AGREEMENT AND PLAN OF MERGER By and Among Liberty Partners Holdings 28 LLC, Teach Acquisition Corporation and Concorde Career Colleges, Inc. June 21, 2006
AGREEMENT
AND PLAN OF MERGER
By
and
Among
Liberty
Partners Holdings 28 LLC,
Teach
Acquisition Corporation
and
Concorde
Career Colleges, Inc.
June
21,
2006
057223.00125/11527213v.17
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TABLE
OF CONTENTS
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Page
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ARTICLE
I
DEFINITIONS1
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1.1 Defined
Terms.....................................................................................................................................................................................................................2
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1.2 Additional
Terms................................................................................................................................................................................................................2
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ARTICLE
II
TERMS OF THE
MERGER..................................................................................................................................................................................11
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2.1 The
Merger........................................................................................................................................................................................................................11
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2.2 Effective
Time....................................................................................................................................................................................................................11
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2.3 Closing................................................................................................................................................................................................................................11
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ARTICLE
III
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
COMPANY...................................................................12
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3.1 Certificate
of
Incorporation.............................................................................................................................................................................................12
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3.2 The
Bylaws........................................................................................................................................................................................................................12
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ARTICLE
IV
DIRECTORS AND OFFICERS OF THE SURVIVING
COMPANY...............................................................................................................12
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4.1 Directors.............................................................................................................................................................................................................................12
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4.2 Officers...............................................................................................................................................................................................................................12
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ARTICLE
V
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY SHARES
IN THE
MERGER.............................12
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5.1 Merger
Consideration......................................................................................................................................................................................................12
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5.2 Cancellation
of Company Shares and
Options.............................................................................................................................................................13
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5.3 Payment
for Company Shares and Options in the
Merger.........................................................................................................................................14
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5.4 Dissenting
Shares.............................................................................................................................................................................................................16
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5.5 Transfer
of Company Shares After the Effective
Time...............................................................................................................................................17
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5.6 Additional
Actions...........................................................................................................................................................................................................17
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ARTICLE
VI
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.............................................................................................................17
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6.1 Company
Shares...............................................................................................................................................................................................................17
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6.2 Capitalization.....................................................................................................................................................................................................................17
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6.3 Corporate
Organization, Qualification and
Power........................................................................................................................................................18
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6.4 Authorization
of Agreement and
Merger......................................................................................................................................................................18
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6.5 Enforceable
Agreement....................................................................................................................................................................................................19
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6.6 No
Conflicts, Violations, Breaches or
Defaults............................................................................................................................................................19
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6.7 Company
SEC
Reports.....................................................................................................................................................................................................20
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6.8 Financial
Statements; Accounting
Matters..................................................................................................................................................................21
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6.9 Proxy
Statement.................................................................................................................................................................................................................21
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6.10 Litigation..........................................................................................................................................................................................................................21
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6.11 Taxes.................................................................................................................................................................................................................................21
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6.12 Environmental
Laws and
Regulations.........................................................................................................................................................................24
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6.13 Compliance
with Applicable
Laws...............................................................................................................................................................................25
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6.14 Absence
of Certain
Changes........................................................................................................................................................................................25
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6.15 Title
to
Properties............................................................................................................................................................................................................26
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6.16 Real
Estate........................................................................................................................................................................................................................26
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6.17 Intangible
Assets............................................................................................................................................................................................................27
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6.18 Insurance..........................................................................................................................................................................................................................28
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6.19 Contract
Matters.............................................................................................................................................................................................................28
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6.20 Employee
Benefit
Plans..................................................................................................................................................................................................30
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6.21 Regulatory
Matters.........................................................................................................................................................................................................32
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6.22 Student
Financial Assistance
Programs......................................................................................................................................................................35
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6.23 Takeover
Statutes and
Provisions...............................................................................................................................................................................37
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6.24 Labor
Matters..................................................................................................................................................................................................................37
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6.25 Affiliate
Transactions.....................................................................................................................................................................................................37
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6.26 Broker’s
Fees...................................................................................................................................................................................................................38
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6.27 Opinions
of Financial
Advisors....................................................................................................................................................................................38
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ARTICLE
VII
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER
SUB.......................................................................................38
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7.1 Corporate
Organization, Qualification and
Power........................................................................................................................................................38
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7.2 Authorization
of Agreement and
Merger......................................................................................................................................................................38
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7.3 Enforceable
Agreement....................................................................................................................................................................................................38
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7.4 No
Conflicts, Violations, Breaches or
Defaults............................................................................................................................................................39
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7.5 Status
of Buyer; Control
Matters...................................................................................................................................................................................39
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7.6 Proxy
Statement.................................................................................................................................................................................................................40
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7.7 Financing............................................................................................................................................................................................................................40
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7.8 Broker’s
Fees.....................................................................................................................................................................................................................40
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ARTICLE
VIII
CONDUCT PENDING THE CLOSING AND
COVENANTS.......................................................................................................................41
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8.1 Conduct
of Business by
Company................................................................................................................................................................................41
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8.2 Acquisition
Proposals......................................................................................................................................................................................................43
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8.3 Stockholders’
Approval...................................................................................................................................................................................................44
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8.4 All
Reasonable
Efforts.....................................................................................................................................................................................................45
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8.5 Access
to/Confidentiality of
Information.....................................................................................................................................................................46
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8.6 Publicity..............................................................................................................................................................................................................................46
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8.7 Indemnification..................................................................................................................................................................................................................47
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8.8 Certain
Benefit
Plans........................................................................................................................................................................................................48
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8.9 Regulatory
and Other
Approvals...................................................................................................................................................................................48
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8.10 Stockholder
Litigation....................................................................................................................................................................................................49
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8.11 Supplemental
Disclosure...............................................................................................................................................................................................49
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8.12 Waiver..............................................................................................................................................................................................................................50
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ARTICLE
IX
CONDITIONS......................................................................................................................................................................................................50
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9.1 Conditions
to Each Party’s Obligation to
Close..........................................................................................................................................................50
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9.2 Additional
Conditions to the Obligations of Buyer and Merger Sub to
Close.......................................................................................................51
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9.3 Deliveries............................................................................................................................................................................................................................52
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9.4 Additional
Conditions to the Company’s Obligation to
Close..................................................................................................................................53
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9.5 Deliveries............................................................................................................................................................................................................................53
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ARTICLE
X
TERMINATION AND
REMEDIES....................................................................................................................................................................53
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10.1 Termination......................................................................................................................................................................................................................53
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10.2 Effect
of
Termination......................................................................................................................................................................................................55
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ARTICLE
XI
GENERAL
PROVISIONS....................................................................................................................................................................................56
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11.1 Expenses...........................................................................................................................................................................................................................56
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11.2 Nonsurvival.....................................................................................................................................................................................................................56
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11.3 Modification
or
Amendment.........................................................................................................................................................................................56
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11.4 Waiver..............................................................................................................................................................................................................................56
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11.5 Notices..............................................................................................................................................................................................................................57
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11.6 Governing
Law................................................................................................................................................................................................................58
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11.7 Entire
Agreement............................................................................................................................................................................................................58
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11.8 Binding
Effect..................................................................................................................................................................................................................58
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11.9 Assignment......................................................................................................................................................................................................................58
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11.10 Counterparts..................................................................................................................................................................................................................58
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11.11 Severability....................................................................................................................................................................................................................58
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LIST
OF EXHIBITS
Exhibit
1.1 Form of Escrow Agreement
Exhibit
2.2 Form of Certificate of Merger
Exhibit
3.1 Form of Certificate of Incorporation of the Surviving Company
LIST
OF SCHEDULES
Company
Disclosure Schedule
Buyer
Disclosure Schedule
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is made and entered into as of June 21, 2006,
by
and among LIBERTY PARTNERS HOLDINGS 28 LLC, a
Delaware limited liability company (the “Buyer”),
Teach
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary
of
Buyer (the “Merger
Sub”),
and
CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the “Company”).
RECITALS
A. The
Board
of Directors of the Buyer has determined that it is in the best interests
of its
stockholders that Merger Sub be merged with and into the Company and, to
that
end, has approved the merger of Merger Sub with and into the Company in
accordance with the laws of the State of Delaware and the provisions of
this
Agreement (as hereinafter defined).
B. As
a
condition and an inducement to Buyer and Merger Sub entering into this
Agreement
and incurring the obligations set forth herein, concurrently with the execution
and delivery of this Agreement, Buyer is simultaneously entering into Stock
Voting Agreements with certain stockholders of the Company, who, collectively,
hold an aggregate of approximately thirty five percent (35%) of the voting
power
of the outstanding shares of the Company Stock (as hereinafter defined)
(the
“Voting
Agreements”).
C. The
Board
of Directors of the Company has determined that it is in the best interests
of
its stockholders that Merger Sub be merged with and into the Company and,
to
that end, has approved the merger of Merger Sub with and into the Company
in
accordance with the laws of the State of Delaware and the provisions of
this
Agreement and the Voting Agreements, including for purposes of rendering
the
restrictions of Section 203 of the Delaware General Corporation Law inapplicable
to this Agreement, the Voting Agreements, the Merger (as
hereinafter defined) and
the
other transactions contemplated hereby and thereby, and has unanimously
recommended that this Agreement and the transactions contemplated thereby
be
approved by the Company’s stockholders.
D. Buyer,
Merger Sub and the Company desire to make certain representations, warranties
and agreements in connection with, and establish certain conditions precedent
to, the Merger.
AGREEMENT
In
consideration of the mutual agreements, promises and covenants set forth
herein
and the recitals set forth above, and other good and valuable consideration,
the
receipt and adequacy of which are acknowledged, the parties hereto, intending
to
be legally bound, agree as follows.
1
ARTICLE
I
DEFINITIONS
1.1 Defined
Terms. As
used
herein, the following capitalized terms have the following
meanings:
ABHES:
Accrediting Bureau of Health Education Schools.
ACCSCT:
Accrediting
Commission of Career Schools and Colleges of Technology.
Accrediting
Body:
Any
non-governmental entity or organization that has been recognized by the
DOE as a
reliable authority as to the quality of training offered by “institutions of
higher education,” “proprietary institutions of higher education,” or
“educational programs”(as those terms are defined by the DOE) under 34 C.F.R.
Part 602 as promulgated by the DOE, including the ACCSCT, the ▇▇▇ and the
ABHES.
Acid
Test Ratio:
A
fraction, the numerator of which is the Quick Assets, and the denominator
of
which is the Current Liabilities.
Acquisition
Proposal:
Any
proposal
or offer with respect to a merger, reorganization, recapitalization, share
exchange, consolidation, sale, purchase, tender offer, exchange offer or
similar
transaction involving any class of equity securities (or any securities
exercisable or exchangeable for or convertible into such equity securities)
issued by the Company or any of its Subsidiaries, or any of the Company’s or any
such Subsidiary’s assets.
Additional
Agreements:
Those
agreements listed in this Agreement and attached hereto, either as of the
date
hereof or, subject to the mutual agreement of the parties, prior to Closing,
as
exhibits and incorporated herein by reference, including the Paying Agent
Agreement and Voting Agreements, as well as all assignments and ancillary
agreements necessary to effectuate the Merger.
Affiliate:
Any
Person that directly, or indirectly through one or more intermediaries,
controls
or is controlled by or is under common control with the Person specified.
For
purposes of this definition, control of a Person means the power, direct
or
indirect, to direct or cause the direction of the management and policies
of
such Person whether by contract or otherwise, and in any event and without
limitation of the previous sentence, any Person beneficially owning ten
percent
(10%) or more of the voting securities of a second Person shall be deemed
to
control that person.
Agreement:
This
Agreement and Plan of Merger, including the preamble, recitals, exhibits
and
schedules hereto, all of which are hereby incorporated herein by reference
and
made a part hereof.
Buyer:
See the
preamble to this Agreement.
2
Buyer
Disclosure Schedule:
That
schedule from Buyer to the Company to be delivered upon the execution of
this
Agreement, and updated, subject to the approval of the Company, and redelivered
at Closing, which sets forth certain disclosures concerning Buyer and its
business.
