EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
BETWEEN
CORINTHIAN SCHOOLS, INC.
AS BUYER,
AND
REPOSE, INC.
AS SELLER
DATED AS OF MARCH 20, 1996
TABLE OF CONTENTS
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Page
ARTICLE I SALE AND PURCHASE OF ASSETS............................. 1
1.1 Purchased Assets to be Transferred...................... 1
1.2 Excluded Assets......................................... 3
ARTICLE II CONSIDERATION........................................... 3
2.1 Purchase Price.......................................... 3
2.2 Cash Consideration...................................... 3
2.3 Obligations and Liabilities to be Assumed............... 4
2.4 Excluded Liabilities.................................... 4
2.5 Allocation of Purchase Price............................ 4
2.6 Excise and Property Taxes............................... 5
ARTICLE III CLOSING................................................. 5
3.1 Closing................................................. 5
3.2 Deliveries by Seller at Closing......................... 5
3.3 Deliveries by Buyer at Closing.......................... 5
ARTICLE IV TERMINATION............................................. 6
4.1 Termination............................................. 6
4.2 Effect of Termination................................... 6
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER................ 7
5.1 Organization and Corporate Power........................ 7
5.2 Ownership of School..................................... 7
5.3 Capacity; Authorization; Binding Effect, Etc............ 7
5.4 No Conflicts, Etc....................................... 8
5.5 Compliance with Laws; Licenses and Permits.............. 8
5.6 Recruitment; Admissions Procedures; Attendance; Reports. 9
5.7 Cohort Default Rate..................................... 9
5.8 Title to the Purchased Assets........................... 9
5.9 Material Assumed Contracts.............................. 10
5.10 Tradenames; Confidential Information.................... 10
5.11 Financial Statements; Indebtedness...................... 11
5.12 Receivables............................................. 12
5.13 Inventories............................................. 12
5.14 Litigation, Etc......................................... 13
5.15 Insurance............................................... 13
5.16 Environmental Matters................................... 13
5.17 Employee Benefit Plans.................................. 14
5.18 Employment Matters...................................... 14
5.19 Tax Matters............................................. 15
5.20 Brokers or Finders...................................... 15
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Page
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5.21 Absence of Certain Changes.............................. 15
5.22 Delivery of Documents................................... 16
5.23 Disclosure.............................................. 16
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................. 16
6.1 Organization and Corporate Power........................ 16
6.2 Capacity; Authorization; Binding Effect, Etc............ 16
6.3 No Conflicts, Etc....................................... 17
6.4 Brokers or Finders...................................... 17
6.5 Disclosure.............................................. 17
ARTICLE VII COVENANTS............................................... 17
7.1 Covenants of Seller Pending Closing..................... 17
7.2 Covenants of Buyer Pending Closing...................... 18
7.3 Closing and Post-Closing Covenants...................... 18
7.4 Management Agreement and Administration of the School... 20
7.5 Access and Maintenance of Records....................... 20
7.6 Substitution of Undertakings............................ 21
ARTICLE VIII CONDITIONS TO CLOSING; UNWINDING........................ 21
8.1 Conditions Precedent to Obligations of Buyer............ 21
8.2 Conditions Precedent to Obligations of Seller........... 22
8.3 Unwinding the Transaction............................... 23
ARTICLE IX MISCELLANEOUS........................................... 23
9.1 Binding Effect.......................................... 23
9.2 Notices................................................. 24
9.3 Entire Agreement........................................ 24
9.4 Nature and Survival of Representations.................. 25
9.5 Risk of Loss or Damage; Insurance....................... 25
9.6 Waiver.................................................. 25
9.7 Governing Law........................................... 25
9.8 Headings................................................ 25
9.9 Counterparts............................................ 25
9.10 Severability............................................ 25
9.11 Time is of the Essence.................................. 26
9.12 Indemnification by Seller............................... 26
9.13 Indemnification by Buyer................................ 26
9.14 Limitations on Indemnification.......................... 27
9.15 Procedure for Indemnification........................... 27
9.16 Dispute Resolution and Arbitration...................... 28
9.17 Third Party Beneficiaries............................... 29
9.18 Mitigation of Losses.................................... 29
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SCHEDULES
Schedule 1.2.3 Other Excluded Assets
Schedule 2.5 Allocation of Purchase Price
Schedule 5.5(a) Compliance with Laws
Schedule 5.5(b) Licenses and Permits
Schedule 5.6 Policy Manuals & Procedures
Schedule 5.7 Cohort Default Rate
Schedule 5.8 Permitted Exceptions
Schedule 5.9 Material Assumed Contracts
Schedule 5.10 Intellectual Property
Schedule 5.11 Financial Security Arrangements
Schedule 5.14 Litigation
Schedule 5.15 Insurance
Schedule 5.17 Employee Benefit Plans
Schedule 5.18 Employment Matters
Schedule 5.21 Absence of Certain Changes
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Note
Exhibit C Assignment and Assumption Agreement
Exhibit D Xxxx of Sale
Exhibit E-1 Form of Opinion of Seller's Counsel
Exhibit E-2 Form of Opinion of Buyer's Counsel
Exhibit F Management Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 20, 1996 (the
"Agreement"), is entered into between Corinthian Schools, Inc., a Delaware
corporation ("Buyer"), and Repose, Inc., a Washington corporation ("Seller").
P R E A M B L E :
WHEREAS, Seller owns, operates and administers that certain post-
secondary, vocational training school known as Career Floral Design Institute,
located at 00000 XX 00xx Xxxxxx, Xxxxx 0, Xxxxxxxx, Xxxxxxxxxx, 00000 (the
"School");
WHEREAS, Buyer desires to buy, through the payment of cash, the
assumption of certain liabilities of Seller and other valuable consideration,
and Seller desires to sell, substantially all assets and property owned by
Seller and used solely and directly in the business of the School, upon the
terms and conditions hereinafter set forth; and
WHEREAS, Buyer desires to assume management responsibility for the
School prior to the Closing (as defined in Section 3.1 below) in accordance with
the terms of a management agreement;
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained in this Agreement and intending to be legally bound hereby,
agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Purchased Assets to be Transferred. Subject to the terms and
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conditions of this Agreement, Seller hereby agrees to sell, assign, convey,
transfer and deliver to Buyer at the Closing, and Buyer hereby agrees to
purchase from Seller at the Closing, all of the Seller's right, title and
interest in and to the following assets (the "Purchased Assets"), subject to all
existing mortgages, pledges, liens, claims, restrictions, encumbrances and
security interests of any kind or nature, including without limitation the
Assumed Liabilities and as otherwise described in Schedule 5.8 (collectively the
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"Permitted Exceptions"), and except for the Excluded Assets (as defined in
Section 1.2 hereof):
1.1.1 Accounts Receivable. All accounts receivable (and causes
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of action related thereto), including accounts receivable that have been written
off, of Seller ("Accounts Receivable");
1.1.2 Inventory. All of Seller's inventory of textbooks,
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materials and supplies as of the date hereof, plus or minus any such items which
have been added or deleted in the ordinary course of business consistent with
past practice ("Inventory");
1.1.3 Equipment. All of Seller's computer hardware, printers,
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other data processing equipment, other machinery and equipment, furniture,
fixtures, leasehold improvements, furnishings and other tangible personal
property used solely and directly at the School as of the date hereof, plus or
minus any such items which have been added or deleted in the ordinary course of
business consistent with past practice ("Equipment");
1.1.4 Records. All of Seller's records related to or used in
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connection with the operation of the School or pertaining to the Purchased
Assets, including without limitation, all student records, ledgers, copies of
financial statements, copies of correspondence, copies of employment records,
copies of placement records, copies of marketing materials and copies of all
documents filed by Seller with any state, federal or local government authority
or any guaranty or accrediting agency (the "Records");
1.1.5 Contracts and Leases. All of the contracts and leases
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applicable solely to the School to which Seller is a party entered into in the
course of Seller's business, including without limitation those identified in
Schedule 5.9 (collectively, the "Assumed Contracts");
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1.1.6 Intellectual Property. All trademarks, service marks and
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copyrights (whether or not registered) and all applications and registrations
therefor, owned or licensed by Seller, and all computer programs and software,
including those described in Schedule 5.10 (the "Intellectual Property");
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1.1.7 Warranty Rights. All rights of Seller, if any, relating
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to or arising out of express or implied warranties from suppliers with respect
to any of the Purchased Assets, and all causes of action arising therefrom;
1.1.8 Prepaid Expenses. All of Seller's prepaid security,
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vendor, utility and other deposits and expenses;
1.1.9 Permits. To the extent transferable, Seller's licenses,
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permits, certifications, approvals and other governmental and regulatory
authorizations required under all laws, rules and regulations applicable to or
affecting the School, including those described in Schedule 5.5(b);
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1.1.10 Goodwill. All of the goodwill and going concern value of
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the School;
1.1.11 Curriculum. All proprietary curriculum used in connection
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with the educational programs of the School, in the form of texts, lesson plans,
handouts, films, videos, exams and other related materials; and
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1.1.12 Lead Bank. Copies of all information in existence as of
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the Closing in Seller's lead bank (the "Lead Bank Data").
1.2 Excluded Assets. The Excluded Assets shall not be conveyed
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hereunder. The "Excluded Assets" means:
1.2.1 Cash. All of Seller's cash or cash equivalents (including
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cash arising from prepaid tuition and all collected accounts receivable) on hand
at the Closing and Seller's bank accounts relating thereto;
1.2.2 Nontransferable Rights. Any license, permit, contract and
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governmental authorization or accreditation that is not transferable; and
1.2.3 Other Excluded Assets. All assets and rights listed on
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Schedule 1.2.3.
