writing or otherwise, to
take any action described in this Section 5.7.
5.8 Solvency. As of the date of this Agreement, none of the
--------
Selling Parties has any intention of filing a petition under any chapter of the
United States Bankruptcy Code, nor does any Selling Party have any knowledge of
any person or entity threatening or having any intention of filing an
involuntary petition under any chapter of the United States Bankruptcy Code
against any of the Selling Parties.
5.9 Delivery of Documents. All material documents, instruments,
---------------------
agreements and records of Sellers relating to the Purchased Assets, the Assumed
Liabilities, the representations and warranties of the Selling Parties contained
in this Agreement and/or the
14
operation of the Tier I Schools which have been delivered or made available to
Buyer are true, correct and complete in all material respects.
5.10 Disclosure. Neither this Agreement, the Secondary Agreement
----------
nor any of the schedules, exhibits, attachments, documents, certificates or
other items prepared or supplied to Buyer in writing by or on behalf of the
Selling Parties with respect to the transactions contemplated hereby or thereby
contain any untrue statement of a material fact or omit a material fact
necessary to make such statements not misleading in light of the circumstances
in which such statements were made. There is no fact which the Selling Parties
have not disclosed to Buyer pursuant to this Agreement, the Secondary Agreement
or otherwise in writing and of which any of Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx,
C. Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxxxxxxx and any of the presidents of the Tier I
Schools is aware which has had or may reasonably be anticipated to have a
material adverse effect upon the existing or expected financial condition,
operating results, assets, employee relations, accreditation or reputation of
the Tier I Schools.
5.11 Incorporation by Reference. All representations and
--------------------------
warranties of the Selling Parties made in the Secondary Agreement are hereby
incorporated by reference.
5.12 Survival of Representations and Warranties. Subject to the
------------------------------------------
limitations in Sections 9.12 and 9.14 hereof, the representations and warranties
of the Selling Parties contained in this Agreement shall survive the Tier
Closings through the second (2nd) anniversary of the Tier I Closing Date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Selling Parties to enter into
this Agreement, and to sell the Purchased Assets, Buyer hereby represents and
warrants as of the date hereof, that:
6.1 Incorporation; Authority. Buyer is a corporation, duly
------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to execute,
deliver and perform this Agreement and all other agreements and instruments to
be executed by Buyer in connection with or pursuant hereto (the "Ancillary
Documents") and to consummate the transactions contemplated hereunder.
6.2 Due Authorization; Binding Agreement. Buyer has the power,
------------------------------------
legal capacity and authority to execute, deliver and perform this Agreement. The
execution and delivery by Buyer of this Agreement and all Ancillary Documents
and the performance by Buyer of its obligations hereunder and thereunder have
been duly authorized by all necessary corporate action on the part of Buyer.
This Agreement and the Ancillary Documents have been duly executed and delivered
by Buyer. This Agreement and all Ancillary Documents constitute the legal, valid
and binding obligation and act of Buyer enforceable in accordance with the
respective terms hereof and thereof, subject to applicable bankruptcy,
insolvency, fraudulent
15
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or equity).
6.3 No Violation or Conflict. The execution, delivery and
------------------------
performance of this Agreement and the Ancillary Documents, the consummation of
the transactions provided for herein and therein, and the fulfillment of the
terms hereof and thereof by Buyer will not violate any material provision of law
applicable to Buyer, with or without the giving of notice or the passage of
time, or both, conflict with or result in the breach of any provision of the
Certificate of Incorporation or Bylaws of Buyer, or result in the breach of any
of the terms and provisions of, or constitute a default under, or conflict with,
or cause an acceleration of, any obligation of Buyer under any material
agreement, license, indenture, commitment or other instrument to which it is a
party or by which any of its assets or properties is bound, or constitute a
violation of any judgment, decree, or order, or award of any court, governmental
body, or arbitrator, or applicable law, rule or regulation applicable to Buyer,
its assets or properties, or require any approval of, or filing or registration
with any governmental entity or regulatory authority.
6.4 No Undisclosed Liabilities. Buyer has no liability or
--------------------------
obligation of any nature, whether due or to become due, absolute, contingent or
otherwise, including liabilities for or in respect of federal, state and local
taxes and any interest or penalties relating thereto, except (i) liabilities
incurred in the ordinary course of Buyer's business prior to date of the Tier I
Closing or Tier II Closing, as applicable, and (ii) liabilities and obligations
created by this Agreement and the Ancillary Documents.
6.5 Consents and Approvals. No consent, approval or
----------------------
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any third person or entity, is required to be made
or obtained by Buyer in connection with the execution, delivery or performance
of this Agreement and the Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby other than those set forth in
SCHEDULE 6.5, all of which shall have been obtained by Buyer prior to the
--------
applicable Tier Closing to which such approval relates.
6.6 Disclosure. Neither this Agreement nor any representation or
----------
warranty by Buyer in this Agreement or the Ancillary Documents, nor any exhibit,
certificate, schedule attachment or document furnished or to be furnished by
Buyer pursuant hereto or thereto contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein, in light of the
circumstances under which they were made, not misleading.
6.7 Capitalization. Each of Buyer and, by their joinder in the
--------------
execution hereof, Xxxxxx, Xxxxxx Group, FMU and Corinthian Schools, Inc. hereby
represents and warrants as of the date hereof that Buyer is the legal and
beneficial owner of all of the capital stock of each of Xxxxxx and Corinthian
Schools, Inc., and Xxxxxx is the legal and beneficial owner of all of the
capital stock of FMU and Xxxxxx Group. For purposes hereof, Xxxxxx, the
16
Xxxxxx Group, Corinthian Schools, Inc. and FMU are hereinafter collectively
referred to as the "Buyer Parties".
6.8 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Buyer contained in this Agreement shall
survive the Tier Closings through the second (2nd) anniversary of the Tier I
Closing Date, subject to the limitations in Sections 9.13 and 9.14 hereof.