Buyer
Material Adverse Effect:
Any
change, event, occurrence or state of facts which materially and adversely
affects, or which would reasonably be expected to materially and adversely
affect, the ability of Buyer to consummate the Transactions.
Certificates:
Certificates representing Company Shares.
Certificate
of Merger:
The
document to be prepared by the parties hereto, in substantially the form
attached hereto as Exhibit 2.2,
in
compliance in all respects with the requirements of the DGCL and the provisions
of this Agreement and which shall be filed with the Secretary of State
of the
State of Delaware.
Closing:
A
meeting for the purpose of concluding the Transactions to be held at the
place
and on the date fixed in accordance with Section 2.3.
Code:
The
Internal Revenue Code of 1986, as amended.
▇▇▇:
Council
on Occupational Education.
Commercially
Reasonable Efforts:
Efforts
which are reasonably within the contemplation of the Parties at the time
of
entering into this Agreement and which do not require the performing Party
to
expend funds other than expenditures which are customary and reasonable
in
transactions of the kind and nature contemplated by this Agreement in order
for
the performing Party to satisfy its obligations hereunder.
Company:
See the
preamble to this Agreement.
Company
Benefit Plan:
Any
employee benefit plan as defined in Section 3(3) of ERISA, any “voluntary
employees’ beneficiary association” within the meaning of Section 501(c)(9) of
the Code, “welfare benefit fund” within the meaning of Section 419 of the Code,
or “qualified asset account” within the meaning of Section 419A of the Code, and
any other plan, program, policy or arrangement for or regarding bonuses,
commissions, incentive compensation, severance, vacation, deferred compensation,
pensions, profit sharing, retirement, payroll savings, stock options, stock
purchases, stock awards, stock ownership, phantom stock, stock appreciation
rights, equity compensation, medical/dental expense payment or reimbursement,
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature, sponsored,
maintained, contributed to or to which there is an obligation to contribute
by
the Company, its Subsidiaries, or any ERISA Affiliate, for the benefit
of any
current or former employee or director of the Company, or any of its
Subsidiaries or any ERISA Affiliate.
Company
Disclosure Schedule:
That
schedule from the Company to Buyer and the Merger Sub to be delivered upon
the
execution of this Agreement, and, subject to the prior written approval
of
Buyer, updated and redelivered at the Closing, which sets forth certain
disclosures concerning the Company and its business.
3
Company
Material Adverse Effect:
Any
change, event, occurrence or state of facts which materially and adversely
affects, or which would reasonably be expected to materially and adversely
affect, (a) the ability of the Company to consummate the Transactions,
(b) the
ability of the Surviving Company to participate in the Title IV Programs
following the date of the Closing, or (c) the results of operations, financial
condition, assets, liabilities, properties or business of the Company and
its
Subsidiaries, taken as a whole, other than any change or effect (i) to the
extent due to changes in the U.S. economy or financial markets generally,
(ii) to the extent due to changes in the industry in which the Company
operates that affect all Persons active in such industry substantially
in the
same manner and to the same extent or (iii) arising out of or as a result
of the public announcement of the Transactions.
Company
SEC Reports:
The
forms, reports and documents filed by the Company with the SEC since
January 1, 2000.
Company
Share Consideration:
The
aggregate amount of cash consideration to be paid to all holders of Company
Shares upon the effectiveness of the Merger, pursuant to
Section 5.1(a).
Company
Shares:
The
Company Stock issued and outstanding immediately prior to the Effective
Time.
Company
Stock:
The
authorized shares of common stock, $.10 par value per share, of the
Company.
Company’s
Stockholder Meeting:
The
meeting of the stockholders of the Company to be held as promptly as reasonably
practicable after the date hereof for the purpose of voting upon the approval
and adoption of this Agreement and the Transactions.
Covered
Expenses:
Fees,
costs, expenses (including fees and expenses of legal counsel, accountants,
consultants, appraisers, lenders, advisors, and other representatives and
third
party vendors) incurred by either the Company or Buyer in connection with
or
relating to any evaluation (including Buyer’s due diligence investigation of the
Company), pursuit and consummation of the Transactions, whether or not
consummated.
Current
Liabilities:
The sum
of the
Company’s current liabilities, including accrued liabilities, student deposits,
prepaid and unearned tuition and fees (current and non-current), in each
case
determined in accordance with U.S. GAAP.
DGCL:
The
General Corporation Law of the State of Delaware, as amended.
4
Dissenting
Shares:
Company
Shares which are held by stockholders who have properly exercised and perfected,
or are in the process of perfecting, appraisal rights under Section 262 of
the DGCL.
DOE:
The
U.S. Department of Education.
Educational
Agency:
Any
Person, whether governmental, government chartered, tribal, private or
quasi-private, that engages in granting or withholding Educational Approvals
for
or otherwise regulates private postsecondary schools in accordance with
standards relating to the performance, operation, financial condition,
or
academic standards of such schools, including any Accrediting Body, the
DOE, any
State Educational Agency, any student loan guaranty agency, the U.S. Department
of Veterans Affairs and any state approving agency for veterans education
training benefits.
Educational
Approval:
Any
license, permit, authorization, certification, accreditation, program
participation agreement or similar approval issued by any Educational Agency
to
the Company, any Institution or any School, including any such approval
required
for participation in any Student Financial Assistance Program.
Effective
Time:
The
date and time at which the Certificate of Merger has been duly filed with
the
Secretary of State of the State of Delaware or such other time as is agreed
upon
by the Parties and specified in the Certificate of Merger.
Employees:
Any and
all individuals employed by the Company or any of its Subsidiaries.
Environmental
Claim:
Any
action, cause of action, claim, investigation, demand or notice by any
Person
alleging liability or potential liability under, or non-compliance with,
any
Environmental Law.
Environmental
Law:
All
Laws, Permits, Judgments of any Government Authority, and agreements with
any
Governmental Authority or other Person, including real property leases,
in each
case, as amended from time to time, (a) relating to pollution or protection
of
the environment, natural resources or human health and safety (including
worker
health and safety), including Laws relating to Releases or threatened Releases
of Hazardous Substances or otherwise relating to the manufacture, formulation,
generation, processing, distribution, use, treatment, storage, disposal,
Release
(as hereinafter defined), transport, arrangement for transport for disposal
or
treatment, arrangement for disposal or treatment, remediation, abatement,
cleanup or handling, presence of or exposure to Hazardous Substances, (b)
with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances and (c) relating to the management, use,
restoration, or compensation for lost use of or damage to natural
resources.
ERISA:
The
Employee Retirement Income Security Act of 1974, as amended.
5
ERISA
Affiliate:
Any
trade or business, whether or not incorporated that together with the Company
or
any of its Subsidiaries would be deemed a “single employer” within the meaning
of Section 4001(b)(1) of ERISA or Section 414(m) or (o) of the
Code.
Escrow
Agent:
Citibank, N.A., or such other escrow agent selected by Buyer and reasonably
acceptable to the Company.
Escrow
Agreement:
The
escrow agreement, substantially in the form of Exhibit 1.1, to be entered
into
pursuant to Section 5.3(f).
Exchange
Act:
The
Securities Exchange Act of 1934, as amended.
Governmental
Authority:
The
U.S. or any national, state, county, municipal, local or foreign government,
and
any governmental court, agency, bureau, commission, authority or executive,
legislative or judicial body, but excluding any Educational Agency.
Hazardous
Substance:
Any
waste, material or substance listed, defined, regulated designated or classified
as a “pollutant or contaminant,” hazardous, toxic, radioactive or a special
waste under any applicable Environmental Law, including petroleum and any
derivative or by-products thereof, asbestos or asbestos-containing materials,
PCBs, urea formaldehyde, mold, fungi and similar organisms.
HSR
Act:
The
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the
rules
and regulations thereunder.
Institution:
A group
of one or more Schools, consisting of a main campus and any additional
locations
or branches thereof, identified by a single six-digit Office of Postsecondary
Education Identification (OPEID) number by the DOE.
Intangible
Assets:
Any and
all (a) inventions (whether patentable or unpatentable or whether or not
reduced to practice), improvements thereto, and U.S. and foreign patents,
patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof; (b) trade names, trade dress, logos, slogans, symbols, corporate
names, internet domain names, trademarks and service marks and all registration
applications, registrations and renewals in connection therewith and all
goodwill associated therewith; (c) copyrights and all registration
applications, registrations and renewals in connection therewith and all
derivatives and combinations thereof; (d) domain name registrations,
registrations of Uniform Resource Locators (URLs) or other internet addresses;
(e) computer software and databases (including data and related
documentation); (f) trade secrets and confidential or proprietary business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals);
(g) curricula, course materials, instructional video tapes, tape recordings
and visual aids and (h) copies and tangible embodiments of the foregoing
(in whatever form of medium) and all files relating thereto.
6
IRS:
The
U.S. Internal Revenue Service.
Judgment:
Any
judgment, writ, injunction, order or decree of or by any court, judge,
justice
or magistrate, including any bankruptcy court or judge, having appropriate
jurisdiction, and any adjudicative order of or by any Governmental
Authority.
Knowledge:
The
phrase “to the Knowledge of the Company,” or phrases of similar import, shall
mean the actual knowledge of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇
after due inquiry of individuals responsible for such matters at the Company
and
its Subsidiaries, including ▇▇▇▇ ▇▇▇▇▇▇, the Company’s Campus Presidents and
Regional Directors of Operations, and the phrase “to the Knowledge of Buyer,” or
phrases of similar import, shall mean the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
after due inquiry of individuals responsible for such matters at Buyer
and its
Affiliates set forth in Section 7.5 of the Buyer Disclosure Schedule.
Law:
The
common law and any U.S. federal, state, local or foreign statute, law,
ordinance, code or other law, rule, regulation, code, Permit, order, judgment,
requirement or procedure enacted, adopted, promulgated, applied or followed
by
any Governmental Authority.
Lien:
Any
mortgage, pledge, security interest, option, charge, claim, lien or encumbrance
of any kind, which (a) creates or confers an interest in property to secure
payment or performance of a liability, obligation or claim, or which retains
or
reserves such an interest for such purpose; (b) grants to any Person the
right to purchase or otherwise acquire, or obligates any Person to sell
or
otherwise dispose of, or otherwise results or may result in any Person
acquiring, any property or interest in property; (c) restricts the transfer
of, or the exercise of any rights in or the enjoyment of any benefits arising
by
reason of ownership of, any property or (d) otherwise constitutes an
interest in, or claim against, property, whether arising pursuant to any
Law,
including Environmental Law, Judgment or any binding contract.
Merger:
The
merger of Merger Sub into and with the Company at Closing, as set forth
in
Section 2.1.
Merger
Consideration:
The
aggregate amount of cash consideration to be paid to the holders of Company
Shares and Options in an amount that is equal to the sum of the Company
Share
Consideration plus the Option Settlement Amount.
Merger
Payment Fund:
That
amount of cash equal to the Merger Consideration, which shall be delivered
by
Buyer to the Paying Agent pursuant to the Paying Agent Agreement.
Merger
Sub:
See the
preamble to this Agreement.
7
Option:
Each
option to purchase Company Stock issued pursuant to any of the Company’s Option
Plans outstanding immediately prior to the Effective Time.
Option
Cancellation and Termination Acknowledgement:
An
acknowledgement and release to be delivered by holders of Options, as set
forth
in Section 5.3(c).
Option
Plans:
The
Company’s 2003 Long-Term Executive Compensation Plan, the Company’s 2002
Long-Term Executive Compensation Plan, the Company’s 2000 Long-Term Executive
Compensation Plan, the Company’s 1998 Long-Term Executive Compensation Plan, the
Company’s Second Amended and Restated 1988 Incentive Stock Option Plan and the
Company’s Board of Directors Non-Qualified Stock Option Grants listed on Section
6.2 of the Company Disclosure Schedule.