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ARTICLE II
CONSIDERATION
2.1 Purchase Price. The purchase price payable to Seller in
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connection with the transfer to Buyer of the Purchased Assets shall be the cash
consideration portion referred to in Section 2.2, plus the assumption of
liabilities of Seller referred to in Section 2.3 (collectively, the "Purchase
Price").
2.2 Cash Consideration. The cash consideration portion of the
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Purchase Price shall be Two Hundred Fifty Thousand Dollars ($250,000), payable
as follows:
2.2.1 Upon the execution of the Management Agreement (as
defined in Section 7.4), Buyer shall deposit Two Hundred Thousand Dollars
($200,000) into an escrow account (the "Escrow") established at Key Trust
Company of the Northwest pursuant to the Escrow Agreement attached hereto as
Exhibit A (the "Escrow Agreement"). If and when (i) a Program Participation
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Agreement, and (ii) an Eligibility and Certification Approval Report (which
includes the allied health program), are submitted to the Escrow, One Hundred
Eighty Thousand Dollars ($180,000) will be released to Seller from the Escrow.
2.2.2 On the date (which shall be no sooner than the date at
which funds are released from the Escrow pursuant to Section 2.2.1 and no sooner
than 30 days after the Closing Date (as defined in Section 3.1)) when Seller
provides satisfactory evidence to Buyer that all payables incurred prior to the
Closing Date have been paid in full or renegotiated to the mutual satisfaction
of Buyer and Seller, the remaining Twenty Thousand Dollars ($20,000) plus all
interest accrued in Escrow, if any, shall be released to Seller from the Escrow.
2.2.3 At the Closing, Buyer shall deliver to Seller a
promissory note (in substantially the form attached hereto as Exhibit B) (the
"Note") in the principal amount of Fifty Thousand Dollars ($50,000), which shall
be payable in full, without interest at the later of (i)
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the one-year anniversary of the Closing Date, and (ii) the date at which funds
are released from the Escrow pursuant to Section 2.2.1.
2.3 Obligations and Liabilities to be Assumed. At the Closing, Buyer
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shall, by an appropriate instrument of assumption to be executed and delivered
on the Closing Date substantially in the form of Exhibit C hereto (the
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"Assignment and Assumption Agreement"), assume and agree to perform, pay or
discharge, when due, to the extent not theretofore performed, paid or
discharged, all of the following obligations, commitments and liabilities of
Seller relating to or arising from the School (collectively, the "Assumed
Liabilities"):
2.3.1 All obligations of and restrictions on Seller with
respect to the School: (i) under the Assumed Contracts (including assumption of
the liabilities, duties and obligations under enrollment contracts between
students and Seller which Seller is obligated to perform on or after the
Closing), but not including liabilities for breaches by Seller under Assumed
Contracts on or before the Closing Date; (ii) with respect to the Intellectual
Property; and (iii) with respect to the Records;
2.3.2 All obligations and liabilities relating to the refunds
owed to students of the School; and
2.3.3 All regulatory liabilities imposed by the U.S. Department
of Education ("ED") and the applicable state regulatory agencies for periods
from and after the Closing Date.
2.4 Excluded Liabilities. Except for the Assumed Liabilities, Buyer
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shall not assume, or otherwise be responsible for, any liabilities or
obligations (whether actual or contingent, matured or unmatured, liquidated or
unliquidated, or known or unknown) of Seller, any other owner or operator of the
School prior to the Closing Date, or any affiliate of any of the foregoing
(collectively, the "Excluded Liabilities"), including but not limited to any
liability or obligation as a result of, or based upon or arising out of the
conduct of the School on or prior to the Closing Date, including but not limited
to the following: (i) regulatory liabilities imposed by ED and the applicable
state regulatory agencies for periods prior to the Closing Date including, but
not limited to any liabilities arising from the ED program review presently
scheduled to commence on Xxxxx 00, 0000, (xx) liabilities relating to employees
of the School prior to the Closing Date, including, but not limited to, accrued
payroll obligations, (iii) liabilities with respect to accounts payable incurred
on or before the Closing Date, and (iv) the alleged or actual violation of any
law, rule or regulation prior to the Closing, by the Seller or the School.
2.5 Allocation of Purchase Price. Buyer and Seller agree that the
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Purchase Price shall be allocated among the Purchased Assets in accordance with
the allocation set forth in Schedule 2.5 attached hereto. Buyer and Seller
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agree that each will report the federal, state and local income tax and other
tax consequences of the purchase and sale contemplated hereby in a manner
consistent with such allocation and that neither will take any position
inconsistent therewith upon examination of any tax return, in any refund claim,
in any litigation, or otherwise.
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2.6 Excise and Property Taxes. Buyer and Seller shall each pay fifty
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percent (50%) of all sales and use taxes arising out of the transfer of the
Purchased Assets. Each of Buyer and Seller and shall pay its respective
portion, prorated as of the Closing, of state and local real and personal
property taxes of the business.
ARTICLE III
CLOSING
3.1 Closing. The effective time of the completion of the purchase
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and sale of the Purchased Assets (the "Closing") shall take place at the offices
of O'Melveny & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000, at 11:59 p.m. on the last day of the month following the month
in which the conditions specified in Sections 8.1.6 and 8.1.7 first become
satisfied (the "Closing Date").
3.2 Deliveries by Seller at Closing. At the Closing Seller shall
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deliver or cause to be delivered to Buyer the following:
3.2.1 The following documents of transfer and assignment duly
executed by Seller:
(i) Xxxx of Sale substantially in the form of Exhibit D
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hereto; and
(ii) Assignment and Assumption Agreement substantially in
the form of Exhibit C hereto.
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3.2.2 Such other instruments of conveyance as shall, in the
reasonable opinion of Buyer and its counsel, be necessary to vest in Buyer title
to the Purchased Assets;
3.2.3 Certified resolutions of Seller's Board of Directors
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein;
3.2.4 An opinion of counsel to Seller, in form and substance
reasonably acceptable to Buyer, containing the opinions set forth on Exhibit
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E-1, along with usual and customary exceptions and qualifications; and
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3.2.5 An officers' certificate signed by the President and the
Chief Financial Officer of Seller, or such other officer reasonably acceptable
to Buyer, certifying that Seller is, as of the Closing Date, in material
compliance with all of Seller's covenants and obligations under this Agreement.
3.3 Deliveries by Buyer at Closing. At the Closing Buyer shall
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deliver or cause to be delivered to Seller the following:
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3.3.1 The Note;
3.3.2 Certified resolutions of the Board of Directors of Buyer
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein;
3.3.3 Documents reasonably required by Seller for the assumption
by Buyer of Assumed Liabilities in accordance with Section 2.3 duly executed by
Buyer, including without limitation, the Assignment and Assumption Agreement
substantially in the form of Exhibit C hereto.
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3.3.4 An opinion of counsel to Buyer in form and substance
reasonably acceptable to Seller containing the opinions set forth on Exhibit
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E-2, along with usual and customary exceptions and qualifications; and
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3.3.5 An officers' certificate signed by the President and the
Chief Financial Officer of Buyer certifying that Buyer is, as of the Closing
Date, in material compliance with all of Buyer's covenants and obligations under
this Agreement, and that Buyer is in full compliance with all terms and
provisions of the Management Agreement (as defined in Section 7.4 hereof).
ARTICLE IV
TERMINATION
4.1 Termination. This Agreement may be terminated only as follows
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and in each case only by written notice:
4.1.1 At any time by mutual written consent of Seller and Buyer;
4.1.2 Prior to the Closing by Seller on the one hand or Buyer on
the other, if the other party shall be in breach of any covenant, undertaking or
restriction contained herein in any material respect and such breach has not
been cured within fifteen (15) business days after the giving of written notice
to the breaching party of such breach;
4.1.3 Prior to the Closing by Buyer if ED, the State of
Washington or any of its agencies, any guaranty agency or any accreditation
agency deny approval of the School to teach the basic Corinthian Allied Health
program, or determine that the School or the program will not be certified as
eligible for Title IV funds; or
4.1.4 Prior to the Closing by either Party if the Management
Agreement has terminated.
4.2 Effect of Termination. In the event of termination of this
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Agreement by either Buyer or Seller in accordance with the applicable provisions
above, this Agreement shall forthwith terminate upon notice thereof duly given
in accordance with the provisions hereof, and
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there shall be no liability of any nature on the part of either Buyer or Seller
(or their respective officers or directors) to the other, except for liabilities
arising from a breach of this Agreement prior to such termination; provided,
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however, that this Section 4.2 in no way limits the obligations of the parties
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set forth in Sections 9.12, 9.13, 9.14 and 9.15 hereof, which obligations shall
survive the termination. If this Agreement is terminated as provided herein,
each of Buyer and Seller shall, and shall cause its respective representatives
to, either destroy or redeliver all documents, work papers and other materials
relating to the transaction contemplated hereby or to the business or operations
of the other party, whether so obtained before or after the execution hereof, to
such other party, and all such information received by Buyer or Seller, as the
case may be, (other than information which is in or becomes part of the public
domain by publication or otherwise or which has heretofore been or is hereafter
filed or available as public information with any governmental authority) shall
be kept confidential, except as required by law. In addition, each of Buyer and
Seller shall cooperate in good faith following termination of this Agreement to
provide any information or documents reasonably required by the other party in
connection with preparation of such party's financial statements and tax
returns.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement, to
purchase the Assets and assume the Assumed Liabilities, Seller hereby represents
and warrants (a) as of the date hereof and (b) as of the Closing Date, that:
5.1 Organization and Corporate Power. Seller is a corporation, duly
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organized, validly existing and in good standing under the laws of the State of
Washington, Seller has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and to
consummate the transactions contemplated by this Agreement. The copies of
Seller's articles of incorporation and bylaws which have been furnished to Buyer
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
5.2 Ownership of School. The School is owned and operated by Seller
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directly, and no other Person has any ownership interest in the School. No
other Person has any right, option, subscription or other arrangement to
purchase or otherwise acquire any interest in the School.