ARTICLE VII
COVENANTS
7.1 Covenants of the Selling Parties Pending Tier II Closing.
--------------------------------------------------------
With respect to the Tier II Schools, the Selling Parties covenant and agree with
Buyer that from and after the date hereof and until the Tier II Closing or the
termination of this Agreement pursuant to Article IV hereof, the Selling Parties
(i) shall use their best efforts to fulfill or satisfy, or cause to be fulfilled
or satisfied, all of the conditions precedent to Buyer's obligations to
consummate and complete the sale provided herein including, without limitation,
satisfaction of the conditions set forth in Article VIII, hereof and to take all
other steps and do all other things reasonably required to consummate this
Agreement in accordance with its terms, (ii) shall not interfere with the
performance by Buyer of its obligations under this Agreement, (iii) shall not
fail to pay prior to delinquency any taxes, assessments, governmental charges or
levies imposed upon it or its income, profits or assets, (iv) shall not make or
authorize the making of any capital expenditure except for the performance of
obligations previously incurred, or expenditures in the ordinary course or the
replacement of equipment or tangible property necessary to the operations of the
business of Sellers, (v) shall promptly notify Buyer of any notice from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement, or any fact or circumstance of
which Sellers have knowledge which would make any representation or warranty set
forth herein materially untrue or inaccurate as of the applicable date of the
Tier II Closing, or any planned or threatened labor dispute, organization
efforts, strike or collective work stoppage affecting the employees of Sellers,
(vi) shall not take any action outside the ordinary course of business that
would adversely affect any Selling Party's title to the Purchased Assets to be
transferred to Buyer at the Tier II Closing and (vii) until the earlier of the
Tier II Closing or termination of this Agreement, shall not directly or
indirectly solicit, respond to or negotiate with or release any information
relative to the Tier II Schools to any potential buyer other than Buyer. In
addition, from and after the date hereof until the termination of this Agreement
in accordance with Article IV hereof, Sellers shall (a) operate the Tier II
Schools in the ordinary course of business consistent with past practices,
including processing of accounts receivable and accounts payable in accordance
with past practices, and processing and paying refunds to students at the Tier
II Schools in the ordinary course of business consistent with Sellers' past
practices, and (b) will use their commercially reasonable efforts to cause any
employee of any Seller to whom Buyer has proposed to extend an offer of
employment to continue to perform and exercise his or her duties (including the
duty of loyalty) to such Seller during such period.
17
7.2 Support Services Covenants. Xxxxxxxx covenants that it will
--------------------------
maintain its corporate existence during the term of the Support Services
Agreement.
7.3 Covenants of Buyer Pending Tier II Closing. Buyer covenants
------------------------------------------
and agrees with the Selling Parties that from and after the date hereof and
until the termination of this Agreement pursuant to Article IV hereof, Buyer (i)
shall use its best efforts to fulfill or satisfy, or cause to be fulfilled or
satisfied, all of the conditions precedent to Sellers' obligations to consummate
and complete the sale provided herein and to take all other steps and do all
other things reasonably required to consummate this Agreement in accordance with
its terms; (ii) shall not interfere with the performance by Sellers of their
obligations under this Agreement; and (iii) shall secure financing sufficient to
allow Buyer to consummate the purchase of the Purchased Assets in accordance
with the terms of this Agreement. Subject to and in accordance with the terms of
the Real Property Agreement (as defined in Section 3.4.3), Buyer shall purchase
from Sellers the real property located at Xxxxx Xxxxxx College, Parks College
(Denver North), Parks College (Denver South), Orlando College -Melbourne, and
Tampa College -Main, for an aggregate purchase price of $3,393,600.
7.4 Closing and Post-Closing Covenants.
----------------------------------
7.4.1 Further Assurances. From time to time after each
------------------
Tier Closing, (i) each of the Selling Parties will use its reasonable efforts
for as long as it continues its corporate existence to execute and deliver such
instruments of conveyance, sale or assignment as Buyer may reasonably request,
to more effectively vest, confirm or evidence Buyer's title to or rights in any
of the Purchased Assets and to otherwise carry out the purpose and intent of
this Agreement, and (ii) Buyer will execute and deliver such instruments as
Selling Parties may reasonably request to more effectively assure the assignment
to and assumption by Buyer of the obligations and liabilities of the Selling
Parties to be assumed by Buyer pursuant to this Agreement and the Assignment and
Assumption Agreement and to otherwise carry out the purpose and intent of this
Agreement.
7.4.2 Mutual Cooperation. The parties shall use reasonable
------------------
efforts to cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken to consummate the
transactions contemplated hereby and transition ownership of the Schools from
Sellers to Buyer. Before and after each Tier Closing, the Selling Parties shall
use their best efforts to assist Buyer in obtaining any required accreditation
reasonably necessary for Buyer's operation of the Schools, including furnishing
Buyer such necessary information and reasonable assistance as Buyer may request
in connection with its preparation of necessary filings, submissions or
applications to any Regulatory Agency in connection with the transactions
contemplated hereby.
7.4.3 Access to Employees. From and after the Tier I
-------------------
Closing, each of Buyer and the Selling Parties shall afford to the other party,
its officers, counsel, accountants and other authorized representatives (the
"Requesting Party") access to the other party's employees who currently are
employed by the Selling Parties, without cost to the Requesting Party (other
than payment of out-of-pocket costs not including personnel costs) and as
reasonably
18
required by the Requesting Party in connection with any claim, action,
litigation, program review, audit or other proceeding involving the Selling
Parties, a School or any other school previously owned or operated by the
Selling Parties, except where such claim, action, litigation or other proceeding
is between the parties to this Agreement. Each party shall use its reasonable
efforts to cause such employees to cooperate with and assist the Requesting
Party in its prosecution or defense of such claims, actions, litigations,
program reviews, audits and other proceedings, which cooperation shall include,
without limitation, preparing and providing written and oral discovery and
attending and testifying at depositions, hearings, motions and trials, all as
necessary in the reasonable opinion of the Requesting Party or its counsel. Any
such access shall take place only during normal business hours in such a manner
as not to interfere unreasonably with the operation of the business of the other
party.