Option
Settlement Amount: The
aggregate amount of cash consideration to be paid to directors, officers
and
Employees of the Company holding Options in exchange for cancellation of
such
Options, as set forth in Section 5.1(b).
Party:
The
Company, Merger Sub or Buyer.
Paying
Agent:
UMB
Bank, n.a., which shall act as paying agent in connection with payment
of the
Merger Consideration, or such other paying agent selected by Buyer and
reasonably acceptable to the Company for the benefit of the holders of
Company
Shares and Options.
Paying
Agent Agreement:
The
agreement between Buyer and the Paying Agent to be entered into for the
benefit
of the stockholders and holders of Options of the Company to provide for
the
payment of the Merger Consideration and the management of the Merger Payment
Fund, pursuant to Section 5.3.
Permit:
Any
license, certificate, filing, franchise, registration, notice, permit,
approval,
finding of suitability, consent, clearance, waiver, exemption, order,
authorization, application, right or privilege of any nature, required,
granted,
issued, approved or allowed by any Governmental Authority.
Person:
Any
natural person, corporation, general or limited partnership, limited liability
company, joint venture, estate, trust, association, unincorporated entity
of any
kind, Governmental Authority or other entity of any kind or nature.
PPPA:
A
provisional program participation agreement issued by the DOE to any Institution
pursuant to Title IV.
Preferred
Stock:
The
authorized shares of preferred stock, $.10 par value per share, of the
Company.
Proceeding:
Any
suit, action, litigation, arbitration, administrative hearing or other
judicial,
administrative or regulatory proceeding.
8
Proxy
Statement:
The
proxy statement and form of proxy in connection with the vote of the
stockholders of the Company with respect to the Merger and this Agreement
together with any amendments thereof or supplements thereto in the form
mailed
to the Company’s stockholders.
Quick
Assets:
An
amount equal to the sum of the Company’s cash and cash equivalents plus current
accounts receivable net of related allowances and write-offs.
Representatives:
Officers, employees, legal counsel, financial advisors, accountants or
other
authorized representatives of any of the Parties to be provided access
to
information pursuant to Section 8.5.
School:
Any
school location, including those listed on Section 6.21(b)(iii) of the
Company Disclosure Schedule, regulated as such by any Educational Agency
and
owned or operated by the Company or any of its Subsidiaries or Buyer or
any of
its Subsidiaries, as applicable.
SEC:
The
U.S. Securities and Exchange Commission.
Securities
Act:
The
Securities Act of 1933, as amended.
State
Educational Agency:
Any
state educational licensing body that provides any license, permit,
certification or other authorization necessary for any Institution or School
to
provide postsecondary education or any educational program in that state.
Student
Financial Assistance Program:
Any
program of federal student financial assistance administered pursuant to
Title
IV and its implementing regulations promulgated by the DOE, as well as
any state
or other government-sponsored student assistance programs.
Subsidiary:
In
reference to any entity, any corporation or other entity, a majority of
the
outstanding voting securities of which are owned directly or indirectly
by such
entity.
Superior
Proposal:
Any
unsolicited written bona fide
Acquisition Proposal made by a third party to acquire all of the issued
and
outstanding Company Stock, or all or substantially all of the Company’s assets,
on terms which the Board of Directors of the Company determines in good
faith,
after consultation with its financial advisor, to be more favorable from
a
financial point of view to the Company and its stockholders (including
taking
into account the financing thereof) than the Transactions.
Surviving
Company:
The
Company, as the survivor of the Merger, as set forth in
Section 2.1.
Tax:
(a) Any
foreign, federal, state or local income, earnings, profits, gross receipts,
franchise, capital stock, net worth, sales, use, value added, occupancy,
general
property, real property, personal property, intangible property, transfer,
fuel,
excise, escheat, unclaimed property, payroll, withholding, unemployment
compensation, social security, retirement, environmental (including any
Taxes
imposed under Section 59A of the Code) or other tax of any nature; (b)
any
foreign, federal, state or local organization fee, qualification fee, annual
report fee, filing fee, occupation fee, assessment, sewer rent or other
fee or
charges of any nature; or (c) any deficiency, interest or penalty imposed
with
respect to any of the foregoing.
9
Tax
Return:
Any
return (including any information return), report, statement, schedule,
notice,
form, declaration, claim for refund or other document or information filed
with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection
or
payment of any Tax or in connection with the administration, implementation
or
enforcement of or compliance with any law relating to any Tax, including
any
amendment thereto.
Title
IV:
Title
IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.),
as
amended, and any amendments or successor statutes thereto.
Title
IV Program:
Any
program of student financial assistance authorized pursuant to Title
IV.
TPPPA:
A
temporary provisional program participation agreement issued by the DOE
to any
Institution pursuant to Title IV.
Transactions:
The
transactions contemplated by this Agreement, including the Merger and those
contemplated by the Additional Agreements.
U.S.:
United
States of America.
U.S.
GAAP:
Generally accepted accounting principles as in effect in the U.S.
Voting
Agreements:
See the
recitals to this Agreement.
1.2 Additional
Terms. Terms
not
set forth in Section 1.1, but otherwise defined in the body of this
Agreement, shall have the specific meanings attributed to them in the text.
In
construing this Agreement, the following principles shall be
followed:
(a) the
terms
“herein,” “hereof,” “hereby,” “hereunder” and other similar terms refer to this
Agreement as a whole and not only to the particular Article, Section or
other
subdivision in which any such terms may be employed;
(b) except
as
otherwise set forth herein, references to Articles, Sections, schedules,
exhibits and other subdivisions, subsections or clauses refer to the Articles,
Sections, schedules, exhibits and other subdivisions, subsections or clauses
of
this Agreement;
(c) a
reference to any Person shall include such Person’s predecessors;
10
(d) unless
otherwise set forth herein, all accounting terms have the meanings assigned
to
them in accordance with U.S. GAAP;
(e) no
consideration shall be given to the captions of the Articles, Sections,
schedules, exhibits, subdivisions, subsections or clauses, which are inserted
for convenience in locating the provisions of this Agreement and not as
an aid
in its construction;
(f) the
words
“includes” and “including” and their syntactical variants mean “includes, but is
not limited to” and “including, without limitation,” and corresponding
syntactical variant expressions;
(g) unless
otherwise set forth herein, a defined term has its defined meaning throughout
this Agreement, regardless of whether it appears before or after the place
in
this Agreement where it is defined;
(h) the
plural shall be deemed to include the singular and vice versa; and
(i) the
term
“dollars” and the symbol “$” refer to the lawful currency of the
U.S.
ARTICLE
II
TERMS
OF THE MERGER
2.1 The
Merger. Upon
the
terms and subject to the conditions of this Agreement, at the Effective
Time,
the Company and Merger Sub shall consummate the Merger in which (a) Merger
Sub shall be merged with and into the Company in accordance with the DGCL,
(b) the separate existence of Merger Sub shall thereupon cease,
(c) the Company shall be the survivor of the Merger and, as the Surviving
Company, shall continue its corporate existence under the DGCL as a wholly
owned
subsidiary of Buyer, retaining its corporate name, and its other rights,
privileges, immunities, powers and franchises, unaffected by the Merger,
and
shall assume all the rights and obligations of Merger Sub. The Merger shall
have
the effects set forth in the DGCL.
2.2 Effective
Time.
Subject to the terms and conditions of the Agreement, the Parties shall
prepare
and execute a Certificate of Merger substantially in the form of Exhibit 2.2,
attached hereto. The Certificate of Merger shall be filed on the date of
Closing
(or such other date as agreed by Buyer and the Company) with the Secretary
of
State of the State of Delaware in the manner provided in the DGCL and the
Merger
shall be effective at the Effective Time.
2.3 Closing.
Unless this Agreement shall have been terminated in accordance with Section
10.1, the Closing of the Merger shall occur at the offices of Blank Rome
LLP,
The Chrysler Building, 42nd
Street
and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, commencing at 10:00 A.M.,
local
time, on the third business day following the date on which the last of
the
conditions set forth in Article IX hereof shall have been fulfilled or
waived (other than those conditions that by their nature are to be satisfied
at
the Closing) subject to the terms and conditions of the Agreement, or at
such
other place, time and date as Buyer and the Company may agree in
writing.
11
ARTICLE
III
CERTIFICATE
OF INCORPORATION AND
BYLAWS
OF THE SURVIVING COMPANY
3.1 Certificate
of Incorporation. At
the Effective Time and in accordance with the DGCL, the Certificate of
Incorporation of the Company shall be amended and restated in its entirety
in
the Merger by adoption of the Certificate of Incorporation attached as
Exhibit 3.1
hereto,
and such Certificate of Incorporation shall become the Certificate of
Incorporation of the Surviving Company and thereafter may be amended or
repealed
in accordance with its terms and as provided by applicable Law.
3.2 The
Bylaws. At
the Effective Time and without any further action on the part of the Surviving
Company, Buyer, or Merger Sub, the Bylaws of Merger Sub in effect prior
to the
Effective Time shall be the Bylaws of the Surviving Company and thereafter
may
be amended or repealed in accordance with their terms, the Certificate
of
Incorporation of the Surviving Company and as provided by applicable
Law.
ARTICLE
IV
DIRECTORS
AND OFFICERS OF
THE
SURVIVING COMPANY
4.1 Directors. The
directors of Merger Sub at the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Company until their successors
have been duly elected or appointed and qualified or until their earlier
death,
resignation or removal, all in accordance with the Surviving Company’s
Certificate of Incorporation and Bylaws.
4.2 Officers. The
officers of the Company at the Effective Time shall, from and after the
Effective Time, be the officers of the Surviving Company until their successors
have been duly elected or appointed and qualified or until their earlier
death,
resignation or removal, all in accordance with the Surviving Company’s
Certificate of Incorporation and Bylaws.
ARTICLE
V
MERGER
CONSIDERATION; CONVERSION OR
CANCELLATION
OF COMPANY SHARES IN THE MERGER
5.1 Merger
Consideration. The
Merger Consideration shall be $114,528,168 (assuming the issuance prior
to the
Effective Time of 1,500 Company Shares as permitted under Section 8.1(a)),
as
more particularly described below:
(a) Subject
to the terms and conditions of this Agreement, at the Effective Time by
virtue
of the Merger and without any action on the part of the holder thereof,
the
Company, Buyer or Merger Sub, each Company Share, other than Dissenting
Shares,
treasury shares or Company Shares owned by Buyer, or any direct or indirect
wholly owned Subsidiary of Buyer, shall be cancelled as set forth in Section
5.2
and shall be converted into the right to receive an amount to be paid in
cash
equal to Nineteen and 80/100 Dollars ($19.80) per Company Share (“Per
Share Company Share Consideration”),
without interest thereon, upon surrender of the Certificate representing
such
Company Share, in accordance with Section 5.3.
12
(b) Subject
to the terms and conditions of this Agreement, at the Effective Time each
Option
shall be cancelled as set forth in Section 5.2 and each Option with respect
to
each share of Company Stock issuable upon the exercise thereof shall be
converted into the right to receive an amount to be paid in cash equal
to the
amount, if any, by which (i) the Per Share Company Share Consideration
exceeds
(ii) the applicable exercise price payable upon exercise of such Option
with
respect to such share of Company Stock.
(c) Notwithstanding
Section 5.1(b), if it is determined that compliance with any of the foregoing
would cause any individual subject to Section 16 of the Exchange Act to
become
subject to the profit recovery sections thereof, any Options held by such
individual shall be repurchased by the Company immediately prior to the
Effective Time, as previously authorized by the Board of Directors of the
Company, for cash in an amount equal to the amount that such individual
would,
but for this provision, have been entitled to receive in connection with
the
Merger pursuant to Section 5.1(b).
5.2 Cancellation
of Company Shares
and
Options.
(a) All
Company Shares, by virtue of the Merger and without any action on the part of
the holder thereof, the Company, Buyer or Merger Sub, shall cease to be
outstanding, be automatically canceled and cease to exist, and each holder
of a
Certificate shall thereafter cease to have any rights with respect to such
Company Shares, except the right to receive for each of the Company Shares,
upon
the surrender of such Certificate in accordance with Section 5.3, the Per
Share Company Share Consideration.
