EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of December 30, 1996 by and among
Colorado Technical University, Inc., a Colorado corporation ("Buyer"); Lansdowne
University, Ltd., a South Dakota corporation ("Seller"); EIEA America, Inc., a
Delaware corporation and the sole shareholder of Seller ("Parent"), Eastern
International Educational Association, a Japanese corporation and the sole
shareholder of Parent ("Shareholder"); and Dr. Chikara Higashi, the sole
shareholder of Shareholder ("Higashi"). Shareholder, Seller, Parent and Higashi
are collectively referred to herein as the "Seller Group."
RECITALS
Buyer desires to purchase from the Seller, and the Seller desires to
sell to Buyer, substantially all of the assets of Seller utilized in the
business and operations of Huron University in the United States (the
"Acquisition") on the terms and conditions contained herein. Shareholder, Parent
and Higashi are joining in this Agreement in order to induce Buyer to purchase
the said assets, and will derive substantial benefits from the Acquisition.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used herein, the terms below shall have
the following meanings. Any of these terms, unless the context otherwise
requires, may be used in the singular or plural depending upon the reference.
"ACCOUNTS" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, insurance claims and proceeds and
notes receivable of Seller.
"ACCREDITATION" shall mean accreditation, licenses, permits,
certifications, approvals, and other governmental and regulatory authorizations
required under all laws, rules and regulations applicable to or affecting Seller
or the Institution, exclusive of the Certification.
"AFFILIATE" means as to any party, any entity which directly or
indirectly, is in control of, is controlled by, or is under common control with,
such party, including any person who would be treated as a member of a
controlled group under Section 414 of the Code and any officer or director of
such party. For purposes of this definition, an entity shall be deemed to be
"controlled by" a person if the person possesses, directly or indirectly, power
either to (i) vote 10% or more of the securities (including convertible
securities) having ordinary voting power or (ii) direct or cause the direction
of the management or policies of such entity whether by contract or otherwise;
and, as to a party who is a natural person, such person's spouse, parents,
siblings and lineal descendants.
"ASSETS" shall mean all of Seller's right, title and interest in and to
all properties, assets and rights of any kind, whether tangible or intangible,
real or personal, owned by Seller or in which Seller has any interest
whatsoever, including without limitation, the following:
(a) all cash and cash equivalents of the Seller, wherever located, which
shall include but is not limited to, cash held with or by Huron Regional Medical
Center, Inc. ("HRMC") pursuant to that certain Agreement between EIEA, Inc.,
d/b/a Huron University and HRMC for the Operation of the Huron Nursing School
and which cash, except for the cash held by HRMC, shall be delivered as a credit
to the cash portion of the Purchase Price at Closing; provided, however, that
subject to Buyer's review of all pertinent documents pertaining to that certain
investment in Seller by Higashi in the amount of $600,000 in or around May 1996,
said funds shall be excluded from the definition of cash herein;
(b) notes and notes receivable, Accounts and accounts receivable,
refunds (except for any tax refund due to the Seller Group from the United
States Internal Revenue Service) or deposits and prepaid expenses, including
without limitation, any prepaid insurance premiums;
(c) all Contract Rights;
(d) all Fixtures and Equipment (except those located at the Huron
University Campus in Phoenix, Arizona, which location is specifically excluded
from this Agreement) of Seller;
(e) all Real Property;
(f) all Inventory;
(g) all Books and Records;
(h) the Insurance Policies to the extent Buyer desires such
policies to be assigned;
(i) all Permits;
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(j) all Miscellaneous Assets;
(k) all Other Rights; and
(l) all goodwill of the Seller, including all rights to the
name "Huron University"; except as provided in Section
2.07 hereof.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section
2.01(b) hereof.
"BOOKS AND RECORDS" shall mean all records pertaining to the Assets,
Assumed Liabilities, customers, or suppliers of Seller (but specifically
excluding the corporate minute books, corporate tax returns, stock ledger and
related items) provided that Buyer shall make available to Seller such Books and
Records as the Seller shall reasonably require after the Closing in the event of
an audit or similar matter.
"CERTIFICATION" shall mean certification by the U.S. Department of
Education for institutional participation in the programs of student financial
assistance pursuant to Title IV of the Higher Education Act of 1965, as amended.
"CLOSING BALANCE SHEET" shall mean the balance sheet of the Seller as of
the closing date to be prepared by Buyer after the Closing Date.
"CODE" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"CONTRACT" shall mean with respect to Seller any of the agreements,
contracts, Leases, notes, loans, evidences of indebtedness, purchase orders,
letters of credit, franchise agreements, undertakings, covenants not to compete,
employment agreements, licenses, instruments, obligations, commitments to which
Seller is a party or to which any of its assets are subject, whether oral or
written, express or implied.
"CONTRACT RIGHTS" shall mean with respect to Seller all of the Seller's
rights and obligations under the Contracts, to the extent such obligations are
assumed by Buyer pursuant to Section 2.01(b) hereof.
"ED" shall mean the U.S. Department of Education.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other right of third
parties or any member of the Seller Group.
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"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.02
hereof.
"FACILITIES" shall have the meaning set forth in Section 4.11 hereof.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment, spare parts, supplies, vehicles and other
tangible personal property owned by Seller as of the date hereof plus all
additions, replacements or deletions since the date hereof in the ordinary
course of Seller's business.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time.
"GUARANTY AGENCY" shall mean a government or private organization that
has an agreement with the Secretary under which it administers a loan program
under Title IV, and including Education Assistance Corp., Aberdeen, South
Dakota.
"HEA" shall mean the Higher Education Act of 1965, as amended, 20 U.S.C.
1001 et seq.
"HURON UNIVERSITY" or "INSTITUTION" shall mean Huron University in
Huron, South Dakota, and its additional location in Sioux Falls, South Dakota.
"INSTITUTIONAL ACCREDITING AGENCY" shall mean the accrediting agency
that grants Huron University institutional accreditation for the purpose of
participation in Title IV Programs which at the present time is North Central
Association of Colleges and Schools ("NCA").
"INSURANCE POLICIES" shall mean with respect to Seller the insurance
policies relating to the Assets.
"INVENTORY" shall mean all of Seller's inventory and supplies and all
other materials utilized in connection with the Assets.
"LEASES" shall mean all of the leases of Seller listed on the Schedules
hereto and all other leases relating to the Assets which are not required to be
scheduled pursuant to this Agreement.
"MATERIAL ADVERSE EFFECT" shall mean with respect to Seller a material
adverse effect on (i) the Assets, the business or the condition (financial or
otherwise), properties, liabilities, reserves, working capital, earnings,
technology, prospects or relations with customers, students, suppliers,
distributors, employees or regulators of Seller, or (ii) the right or ability of
Seller to consummate the transactions contemplated hereby.
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"MISCELLANEOUS ASSETS" shall mean all employee records relating to those
employees to be employed by the Buyer as of the Closing; all student records for
students presently or historically enrolled at Huron University; all accounting
information pertaining to the continued operations of the Seller and all media
in which or on which any of the information, knowledge, data or other records
relating to the Assets may be related or stored; all computer software relating
to accounting and operations systems; all office and other supplies; all
warranties, claims and causes of action (and the benefit of any and all
collateral or security given in connection therewith) inuring to the benefit of
Seller relating to the Assets; and all other assets used or useful in connection
with the business of the Seller not otherwise described in this Agreement of any
character whatsoever, whether personal, tangible or intangible, wherever
located, owned or possessed by Seller and related to the business of the Seller
in the United States.
"OTHER RIGHTS" shall mean all assignable or conveyable rights under
licenses, permits, approvals, qualifications or the like relating directly or
indirectly to the business of the Seller issued or to be issued prior to the
Closing by any government or by any governmental unit, agency, body or
instrumentality whether Federal, State, local, foreign or other.
"PERMITS" shall mean all licenses, permits and other governmental
authorizations necessary to carry on the business of Seller as presently
conducted and as proposed to be conducted.
"REAL PROPERTY" shall mean the real property owned by Seller and
utilized in any manner in the business or operations of Huron University, all of
which is described in Schedule 4.11 hereto.
"TAX" or "TAXES" shall mean all federal, state, local, foreign and other
taxes, assessments or other government charges, including, without limitation,
income, estimated income, business, occupation, franchise, property, sales,
transfer, use, employment, commercial rent or withholding taxes, including
interest, penalties and additions in connection therewith for which Seller may
be liable.
