Exhibit 1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
June 26, 2000
BY AND AMONG
XXXXXX, INC.
ODYSSEY ACQUISITION CORP.
AND
QUEST EDUCATION CORPORATION
TABLE OF CONTENTS
Page
RECITALS.................................................................... 1
1. THE TENDER OFFER............................................................ 1
1.1 The Offer.............................................................. 1
1.2 Company Action......................................................... 3
1.3 Directors.............................................................. 4
2. THE MERGER.................................................................. 5
2.1 Merger................................................................. 5
2.2 Conversion of Shares and Options....................................... 6
2.3 Exchange of Certificates............................................... 7
2.4 Dissenting Shares...................................................... 7
2.5 Certificate of Incorporation and Bylaws of the Surviving Corporation... 8
2.6 Directors and Officers of the Surviving Corporation.................... 8
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER.................. 8
3.1 Corporate Organization................................................. 9
3.2 Authority.............................................................. 9
3.3 Consents And Approvals; No Violation................................... 9
3.4 Financing.............................................................. 10
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 10
4.1 Corporate Organization................................................. 10
4.2 Capitalization......................................................... 10
4.3 Subsidiaries........................................................... 11
4.4 Authority.............................................................. 11
4.5 Consents and Approvals; No Violation................................... 12
4.6 Schedule 14D-9; Proxy or Information Statement; Schedule TO............ 12
4.7 Conduct of Business.................................................... 13
4.8 SEC Documents.......................................................... 14
4.9 Litigation............................................................. 15
4.10 Labor Relations; Employees............................................. 15
4.11 Certain Agreements and Employee Benefit Plans.......................... 15
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TABLE OF CONTENTS
(continued)
Page
4.12 Taxes.................................................................. 17
4.13 Absence of Certain Changes or Events................................... 18
4.14 Properties............................................................. 19
4.15 Intellectual Property.................................................. 19
4.16 Material Contracts..................................................... 20
4.17 Company Stockholder Rights Plan........................................ 20
4.18 Fees................................................................... 20
4.19 Business Combination Statute Inapplicable.............................. 20
4.20 Compliance with Laws................................................... 20
5. COVENANTS.................................................................... 25
5.1 Conduct of Business of the Company...................................... 25
5.2 Stockholder Meeting; Proxy Material; Information Statement.............. 27
5.3 No Solicitation of Competing Transactions............................... 28
5.4 Consents and Approvals.................................................. 30
5.5 Educational Approvals and Other Licenses................................ 30
5.6 Consents................................................................ 30
6. ADDITIONAL AGREEMENTS........................................................ 31
6.1 Access to Information................................................... 31
6.2 Legal Conditions to Offer and Merger.................................... 32
6.3 Confidentiality Agreement............................................... 33
6.4 Public Announcements.................................................... 33
6.5 Company Stock Option Plans.............................................. 33
6.6 Company Employee Stock Purchase Plan.................................... 33
6.7 Notice of Certain Events................................................ 34
6.8 Obligations of Purchaser................................................ 34
6.9 Voting of Shares........................................................ 34
6.10 Tender of Shares and Delivery of Proxies by Certain Stockholders........ 34
7. CONDITIONS................................................................... 35
7.1 Conditions of Each Party's Obligation to Effect the Merger.............. 35
7.2 Conditions to the Obligations of the Company to Effect the Merger....... 35
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TABLE OF CONTENTS
(continued)
Page
8. TERMINATION................................................................. 35
8.1 Termination............................................................ 35
8.2 Effect of Termination.................................................. 37
8.3 Certain Payments to Purchaser.......................................... 37
8.4 Certain Payments to the Company........................................ 37
9. GENERAL PROVISIONS.......................................................... 38
9.1 Nonsurvival of Representations, Warranties and Agreements.............. 38
9.2 Amendments and Waivers................................................. 38
9.3 Successors and Assigns................................................. 38
9.4 Governing Law.......................................................... 38
9.5 Counterparts........................................................... 38
9.6 Titles and Subtitles................................................... 38
9.7 Notices................................................................ 38
9.8 Severability........................................................... 39
9.9 Entire Agreement....................................................... 39
9.10 Advice of Legal Counsel................................................ 39
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of June
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26, 2000, is entered into by and among Xxxxxx, Inc., a Delaware corporation
("Parent"), Odyssey Acquisition Corp., a Delaware corporation and a wholly owned
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subsidiary of Parent (the "Purchaser"), and Quest Education Corporation, a
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Delaware corporation (the "Company").
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RECITALS
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The respective Boards of Directors of the Company, Parent and the
Purchaser have approved the acquisition of the Company by the Purchaser and, in
furtherance of such acquisition, Parent proposes to cause the Purchaser to make
a cash tender offer (the "Offer") for all of the outstanding shares of common
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stock, par value $0.01 per share (the "Common Stock"), of the Company (the
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"Shares") together with the associated preferred share purchase rights (the
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"Rights") issued pursuant to the Rights Agreement, adopted on May 14, 1999 (the
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"Rights Plan") between the Company and First Union National Bank, as Rights
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Agent, on the terms specified herein. The Board of Directors of the Company has
approved the Offer and recommended that it be accepted by the stockholders of
the Company. The Boards of Directors of the Company and the Purchaser deem it
advisable and in the best interests of the stockholders of such corporations to
effect the merger (the "Merger") of the Purchaser with and into the Company
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following the consummation of the Offer, all pursuant to this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL").
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AGREEMENT
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The parties hereby agree as follows:
SECTION ONE
1. The Tender Offer.
1.1 The Offer.
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(a) Subject to the provisions of this Agreement and provided that
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nothing shall have occurred that could result in a failure to satisfy any of the
conditions set forth in attached Exhibit A hereto, Parent shall cause the
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Purchaser to, as promptly as reasonably practicable after the date hereof, but
in no event later than five (5) business days following the initial public
announcement of the Purchaser's intention to commence the Offer, commence
(within the meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), the Offer for all of the outstanding Shares
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(and associated Rights) at a price of $18.35 per Share, net to the seller in
cash, subject only (i) to a minimum of fifty one percent (51%) of the Shares (or
such other number of Shares, when added to the number of Shares already owned by
Parent, the Purchaser or any direct or indirect wholly owned Subsidiary (as
defined in Section 1.3(a)) of Parent, as shall constitute a majority of the
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Company's Fully Diluted Shares (as defined in Section 4.2) (the "Minimum
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Shares") being validly tendered and
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not withdrawn prior to the expiration or termination of the Offer (the "Minimum
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Share Condition") and (ii) to the other conditions to the Offer set forth in
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Exhibit A. The Purchaser may at any time transfer or assign to one or more
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corporations directly or indirectly wholly owned by Parent the right to purchase
all or any portion of the Shares tendered pursuant to the Offer (the "Tendered
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Shares"), but no such assignment shall relieve the Purchaser of its
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obligations hereunder. The Purchaser expressly reserves the right to waive any
of the conditions to the Offer set forth in Exhibit A and to modify the terms
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and conditions of the Offer; provided, however, that, without the prior written
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approval of the Company, the Purchaser shall not amend or modify the terms of
the Offer to (i) reduce the cash price to be paid pursuant to the Offer, (ii)
reduce the number of Shares as to which the Offer is made, (iii) change the form
of consideration to be paid in the Offer, (iv) modify or waive the Minimum Share
Condition, or (v) impose conditions to its obligation to accept for payment or
pay for the Tendered Shares other than those set forth in Exhibit A.
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Notwithstanding anything else in this Agreement to the contrary, without the
consent of the Company, Purchaser shall have the right to extend the Offer
beyond the initial expiration date of the Offer (which shall be twenty (20)
business days following commencement of the Offer, the "Initial Expiration
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Date"), to August 1, 2000 in any event, and in the following events: (i) from
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time to time if, at the Initial Expiration Date (or extended expiration date of
the Offer, if applicable) any of the conditions to the Offer (other than the
Minimum Share Condition to which this clause does not apply) shall not have been
satisfied or waived, until such conditions are satisfied or waived; (ii) for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the Staff thereof applicable
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to the Offer or any period required by applicable law; (iii) if all conditions
to the Offer other than the Minimum Share Condition are satisfied or waived, but
the Minimum Share Condition has not been satisfied, for one or more periods not
to exceed ten (10) business days each (or an aggregate of thirty (30) business
days for all such extensions; or (iv) if all of the conditions to the Offer are
satisfied or waived but the number of shares of Company Common Stock validly
tendered and not withdrawn is less than ninety percent (90%) of the then
outstanding number of shares of Company Common Stock on a diluted basis, for an
aggregate period not to exceed twenty (20) business days (for all such
extensions); provided that Purchaser shall accept and promptly pay for all
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securities tendered prior to the date of such extension and shall otherwise meet
the requirements of Rule 14d-11 under the Exchange Act in connection with each
such extension.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, the Purchaser shall file with the SEC a Tender Offer Statement on
Schedule TO (together with any amendments or supplements thereto, the "Schedule
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TO") with respect to the Offer, which shall contain or shall incorporate by
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reference an offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule TO and the documents included therein or
incorporated therein by reference pursuant to which the Offer will be made,
together with any supplements or amendments thereto (the "Offer Documents")).
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Parent and the Purchaser agree that the Offer Documents shall comply as to form
in all material respects with the Exchange Act, and the rules and regulations
promulgated thereunder, and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which
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they were made, not misleading, except that no representation is made by Parent
or the Purchaser with respect to information supplied by the Company or any of
its representatives which is included in the Offer Documents. Each of Parent,
the Purchaser and the Company agrees to correct promptly any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading, and each of Parent and the
Purchaser further agrees to take all steps necessary to amend or supplement the
Offer Documents and to cause the Offer Documents as so amended or supplemented
to be filed with the SEC and to be disseminated to the Company's stockholders,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given a reasonable opportunity to
review the Offer Documents and all amendments and supplements thereto prior to
their filing with the SEC or dissemination to stockholders of the Company.
Parent and the Purchaser agree to provide the Company and its counsel any
comments Parent, the Purchaser or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(c) Subject to the terms and conditions of the Offer, the Purchaser
will accept for payment all Shares validly tendered (and not properly withdrawn
in accordance with the Offer Documents) prior to the date the Offer expires (the
"Expiration Date") promptly after the occurrence of the Expiration Date;
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provided that Purchaser shall accept and pay for all Shares which have been
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validly tendered and not withdrawn prior to the Initial Expiration Date promptly
after the Initial Expiration Date. Purchaser shall pay for Shares which have
been validly tendered and not withdrawn promptly following the acceptance of
Shares for payment pursuant to the Offer. Notwithstanding the immediately
preceding sentence and subject to applicable rules and regulations of the SEC
and the terms of this Agreement, Purchaser expressly reserves the right to delay
payment for Shares in order to comply in whole or in part with applicable laws.
1.2 Company Action.
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(a) The Company hereby approves of and consents to the Offer and
represents that at a meeting duly called and held the Board of Directors of the
Company has (i) approved and adopted this Agreement and the transactions
contemplated hereby and determined that the Offer and the Merger are in the best
interests of the Company and its stockholders and on terms that are fair to such
stockholders, and (ii) recommended that the Company's stockholders accept the
Offer and tender all of their Shares and associated Rights in connection
therewith and, if required under the DGCL, approve this Agreement and the
transactions contemplated hereby. The Company represents that its Board of
Directors has received the written opinion of Xxxxxxxxx Xxxxxx & Xxxxxxxx
Securities Corporation that the consideration to be received by the Company's
stockholders pursuant to each of the Offer and the Merger is fair to the
Company's stockholders from a financial point of view, and that a complete and
correct signed copy of such opinion will be delivered promptly following the
date hereof by the Company to Parent.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended and supplemented from time to time, the "Schedule 14D-9") and shall mail
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the Schedule 14D-9 to the stockholders
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of the Company. Subject to the fiduciary duties of the Board of Directors as
advised by counsel, the Offer Documents and the Schedule 14D-9 shall contain the
recommendation of the Company's Board of Directors described in Section 1.2(a).