5.3 Capacity; Authorization; Binding Effect, Etc. Seller has the
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power, legal capacity and authority to execute, deliver and perform this
Agreement and each other document being executed in connection herewith to which
it is a party. Seller has the power, legal capacity and authority to transfer,
convey and deliver the Purchased Assets, free and clear of all liens, claims,
encumbrances, options, rights and restrictions, except as otherwise disclosed in
Schedule 5.8. This Agreement and each other document executed by Seller in
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connection herewith has been duly executed and delivered by Seller, and
(assuming the due authorization, execution and
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delivery hereof and thereof by Buyer) this Agreement and each such other
document is a valid and binding obligation of Seller, enforceable against it, in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
5.4 No Conflicts, Etc. The execution, delivery and performance of
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this Agreement and each other document being executed by Seller in connection
herewith, and the consummation of the transactions contemplated hereby and
thereby will not: (a) violate any provisions of law applicable to Seller; (b)
with or without the giving of notice or the passage of time, or both, conflict
with or result in the breach of any provision of the articles of incorporation
or bylaws of Seller, any material instrument, license, agreement or commitment
to which Seller is a party or by which any of its assets or properties is bound;
(c) constitute a violation of any order, judgment or decree to which Seller is a
party or by which any of its assets or properties is bound; or (d) require any
approval of, or filing or registration with, any governmental entity or
regulatory authority other than those which will be effected by Seller prior to
the Closing Date.
5.5 Compliance with Laws; Licenses and Permits. Except as shown on
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Schedule 5.5(a), Seller is not in violation of any law or any regulation or
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requirement which violation might reasonably be expected to have a material
adverse effect upon the financial condition, operating results, accreditation or
business prospects of the School, and Seller has not received notice of any such
violation. Seller currently maintains all licenses, accreditation,
certificates, permits, consents, authorizations and other governmental or
regulatory approvals (the "Licenses and Permits") necessary for Seller to
conduct the business and operations of the School as presently being conducted.
Seller has duly filed all reports and returns required to be filed by it with
respect to the School with governmental authorities and accrediting bodies. The
Licenses and Permits for the School are in full force and effect, and no
proceedings for the suspension or cancellation of any of them is pending or, to
the best of Seller's knowledge, threatened. No application made by Seller for
any Licenses and Permits during the last three (3) years has been denied, and to
the best of Seller's knowledge, no such applications were denied for the two (2)
preceding years. Schedule 5.5(b) attached hereto is a true, correct and
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complete list of all Licenses and Permits held by Seller with respect to the
School and the governmental authority or accrediting body granting such Licenses
and Permits. Seller has delivered to Buyer copies of all such Licenses and
Permits. Seller has received no notice that any of the Licenses and Permits
will not be renewed and to the best of Seller's knowledge, there is no basis for
nonrenewal. The School is accredited by A.C.C.S.C.T., is certified by ED as a
qualified institution under Title IV and is a party to, and in compliance with,
valid program participation agreements with ED with respect to the School's
operations. Seller has not received any notice, not previously complied with,
in respect of any alleged violation of the rules or regulations of ED or any
applicable accrediting body in respect of the School, including sales and
marketing activities, or the terms of any program participation agreement to
which it is or was a party. If any such notices have been received and complied
with, Seller has disclosed their receipt and disposition to Buyer prior to the
execution of this Agreement in writing. Except for the ED program review
presently scheduled to commence on March 25, 1996, Seller
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is not aware of any investigation or review of Seller's student financial aid
programs or any review of the accreditation of the School by any Person.
5.6 Recruitment; Admissions Procedures; Attendance; Reports.
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Schedule 5.6 attached hereto is a complete list of all policy manuals and other
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statements of procedures or instruction relating to recruitment of students for
the School, including (a) procedures for assisting in the application by
prospective students for direct or indirect state or federal financial
assistance; (b) admissions procedures, including any descriptions of procedures
for insuring compliance with state or federal or other appropriate standards or
tests of eligibility; and (c) procedures for encouraging and verifying
attendance, minimum required attendance policies, and other relevant criteria
relating to course completion and certification (collectively, the "Policy
Guidelines"). Seller has delivered to Buyer true, correct and complete copies
of all Policy Guidelines. To the best of Seller's knowledge, Seller's
operations with respect to the School have, in all material respects, been
conducted in accordance with the Policy Guidelines and all relevant standards
imposed by applicable accrediting bodies, agencies administering state or
federal governmental programs in which Seller participates, and other applicable
laws or regulations. Seller has submitted all reports, audits, and other
information, whether periodic in nature or pursuant to specific requests, for
the School ("Compliance Reports") to all agencies or other entities with which
such filings are required relating to its compliance with (i) applicable
accreditation standards governing its activities or (ii) laws or regulations
governing programs pursuant to which Seller or its students receive funding, and
(iii) all articulation agreements with degree-granting colleges and universities
in effect as of the date of this Agreement. Complete and accurate records in
all material respects for all present and past students attending the School
have been maintained consistent with the operations of a school business. All
forms and records with respect to the School have been prepared, completed,
maintained and filed in all material respects in accordance with all applicable
federal and state laws and regulations, and are true and correct in all material
respects. All financial aid grants and loans, disbursements and record keeping
relating thereto have been completed in compliance with all federal and state
requirements, and there are no material deficiencies in respect thereto. No
student at the School has been funded prior to the date for which such student
was eligible for funding, and such student's records conform in form and
substance to all relevant regulatory requirements.
5.7 Cohort Default Rate. Schedule 5.7 attached hereto sets forth the
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cohort default rate for the School, calculated in the manner prescribed by ED,
of all students attending the School receiving assistance pursuant to Title IV
programs for the years ended December 31, 1990 through 1993, with an estimate
prepared by Seller for 1994. To the best knowledge of Seller, such schedule is
materially accurate in all respects.
5.8 Title to the Purchased Assets.
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(i) The leased facilities ("the Facilities") located at 00000
X.X. 00xx Xxxxxx, Xxxxxx 0 through 4, Bellevue, Washington, King County, as
further described in that certain Lease Agreement dated June 29, 1994 by and
between Seller, Xxxxxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx as Lessee, and Xxxx X.
and Xxxx Xxx Xxxxxxxxx and Xxx X. and Gulah X. Xxxxxx as Lessor, constitute the
only real property used in connection with the operation of the School by
Seller.
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(ii) All of Seller's operations with respect to the School are
conducted at the Facilities of the School, and all of the tangible Purchased
Assets and records relating to intangible Purchased Assets of the School are or
as of the Closing will be located at the Facilities. Seller is not under any
contractual or other legal obligation and has not entered into any commitment to
make capital improvements or alterations to the Facilities. The Facilities are
not subject to any zoning ordinance or other restrictions which would prohibit
the use and enjoyment of the Facilities in the manner in which the Facilities
are currently used. Seller has no knowledge of any condemnation proceedings
relating to any Facility. To the best of Seller's knowledge, each Facility and
Seller's use thereof is in compliance in all material respects with all laws,
including, without limitation, the Americans with Disabilities Act.
(iii) Seller owns outright, and has good and marketable title
to, all of the Purchased Assets of the School, free and clear of all liens,
claims and encumbrances, options, rights, and restrictions, other than as set
forth on Schedule 5.8 and liens for current taxes not yet due and payable. All
------------
leases for tangible personal property used by Seller in connection with the
operation of the School are valid and in full force and effect and are
enforceable in all material respects in accordance with their terms. Neither
Seller nor, to the best of Seller's knowledge, any of the other parties thereto,
is in default under any such lease, and no event, act or omission has occurred
which (with or without notice, the passage of time or the happening or
occurrence of any other event) would result in a default thereunder.
(iv) The tangible Purchased Assets and properties of the School
which are owned or leased by Seller and used in connection with the operation of
the School are in good operating condition, order and repair, useable in the
ordinary course of business consistent with past practice, subject to ordinary
wear and tear, and are sufficient and adequate for all current operations.
Seller has not received notice of any violation of or default under any law,
ordinance, order, regulation or requirement relating to any of the Purchased
Assets of the School which remains uncured or has not been resolved.
5.9 Material Assumed Contracts. Schedule 5.9 attached hereto sets
-------------------------- ------------
forth a true, complete and correct list of all material Assumed Contracts
(hereinafter collectively referred to as the "Material Assumed Contracts") of
Seller. True, complete and correct copies of all Material Assumed Contracts,
together with all amendments thereto, have heretofore been delivered or
otherwise made available to Buyer. The Material Assumed Contracts are in full
force and effect, constitute legal, valid and binding obligations of Seller and,
to the best knowledge of Seller, of the other parties thereto. Seller is not in
material default or alleged to be in material default on any term of any such
Material Assumed Contract. Except as noted on Schedule 5.9 attached hereto, the
------------
consummation of the transactions contemplated by this Agreement does not require
the consent or approval of any party to any Material Assumed Contract.