"TITLE IV PROGRAMS"shall mean the Programs of Student Financial
Assistance in effect under Title IV of the Higher Education Act of 1965, as
amended.
ARTICLE II
PURCHASE AND SALE OF ASSETS
SECTION 2.01. TRANSFER OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES.
Upon the terms and subject to the conditions herein set forth, on the Closing
Date (as defined in Section 3.01):
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(a) Seller shall sell, convey, transfer, assign, and deliver to
Buyer, and Buyer shall purchase from Seller, the Assets, free and clear of all
encumbrances, liens, security interests and claims of any person or entity,
except as may be expressly assumed by Buyer.
(b) Buyer shall assume the following obligations and
liabilities of Seller (the "Assumed Liabilities"):
(i) All liabilities of Seller for the payment of money
with respect to trade accounts payable and accrued expenses of
Seller incurred prior to the Closing Date and shown on the
Closing Balance Sheet; PROVIDED, HOWEVER, that in no event shall
the liabilities assumed exceed an aggregate of $500,000. All
trade accounts payable and accrued expenses in excess of $500,000
shall be paid by the Seller Group in the manner set forth in
Section 3.03 hereof; and
(ii) All liabilities, obligations and commitments of
Seller arising on or after the Closing Date pursuant to the
Leases and Contracts of Seller listed on Schedule 2.01, but
expressly excluding any obligations or liabilities of Seller for
any breach of or default under any Leases or Contracts occurring
on or prior to the Closing Date.
(c) In addition to assuming the aforesaid liabilities,
Buyer shall pay, at Closing, up to $750,000 to pay off the
outstanding balance of the mortgages presently secured by
Seller's Real Property (the "Mortgages"). All other amounts
necessary to fully repay and satisfy the Mortgages at Closing
shall be paid by the Seller Group.
(d) Within 60 days after the Closing Date, Buyer shall
cause its auditors to prepare an audited Closing Balance Sheet in
accordance with GAAP. The Closing Balance Sheet shall show all of
the trade accounts payable, accrued expenses and other
liabilities of Seller as of the Closing Date. All accounts
payable, accrued expenses and other liabilities of Seller set
forth thereon in excess of $500,000 in the aggregate will be paid
by the Seller Group from the escrow established pursuant to
Section 3.03 hereof. In the event of any dispute among the
parties with respect to the Closing Balance Sheet, such dispute
shall be determined by the decision of an independent Big Six
accounting firm, to be selected by the parties' auditors. The
fees of that accounting firm shall be shared equally by the
Seller Group and Buyer.
SECTION 2.02 EXCLUDED LIABILITIES. Notwithstanding any other provision
of this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.01(b), Buyer shall not assume, or otherwise be responsible for, any
liabilities or obligations of Seller, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, or known or unknown, whether arising out
of occurrences prior to, at or after the date hereof and notwithstanding the
fact that any such liability
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is identified herein or on the schedules hereto (collectively, "Excluded
Liabilities").
SECTION 2.03. PURCHASE PRICE.
(a) CASH. Upon the terms and subject to the conditions,
prorations, credits and adjustments herein set forth (including but not limited
to, the credits set forth on the attached Seller's Certificate of Closing
Credits), on the Closing Date Buyer shall pay to the Seller Two Million Two
Hundred Fifty Thousand ($2,250,000) Dollars in certified funds or by wire
transfer of immediately available funds.
(b) STOCK. In addition to the cash purchase price, but only if
Buyer obtains Certification for Huron University, Buyer shall, subject to
Article XI, cause to be issued to Seller a number of shares of common stock (the
"Xxxxxxx Shares") of Xxxxxxx Education Group, Inc., a New Jersey corporation
("Xxxxxxx"), which, as of the date of such Certification, have an aggregate
market value (determined as set forth below) of $150,000. For purposes of this
Agreement, the value of a share of Xxxxxxx'x common stock shall be the closing
price thereof on the American Stock Exchange on the date Certification is issued
by ED (or if such date is not a trading day, on the trading day immediately
preceding such date). The issuance of the Xxxxxxx Shares to Seller hereunder
shall not be registered under the Securities Act of 1933 (the "1933 Act") by
reason of the exemption provided by Section 4(2) thereunder; and such shares may
not be further transferred by Seller unless such transfer is registered under
applicable securities laws or, in the reasonable opinion of Xxxxxxx'x counsel,
such transfer qualifies for an exemption from registration. The certificates
evidencing the Xxxxxxx Shares to be issued to Seller shall be legended to
reflect the foregoing restriction. The Seller Group have received and reviewed
copies of the following disclosure documents filed with the Securities and
Exchange Commission ("SEC") by Xxxxxxx (collectively, the "SEC Documents"): (1)
Quarterly Reports on Form 10-Q for the quarters ended June 30 and September 30,
1996; (2) Proxy Statement mailed to shareholders in connection with the
shareholders meeting held on October 11, 1996; and (3) Annual Report to
Shareholders and Annual Report on Form 10-K for the fiscal year ended March 31,
1996.
SECTION 2.04. CLOSING COSTS; TRANSFER TAXES. Seller shall be responsible
for any documentary transfer taxes and any sales, use or other taxes imposed by
reason of the transfer of the Assets, and the fees and costs of recording or
filing all applicable conveyancing instruments necessary to transfer the Assets.
SECTION 2.05. ALLOCATION OF PURCHASE PRICE. At or after the Closing,
Buyer shall allocate the Purchase Price and the amount of the Assumed
Liabilities among the Assets in accordance with the "residual method" and in
accordance with Section 1060 of the Code. Buyer and Seller shall (a) prepare all
required tax returns and reports in a manner that is consistent with such
allocation; (b) file Internal Revenue Service Form 8594 in such manner; and (c)
not voluntarily take any position inconsistent therewith upon examination of any
such tax return, in any refund claim, in any litigation or otherwise with
respect to such income tax returns.
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SECTION 2.06. PRORATIONS. Buyer and Seller shall prorate those items
normally subject to proration and reimbursement, such as revenue, fees, fuel
oil, utilities and other real property related expenses relating to the
Facilities, lease payments, insurance premiums regarding those policies which
are assigned to the Buyer and ad valorem personal or real property taxes, on the
basis of the number of days of the tax year, calendar year or service period, as
the case may be, which has elapsed as of the Closing Date. Seller shall be
responsible for all amounts, including wages, salaries, bonuses, commissions,
vacation and/or sick pay and severance pay, if any, and all other employee
benefits due to all of its employees through the Closing Date. So long as the
Closing occurs in 1996, and solely for purposes of facilitating prorations
hereunder, the parties shall assume that the Closing Date is December 31, 1996.
Without limiting the generality of the foregoing, Buyer shall be entitled to all
fees, tuition and other amounts, wherever paid, by or on behalf of students, on
or before Closing, for instruction or other goods and services to be provided
after Closing (the "Revenue Credit"). At the Closing, Seller shall provide a
Seller's Certificate of Closing Credits evidencing, inter alia, the Revenue
Credit. The Revenue Credit shall be paid to Buyer as a credit in favor of Buyer
against the cash proceeds due Seller hereunder.
SECTION 2.07. USE OF NAME. The parties understand and acknowledge that
all rights to the name "Huron University" are being transferred to Buyer
hereunder except as provided herein. Notwithstanding the foregoing, Seller may
use the name "Huron International University" in California, Phoenix, Arizona
metropolitan area, Hawaii and the Washington, D.C. metropolitan area, provided
that the name "Huron International University" shall only be utilized in
advertising, promotional or other printed materials of any kind with the
conspicuous disclaimer: "Not associated with or related to Huron University in
South Dakota" or a similar disclaimer agreed upon by the parties. Seller agrees
not to transfer the right to utilize the name "Huron International University,"
with or without the above-quoted disclaimer, in connection with the sale of
those locations or otherwise.
ARTICLE III
CLOSING
"SECTION 3.01. CLOSING. Upon the terms and subject to the conditions set
forth herein, the closing of the transactions contemplated herein (the
"Closing") shall be held December 30, 1996 at 10:00 a.m. local time or such
other day when all of the conditions set forth in Articles VIII and IX are
satisfied (the "Closing Date") at the offices of Xxxxxx Xxxxxxx, Esq., Xxxxxxxxx
& Manolis, 00 - Xxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxx, Xxxxx Xxxxxx 00000, unless
the parties hereto otherwise agree. The Closing shall in all events be subject
to the condition subsequent set forth in Section 7.02.