7.5 Access and Maintenance of Records. From and after the Tier I
---------------------------------
Closing, each party shall afford the other party, its officers, counsel,
accountants and other authorized representatives and any Regulatory Agency (the
"Reviewing Party") access to the other party's properties, books, records, files
or documents, at any time and from time to time upon reasonable notice from the
Reviewing Party, as reasonably required by the Reviewing Party. Until seven
years after the Tier I Closing or until the expiration of the record retention
period under relevant Regulatory Agency requirements, if longer, no party to
this Agreement will destroy or otherwise dispose of or change the storage format
of any of the properties, books, records, files or documents relating to the
Purchased Assets without giving the parties on the other hand thirty (30) days'
prior written notice and an opportunity to take possession or make extracts or
copies thereof. "Properties, books, records, files or documents" shall include,
but not be limited to, copies of any insurance policies, testing logs,
application forms, all student records, including academic and financial aid
records and files, attendance records, all accounting records, including student
accounts, accreditation reports, personnel files, financial statements,
operational reports, school policies, correspondence, all reports prepared for
or provided to any Regulatory Agency, all records that the Schools retained
pursuant to relevant Regulatory Agency requirements and any other properties,
books, records, files or documents that are provided to Buyer pursuant to
Section 1 of this Agreement. The Buyer shall permit the Secretary of Education
or the Secretary's authorized representatives to have access to and examine and
make copies of any properties, books, records, files or documents of Buyer in
accordance with applicable statutory or regulatory requirements. Any document or
other information obtained from a party hereunder that is designated by such
party as confidential shall be maintained in confidence by the Reviewing Party,
except to the extent that the Reviewing Party is required by law or regulation
to disclose all or part of such document or information or deems it appropriate
to do so in connection with any administrative, regulatory or judicial process.
7.6 Coordination of Agreements. In determining whether the
--------------------------
representations and warranties of the Selling Parties are true and correct in
all material respects or whether the Selling Parties shall have performed in all
material respects all of the obligations, covenants and agreements in this
Agreement to be performed by it, the Purchased Assets, the Material Assets and
the transactions contemplated by this Agreement and the Secondary Agreement and
any other agreements, notes or documents executed in connection with the
transactions contemplated
19
by this Agreement and the Secondary Agreement must be considered in combination
as if the Purchased Assets as defined in this Agreement and the Secondary
Agreement were to be conveyed pursuant to a single agreement.
7.7 Guaranty. Buyer hereby agrees that as long as any amounts
--------
are outstanding, due or owing to any of the Selling Parties by any of the Buyer
Parties pursuant to this Agreement, the Secondary Agreement, the Ancillary
Documents (as defined hereunder and under the Secondary Agreement), the Real
Property Agreement, the Interim Note, the Escrow Funding Note and any other
agreement, certificate, instrument, deed of trust, promissory note or document
related hereto or thereto or otherwise, (a) Buyer shall provide written notice
to the Selling Parties of any change in the Ultimate Parent of any of the Buyer
Parties or if its capital stock becomes owned by an Ultimate Parent and (b) upon
any person or entity becoming an Ultimate Parent of any of the Buyer Parties,
Buyer shall cause such person or entity to execute and deliver to the Selling
Parties a guaranty in the form of EXHIBIT N hereto and shall cause such guaranty
-------
to remain the legal, valid and binding obligation of such person or entity,
enforceable against such person or entity in accordance with its terms. For
purposes hereof, an "Ultimate Parent" of any of the Buyer Parties is the Parent,
which, from time to time, controls, directly or indirectly, every other Parent
of such Buyer Party. For purposes hereof, a "Parent" is any entity or person
that, from time to time, directly or indirectly, owns any equity or voting
interest in an entity or person, other than in the capacity as a stockholder of
a public company.
7.8 Limitation on Dividends. So long as any amounts are
-----------------------
outstanding, due or owing to any of the Selling Parties by any of the Buyer
Parties pursuant to this Agreement, the Secondary Agreement, the Ancillary
Documents (as defined hereunder and under the Secondary Agreement), the Real
Property Agreement, the Interim Note, the Escrow Promissory Note and any other
agreement, certificate, instrument, deed of trust, promissory note or document
related hereto or thereto or otherwise, the Buyer shall not (i) declare or pay
any dividends upon the Buyer's common stock, whether in cash, in-kind property
or otherwise; (ii) allocate or otherwise set apart any sum for the payment of
any dividend on any shares of the Buyer's common stock; (iii) redeem any of
Buyer's common stock on a pro-rata basis; or (iv) sell more than thirty percent
(30%) of the fair market value of its assets in any twelve-month period.
ARTICLE VIII
CONDITIONS
8.1 Conditions Precedent to Obligations of Buyer at Each Tier
---------------------------------------------------------
Closing. The obligation of Buyer to complete the purchase of Purchased Assets
-------
at the Tier II Closing as provided for herein is subject to the fulfillment or
satisfaction on or before the Tier II Closing of each of the conditions set
forth below, any of which may be waived by Buyer in writing.
8.1.1 All representations and warranties of each of the
Selling Parties contained in this Agreement shall be true and correct in all
material respects with respect to the Tier II Schools as of the date of the Tier
II Closing (except to the extent such representations and warranties speak of a
particular date), and Buyer shall have received a certificate signed by
20
one executive officer of Xxxxxxxx, substantially in the form as set forth in
EXHIBIT E-2, to such effect;
-------
8.1.2 Each of the Selling Parties shall have performed in all
material respects all of the obligations, covenants and agreements contained in
this Agreement to be performed by it on or before the date of the Tier II
Closing with respect to the Tier II Schools, and Buyer shall have received a
certificate signed by one executive officer of Xxxxxxxx, substantially in the
form as set forth in EXHIBIT E-2, to such effect;
-------
8.1.3 All instruments and documents required on the part of each
of the Selling Parties to effectuate and consummate the transactions
contemplated hereby as of the Tier II Closing including those set forth in
Article III, shall be delivered by the appropriate Selling Party and shall be in
form and substance reasonably satisfactory to Buyer and its counsel;
8.1.4 No law or order shall have been enacted, entered, issued,
or promulgated by any governmental entity which prohibits or restricts the
transactions contemplated hereby, and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any court or
governmental agency or other regulatory or administrative agency or commission,
challenging any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions; and
8.1.5 Buyer shall have received satisfactory evidence that all
liens (other than the Permitted Exceptions) on the Purchased Assets have been
terminated and completely released of record.