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The Company agrees that the Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or the Purchaser or any of their respective
representatives which is included in the Schedule 14D-9. Each of the Company,
Parent and the Purchaser agrees to correct promptly any information provided by
it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading, and the Company further agrees to take
all steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's stockholders, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given a reasonable opportunity to review the Schedule 14D-9 and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Parent and its
counsel with any comments the Company or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish the Purchaser or its designee promptly with mailing labels
containing the names and addresses of the record holders of Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Common Stock, and shall
furnish to the Purchaser such information and assistance (including updated
lists of stockholders, security position listings and computer files) as the
Purchaser may reasonably request in communicating the Offer to the Company's
stockholders. Subject to the requirements of applicable law, and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and the
Purchaser and their agents shall hold in confidence the information contained in
any such labels, listings and files, will use such information only in
connection with the Offer and the other transactions contemplated hereby and, if
this Agreement shall be terminated, will deliver, and will use their reasonable
efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
1.3 Directors.
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(a) Promptly upon the purchase by the Purchaser of Shares in the
Offer, and from time to time thereafter, the Purchaser shall be entitled to
designate the number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to
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the election of any additional directors pursuant to this Section 1.3) and (ii)
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the percentage that the number of Shares owned by the Purchaser, Parent and any
direct or indirect wholly owned Subsidiary of Parent (including Shares purchased
in the Offer) bears to the total number of Shares outstanding, and to effect the
foregoing the Company shall upon request by the Purchaser, at Purchaser's
election, either increase the number of directors comprising the Company's Board
of Directors or seek and accept resignations of incumbent directors. The first
date on which designees of the Purchaser shall constitute a majority of the
Company's Board of Directors is referred to in this Agreement as the "Cut-Off
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Date." At such times, the Company will cause individuals designated by the
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Purchaser to constitute the same percentage as such individuals represent on the
Company's Board of Directors of (x) each committee of the Board, (y) if
requested by Parent each board of directors of each Subsidiary of the Company
and (z) if requested by Parent each committee of each such board. As used in
this Agreement, a "Subsidiary" of any other corporation means a corporation an
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amount of whose voting securities sufficient to elect at least a majority of its
Board of Directors is owned directly or indirectly by such other corporation.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 such
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information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 1.3. The Purchaser will supply to the Company and be solely
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responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the Cut-Off Date and prior to the Effective Time (as
defined below), the Board of Directors of the Company shall have at least one
director who is neither designated by the Purchaser, an employee of the Company
or any of its Subsidiaries nor otherwise affiliated with the Purchaser (one or
more of such directors, the "Independent Directors") and any amendment of this
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Agreement or the Certificate of Incorporation or Bylaws of the Company or any of
its Subsidiaries, any termination or amendment of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or the Purchaser or any exercise or waiver
of any of the Company's rights hereunder, will require the concurrence of a
majority of the Independent Directors.
SECTION TWO
2. The Merger.
2.1 Merger.
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(a) At the Effective Time (as defined in subsection (b) below) and
subject to the terms and conditions hereof and the provisions of the DGCL, the
Purchaser will be merged with and into the Company in accordance with the DGCL,
the separate existence of the Purchaser shall thereupon cease and the Company
shall continue as the surviving corporation
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(the "Surviving Corporation"). The Purchaser and the Company are sometimes
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hereinafter referred to collectively as the "Constituent Corporations."
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(b) Subject to the terms and conditions hereof, the Merger shall be
consummated as promptly as practicable after the expiration of the Offer and the
Stockholders' Meeting (as defined in Section 5.2), if any, by duly filing an
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appropriate certificate of merger or certificate of ownership, as the case may
be, in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL. The Merger shall be effective at such time as
the certificate of merger or certificate of ownership is duly filed with the
Secretary of State of the State of Delaware in accordance with the DGCL or at
such later time as is specified in the certificate of merger or certificate of
ownership (the "Effective Time"). Prior to such filing, a closing shall take
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place at the offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, XX 00000, or at such other place as the parties shall agree, for the
purpose of confirming the satisfaction or waiver of the conditions contained in
Section Seven hereof.
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(c) The separate corporate existence of the Company, as the Surviving
Corporation, with all its purposes, objects, rights, privileges, powers,
certificates and franchises, shall continue unimpaired by the Merger. The
Surviving Corporation shall succeed to all the properties and assets of the
Constituent Corporations and to all debts, choses in action and other interests
due or belonging to the Constituent Corporations and shall be subject to, and
responsible for, all the debts, liabilities and duties of the Constituent
Corporations with the effect set forth in Section 259 of the DGCL.
2.2 Conversion of Shares and Options.
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(a) At the Effective Time and by virtue of the Merger and without any
action on the part of the holders of the capital stock of the Constituent
Corporations:
(i) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) Shares to be canceled pursuant to subsection (b)
below and (ii) Dissenting Shares (as defined in Section 2.4)) shall be converted
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into the right to receive in cash an amount per Share equal to the highest price
paid per Share pursuant to the Offer (the "Merger Price");
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(ii) Each Share held in the treasury of the Company and each
Share owned by Parent, the Purchaser or the Company, or by any direct or
indirect wholly owned Subsidiary of any of them, shall be canceled and retired
without payment of any consideration therefor; and
(iii) Each share of Common Stock, par value $0.01 per share, of
the Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, par value $0.01 per share, of the Surviving Corporation.
(b) The Options shall be converted in the manner described in Section
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6.5.
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2.3 Exchange of Certificates.
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(a) From and after the Effective Time, a bank or trust company to be
designated by Parent with the concurrence of the Company shall act as exchange
agent (the "Exchange Agent") in effecting the exchange of the Merger Price for
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certificates which prior to the Effective Time represented Shares and which as
of the Effective Time represent the right to receive the Merger Price (the
"Certificates"). Promptly after the Effective Time, the Exchange Agent shall
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mail to each record holder of Certificates a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Price therefor in a form approved by Parent and the Company. Upon the surrender
of each Certificate and the issuance and delivery by the Exchange Agent of the
Merger Price for the Shares represented thereby in exchange therefor, the
Certificate shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate shall represent solely the right to receive the Merger Price
for the Shares represented thereby, without any interest thereon. Upon the
surrender and exchange of such an outstanding Certificate, the holder thereof
shall receive the Merger Price multiplied by the number of Shares represented by
such Certificate, without any interest thereon. If any cash is to be paid to a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition to such payment or exchange that the
person requesting such payment or exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the payment of such cash to a name
other than that of the registered holder of the Certificate surrendered, or such
person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Certificates
for any part of the Merger Price payments made to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(b) Promptly following the sixth month after the Effective Time, the
Exchange Agent shall return to the Surviving Corporation all cash relating to
the transactions described in this Agreement, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Price for such Shares, without any interest thereon, but shall have no greater
rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation under applicable law. At and after the
Effective Time, holders of Certificates shall cease to have any rights as
stockholders of the Company except for the right to surrender such Certificates
in exchange for the Merger Price for such Shares or to perfect their right to
receive payment for their Shares pursuant to Section 262 of the DGCL and Section
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2.4 below, and there shall be no transfers on the stock transfer books of the
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Company or the Surviving Corporation of any Shares that were outstanding
immediately prior to the Merger.
2.4 Dissenting Shares.
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(a) Notwithstanding the provisions of Section 2.2 or any other
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provision of this Agreement to the contrary, Shares that are issued and
outstanding immediately prior to the Effective Time and are held by stockholders
who have not voted such Shares in favor of the
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approval and adoption of this Agreement and who shall have properly demanded
appraisal of such Shares in accordance with Section 262 of the DGCL ("Dissenting
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Shares") shall not be converted into the right to receive the Merger Price at
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the Effective Time, unless and until the holder of such Dissenting Shares shall
have failed to perfect or shall have effectively withdrawn or lost such right to
appraisal and payment under the DGCL. If a holder of Dissenting Shares (a
"Dissenting Stockholder") shall have so failed to perfect or shall have
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effectively withdrawn or lost such right to appraisal and payment, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, such
Dissenting Shares shall be converted into and represent solely the right to
receive the Merger Price, without any interest thereon, as provided in Section
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2.2.
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(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Section 262 of the DGCL received by the Company,
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under Section 262 of the DGCL. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or settle or offer to settle any such demands.
2.5 Certificate of Incorporation and Bylaws of the Surviving Corporation.
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(a) At the Effective Time the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
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however, that Article I of the Certificate of Incorporation of the Surviving
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Corporation shall be amended to read as follows: "The name of the corporation
is Quest Education Corporation."
(b) The Bylaws of the Purchaser, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation or such Bylaws.
2.6 Directors and Officers of the Surviving Corporation. At the Effective
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Time, the directors of the Purchaser immediately prior to the Effective Time
shall become the directors of the Surviving Corporation, each of such directors
to hold office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their successors
shall be duly elected or appointed and shall duly qualify. At the Effective
Time, the officers of the Company immediately prior to the Effective Time shall
become the officers of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
SECTION THREE
3. Representations and Warranties of Parent and the Purchaser. Parent and the
Purchaser hereby jointly and severally represent and warrant to the Company
that, except as and to the extent set forth in a Disclosure Schedule delivered
to the Company on or prior to the date hereof setting forth additional
exceptions specified therein to the representations and warranties
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contained in this Section Three, which Disclosure Schedule shall identify
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exceptions by specific Section references:
3.1 Corporate Organization.
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(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Purchaser has
not engaged in any business since it was incorporated other than in connection
with the transactions contemplated by this Agreement. Parent owns all of the
outstanding capital stock of the Purchaser.
3.2 Authority. Each of Parent and the Purchaser has the full corporate
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power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the respective
Boards of Directors of Parent and the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to consummate
the transactions so contemplated (other than, with respect to the Merger, the
filing and recordation of the appropriate merger documents as required by the
DGCL). This Agreement has been duly executed and delivered by each of Parent
and the Purchaser and, assuming the due authorization, execution and delivery
thereof by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser, enforceable against such parties in accordance with
its terms.
3.3 Consents And Approvals; No Violation. Neither the execution and
------------------------------------
delivery of this Agreement by Parent and the Purchaser nor the consummation by
Parent and the Purchaser of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of their respective
Certificates of Incorporation or Bylaws, or (ii) assuming compliance with the
matters referred to in clause (iii) below, constitute a default (or an event
which, with notice or lapse of time or both, could constitute a default) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation contained in or to the loss of a benefit under, or result in the
creation of any lien or other encumbrance upon any of the properties or assets
of Parent or the Purchaser under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease agreement or
other agreement, instrument, obligation, permit, concession, franchise,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or the Purchaser, or to which either of them or any of their
respective properties or assets may be subject, except for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of liens
or other encumbrances, which, individually or in the aggregate, will not have a
material adverse effect on Parent and its Subsidiaries taken as a whole, or
(iii) require any consent, approval, authorization or permit of, or filing with
or notification to, any court, administrative agency, commission or other
governmental or regulatory authority or instrumentality, domestic or foreign,
including Educational Agencies (a "Governmental Entity"), except (A) pursuant to
-------------------
the Exchange Act, (B) filing a certificate of merger or certificate of
ownership, as the case may be, pursuant to the
-9-
DGCL, (C) filings required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the termination of the waiting
-------
periods thereunder, (D) consents, approvals, authorizations, permits, filings or
notifications which if not obtained or made will not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries taken
as a whole or prevent or materially delay consummation of the Offer or the
Merger, or (E) the approval of or notice to any Educational Agency with
jurisdiction over Company or Schools for the consummation of the transactions
contemplated by this Agreement and the transfer of ownership of Schools to
Purchaser.
3.4 Financing. The Purchaser has or will have, prior to the expiration of
---------
the Offer and the Effective Time of the Merger, sufficient cash or cash-
equivalent funds available to purchase all of the Shares outstanding in the
Offer and the Merger.
SECTION FOUR
4. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to Parent and the Purchaser that, except as and to the
extent set forth in a Disclosure Schedule delivered to Parent on or prior to the
date hereof setting forth additional exceptions specified therein to the
representations and warranties contained in this Section Four, which Company
------------
Disclosure Schedule shall identify exceptions by specific Section references:
4.1 Corporate Organization. The Company is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware
and the Subsidiaries of the Company are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation, and the Company and its Subsidiaries have the requisite
corporate power and authority and all necessary governmental approvals to own or
lease and operate their properties and assets and to carry on their businesses
as they are now being conducted, and are duly qualified or licensed as foreign
corporations to do business and are in good standing in each jurisdiction in
which the nature of the businesses conducted by them or the character or
location of the properties owned or leased by them makes such qualification or
licensing necessary, except where the failure to be so organized, existing, in
good standing, qualified or licensed could not have a Material Adverse Effect.