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SECTION 3.02. DELIVERIES AT CLOSING.
(a) INSTRUMENTS AND POSSESSION. To effect the transfer referred
to in Section 2.01 hereof, the Seller shall, on the Closing Date, execute and
deliver to Buyer:
(i) bills of sale, in form and substance satisfactory to
Buyer, conveying in the aggregate all personal property
included in the Assets;
(ii) general warranty deeds, in form and substance
satisfactory to Buyer, and if so requested by Buyer,
including Buyer's designee(s) as grantee(s), conveying the
Real Property included in the Assets;
(iii) assignments in form and substance satisfactory to
Buyer, with all required consents of Leases and other
Contracts which Buyer has agreed to assume; and
(iv) such other instruments as shall be reasonably
requested by Buyer to vest in Buyer title in and to the
Assets in accordance with the provisions hereof.
(b) ASSUMPTION DOCUMENTS. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Buyer shall execute and
deliver to the Seller instruments of assumption evidencing Buyer's assumption of
the Assumed Liabilities.
SECTION 3.03. ESCROW. An escrow account in the amount of $200,000,
funded from the cash proceeds payable to Seller hereunder, shall be established
at closing with Xxxxxx Xxxxxxx, Esq. as escrow agent. The escrow account shall
be maintained until the tenth (10th) day after the delivery of the final,
audited Closing Balance Sheet provided in Section 2.01(d) hereof. All (i)
accounts payable, accrued expenses or other liabilities in the aggregate of
Seller in excess of $500,000 evidenced thereon (to the extent not previously
credited at Closing pursuant to the Seller's Certificate of Closing Credits);
(ii) any other accounts payable or accrued expenses arising after the Closing
Date that, in the ordinary course of business, should have arisen prior to the
Closing Date; (iii) the amount set forth on the Closing Balance Sheet as due
from related parties, net of amounts due to related parties; and (iv) the cost
of Xxxxxxx Xxxxxxxxx' education at Huron University through August 30, 1997, or
if any of the foregoing has been paid by Buyer by such date, reimbursed to Buyer
from the escrow account. Amounts paid from the escrow account shall be released
by Xxxxxx Xxxxxxx, Esq. to Buyer solely on the written instructions of Buyer.
Amounts remaining in the escrow account after payment provided herein shall be
remitted to Seller within ten (10) days after delivery of the Closing Balance
Sheet. In the event the escrow account is insufficient to pay the amounts set
forth herein, Seller shall promptly pay to Buyer any shortfall necessary to meet
Seller's obligations pursuant to this Section within ten (10) days after
delivery of the Closing Balance Sheet. Buyer's rights to reimbursement from the
escrow shall be in addition to, and not in limitation of, its rights under
Article XI.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP
Seller, Shareholder, Parent and Higashi hereby jointly and severally
represent and warrant to, and covenant with, Buyer as follows:
SECTION 4.01. ORGANIZATION AND CAPITALIZATION. Each of Seller,
Shareholder and Parent is a corporation duly organized, validly existing and in
good standing under the laws of the state or country of its incorporation.
SECTION 4.02. POWER AND AUTHORITY. Each of Seller, Shareholder and
Parent has all requisite corporate power and authority to own, lease and operate
its properties and to conduct its business as presently conducted and as
proposed to be conducted and is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction in which the character of its
properties or the nature of its business activities requires such qualification.
SECTION 4.03. AUTHORITY FOR AGREEMENT. The Board of Directors and the
shareholders of Shareholder, Seller and Parent have approved this Agreement, and
have authorized the execution and delivery and performance hereof. Each of
Shareholder, Seller and Parent has full corporate power, authority and legal
right to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a legal, valid and binding obligation of
Shareholder, Seller, Parent and Higashi, enforceable against each of them in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general.
SECTION 4.04. NO VIOLATION TO RESULT. Except as set forth on Schedule
4.04, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby:
(a) are not in violation or breach of, do not conflict with or
constitute a default under, and will not accelerate or permit the acceleration
of the performance required by, any of the terms of the charter documents or
by-laws of Shareholder, Seller or Parent or any Contract, note, debt instrument,
security agreement or mortgage, or any other contract or agreement, written or
oral, to which Shareholder, Seller, Parent or Higashi is a party or which
affects any of the Assets;
(b) will not be an event which, after notice or lapse of time or
both, will result in any such violation, breach, conflict, default, or
acceleration;
(c) will not result in a violation under any law, judgment,
decree, order, rule, regulation, Permit or other legal requirement of any
governmental authority, court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or otherwise) at law or in
equity, and applicable to the Seller; and
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(d) will not result in the creation or imposition of any
Encumbrance in favor of any person upon any of the properties or assets of the
Seller.
SECTION 4.05. FINANCIAL STATEMENTS. The audited financial statements of
the Seller as of and for the three fiscal years ended May 31, 1996, respectively
(which financial statements, including, without limitation, any notes thereto
and reports thereon are hereinafter collectively called the "Financial
Statements"), and the financial statements of the Seller as of and for the six
months ended November 30, 1996 (the "Interim Financial Statements"), all of
which shall be prepared and delivered to Buyer pursuant to Section 6.06, will be
complete and correct in all material respects, will fairly present the financial
position of the Seller and the results of its operations as of the respective
dates and for the periods indicated thereon in all material respects, and shall
be prepared in accordance with GAAP applied on a consistent basis. The Seller
has no liability or obligation, fixed, contingent, known, unknown or otherwise,
not reflected in the May 31, 1996 balance sheet (the "1996 Balance Sheet"), and
all provisions, reserves and allowances provided for therein are adequate,
except for liabilities or obligations incurred between May 31, 1996 and the date
of this Agreement in the ordinary and usual course of business, none of which
has had or will have a Material Adverse Effect.
SECTION 4.06. NO ADVERSE CHANGES. From the date of the 1996 Balance
Sheet to the date of this Agreement, except as disclosed on SCHEDULE 4.06: (i)
there has been no change in the condition (financial or otherwise), business,
net worth, assets, properties, liabilities or obligations (fixed, contingent,
known, unknown or otherwise) of the Seller which has had or is likely to have a
Material Adverse Effect, and there has been no occurrence, circumstance or
combination thereof which might reasonably be expected to result in any such
Material Adverse Effect before or after the Closing Date; and (ii) Seller has
complied with all of the covenants set forth in Section 6.02, to the same extent
as if this Agreement had been signed on the date of the 1996 Balance Sheet.
SECTION 4.07. EMPLOYMENT PLANS AND AGREEMENTS. Schedule 4.07 contains an
accurate and complete list of all plans, contracts, programs and arrangements,
whether written or oral, including, but not limited to, employment agreements,
union contracts, pensions, welfare benefits, deferred compensation, supplemental
retirement, severance, salary continuation, and other employee benefit plans,
programs, policies or arrangements of every kind, maintained by the Seller and
providing benefits to any employee or former employee (or dependents of such
employee) of the Seller, whether or not any of the foregoing is funded (the
"Plans"). Except as set forth on SCHEDULE 4.07:
(a) All of the Plans which are "employee pension benefit plans,"
within the meaning of Section 3(2) of the Employee Retirement Income Security
Act ("ERISA"), which plans are identified as such on SCHEDULE 4.07 hereto, and
the trusts, if any, forming a part thereof (each a "Pension Plan and Trust") now
meet, and since the date of the most recent IRS determination letter have met,
the requirements for the qualification under Section 401(a) or 403 of the
Internal Revenue Code (the "Code") in all respects and are now, and since the
date of the most recent IRS determination letter have been, exempt from taxation
under Section 501(a) of the Code. To the extent applicable, Seller shall take
whatever actions are necessary to change the trustee in any such
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"employee pension benefit plans" from Seller to Buyer or Buyer's designee.
(b) Seller is in compliance with, and each Plan has been operated
in all respects in accordance with, its provisions and the rules and regulations
governing each such employee benefit plan, including without limitation, the
rules and regulations promulgated by the Department of Labor, the Pension
Benefit Guaranty Corporation (the "PBGC") and the Department of the Treasury
pursuant to the provisions of ERISA and the Code.