5.10 Tradenames; Confidential Information.
------------------------------------
(i) All tradenames, trademarks or service marks and all forms,
derivatives and graphic presentations thereof of the School (collectively, the
"Tradenames"), having any material value to the operation of the School are set
forth on Schedule 5.10 attached
-------------
10
hereto. Seller has exclusive right to the use of each Tradename as an assumed
business name in the states in which such Tradename is used, and Schedule 5.10
-------------
sets forth all registrations of each Tradename as a trademark, servicemark or
assumed name. Seller has not licensed any other Person to use any Tradename.
Seller has not been sued or threatened with suit for infringement, violation or
breach with respect to any Tradename, and to the best of Seller's knowledge, no
basis exists for any such suit. Except as disclosed on Schedule 5.10, Seller is
-------------
not on notice of any infringement, violation or breach of the Tradename by any
other Person.
(ii) Seller has the right to use, free and clear of any claims
or rights of any third party, all trade secrets, customer lists, know-how,
curricula and any other confidential information required for or used in the
operation of the School. Seller is not in any way making any unlawful or
wrongful use of any trade secrets, customer lists, know-how, curricula or any
other confidential information of any third party including, without limitation
any former employer of any present or past employee of Seller in connection with
the operation of the School.
5.11 Financial Statements; Indebtedness. Seller has previously
----------------------------------
furnished to Buyer the following financial statements: reviewed Balance Sheets
at December 31, 1990, and December 31, 1991, audited Balance Sheets at December
31, 1993, December 31, 1994 and December 31, 1995; reviewed Cash Flow Statements
for the fiscal years ended December 31, 1990 and December 31, 1991, and audited
Cash Flow Statements for the fiscal years ended December 31, 1993, December 31,
1994 and December 31, 1995; reviewed Statements of Operations and Deficit for
the fiscal years ended December 31, 1990 and December 31, 1991 and audited
Statement of Operations and Deficit for the fiscal year ended December 31, 1993
and audited Statement of Operations and Stockholder Equity for December 31, 1994
and December 31, 1995 (collectively, the "Financial Statements"). The balance
sheets included in the Financial Statements present fairly in accordance with
generally accepted accounting principles ("GAAP") the assets and liabilities of
the School covered thereby as of the respective dates thereof, and the related
statements of operations present fairly in accordance with GAAP the results of
operations of the School for the respective periods covered thereby. The
Financial Statements for the School have been prepared in a manner consistent
with Seller's standard internal accounting practices, consistently applied, are
substantially correct and complete and fairly present the financial position of
the School as of the dates of such Financial Statements, and the results of
operations and changes in financial position for the periods covered by such
Financial Statements. Seller has maintained the books and records of the School
in accordance with applicable laws, rules and regulations and with GAAP, and
such books and records are, and during the periods covered by the Financial
Statements were, correct and complete, fairly reflecting the income, expenses,
assets and liabilities of the School. On the date hereof, the School does not
have any liabilities required to be set forth in a balance sheet prepared in
accordance with GAAP, that were not included in the Financial Statements. Except
as provided in Schedule 5.11, Seller is not required to provide any letters of
-------------
credit, guaranty or other financial security arrangements in connection with any
transactions, approvals or licenses in the ordinary course of the School's
business. Except as disclosed on Schedule 5.14, as of the date hereof, the
-------------
School has no indebtedness, liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, other than:
11
(i) those set forth or reserved against in the balance sheets
included in the Audited Financial Statements for the fiscal years then
ended to the extent set forth, reserved against or disclosed;
(ii) those set forth or reserved against in the Unaudited
Financial Statements, or those which would have been disclosed in footnotes
if footnotes had been prepared and which have been disclosed in writing to
Buyer, to the extent set forth, reserved against or, in the case of
footnote items, disclosed; and
(iii) those incurred since December 31, 1995, in the ordinary
course of business and consistent in nature with past practice.
To the best of Seller's knowledge, there exists no condition relating to the
School, whether absolute, accrued, contingent or otherwise, which could have a
material adverse effect on the properties, business, Purchased Assets, results
of operations or condition (financial or otherwise) of the School or which would
prevent the operations of the School from being carried on in the future in
substantially the same manner as it is presently being conducted. There are no
long-term fixed or contractual liabilities relating to the operation of the
School which are required to be assumed by Buyer in order to continue to operate
the School as presently operated by Seller, the annual expense of which are not
reflected in the Financial Statements or which are not otherwise disclosed in
this Agreement or any schedule hereto.
5.12 Receivables. The tuition receivable and accounts receivable of
-----------
the School, except to the extent of the allowance for cancellations and doubtful
accounts set forth in the Financial Statements, are bona fide receivables, arose
out of arms' length transactions in the normal and usual practices of Seller and
the School, are recorded correctly on the books and records of Seller and the
School, and, to the best of Seller's knowledge, will be collected in full in the
ordinary course of business, within the ordinary time frame for such
receivables, subject in the case of certain receivables to reserves established
for such receivables in the Financial Statements. Such receivables are not
subject to any defense, counterclaim or setoff or trade discounts or credits not
reflected in the Financial Statements (other than tuition refund policies
administered in accordance with all applicable legal requirements and the
applicable Policy Guidelines), and Seller has no knowledge of any facts or
circumstances which would cause any of such receivables to have to be written
down or written off.
5.13 Inventories. The only inventories maintained by Seller in
-----------
connection with the operation of the School consist of supplies used in the
ordinary course of business of the School and are reflected on the Financial
Statements as "other assets." Such supplies are reflected at cost, are usable
in the ordinary and regular course of business, are to the best of Seller's
knowledge fit and sufficient for the purpose for which they were purchased, and,
at the date of this Agreement, are in customary amounts appropriate to Seller's
operations of the School. All excess or obsolete items have been written down
to net realizable value or written off.
12
5.14 Litigation, Etc. Except as set forth in Schedule 5.14 attached
---------------- -------------
hereto; there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of Seller's knowledge,threatened against or
affecting Seller or the School at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality or
accrediting body pertaining to or affecting Seller or the School; to the best of
Seller's knowledge, Seller is not the subject of any governmental investigations
or inquiries (including inquiries as to the qualification to hold or receive any
of the Licenses and Permits with respect to the School); and, to the best of
Seller's knowledge, there is no basis for any of the foregoing.
5.15 Insurance. Schedule 5.15 attached hereto sets forth the
--------- -------------
insurance coverages maintained by Seller on the Facilities, the other Purchased
Assets and the operations of the School, including all policies or binders of
fire, extended coverage, general and vehicular, fidelity and fiduciary
liability, workers' compensation, key-man life and other insurance held by
Seller and all binders for insurance to be purchased on or before Closing, in
order to replace policies expiring prior to the Closing or otherwise. Such
policies and binders are in full force and effect, and there is no material
breach or default with respect to any provision contained in any such policy or
binder, and all premiums, to the extent due and payable, have been paid or the
liability therefor properly accrued. To the best of Seller's knowledge, the
insurance coverage maintained by Seller for the School is sufficient and is
customary for a well-insured School of similar size, engaged in similar lines of
business. Except for amounts deductible under such policies of insurance, Seller
is not and has not been, prior to the date hereof, subject to liability as a
self-insurer for the School. There are no claims pending or threatened under any
of said policies pertaining to the School or disputes with underwriters
regarding coverage under such policies pertaining to the School. Except as set
forth on Schedule 5.15, neither the execution, delivery and performance of this
-------------
Agreement, nor the consummation of the transactions contemplated hereby, will
result in the loss to Seller of any of the insurance policies listed or impair
the rights of Seller with respect to liabilities arising in connection with the
operation of the School prior to the Closing for the School. Within the three
(3) years prior to the date hereof, Seller has not been denied insurance for the
School, or been offered insurance for the School only at a commercially
prohibitive premium nor to the best of Seller's knowledge, were there any such
denials or offerings for the preceding two (2) years.
5.16 Environmental Matters. In connection with the operations of the
---------------------
School, Seller has not generated, transported, stored, treated or disposed, nor
has it allowed or arranged for any third persons to transport, store, treat or
dispose, any hazardous substance to or at: (a) any location other than a site
lawfully permitted to receive such hazardous substance for such purposes or (b)
any location designated for remedial action pursuant to federal, state or local
statute and relating to the environment or waste disposal; nor has Seller
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any laws or regulations or in any
other manner which may result in liability for contamination or threat of
contamination of the environment. No generation, use, handling, storage,
treatment, release, threat of release, discharge, spillage or disposal of any
hazardous substance, has occurred or is occurring at the Facilities or any other
facilities or properties owned or operated by Seller in connection with its
operation of the School. Seller has not received notification, nor is it aware
of, any past or present failure by Seller to comply with any environmental
laws,
13
regulations, permits, franchises, licenses or orders applicable to the School or
its operations. Seller has not received any notification, nor is it aware of,
any past or present failure to comply with any environmental laws, regulations,
permits, franchises, licenses or orders applicable to its operations other than
the School which may result in judicial, regulatory or other legal proceedings
having a material adverse impact on the operations of the School or result in
the imposition of any lien, claim, assessment or other encumbrance against the
Purchased Assets. To the best of Seller's knowledge, the Facilities do not
contain asbestos or polychlorinated biphenyls or any underground storage tanks.