As used herein, the term "Material Adverse Effect" means any change,
-----------------------
circumstance or effect that, individually or in the aggregate, is or is
reasonably likely to be materially adverse to (i) the business, operations,
properties, prospects, financial condition, assets or liabilities (including,
without limitation, contingent liabilities) of the Company and the Subsidiaries
taken as a whole, (ii) the ability of the Company to consummate the transactions
contemplated hereby, or (iii) the ability of the Surviving Corporation to
conduct the business of the Company after the Effective Time in substantially
the manner currently being conducted by the Company.
4.2 Capitalization. The authorized capital stock of the Company consists
--------------
of 15,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock.
As of the close of business on June 26, 2000, 7,964,283 shares of Common Stock
were issued and outstanding, 1,335,580 shares of Common Stock were reserved for
issuance upon the exercise of outstanding options to acquire shares of Common
Stock ("Stock Options"), 56,998 shares of Common Stock
-------------
-10-
were reserved for issuance upon the exercise of outstanding warrants to acquire
shares of Common Stock ("Warrants"), no shares of Common Stock were held by the
--------
Company in its treasury and 200,000 shares of Common Stock were reserved for
issuance under the Company's 1998 employee stock purchase plan (the "Stock
-----
Purchase Plan") and no shares of Preferred Stock were issued and outstanding.
-------------
The number of issued and outstanding shares of Common Stock at any time taken
together with the number of shares of Common Stock reserved for issuance upon
the exercise of outstanding Stock Options and Warrants at such time is referred
to herein as the "Fully Diluted Shares." All of the issued and outstanding
--------------------
shares of Common Stock are validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which the Company or its assets is bound. Except as disclosed in
this Section 4.2 and Section 4.2 of the Company Disclosure Schedule, there are
----------- -----------
no shares of capital stock of the Company issued or outstanding, and, except for
the Stock Options, the Rights and rights to purchase shares of Common Stock
under the Stock Purchase Plan, there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other agreements or commitments of
any character (including, without limitation, rights which will or could become
exercisable as a result of this Agreement or any transaction contemplated
hereby) relating to the issued or unissued capital stock or other securities of
the Company obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company or
obligating the Company to grant, extend or enter into any subscription, option,
warrant, right, convertible security or other similar agreement or commitment.
There are no voting trusts or other agreements or understandings to which the
Company or any Subsidiary of the Company is a party with respect to the voting
of the capital stock of the Company or such Subsidiary.
4.3 Subsidiaries. The Subsidiaries of the Company are listed on Section
------------ -------
4.3 of the Company Disclosure Schedule. All of the outstanding shares of
---
capital stock of each Subsidiary of the Company are validly issued, fully paid
and nonassessable and are owned by the Company or a wholly owned Subsidiary of
the Company, free and clear of all liens (except as set forth in Section 4.3 of
-----------
the Company Disclosure Schedule), claims or encumbrances. There are no existing
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any Subsidiary of the Company obligating
any such Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of any Subsidiary of the Company or
obligating any Subsidiary of the Company to grant, extend or enter into any
subscription, option, warrant, right, convertible security or other similar
agreement or commitment. Except as disclosed in Section 4.3 of the Company
-----------
Disclosure Schedule, the Company does not own, directly or indirectly, any
equity or similar interest in, or any interest convertible into or exchangeable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
4.4 Authority. The Company has the full corporate power and authority to
---------
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Board of Directors of the
-11-
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and adoption
of this Agreement by the stockholders of the Company if and to the extent
required by applicable law, and the filing and recordation of the appropriate
merger documents as required by the DGCL). Neither the Certificate of
Incorporation or the Bylaws of the Company require a supermajority stockholder
approval of the Merger. This Agreement has been duly executed and delivered by,
and, assuming the due authorization, execution and delivery thereof by Parent
and the Purchaser, constitutes a valid and binding obligation of, the Company,
enforceable against the Company in accordance with its terms.
4.5 Consents and Approvals; No Violation. Except as set forth in Section
------------------------------------ -------
4.5 of the Company Disclosure Schedule, neither the execution and delivery of
---
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will (i) conflict with or result in any breach
or violation of any provision of the Certificate of Incorporation or Bylaws (or
other comparable organizational documents) of the Company or any Subsidiary of
the Company, or (ii) constitute a default (or an event which, with notice or
lapse of time or both, could constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation contained
in or to the loss of a benefit under, or result in the creation of any lien or
other encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any such Subsidiary or to which they or any of their respective
properties or assets may be subject, except for such violations, conflicts,
breaches, terminations, accelerations or creations of liens or other
encumbrances, which will not have a Material Adverse Effect, or (iii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) pursuant to the Exchange
Act, (B) filing a certificate of merger pursuant to the DGCL, (C) filings under
the HSR Act and the termination of the waiting periods thereunder, (D) consents,
approvals, authorizations, permits, filings or notifications which if not
obtained or made will not have a Material Adverse Effect or prevent or
materially delay consummation of the Offer or the Merger, or (E) the approval of
or notice to any Educational Agency with jurisdiction over Company or Schools
for the consummation of the transactions contemplated by this Agreement and the
transfer of ownership of Schools to Purchaser.
4.6 Schedule 14D-9; Proxy or Information Statement; Schedule TO. Neither
-----------------------------------------------------------
the Schedule 14D-9 nor any information supplied by the Company for inclusion in
the Schedule TO will, at the respective times the Schedule 14D-9 and the
Schedule TO are filed with the SEC and first published, sent or given to the
Company's stockholders, contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. If the DGCL shall require a Stockholders' Meeting (as
defined in Section 5.2 below) to be convened in connection with the Merger, the
-----------
proxy statement to be provided to stockholders of the Company in connection with
the Stockholders' Meeting (together with the
-12-
amendments thereof and supplements thereto, the "Proxy Statement") and all
---------------
amendments thereof and supplements thereto shall, and if the DGCL shall not
require a Stockholders' Meeting to be convened in connection with the Merger,
the information statement to be provided to stockholders of the Company in
connection with the Merger (together with the amendments thereof and supplements
thereto, the "Information Statement") shall, comply as to form in all material
---------------------
respects with the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder, and shall not, at the time of (i) first
mailing thereof or (ii) in the case of the Proxy Statement, the Stockholders'
Meeting to be held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that (x) no
representation is made by the Company with respect to information supplied in
writing by Parent or any affiliates or representatives of Parent or the
Purchaser for inclusion in the Proxy Statement or Information Statement, as the
case may be, and (y) no representation is made with respect to a Proxy Statement
or Information Statement, as the case may be, prepared by the Company and
provided to the Company's stockholders at any time following the Cut-Off Date.
4.7 Conduct of Business.
-------------------
(a) The businesses of the Company and its Subsidiaries are not being
conducted in default or violation of (i) their respective charters or bylaws, or
(ii) except as set forth in Section 4.7(a) of the Company Disclosure Schedule,
--------------
any material term, condition or provision of any note, bond, mortgage,
indenture, deed of trust, lease, material agreement, or other material
instrument or obligation of any kind to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets may be bound, or (iii) any federal,
state, local or foreign statue, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of its
Subsidiaries, the failure to comply with which could have a material adverse
effect on the Company or any of its Subsidiaries, except as set forth in Section
-------
4.7(a) of the Company Disclosure Schedule.
-----
(b) The Company, each of its Subsidiaries and each of the Schools
have all licenses, permits, orders or approvals of, and have made all required
registrations with, all Governmental Entities (other than the Licenses, which
are addressed in Section 4.20), that are required for the conduct of the
------------
business of each of the Schools (collectively, "Permits"). Except as publicly
-------
disclosed by the Company in its SEC Documents (as defined below) and except for
matters which are not material or which may be cured in the ordinary course of
business without material expense, (i) all Permits are in full force and effect;
(ii) no material violations are or have been recorded in respect of any Permit;
and (iii) no proceeding is pending or, to the Company's knowledge, threatened to
revoke or limit any Permit.
(c) Neither the Company nor any of its Subsidiaries has received any
written communication from a Governmental Entity that alleges that the Company
or any Subsidiary of the Company is not in compliance with any Environmental Law
(as defined below). The
-13-
Company has no knowledge of any environmental materials or information,
including on-site or off-site disposal or releases of Hazardous Materials (as
defined below) the presence, disposal or release of which is not in compliance
with Environmental Law. As used in this Agreement, the term "Environmental
-------------
Laws" means any applicable treaties, laws, regulations, enforceable
----
requirements, orders, decrees or judgments issued, promulgated or entered into
by any Governmental Entity, which relate to (A) pollution or protection of the
environment or (B) the generation, storage, use, handling, disposal or
transportation of or exposure to Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Resource Conservation
-- --- ------
and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., the Federal Water
-- ---
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq., the Clean
-- ---
Air Act of 1970, as amended, 42 U.S.C. Section 7401 et seq., the Toxic
-- ---
Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Hazardous
-- ---
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., and any similar
-- ---
or implementing state or local law, and all amendments or regulations
promulgated thereunder. As used in this Agreement, the term "Hazardous
---------
Materials" means all explosive or regulated radioactive materials or substances,
---------
biological hazards, genotoxic or mutagenic hazards, hazardous or toxic
substances, medical wastes or other wastes or chemicals, petroleum or petroleum
distillates, asbestos or asbestos-containing materials, and all other materials
or chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. Section 172.101 and materials defined as hazardous pursuant
to Section 101(14) of CERCLA.
4.8 SEC Documents. The Company has filed all required reports, schedules,
-------------
forms, statements and other documents with the SEC since January 1, 1996 (the
"SEC Documents"). As of their respective dates, the SEC Documents complied in
--------------
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
--------------
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and, at the time of filing, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by the applicable form under the
Exchange Act) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and their consolidated statements of operations, stockholders' equity and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal and recurring year-end audit adjustments which were and are not
expected to have a Material Adverse Effect). Except as and to the extent set
forth on the consolidated balance sheet of the Company and the Subsidiaries as
at March 31, 2000, including the notes thereto, neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise and whether required to be reflected on a
balance sheet or not), except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since
-14-
March 31, 2000 which in the aggregate could not reasonably be expected to have a
Material Adverse Effect. The Company has heretofore made available to Parent
complete and correct copies of all of the SEC Documents and all amendments and
modifications thereto, as well as, to the extent any shall exist, all material
amendments and modifications that have not been filed by the Company with the
SEC to all agreements, documents and other instruments that previously had been
filed by the Company with the SEC and are currently in effect.
4.9 Litigation. Except as set forth in Section 4.9 of the Company
---------- -----------
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
its Subsidiaries.
4.10 Labor Relations; Employees.
--------------------------
(i) Neither the Company nor any of its Subsidiaries is,
directly or indirectly, a party to or bound by any collective bargaining
agreement;
(ii) No collective bargaining agreement is currently being
negotiated by the Company or its Subsidiaries; and
(iii) To the knowledge of the Company, no representation question
exists respecting the employees of the Company or its Subsidiaries.
4.11 Certain Agreements and Employee Benefit Plans.
---------------------------------------------
(a) Except as set forth in Section 4.11 of the Company Disclosure
------------
Schedule, neither the Company nor any of its Subsidiaries is a party to any
written (i) employment, severance, collective bargaining or consulting agreement
not terminable on 60 days' or less notice without penalty, (ii) agreement with
any officer or other key employee of the Company or any Subsidiary of the
Company (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any Subsidiary of the Company of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee extending for a period longer than one year, (C)
providing severance benefits or other benefits after the termination of
employment of such executive officer or key employee regardless of the reason
for such termination of employment, or (D) providing for performance based
compensation, (iii) agreement, plan or arrangement under which any person may
receive payments subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (iv) agreement or plan,
----
including, without limitation, any stock option plan (other than the Stock
Option Plans, the Rights Plan and the Stock Purchase Plan), stock appreciation
right plan, restricted stock plan or stock purchase plan, the benefits of which
would be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
-15-
(b) Section 4.11(b) of the Company Disclosure Schedule contains a true
---------------
and complete summary or list of, or otherwise describes (i) all employee benefit
plans (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
-----
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements to which the Company or any Subsidiary is a party, with
respect to which the Company or any Subsidiary has any obligations which are
material in amount and which are maintained, contributed to or sponsored by the
Company or any Subsidiary for the benefit of any current or former employee,
officer or director of the Company or any Subsidiary and (ii) each employee
benefit plan for which the Company or any Subsidiary could incur liability under
Section 4069 of ERISA, in the event such plan were terminated, or under Section
4212(c) of ERISA, or in respect of which the Company or any Subsidiary remains
secondarily liable under Section 4204 of ERISA (collectively, the "Material
--------
Plans"). Each Material Plan is in writing and the Company has previously made
-----
available to Parent a true and complete copy of each Material Plan and a true
and complete copy of each material document prepared in connection with each
such Material Plan including, without limitation: (i) a copy of each trust or
other funding arrangement, (ii) the most current summary plan description and
summary of material modifications, (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
---
determination letter for each such Material Plan, and (v) the most recently
prepared actuarial report and financial statement in connection with each such
Material Plan. Neither the Company nor any Subsidiary has any express or
implied commitment (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual, or (iii) to modify, change or terminate any Material Plan, other
than with respect to a modification, change or termination required by ERISA or
the Code. To the extent applicable, the Material Plans comply with the
requirements of ERISA and the Code, and any Material Plan intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and has been so qualified during the period
from its adoption to date. No Material Plan is covered by Title IV of ERISA or
Section 412 of the Code. Neither the Company, its Subsidiaries nor any officer
or director of the Company or any of its Subsidiaries has incurred any liability
or penalty under Sections 4975 through 4980 of the Code or Title I of ERISA. To
the knowledge of the Company, each Material Plan has been maintained and
administered in all material respects in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Material Plans. There are no pending or anticipated claims against or otherwise
involving any of the Material Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of Material Plan
activities) has been brought, or to the knowledge of the Company is threatened,
against or with respect to any such Material Plan. All material contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Material Plans have been made or accrued.