(c) SCHEDULE 4.07 contains a complete and correct list of all
employees of Seller whose aggregate compensation for 1996 exceeds, or will
exceed, $50,000, and the 1996 compensation paid or payable to each such
employee. Except as set forth in SCHEDULE 4.07, (i) the terms of employment or
engagement of all directors, officers, employees, agents, consultants and
professional advisers of the Seller are such that their employment or engagement
may be terminated upon not more than two weeks' notice given at any time and
without liability for payment of compensation or damages, and (ii) there are no
severance payments which are or could become payable by the Seller to any
director, officer or other employee of the Seller under the terms of any oral or
written agreement or commitment or any law (including common law), custom, trade
or practice.
(d) Buyer shall have no obligation to employ any employees of
Seller after Closing. Seller shall be responsible for (i) any severance,
termination payments, or other amounts due to its employees by reason of their
termination at or before Closing, and (ii) any other liability arising from
such termination.
(e) All accrued vacation and/or sick leave pay due and owing to
any employee of Seller through the Closing Date has been paid by Seller or will
be paid by Seller at or before Closing.
SECTION 4.08. FULL DISCLOSURE. The written information furnished by the
Seller or by any of the directors, officers, employees, agents, accountants or
representatives of the Seller to the Buyer pursuant to this Agreement, the
information contained in the schedules to this Agreement, and any other written
information furnished to Buyer by the Seller or by any of the directors,
officers, employees, agents, accountants or representatives of the Seller at any
time prior to the Closing Date (pursuant to the request of the Buyer or
otherwise), does not and will not contain any untrue statement of a material
fact and does not and will not omit to state any material fact necessary to make
all such information not misleading.
SECTION 4.09. TAXES. The Seller will prepare (or caused to be prepared)
and will timely and properly file (or caused to be timely and properly filed)
with the appropriate federal, state, provincial, municipal or local authorities
(within the U.S. or otherwise) all tax returns, information returns and other
reports required to be filed and has paid or accrued (or caused to be so paid or
accrued) in full all taxes, interest, penalties, assessments or deficiencies, if
any, due to, or claimed to be due by, any
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taxing authority. The balance sheets included in the Financial Statements and
the Interim Financial Statements include appropriate provisions for all taxes,
interest, penalties, assessments or deficiencies, if any, for the periods
indicated thereon to the extent not theretofore paid. The Seller has not
executed or filed with any taxing authority any agreement extending the period
for assessment or collection of any taxes. The Seller is not a party to any
pending action or proceeding, nor is any such action or proceeding threatened,
by any governmental authority for the assessment or collection of taxes, and no
claim for assessment or collection of taxes has been asserted against
the Seller, and during the course of any audit currently in process or not
completed, no issues have been suggested by any representative of any such
governmental authority that, if asserted, would result in a proposed assessment
of taxes, interest or penalties, against the Seller.
SECTION 4.10. TITLE TO ASSETS. The Seller has good and marketable title
to the Assets, free and clear of any and all Encumbrances and defects in title
except for the Mortgages. As of the Closing Date, the Seller will transfer to
Buyer or its designees by general warranty deed good and marketable title to
such properties and assets, free and clear of any and all Encumbrances and
defects in title.
SECTION 4.11. REAL PROPERTY. SCHEDULE 4.11 constitutes a true and
complete list of all real property and leaseholds of real property owned or
leased by the Seller or to which the Seller may have any ownership or leasehold
rights (collectively, the "Facilities"). Except as otherwise disclosed on
Schedule 4.11, (a) there are no outstanding written or oral leases, rights to
occupancy, or tenancies of any kind (including tenancies by sufferance and/or
holdover tenancies arising under expired written or oral leases) covering or in
any way affecting the Facilities or any part or parts thereof; (b) no person,
firm or corporation other than the Seller has any rights (including rights
arising under an installment contract, option to purchase, easement,
rightoofoway, or otherwise) with respect to the Facilities or any part thereof;
and (c) there have been no improvements to, construction on, work done at,
and/or services or material supplied to, the Facilities or any part or parts
thereof for which payment in full has not been made and which might give rise to
mechanic's liens or other lien rights.
SECTION 4.12. BROKERS. Except for Xxxxx Xxxxxxx, the Seller has not
expressly or impliedly engaged any broker, finder or agent with respect to this
Agreement or any transaction contemplated hereby. The obligation to pay Xxxxx
Xxxxxxx a brokerage fee in the amount of $40,000 in connection with the
transactions contemplated hereby shall be the sole obligation of the Seller
Group and shall be paid at Closing.
SECTION 4.13. CONTRACTS. SCHEDULE 4.13 constitutes a true and complete
list of each Contract requiring aggregate payments by the Seller, or receipt by
the Seller, of in excess of $10,000 and to which the Seller is a party, or which
affects the Seller or the Assets. Each of the Contracts listed in SCHEDULE 4.13
is in full force and effect, is a valid, binding and enforceable obligation by
or against the Seller and the other parties thereto, and no event has occurred
which constitutes or, with the giving of notice or passage of time, or both,
would constitute, a default or breach thereunder. None of such Contracts is
subject to renegotiation by governmental authorities. The Seller has delivered
or caused to be delivered or made available to the Buyer correct and complete
copies of each Contract listed in SCHEDULE 4.13 and all amendments thereto, and
every oral contract or agreement listed on SCHEDULE 4.13, and all amendments
thereto, are correctly and completely summarized in such Schedule.
SECTION 4.14. LITIGATION. Except as set forth in Schedule 4.14, there is
no litigation, suit, proceeding, action, claim, demand or investigation, at law
or in equity, pending or to the best knowledge of the Seller Group threatened
against or affecting the Seller or the Assets before any court, agency,
authority or arbitration tribunal, including, without limitation, any product
liability,
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workers' compensation or wrongful dismissal claims, or claims, actions, suits,
demands or proceedings relating to toxic materials, hazardous substances,
pollution or the environment. To the best knowledge of the Seller Group there
are no facts that would likely result in any such litigation, suit, proceeding,
action, claim or investigation. The Seller is not subject to or in default with
respect to any notice, order, writ, injunction or decree of any court, agency,
authority or arbitration tribunal.
SECTION 4.15. COMPLIANCE WITH LAWS. The Seller has complied and is
currently in compliance, in all material respects, with all laws, regulations,
rules, orders, Permits, judgments, decrees and other requirements and policies
imposed by any governmental authority applicable to it, its properties or the
operation of its business. The Seller has not received any notice or citation
for noncompliance with any of the foregoing, and there exists no condition,
situation or circumstance, nor has there existed such a condition, situation or
circumstance, which, after notice or lapse of time, or both, would constitute
noncompliance with or give rise to future liability with regard to any of the
foregoing. The Seller has all licenses, permits, approvals, qualifications or
the like, from any government or any governmental unit, agency, body or
instrumentality, whether federal, state, provincial, municipal or local (within
the U.S. or otherwise) or any third party necessary for the conduct of the
Seller's business and all such items are in full force and effect.
SECTION 4.16. COMPLIANCE WITH TITLE IV PROGRAMS.
(a) SCHEDULE 4.16 lists all agreements between the Seller and ED
or any other governmental unit, agency, body or instrumentality relating to any
federal program for the funding of student loans or other forms of financial aid
for education under the Title IV Programs (the "Financial Aid"). Each of such
agreements listed in SCHEDULE 4.16 is in full force and effect, is a valid,
binding and enforceable obligation by or against the Seller and the other
parties thereto and to the best knowledge of the Seller Group, no event has
occurred which constitutes or, with the giving of notice or the passage of time,
or both, would constitute, a default or breach thereunder. The Seller has
delivered or caused to be delivered to the Buyer correct and complete copies of
each contract or agreement listed in SCHEDULE 4.16 and all amendments thereto.
(b) SCHEDULE 4.16 also lists each program pursuant to which
Financial Aid is provided to or on behalf of the Seller including a description
of whether such Financial Aid is provided pursuant to the Pell Grant Program, 20
U.S.C. 1070(a), ET SEQ., the Guaranteed Student Loan Program, including the
Xxxxxxxx Loan Program, 20 U.S.C. 1071, et seq., the Plus Program, 20 U.S.C.