5.17 Employee Benefit Plans. Schedule 5.17 attached hereto sets forth
---------------------- -------------
a complete accurate and detailed description of all of Seller's employee welfare
and benefit plans ("Plans"). Except as set forth in Schedule 5.17, none of the
-------------
Plans constitutes a pension plan, profit sharing plan or "employee benefit plan"
as such term is defined in Section 3 of ERISA, with respect to which Seller is
required to obtain a determination letter from the Internal Revenue Service or
to file Form 5500. Each Plan and related trust agreement (as applicable) has
been administered and operated in accordance with its terms and applicable law,
and to the extent applicable, each Plan is "qualified" within the meaning of
Section 401(a) of the Code, and each related trust is exempt from tax under
Section 501(a) of the Code, and each qualified plan has been amended to conform
to the requirements of the Tax Reform Act of 1986 and applicable regulations and
the Omnibus Budget Reconciliation Act of 1987 and all other applicable laws and
regulations. No liability under ERISA or otherwise has been incurred or, based
upon existing facts, may be expect to be incurred with respect to any Plan.
Other than claims for benefit payments in the ordinary course under the Plans,
there are no actions, suits, claims or proceedings, pending or, to the best of
Seller's knowledge, threatened, nor, to the best of Seller's knowledge, does
there exist any basis therefor, which would result in any liability with respect
to any Plan. Seller is not now, nor has it ever been a participant in, any
Multiemployer Plan within the meaning of Section 3(37) of ERISA. There are no
accrued liabilities under any Plans, programs or practices maintained on behalf
of the employees of the School which are not provided for on its books or in the
Financial Statements or which have not been fully provided for by contributions
to such Plans, programs or practices. As of the date hereof, Seller does not
maintain any employee welfare benefit plans, as defined in Section 3(1) of
ERISA, which provide post-retirement benefits to former employees of the School
and to current employees of the School after their termination of employment
(including, without limitation, medical and life insurance benefits), other than
as may be required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and interpreted by regulations thereunder.
5.18 Employment Matters. Except as disclosed in Schedule 5.18, Seller
------------------ -------------
and the School are in compliance in all material respects with all federal,
state and local laws, rules and regulations affecting employment and employment
practices with respect to the School, including terms and conditions of
employment, employment discrimination and wages and hours, and Seller is not
engaged in any unfair labor practices with respect to employees of the School;
there are no complaints against Seller with respect to employees of the School
pending before the National Labor Relations Board or any similar state or local
labor agency; there are no labor strikes, slow-downs or stoppages or other labor
troubles pending or, to the best of Seller's knowledge, threatened with respect
to any employees of the School; no labor organization activities have occurred
with respect to employees of the School during the past three (3) years;
14
there are no collective bargaining agreements binding on Seller relating to the
operation of the School; no grievances have been asserted against Seller with
respect to employees of the School; and Seller has not experienced any work
stoppage by its employees at the School during the last three (3) years.
5.19 Tax Matters. Seller has completed and filed on or before the due
-----------
dates thereof or within applicable extension periods all returns for taxes
required to be filed, and such returns are true and correct in all material
respects. Seller has paid all taxes shown to be due and payable on such returns
to the extent that the same have become due and payable on or before the
Closing. Seller is not a party to, nor to the best of Seller's knowledge,
expected to become a party to, any pending or threatened action or proceeding,
assessment or collection of taxes by any governmental authority relating to the
business and operations of Seller.
5.20 Brokers or Finders. Seller represents that except for the
------------------
retention of Xxxx Xxxxxxxx by Seller, whom Seller shall pay or reimburse at
Seller's sole cost and expense, no agent, broker, investment banker or other
firm or person retained by Seller is or will be entitled to any broker's or
finder's fee or any similar commission or fee in connection with any of the
transactions contemplated by this Agreement.
5.21 Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement or as set forth on Schedule 5.21 attached hereto, for the School, from
-------------
December 31, 1995 until the date of this Agreement there has not been, occurred
or arisen with respect to the School:
(i) any sale, lease, transfer, abandonment or other disposition
of any right, title or interest in or to any of the properties or assets of
Seller used in connection with the operations of the School (tangible or
intangible), except in the ordinary course of business;
(ii) (i) any approval or action to put into effect any increase
in any compensation or benefits payable to any employee, agent or officer
of Seller employed or providing services in connection with the operation
of the School or any payment, grant or accrual to or for the benefit of any
such employee, agent or officer of any bonus, service award, percentage
compensation or other benefit, (ii) any adoption or amendment of any Plans,
or any severance agreement or employment contract to which any such
employee, agent or officer of the School is a party or (iii) any entering
into of any employment, deferred compensation or other agreements with
respect to bonuses, service awards, percentage compensation or other
benefits with any such employee, agent or officer;
(iii) any material adverse change in the financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), business
prospects, reserves or operations of the School;
(iv) any damage, destruction or loss, whether or not covered by
insurance, materially adverse to the assets, business, or operations of the
School;
15
(v) any change in any material respect in the business policies
or practices of the School or a failure to operate the business of the
School in the ordinary course with a view to preserving such business
intact, to retaining the services of the present officers, employees and
agents of Seller employed or providing services in connection with the
operation of the School and with a view to preserving the business
relationships of the School with, and the goodwill of, students, sales
representatives, suppliers, accrediting bodies, governmental authorities
and others; or
(vi) any agreement, whether in writing or otherwise, to take any
action described in this Section 5.21.
5.22 Delivery of Documents. True, correct and complete copies of all
---------------------
material documents, instruments, agreements and records of Seller relating to
the Purchased Assets, the Assumed Liabilities, the representations and
warranties of Seller contained in this Agreement and/or the operation of the
School have been delivered or made available to Buyer.
5.23 Disclosure. Neither this Agreement nor any of the schedules,
----------
exhibits, attachments, documents, certificates or other items prepared or
supplied to Buyer in writing by or on behalf of Seller with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make such statements not misleading in
light of the circumstances in which such statements were made. To the best of
Seller's knowledge, there is no fact which Seller has not disclosed to Buyer in
writing and of which any of its officers, directors or executive employees is
aware and which has had or may reasonably be anticipated to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, employee relations, accreditation, reputation or business
prospects of the School.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement, Buyer
hereby represents and warrants (a) as of the date hereof and (b) as of the
Closing Date, that:
6.1 Organization and Corporate Power. Buyer is a corporation, duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to consummate
the transactions contemplated by this Agreement. The copies of Buyer's Restated
Certificate of Incorporation and bylaws which have been furnished to Seller
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
6.2 Capacity; Authorization; Binding Effect, Etc. Buyer has the
--------------------------------------------
power, legal capacity and authority to execute, deliver and perform this
Agreement and each other document being executed in connection herewith to which
it is a party. This Agreement and each other document executed by Buyer in
connection herewith has been duly executed and delivered by Buyer, and (assuming
the due authorization, execution and delivery hereof and thereof by Seller)
16
this Agreement and each such other document is a valid and binding obligation of
Buyer, enforceable against it, in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
6.3 No Conflicts, Etc. The execution, delivery and performance of
-----------------
this Agreement and each other document being executed by Seller in connection
herewith, and the consummation of the transactions contemplated hereby and
thereby will not: (a) violate any provisions of law applicable to Buyer; (b)
with or without the giving of notice or the passage of time, or both, conflict
with or result in the breach of any provision of the articles of incorporation
or bylaws of Buyer, any material instrument, license, agreement or commitment to
which Buyer is a party or by which any of its assets or properties is bound; (c)
constitute a violation of any order, judgment or decree to which Buyer is a
party or by which any of its assets or properties is bound; or (d) require any
approval of, or filing or registration with, any governmental entity or
regulating authority other than those which will be effected by Seller prior to
the Closing Date.
6.4 Brokers or Finders. Buyer represents that no agent, broker,
------------------
investment banker or other firm or person retained by Buyer is or will be
entitled to any broker's or finder's fee or any similar commission or fee in
connection with any of the transactions contemplated by this Agreement.
6.5 Disclosure. Neither this Agreement nor any of the schedules,
----------
exhibits, attachments, documents, certificates or other items prepared or
supplied to Seller in writing by or on behalf of Buyer with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make such statements not misleading in
light of the circumstances in which such statements were made.
ARTICLE VII
COVENANTS
7.1 Covenants of Seller Pending Closing. Seller covenants and agrees
-----------------------------------
with Buyer that from and after the date hereof and until the earlier of the
Closing Date or the termination of this Agreement pursuant to Article IV hereof,
Seller (i) shall use commercially reasonable efforts to fulfill or satisfy, or
cause to be fulfilled or satisfied, all of the conditions precedent to Seller's
obligations to consummate and complete the sale provided herein and to take all
other steps and do all other things reasonably required to consummate this
Agreement in accordance with its terms, (ii) shall not interfere with the
performance by Buyer of its obligations under this Agreement, (iii) shall not
fail to pay prior to delinquency any taxes, assessments, governmental charges or
levies imposed upon it or its income, profits or assets or otherwise required to
be paid by it, (iv) shall not make or authorize the making of any capital
expenditure in excess of $250 without Buyer's prior written consent except for
the performance of obligations previously incurred, or for the replacement of
equipment or tangible property necessary to the operations of the business of
Seller, (v) shall promptly notify Buyer of any notice from any governmental or
regulatory agency or authority in connection with the
17
transactions contemplated by this Agreement, or any fact or circumstance of
which Seller has knowledge which would make any representation or warranty set
forth herein materially untrue or inaccurate as of the Closing Date or as of the
date of this Agreement, or any planned or threatened labor dispute, organization
efforts, strike or collective work stoppage affecting the employees of Seller
and (vi) shall not take any action outside the ordinary course of business that
would cause Buyer to be unable to obtain good and marketable title to the
Purchased Assets to be transferred to Buyer at the Closing. Until the earlier
of the Closing or termination of this Agreement, Seller will not directly or
indirectly solicit, respond to or negotiate with or release any information
relative to the School to any potential buyer other than Buyer.