(c) Section 4.11(c) of the Company Disclosure Schedule contains a true
---------------
and correct list of each person who holds any Stock Option as of the date
hereof, together with (i) the
-16-
number of shares of Common Stock subject to such Stock Option, (ii) the date of
grant of such Stock Option, (iii) the extent to which such Stock Option is
currently vested or scheduled to vest, (iv) the exercise price of such Stock
Option, (v) whether such Stock Option is intended to qualify as an incentive
stock option within the meaning of Section 422(b) of the Code (an "ISO"), and
---
(vi) the expiration date of such Stock Option. Section 4.11(c) of the Company
---------------
Disclosure Schedule also sets forth the aggregate number of ISO's and
nonqualified Stock Options outstanding as of the date hereof.
(d) Section 4.11(d) of the Company Disclosure Schedule contains a true
---------------
and correct list of each person who holds any Warrants as of the date hereof,
together with (i) the number of shares of Common Stock subject to such Warrant,
(ii) the date of grant of such Warrant, (iii) the extent to which such Warrant
is currently vested or scheduled to vest; (iv) the exercise price of such
Warrant, and (v) the expiration date of such Warrant. Section 4.11(d) of the
--------------
Company Disclosure Schedule also sets forth the aggregate number of Warrants
outstanding as of the date hereof.
4.12 Taxes.
-----
(a) The Company and its Subsidiaries (i) except as set forth in
Section 4.12(a) of the Company Disclosure Schedule, have filed when due (taking
---------------
into account extensions) with the appropriate federal, state, local, foreign and
other governmental agencies, all tax returns, estimates and reports required to
be filed by it, (ii) either paid when due and payable or established adequate
reserves or otherwise accrued all requisite federal, state, local or foreign
taxes, levies, imposts, duties, licenses and registration fees and charges of
any nature whatsoever, and unemployment and social security taxes and income tax
withholding, including interest and penalties thereon ("Taxes") and there are
-----
and will be no tax deficiencies claimed in writing and received by the Company
or its Subsidiaries in respect of any period preceding the Effective Time that,
in the aggregate, could result in any tax liability in excess of the amount of
the reserves or accruals, and (iii) have established or will establish in
accordance with its normal accounting practices and procedures accruals and
reserves that, in the aggregate, are adequate for the payment of all Taxes not
yet due and payable and attributable to any period preceding the Effective Time.
(b) No taxes, interest, penalties, assessments or deficiencies have
been threatened or claimed in a writing and received by the Company or any of
its Subsidiaries by any taxing authority in respect of any tax returns filed by
the Company and its Subsidiaries (or any predecessor corporations). Neither the
Company nor any of its Subsidiaries (nor any predecessor corporation) have
executed or filed with the IRS or any other taxing authority any agreement or
other document extending, or having the effect of extending, the period of
assessment or collection of any Taxes. Neither the Company nor any of its
Subsidiaries is currently being audited by any taxing authority or have received
notice of a proposed audit pertaining to Taxes. There are no tax liens on any
assets of the Company or any affiliate, except for Taxes not yet due and
payable. The accruals and reserves for taxes reflected in the consolidated
balance sheet of the Company and the Subsidiaries as at March 31, 2000 are in
all material respects adequate to
-17-
cover all Taxes accruable through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in accordance with
generally accepted accounting principles.
(c) The Company neither is a party to, is bound by, nor has any
obligation under any tax sharing or similar agreement.
(d) Neither the Company nor any of its Subsidiaries is required or
could be required as a result of the transactions contemplated hereby, to
include in income (i) any amount in respect of any adjustment under Section 481
of the Code, (ii) any deferred intercompany transaction, or (iii) any
installment sale gain, where the inclusion in income could result in a tax
liability materially in excess of the reserves therefor. Neither the Company nor
any of its Subsidiaries has given a consent under Section 341(f) of the Code.
Neither the Company nor any of its Subsidiaries is, or has been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(e) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that may result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 280G of the Code by reason of the consummation of the Offer or the
Merger, determined without regard to Section 280G(b)(4) of the Code. No
acceleration of the vesting schedule for any property that is substantially
unvested within the meaning of the regulations under Section 83 of the Code will
occur in connection with the transactions contemplated by this Agreement.
Neither the Company nor any of its Subsidiaries is or has been subject to any
accumulated earnings tax or personal holding company tax. Neither the Company
nor any of its Subsidiaries owns stock in (i) a passive foreign investment
company within the meaning of Section 1296 of the Code or (ii) a controlled
foreign corporation within the meaning of Section 957 of the Code. Neither the
Company nor any of its Subsidiaries is obligated under any agreement with
respect to industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for federal income tax
purposes could be affected by the transactions contemplated hereunder. Neither
the Company nor any of its Subsidiaries has an unrecaptured overall foreign loss
within the meaning of Section 904(f) of the Code or has participated in or
cooperated with an international boycott within the meaning of Section 999 of
the Code. Neither the Company nor any of its Subsidiaries owns any property of
a character the transfer of which could give rise to (x) a revaluation of such
property for purposes of any Ad Valorem or similar tax, or (y) any documentary,
stamp or other transfer tax. Neither the Company nor any of its Subsidiaries
has an "excess loss account" for purposes of the Treasury Regulations
promulgated under Section 1502 of the Code.
4.13 Absence of Certain Changes or Events. Except as set forth in Section
------------------------------------ -------
4.13 of the Company Disclosure Schedule, since March 31, 2000, except as
----
contemplated by this Agreement or disclosed in any SEC Document filed since
March 31, 2000 and prior to the date of this Agreement, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice, and there has not been (i) any damage,
destruction or loss, whether covered by insurance or not, having or which,
insofar as reasonably can be foreseen, in the future could have a Material
Adverse Effect, (ii) any declaration, setting
-18-
aside or payment of any dividend (whether in cash, stock or property) with
respect to Common Stock, or any redemption, purchase or other acquisition of any
of its securities, (iii) any change in the business, operations, properties,
prospects, financial condition, assets or liabilities (including, without
limitation, contingent liabilities) of the Company or any Subsidiary which could
have a Material Adverse Effect, (iv) any labor dispute, other than routine
matters, none of which is material to the Company and its Subsidiaries taken as
a whole, (v) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business consistent with past practice, (vi) any change by
the Company in its accounting methods, principles or practices, (vii) any
revaluation by the Company of any asset (including, without limitation, any
writing down of the value of inventory or writing off of notes or accounts
receivable), other than in the ordinary course of business consistent with past
practice, or (viii) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any Subsidiary, except in the ordinary course of business
consistent with past practice.
4.14 Properties. All of the properties and assets owned by the Company and
----------
each of its Subsidiaries are owned by each of them, respectively, free and clear
of any lien, claim, encumbrance or restriction of any nature whatsoever, except
as disclosed in Item 2 of Part 1 of the Form 10-K filed by the Company with the
SEC on June 26, 2000 (a "Lien"), and except for Liens which could not
----
reasonably be expected to materially impair the value of any School, Building,
or educational offering of the Company. The Company and its Subsidiaries have
good and marketable title subject to no Liens, other than those permitted under
this Section 4.14, to all of the properties and assets necessary for the conduct
------------
of their business.
4.15 Intellectual Property. The Company and the Subsidiaries own or
---------------------
possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and for
service marks, know-how and other proprietary rights and information used or
held or intended as of the date hereof by management of the Company to be used
by the Company or any Subsidiary in, and all such intellectual property
necessary in the conduct of, the business of the Company and the Subsidiaries as
currently conducted or as contemplated to be conducted as of the date hereof by
management of the Company (except for the contemplated distance learning
business), and there are no other items of intellectual property that are
material to the Company or any Subsidiary or the business of the Company and the
Subsidiaries. The Company is unaware of any assertion or claim challenging the
validity of any of the foregoing. The conduct of the business of the Company
and the Subsidiaries as currently conducted and as contemplated to be conducted
as of the date hereof by management of the Company does not and will not
conflict in any way with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service xxxx or copyright of any third
party, and neither the Company nor any Subsidiary has received any claim or
written notice from any person to such effect. To the knowledge of the Company,
there are no infringements of any proprietary rights
-19-
owned by or licensed by or to the Company or any Subsidiary. Neither the Company
nor any Subsidiary has licensed or otherwise permitted the use by any third
party of any proprietary information on terms or in a manner which could
reasonably be expected to have a Material Adverse Effect.
4.16 Material Contracts. All contracts, leases and other agreements to
------------------
which the Company or any of its Subsidiaries are a party that is required to be
filed as Exhibits to the SEC Documents and any other agreement with respect to
which a default by the Company could have a Material Adverse Effect (the
"Material Contracts") have been filed (to the extent required) as Exhibits to
------------------
the SEC Documents, and (i) each Material Contract is in full force and effect
except as the same may have expired in accordance with its terms; (ii) neither
the Company nor any of its Subsidiaries has received any written assertion of
default under any Material Contract; and (iii) neither the Company nor any of
its Subsidiaries reasonably expects or has received any notice related to any
termination or material change to, or proposal with respect to, any of the
Material Contracts as a result of the transactions contemplated by this
Agreement. As of the date hereof, neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreements or any
other agreements or arrangements that limit or otherwise restrict the Company or
any of its Subsidiaries or any of their respective affiliates or any successor
thereto, or that could, after the Effective Time limit or restrict Purchaser or
any of its affiliates (including the Surviving Corporation) or any successor
thereto, from engaging or competing in any line of business or in any geographic
area.
4.17 Company Stockholder Rights Plan. The Board of Directors of the
-------------------------------
Company has amended the Rights Plan in accordance with its terms to render it
inapplicable to the Offer, the Merger and the transactions contemplated hereby.
The Company has delivered to Parent a true and correct copy of the Rights Plan,
as amended, in effect as of execution and delivery of this Agreement.
4.18 Fees. Except for the fees payable by the Company to Xxxxxxxxx Lufkin
----
& Xxxxxxxx Securities Corporation described in an engagement letter dated July
30, 1997, a complete and correct copy of which has been provided to Parent,
neither the Company nor any of its Subsidiaries has paid or will become
obligated to pay any fee or commission to any broker, finder or intermediary in
connection with the transactions contemplated hereby.
4.19 Business Combination Statute Inapplicable. As of the date hereof and
-----------------------------------------
pursuant to Section 203(a)(1) of the DGCL, the restrictions contained in Section
203 of the DGCL are, and at all times on or prior to the Effective Time such
restrictions shall be, inapplicable to the Offer, the Merger and the
transactions contemplated by this Agreement. The Company has heretofore
delivered to Parent a complete and correct copy of the resolutions of the Board
of Directors of the Company to the effect that pursuant to Section 203(a)(1) of
the DGCL the restrictions contained in Section 203 of the DGCL are and shall be
inapplicable to the Offer, the Merger and the transactions contemplated by this
Agreement.