1078-2 and the Supplemental Loans for Students Program, 20 U.S.C. 1078-1, the
Xxxxxxx Loan Program, 20 U.S.C. 1087(aa), ET SEQ., the Supplemental Educational
Opportunity Grant Program, 20 U.S.C. 1070(b), et seq., the College Work-Study
Program, or otherwise.
(c) Except as set forth on SCHEDULE 4.16, there exists no set of
facts which could have an adverse effect on the ability of the Buyer to enter
into or continue in a program participation agreement with ED. The Seller has,
for the fiscal years 1991, 1992 and 1993, a published official cohort default
rate of 17.4%, 17.0% and 13.2% respectively, and a preliminary draft 1994 cohort
default rate of 10.9%, and Xxxxxxx loan default rates of _______%, 13.33% and
12.10%, respectively for 1991-1993 and a preliminary draft 1994 rate of 36.25%.
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(d) The Seller has previously delivered to the Buyer true and
complete copies of all correspondence received or sent by or on behalf of Seller
from or to ED or any other governmental or regulatory authority having
jurisdiction over the provision, funding or approval of Financial Aid for the
past three years, including, without limitation (i) any documentation relating
to the agreements described in SECTION 4.16(A) above; (ii) any reports relating
to any audits or examinations conducted by ED; (iii) notices or correspondence
concerning the qualification of Seller for the receipt of the Financial Aid; and
(iv) notices or correspondence indicating an intention to withdraw, suspend or
terminate the provision of Financial Aid to the Seller.
(e) Except as set forth on SCHEDULE 4.16, the Seller has complied
and is in compliance in all material respects with any and all applicable laws,
regulations and requirements pursuant to which it receives Financial Aid.
Without limiting the generality of the foregoing, except as otherwise described
in SCHEDULE 4.16, the Seller (i) maintains cash balances in the Title IV federal
funds account not in excess of its three-business day requirements, and (ii) is
in compliance with applicable Federal statutes and regulations governing record
keeping and student file maintenance and information disclosure requirements to
students and others in connection with its Financial Aid.
(f) Since 1993, no principal, affiliate (as those terms are
defined in 34 C.F.R. parta85) owner, stockholder, trustee, or any other
individual or entity holding an ownership interest in Shareholder, Seller or
Parent, whether legal or equitable, is or has been a principal, affiliate,
owner, stockholder or trustee or held an ownership interest, whether legal or
equitable, in any other Title IV participating institutions other than as
disclosed in Schedule 4.16. No Title IV participating institution is, or has
been, administered commonly, jointly or in conjunction with the Seller.
SECTION 4.17. INSTITUTIONAL APPROVAL AND ACCREDITATION. SCHEDULE 4.17
lists each state and governmental department and/or agency and independent
accrediting commission that has authorized, licensed and accredited the
Institution or any of its programs, including, without limitation, the North
Central Association of Colleges and Schools ("NCA") and the department of
education, or other similar state agency, in the State where such educational
institutions are operated ("State Authorization"). Except as otherwise set forth
on SCHEDULE 4.17 hereto, the Institution has received all necessary licenses,
permits, approvals and accreditation necessary for its existing operation and
receipt of Financial Aid, including, without limitation, State Authorization and
accreditation by the NCA.
SECTION 4.18. ENVIRONMENTAL MATTERS. Except as set forth on Schedule
4.18, there are no Contaminants (as defined hereinbelow) located on, under or
within the Seller's properties, and there is no ongoing release and there has
been no past release of Contaminants into the environment from the operation of
the business of the Seller. Except as set forth on Schedule 4.18 there are no
PCBs nor any asbestos contained in or otherwise part of the Facilities and no
product compositions used in the business of the Seller contain more than five
percent of the element beryllium. The Seller has no knowledge of any information
indicating that any person, including any employee, may have impaired health or
that the environment may have been damaged as the result of the operation of the
business of the Seller or as the result of the release of Contaminants from the
Facilities. The term "Contaminants" includes any pollutant, waste materials,
petroleum and petroleum products and
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hazardous substances. Seller shall contribute $170,000 toward the cost of
remediation of the environmental issues set forth in SCHEDULE 4.18 to be paid as
a credit to the cash portion of the purchase price due Seller at Closing.
SECTION 4.19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The representations and warranties of the Seller made in this Agreement are
correct, true and complete as of the date hereof and will be correct, true and
complete as of the Closing Date and shall survive the Closing Date for a period
of three years, except that the representations and warranties contained in
Section 4.09 hereof with respect to taxes shall survive the Closing Date, as
applied to any particular tax, for so long as the amount of such tax is open to
examination, reassessment and/or adjustment; provided, however, that any
representation or warranty with respect to the breach or alleged breach of which
a claim has been asserted by written notice to Seller prior to the expiration of
the relevant time period shall survive (but only with respect to the claim or
claims so asserted during such time period) for such longer period as may elapse
for resolution of such claim as permitted by law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER Buyer hereby represents and
warrants to, and covenants with, the Seller Group as follows:
SECTION 5.01. ORGANIZATION AND CAPITALIZATION OF BUYER. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado and authorized to do business in all jurisdictions
where such authorization is necessary.
SECTION 5.02. AUTHORITY FOR AGREEMENT. Subject to obtaining approval of
this Agreement by the Board of Directors of Buyer, (a) Buyer has full power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby; and (b) this Agreement has been duly executed
and delivered by Buyer and is a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights in general.
SECTION 5.03. NO VIOLATION TO RESULT. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby:
(a) are not in violation or breach of, do not conflict with or
constitute a default under, and will not accelerate or permit the acceleration
of the performance required by, any of the terms of the charter documents or
by-laws of the Buyer or any note, debt instrument, security agreement or
mortgage, or any other contract or agreement, written or oral, to which the
Buyer is a party or by which the Buyer or Xxxxxxx or any of their respective
properties or assets are bound;
(b) will not be an event which, after notice or lapse of time or
both, will result in any such violation, breach, conflict, default, or
acceleration;
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(c) will not result in violation under any law, judgment, decree,
order, rule, regulation or other legal requirement of any governmental
authority, court or arbitration tribunal whether federal, state, provincial,
municipal or local (within the U.S. or otherwise) at law or in equity, and
applicable to either the Buyer or Xxxxxxx; and
(d) will not result in the creation or imposition of any lien,
possibility of lien, encumbrance, security agreement, equity, option, claim,
charge, pledge or restriction in favor of any third person upon any of the
properties or assets of the Buyer.
SECTION 5.04. FULL DISCLOSURE. The written information furnished by the
Buyer or by any of the directors, officers, employees, agents, accountants or
representatives of the Buyer to the Seller pursuant to this Agreement (including
the SEC Documents) and any other written information furnished to Seller by the
Buyer or by any of the directors, officers, employees, agents, accountants or
representatives of the Buyer at any time prior to the Closing Date (pursuant to
the request of the Seller or otherwise), does not and will not contain any
untrue statement of a material fact and does not and will not omit to state any
material fact necessary to make all such information not misleading.
SECTION 5.05. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF BUYER. The
representations and warranties of the Buyer made in this Agreement are correct,
true and complete as of the date hereof and will be correct, true and complete
as at the Closing Date with the same force and effect as though such
representations and warranties had been made at the Closing Date, and shall
survive the Closing Date for a period of three years, provided, however, that
any representation or warranty with respect to the breach or alleged breach of
which a claim has been asserted by written notice to Buyer prior to the
expiration of the relevant time period shall survive (but only with respect to
the claim or claims so asserted during such time period) for such longer period
as may elapse for resolution of such claim as permitted by law.
ARTICLE VI
COVENANTS
SECTION 6.01. ACCESS TO PROPERTIES AND RECORDS. The Seller shall afford
to the officers, employees, attorneys, accountants and other authorized
representatives of the Buyer, free and full access to all of the Seller's
assets, properties, Books and Records, students and employees in order to afford
the Buyer as full an opportunity of review, examination and investigation as the
Buyer shall desire to make of the affairs of the Seller, and the Buyer shall be
permitted to make extracts from, or take copies of, such books, records
(including the stock record and minute books) or other documentation or to
obtain temporary possession of any thereof as may be reasonably necessary; and
the Seller shall furnish or cause to be furnished to the Buyer such reasonable
financial and operating data and other information about the Seller's business,
properties and assets which any of the Buyer's respective officers, employees,
attorneys, accountants or other authorized representatives may request; provided
that Buyer and its agents shall not unreasonably interfere with the operations
of Seller's business.