7.2 Covenants of Buyer Pending Closing. Buyer covenants and agrees
----------------------------------
with Seller that from and after the date hereof and until the earlier of the
Closing Date or the termination of this Agreement pursuant to Article IV hereof,
Buyer (i) shall use commercially reasonable efforts to fulfill or satisfy, or
cause to be fulfilled or satisfied, all of the conditions precedent to Seller's
obligations to consummate and complete the sale provided herein and to take all
other steps and do all other things reasonably required to consummate this
Agreement in accordance with its terms; (ii) shall not interfere with the
performance by Seller of its obligations under this Agreement; (iii) shall fully
perform all its obligations under the Management Agreement; and (iv) shall
promptly notify Seller of any regulatory or accreditation decision or
determinations which would prevent or prohibit Buyer from performing its
obligations under this Agreement.
7.3 Closing and Post-Closing Covenants.
----------------------------------
7.3.1 Further Assurances. From time to time after the Closing,
------------------
(i) Seller will use reasonable efforts for as long as it continues its corporate
existence to execute and deliver such instruments of conveyance, sale or
assignment as Buyer may reasonably request, to more effectively vest, confirm or
evidence Buyer's title to or rights in any of the Purchased Assets and to
otherwise carry out the purpose and intent of this Agreement, and (ii) Buyer
will execute and deliver such instruments as Seller may reasonably request to
more effectively assure the assignment to and assumption by Buyer of the
obligations and liabilities of Seller to be assumed by Buyer pursuant to this
Agreement and to otherwise carry out the purpose and intent of this Agreement.
7.3.2 Mutual Cooperation. The parties shall use reasonable
------------------
efforts to cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken to consummate the
transaction contemplated hereby and transition management and ownership of the
School from Seller to Buyer. Before and after the Closing, Seller shall use its
best efforts to assist Buyer in obtaining any required accreditation reasonably
necessary for Buyer's operation of the School (collectively "Buyer's
accreditations"), including furnishing Buyer such necessary information and
reasonable assistance as Buyer may request in connection with its preparation of
necessary filings, submissions or accreditation applications to any governmental
agency in connection with the transactions contemplated hereby.
18
7.3.3 Access to Employees. From and after the Closing, each of
-------------------
Buyer and Seller shall afford to the other party, its officers, counsel,
accountants and other authorized representatives (the "Requesting Party")
reasonable access to the other party's employees who formerly were or currently
are employed by Seller, as the case may be, without cost to the Requesting Party
(other than payment of out-of-pocket costs not including personnel costs) and as
reasonably required by the Requesting Party in connection with any claim,
action, litigation or other proceeding involving Seller or the School. Each
party shall use its best efforts to cause such employees to cooperate with and
assist the Requesting Party in its prosecution or defense of such claims,
actions, litigations and other proceedings, which cooperation shall include
without limitation preparing and providing written and oral discovery and
attending and testifying at depositions, hearings, motions and trials, all as
necessary in the reasonable opinion of the Requesting Party or its counsel. Any
such access shall take place only during normal business hours in such a manner
as not to interfere unreasonably with the operation of the business of the other
party.
7.3.4 Best Efforts to Satisfy Conditions. Prior to and after the
----------------------------------
Closing, Seller and Buyer shall provide to the ED and to all state regulatory
agencies and accrediting bodies all information required or reasonably requested
by any of them, and Buyer shall use its best efforts to satisfy promptly all
requirements and demands of ED or any such agency or body requisite to obtaining
certification. Without limiting the foregoing, Buyer shall submit to ED a
completed application for certification for the School conveyed to Buyer at the
Closing within a reasonable time after that Closing, but in any event no later
than thirty (30) days after Closing.
7.3.5 Continued Operation of Floral Program. Buyer shall
-------------------------------------
continue to operate the School's current floral design program for a period of
at least 12 months following the Closing on the condition that such program
remains profitable and continues to be eligible for Title IV funds.
7.3.6 Director. Buyer agrees to employ Xxxxxx Xxxxxxx (the
--------
"Director") as the full-time Director of the School for a period of one year
following the Closing Date, at an annual salary of $35,000 payable monthly in
arrears. The Director shall be entitled to two (2) weeks paid vacation
annually, which vacation shall accrue on a monthly basis in arrears. Buyer
shall be entitled to terminate the employment of Director hereunder for any
reason at Buyer's sole discretion; provided, however, that if such termination
is for any reason other than "Cause" (as defined below), Buyer shall be required
to continue making the monthly salary payments through the remainder of the
twelve-month period. "Cause" for termination of the employment of Director by
Buyer shall mean that Buyer, acting in good faith, determines that Director has:
(i) committed a material breach of her duties and responsibilities (other than
as a result of incapacity due to disability); or (ii) engaged in an act or acts
of personal dishonesty involving moral turpitude and intended to result in
personal enrichment of Director; or (iii) been convicted of a felony or
misdemeanor; or (iv) refused to perform duties and responsibilities required of
her in good faith by the Board of Directors of Buyer; or (v) violated any
fiduciary duty owed to Buyer or the School.
19
7.4 Management Agreement and Administration of the School.
-----------------------------------------------------
7.4.1 Management Agreement. Concurrently with the execution of
--------------------
this Agreement, Buyer and Seller shall execute and deliver a Management
Agreement in the form of that attached hereto as Exhibit F and made a part
---------
hereof by this reference (the "Management Agreement"). The Management Agreement
shall become effective upon execution. Covenants contained in the Management
Agreement shall be supplemental to any continuing covenants undertaken by Buyer
in this Agreement.
7.4.2 Administration in Accordance with accreditations. From and
------------------------------------------------
after the Effective Date, Buyer, at Buyer's sole cost and expense, shall
administer and operate the School in accordance with all federal and state laws,
statutes, rules and regulations and in accordance with all permits,
accreditations, authorizations and agreements issued by or entered into with any
federal, state or local governmental or quasi-governmental entity in any way
regulating or otherwise relating to the administration and operation of the
School, or any of them. Subject to the terms and provisions of this Agreement,
Buyer and Seller shall work together cooperatively and in good faith to obtain
any and all approvals from ED, any state education regulatory authority and any
other governmental or quasi-governmental entity that may be necessary or
appropriate to vest in Buyer the right and authority to administer and operate
the School and to release Seller from further liability or obligations in
connection with the administration or operation of the School.
7.5 Access and Maintenance of Records. From and after the Closing,
---------------------------------
each party shall afford the other party, its officers, counsel, accountants and
other authorized representatives and regulatory authorities (the "Requesting
Party") access to the other party's properties, books and records, including
those maintained by the other party's accountants, at any time and from time to
time upon reasonable notice from the Requesting Party, as reasonably required by
the Requesting Party in connection with (i) performance by the Requesting Party
of any of its obligations under the terms and conditions of this Agreement,
including without limitation any liability or obligation of Seller not assumed
by Buyer pursuant to the Agreement, (ii) any claim, action, litigation or other
proceeding involving the Requesting Party or the School and (iii) the Requesting
Party's preparation of its financial statements and tax returns. In addition,
the Requesting Party, at its expense, may make copies of any such records as may
be necessary or appropriate for the Requesting Party's use. Each party shall
maintain all such records in accordance with, and subject to all restrictions
imposed by, all laws, rules and regulations. Each party shall not destroy or
otherwise dispose of any of such records without prior notice to the other
party, which party shall have the option, at such party's expense, to take
possession of any such records which the other party elects to destroy or
otherwise dispose of. Any such access shall take place only during normal
business hours in such a manner as not to interfere unreasonably with the
operation of the business of the other party. Notwithstanding the foregoing,
Buyer shall preserve and protect all books, documents, papers, computer programs
and records pertaining in any manner to the administration by Seller of the
Federal student financial assistance programs pursuant to Title IV of the Higher
Education Act of 1965, as amended, for the period of time specified under
applicable law and regulation. Any document or other information obtained from a
party hereunder that is designated by such party as confidential shall be
maintained in confidence by the other party, except to the extent Seller is
20
required by law or regulation to disclose part or all of such documents or
information. Seller and Buyer agree that the books and records relating to the
School and the floral design program shall be maintained separate and apart from
the books and records relating to Buyer's allied health program and its other
operations until the date at which funds are first released from Escrow pursuant
to Section 2.2.1.
7.6 Substitution of Undertakings. As of the Closing, Buyer shall
----------------------------
substitute Buyer's undertaking, guarantee, bond or other commitment for each
undertaking, guarantee, bond or commitment, identified on Schedule 5.11, made by
-------------
Seller or any affiliate of Seller in favor of any governmental or quasi-
governmental entity in support of or relating to any permit, contract,
authorization, accreditation or license from any such governmental entity with
respect to the School, and upon Closing Buyer shall promptly take action and
make commercially reasonable efforts to obtain such substitutions.