(b) At
the
Effective Time, each Company Share that is held by the Company as treasury
stock
or held by Buyer or any direct or indirect wholly owned Subsidiary of Buyer,
immediately prior to the Effective Time shall, by virtue of the Merger
and
without any action on the part of the holder thereof, the Company, Buyer
or
Merger Sub, cease to be outstanding, be automatically canceled and cease
to
exist without payment of any consideration therefore.
(c) As
of the
Effective Time, the Company shall cause all Option Plans to terminate and
any
rights under any provision of any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the Company
Stock,
any other capital stock of the Company or the capital stock of any of the
Company’s Subsidiaries shall be automatically canceled.
(d) At
the
Effective Time, each Option shall cease to be outstanding, be automatically
canceled and cease to exist, and each Option shall only entitle the holder
thereof to the payment set forth in Section 5.1(b).
Prior
to the Effective Time, the Company shall use its Commercially Reasonable
Efforts, subject to the terms of the Option Plans, including satisfying
any
applicable notice requirements, to cancel any outstanding Options effective
at
and as of the Effective Time, without any payment therefore except as set
forth
in Section 5.1(b).
(e) Stock
of Merger Sub.
Each
share of common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of
the
Merger, be converted into and become one duly authorized, validly issued,
fully
paid and nonassessable share of common stock, par value $.01 per share,
of the
Surviving Company. Following the Effective Time, each certificate evidencing
ownership of shares of Merger Sub common stock shall evidence ownership
of such
shares of the Surviving Company.
13
5.3 Payment
for Company Shares and Options in the Merger.
The manner of making payment for Company Shares and Options in the Merger
shall
be as follows:
(a) At
the
Effective Time, subject to Section 5.3(f), pursuant to the Paying Agent
Agreement, Merger Sub shall make available, or shall cause to be made available,
to the Paying Agent, (i) the Company Share Consideration payable pursuant
to Section 5.1(a), and (ii) the Option Settlement Amount payable pursuant
to Section 5.1(b), which cash amount shall constitute the Merger Payment
Fund.
Pursuant to the terms of the Paying Agent Agreement, the Merger Payment
Fund
shall be invested by the Paying Agent, as directed by the Buyer, so long
as such
directions do not impair the rights of the holders of Company Shares or
Options,
in direct obligations of the U.S., obligations for which the full faith
and
credit of the U.S. is pledged to provide for the payment of principal and
interest, commercial paper rated the highest quality by ▇▇▇▇▇’▇ Investors’
Services or Standard & Poor’s Corporation, or certificates of deposit issued
by a commercial bank having at least $1,000,000,000 of positive net worth;
and
any net earnings with respect thereto shall be paid to the Surviving Company
as
and when requested by the Surviving Company. The Paying Agent shall, pursuant
to
irrevocable instructions, make the payments provided for in this
Section 5.3 out of the Merger Payment Fund. At any time after the Effective
Time, upon notice from the Surviving Company that a stockholder has properly
dissented, demanded payment of the fair value of his/her/its shares and
otherwise properly perfected his/her/its appraisal rights under Section
262 of
the DGCL, the Paying Agent shall promptly repay to the Surviving Company
from
the Merger Payment Fund an amount equal to the product of (A) the number
of
Dissenting Shares held by such stockholder and (B) the Per Share Company
Share Consideration. The Merger Payment Fund shall not be used for any
purpose
other than as described herein.
(b) Promptly
after the Effective Time, the Paying Agent shall mail to each holder of
record
of a Certificate or Certificates (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title
to the
Certificates shall pass, only upon proper delivery of the Certificates
to the
Paying Agent) and (ii) instructions for use in effecting the surrender of
the Certificates for payment therefore. Upon surrender of Certificates
to the
Paying Agent, together with such letter of transmittal duly executed and
any
other required documents, the holder of such Certificates shall be entitled
to
receive for each of the Company Shares represented by such Certificates
from the
Merger Payment Fund an amount equal to the Per Share Company Share
Consideration. After the Effective Time and until so surrendered, such
Certificates shall represent solely the right to receive an amount equal
to the
Per Share Company Share Consideration with respect to each of the Company
Shares
represented thereby. No interest shall be paid or accrue on the amount
of the
Company Share Consideration payable upon surrender of the Certificates.
If any
payment of the Company Share Consideration from the Merger Payment Fund
is to be
made to a Person other than the one in whose name the Certificate surrendered
in
exchange therefore is registered, it shall be a condition of such payment
that
the Certificate so surrendered shall be properly endorsed and otherwise
in
proper form for transfer and that the Person requesting such payment shall
pay
to the Paying Agent any applicable transfer or other similar Taxes, or
shall
establish to the satisfaction of the Paying Agent that any such Tax has
been
paid or is not applicable. Notwithstanding the foregoing, neither the Paying
Agent nor any Party, or any employee, officer, director, agent or Affiliate
thereof, shall be liable to a holder of Company Shares for any Company
Share
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat or similar Law.
If any
Certificate shall have been lost, stolen or destroyed, upon the making
of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Company, the posting
by
such Person of a bond in such reasonable amount as the Surviving Company
may
require as indemnity against any claim that may be made against it with
respect
to such Certificate, the Paying Agent shall pay in exchange for such lost,
stolen or destroyed Certificate cash in an aggregate amount equal to the
Per
Share Company Share Consideration multiplied by the number of Company Shares
formerly represented by such Certificate payable pursuant to this Agreement.
From and after the Effective Time, holders of Certificates shall cease
to have
any rights as stockholders of the Company, except as provided herein or
by
applicable Law.
14
(c) Promptly
after the Effective Time, Buyer shall instruct the Paying Agent to mail
as soon
as reasonably practicable after the Effective Time, but in no event later
than
five (5) business days after the Paying Agent receives an electronic copy
of the
Company’s option records as of the Effective Time, suitable for the Paying
Agent’s use, to each Option holder who has not previously exercised his or her
Option: (i) a form of letter of transmittal reasonably acceptable to the
Company, which shall specify that the surrender, cancellation and termination
of
the Options shall be effected only upon proper delivery of (A) the Option
(or a
duly executed affidavit of loss in a form reasonably acceptable to Buyer)
and
(B), if not previously delivered to the Company, the duly authorized and
executed Option Cancellation and Termination Acknowledgement to the Paying
Agent
and shall be in such form and have such other provisions as to which the
Buyer
and the Company may agree and (ii) instructions reasonably acceptable to
the
Company for use in effecting the surrender, cancellation and termination
of the
Option in exchange for such holder’s portion of the Option Settlement Amount in
accordance with Section 5.1(b); provided, however, that prior to payment
of the
applicable portion of the Option Settlement Amount to a holder of an Option,
such holder must have (Y) delivered such Option to the Company (or a duly
executed affidavit of loss in a form reasonably acceptable to Buyer) and
(Z)
duly authorized, executed and delivered to the Paying Agent the Option
Cancellation and Termination Acknowledgement or such other document necessary,
or customarily required, in a form which shall be reasonably satisfactory
to
Buyer and the Surviving Company, indicating such holders acknowledgement
that,
except for such holders rights to receive a portion of the Option Settlement
Amount as set forth in Section 5.1(b), any and all claims with respect
to any
Option shall be fully released and terminated. Until so surrendered, such
Options shall represent solely the right to receive the Option Settlement
Amount. No interest shall be paid or accrue on the Option Settlement Amount.
(d) Pursuant
to the Paying Agent Agreement, any portion of the Merger Payment Fund (including
any interest thereon or earnings or profits with respect thereto) which
remains
unclaimed by the former stockholders or option holders of the Company for
six
(6) months after the Effective Time shall be delivered to the Surviving
Company,
upon demand of the Surviving Company, and any former stockholders or option
holders of the Company shall thereafter look only to the Surviving Company
for
payment of their claim for the Company Share Consideration for the Company
Shares or the Option Settlement Amount for the Options. The Surviving Company’s
obligations to former stockholders and option holders of the Company with
respect to the payment of Merger Payment Fund shall be guaranteed by
Buyer.
15
(e) The
Paying Agent or the Surviving Company shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to
any
holder of Company Shares or Options, such amounts as the Surviving Company
or
the Paying Agent is required to deduct and withhold with respect to the
making
of such payment under any provision of applicable Tax Law. To the extent
that
amounts are so withheld by the Surviving Company or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having
been paid to the holder of Company Shares or Options in respect of which
such
deduction and withholding was made by the Surviving Company or the Paying
Agent,
as the case may be.
(f) Notwithstanding
any provision of this Agreement to the contrary, after due execution and
delivery of the Escrow Agreement by the parties thereto, and promptly upon
satisfaction of the condition set forth in Section 9.1(c)(i), Merger Sub
shall
make available, or cause to be made available, to the Escrow Agent $76,500,000
in cash to be held and disbursed by the Escrow Agent in accordance with
the
terms and conditions set forth in the Escrow Agreement. Any of such funds
that
are subsequently paid or otherwise transferred by the Escrow Agent to the
Paying
Agent, as contemplated by the Escrow Agreement, shall be deemed to constitute
payments in satisfaction of Merger Sub’s obligations under Section 5.3(a)
hereof. Each Party shall use their Commercially Reasonable Efforts to enter
into
the Escrow Agreement within ten (10) business days after the date
hereof.
5.4 Dissenting
Shares.
(a) Notwithstanding
anything in this Agreement to the contrary, those Company Shares which
immediately prior to the Effective Time are Dissenting Shares shall not
be
converted into the right to receive the Company Share Consideration as
provided
in Section 5.1 hereof, but the holders of Dissenting Shares shall be
entitled to receive such consideration as shall be determined pursuant
to
Section 262 of the DGCL; provided, however, that, if any such holder shall
have failed to perfect or shall withdraw or lose his right to appraisal
and
payment under the DGCL, such holder’s shares shall thereupon be deemed to have
been converted as of the Effective Time into the right to receive the Per
Share
Company Share Consideration, without any interest thereon, as provided
in
Section 5.1 and such shares shall no longer be Dissenting
Shares.
(b) The
Company shall give Buyer and Merger Sub (i) notice of any written demands
for appraisal, withdrawals of demands for appraisal, and any other instrument
served pursuant to Section 262 of the DGCL, received by the Company within
one business day after such receipt, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Section 262 of the DGCL. The Company shall not, except with the prior
written consent of Buyer, voluntarily make any payment with respect to
any
demands for appraisal or settle or offer to settle any such
demands.
16
5.5 Transfer
of Company Shares After the Effective Time.
No
transfers of Company Shares shall be made on the stock transfer books of
the
Company after the close of business on the business day preceding the date
of
the Effective Time.
5.6 Additional
Actions. If,
at
any time after the Effective Time, the Surviving Company shall consider
or be
advised that consistent with the terms of this Agreement any further assignments
or assurances in law or any other acts are necessary or desirable to carry
out
the purposes of this Agreement, then, subject to the terms and conditions
of
this Agreement, the Company and its officers and directors shall be deemed
to
have granted to the Surviving Company an irrevocable power of attorney
to
execute and deliver all such deeds, assignments and assurances in law and
to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such property or rights in the Surviving Company and otherwise to carry
out
the purposes of this Agreement; and the officers and directors of the Surviving
Company are fully authorized in the name of the Company to take any and
all such
action.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
disclosed in the Company Disclosure Schedule (each Section of which qualifies
the numbered representation and warranty only), the Company hereby represents
and warrants to Buyer and Merger Sub as follows:
6.1 Company
Shares.
The Company Shares, at the Effective Time, will constitute all of the issued
and
outstanding capital stock of the Company and all such shares of Company
Shares
will have been duly authorized, validly issued and shall be fully paid
and
non-assessable and not subject to any preemptive (or similar)
right.