4.20 Compliance with Laws.
--------------------
-20-
(a) General. Except as set forth in Section 4.20(a) of the Company
-------
Disclosure Schedule, Company, each Subsidiary and each School is not and has not
been in violation of, and the business of the Company and each Subsidiary has
been and is being conducted in accordance with, all federal, state, municipal,
foreign and other laws, regulations, orders, Accrediting Body standards and
other requirements applicable thereto, including, but not limited to, the
provisions of Title IV, any regulations implementing or relating to Title IV,
and any laws, regulations, orders, Accrediting Body standards or requirements
related to or administered by any Educational Agency (collectively, "Education
---------
Laws"), the failure to comply with which could, individually or in the
----
aggregate, have a material adverse effect on any School or the Company.
(b) Licenses. Set forth in Section 4.20(b) of the Company Disclosure
-------- ---------------
Schedule is an accurate and complete list of all Educational Approvals held or
used by the Company, any Subsidiary or any School (collectively, the
"Licenses"). Each of the Licenses has been duly obtained, is valid and in full
--------
force and effect, and is not subject to any pending or, to our knowledge,
threatened proceeding to revoke, cancel or declare such License invalid or to
limit such License in a manner which could, individually or in the aggregate,
have a materially adverse effect on any School or the Company. Each of the
Licenses is sufficient in all material respects to permit the continued lawful
conduct of the business in the manner now conducted by the Company and each
Subsidiary and School. Neither the Company, any Subsidiary nor any School is in
default in any material respect with respect to any of the Licenses, and no
event has occurred which constitutes, or with due notice or lapse of time or
both may constitute, a material default by Company or any School under any
License.
(c) Educational Approvals.
---------------------
(i) Each School is certified by the DOE as an eligible institution
under Title IV and is a party to, and in compliance in all material respects
with, a valid program participation agreement with the DOE. Neither the Company
nor any School has received notice that any Educational Approval will not be
renewed and there is no basis for non-renewal.
(ii) The Company has received and maintained without interruption all
Educational Approvals material to each School's operations and receipt of all
Financial Assistance since July 1, 1995 during the Company's period of ownership
of such School.
(iii) There exists no fact, circumstance, act or omission with respect
to the present or prospective financial condition, business or operations of the
Company, any Subsidiary or any School (except as may solely relate to the
Purchaser or Parent) that could serve as a basis to revoke, deny, withdraw,
terminate, suspend, condition or limit any Educational Approval for the Company,
any School or any consents or approvals of Education Agencies necessary to
permit the transaction to be consummated and ownership of the Company and the
Schools transferred to Purchaser without forfeiture or material impairment of
any Educational Approval, including any consent or approval required to be
obtained after the first date on which Purchaser owns a majority of the Shares
(the "Change of Ownership Date").
(iv) Except as set forth in Section 4.20(c)(iv) of the Company's
-------------------
Disclosure Schedule, since July 1, 1996, neither the Company nor any School has
received any
-21-
notice with respect to any alleged violation of any Education Law with respect
to any School, including with respect to recruitment, sales and marketing
activities, or the terms of any program participation agreement to which the
Company (including any School) is or was a party, the failure to comply with
which could cause, individually or in the aggregate, a material adverse effect
on any School or the Company.
(v) No person who exercises substantial control over the Company, any
School or any Subsidiary (as the term "substantial control" is defined under 34
C.F.R. (S) 600.30) or any member or members of that person's family, alone or
together, exercises or, since July 1, 1994 has exercised, substantial control
over another post-secondary institution, other than the Schools, or a third-
party servicer. Since July 1, 1994, none of the Company, any Subsidiary, any
School or the chief executive officer of the Company, any Subsidiary or the
School has been found guilty of a crime involving the acquisition, use, or
expenditure of funds under the Title IV Programs or has been judicially
determined to have committed fraud involving funds under the Title IV Programs.
Neither the Company, any Subsidiary, nor any School, nor any affiliate of the
Company, any Subsidiary or any School, that has the power, by contract or
ownership interest, to direct or cause the direction of the management of
policies of any School, has ever filed for relief in bankruptcy or had entered
against it an order for relief in bankruptcy. To the knowledge of the Company,
no School employs or, since July 1, 1994 has employed, any individual or entity
in a capacity that involves the administration or receipt of funds under the
Title IV Programs, or contracted with any institution or third-party servicer,
which has been terminated under the Title IV Programs for a reason involving the
acquisition, use, or expenditure of federal, state, or local government funds,
or has been convicted of, or has pled nolo contendere or guilty to, a crime
involving the acquisition, use or expenditure of federal, state, or local
government funds, or has been administratively or judicially determined to have
committed fraud or any other material violation of law involving federal, state,
or local government funds.
(vi) No post-secondary institution other than the Schools (whether or
not participating in the Title IV Programs) or any third-party servicer (as that
term is defined at 34 C.F.R. (S) 668.2) is, or, since July 1, 1997 has been,
administered commonly, jointly or in conjunction with the Company, any
Subsidiary or any School. No other institution or organization of any sort
provides, or, since July 1, 1997 has provided, any educational instruction on
behalf of the Company or any School. Neither the Company nor any School
provides, or since July 1, 1997, has provided, any educational instruction on
behalf of any other institution or organization of any sort.
(vii) Except as set forth in Section 4.20(c)(vii) of the Company's
--------------------
Disclosure Schedule, no School currently contracts with a third-party servicer
(as that term is defined in 34 C.F.R. (S) 668.2) to provide any services in
connection with the processing or administration of the School's administration
of any form of Financial Assistance.
-22-
(d) Financial Assistance Programs.
-----------------------------
(i) The Company and each School has complied with the
limitation on the receipt of Title IV Program funding under the "85/15 Rule"
codified at 34 C.F.R. (S) 600.5(d) for the three fiscal years ending on or
before March 31, 1998, and under the "90/10 Rule" codified at 34 C.F.R. (S)
600.5(d) and amended by section 102(b)(1)(F) of Public Law No. 105-244 (Higher
Education Amendments of 1998) for the two fiscal years ending on or before March
31, 2000.
(ii) The Company and each School satisfied the standards of
financial responsibility in accordance with (i) 34 C.F.R. (S) 668.15 or 34
C.F.R. (S) 668.171-.174 for the fiscal year ending March 31, 1998, and (ii) 34
C.F.R. (S) 668.171.-.174 for the fiscal years ending March 31, 1999 and March
31, 2000.
(iii) Except as set forth in Section 4.20(d)(iii) of the
--------------------
Company's Disclosure Schedule, since January 1, 1998, neither the Company nor
any School has received notice from the DOE or any other Educational Agency that
the Company or any School lacked financial responsibility or administrative
capability for any period under the Education Laws or standards in effect in
such period or was required to post a letter of credit or other form of surety
for any reason, including any request for a letter of credit based on late
refunds pursuant to 34 C.F.R. (S) 668.173, 34 C.F.R. (S) 668.15 or any
predecessor regulation.
(iv) Section 4.20(d)(iv) of the Company's Disclosure Schedule
-------------------
includes a correct and complete list of each School's official, published cohort
default rates for Federal Family Education Loan Program loans or Federal Direct
Loan Program loans for the federal fiscal years ending September 30, 1995,
September 30, 1996, and September 30, 1997, respectively, and each School's
draft cohort default rate for Federal Family Education Loan Program loans or
Federal Direct Loan Program loans for the federal fiscal year ending September
30, 1998.
(v) To the Company's knowledge, since July 1, 1994, the Company
and each School has complied in all material respects with all Education Laws
concerning the provision of commissions, bonuses, or other incentive payments to
admissions representatives, agents, and other Persons engaged in any student
recruiting or admission activities or in making decisions regarding the awarding
of Title IV Program funds for or on behalf of the Company or any School.
(e) Certain Definitions. For the purposes of this Agreement the
-------------------
following terms shall have the indicated meanings:
ABHES shall mean the Accrediting Bureau of Health Education Schools.
ACICS shall mean the Accrediting Council for Independent Colleges and
Schools.
Accrediting Body shall mean any entity or organization, whether
governmental, government-chartered, private or quasi-private, which engages in
the granting or withholding of
-23-
accreditation of private post-secondary schools or of educational programs
provided by such Schools in accordance with standards and requirements relating
to the performance, operations, financial condition and/or academic standards of
such schools including, without limitation, ABHES, ACICS, ACCSCT, NEASC, NCA and
SACS.
ACCSCT shall mean the Accrediting Commission of Career Schools and Colleges
of Technology.
Consents shall mean all consents, permits, or approvals of Educational
Agencies necessary to permit the transaction to be consummated lawfully in
accordance with this Agreement, without forfeiture or material impairment of any
Educational Approval, including any such consent, permit, or approval required
to be obtained after the Change of Ownership Date.
DOE shall mean the United States Department of Education and any successor
agency administering student financial assistance under Title IV.
DOE Approval Notice shall mean a program participation agreement, including
a provisional program participation agreement, issued to a School, and as
executed by the DOE, in conjunction with an accurate Eligibility and
Certification Approval Report (but not including a TPPPA), that does not include
any condition that could materially impair the School's operations, other than a
requirement that the School (a) post a letter of credit based solely on
Purchaser's financial condition, (b) meet deadlines to file for a
recertification, (c) satisfy precertification training requirements, or (d)
accept any requirement that appears under the heading "Special Requirements for
Substantial Changes Made During Term of Provisional Certification".
Educational Agency shall mean any Person, entity or organization, whether
governmental, government chartered, tribal, private, or quasi-private, that
engages in granting or withholding Educational Approvals for and regulates
private post-secondary schools in accordance with standards relating to the
performance, operation, financial condition, or academic standards of such
schools, and the provision of Financial Assistance by and to such schools,
including, without limitation, state authorizing and licensing agencies, any
Accrediting Body, the DOE and any student loan guaranty agency.
Educational Approval shall mean any license, permit, authorization,
certification, agreement, accreditation, or similar approval material to the
operations of a School issued by any Educational Agency to the Company
(including any Subsidiary or School).
Financial Assistance shall mean any form of student financial assistance,
grants or loans, including Title IV Program funding.
Licenses shall have the meaning set forth in Section 4.20(b).
---------------
NCA shall mean the North Central Association of Colleges and Schools.
-24-
NEASC shall mean the New England Association of Schools and Colleges.
SACS shall mean the Commission on Colleges of the Southern Association of
Colleges and Schools.
Schools shall mean the main campus, together with the campuses that are
additional locations of that main campus, as designated by the DOE and owned by
the Company or any Subsidiary of the Company.
Title IV shall mean Chapter 28, Subchapter IV of the Higher Education Act
of 1965, as amended, 20 U.S.C. (S) 1070, et seq., and any amendments or
successor statutes thereto.
Title IV Program shall mean any program of student financial assistance
administered pursuant to Title IV.
TPPPA shall mean means a temporary provisional program participation
agreement executed by the DOE and issued to a School following the Change of
Ownership Date for an interim period allowing the DOE's further review of the
School's application for the DOE Approval Notice.