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SECTION 6.02. INTERIM COVENANTS OF THE SELLER. From the date of this
Agreement until the Closing Date, except to the extent expressly permitted by
this Agreement or otherwise consented to by an instrument in writing signed by
the Buyer or as otherwise set forth in Schedule 6.02, the Seller shall keep its
business and organization intact and shall not take or permit to be taken or do
or suffer to be done anything other than in the ordinary course of its business
as the same is presently being conducted, and shall use its good faith efforts
to keep available the services of its directors, officers, employees and agents
and retain and maintain good relationships with its students and maintain the
goodwill and reputation associated with its business. Without limiting the
generality of the foregoing, the Seller shall not:
(a) purchase, sell, lease or dispose of or make any contract for
the purchase, sale, lease or disposition of or subject to lien or security
interest or any other Encumbrance any of its properties or assets, other than in
the ordinary and usual course of its business, consistent with the
representations and warranties contained herein, and not in breach of any of the
provisions of this Article VI, in each case for a consideration at least equal
to the fair value of such property or asset;
(b) except consistent with past salary practices, grant any
salary increase to, or increase the draw of, any of its officers, directors,
employees or agents, or enter into any new, or amend or alter any existing,
employment, bonus, incentive compensation, deferred compensation, profit
sharing, retirement, pension, stock option, group insurance, death benefit or
other fringe benefit plan, trust agreement or other similar or dissimilar
arrangement, or any employment or consulting agreement;
(c) incur any bank indebtedness or borrowings, whether or not in
the ordinary course of its business, or issue any commercial paper;
(d) enter into any material leases of real property or equipment
and machinery;
(e) enter into any Contract, (i) which would be required to be
listed on SCHEDULE 4.13 had it been entered into prior to the date hereof; or
(ii) in which any Affiliate of Seller has any beneficial interest;
(f) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock or debt securities or any option,
warrant or other right to purchase or acquire any such shares, or declare or pay
any dividend or other distribution (whether in cash, stock or other property)
with respect to its capital stock;
(g) create, incur or assume any liability or indebtedness, except
in the ordinary course of business consistent with past practices; or postpone
or defer the creation, incurrence, or assumption of any liability or
indebtedness that would otherwise be created, incurred or assumed in the
ordinary course of business absent the execution of this Agreement;
(h) pay or apply any of its assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount, directly or
indirectly, to or for the benefit of Seller or any Affiliate thereof except for
payments to Seller's Affiliates in accordance with past practice, provided
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that any such transaction is on terms no less favorable to the Seller than terms
generally available with third parties in arms length transactions; or
(i) solicit students of Huron University to complete their
education elsewhere.
SECTION 6.03. INFORMATION. The Seller Group shall furnish the Buyer,
upon request, with all information concerning the Seller Group reasonably
required for inclusion in any application made by the Buyer to the SEC or any
governmental or regulatory body in connection with the transactions contemplated
by this Acquisition.
SECTION 6.04. PUBLIC ANNOUNCEMENTS. The Buyer and the Seller will
consult with each other with respect to any announcement to the public or any
statement to their employees (and students in the case of Seller) generally
concerning or relating to the Acquisition except for announcements which Buyer
believes to be required by applicable securities laws or stock exchange rules.
Prior to the Closing Date, Seller will not make any announcement to the public
without the prior written consent of the Buyer.
SECTION 6.05. NEGOTIATIONS WITH THIRD PARTIES. None of the Seller Group
or any of their officers, directors or agents will, directly or indirectly,
without the prior written approval of the Buyer, furnish any information to, or
initiate or participate in discussions or negotiations with, third parties
relating to, or otherwise cause or seek to cause or permit to occur, any merger,
sale or other disposition of any substantial part of the assets or stock of
Shareholder, Seller or Parent.
SECTION 6.06. FINANCIAL STATEMENTS. Seller shall cause its auditors,
working together with Buyer's auditors, to complete and deliver to Buyer and ED:
(i) complete audited financial statements for Seller, including income
statements, as of and for the three fiscal years ended May 31, 1996, and balance
sheets as of May 31, 1995 and 1996; and (ii) unaudited financial statements of
Seller as of, and for the six months ended, November 30, 1996. Seller shall bear
the costs and fees associated with the work performed by its auditors and Buyer
shall bear the costs and fees associated with work performed by Buyer's
auditors. All of the aforesaid financial statements shall be completed and
delivered to Buyer no less than ten (10) days prior to the Closing Date.
SECTION 6.07. ED LETTER OF CREDIT. No less than three (3) days prior to
Closing, Seller shall provide to ED (with proof thereof to Buyer) an irrevocable
letter of credit (the "Letter of Credit") in the amount of $300,000 and in form
and for a term acceptable to ED in its sole discretion such that the
Institutional Participation Division will process the change in control
contemplated herein notwithstanding Huron University's failure to timely file
required audited financial statements and student financial aid audits (and
irrespective of the content thereof). The Letter of Credit shall secure the
payment of any and all Title IV liabilities assessed against Huron University by
ED as a result of Seller's operation of Title IV programs prior to the Closing
Date; including liabilities arising from financial aid audits or its failure to
provide ED audited financial statements (collectively, "Seller's Title IV
Liabilities"). Seller acknowledges that notwithstanding the existence of the
Letter of Credit, ED may collect or attempt to collect Title IV Liabilities
directly from Buyer instead of drawing against the Letter of Credit. In such
event, Buyer shall be subrogated to ED's rights to draw against the Letter of
Credit to the extent of any payments made to ED by Buyer with respect to
Seller's Title
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IV Liabilities and the Letter of Credit shall so provide. Such subrogation
rights shall be in addition to any other rights of Buyer, including its right to
seek indemnification from the Seller Group for Seller's Title IV Liabilities
under Article XI hereof.
SECTION 6.08. FINANCIAL AID AUDIT. Seller shall complete the financial
aid audit of Huron University, in accordance with applicable regulations and ED
requirements, and deliver the same to ED and Buyer, no less than ten (10) days
prior to the Closing Date.
ARTICLE VII
PERFORMANCE SUBSEQUENT TO CLOSING
SECTION 7.01. COVENANTS OF BUYER PENDING EXPIRATION OF CONDITION
SUBSEQUENT. Buyer covenants and agrees with Seller that, except in connection
with the financing of the purchase of the Real Property, from and after the
Closing and until the satisfaction or expiration of the condition subsequent
described in Section 7.02 hereof, unless otherwise agreed in writing by Seller,
Buyer (i) shall not mortgage, pledge, assign, sell or otherwise transfer any of
the Assets other than in the ordinary course of Buyer's business, (ii) shall
conduct the business, operations, activities and practices of the Institution
and Seller's business herein acquired by Buyer in the usual and ordinary course,
(iii) shall use its best efforts to preserve the business organization of Seller
intact, keep available to itself and Seller the present services of Seller's
employees who become Buyer's employees at the Closing, and preserve for itself
and Seller the goodwill of the suppliers, students and others with whom Seller
or Buyer has a business relationship, (iv) shall maintain the tangible property
in the same condition as it now exists, ordinary usage, wear and tear excepted,
(v) shall not breach any agreements necessary for its operations, and (vi) shall
not enter into any contract or commitment the performance of which may extend
beyond the expiration of the condition subsequent, except those made in the
ordinary course of business.
SECTION 7.02. CONDITION SUBSEQUENT TO OBLIGATIONS OF BUYER.
Notwithstanding anything to the contrary contained in this Agreement, if within
150 calendar days after the Closing Date (unless extended by Buyer in its sole
discretion), the ED fails to grant Certification, whether absolutely or
provisionally, for Huron University to participate in the Title IV Programs, the
Buyer may, at Buyer's option, terminate and rescind this Agreement by giving
Seller written notice to such effect. Immediately upon triggering the condition
subsequent set forth in this Section, the parties shall work cooperatively and
in good faith to rescind the Acquisition in the manner and to the extent herein
contemplated, including immediately seeking reinstitution of all of Seller's
Accreditation, prompt reconveyance of the Assets and Assumed Liabilities to
Seller, and preservation of the goodwill of the business of the Institution.