6.2 Capitalization The
entire authorized capital stock of the Company consists of 19,400,000 shares
of
Common Stock and 600,000 shares of Preferred Stock. As of the date hereof,
5,515,331 shares of Common Stock were issued and outstanding, 947,366 shares
of
Common Stock were held in treasury and no shares of Preferred Stock were
outstanding. The issued and outstanding shares of Common Stock have been
duly
authorized, validly issued and are fully paid and nonassessable and not
subject
to any preemptive (or similar) right. As of the date hereof, the Company
has
reserved for issuance 884,508 shares of Common Stock, of which 59,273 shares
are
reserved for issuance under the Company’s 2003 Amended and Restated Employee
Stock Purchase Plan, 265,467 shares are reserved for issuance under the
Option
Plans for options that have not been granted and 559,768 shares are reserved
under outstanding options, which have an aggregate exercise price of $6,146,812.
Section 6.2 of the Company Disclosure Schedule includes a true and correct
list
of all the Option Plans and all holders of outstanding options under such
Option
Plans, including the name of such holder, the number of shares of Company
Stock
subject to each such option, the date of grant and the exercise price per
share
of each such option. All outstanding options under such Option Plans, including
the Options, are fully vested. All the outstanding shares of capital stock
or
other equity securities of each Subsidiary of the Company are owned by
the
Company, or by another wholly owned subsidiary of the Company, free and
clear of
all Liens, and are duly authorized, validly issued, fully paid and nonassessable
and are not subject to any preemptive (or similar) right. Except as set
forth in
Section 6.2 of the Company Disclosure Schedule, there are not, as of the
date
hereof, and there will not be at the Effective Time, any stockholder agreements,
proxies, voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries is a party or to which it is bound relating
to the voting of any shares of the capital stock of the Company, or the
capital
stock or securities of any of its Subsidiaries. There are no outstanding
or
authorized options, warrants, subscriptions, calls, demands or rights of
any
character relating to the Company’s capital stock, or the capital stock of its
Subsidiaries, whether or not issued, which the Company, or any of its
Subsidiaries, is a party to, including securities convertible into or evidencing
the right to purchase any capital stock or other securities of the Company
or
any of its Subsidiaries. Other
than with respect to the Subsidiaries of the Company, the Company does
not own,
directly or indirectly, (i) any capital stock or other equity securities
of any
corporation or (ii) any direct or indirect equity or ownership interest,
including interests in partnerships and joint ventures, in any Person.
The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or that are convertible
or exchangeable into or exercisable for securities having the right to
vote)
with the stockholders of the Company on any matter. No agreement or other
document to which the Company or any of its Subsidiaries is a party grants
or
imposes on any Company Shares any right, preference, privilege or transfer
restriction with respect to the Transactions (including any rights of first
refusal). All Company Shares that may be issued upon the exercise of Options
will be when issued, duly authorized, validly issued, fully paid, nonassessable
and free of preemptive (or similar) rights. There are no outstanding obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its Subsidiaries
or
to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in the Company, any of its Subsidiaries or any
other
Person.
17
6.3 Corporate
Organization, Qualification and Power.
Each of the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the Laws of the jurisdiction
of its
incorporation and is duly qualified to conduct its business in every other
jurisdiction in which its business is conducted, except where failure to
be so
qualified or licensed would not, individually or in the aggregate, have
a
Company Material Adverse Effect. Each of the Company and its Subsidiaries
has
the corporate power to own or lease its respective properties and to carry
on
its business as now being conducted, wherever located. The Company’s
Subsidiaries are listed on Section 6.3 of the Company Disclosure Schedule,
and,
except as disclosed on Section 6.3 of the Company Disclosure Schedule,
the
Company owns no interest in any corporation, partnership, proprietorship
or any
other business entity. The Company has heretofore made available to Buyer
true
and correct copies of its Certificate of Incorporation, as amended, and
Bylaws,
as amended, and the Articles of Incorporation and Bylaws, or other comparable
charter or organizational documents, of its Subsidiaries, in each case
as
amended to the date of this Agreement, and all such documents as so delivered
are in full force and effect. Neither the Company nor any of its Subsidiaries
is
in violation of its Certificate or Articles of Incorporation, Bylaws, or
other
comparable charter or organizational documents.
6.4 Authorization
of Agreement and Merger.
The Company has the requisite corporate power and authority to approve,
authorize, execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions (subject to the requisite
approval
of the Merger by stockholders of the Company holding a majority of the
outstanding voting stock of the Company,
pursuant
to Section 251(c) of the DGCL). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
Transactions, and the Voting Agreements, have been duly and validly authorized
by the Board of Directors of the Company, which has
(i)
approved this Agreement, the Voting Agreements, the Merger and the Transactions,
(ii) determined that the Transactions are advisable and in the best interests
of
the holders of Company Shares and (iii) determined to recommend this Agreement,
the Merger and the Transactions to the Company’s stockholders for approval and
adoption,
and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement, the performance
of the
Company’s obligations hereunder or to consummate the Transactions (other than
the majority vote of the outstanding Company Stock for the adoption of
the
Merger Agreement, pursuant to Section 251(c) of the DGCL).
18
6.5 Enforceable
Agreement. This
Agreement has been duly and validly executed and delivered by the Company
and,
assuming the due authorization, execution and delivery hereof by Buyer,
constitutes a valid and binding obligation of the Company, enforceable
against
the Company according to its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws affecting
the
enforceability of contractual obligations and creditor’s rights generally and by
the application of equitable principles by courts of competent jurisdiction,
sitting at law or in equity.
6.6 No
Conflicts, Violations, Breaches or Defaults.
(a) The
execution and delivery of this Agreement by the Company and its performance
of
the obligations hereunder, including its execution, delivery and performance
of
any Additional Agreements to which it is a party and the consummation of
the
Transactions, do not (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation, as amended, or Bylaws, as
amended, of the Company or the comparable charter or organizational documents
of
any of its Subsidiaries; (ii) except with respect to the Pre-Closing
Educational Consents and Post-Closing Educational Consents set forth in
Section 6.6(a)(ii) of the Company Disclosure Schedule, require any consent,
approval, authorization or permit of, or filing with, or notification to,
any
Educational Agency, (iii) require any consent, approval, authorization or
permit of, or filing with, or notification to, any Governmental Authority,
except (A) pursuant to the applicable requirements of the Securities Act
and the Exchange Act, and the rules and regulations promulgated thereunder;
(B) the filing of the Certificate of Merger pursuant to the DGCL and, as
set forth in Section 6.6(a)(iii)(B) of the Company Disclosure Schedule, the
documents with the relevant authorities of other states in which the Company
is
authorized to do business; (C) as set forth in Section 6.6(a)(iii)(C)
of the Company Disclosure Schedule, such filing or consent as may be required
under any environmental, health or safety Law; or (D) as set forth in
Section 6.6(a)(iii)(D) of the Company Disclosure Schedule, approvals, if
any, required of state Governmental Authorities having jurisdiction over
the
Company; (iv) except as set forth in Section 6.6(a)(iv) of the Company
Disclosure Schedule, conflict with or result in a breach or violation of,
or
constitute a default (or an event which, with notice or lapse of time or
both
would become a default) under, or result in (or create in any party the
right to
cause) any modification, termination, cancellation or acceleration of any
performance or payment required by the Company or its Subsidiaries under,
(A) any Judgment or Law to which they are subject or bound (subject to any
consents, approvals, authorizations, permits, filings or notifications
required
under clause (ii) or (iii) above), or (B) any mortgage, bond, indenture,
agreement, contract, Permit, license or other instrument or obligation
to which
the Company or its Subsidiaries, or any of their respective properties
or
assets, are subject or bound; or (v) result in the creation of any Lien on
any of the property or assets of the Company or its Subsidiaries; other
than, in
the case of clauses (ii), (iii) and (iv), where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, or the occurrence of any breach, violation, Judgment, Lien,
default or loss would not, individually or in the aggregate, have a Company
Material Adverse Effect.
19
(b) Except
as
set forth in Section 6.6(b) of the Company Disclosure Schedule, the execution
and delivery of this Agreement by the Company and its performance of the
obligations hereunder, including its execution, delivery and performance
of any
Additional Agreements to which it is a party and the consummation of the
Transactions, do not trigger (i) any rights or remedies of any third party
or
(ii) any obligations of the Company or any of its Subsidiaries to third
parties,
under any and all agreements, arrangements, contracts and understandings,
whether written or otherwise, to or by which the Company or any of its
Subsidiaries or any of their respective assets or properties are subject
or
bound.
6.7 Company
SEC Reports.
Except as set forth in Section 6.7 of the Company Disclosure Schedule,
since
January 1, 2003, the Company has filed all forms, reports and documents
with the SEC required to be filed by it pursuant to the federal securities
Laws,
all of which complied as of their respective dates in all material respects
with
all applicable requirements of the Securities Act and the Exchange Act
and the
rules and regulations promulgated thereunder. As
of
their respective dates, the Company SEC Reports did not, and all such documents
filed with the SEC after the date hereof will not, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light
of
the circumstances under which they were made, not misleading. Except as
set
forth in the Company SEC Reports or Section 6.7
of the
Company Disclosure Schedule,
the
Company has made all certifications and statements required by Sections
302 and
906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the related rules
and
regulations promulgated thereunder with respect to the Company’s filings
pursuant to the Exchange Act. The Company has established and maintains
disclosure controls and procedures (as defined in Rule 13a-15 under the
Exchange
Act) designed to ensure that material information relating to the Company,
including its Subsidiaries, is made known on a timely basis to the individuals
responsible for the preparation of the Company’s filings with the SEC and other
public disclosure documents. Without limiting the generality of the foregoing,
and except
as
set forth in Section 6.7 of the Company Disclosure Schedule
(a) the
Company has established and maintains a system of internal accounting control
over financial reporting sufficient to comply with all legal and accounting
requirements applicable to the Company, (b) the Company has disclosed,
based on
its most recent evaluation of internal controls, to the Company’s auditors and
its audit committee, (i) any significant deficiencies and material weaknesses
in
the design or operation of its internal accounting controls which are reasonably
likely to materially and adversely affect the Company’s ability to record,
process, summarize and report financial information, and (ii) any fraud
known to
the Company that involves management or other Employees who have a significant
role in internal controls, and (c) the Company has not received any complaint,
allegation, assertion or claim in writing regarding the accounting practices,
procedures, methodologies or methods of the Company or its internal accounting
controls over financial reporting, including any such complaint, allegation,
assertion or claim that the Company has engaged in questionable accounting
or
auditing practices.
20
6.8 Financial
Statements; Accounting Matters.
The statements of financial position and the related statements of revenues
and
expenses, stockholders’ equity and cash flows (including the related notes and
schedules thereto) of the Company included in or incorporated by reference
into
the Company SEC Reports complied as to form in all material respects with
the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with U.S. GAAP applied on a basis consistent with
prior
periods (except as otherwise noted therein or in Section 6.8 of the Company
Disclosure Schedule), and present fairly the financial position of the
Company
and its Subsidiaries as of their respective dates, and the consolidated
results
of its operations and its cash flows for the periods presented therein
(subject,
in the case of the unaudited interim financial statements, to normal year-end
adjustments in amounts that are not, individually or in the aggregate,
material
and except that the unaudited interim financial statements do not contain
all of
the footnote disclosures required by U.S. GAAP). Except
as
set forth in the Company SEC Reports, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations (including Tax
liabilities) (whether absolute, accrued, contingent or otherwise), other
than
liabilities or obligations incurred in the ordinary course of business
since
December 31, 2005, liabilities or obligations under this Agreement, or
liabilities or obligations, that, individually or in the aggregate, would
not
reasonably be expected to materially impair the ability of the Surviving
Company
to conduct the businesses of the Company and its Subsidiaries substantially
in
the manner conducted on the date hereof.
6.9 Proxy
Statement. None
of the information supplied or to be supplied by the Company or any of
its
Subsidiaries for inclusion or incorporation by reference in the Proxy Statement
required to be filed in connection with the Transactions (or any amendment
or
supplement thereto) will at the time of the mailing of the Proxy Statement
and
at the time of the Company’s Stockholder Meeting contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will (with respect to the Company and other information supplied by the
Company
for inclusion therein) comply as to form in all material respects with
the
requirements of the Exchange Act and the rules and regulations
thereunder.