8.2 Intentionally Omitted.
8.3 Conditions Precedent to Obligations of Buyer at the Tier II
-----------------------------------------------------------
Closing. Buyer shall have no obligation to purchase the Purchased Assets
-------
related to any Tier II School unless, prior to October 31, 1996, Buyer receives
official written determination from the ED that such Tier II School's official
1994 CDR is less than 25% (a "CDR Verification"). The Tier II Payment shall
equal the sum of the Tier II Value Prices listed on EXHIBIT K for all Tier II
-------
Schools for which Buyer receives CDR Verifications. In the event any such
official written notification from the ED provides that the official 1994 CDR
for any Tier II School is less than 20%, then the Tier II Payment (and, as a
result, the Purchase Price) shall be increased by an amount equal to the excess
of such School's Alternate Tier II Value Price over such School's Tier II Value
Price, all as listed on EXHIBIT K.
-------
8.4 Conditions Precedent to Obligations of Selling Parties. The
------------------------------------------------------
obligations of the Selling Parties to complete the sale of Purchased Assets
related to the Tier II Schools as provided for herein are subject to the
fulfillment or satisfaction on or before the date of the Tier II Closing of each
of the conditions set forth below, any of which may be waived by the Selling
Parties in writing.
21
8.4.1 All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as of the date of
the Tier II Closing with the same force and effect as if the same had been made
on and as of the date of the Tier II Closing (except to the extent such
representations and warranties speak of a particular date), and the Selling
Parties shall have received a certificate signed by two executive officers of
Buyer, substantially in the form as set forth in EXHIBIT E-1, to such effect;
-------
8.4.2 Buyer shall have performed in all material respects all of
the obligations, covenants and agreements contained in this Agreement to be
performed by Buyer on or before the date of the Tier II Closing, and the Selling
Parties shall have received a certificate signed by two executive officers of
Buyer, substantially in the form as set forth in EXHIBIT E-1, to such effect;
-------
8.4.3 All instruments and documents required on Buyer's part to
effectuate and consummate the transactions contemplated hereby including those
set forth in Article III shall be delivered by Buyer and shall be in form and
substance reasonably satisfactory to the Selling Parties and their counsel;
8.4.4 No law or order shall have been enacted, entered, issued,
or promulgated by any governmental entity which prohibits or restricts the
transactions contemplated hereby and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any court or
governmental agency or other regulatory or administrative agency or commission,
challenging any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions; and
8.4.5 The Selling Parties shall have received from counsel of
Buyer the opinion referenced in Section 3.5.3 above dated as of the date of the
Tier II Closing.
8.4.6 Additional Conditions - Simultaneous Closing and
------------------------------------------------
Coordination with Secondary Agreement. Notwithstanding any other provision of
-------------------------------------
this Agreement or the Secondary Agreement, the Selling Parties, Buyer and, by
their joinder in the execution hereof, Xxxxxx, the Xxxxxx Group and FMU, agree
as follows:
(a) (i) that the Tier I Closing under the Secondary
Agreement shall occur simultaneously with the Tier I Closing under this
Agreement, and (ii) that the obligations of the Selling Parties to complete the
sale of the Purchased Assets related to the Tier II Schools under this Agreement
and the obligations of the Selling Parties to consummate the transactions
related to the Tier II Schools contemplated by the Secondary Agreement are
subject to the condition that the Tier II Closing under the Secondary Agreement
shall occur simultaneously with the Tier II Closing under this Agreement;
provided, however, that Selling Parties may not assert such conditions precedent
as a basis to fail to close, if the failure of such conditions results from the
breach by the Selling Parties of their agreements, representations, warranties
or covenants hereunder or under the Secondary Agreement;
22
(b) (i) that the Tier I Closing under the Secondary Agreement
shall occur simultaneously with the Tier I Closing under this Agreement, and
(ii) that the obligations of Buyer to complete the purchase of the Purchased
Assets related to the Tier II Schools under this Agreement and the obligations
of Xxxxxx, the Xxxxxx Group, and FMU to consummate the transactions related to
the Tier II Schools contemplated by the Secondary Agreement are subject to the
condition that the Tier II Closing under the Secondary Agreement shall occur
simultaneously with the Tier II Closing under this Agreement; provided, however,
that Buyer, FMU, the Xxxxxx Group or Xxxxxx may not assert such conditions
precedent as a basis to fail to close, if the failure of such conditions results
from the breach by Buyer, Xxxxxx, the Xxxxxx Group or FMU of their agreements
hereunder or under the Secondary Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Binding Effect. All terms and provisions of this Agreement shall
--------------
be binding upon and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement, nor the obligations of any party hereunder, shall be assignable
or transferable by any party without the prior written consent of all parties
hereto. If Buyer desires to assign its right to acquire a portion of the
Purchased Assets to an affiliated entity, the Selling Parties will consider such
request in good faith and will not unreasonably withhold consent; provided,
however, that Buyer shall remain liable for the payment of the entire Purchase
Price notwithstanding such assignment or transfer. Without limiting the Selling
Parties' rights of approval, the parties acknowledge that approval may be
withheld if the Selling Parties believe such assignment may impair or otherwise
negatively affect Buyer's ability to obtain timely all accreditations, approvals
and consents (including, without limitation, ED certification of the Schools to
participate in the Title IV Programs under the ownership of Buyer) contemplated
in this Agreement.
9.2 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be given or made by personal
delivery, or by a nationally recognized courier service for overnight delivery.
if to Buyer, Xxxxxx, the Xxxxxx Group or FMU, at:
Corinthian Colleges, Inc.
0000 Xxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, President
23
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to any of the Selling Parties, at:
Xxxxxxxx Colleges, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
with a copy to:
Xxxxxxx & Marsal, Inc.
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Dow, Xxxxxx & Xxxxxxxxx PLLC
0000 Xxx Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Bureau, Esq.
or at such other place as the party to whom such notice or communication is to
be addressed may have designated to the other parties by notice conforming to
this Section 9.2. Notices shall be deemed effective and received (i) on the
actual receipt thereof in the case of hand delivery, or (ii) on the next
business day after deposit in the case of notices by nationally recognized
overnight courier services. As used herein, notice to a party shall include
concurrent notice to that party's counsel as set forth herein.