SECTION FIVE
5. Covenants.
5.1 Conduct of Business of the Company. Except as contemplated by this
----------------------------------
Agreement, during the period commencing on the date of this Agreement and
continuing until the Cut-Off Date or until the termination of this Agreement in
accordance with its terms, the Company and each of its Subsidiaries shall
conduct its operations in the ordinary and usual course consistent with past
practice, and the Company and its Subsidiaries will each endeavor to preserve
intact its business organization, to keep available the services of its officers
and employees and to maintain satisfactory relations with suppliers,
contractors, distributors, licensors, licensees, customers and others having
business relationships with it. Without limiting the generality of the
foregoing and except as provided in this Agreement, prior to the Cut-Off Date,
neither the Company nor any of its Subsidiaries shall directly or indirectly do,
or propose to do, any of the following, without the prior written consent of
Parent:
(a) Declare or pay any dividends on or make any other distribution in
respect of any of the capital stock of the Company;
(b) Split, combine or reclassify any of the capital stock of the
Company or issue or authorize any other securities in respect of, in lieu of or
in substitution for, shares of the capital stock of the Company or repurchase,
redeem or otherwise acquire any shares of the capital stock of the Company;
(c) Issue, deliver, encumber, sell or purchase any shares of the
capital stock of the Company or any securities convertible into, or rights,
warrants, options or other rights of any
-25-
kind to acquire, any such shares of capital stock, other convertible securities
or any other ownership interest (including, without limitation, any phantom
interest) (other than the issuance of Common Stock upon the exercise of
outstanding Stock Options, in compliance with the Stock Purchase Plan stock
purchases to be made on June 30, 2000, and upon the exercise of outstanding
warrants for Company Common Stock ("Warrants")); provided that the occurrence of
-------- --------
a separation of the Rights under the Rights Plan, and the related issuance of
shares of Company Common Stock to the Company's stockholders thereunder shall
not be deemed a breach of this Agreement to the extent that (i) the occurrence
of such separation occurred as a result of an unsolicited acquisition of Company
Common Stock by a third party, and (ii) such acquisition did not occur as a
result of the Company breaching Section 5.3 hereof;
-----------
(d) Amend or otherwise change its Certificate of Incorporation or
Bylaws (or other comparable organizational document), or amend the Rights Plan
or reduce the Rights issued thereunder;
(e) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof;
(f) Sell, lease or otherwise dispose of any of its assets, other than
in the ordinary course of business consistent with its past practices, except as
set forth in Section 5.1(f) of the Company Disclosure Schedule;
-------------
(g) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or any
Subsidiary of the Company or guarantee any debt securities of others, other than
in the ordinary course of business consistent with past practice;
(h) Enter into any contract or agreement other than in the ordinary
course of business consistent with past practice;
(i) Authorize any single capital expenditure which is in excess of
$50,000 or capital expenditures which are, in the aggregate, in excess of
$500,000 for the Company and the Subsidiaries taken as a whole;
(j) Increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past practices in
salaries or wages of employees of the Company or any Subsidiary who are not
officers of the Company, or, except in the ordinary course of business, grant
any severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or any
Subsidiary, or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
-26-
(k) Take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to cash management, the payment of accounts payable and the
collection of accounts receivable);
(l) Make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes;
(m) Pay, discharge, satisfy, settle or compromise any suit, claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past practice, of liabilities
reflected or reserved against in the Company's consolidated balance sheet dated
as of March 31, 2000, as filed by the Company with the SEC in its Annual Report
on Form 10-K for its fiscal year ended March 31, 2000, litigation or claims set
forth in Section 4.9 of the Company Disclosure Schedule, or subsequently
-----------
incurred in the ordinary course of business and consistent with past practice;
or
(n) Take any action that could result in any of the representations
and warranties of the Company set forth in this Agreement becoming untrue in any
material respect or in any of the conditions to the Offer or any of the
conditions to the Merger set forth in Section Seven not being satisfied.
-------------
5.2 Stockholder Meeting; Proxy Material; Information Statement.
----------------------------------------------------------
(a) If this Agreement is required by the DGCL to be approved by the
Company's stockholders, then the Company shall cause a meeting of its
stockholders (the "Stockholders' Meeting") to be duly called and held as soon as
---------------------
reasonably practicable for the purpose of voting on the approval and adoption of
this Agreement and the transactions contemplated hereby. The Board of Directors
of the Company shall, subject to their fiduciary duties as advised by counsel,
recommend approval and adoption of this Agreement and the Merger by the
Company's stockholders. In connection with such meeting, the Company (i) shall
promptly prepare and file with the SEC, use all reasonable efforts to have
cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable the Proxy Statement and all other proxy materials for such meeting,
(ii) shall notify Parent of the receipt of any comments of the SEC with respect
to the Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC, (iii) shall give Parent and its counsel the
opportunity to review the Proxy Statement prior to its being filed with the SEC
and shall give Parent and its counsel the opportunity to review all amendments
and supplements to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC, (iv) shall, subject to the fiduciary duties of its Board of
Directors as advised by counsel, use all reasonable efforts to obtain the
necessary approvals by its stockholders of this Agreement and the
-27-
transactions contemplated hereby and (v) shall otherwise comply with all legal
requirements applicable to such meeting.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the then outstanding Shares, the parties hereto agree,
at the request of Purchaser, subject to Section Seven, to take all necessary and
-------------
appropriate action, including the preparation and mailing of the Information
Statement, to cause the Merger to become effective, in accordance with Section
253 of the DGCL, as soon as reasonably practicable after such acquisition,
without a meeting of the stockholders of the Company.
5.3 No Solicitation of Competing Transactions.
-----------------------------------------
(a) The Company and its affiliates shall, and shall cause their
respective officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties with respect
to any Competing Transaction (as defined below) and shall seek to have returned
to the Company any confidential information that has been provided in any such
discussions or negotiations. Neither the Company nor any Subsidiary shall,
directly or indirectly, through any officer, director, agent or otherwise,
initiate, solicit or intentionally encourage (including by way of furnishing
non-public information or assistance), or take any other action to intentionally
facilitate, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction, or enter into
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any investment banker, financial advisor, attorney,
accountant or other agent or representative of the Company to take any such
Action; provided, however, that nothing contained in this Section 5.3 shall
-------- ------- -----------
prohibit the Board of Directors of the Company, before the consummation (or, if
the Offer is consummated and extended, the initial consummation) of the Offer,
from (i) furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited, bona fide written proposal
to acquire the Company pursuant to a merger, consolidation, share exchange,
business combination, tender or exchange offer or other similar transaction, if,
and only to the extent that, (A) the Board of Directors of the Company
determines in good faith (after consultation with its financial advisor) that
the proposal would, if consummated, result in a transaction more favorable to
the Company's stockholders from a financial point of view than the transactions
contemplated by this Agreement, (B) the Board of Directors of the Company
further determines in good faith after consultation with its financial adviser
and outside counsel that the proposal is as likely to be consummated, taking
into account the legal, financial, regulatory, and other aspects of such
proposal, as the transactions contemplated hereby, and, after consultation with
its outside counsel, that the failure to do so would cause the Board of
Directors of the Company to breach its fiduciary duties to the Company or its
stockholders under applicable law (any such proposal, a "Superior Proposal"),
-----------------
(C) no information is so furnished, and no such discussions or negotiations are
held, prior to the execution by the receiving party and the Company of a
confidentiality agreement on terms no less favorable to the Company than those
contained in the Confidentiality Agreement (as defined in Section 6.3 below),
-----------
and (D) such
-28-
actions are not in violation of this Agreement, or (ii) complying with Rule 14e-
2 promulgated under the Exchange Act with regard to a tender or exchange offer.
(b) The Company shall notify Parent promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Parent indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact, and shall
advise Parent from time to time of the status and any material developments
concerning the same. The Company agrees not to release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which the
Company is a party (except to the extent necessary to permit such third party to
deliver a Superior Proposal).
(c) Except as provided in the following sentence, neither the Company
nor the Company's Board of Directors (the "Board") shall withdraw or modify in a
-----
manner adverse to Parent or Purchaser, or propose to withdraw or modify in a
manner adverse to Parent or Purchaser, or fail at Parent's request to reaffirm,
the approval by such Board of this Agreement, the Offer or the Merger or the
favorable recommendation of the Board with respect thereto. The foregoing
notwithstanding, in the event that, after the Company has received a bona fide
written proposal for a Competing Transaction that is a Superior Proposal that is
made after the date hereof, and that is not solicited in violation of this
Agreement, the Board determines (based on the advice of its outside counsel),
prior to the consummation (or, if the Offer is consummated and extended, the
initial consummation) of the Offer, that the failure to take such actions would
be a breach of its fiduciary duties to the Company's stockholders under
applicable law, then the Board may (x) withdraw or modify its approval or
recommendation of this Agreement, the Offer or the Merger and disclose to the
Company's stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a)
promulgated under the Exchange Act or otherwise make disclosure to them, or (y)
approve or recommend such a Competing Transaction that is a Superior Proposal;
provided, however, that in no event may the Board take either such action
-------- -------
earlier than the second full business day following Parent's receipt of written
notice of the intention of the Board to do so.
(d) The Company and the Board shall not (i) redeem the Rights under
the Rights Plan, or waive or amend any provision of the Rights Plan, in any such
case to permit or facilitate the consummation of any Competing Transaction or
Superior Proposal, or (ii) enter into any agreement with respect to, or
otherwise approve or recommend to stockholders, or publicly propose to approve
or recommend, any Superior Proposal or Competing Transaction, unless this
Agreement has been terminated in accordance with its terms.
(e) The Company shall not release any third party from the
confidentiality provisions of any agreement to which the Company is a party.
(f) For purposes of this Agreement, a "Competing Transaction" shall
---------------------
mean any of the following involving the Company: (i) any merger, consolidation,
share exchange, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of more
than 25% of the assets of the Company in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for more than 25% of
-29-
the Shares or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any person having acquired beneficial ownership or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) having been formed which beneficially owns or has the
right to acquire beneficial ownership of, more than 25% of the Shares.
5.4 Consents and Approvals. Company shall use its best efforts to obtain
----------------------
as expeditiously as possible all necessary permits, consents, waivers,
approvals, agreements, orders and authorizations of all Governmental Entities
and other persons or entities required to be obtained by such party hereto in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby by such party,
including, but not limited to, the best efforts of Company to file applications
with the DOE as soon as practicable before the expected Change of Ownership
Date.
5.5 Educational Approvals and Other Licenses.
----------------------------------------
(a) The Company shall prosecute with due diligence and full
consultation with Purchaser any applications to any Governmental Entity
necessary for the operation of the Schools before and after the Change of
Ownership Date. The Company will as promptly as practicable provide Purchaser
with complete copies of all letters, applications, or other documents submitted
to or received from any Governmental Entity with respect to any Educational
Approval or License. All applications or other documents to be submitted by the
Company to any Governmental Entity in connection with the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby or thereby shall be subject to the prior review, comment and
approval of Purchaser.
(b) The Company shall not cause or permit, by any act or failure to
act, any Educational Approval or other License to expire or to be revoked,
suspended, or modified, or take any action that could reasonably be expected to
cause any Educational Agency or other Governmental Entity to institute
proceedings for the suspension, revocation, or adverse modification of any of
any Educational Approval or other License, except as could not have a material
adverse effect on the Company or any School and except as set forth in Section
-------
5.5(b) of the Company Disclosure Schedule. The Company will promptly provide
-----
Purchaser with complete copies of all letters, applications, or other documents
submitted to or received from any Governmental Entity with respect to any
Educational Approval or other License, including, wherever possible, drafts of
letters, applications, and other documents to be submitted to any Educational
Agency or Governmental Entity.
5.6 Consents.
--------
(a) The Company will promptly and regularly advise Purchaser
concerning the occurrence and status of any discussions or other communications,
whether oral or written, with any Educational Agency, other Governmental Entity
or other third party with respect to any Consent, including any difficulties or
delays experienced in obtaining any Consent and of any conditions proposed,
considered, or requested for any Consent.
-30-
(b) Purchaser will cooperate with the Company in their efforts to
obtain any Consents, but, with the exception of any conditions arising solely
from an action, an omission, or the condition, financial or otherwise, of
Purchaser or its direct or indirect stockholders, Purchaser will not be required
(1) to make any expenditure or payment of funds or to give any other
consideration in order to obtain any Consent, or (2) to permit any adverse
changes in, or the imposition of any adverse condition to, any Educational
Approval or other License as a condition to obtaining any Consent. Such
cooperation shall include Purchaser's cooperation in timely filing applications
and other documents (including applications and other documents filed prior to
the Change of Ownership Date) necessary to obtain any Consent or Educational
Approval.
(c) The Company will provide advance notice to and allow Purchaser
and its agents and representatives to participate in any meetings or telephone
calls with any Educational Agency or Governmental Entity to discuss the status
of any Consent. The Company acknowledges and agrees that Purchaser, Parent and
their agents and representatives have the right to initiate contacts with
Educational Agencies (including by telephone or in meetings) with respect to the
Company, the Subsidiaries and the Schools, and Purchaser and Parent agree to
provide advance notice to and allow the Company and its agents and
representatives to participate in any such meetings or telephone calls.
(d) The Company will ensure that its appropriate officers and
employees shall be available to attend, as any Governmental Entity may
reasonably request, any scheduled hearings or meetings in connection with
obtaining any Consent.