Without limiting the generality of the foregoing, upon any rescission of the
purchase of the Assets pursuant to this section: (a) Seller shall pay to Buyer
cash in an amount equal to: (i) all of the cash paid to Seller at Closing; plus
(ii) all of the amounts paid by Buyer, at or after Closing, with respect to
liabilities of Seller (including without limitation the Mortgages and the
Assumed Liabilities); and (iii) any additional working capital used or allocated
by Buyer in the ownership or operation of the Assets, and any additional
investment in the Assets by Buyer after the Closing Date; and (b) Buyer shall
reconvey, or cause to be reconveyed, the Assets to Seller.
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SECTION 7.03. DISBURSEMENT OF TITLE IV FUNDS. Seller agrees that
immediately prior to the Closing Date, Seller will disburse Title IV funds in
accordance with 34 C.F.R. Sec. 668.26. Buyer expressly acknowledges that
documentation establishing Buyer's eligibility and certification to participate
in the programs administered under Title IV must be issued by ED before Buyer
may participate in the federal student financial assistance programs under Title
IV.
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATIONS
All obligations of the Buyer under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Closing Date
is scheduled to occur, of each of the following conditions precedent, any one or
more of which may be waived by the Buyer in writing.
SECTION 8.01. REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE.
At the Closing Date, the representations and warranties of the Seller contained
in this Agreement will be true and correct in all material respects at and as of
such time.
SECTION 8.02. THE SELLER'S PERFORMANCE. Each of the obligations of the
Seller to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects at the
Closing Date.
SECTION 8.03. OPINION OF THE SELLER'S COUNSEL. The Buyer shall have been
furnished an opinion or opinions of counsel to the Seller, dated the date of the
Closing Date, in form substantially as set forth on SCHEDULE 8.03 hereto.
SECTION 8.04. NO MATERIAL ADVERSE CHANGE. There shall have been, between
May 31, 1996 and the Closing Date, (i) no material adverse change in the
condition, financial or otherwise, of the Seller, or (ii) no resignations or
terminations of, or indications of an intention or plan to resign, employment by
a number of employees or student withdrawals or losses of enrollments such that
the continued operations of the Seller's business would be materially and
adversely affected.
SECTION 8.05. ASSIGNMENT OF CONTRACTS. The Seller shall have received
consents under all Contracts, agreements, commitments, understandings and
instruments comprising the Assets to which the Seller is a party or by which it
is bound which require the consent of any other party or person to the
assignment thereof either by the terms thereof or as a matter of law for their
assumption or performance by the Buyer.
SECTION 8.06 CERTIFICATES. The Seller shall have furnished the Buyer
with such certificates of the officers of the Seller and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by the Buyer.
SECTION 8.07. NON-COMPETE AGREEMENTS. The Seller Group shall have
executed and delivered an agreement not to compete in favor of the Buyer in
substantially the form of Schedule
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8.07 except that such agreement will be void if the Acquisition unwinds in
accordance with Article 7.
SECTION 8.08. BUYER'S REVIEW. Buyer's due diligence review of Seller
shall be acceptable to Buyer, in its sole discretion.
SECTION 8.09. BUYER'S BOARD APPROVAL. The Board of Directors of Buyer
shall have approved this Agreement and the transactions contemplated thereby.
SECTION 8.10. FINANCING. Buyer shall have made arrangements, acceptable
to Buyer in its sole discretion, for the assignment of the right to purchase the
Real Property included in the Assets to a third party and said third party shall
have secured appropriate financing thereof and have leased same to Buyer.
ARTICLE IX
CONDITIONS TO THE SELLER'S OBLIGATIONS
All obligations of the Seller Group under this Agreement are subject to
the fulfillment and satisfaction, prior to or at the time at which the Closing
Date is scheduled to occur, of each of the following conditions, any one or more
of which may be waived in writing by the Seller Group.
SECTION 9.01. REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE.
At the Closing Date, the representations and warranties of the Buyer contained
in this Agreement will be true and correct in all material respects at and as of
such time, except to the extent affected by the transactions contemplated
hereby, and at the Closing Date, the Buyer shall have delivered to the Seller a
certificate to such effect signed by the President and the Chief Financial
Officer of the Buyer.
SECTION 9.02. BUYER'S PERFORMANCE. Each of the obligations of the Buyer
to be performed by it on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects at the
Closing Date, and at the Closing Date the Buyer shall have delivered to the
Seller a certificate to such effect signed by the President and the Chief
Financial Officer of the Buyer.
SECTION 9.03. AUTHORITY. All action required to be taken by, or on the
part of, the Buyer to authorize the execution, delivery and performance of this
Agreement by the Buyer and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by the Board of Directors of the
Buyer.
ARTICLE X
TERMINATION
SECTION 10.01. TERMINATION. Notwithstanding anything herein or elsewhere
to the contrary,
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this Agreement may be terminated and the Acquisition abandoned:
(a) by the Buyer if the Closing Date shall not have taken
place on or prior to December 31, 1996; or
(b) by the Seller if the Buyer's Board of Directors has not
approved this Agreement on or before December 27, 1996; or
(c) by the Buyer if the Boards of Directors of Seller, Parent and
Shareholder have not approved this Agreement on or before December 27, 1996;
(d) by the Buyer at any time prior to the Closing Date if:
(i) a material condition to the Buyer's performance under
this Agreement or a covenant of the Seller contained
herein shall not be fulfilled on or before the Closing
Date or on such other date specified for the fulfillment
of such covenant or condition; or
(ii) a material default or breach of this Agreement shall
be made by the Seller.
SECTION 10.02. ADDITIONAL RIGHT OF BUYER TO TERMINATE. As soon as
practicable after execution of this Agreement, Buyer and/or Buyer's
representative shall meet with officials from ED's Institutional Participation
Division ("IPD") to inform IPD of this Agreement and determine whether IPD
reasonably anticipates that Buyer will be able to obtain Certification for Huron
University subsequent to the proposed Acquisition. If, on the basis of the
above-described meeting, Buyer reasonably believes that IPD will not certify the
Huron University under Buyer at any time or in a timely manner, then
notwithstanding any other provision of this Agreement to the contrary, Buyer may
elect to terminate this Agreement by notice to Seller given not less than five
(5) days prior to the Closing Date, including in such notice the basis for the
belief upon which the election is taken. The Buyer may withdraw its election if,
subsequent to the giving of notice, it is satisfied that the basis cited in the
notice has been satisfactorily resolved, the determination of Buyer to be
dispositive.
ARTICLE XI
INDEMNITY
SECTION 11.01. INDEMNIFICATION BY SELLER GROUP.
(a) Shareholder, Seller, Parent and Higashi (hereinafter
collectively called the "Indemnitor") shall jointly and severally defend,
indemnify and hold harmless Buyer and its corporate affiliates, their officers,
directors, employees, shareholders, and agents, their successors and assigns,
and each of them (hereinafter collectively called "Indemnitees") against and in
respect of any and all claims, loss, damage, liability, cost and expense,
including reasonable attorneys' fees and amounts paid in settlement (all of the
foregoing being hereinafter called "Indemnified Losses"),
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suffered or incurred by any Indemnitee by reason of, or arising out of:
(1) any misrepresentation, breach of warranty or breach or
nonfulfillment of any agreement of the Seller Group, or any of them, contained
in this Agreement;
(2) liabilities and obligations of, or claims against, the Seller
Group, or any of them, of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, arising before or after the Closing Date hereof, except
the Assumed Liabilities; or
(3) claims, damages, attorneys' fees, remediation costs or other
liability or expenses associated with or resulting from any environmental issues
affecting the Real Property, including but not limited to, those matters set
forth on Schedule 4.18, which are or may be assessed against or charged to or
otherwise incurred by Buyer.
SECTION 11.02. INDEMNIFICATION BY BUYER. Buyer (hereinafter called the
"Indemnitor") shall defend indemnify and hold harmless the Seller, the Parent,
the Shareholder and their officers, directors, employees, agents, and
shareholders (including Higashi), their successors and assigns, and each of them
(hereinafter collectively called "Indemnitees") against and in respect of any
and all Indemnified Losses suffered or incurred by any Indemnitee by reason of,
or arising out of: (i) any misrepresentation, breach of warranty or breach or
non-fulfillment of any agreement of Buyer contained in this Agreement; or (ii)
Buyer's failure to pay or perform the Assumed Liabilities.