6.10 Litigation.
Except as set forth in Section 6.10 of the Company Disclosure Schedule, as
of the date hereof, there is no Proceeding pending, or, to the Knowledge
of the
Company, threatened in writing, against the Company or any of its Subsidiaries,
any of their respective properties, assets or business, or any of their
respective current or former officers or directors, in their capacity as
such,
or any other Person whom the Company or any of its Subsidiaries has agreed
to
indemnify, which, individually or in the aggregate, would have a Company
Material Adverse Effect.
6.11 Taxes.
(a) Except
as
set forth in Section 6.11(a) of the Company Disclosure Schedule, the Company
and
its Subsidiaries have timely filed all Tax Returns that were required to
be
filed. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by the Company and its Subsidiaries (whether or not shown
on any
Tax Return) have been paid. Except as set forth in Section 6.11(a) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
currently is the beneficiary of any extension of time within which to file
any
Tax Return. No claim has ever been made by an authority in a jurisdiction
where
the Company or any of its Subsidiaries does not file Tax Returns that it
is or
may be subject to taxation by that jurisdiction. There are no Liens on
any of
the assets of the Company or any of its Subsidiaries that arose in connection
with any failure (or alleged failure) to pay any Tax.
21
(b) No
audits
or other administrative proceedings or court proceedings have been conducted
during the last five (5) years, are presently pending or, to the Knowledge
of
the Company, threatened with regard to any Taxes or Tax Return of the Company,
any of its Subsidiaries or any affiliated, consolidated, combined or unitary
group of which the Company or any Subsidiary of the Company is a member
and, to
the Knowledge of the Company, no material issues have been raised by any
Tax
Authority in connection with any Tax or Tax Return.
(c) Buyer
has
received true and correct copies of (i) all federal, state, local and foreign
income or franchise Tax Returns of the Company and each of its Subsidiaries
relating to the taxable periods since January 1, 2003 and (ii) any audit
report
issued within the last five (5) years relating to any Taxes due from or
with
respect to the Company and each of its Subsidiaries.
(d) Except
as
set forth in Section 6.11(d) of the Company Disclosure Schedule and except
for the affiliated group of which the Company is presently a member, the
Company
has never been a member of an affiliated group of corporations, within
the
meaning of Section 1504 of the Code, other than as a common parent corporation,
and each of Company’s Subsidiaries has never been a member of an affiliated
group of corporations, within the meaning of Section 1504 of the Code,
except
where the Company was the common parent of such affiliated group.
(e) Neither
the Company nor any of its Subsidiaries (i) is a party to, is bound by
or has
any obligation under any Tax sharing agreement or similar contract (whether
or
not written) other than one that is solely between the Company and one
or more
of its Subsidiaries or (ii) has any liability for Taxes of any Person (other
than the Company or any of its Subsidiaries) under Treasury Regulation
Section
1.1502-6 or any similar Law, as a transferee or successor, by contract
or
otherwise.
(f) Neither
the Company nor any of its Subsidiaries has a contract, agreement plan,
or other
similar type of arrangement currently in place covering any Person that,
individually or collectively, could give rise to the payment of any amount
that
would not be deductible by reason of Section 280G of the Code, or would
constitute compensation in excess of the limitation set forth in Section
162(m)
of the Code. The Company is not obligated to make any “gross-up” or similar
payment to any Person on account of any Tax under Section 4999 of the
Code.
(g) Neither
the Company nor any of its Subsidiaries is, or has been, a U.S. real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
None of
the stockholders of the Company is a “foreign person” as such term is defined in
Section 1445 of the Code.
22
(h) Neither
the Company nor any of its Subsidiaries has been the “distributing company”
(within the meaning of Section 355(a)(1) of the Code) nor the “controlled
corporation” (within the meaning of Section 355(a)(1) of the Code) (i) within
the two-year period ending as of the date of this Agreement or (ii) in
a
distribution that could otherwise constitute part of a “plan” or “series of
transactions” (within the meaning of Section 355(e) of the Code) in conjunction
with this Agreement.
(i) Neither
the Company nor any of its Subsidiaries has agreed to make, nor is it required
to make, any adjustment under Section 481(a) of the Code (or any similar
provision of state, local or foreign law) by reason of a change in accounting
method or otherwise, and, the IRS has not proposed any such adjustment
or change
in accounting method. Neither
the Company nor any of its Subsidiaries will be required to include any
item of
income in, or exclude any item of deduction from, taxable income for any
taxable
period (or portion thereof) ending after the Effective Time as a result
of any:
(i) “closing agreement” as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law); (ii)
installment sale or open transaction disposition made on or prior to the
date of
Closing; (iii) prepaid amount received on or prior to the date of Closing;
or
(iv) intercompany transactions or any excess loss accounts described in
the
Treasury Regulations promulgated under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax
law).
(j) Neither
the Company nor any of its Subsidiaries is subject to any private letter
ruling
of the IRS or comparable rulings of other Taxing Authorities. No power
of
attorney currently in force has been granted by the Company or any of its
Subsidiaries concerning any Tax matter.
(k) Except
as
set forth in Schedule 6.11(k) of the Disclosure Schedule, each of the Company
and its Subsidiaries has complied (and until the Effective Time will comply)
with the provisions of the Code relating to the withholding and payment
of Taxes
including the withholding and reporting requirements under Code sections
1441
through 1464, 3401 through 3406, and 6041 through 6049, as well as similar
provisions under any other Laws, and have, within the time and in the manner
prescribed by Law, withheld from employee wages and paid over to the proper
Governmental Authorities all amounts required. Each of the Company and
its
Subsidiaries has undertaken in good faith to appropriately classify all
service
providers as either employees or independent contractors for all Tax
purposes.
(l) Neither
the Company nor any of its Subsidiaries has taken any reporting position
on a
Tax Return, which reporting position (i) if not sustained would be reasonably
likely, absent disclosure, to give rise to a penalty for substantial
understatement of U.S. federal income Tax under Section 6662 of the Code
(or any
predecessor statute or any corresponding provision of any such predecessor
statute, or state, local, or foreign Tax law), and (ii) has not adequately
been
disclosed on such Tax Return in accordance with Section 6662(d)(2)(B) of
the
Code (or corresponding provision of any such predecessor statute, or state,
local, or foreign Tax law).
23
(m) The
Company and each of its Subsidiaries (i) has disclosed to the IRS on the
appropriate Tax Returns any Reportable Transaction in which it has participated
and (ii) has retained all documents and other records pertaining to any
Reportable Transaction in which it has participated, including documents
and
other records listed in Treasury Regulation Section 1.6011-4(g) and any
other
documents or other records which are related to any Reportable Transaction
in
which it has participated but not listed in Treasury Regulation Section
1.6011-4(g). For purposes of this Agreement, the term “Reportable
Transaction”
shall
mean any transaction listed in Treasury Regulation Section
1.6011-4(b).
(n) Neither
the Company nor any of the Subsidiaries has or has ever had a permanent
establishment or other taxable presence in any foreign country, as determined
pursuant to applicable foreign law and any applicable Tax treaty or convention
between the U.S. and such foreign country.
(o) Neither
the Company, nor any of its Subsidiaries has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
a Tax
assessment or deficiency and there is no reasonable basis for any Tax deficiency
or adjustment to be assessed against either the Company or any of its
Subsidiaries.
6.12 Environmental
Laws and Regulations. Each
of
the Company and its Subsidiaries and their respective assets, businesses,
operations and present and former properties, and to the Knowledge of the
Company, any Person for whose conduct any of them has agreed to be liable,
have
complied with and are currently in compliance in all materials respects
with all
applicable Environmental Laws. Neither the Company nor any of its current
or
former Subsidiaries, nor, to the Knowledge of the Company, any Person for
whose
conduct any of them has agreed to be liable has received any written notices,
demand letters, request for information or any other written communication
from
any Governmental Authority or any third party claiming that the Company,
any
current or former Subsidiary or any such Person or their businesses, operations
or present or former properties is or may be, in violation of, or liable
under
or, to the Knowledge of the Company, subject to investigation or inquiry
with
respect to, any Environmental Law, including liability for off-site disposal,
personal injuries or property damages, and to the Knowledge of the Company,
no
such claims are threatened, except with respect to such matters as have
been
fully resolved with no further liability to the Company or any of its current
or
former Subsidiaries. None of the Company, its current or former Subsidiaries
and
their assets, present or former properties, businesses and operations,
nor to
the Knowledge of the Company, any Person for whose conduct any of them
has
agreed to be liable, are subject to any material Proceeding or writ,
judgment, decree, injunction or other order
arising
under any Environmental Law, except with respect to such matters as have
been
fully resolved with no further liability to the Company or any of its current
or
former Subsidiaries; and no Hazardous Substance has been disposed of, spilled,
leaked, discharged, emitted, poured or otherwise released or threatened
to be
released (collectively, “Release”)
into
the indoor or outdoor environment, including soils, sediments, groundwater
or
surface water, at or from, or is otherwise present at, under or about,
any of
the present or former properties where such Release or presence would be
reasonably likely to result in any material Environmental Claim against
the
Company, any of its current or former Subsidiaries, or any Person for whose
conduct any of them has agreed to be liable, and there are no other facts,
circumstances, or conditions which would be reasonably likely to result
in an
Environmental Claim against the Company, any of its current or former
Subsidiaries, or any Person for whose conduct any of them has agreed to
be
liable, including with respect to the off-site disposal of any Hazardous
Substance and, to the Knowledge of the Company, the migration of Hazardous
Substances to the present or former properties. For purposes of this Section
6.12, the term “present
or former properties”
shall
include any properties owned, operated, leased, occupied or managed at
any time
by or on behalf of the Company or any of its current or former
Subsidiaries.
24
6.13 Compliance
with Applicable Laws.
Each of the Company and its Subsidiaries holds, and is in compliance with
the
terms of, all Permits necessary for the conduct of its businesses, except
for
failures to hold or to comply with such Permits, which, individually or
in the
aggregate, would not have a Company
Material Adverse Effect.
Other
than with respect to environmental matters which are governed by Section
6.12,
Taxes which are governed by Section 6.11, DOE and related regulatory matters
which are governed by Section 6.21 and 6.22, labor matters which are governed
by
Section 6.24 and Company Benefit Plans which are governed by Section 6.20,
the
businesses of each of the Company and its Subsidiaries are not being conducted
in violation of any Law or Permit, except for possible violations which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
6.14 Absence
of Certain Changes.
Since December 31, 2005, the Company has conducted its business in the
ordinary course and in a manner consistent with past practice and there
has not
been any:
(a) Company
Material Adverse Effect;
(b) transactions
by the Company or its Subsidiaries outside the ordinary course of business
of
the Company or its Subsidiaries, except for the Transactions;
(c) declaration
or payment of any dividend or any distribution in respect of the capital
stock
of the Company or its Subsidiaries (other than distributions to the Company)
or
any direct or indirect redemption, purchase or other acquisition of any
such
stock by the Company;
(d) payments
to any stockholder, except pursuant to arrangements described in the Company
SEC
Reports filed prior to the date of this Agreement pursuant to Item 404
of
Regulation S-K of the SEC or in connection with transactions in the ordinary
course of business upon commercially reasonable terms consistent with past
practice of the Company;
(e) sale,
lease to any third party, transfer or assignment of material assets, tangible
or
intangible, of the Company or its Subsidiaries other than in the ordinary
course
of business consistent with past practice upon terms no less favorable
to the
Company than those that could be obtained in an arm’s-length transaction and
other than the disposition of obsolete or unusable property;
(f) material
damage, destruction, or loss (whether or not covered by insurance) from
fire or
other casualty to the tangible property of the Company or its
Subsidiaries;
25
(g) change
by
the Company or any of its Subsidiaries in their respective accounting methods,
principles or practices, except as required by the rules and regulations
of the
SEC or U.S. GAAP;
(h) revaluation
by the Company or any of its Subsidiaries of any of their assets, including
writing down the value of deferred tax assets or writing off notes or accounts
receivable other than in the ordinary course of business in amounts that
are
not, individually or in the aggregate, material to the business;
(i) except
as
set forth in Section 6.14(i) of the Company Disclosure Schedule, material
increase in the base salary of any officer or Employee of the Company or
its
Subsidiaries, or adoption, amendment, modification or termination of any
bonus,
profit-sharing, incentive, severance, change-of-control or other similar
plan
for the benefit of the directors, officers or Employees of the Company
or its
Subsidiaries, except as consistent with past practices; or
(j) event
that would breach any of the prohibitions set forth in Section 8.1 if taken
after the date hereof.