SECTION SIX
6. Additional Agreements.
6.1 Access to Information.
---------------------
(a) Between the date of this Agreement and the Cut-Off Date, the
Company and its Subsidiaries will promptly afford to Parent and its authorized
representatives for the transactions contemplated hereby and the authorized
representatives of such parties and persons providing or committing to provide
Parent or the Purchaser financing for the transactions contemplated hereby,
access at all reasonable times to the officers, employees, agents, properties,
offices and all other facilities, books and records of the Company and its
Subsidiaries as Parent may reasonably request. Additionally, the Company will
promptly permit Parent and its authorized representatives for the transactions
contemplated hereby, and the authorized representatives of such parties and
persons providing or committing to provide Parent or the Purchaser financing for
the transactions contemplated hereby to make such inspections of the Company and
its operations at all reasonable times as it may reasonably require and will
cause its officers, employees and agents, and those of its Subsidiaries to
furnish Parent with such financial and operating data and other information with
respect to the business and properties of the Company and its Subsidiaries as
Parent may from time to time request. No investigation pursuant to this Section
-------
6.1 shall affect any representation or warranty in this Agreement of any party
---
hereto or any condition to the obligations of the parties hereto.
-31-
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent, within twenty-five (25) business days after the end of each
calendar month (commencing with June 2000), an unaudited balance sheet of the
Company as of the end of the such month, and the related statements of earnings,
stockholders' equity; and, within twenty-five (25) business days after the end
of each calendar quarter, cash flows for the quarter then ended, each prepared
in accordance with generally accepted accounting principles in conformity with
the practices consistently applied by the Company with respect to its monthly
financial statements. All the foregoing shall be in accordance with the books
and records of the Company and shall fairly present its financial position
(taking into account the differences between the monthly and quarterly
statements prepared by such party in conformity with its past practices) as of
the last day of the period then ended.
6.2 Legal Conditions to Offer and Merger.
------------------------------------
(a) The Company will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on the Company with
respect to the Offer and the Merger (including furnishing all information
required under the HSR Act, subject to the limitations set forth in clause (b)
of Exhibit A) and will take all reasonable actions necessary to cooperate
---------
promptly with and furnish information to the Purchaser or Parent in connection
with any such requirements imposed upon the Purchaser or Parent in connection
with the Offer and the Merger. The Company will take, and will cause its
Subsidiaries to take, all reasonable actions necessary to obtain (and will take
all reasonable actions necessary to cooperate promptly with the Purchaser and
Parent in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity, or other third party, required to be
obtained or made by the Company or any of its Subsidiaries (or by the Purchaser
or Parent) in connection with the Offer or the Merger or the taking of any
action contemplated thereby or by this Agreement. In addition to the foregoing,
subject to clause (b) of Exhibit A, prior to the Effective Time, the parties
---------
shall take, or cause to be taken, all such actions as may be necessary or
appropriate in order to effectuate, as expeditiously as practicable, the Offer
and the Merger and the other transactions contemplated by this Agreement,
including any necessary consents and waivers.
(b) Subject to clause (b) of Exhibit A, the Purchaser and Parent
---------
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the Offer and the
Merger (including furnishing all information required under the HSR Act) and
will take all reasonable actions necessary to cooperate promptly with and
furnish information to the Company in connection with any such requirements
imposed upon the Company or any Subsidiary of the Company in connection with the
Offer and the Merger. The Purchaser and Parent will take all reasonable actions
necessary to obtain (and will take all reasonable actions necessary to cooperate
promptly with the Company and its Subsidiaries in obtaining) any consent,
authorization, order or approval of, or exemption by, any Governmental Entity,
or other third party, required to be obtained or made by the Purchaser or Parent
(or by the Company or any of its Subsidiaries) in connection with the Offer or
the Merger or the taking of any action contemplated thereby or by this
Agreement.
-32-
6.3 Confidentiality Agreement. The Company and Parent acknowledge that
-------------------------
the existing confidentiality agreement between such parties (the
"Confidentiality Agreement") shall remain in full force and effect at all times
--------------------------
prior to the Effective Time and after any termination of this Agreement, and
such parties agree to comply with the terms of such Agreement.
6.4 Public Announcements. The Purchaser, Parent and the Company will
--------------------
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer, the Merger or any transaction
contemplated hereby and shall not issue any such press release or make any such
public statement except as they may mutually agree unless required so to do by
law or by obligations pursuant to any listing agreement with any national
securities exchange or the National Association of Securities Dealers, Inc. The
Company and Parent have agreed as to the form of joint press release announcing
execution of this Agreement.
6.5 Company Stock Option Plans.
--------------------------
(a) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee administering the Stock Option Plans
(as defined below)) shall adopt such resolutions or take such other actions as
are required to provide that each outstanding Stock Option heretofore granted
under any stock option, stock appreciation rights or stock purchase plan,
program or arrangement of the company (collectively, the "Stock Option Plans")
------------------
outstanding immediately prior to the consummation of the Offer, whether or not
then exercisable, shall be, unless otherwise consented to by Parent in its sole
discretion, exchanged, in whole and not in part, for a cash payment from the
Company in an amount (subject to any applicable withholding tax) equal to the
product of (i) the excess of the Merger Price over the per share exercise price
of the Stock Option, multiplied by (ii) the number of Shares covered by the
Stock Option immediately prior to the Effective Time (such payment to be net of
applicable withholding taxes).
(b) Except as provided in this Agreement or as otherwise agreed to by
the parties and to the extent permitted by the Stock Option Plans, (i) the Stock
Option Plans shall terminate as of the Effective Time and (ii) the Company shall
use reasonable efforts to ensure that following the Effective Time no holder of
options or any participant in the Stock Option Plans shall have any right
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof.
6.6 Company Employee Stock Purchase Plan. The Company shall take all
------------------------------------
actions necessary pursuant to the terms of Stock Purchase Plan to terminate the
Stock Purchase Plan on June 30, 2000 (the final "Final Purchase Date"). On the
-------------------
Final Purchase Date, the Company shall first apply the funds credited as of such
date under the Stock Purchase Plan within each participant's payroll
withholdings account to the purchase of whole shares of Common Stock in
accordance with the terms of the Stock Purchase Plan. The cost to each
participant in the Stock Purchase Plan for shares of Common Stock shall be the
lower of 85% of the closing sale price of Common Stock on the Nasdaq National
Market on (i) the first day of the Current Offering Period and (ii) the last
trading day on or prior to the Final Purchase Date.
-33-
6.7 Notice of Certain Events. The Company shall promptly notify Parent,
------------------------
and Parent shall promptly notify the Company, of:
(a) receipt of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) receipt of any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement;
(c) receipt of notice that any actions, suits, claims, investigations
or proceedings have been commenced or, to the knowledge of the Company,
threatened against, or involving the Company or any of its Subsidiaries, or
Parent, as applicable, which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.9 or which
---
relate to the consummation of the transactions contemplated by this Agreement;
(d) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence of which could be likely to cause any representation or
warranty of it (and, in the case of Parent, of the Purchaser) contained in this
Agreement to be untrue or inaccurate; and
(e) any failure of the Company, Parent or the Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 6.7 shall not limit or otherwise affect
-----------
the remedies available hereunder to the party receiving such notice.
6.8 Obligations of Purchaser. Parent will take all action necessary to
------------------------
cause the Purchaser to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.9 Voting of Shares. Parent agrees to cause Purchaser (i) to vote all
----------------
Shares beneficially owned by it in favor of adoption of this Agreement and the
Merger at the Stockholders' Meeting, if any such meeting shall be required by
the DGCL, and (ii) if no Stockholders' Meeting shall be required by the DGCL,
file the certificate of ownership providing for the Merger of Purchaser with and
into the Company as soon as permitted under applicable regulatory requirements
and law.
6.10 Tender of Shares and Delivery of Proxies by Certain Stockholders.
----------------------------------------------------------------
Parent has received, concurrent with the execution of this Agreement: (a) a
tender agreement and an irrevocable proxy, each in form and substance
satisfactory to Parent, of each director of the Company to accept the Offer and
tender to Purchaser all Shares beneficially owned by such directors, in
accordance with the terms and conditions of the Offer and to vote their Shares
in favor of the Merger; and (b) a tender and option agreement and an irrevocable
proxy, each in form and substance satisfactory to Parent, of each of the Chief
Executive Officer, Chief Financial Officer and the Vice President of Operations
of the Company to accept the Offer and tender to Purchaser all Shares
beneficially owned by such officers, in accordance with the terms and conditions
of the Offer and to vote their Shares in favor of the Merger and to grant
Purchaser an
-34-
option to purchase their Shares on the terms and conditions set forth in such
tender and option agreement.
SECTION SEVEN
7. Conditions.
7.1 Conditions of Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. If required by the DGCL, this Agreement and
--------------------
the Merger shall have been approved and adopted by the affirmative vote or
consent of the stockholders of the Company to the extent required by the DGCL
and the Certificate of Incorporation of the Company.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Entity, nor other legal
restriction, restraint or prohibition, preventing the consummation of the Merger
shall be in effect; provided, however, that each of the parties shall have used
-------- -------
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as practicable any injunction or other order that may
be entered.
(c) The Offer. Shares shall have been purchased pursuant to the
---------
Offer.
7.2 Conditions to the Obligations of the Company to Effect the Merger.
-----------------------------------------------------------------
The obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver at or prior to the Effective Time of the conditions that
Parent and the Purchaser shall have performed in all material respects each of
their obligations under this Agreement required to be performed by them pursuant
to the terms hereof and the representations and warranties of Parent and the
Purchaser contained herein shall be true and correct in all material respects.
SECTION EIGHT
8. Termination.
8.1 Termination. This Agreement may be terminated and the Merger may be
-----------
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval of this Agreement and the transactions contemplated hereby by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and the Purchaser;
(b) by either Parent or the Company if (i) the Cut-Off Date shall not
have occurred on or before the date which is 120 days after the date hereof;
provided, however, that the right to terminate this Agreement under this Section
-------- ------- -------
8.1(b) shall not be available (A) to any
-----
-35-
party whose failure to fulfill any obligation under this Agreement has been the
substantial cause of, or resulted in, the failure of the Cut-Off Date to occur
on or before such date, or (B) to Parent if it shall fail to designate persons
that will constitute a majority of the Board of Directors in accordance with
Section 1.3 by the date which is 120 days after the date hereof, or (ii) any
-----------
court of competent jurisdiction or other Governmental Entity shall have issued
an order, decree, ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the acceptance for payment of, or payment
for, Shares pursuant to the Offer or the Merger and such order, decree, ruling
or other action shall have become final and nonappealable;
(c) by either Parent or the Company if (i) as a result of an
occurrence or circumstance that could result in the failure of any of the
conditions set forth in Exhibit A hereto the Offer shall have terminated or
---------
expired in accordance with its terms without the Purchaser having accepted for
payment any Shares pursuant to the Offer; or (ii) the Purchaser shall not have
accepted for payment any Shares pursuant to the Offer within 125 days following
the commencement of the Offer; provided, however, that the right to terminate
-------- -------
this Agreement pursuant to this Section 8.1(c) shall not be available to any
-------------
party the failure of which (or the failure of the affiliates of which) to
perform in any material respect any of its obligations under this Agreement
results in the failure of any such condition or if the failure of such condition
results from facts or circumstances that constitute a material breach of a
representation or warranty under this Agreement by such party;
(d) by Parent if prior to the purchase of Shares pursuant to the
Offer, (i) the Board of Directors of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to the Purchaser or Parent its
approval or recommendation of the Offer, this Agreement, the Merger or any other
transaction contemplated by this Agreement; or (ii) the Board of Directors of
the Company or any committee thereof shall have recommended to the stockholders
of the Company acceptance of a Competing Transaction; or (iii) the Company shall
have entered into any definitive agreement with respect to a Competing
Transaction; or (iv) the Board of Directors of the Company or any committee
thereof shall have resolved to do any of the foregoing; or (v) Purchaser shall
have terminated the Offer without purchasing any Shares pursuant thereto,
provided such termination of the Offer is not in violation of the terms of the
--------
Offer; or (vi) a tender offer or exchange offer for 15% or more of the Shares is
commenced, and the Board of Directors of the Company, within 10 business days
after such tender offer or exchange offer is commenced, either fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders or takes no position with respect to the acceptance of such tender
offer or exchange offer by its stockholders.
(e) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Purchaser set forth in this
Agreement or if any representation or warranty of Parent or Purchaser shall have
become untrue, and such breach shall not have been cured or such representation
or warranty shall not have been made true within twenty (20) business days after
notice by the Company thereof, provided that the Company has not breached any of
--------
its obligations hereunder; or (ii) there shall have been a breach by Parent or
Purchaser of any of their respective covenants or agreements hereunder having a
Material Adverse Effect on Parent or materially adversely affecting (or
materially delaying) the consummation of the
-36-
Merger, and Parent or Purchaser, as the case may be, has not cured such breach
within twenty (20) business days after notice by the Company thereof, provided
--------
that the Company has not breached any of its obligations hereunder; or (iii)
Purchaser has not timely commenced the Offer pursuant to Section 1.1; or (iv)
-----------
the Board has received a Superior Proposal, has complied with the provisions of
Section 5.3, and concurrently complies with the provisions of Section 8.3.