9.3 Entire Agreement. This Agreement and the Secondary Agreement and
----------------
the documents referred to herein and therein and to be delivered pursuant hereto
and thereto constitute the entire agreement between the parties pertaining to
the subject matter hereof, and supersede all prior agreements, understandings,
negotiations, representations, warranties and discussions of the parties,
whether oral or written; and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof,
except as specifically set forth herein or therein. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
24
9.4 Risk of Loss or Damage; Insurance. It is understood and agreed
---------------------------------
that all right, title and interest in and to the Purchased Assets and all risk
of loss or damage thereto shall not pass from the Selling Parties to Buyer
unless and until the Tier I Closing whereupon all risk of loss or damage shall
pass to Buyer. In the event of a casualty or condemnation in respect of the
Purchased Assets prior to the Tier I Closing, Buyer shall have the right, at its
sole option, to elect to either terminate this Agreement or to accept the
insurance proceeds in respect of such casualty or condemnation and proceed to
close otherwise in accordance with the terms and conditions of this Agreement.
9.5 Waiver. No waiver shall be deemed to have been made by any party
------
of any of its rights hereunder unless the same shall be in writing and shall be
signed by the waiving party. Such a waiver, if any, shall be a waiver only in
respect to the specific instance involved and shall in no way impair the rights
of the waiving party or the obligations of any other party in any other respect
at any other time. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision of this Agreement,
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
9.6 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the substantive laws of the State of California without giving
effect to the principles of conflicts of law thereof.
9.7 Headings. The headings of the articles and sections of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
9.8 Counterparts. This Agreement may be executed by the parties in
------------
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.9 Severability. In the event that any one or more terms or
------------
provisions hereof shall be held void or unenforceable by any court or
arbitrator, all remaining terms and provisions hereof shall remain in full force
and effect.
9.10 Time is of the Essence. The Selling Parties and Buyer agree that
----------------------
time is of the essence in connection with the implementation and performance by
the parties of all terms, conditions and obligations of this Agreement.
9.11 Brokers or Finders. None of the Selling Parties has retained any
------------------
broker or finder and is not and will not be obligated to pay any brokers' or
finders' fee in connection with the negotiation or consummation of the
transactions contemplated by this Agreement, except for the retention of the
management consulting firm of Xxxxxxx & Marsal, Inc. ("A&M") by Xxxxxxxx.
Xxxxxxxx is responsible for fees payable to A&M in respect of the transactions
contemplated by this Agreement. The Buyer has not retained any broker or finder
and is not and will not be obligated to pay any brokers' or finders' fee in
connection with the negotiation or consummation of the transactions contemplated
by this Agreement, except for the retention
25
of Banc One Capital Group by Buyer. Buyer is responsible for fees payable to
Banc One Capital Group in respect of the transactions contemplated by this
Agreement.
9.12 Indemnification by Selling Parties. The Selling Parties, jointly
----------------------------------
and severally, hereby indemnify, defend and hold harmless Buyer and its
Affiliates and their respective officers and directors from and against:
(a) any loss, liability, claim, obligation, damage or deficiency
arising out of or resulting from any material breach of any representation or
warranty or nonfulfillment of any covenant or agreement on the part of the
Selling Parties contained in this Agreement, the Secondary Agreement or any
other agreement, statement or certificate furnished or to be furnished by the
Selling Parties in connection with the transactions contemplated hereby and
thereby which is not cured within twenty (20) calendar days of written notice
thereof from Buyer to the Selling Parties;
(b) any loss, liability, claim, obligation, damage or deficiency
arising out of or resulting from any claim related to or arising out of the
operation of the Schools prior to the Tier I Closing that are asserted with
respect to any liabilities that are not Assumed Liabilities in this Agreement or
in the Secondary Agreement; and
(c) any actions, judgments, costs and expenses (including
reasonable attorneys' fees, expert witness fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to any of the foregoing or the enforcement of this
Section 9.12.
9.13 Indemnification by Buyer. Buyer hereby indemnifies, defends and
------------------------
holds harmless each of the Selling Parties and their Affiliates and their
respective officers and directors from and against:
(a) any loss, liability, claim, obligation, damage or deficiency
arising out of or resulting from any material breach of any representation or
warranty or nonfulfillment of any covenant or agreement on the part of Buyer
contained in this Agreement, the Secondary Agreement or any other agreement,
statement or certificate furnished or to be furnished by Buyer in connection
with the transactions contemplated hereby and thereby which is not cured within
twenty (20) calendar days of written notice thereof from the Selling Parties to
Buyer;
(b) any loss, liability, claim, obligation, damage or deficiency
resulting from or arising out of the failure by Buyer to pay, perform or
discharge, or cause to be paid, performed or discharged, any of the Assumed
Liabilities in this Agreement or in the Secondary Agreement; and
(c) any actions, judgments, costs and expenses (including
reasonable attorneys' fees, expert witness fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to any of the foregoing or the enforcement of this
Section 9.13.
26
9.14 Procedure for Indemnification.
-----------------------------
9.14.1 The provisions of this Section 9.14 shall govern any
claim for indemnification of Buyer and its Affiliates, pursuant to Section 9.12,
or of the Selling Parties and their Affiliates, pursuant to Section 9.13 (each
such party an "Indemnitee") against the party agreeing to provide
indemnification hereunder (the "Indemnitor").
9.14.2 The Indemnitee shall promptly give notice hereunder to
the Indemnitor, but in no event more than the lesser of thirty (30) days or,
with respect to third party claims, one-half (1/2) of the response time required
with respect to the third party's notice to the Indemnitee, after obtaining
notice of any claim as to which recovery may be sought against the Indemnitor
because of the indemnity in Sections 9.12 or 9.13, and, if such indemnity shall
arise from the claim of a third party, the Indemnitee shall consent to the
Indemnitor assuming the defense of any such claim; provided that the Indemnitee
--------
shall not be required to permit the Indemnitor to assume the defense of any
third party claim (x) which, if not first paid, discharged or otherwise complied
with, would result in a material interruption or cessation of the conduct of the
business of the Indemnitee, or (y) if the Indemnitee reasonably concludes that
there may be a conflict of interest between the Indemnitor, on the one hand, and
the Indemnitee, on the other hand, in the conduct of the defense of such action.