6.15 Title
to Properties.
The Company and each of its Subsidiaries has good and marketable title
to, or
valid leasehold interests in, all their respective properties and assets
except
for such as are no longer used or useful in the conduct of their respective
businesses or as have been disposed of in the ordinary course of business
and
except for defects in title, easements, encroachments, restrictive covenants
and
similar encumbrances or impediments as are not material, individually or
in the
aggregate. All such assets and properties, other than assets and properties
in
which the Company or any of its Subsidiaries has leasehold interests, are
free
and clear of all Liens other than those set forth in Section 6.15 of the
Company
Disclosure Schedule.
6.16 Real
Estate.
(a) Owned
Real Estate.
Section
6.16(a) of the Company Disclosure Schedule lists all the real property
that is
owned by the Company or its Subsidiaries (the “Owned
Real Estate”).
The
Company or the Subsidiary set forth in Section 6.16(a) of the Company Disclosure
Schedule has good and marketable fee simple title to all of the Owned Real
Estate, in each case free and clear of all Liens, other than (i) Liens
for
current Taxes not yet due and payable, and water, sewer and other assessments
not yet due and payable, (ii) ordinary course inchoate mechanics’ and
materialmen’s Liens for construction in progress with respect to amounts not yet
overdue, (iii) ordinary course workmen’s, repairmen’s, warehousemen’s and
carriers’ Liens and (iv) Liens, matters of record, including easements,
rights-of-way, covenants, restrictions, conditions, setbacks, encroachments,
gaps and gores, and other imperfections of title, that are typical for
the
applicable property type and locality, none of which, individually or in
the
aggregate, materially impairs the use, value or operations of the affected
property or materially interferes with the conduct of the business of the
Company and its Subsidiaries as presently conducted. Copies of title insurance
policies obtained by the Company for each parcel of Owned Real Estate have
been
made available to Buyer. The Owned Real Estate is in compliance with all
applicable zoning, subdivision, health and safety and other land use Laws
(collectively, the “Real
Property Laws”),
and
the current use and occupancy of the Owned Real Estate and operation of
the
Company’s business thereon does not violate in any material respect any Real
Property Laws. Neither the Company nor any of its Subsidiaries has received
any
notice of violation of any Real Property Law.
26
(b) Rental
Real Estate.
Section
6.16(b) of the Company Disclosure Schedule lists all real property that
is
leased to, used or occupied by the Company or its Subsidiaries in connection
with their business but not owned by the Company or its Subsidiaries (the
“Rental
Real Estate”)
and
the leases, subleases and agreements pertaining to such Rental Real Estate
(the
“Leases”),
true
and correct copies of which, have been made available to the Buyer. The
Leases
are legal, valid, binding, enforceable and in full force and effect, except
as
the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws generally affecting the rights
of
creditors and subject to general equity principles. Except for the Leases,
there
are no leases, subleases, licenses, concessions, or other agreements to
which
the Company or its Subsidiaries is a party, whether written or oral, granting
to
any Person the right of use or occupancy of any portion of the Rental Real
Estate. Subject to obtaining the necessary consents set forth in Section
6.6 of
the Company Disclosure Schedule, the Transactions will not affect the validity,
enforceability or continuity of any of the Leases.
With
respect to each of the Leases:
(i) Neither
the Company nor any of its Subsidiaries or any other party to the Lease
is in
breach or default under such Lease, and no event has occurred or circumstance
exists which, with a delivery of notice, the passage of time or both, would
constitute such a breach or default, or permit the termination, modification
or
acceleration of rent under such Lease.
(ii) No
security deposit or portion thereof deposited with respect to such Lease
has
been applied in respect of a breach or default under such Lease which has
not
been redeposited in full.
6.17 Intangible
Assets.
(a) Section
6.17 of the Company Disclosure Schedule contains a list of Intangible Assets
of
the Company by category. The Company and each of its Subsidiaries own all
right,
title and interest in, is licensed to use, or otherwise possesses valid
licenses
or other rights to use, all material Intangible Assets necessary to conduct
its
business as now conducted, free and clear of any Liens and without obligation
to
pay any royalties or other fees with respect thereto.
There is
no impediment at law or in equity relating to the Intangible Assets to
the
Company’s ability to consummate the Transactions, including the
Merger.
(b) There
are
no claims, demands or Proceedings instituted, pending, or, to the Knowledge
of
the Company, threatened in writing by any Person contesting or challenging
the
right of the Company or its Subsidiaries to use any of their material Intangible
Assets.
(c) Each
Intangible Asset which is owned by the Company or one or more of its
Subsidiaries has been maintained in good standing; the Company has taken
all
necessary steps to protect, preserve and maintain the material Intangible
Assets, and any such material Intangible Asset licensed to the Company
or its
Subsidiaries has, to the Company’s Knowledge, been maintained in good
standing.
27
(d) To
the
Knowledge of the Company, no Person is infringing, misappropriating, diluting,
interfering with or otherwise violating the Intangible Assets of the Company
or
any of its Subsidiaries.
(e) Neither
the Company nor any of its Subsidiaries is using any material Intangible
Asset
of any other Person without such Person’s license, permission or
consent.
(f) Neither
the Company nor any of its Subsidiaries has infringed, misappropriated,
diluted,
or interfered with or otherwise violated, or is infringing, misappropriating,
diluting, interfering with or otherwise violating, any Intangible Assets
of any
other Persons.
(g) The
Company and each of its Subsidiaries has taken Commercially Reasonable
Efforts
to protect the secrecy, confidentiality and value of all Intangible Assets
owned, held, or used by any one or more of them.
(h) Neither
the Company nor any of its Subsidiaries is in material violation or in
material
default of any license or other agreement granting rights in respect of
any
Intangible Assets, including any licenses for use of software.
(i) The
consummation of the Merger and the Transactions in accordance with the
terms
hereof will not impair materially the validity, enforceability, ownership,
or
right of the Company or its Subsidiaries to use its Intangible Assets;
nor will
it result in any termination or any restriction being imposed on any Intangible
Assets
or
infringe the rights, including intellectual property rights, of any
Person.
6.18 Insurance.
The
Company and each of its Subsidiaries have obtained and currently maintain
in
full force and effect insurance with responsible and reputable insurance
companies or associations in such amounts, on such terms and covering such
risks, including fire and other risks insured against by extended coverage,
as
is reasonably prudent, and each is maintaining in full force and effect
casualty, general liability, business interruption, product liability and
public
liability insurance, insurance against claims for personal injury or death
or
property damage occurring in connection with the activities of the Company
or
its Subsidiaries or any properties owned, occupied or controlled by the
Company
or its Subsidiaries, in such amount as reasonably deemed necessary by the
Company or its Subsidiaries. Such insurance coverages are set forth in
Section
6.18 of the Company Disclosure Schedule. Since
January 1, 2003, the Company has not been refused any insurance coverage
or had
any insurance policy canceled.
6.19 Contract
Matters.
(a) Agreements,
Contracts and Commitments.
Except
as set forth in the Exhibits to the Company SEC Reports filed prior to
the date
of this Agreement or on Section 6.19 of the Company Disclosure Schedule,
neither
the Company nor any of its Subsidiaries is a party to, nor are their properties
or assets bound by, any Material Contract. For purposes of this Agreement,
“Material Contract” means:
28
(i) any
collective bargaining agreements;
(ii) any
severance, bonus or employee retention agreement, contract, plan or binding
commitment;
(iii) any
employment or consulting agreement, contract or binding commitment providing
for
future compensation or payments in excess of $75,000 in any year not terminable
by the Company or its Subsidiaries on thirty (30) days’ notice without
liability, except to the extent general principles of wrongful termination
or
other employment law may limit the Company’s or Subsidiary’s ability to
terminate Employees at will;
(iv) any
agreement of indemnification or guaranty not entered into in the ordinary
course
of business with any party in excess of $50,000 individually or in the
aggregate, and any agreement of indemnification or guaranty between the
Company
or its Subsidiaries and any of their officers, directors or Employees,
irrespective of the amount of such agreement or guaranty;
(v) any
agreement, contract or binding commitment, with the exception of the Educational
Approvals, containing any covenant directly or indirectly limiting the
freedom
of the Company or its Subsidiaries to engage in any line of business, compete
with any person, or sell any product, or which, following the consummation
of
the Merger, would so limit Buyer or the Surviving Company;
(vi) any
agreement, contract or binding commitment relating to the disposition or
acquisition of material assets not in the ordinary course of business or
any
ownership interest in any corporation, partnership, joint venture or other
business enterprise;
(vii) any
mortgages, indentures, loans or credit agreements, security agreements
or other
agreements or instruments relating to the borrowing of money or extension
of
credit (other than extensions of credit in the ordinary course of business
from
vendors);
(viii) any
Leases;
(ix) other
than in connection with the Merger and other transactions contemplated
by this
Agreement, any other agreement, contract or binding commitment which involves
payment by the Company or its Subsidiaries of $75,000 or more in the aggregate
which cannot be terminated on thirty (30) days’ notice without cost or expense
to the Company or its Subsidiaries;
(x) any
agreement, contract or binding commitment defining the rights of the security
(debt or equity) holders of the Company or any of its Subsidiaries;
(xi) any
agreement, contract or binding commitment to which the Company or any of
its
Subsidiaries is a party or to which it is bound relating to the voting
of any
shares of the capital stock of the Company, or the capital stock or other
securities of any of its Subsidiaries;
29
(xii) any
agreement, contract or binding commitment to register the Company’s securities;
or
(xiii) any
other
agreements, contracts or binding commitments which are material to the
Company
or any of its Subsidiaries or the operation of their respective
businesses.
The
Company has provided or made available to Buyer true and correct copies
of all
Material Contracts as amended to date.
(b) Performance
of Contracts.
Each of
the Material Contracts of the Company and its Subsidiaries and all of the
student enrollment agreements entered into by or on behalf of any of the
Schools
are in full force and effect and, assuming that such Material Contracts
have
been duly and validly executed and delivered by or on behalf of the respective
other party thereto, which party has the power to enter into and perform
its
obligations thereunder, constitute the valid, legal and binding obligation
of
the Company or its Subsidiaries and constitute the valid, legal and binding
obligation of the other parties thereof, enforceable against each such
Person in
accordance with its terms, in each case except as the enforcement thereof
may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or
similar Laws generally affecting the rights of creditors and subject to
general
equity principles. There are, as of the date hereof, no existing material
breaches or material defaults by the Company or its Subsidiaries under
any such
Material Contract or the student enrollment agreements, and, no event has
occurred which, with the passage of time or the giving of notice or both,
could
be expected to constitute such a breach or default and, as of the date
of the
Closing, there shall not be any breaches or defaults by the Company or
its
Subsidiaries under any such Material Contract or the student enrollment
agreements which, individually or in the aggregate, would have a Company
Material Adverse Effect.
6.20 Employee
Benefit Plans.