----------- -----------
8.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 8.1, this Agreement shall become void and of no effect with no liability
-----------
on the part of any party hereto, except for fraud and for willful breach of a
material obligation contained herein and except that the agreements contained in
Sections 6.3, 8.3 and this Section 8.2 shall survive the termination hereof.
------------ ---- -----------
8.3 Certain Payments to Purchaser. In the event that:
-----------------------------
(a) any person, other than Parent or any affiliate of Parent, shall
have become the beneficial owner of a majority of the then outstanding Shares
and this Agreement shall have been terminated pursuant to Section 8.1;
-----------
(b) any person shall have commenced, publicly proposed or
communicated to the Company a Competing Transaction and (A) the Offer shall have
remained open for at least 20 business days, (B) the Minimum Share Condition
shall not have been satisfied, (C) this Agreement shall have been terminated
pursuant to Section 8.1 and (D) the Company shall have consummated a Competing
-----------
Transaction with any person other than Parent or any of its affiliates before or
within 12 months after the date of such termination; or
(c) this Agreement is terminated (A) pursuant to Section 8.1(d) or
-------------
Section 8.1(e)(iv); or (B) pursuant to Section 8.1(c) to the extent that the
----------------- -------------
termination or the failure to accept any Shares for payment, as set forth in
Section 8.1(c), shall relate to the intentional failure of the Company to
-------------
perform in any material respect any material covenant or agreement of it
contained in this Agreement or the intentional material breach by the Company of
any material representation or warranty of it contained in this Agreement;
then, in any such event, the Company shall pay Parent promptly (but in no event
later than one business day after the first of such events shall have occurred)
a fee of $8,000,000 (and shall also reimburse Parent for its out-of-pocket
expenses, including attorneys' fees) which amount shall be payable in
immediately available funds.
8.4 Certain Payments to the Company. In the event that this Agreement is
-------------------------------
terminated pursuant to Section 8.1(c) to the extent that such termination or the
-------------
failure to accept any Shares for payments as set forth in Section 8.1(c) shall
-------------
arise from the intentional failure of Parent to perform in any material respect
any material covenant or agreement of it contained in this Agreement or the
intentional material breach by Parent of any material representation or warranty
contained in this Agreement; then, in any such event, Parent shall pay the
Company (but in no event later than one business day after the first of such
events shall have occurred) a fee of $5,000,000 which amount shall be payable in
immediately available funds.
-37-
SECTION NINE
9. General Provisions.
9.1 Nonsurvival of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger or
termination of this Agreement, as the case may be, except for the agreements
contained in Sections 6.4 and 6.8, of this Agreement, each of which shall
------------ ---
survive the Merger, and the agreements contained in Sections 6.3, 8.2 and 8.3,
------------ --- ---
and this Section 9.1, each of which shall survive termination of this Agreement.
-----------
9.2 Amendments and Waivers. Any term of this Agreement may be amended or
----------------------
waived with the written consent of the parties or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section
-------
9.2 shall be binding upon the parties and their respective successors and
---
assigns.
9.3 Successors and Assigns. This Agreement shall not be assigned by
----------------------
operation of law or otherwise, except that the Purchaser may assign this
Agreement; provided that such an assignment will not serve to release any
--------
obligations of the Purchaser hereunder. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in Section 1.1(a).
--------------
9.4 Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
9.5 Counterparts. This Agreement may be executed (including by facsimile
------------
transmission) in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument.
9.6 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.7 Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice, and (a) if to Parent or Purchaser: Xxxxxx, Inc., 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, Telecopier: (000) 000-0000, Attention: President and Chief
Executive Officer, with a copy to Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Telecopier: (415) 773-
-38-
5759, Attention: Xxxx X. Xxxxxx, Esq. or (b) if to the Company: Quest Education
Corporation, 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 Telecopier:
(000) 000-0000, Attention: President and Chief Executive Officer, with a copy to
Xxxxxxxxx Traurig, P.A., 000 Xxxxx Xxxxxxx Xxxxx, #000-Xxxx, Xxxx Xxxx Xxxxx, XX
00000, Telecopier: (000) 000-0000, Attention: Xxxxxx X. Xxxxx, Esq., Esq.
9.8 Severability. If one or more provisions of this Agreement are held to
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be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
9.9 Entire Agreement. This Agreement (including the Disclosure Schedules
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and Exhibits), together with the Confidentiality Agreement and the documents
referred to herein are the product of all of the parties hereto, and constitutes
the entire agreement between such parties pertaining to the subject matter
hereof and thereof, and merges all prior negotiations and drafts of the parties
with regard to the transactions contemplated herein and therein. Any and all
other written or oral agreements existing between the parties hereto regarding
such transactions are expressly canceled.
9.10 Advice of Legal Counsel. Each party acknowledges and represents that,
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in executing this Agreement, it has had the opportunity to seek advice as to its
legal rights from legal counsel and that the person signing on its behalf has
read and understood all of the terms and provisions of this Agreement. This
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
- Signature Page Follows-
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The parties have caused this Agreement as of the date first written above.
XXXXXX, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
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(print)
Title: President and Chief Executive Officer
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ODYSSEY ACQUISITION CORP.
By: /s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
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(print)
Title: President and Chief Executive Officer
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QUEST EDUCATION CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
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(print)
Title: President and Chief Executive Officer
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EXHIBIT A
CONDITIONS OF THE OFFER
Defined Terms. Capitalized terms used in this Exhibit A and not otherwise
defined shall have the meanings attributed thereto in the Agreement and Plan of
Merger, dated as of June 26, 2000, the "Merger Agreement"), by and among Parent,
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Purchaser and Company, of which this Exhibit A is a part.
Conditions of the Offer. Notwithstanding any other term of the Offer, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated
under the Exchange Act (relating to the obligation of Purchaser to pay for or
return tendered shares of Company Common Stock promptly after termination or
withdrawal of the Offer), pay for (subject to any such rules or regulations) any
Shares tendered pursuant to the Offer, and may terminate or amend the Offer and
may postpone the acceptance for payment of and payment for Shares tendered, if
(i) the Minimum Share Condition shall not have been satisfied, or (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer, or (iii) at any time on or
after the date of the Merger Agreement and before the acceptance of tendered
Shares for payment or the payment therefor, any of the following conditions
exists:
(a) a preliminary or permanent injunction or other order by any federal,
state or foreign court which prevents the acceptance for payment of, or payment
for, some of or all the Shares shall have been issued and shall remain in
effect; or
(b) there shall have been instituted or be pending any action or proceeding
by any Governmental Entity (i) challenging the acquisition by the Purchaser of
Shares or otherwise seeking to restrain, materially delay or prohibit the
consummation of the Offer or the Merger or seeking damages that could make the
Offer, the Merger or any other transaction contemplated hereby materially more
costly to Parent or the Purchaser, (ii) seeking to prohibit or limit materially
the ownership or operation by the Purchaser or Parent of all or a material
portion of the business or assets of the Company and its Subsidiaries, or to
compel the Purchaser or Parent to dispose of or hold separate all or a material
portion of the business or assets of the Company and its Subsidiaries or the
Purchaser or Parent, as a result of the Offer or the Merger, (iii) seeking to
impose or confirm limitations on the ability of Parent or the Purchaser
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders, including, without limitation,
the approval and adoption of the Merger Agreement and the transactions
contemplated hereby, or (iv) seeking to require divestiture by Parent, the
Purchaser or any other affiliate of Parent of any Shares; or
(c) there shall have been any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Offer, the Merger or any other transaction contemplated hereby, Parent, the
Company or any affiliate of Parent or the Company by any Governmental Entity,
except for the waiting period provisions of the HSR Act, which is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (b) above; or
(d) any change or effect that, individually or in the aggregate, is or
is reasonably likely to constitute a Material Adverse Effect shall have occurred
following the date of the Merger Agreement; or
(e) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement; or
(f) to the extent that a material adverse effect with respect to the
Company or any Subsidiary or School would result, any representation or warranty
of the Company in the Merger Agreement that is qualified as to materiality shall
not be true and correct or any such representation or warranty that is not so
qualified shall not be true and correct in any material respect, in each case
when made and immediately prior to the Change of Ownership Date as if made at
and as of such time; or
(g) this Agreement shall have been terminated by the Company or Parent
in accordance with its terms; or
(h) Parent and the Company shall have agreed in writing that Purchaser
shall amend the Offer to terminate the Offer or postpone the payment for shares
of Company Common Stock pursuant thereto; or
(i) the Board shall have modified or amended its recommendation of the
Offer in any manner adverse to Parent or shall have withdrawn its recommendation
of the Offer, or shall have recommended acceptance of any Acquisition Proposal
or shall have resolved to do any of the foregoing; which in the reasonable
judgment of Parent or the Purchaser, in any such case, and regardless of the
circumstances giving rise to such condition, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment or payments; or
(j) Purchaser shall have received oral or written advice (a
"Materially Adverse Notice") from any Educational Agency (which Materially
Adverse Notice has not been withdrawn), from which advice it can reasonably be
concluded that it is unlikely that such Educational Agency will issue a relevant
Consent or Educational Approval to each of the Schools to continue its
operations following the Change of Ownership Date without conditions,
restrictions or limits which would individually or in the aggregate materially
reduce the economic benefit to Purchaser of the transactions contemplated by
this Agreement (assuming the completion of such transactions), unless such
Materially Adverse Notice is solely the result of an action, an omission, or the
condition, financial or otherwise, of Purchaser or its direct or indirect
stockholders; or
(k) Except for the matters listed on Schedules (k)(i) and (k)(ii), the
Company shall not have received oral or written advice from the applicable
Educational Agency (which advice has not been withdrawn) indicating the matters
set forth in Section 4.20(a) of the Company Disclosure Schedule are reasonably
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likely to be determined in a way which would not
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have a material adverse effect on the relevant School, or Purchaser has been
unable to confirm such advice; or
(l) Any Warrants shall be outstanding, or the Company shall be under
an obligation to issue any warrants for Company Common Stock.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent and Purchaser regardless of the circumstances
giving rise to any such condition, and, except for the Minimum Share Condition
and otherwise subject to the terms of this Agreement, may be waived by Parent
and Purchaser, in whole or in part, at any time and from time to time, in the
sole discretion of Parent and Purchaser.
The determination as to whether any condition has been satisfied shall be
deemed a continuing right which may be asserted at any time and from time to
time. Notwithstanding the fact that the Parent and Purchaser reserve the right
to assert the failure of a condition following acceptance for payment but prior
to payment in order to delay payment or cancel their obligation to pay for
properly tendered Shares, the Parent and Purchaser will either promptly pay for
such Shares or promptly return such Shares.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment pursuant thereto shall
forthwith be returned to the tendering stockholders.
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SCHEDULE (k)(i) to EXHIBIT A
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Summary of El Paso Surgical Technology Program Review Issues
The actual or potential failure of the El Paso Surgical Technology
Program to receive accreditation in and by itself (or in conjunction with the
actual or potential termination of the Maric Associate of Science in Nursing
program as described in Schedule (k)(ii) to Exhibit A) will not constitute the
failure of a condition of the Offer pursuant to Exhibit A to the Agreement, nor
shall the affirmative comfort provided for in Section (k) of Exhibit A apply to
the Accreditation Review Committee on Education in Surgical Technology with
respect to the El Paso Surgical Technology Program.
SCHEDULE (k)(ii) to EXHIBIT A
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Summary of Conversations regarding San Diego Educational Agency Issues
The termination of the Maric College-San Diego Associate of Science in
Nursing program by the Bureau for Private Postsecondary and Vocational Education
in and by itself (or in conjunction with the actual or potential failure of the
El Paso Surgical Technology Program to receive accreditation as described in
Schedule (k)(i) of Exhibit A) will not constitute the failure of a condition of
the Offer pursuant to Exhibit A of the Agreement, nor shall the affirmative
comfort provided for in Section (k) apply to the California State Board of
Registered Nursing with respect to the Maric Associate of Science in Nursing
program.