Failure by the Indemnitor to notify the Indemnitee of its election to defend any
such claim or action within 14 days of the date of notice from the Indemnitee
shall be deemed to constitute its consent to the Indemnitee's assumption of such
defense. If the Indemnitor assumes the defense of such claim or litigation
resulting therefrom, the obligations of the Indemnitor hereunder as to such
claim shall include taking all steps necessary in the defense or settlement of
such claim or litigation resulting therefrom including the retention of counsel,
which counsel must be to the Indemnitee's reasonable satisfaction, and holding
the Indemnitee harmless from and against any and all damages resulting from,
arising out of, or incurred with respect to any settlement approved by the
Indemnitor or any judgment in connection with such claim or litigation resulting
therefrom. The Indemnitor shall not, in the defense of such claim or litigation,
(i) consent to the entry of any judgment (other than a judgment of dismissal on
the merits without costs) except with the written consent of the Indemnitee,
which consent shall not be unreasonably withheld or (ii) enter into any
settlement (except with the written consent of the Indemnitee, which consent
shall not be unreasonably withheld), unless the Indemnitee is released and held
harmless from and against any and all damages resulting from, arising out of or
incurred with respect to such judgment or settlement.
9.14.3 If the Indemnitor is offered the opportunity, but does
not assume the defense of any such claim by a third party or litigation
resulting therefrom, the Indemnitee may defend against such claim or litigation
in such manner as it deems appropriate, and the Indemnitee may settle such claim
or litigation on such terms as it may deem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of such settlement and for all
damages incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation.
27
9.14.4 Indemnification Floor. Notwithstanding anything to the
---------------------
contrary herein, any claim by an Indemnitee against an Indemnitor under this
Agreement that has been Definitively Resolved (as hereinafter defined) against
the Indemnitor, shall be payable by the Indemnitor only in the event and to the
extent that the accumulated amount of all such Settled Claims, as hereinafter
defined, shall exceed the amount of One Hundred Thousand Dollars ($100,000) in
the aggregate, including any amounts claimed under any other agreement
(including, without limitation, the Secondary Agreement) executed in connection
with this Agreement (the "Basket Amount"). At such time as the aggregate amount
of Settled Claims of an Indemnitor shall exceed the Basket Amount, such
Indemnitor shall thereafter be liable on a dollar-for-dollar basis for all
Settled Claims, including the Basket Amount.
9.14.5 Payments from Escrow. The parties acknowledge and agree
--------------------
that all Settled Claims for which any of the Selling Parties is the Indemnitor
shall initially be payable from amounts held pursuant to the Escrow Agreement in
accordance with the provisions thereof. To the extent that the amount of a
Settled Claim for which a Selling Party is the Indemnitor exceeds the amount in
the escrow account, such Selling Party shall be liable for such Payable Claim.
9.14.6 Maximum Liabilities. In no event shall the maximum
-------------------
aggregate liability of the Selling Parties with respect to all claims under this
Article IX exceed the aggregate amount of the Purchase Price.
9.14.7 Definition. For purposes hereof, any claim for
----------
indemnification hereunder shall be deemed to have been "Definitively Resolved"
when any of the following has occurred:
(a) a claim is settled by mutual agreement of the
parties;
(b) forty-five (45) days have elapsed since the receipt
by the party against which indemnification has been claimed and the claiming
party has not received on or before such date, a written notice disputing such
claim; or
(c) a judgment, order or award of a court of competent
jurisdiction or arbitrator (pursuant to Section 9.18.2 or otherwise) or
administrative judge deciding such claim has been rendered, as evidenced by a
certified copy of such judgment, order or award ("Original Judgment"); provided,
however, if the Original Judgment is reversed or modified on appeal, the
Indemnitee shall repay the Indemnitor any amounts received by the Indemnitee
from the Indemnitor as a result of the Original Judgment (with the Indemnitor
remaining responsible for any amounts awarded to the Indemnitee in connection
with a modification of the Original Judgment in excess of those amounts already
paid); provided, however, that the Indemnitee must continue to appeal or
challenge the Original Judgment in accordance with its rights if there is a
reasonable basis to conclude that such Original Judgment could be reversed or
modified on appeal.
28
Any indemnity claim that has been Definitively Resolved against an
Indemnitor is referred to herein as a "Settled Claim."
9.14.8 Indemnification Time Limit. Notwithstanding any provision
--------------------------
of this Agreement to the contrary, no party shall be entitled to indemnification
hereunder for any claim which is not asserted against such party within two (2)
years of the Tier I Closing, if such claim relates to a Tier I School or the
Tier I Closing or within two (2) years of the Tier II Closing, if such claim
relates to a Tier II School or the Tier II Closing.
9.14.9 Definition. For purposes of this Agreement, the term
----------
"Affiliate" of any person or entity means any corporation, partnership or other
entity of which more than 50% of the securities or other ownership interests
having by the terms thereof ordinary voting power to elect more than 50% of the
board of directors or others performing similar functions with respect to such
Corporation, partnership or other entity, directly or indirectly, controls, is
controlled by, or is under common control with such person or entity.
9.15 Exclusive Remedy. After the Tier I Closing, indemnification
----------------
pursuant to Sections 9.12 and 9.13 shall be the sole and exclusive remedies of
the parties to this Agreement and the parties to the Secondary Agreement for any
claims of any nature whatsoever, arising out of or relating to the transactions
contemplated by this Agreement, the Secondary Agreement or the Ancillary
Documents (except the Interim Note and the Escrow Funding Note), whether such
claims may be asserted as a breach of contract, tort or otherwise.
9.16 Limitation. Notwithstanding anything in this Agreement to the
----------
contrary, no shareholder, partner, director, officer, employee, agent, manager
or Affiliate of the Selling Parties (or any direct or indirect shareholder,
partner, director, officer, employee, agent, manager or affiliate of any of
them) shall have any liability of any nature whatsoever to Buyer as a result of
a breach of any representation, warranty, covenant or agreement contained in
this Agreement, the Secondary Agreement or the Ancillary Documents or otherwise
arising out of the transactions contemplated hereby or thereby.