ARTICLE VIII
CONDITIONS TO CLOSING; UNWINDING
8.1 Conditions Precedent to Obligations of Buyer. The obligation of
--------------------------------------------
Buyer to complete the purchase of Purchased Assets as provided for herein is
subject to the fulfillment or satisfaction on or before the Closing Date of each
of the conditions set forth below, any of which may be waived by Buyer in
writing.
8.1.1 All representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date (except to the extent such representations and warranties speak of
a particular date), and Buyer shall have received a certificate signed by an
executive officer of Seller to such effect;
8.1.2 Seller shall have performed in all material respects all
of the obligations, covenants and agreements contained in this Agreement (and
the Management Agreement) to be performed by Seller on or before the Closing
Date, and Buyer shall have received a certificate signed by an executive officer
of Seller to such effect;
8.1.3 All instruments and documents required on Seller's part to
effectuate and consummate the transactions contemplated hereby as of the
Closing, including those set forth in Section 3.2, shall be delivered by Seller
and shall be in form and substance reasonably satisfactory to Buyer and its
counsel; and
8.1.4 No order of any court or administrative agency shall be in
effect which restrains or prohibits the transactions contemplated hereby and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission, challenging any of the transactions
contemplated by this Agreement or seeking monetary relief by reason of the
consummation of such transactions; and
21
8.1.5 Seller shall have received from counsel for Seller the
opinion referenced in Section 3.2.4 above dated as of the Closing Date.
8.1.6 Seller shall have obtained all registrations, licenses,
permits and approvals required by any governmental entity or agency or other
regulatory body to operate the School in the State of Washington and all local
jurisdictions contained therein;
8.1.7 The School shall have received all required accreditation
approvals, including approval to teach a basic allied health curriculum similar
to that presently offered by Buyer;
8.1.8 Seller shall have provided evidence satisfactory to Buyer
that all debts incurred through the Closing Date, including lender payables,
regulatory fines, repayment, refunds, and all known obligations or liens have
been satisfied and paid in full or renegotiated to the mutual satisfaction of
Buyer and Seller; and
8.1.9 Buyer shall have received satisfactory evidence that all
liens on the Purchased Assets, including but not limited to UCC-1 Financing
Statement No. 00-000-0000 filed with the State of Washington Department of
Licensing in favor of Career Floral Design Institute, Inc., as secured party,
have been terminated and completely released of record.
8.2 Conditions Precedent to Obligations of Seller. The obligations
---------------------------------------------
of Seller to complete the sale of Purchased Assets as provided for herein are
subject to the fulfillment or satisfaction on or before the Closing Date of each
of the conditions set forth below, any of which may be waived by Seller in
writing.
8.2.1 All representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date (except to the extent such representations and warranties speak of
a particular date), and Seller shall have received a certificate signed by an
executive officer of Buyer to such effect;
8.2.2 Buyer shall have performed in all material respects all of
the obligations, covenants and agreements contained in this Agreement (and the
Management Agreement) to be performed by Buyer on or before the Closing Date,
and Seller shall have received a certificate signed by an executive officer of
Buyer to such effect;
8.2.3 All instruments and documents required on Buyer's part to
effectuate and consummate the transactions contemplated hereby including those
set forth in Section 3.3 shall be delivered by Buyer and shall be in form and
substance reasonably satisfactory to Seller and its counsel;
8.2.4 No order of any court or administrative agency shall be in
effect which restrains or prohibits the transactions contemplated hereby and
there shall not have been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other regulatory or
administrative agency or commission, challenging
22
any of the transactions contemplated by this Agreement or seeking monetary
relief by reason of the consummation of such transactions; and
8.2.5 Seller shall have received from counsel for Buyer the
opinion referenced in Section 3.3.4 above dated as of the Closing Date.
8.3 Unwinding the Transaction. Notwithstanding anything to the
-------------------------
contrary in this Agreement, it is the parties' express intention that all
transactions contemplated by this Agreement be unwound if subsequent to the
Closing ED denies approval of the School to teach the basic allied health
program currently offered by Buyer in other locations or determines that the
School (or such allied health program) will not be certified as eligible to
receive Title IV funds or if conditions to approval or certification are raised
by either ED, ACCSCT or WTECB, which conditions would be deemed unacceptable by
a reasonable buyer of the Purchased Assets. Accordingly, if such an event
occurs after the Closing, the parties shall take all actions necessary to return
the parties to their original status as if the Closing had not occurred and the
Purchased Assets had not been transferred. Seller shall immediately return to
Buyer all funds received hereunder (exclusive of any fees received pursuant to
the Management Agreement). Buyer shall transfer, assign and reconvey to Seller,
and Seller shall accept and assume from Buyer, all Purchased Assets and Assumed
Liabilities. Notwithstanding the foregoing, the parties agree that if the
transaction is unwound after the Closing pursuant to this Section 8.3 and Seller
has not obtained a restoration of its (or the School's) institutional
participation in Title IV funding within sixty (60) days following such
unwinding after Seller's having diligently pursued such restoration, Seller
shall be entitled to liquidated damages from Buyer in the amount of Fifteen
Thousand Dollars ($15,000), such damages being a reasonable estimate by both
parties of the financial risk and damages to Seller from such unwinding, the
true damages being incapable of calculation. The parties agree that the
indemnification provisions and governing procedures set forth in Article IX
shall continue in effect beyond any such "unwinding."
ARTICLE IX
MISCELLANEOUS
9.1 Binding Effect. All terms and provisions of this Agreement shall
--------------
be binding upon and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement, nor the obligations of either party hereunder, shall be
assignable or transferable by either such party without the prior written
consent of all parties hereto. If Buyer desires to assign its right to acquire
a portion of the School to an affiliated entity, Seller will consider such
request in good faith and will not unreasonably withhold its consent.
23
9.2 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be given or made by personal
delivery, by a nationally recognized courier service for overnight delivery or
by registered or certified mail, postage prepaid, return receipt requested,
addressed
if to Buyer, at:
Corinthian Schools, Inc.
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, President
with each such notice to Buyer, a copy to:
O'Melveny & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to Seller, at:
Repose, Inc.
Attention: Xxxxxx Xxxxxxx
00000 00xx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
with each such notice to Seller, a copy to:
Xxxx Xxxxxx Xxxxxxxx
0000 Xxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
or at such other place as the party to whom such notice of communication is to
be addressed may have designated to the other parties by notice conforming to
this Section 9.2. Notices shall be deemed effective and received (i) on the
actual receipt in the case of hand delivery, (ii) on the next business day after
deposit in the case of notices by nationally recognized overnight courier
services, or (iii) on the third business day after the date of mailing in the
manner set forth herein. As used herein, notice to a party shall include
concurrent notice to that party's counsel as set forth herein.
9.3 Entire Agreement. This Agreement and the documents referred to
----------------
herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations,
representations, warranties and discussions of the parties, whether oral or
written; and there are no warranties, representations or other agreements
between the
24
parties in connection with the subject matter hereof, except as specifically set
forth herein or therein. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
9.4 Nature and Survival of Representations. The representations,
--------------------------------------
warranties, covenants and agreements of Buyer and Seller contained in this
Agreement, and all statements contained in this Agreement or any Exhibit or
Schedule hereto or any certificate or financial statement delivered pursuant to
this Agreement shall be deemed to constitute representations, warranties,
covenants and agreements of the respective party delivering the same. All such
representations, warranties, covenants and agreements shall survive the Closing
hereunder but shall be subject to the limitations in Sections 9.12, 9.13, 9.14
and 9.15 hereof.
9.5 Risk of Loss or Damage; Insurance. It is understood and agreed
---------------------------------
that all right, title and interest in and to the Purchased Assets and all risk
of loss or damage thereto shall not pass from Seller to Buyer unless and until
the Closing occurs whereupon all risk of loss or damage shall pass to Buyer. In
the event of a casualty or condemnation in respect of the Purchased Assets prior
to the Closing, Buyer shall have the right, at its sole option, to elect to
either terminate this Agreement or to accept the insurance proceeds in respect
of such casualty or condemnation and proceed to close otherwise in accordance
with the terms and conditions of this Agreement. Seller agrees to maintain the
insurance currently carried with respect to the Purchased Assets until the
Closing.
9.6 Waiver. No waiver shall be deemed to have been made by any party
------
of any of its rights hereunder unless the same shall be in writing and shall be
signed by the waiving party. Such a waiver, if any, shall be a waiver only in
respect to the specific instance involved and shall in no way impair the rights
of the waiving party or the obligations of any other party in any other respect
at any other time.
9.7 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the substantive laws of the State of California without giving
effect to the principles of conflicts of law thereof.
9.8 Headings. The headings of the articles and sections of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
9.9 Counterparts. This Agreement may be executed by the parties in
------------
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.10 Severability. In the event that any one or more terms or
------------
provisions hereof shall be held void or unenforceable by any court or
arbitrator, all remaining terms and provisions hereof shall remain in full force
and effect.
25
9.11 Time is of the Essence. Seller and Buyer agree that time is of
----------------------
the essence in connection with the implementation and performance by the parties
of all terms, conditions and obligations of this Agreement.
9.12 Indemnification by Seller. Seller hereby indemnifies, defends
-------------------------
and holds harmless Buyer and its affiliates and their respective officers and
directors from and against:
(i) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any misrepresentation, breach of
warranty or nonfulfillment of any covenant or agreement on the part of Seller
contained in this Agreement or the Management Agreement or any other agreement,
statement or certificate furnished or to be furnished to Seller in connection
with the transactions contemplated hereby provided that notice of a claim
pursuant to this subsection 9.12(i) must be provided to Seller on or before the
three (3) year anniversary of the Closing Date;
(ii) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any claim related to or arising out
of Seller's operation of the School prior to the Closing Date that are asserted
with respect to any liabilities that are not Assumed Liabilities;
(iii) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from the Excluded Liabilities; and
(iv) any actions, judgments, costs and expenses (including
reasonable attorneys' fees, expert witness fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to any of the foregoing or the enforcement of this
Section 9.12.