SECTION 11.03. NOTICES, PARTICIPATION, AND SETTLEMENT. Promptly after
receipt by any party of notice of a claim or commencement of any action (legal
or administrative) which, if successful, might require another party hereto to
indemnify such party, the party entitled to indemnification will give notice
thereof to the other party or parties; provided, that the failure of any party
to give such written notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent that the indemnifying party is
actually prejudiced by such failure. If a claim is so noticed, the indemnifying
party shall be entitled to participate in the resolution of such claim, and if
legal proceedings are commenced against any indemnified party, the indemnifying
party shall be entitled to participate in, but not to assume, the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, that in all events the indemnified party shall control the
negotiation, defense and settlement of any such claim. With regard to claims of
third parties for which indemnification is payable hereunder, such
indemnification shall be paid by the indemnifying party upon the earlier to
occur of: (i) the entry of a judgment against the indemnified party and the
expiration of any applicable appeal period, or if earlier, five days prior to
the date that the judgment creditor has the right to execute on the judgment;
(ii) the entry of an unappealable judgment or final appellate decision against
the indemnified party; or (iii) a settlement of the claim. Notwithstanding the
foregoing, expenses by counsel to the indemnified party shall be reimbursed as
invoiced by such counsel to the indemnifying party. With regard to other claims
for which indemnification is payable hereunder, such indemnification shall be
paid promptly by the indemnifying party upon demand by the indemnified party.
Any claim for indemnity shall be reduced by the amount of any insurance proceeds
received by the indemnified party.
SECTION 11.04. TITLE IV LIABILITIES. In the event ED, a Guaranty
Agency or any other
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cognizant government or non-government agency notifies the Buyer that a review
of the administration of Title IV programs encompassing periods prior to the
Closing Date will take place, at a certain time, place and date, the Buyer shall
notify Seller by overnight mail or facsimile of that fact; and if ED, a Guaranty
Agency or other agency conducts an unannounced visit or review, Buyer shall
inform Seller or Seller's representative of that fact within one business day of
the reviewer's arrival at the institution. If ED, Guaranty Agency or other
agency indicates that it will conduct a review for a period prior to the Closing
Date, Seller shall have the option of having a representative present at the
Huron University facilities under review, and Seller shall have the right to be
present during any discussions or interviews with the reviewers; provided, that
Buyer's representatives shall in all events conduct and control all such
discussions.
SECTION 11.05. OFFSET. In addition to any other rights of Buyer to
recover Indemnified Losses hereunder, Buyer shall have the right to offset any
Indemnified Loss incurred hereunder against any amounts or property to be paid
or delivered to Seller after Closing, including without limitation the escrowed
funds or the Xxxxxxx Shares.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. SUCCESSORS, ASSIGNS AND THIRD PARTIES. This Agreement
shall inure to the benefit of and be binding upon Seller and its respective
successors and assigns; provided, however, that Seller may not make any
assignment of this Agreement or any interest herein without the prior written
consent of Buyer. This Agreement or any of the severable rights and obligations
inuring to the benefit or to be performed by Buyer hereunder may be assigned by
Buyer to a third party, in whole or in part, and to the extent so assigned,
Seller hereby recognizes said assignee as the party-in-interest with respect to
the rights and obligations assigned and agrees to look solely to said assignee
for the purpose of conferring benefits, or requiring performance of obligations,
assigned to it by Buyer. Except as provided herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
SECTION 12.02. GOVERNING LAW. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the internal
substantive laws of the State of Colorado, disregarding principles of conflict
of laws and the like.
SECTION 12.03. SPECIFIC ENFORCEMENT. All of the parties hereto
acknowledge that the parties will be irreparably damaged in the event that this
Agreement is not specifically enforced. Upon a breach or threatened breach of
the terms, covenants or conditions of this Agreement by any of the parties
hereto, the other parties shall, in addition to all other remedies, be entitled
to a temporary or permanent injunction, without showing any actual damage, or a
decree for specific performance, in accordance with the provisions hereof.
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SECTION 12.04. SEVERABILITY. Each section, subsection and lesser section
of this Agreement constitutes a separate and distinct undertaking, covenant
and/or provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect; provided, however that if such unlawful clause is so
material to the party for whose benefit the clause was originally included so
that such party would not have entered into this Agreement without such unlawful
clause, the severability of such clause shall be arbitrated pursuant to Section
12.09 hereof.
SECTION 12.05. CERTAIN WORDS. Words such as "herein," "hereof,"
"hereby," "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular Section or subsection of this Agreement.
Whenever the word "including" is used herein, it shall be deemed to be followed
by the words "without limitation."
SECTION 12.06. NOTICES. Except as otherwise expressly provided herein,
any notice, consent, or other communication required or permitted to be given
hereunder shall be in writing, delivered by certified mail or a national
overnight delivery services and shall be deemed to have been given when
received, and shall be addressed as follows:
(a) If to Buyer: Colorado Technical University
0000 Xxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxx X. X'Xxxxxxx
with a copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, P.C.
000 Xxxx Xxxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
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Xxxxxxx X. Xxxxxxx, Esq.
Vice President
Legal Affairs and General Counsel
Xxxxxxx Education Group, Inc.
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxx, Xxxxxxx 00000
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(b) If to any member of
the Seller Group: c/o Lansdowne University, Ltd.
0-00-0 Xxxxxxxxxx, Xxxxxxxx-Xx
Xxxxx, Xxxxx 161
Attn: Dr. Chikara Higashi
with a copy to: Xxxxxx Xxxxx, Esq.
Akin, Gump, Strauss, Xxxxx & Xxxx, X.X.
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
or at such other address or addresses as the party addressed may from time to
time designate in writing. Any communication dispatched by telegram or telex
shall be confirmed by letter.
SECTION 12.07. EXPENSES. Except as otherwise provided in Article XI, all
expenses (including, without limitation, financial advisory fees, legal fees and
expenses, broker and finder fees, fees and expenses of accountants) incurred by
each party in connection with the transactions contemplated hereby (hereunder
referred to as "Expenses") will be borne by the party incurring such Expenses,
provided that any Expenses incurred by the Seller prior to the Closing Date
shall be borne by Parent, and to the extent that any Expenses have been paid by
the Seller such amount, shall be credited against the cash portion of the
Purchase Price at Closing, or paid to Buyer from the escrow established in
Section 3.03 above.
SECTION 12.08. HEADINGS. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
SECTION 12.09. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute the same agreement.
SECTION 12.10. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, by a
tribunal sitting in Colorado Springs, Colorado, and judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Each of the parties hereto hereby submits to the jurisdiction of any
arbitration panel in Colorado Springs, Colorado, appointed in accordance with
this Agreement, for the purpose of any controversy arising out of or relating to
this Agreement (an "Action"), and the parties agree that all such Actions shall
be heard and determined in such arbitration. Each of the parties hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of any Action in Colorado Springs,
Colorado. In any such arbitration, the prevailing party shall be awarded its
reasonable costs and attorneys's fees from the non-prevailing party.
SECTION 12.11. FACSIMILE SIGNATURES. This Agreement and any document
or schedule required hereby may be signed by facsimile signature which shall be
considered legally binding for all purpose.
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SECTION 12.12. FURTHER ASSURANCES. The parties hereto each agree to
execute and deliver to the others, or publicly file or record after Closing such
other documents or instruments as may be necessary to fully effectuate the
intent of this Agreement and/or to evidence same to third parties.
IN WITNESS WHEREOF, the parties hereto have caused their
signatures to be affixed to this Agreement as of the date first above written.
COLORADO TECHNICAL UNIVERSITY, INC.
By _______________________________________
Name: Xxxxx X. X'Xxxxxxx
Title: President
__________________________________________
CHIKARA HIGASHI, individually
EASTERN INTERNATIONAL EDUCATIONAL
ASSOCIATION
By:_______________________________________
Name _____________________________________
Title: ___________________________________
EIEA AMERICA, INC.
By:_______________________________________
Name: ____________________________________
Title: ___________________________________
LANSDOWNE UNIVERSITY, LTD.
By: ______________________________________
Name:_____________________________________
Title: ___________________________________
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