9.17 No Double Indemnification. In no event shall Buyer or its
-------------------------
Affiliates be entitled to indemnification hereunder for claims based upon any
matters which were also the basis for any claims pursuant to which Buyer or its
Affiliates received indemnification under the Secondary Agreement. In no event
shall Buyer or its Affiliates be entitled to indemnification under the Secondary
Agreement for claims based upon any matters which were also the basis for any
claims pursuant to which Buyer or its Affiliates received indemnification under
this Agreement. In no event shall the Selling Parties or their Affiliates be
entitled to indemnification hereunder for claims for which the Selling Parties
or their Affiliates received indemnification under the Secondary Agreement. In
no event shall the Selling Parties or their Affiliates be entitled to
indemnification under the Secondary Agreement for claims for which the Selling
Parties or their Affiliates received indemnification under this Agreement.
29
9.18 Dispute Resolution and Arbitration.
----------------------------------
9.18.1 Negotiation Between Executives. The parties shall attempt
------------------------------
in good faith to resolve any dispute arising out of or relating to this
Agreement promptly by negotiation between executives who have authority to
settle the controversy and who are at a higher level of management (if any) than
the persons with direct responsibility for administration of this Agreement. Any
party may give the other party written notice of any dispute not resolved in the
normal course of business. Within 15 days after delivery of the notice the
receiving party shall submit to the other a written response. The notice and the
response shall include (i) a statement of each party's position and a summary of
arguments supporting that position, and (ii) the name and title of the executive
who represents that party and of any other person who will accompany the
executive. Within 10 days after delivery of the disputing party's notice, the
executives of both parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to attempt to resolve
the dispute. All reasonable requests for information made by one party to the
other will be honored. If the matter has not been resolved within 45 days of the
disputing party's notice, or if the parties fail to meet within 10 days of such
notice, either party may initiate arbitration of the controversy or claim as
provided hereinafter. All negotiations pursuant to this clause are confidential
and shall be treated as compromise and settlement negotiations for purposes of
the Federal Rules of Evidence of California and other states' Rules of Evidence.
9.18.2 Arbitration. Any dispute arising out of or relating to
-----------
this Agreement or the breach, termination or the validity thereof, which has not
been resolved by the nonbinding meet and confer provisions provided in Section
9.18.1 within 90 days of the initiation of such procedure, shall be settled by
arbitration in accordance with the then-current End Dispute-Judicial Arbitration
and Mediation Services (JAMS) rules for arbitration of business disputes by a
sole arbitrator who shall be a former superior court or appellate court judge or
justice with significant experience in resolving business disputes. If
available, the arbitrator should have familiarity or experience in Title IV
funding matters. The arbitration shall be governed by the California Code of
Civil Procedure Section 1280 et seq. and the parties intend this procedure to be
------
specifically enforceable in accordance with such provisions. Judgment upon the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The place of arbitration shall be Orange County, California. The
arbitrator may award equitable relief in those circumstances where monetary
damages would be inadequate. The arbitrator shall be required to follow the
applicable law as set forth in the governing law section of this Agreement.
9.19 Third Party Beneficiaries. This Agreement shall be binding upon,
-------------------------
be enforceable against, and inure to the benefit of the parties and their
respective successors and permitted assigns; otherwise, this Agreement shall
not, and shall not be deemed to, inure to the benefit of or be enforceable by
any third party.
9.20 Bulk Transfers. If Buyer requests, Selling Parties will comply
--------------
with any applicable bulk transfer laws. If Buyer does not so request, Buyer and
Selling Parties each hereby waives compliance with any applicable bulk transfer
laws in connection with the sale of
30
the Purchased Assets hereunder and Selling Parties hereby agree to indemnify
Buyer against and hold Buyer harmless from any and all damages and liabilities
(including reasonable attorneys' fees) relating to or resulting from such non-
compliance.
9.21 Expenses. Except as otherwise provided in this Agreement, each
--------
party shall pay its own expenses incurred in connection with the authorization,
preparation, execution, and performance of this Agreement and the Ancillary
Documents, including all fees and expenses of counsel, accountants, agents and
representatives.
31
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of this 17th day of October, 1996.
CORINTHIAN COLLEGES, INC.
/s/ Xxxxx X. Xxxxx
By: --------------------------------
Name: ______________________________
Title: _____________________________
CORINTHIAN SCHOOLS, INC.
/s/ Xxxxx X. Xxxxx
By: ---------------------------------
Name: _______________________________
Title: ______________________________
XXXXXX COLLEGES, INC.
/s/ Xxxxx X. Xxxxx
By: ---------------------------------
Name: _______________________________
Title: ______________________________
XXXXXX BUSINESS GROUP, INC.
/s/ Xxxxx X. Xxxxx
By: ---------------------------------
Name: _______________________________
Title: ______________________________
FLORIDA METROPOLITAN UNIVERSITY, INC.
/s/ Xxxxx X. Xxxxx
By: ---------------------------------
Name: _______________________________
Title: ______________________________
FLORIDA METROPOLITAN UNIVERSITY, INC.
/s/ Xxxxx X. Xxxxx
By: ---------------------------------
Name: _______________________________
Title: ______________________________
XXXXXXXX COLLEGES, INC.
[SIGNATURE ILLEGIBLE]
By: ---------------------------------
Name ________________________________
Title _______________________________
XXXXX BUSINESS COLLEGE, INC.
[SIGNATURE ILLEGIBLE]
By: ----------------------------------
Name: ________________________________
Title: _______________________________
XXXXXXXX COLLEGE OF DENVER, INC.
[SIGNATURE ILLEGIBLE]
By:----------------------------------
Name: _______________________________
Title: ______________________________
TO-BA CORPORATION
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title:________________________________
XXXXXXXX COLLEGE OF LOS ANGELES, INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title:________________________________
XXXXXXXX EDUCATIONAL SERVICES OF NEW
YORK CITY, INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title:________________________________
XXXXXXXX EDUCATIONAL GROUP OF
PENNSYLVANIA, INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title:________________________________
XXXXXXXX EDUCATIONAL GROUP OF
PORTLAND, INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name: ________________________________
Title:________________________________
ROCHESTER BUSINESS INSTITUTE, INC.