9.13 Indemnification by Buyer. Buyer hereby indemnifies, defends and
------------------------
holds harmless Seller, and its affiliates and their respective officers and
directors from and against:
9.13.1 any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any misrepresentation, breach of
warranty or nonfulfillment of any covenant or agreement on the part of Buyer
contained in this Agreement, the Management Agreement or any other agreement,
statement or certificate furnished or to be furnished to Seller in connection
with the transactions contemplated hereby;
9.13.2 any loss, liability, claim, obligation, damage or
deficiency resulting from or arising out of the failure by Buyer to pay, perform
or discharge, or cause to be paid, performed or discharged, any of the Assumed
Liabilities; and
9.13.3 all actions, judgments, costs and expenses (including
reasonable attorneys' fees, expert witness fees and all other expenses incurred
in investigating, preparing or defending any litigation or proceeding, commenced
or threatened) incident to any of the foregoing or the enforcement of this
Section 9.13.
26
9.14 Limitations on Indemnification.
------------------------------
9.14.1 Threshold. Notwithstanding anything to the contrary
---------
herein, no claim for indemnification shall be made by any party against the
other party unless and until the claiming party has claims totalling at least
Five Thousand Dollars ($5,000.00) (the "Threshold Amount"); provided, however,
once the Threshold Amount has been met or surpassed, all indemnifiable claims
are recoverable hereunder with no deduction of the Threshold Amount.
9.14.2 Aggregate Recovery. Notwithstanding anything to the
------------------
contrary herein, absent fraud, and exclusive of loss or damage arising from or
related to the Excluded Liabilities, Seller's maximum aggregate liability
pursuant to Section 9.12 shall be Two Hundred Fifty Thousand Dollars ($250,000).
Notwithstanding anything to the contrary herein, absent fraud, Buyer's maximum
aggregate liability pursuant to Section 9.13 shall be Two Hundred Fifty Thousand
Dollars ($250,000).
9.15 Procedure for Indemnification.
-----------------------------
9.15.1 The provisions of this Section 9.15 shall govern any
claim for indemnification of Buyer, pursuant to Section 9.12, or of Seller,
pursuant to Section 9.13 (each such party an "Indemnitee") against the party
agreeing to provide indemnification hereunder (the "Indemnitor").
9.15.2 The Indemnitee shall promptly give notice hereunder to
the Indemnitor, after obtaining notice of any claim as to which recovery may be
sought against the Indemnitor because of the indemnity in Sections 9.12 or 9.13,
and, if such indemnity shall arise from the claim of a third party, the
Indemnitee shall consent to the Indemnitor assuming the defense of any such
claim; provided that the Indemnitee shall not be required to permit the
--------
Indemnitor to assume the defense of any third party claim (x) which, if not
first paid, discharged or otherwise complied with, would result in a material
interruption or cessation of the conduct of the business of the Indemnitee, or
(y) if the Indemnitee, reasonably concludes that there may be a conflict of
interest between the Indemnitor, on the one hand, and the Indemnitee, on the
other hand, in the conduct of the defense of such action. Failure by the
Indemnitor to notify the Indemnitee of its election to defend any such claim or
action within 14 days of the date of notice from the Indemnitee shall be deemed
to constitute its consent to the Indemnitee's assumption of such defense. If the
Indemnitor assumes the defense of such claim or litigation resulting therefrom,
the obligations of the Indemnitor hereunder as to such claim shall include
taking all steps necessary in the defense or settlement of such claim or
litigation resulting therefrom including the retention of counsel, which counsel
must be to the Indemnitee's reasonable satisfaction, and holding the indemnitee
harmless from and against any and all Damage resulting from, arising out of, or
incurred with respect to any settlement approved by the Indemnitor or any
judgment in connection with such claim or litigation resulting therefrom. The
Indemnitor shall not, in the defense of such claim or litigation, (i) consent to
the entry of any judgment (other than a judgment of dismissal on the merits
without costs) except with the written consent of the Indemnitee, which consent
shall not be unreasonably withheld or (ii) enter into any settlement (except
with the written consent of the Indemnitee, which consent shall not be
unreasonably withheld), unless the Indemnitee is released and held harmless from
and against
27
any and all Damages resulting from, arising out of or incurred with respect to
such judgment or settlement.
9.15.3 If the Indemnitor shall not assume the defense of any
such claim by a third party or litigation resulting therefrom, the Indemnitee
may defend against such claim or litigation in such manner as it deems
appropriate, and the Indemnitee may settle such claim or litigation on such
terms as it may deem appropriate and the Indemnitor shall promptly reimburse the
Indemnitee for the amount of such settlement and for all Damages incurred by the
Indemnitee in connection with the defense against or settlement of such claim or
litigation.
9.16 Dispute Resolution and Arbitration.
----------------------------------
9.16.1 Negotiation Between Executives. The parties shall attempt
------------------------------
in good faith to resolve any dispute arising out or relating to this Agreement
promptly by negotiation between executives who have authority to settle the
controversy and who are at a higher level of management (if any) than the
persons with direct responsibility for administration of this contract. Any
party may give the other party written notice of any dispute not resolved in the
normal course of business. Within 15 days after delivery of the notice the
receiving party shall submit to the other a written response. The notice and the
response shall include (i) a statement of each party's position and a summary of
arguments supporting that position, and (ii) the name and title of the executive
who represents that party and of any other person who will accompany the
executive. Within 10 days after delivery of the disputing party's notice, the
executives of both parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to attempt to resolve
the dispute. All reasonable requests for information made by one party to the
other will be honored. If the matter has not been resolved within 45 days of the
disputing party's notice, or if the parties fail to meet within 10 days, either
party may initiate arbitration of the controversy or claim as provided
hereinafter. All negotiations pursuant to this clause are confidential and shall
be treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence of California and other states' Rules of Evidence.
9.16.2 Arbitration. Any dispute arising out of or relating to
-----------
this contract or the breach, termination or the validity thereof, which has not
been resolved by the nonbinding meet and confer provisions provided in Section
9.16.1 within 90 days of the initiation of such procedure, shall be settled by
arbitration in accordance with the then-current End Dispute-Judicial Arbitration
and Mediation Services (JAMS) rules for arbitration of business disputes by a
sole arbitrator who shall be a former superior court or appellate court judge or
justice with significant experience in resolving business disputes. If
available, the arbitrator should have familiarity or experience in Title IV
funding matters. The arbitration shall be governed by the California Code of
Civil Procedure Section 1280 et seq. and the parties intend this procedure to be
------
specifically enforceable in accordance with such provisions. Judgment upon the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The place of arbitration shall be Orange County, California. THE
ARBITRATOR IS NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES
(INCLUDING REASONABLE ATTORNEYS FEES AND EXPERT WITNESS FEES) AND EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT TO RECOVER SUCH DAMAGES
28
(INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES) IN ANY FORUM. The arbitrator
may award equitable relief in those circumstances where monetary damages would
be inadequate. The arbitrator shall be required to follow the applicable law as
set forth in the governing law section of this Agreement.
9.16.3 Satisfaction of Damages. In the event that an arbitrator
-----------------------
awards Damages to Buyer hereunder, or Seller admits in writing liability for
Damages hereunder, and if there is then outstanding any amount owed by Buyer to
Seller hereunder, then the amount of such Damages shall first be satisfied by
offset against such outstanding amounts.
9.17 Third Party Beneficiaries. This Agreement shall be binding upon,
-------------------------
be enforceable against, and inure to the benefit of the parties and their
respective successors and permitted assigns; otherwise, this Agreement shall
not, and shall not be deemed to, inure to the benefit of or be enforceable by
any third party.
9.18 Mitigation of Losses. Losses for which any party is liable under
--------------------
this Article IX shall be subject to appropriate mitigation for actual recovery
from third parties, and the actual collection of insurance proceeds in respect
of the event or conditions giving rise to the recoverable loss.
29
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of this 20th day of March, 1996.
---- -----
"BUYER"
CORINTHIAN SCHOOLS, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
-------------------------
Name: Xxxxx X. Xxxxx
-----------------------
Title: President /CEO
----------------------
"SELLER"
REPOSE, INC.,
a Washington corporation
By:/s/ Xxxxxx X Xxxxxxx
------------------------
Name: XXXXXX X XXXXXXX
----------------------
Title: PRESIDENT
---------------------
CONSENT OF SPOUSES
Each of the undersigned executed this consent and agrees to be bound by
this Agreement in his capacity as spouse of the Seller's principals to the
extent he may have any community property or other interest in the assets of the
principals of the Seller or the Purchased Assets.
/s/ Xxxxx Xxxxxx /s/ Xxxxx Xxxxxxx
------------------- ----------------------
Xxxxx Xxxxxx Xxxxx Xxxxxxx
31
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of this ___ day of _____________, 1996.
"BUYER"
CORINTHIAN SCHOOLS, INC.,
a Delaware corporation
By: ________________________________
Name: ______________________________
Title: _____________________________
"SELLER"
REPOSE, INC.,
a Washington corporation
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
------------------------------
Title: President
-----------------------------