[SIGNATURE ILLEGIBLE]
By:----------------------------------
Name:________________________________
Title:_______________________________
XXXXXXXX EDUCATIONAL GROUP OF UTAH,
INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title:________________________________
XXXXXXXX EDUCATIONAL GROUP OF
MISSOURI, INC.
[SIGNATURE ILLEGIBLE]
By:-----------------------------------
Name:_________________________________
Title: _______________________________
XXXXXXXX EDUCATIONAL GROUP OF CENTRAL
FLORIDA, INC.
[SIGNATURE ILLEGIBLE]
By:----------------------------------
Name:________________________________
Title:_______________________________
EXHIBIT A
-------
LIST OF SUBSIDIARIES OF XXXXXXXX
1. Xxxxx Business College, Inc. (a Colorado corporation)
2. Xxxxxxxx College of Denver, Inc. (a Colorado corporation)
3. TO-BA Corporation (a Nevada corporation)
4. Xxxxxxxx College of Los Angeles, Inc. (a California corporation)
5. Xxxxxxxx Educational Services of New York City, Inc. (a New York
corporation)
6. Xxxxxxxx Educational Group of Pennsylvania, Inc. (a Pennsylvania
corporation)
7. Xxxxxxxx Educational Group of Portland, Inc. (an Oregon corporation)
8. Rochester Business Institute, Inc. (a New York corporation)
9. Xxxxxxxx Educational Group of Utah, Inc. (a Utah corporation)
10. Xxxxxxxx Educational Group of Missouri, Inc. (a Missouri corporation)
11. Xxxxxxxx Educational Group of Central Florida, Inc. (a Florida corporation)
A-1
EXHIBIT B
-------
BID PRICES
TIER I SCHOOLS
NAME; LOCATION STATE TIER I BID PRICE
-------------- ----- ----------------
XXXXXX SCHOOLS:
Western Business College; Portland OR $ 1,600,000
Xxxxx Xxxxxx College; Colorado Springs CO $ 000,000
Xxxxx Xxxxxxx (Xxxxx); Xxxxxx XX $ 100,000
Parks College (South); Aurora CO $ 300,000
Xxxxxxxx College; Las Vegas NV $ 200,000
Xxxxxxxx Xxxxxx College of Salt Lake City; Salt UT $ 400,000
Lake City
Xxxxxxxx Xxxxxx College; Springfield MO $ 500,000
XXXXXX GROUP SCHOOLS:
Duff's Business Institute; Pittsburgh PA $ 400,000
Rochester Business Institute; Rochester NY $ 300,000
FLORIDA SCHOOLS:
FMUS* - Ft. Lauderdale College; Ft. FL $ 225,000
Lauderdale
FMUS* - Orlando College (North); Orlando FL $ 1,700,000
FMUS* - Orlando College (South); Orlando FL $ 2,800,000
FMUS* - Orlando College (Melbourne); FL $ 325,000
Melbourne
FMUS* - Tampa College (Main); Tampa FL $ 6,500,000
FMUS* - Tampa College (Xxxxxxx); Tampa FL $ 1,500,000
FMUS* - Tampa College (Pinellas); Clearwater FL $ 3,800,000
FMUS* - Tampa College; Lakeland FL $ 650,000
--------------------------------------------------------------------------
Aggregate Tier I Bid Price $22,000,000
_________________
* FMUS means the Florida Metropolitan University System.
B-1
Tier II Schools
ALTERNATE
LOCATION STATE TIER II BID PRICE TIER II BID PRICE
-------------------------------------------------------------------
XXXXXX SCHOOLS:
Xxxxxxxx Xxxxxx CA $1,200,000 $2,400,000
College (Van Nuys);
Northridge
XXXXXX GROUP
Xxxxxx Business NY $1,200,000 $1,200,000
Institute; New York
B-2
EXHIBIT K
-------
VALUE PRICES
TIER I SCHOOLS
NAME; LOCATION STATE TIER I VALUE PRICE
-------------- ----- ------------------
XXXXXX SCHOOLS:
Western Business College; Portland OR $ 1,200,000
Xxxxx Xxxxxx College; Colorado Springs CO $ 000,000
Xxxxx Xxxxxxx (Xxxxx); Xxxxxx XX $ 75,000
Parks College (South); Aurora CO $ 225,000
Xxxxxxxx College; Las Vegas NV $ 150,000
Xxxxxxxx Xxxxxx College of Salt Lake City; UT $ 300,000
Salt Lake City
Xxxxxxxx Xxxxxx College; Springfield MO $ 375,000
XXXXXX GROUP SCHOOLS:
Duff's Business Institute; Pittsburgh PA $ 300,000
Rochester Business Institute; Rochester NY $ 225,000
FLORIDA SCHOOLS:
FMUS - Ft. Lauderdale College; Ft. FL $ 168,750
Lauderdale
FMUS - Orlando College (North); Orlando FL $ 1,275,000
FMUS - Orlando College (South); Orlando FL $ 2,100,000
FMUS - Orlando College (Melbourne); FL $ 243,750
Melbourne
FMUS - Tampa College (Main); Tampa FL $ 4,875,000
FMUS - Tampa College (Xxxxxxx); Tampa FL $ 1,125,000
FMUS - Tampa College (Pinellas); FL $ 2,850,000
Clearwater
FMUS - Tampa College; Lakeland FL $ 487,500
-----------------------------------------------------------------------
Aggregate Tier I Value Price $16,500,000
K-1
TIER II SCHOOLS
ALTERNATE
LOCATION STATE TIER II VALUE PRICE TIER II VALUE PRICE
------------------------------------------------------------------------------------------
Xxxxxxxx Xxxxxx CA $900,000 $1,800,000
College (Van Nuys);
Northridge
XXXXXX GROUP
Xxxxxx Business NY $900,000 $ 900,000
Institute; New York
K-2