(a) The
Company has made available to Buyer (i) true and correct copies of each
Company
Benefit Plan (and all amendments thereto) or an accurate description thereof;
(ii) a copy of the most recent annual report, if any, with respect to each
Company Benefit Plan; (iii) a copy of the most recent actuarial report,
if any,
with respect to each Company Benefit Plan; (iv) a copy of the most recent
summary plan description, together with each summary of material modifications,
if either exists, with respect to each Company Benefit Plan; (v) if the
Company
Benefit Plan is funded through a trust or any third party funding vehicle,
a
copy of the trust or other funding agreement (including all amendments
thereto)
and the latest financial statements thereof; (vi) the most recent determination
letter, if any, received from the IRS with respect to each Company Benefit
Plan;
and (vii) any other form or filing required to be submitted to any Governmental
Authority with regard to any Company Benefit Plan that would reasonably
be
expected to have a Company Material Adverse Effect.
30
(b) The
Company has no formal plan or commitment to create any additional Company
Benefit Plan or to amend or change in any material respect any existing
Company
Benefit Plan.
(c) The
Company has applied for and received a currently effective determination
letter
from the IRS for each Company Benefit Plan that is intended to be qualified
under Section 401(a) of the Code stating that it is so qualified, and,
to the
Knowledge of Company, no event has occurred that could reasonably be expected
to
cause the loss of such qualification.
(d) All
contributions and premiums required to be paid under the terms of each
of the
Company Benefit Plans have, to the extent due, been paid in full or properly
recorded and accrued on the financial statements or records of
Company.
(e) No
Company Benefit Plan is subject to Title IV of ERISA. No material liability
under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate
since the effective date of ERISA that has not been satisfied in full,
and, to
the Knowledge of the Company, no condition exists that presents a risk
to the
Company, its Subsidiaries or any ERISA Affiliate of incurring any liability
under such Title. No Company Benefit Plan is a Multiple Employer Plan or
Multiemployer Plan within the meaning of Section 413(c) or 414(f) of the
Code.
No Company Benefit Plan provides a self-insured benefit. No Company Benefit
Plan
promises or provides health, life or other welfare benefits to retirees
or
former employees, or severance benefits, except as required by Section
4980B of
the Code, Sections 601 through 609 of ERISA, or comparable state statutes
which
provide for continuing health care coverage. No Company Benefit Plan is
a “MEWA”
as defined in Section 3(40)(A) of ERISA.
(f) Except
as
set forth in Section 6.20(f) of the Company Disclosure Schedule, all of
the
Company Benefit Plans are, and have been, operated and administered in
compliance with their provisions and in all material respects with all
applicable Laws including ERISA and the Code and the regulations and rulings
thereunder. The Company and all fiduciaries of the Company Benefit Plans
have
complied with the provisions of the Company Benefit Plans and in all material
respects with all applicable Laws, including ERISA and the Code and the
regulations and rulings thereunder.
(g) No
Company Benefit Plan is a “multiemployer pension plan,” as such term is defined
in Section 3(37) of ERISA.
(h) Neither
the execution, delivery or performance of this Agreement nor the consummation
of
the Transactions will (i) result in any payment (including, severance,
unemployment compensation, golden parachute or otherwise) becoming due
from the
Company under any Company Benefit Plan, (ii) increase in any material respects
any benefit otherwise payable under any Company Benefit Plan or (iii) result
in
the acceleration of the time of payment or vesting of any such benefit
to any
extent.
31
(i) There
are
no pending material Proceedings involving any Company Benefit Plan, which
have
been asserted or instituted against any of the Company Benefit Plans, the
assets
of any of the trusts under such plans, the plan sponsor, the plan administrator
or, to the Knowledge of the Company, against any fiduciary of any of the
Company
Benefit Plans (other than routine benefit claims) nor, to the Knowledge
of the
Company, are there facts which could form the basis for any such Proceeding.
To
the Knowledge of the Company, there are no investigations or audits by
any
Governmental Authority of any of the Company Benefit Plans, any trusts
under
such plans, the plan sponsor, the plan administrator or, any fiduciary
of any of
the Company Benefit Plans which have been instituted or notice of which
has been
received by the Company or any of its Subsidiaries.
6.21 Regulatory
Matters
.
(a) Revenue
Thresholds.
For the
fiscal years ended December 31, 2005, December 31, 2004,
December 31, 2003 and December 31, 2002, each Institution has derived
no more than ninety percent (90%) of its revenues on a cash basis from
Title IV
Program funds, as such calculation is set forth at 34 C.F.R.
§ 600.5(d).
Section
6.21(a) of the Company Disclosure Schedule sets forth the correct statements
of
the percentages of revenue from Title IV Program funds for each Institution
for
each such fiscal year.
(b) Educational
Approvals.
(i) Each
Institution and School holds, and since January 1, 2002 (the “Compliance
Date”)
has
held, all material Educational Approvals required to conduct the business
of
such Institution and School as then conducted. Section 6.21(b) of the
Company Disclosure lists all such Educational Approvals presently held
by each
Institution and School, and lists each Educational Agency granting such
Educational Approvals. The Company has provided to Buyer correct and complete
copies of all Educational Approvals listed on Section 6.21(b) of the Company
Disclosure Schedule. The Educational Approvals listed on Section 6.21(b)
of the
Company Disclosure Schedule are in full force and effect, according to
their
terms, and no proceeding for the suspension, limitation, revocation, termination
or cancellation of any of them is pending or, to the Knowledge of the Company,
threatened.
(ii) Since
the
Compliance Date, no Institution or School has received written notice from
any
Educational Agency that it has been placed on probation or ordered to show
cause
why any Educational Approval for any Institution or any School should not
be
revoked. Neither the Company, its Subsidiaries, any Institution, nor any
School
has received any written notice (a) that any Educational Approval will
not be
renewed, or (b) that any Educational Approval is under investigation, review
or
audit by any Educational Agency.
(iii) Each
Institution is certified by the DOE as an eligible institution of higher
education under Title IV and is a party to, and in compliance with, a valid
program participation agreement with the DOE. Section 6.21(b)(iii) of the
Company Disclosure Schedule contains a complete and correct list of each
eligible Institution as defined by the DOE operated by the Company and
its
Subsidiaries since the Compliance Date, with each School identified as
a main
campus or additional location, as applicable, and with applicable Office
of
Postsecondary Education Identification Numbers.
32
(iv) Since
the
Compliance Date, each Institution and School has received all material
Educational Approvals necessary for operations and receipt of Student Financial
Assistance Program funds, including all such approvals required by all
applicable Educational Agencies for each of campus, location, and educational
and training program offered. Each educational program offered by any
Institution or any School for which Title IV Program funds are provided
is an
eligible program in compliance in all material respects with the requirements
of
34 C.F.R. § 668.8.
(v) Each
Institution and School has timely reported, in compliance in all material
respects with the applicable provisions of 34 C.F.R. Part 600: (i) the
addition
of any new educational programs or locations; and (ii) any shifts in ownership
or control, including any changes in reported ownership levels or
percentages.
(c) Cohort
Default Rate.
Section
6.21(c) of the Company Disclosure Schedule sets forth (i) the official,
published cohort default rate (whether final or draft) for Federal Family
Education Loan Program loans or Federal Direct Loan Program loans for each
Institution, for the federal fiscal years ending December 31, 2001,
December 31, 2002, December 31, 2003 and December 31, 2004; and
(ii) the official cohort default rates on Federal ▇▇▇▇▇▇▇ Loans for award
years 2001-2003 for each Institution which participates in such loan program.
Such schedule is materially accurate in all respects.
(d) Student
Recruiting.
Since
the Compliance Date, each
Institution and School has complied with the Title IV Program requirements
set
forth at 20 U.S.C. § 1094(a)(20), and the DOE’s implementing regulations set
forth at 34 C.F.R. § 668.14(b)(22), concerning the payment of commissions,
bonuses or other incentive payments to admissions representatives, agents,
or
other persons engaged in any student recruiting, admissions, or other enrollment
related activities, or in the making of decisions regarding the awarding
of
Title IV Program funds for or on behalf of any Institution or
School.
(e) Control
Matters.
No
person who exercises substantial control over the Company, its Subsidiaries
or
any Institution (as the term “substantial control” is defined at 34 C.F.R.
§§ 600.30) exercised substantial control over another postsecondary
educational institution other than the Company (whether or not participating
in
the Title IV Programs) or any third-party servicer (as that term is defined
at
34 C.F.R. §§ 668.2) or a third-party servicer that owes a liability for a
violation of any requirements of the Title IV Programs. No Institution
nor any
person who exercises substantial control over the Company, its Subsidiaries
or
any Institution (as the term “substantial control” is defined at 34 C.F.R.
§§ 600.30) has pled guilty to, has pled nolo contendere to, or has been
found guilty of, a crime involving the acquisition, use or expenditure
of funds
under the Title IV Programs or has been judicially determined to have
committed fraud involving funds under the Title IV Programs. To the
Knowledge of the Company, neither the Company nor any Institution nor any
Affiliate of the Company or any Institution that has the power, by contract
or
ownership interest, to direct or cause the direction of the management
of
policies of any Institution, has filed for relief in bankruptcy or has
entered
against it an order for relief in bankruptcy. Neither the Company nor any
Institution knowingly employs, and, since the Compliance Date has knowingly
employed, any individual or entity in a capacity that involves the
administration or receipt of funds under the Title IV Programs, or knowingly
contracted with any institution or third-party servicer, which has been
terminated under the Higher Education Act of 1965, as amended, for a reason
involving the acquisition, use or expenditure of federal, state or local
government funds, or has been convicted of, or has pled nolo contendere
or
guilty to, a crime involving the acquisition, use or expenditure of federal,
state or local government funds, or has been administratively or judicially
determined to have committed fraud or any other material violation of law
involving, federal, state or local government funds.
33
(f) Recruitment;
Admissions Procedures; Attendance Reports.
(i) The
Company has made available to Buyer accurate copies of all policy manuals
and
other material statements of procedures or instructions currently in effect
relating to (A) recruitment of students for each School, including
procedures for assisting in the application by prospective students for
direct
or indirect funding under Student Financial Assistance Programs;
(B) admissions procedures, including any descriptions of procedures for
insuring compliance with applicable Educational Agency requirements;
(C) procedures for encouraging and verifying attendance, minimum required
attendance policies, and other relevant criteria relating to course performance
requirements and completion and (D) procedures for processing, disbursing
and returning Student Financial Assistance Program Funds (collectively,
the
“Policy
Guidelines”).
(ii) The
operations of the Company, each Institution and each School have been conducted
in accordance in all material respects with the Policy Guidelines and all
relevant standards and requirements imposed by applicable Educational Agencies
and other agencies administering Student Financial Assistance
Programs.
(iii) Since
the
Compliance Date, the Company, its Subsidiaries, each Institution and each
School
have submitted all reports, audits, and other information, whether periodic
in
nature or pursuant to specific requests, for the Company and each Institution
or
School to all Educational Agencies with which such filings are required
in order
to be in compliance in all material respects with applicable Educational
Agency
requirements, legal requirements governing programs pursuant to which such
School or its students receive student financial assistance and all articulation
agreements between the Company or such School and degree granting colleges
and
universities in effect as of the date hereof.
(g) Educational
Agency Consents.
To the
Knowledge of the Company, there exist no facts or circumstances attributable
to
the Company, its Subsidiaries, any Institution or any School which would
reasonably be expected to cause DOE, or any other Educational Agency whose
authorization, consent, or similar approval is required for the consummation
of
the Transactions or the operation of any Institution or School after the
date of
Closing, to refuse to deliver such authorization, consent or similar approval.
Neither the Company, its Subsidiaries, any Institution or any School, nor
the
respective employees thereof, have been or are subject to any actions,
suits,
proceedings, investigations, audits, program reviews or claims that would
reasonably be expected to prevent or delay the approval of the change in
ownership of the Institutions and Schools by any Educational Agency that
is
required to approve the change or issue an Educational Approval to the
Buyer,
the Institutions or the Schools as a result of such a change.
34
(h) Regulatory
Deliveries.
The
Company has made available to Buyer true
and
correct copies of all
material correspondence received from or sent by or on behalf of the Company,
its Subsidiaries, any Institution or any School to any Educational Agency
to the
extent such correspondence (i) was sent or received since the Compliance
Date or prior thereto if such correspondence relates to any issue which
remains
pending, and (ii) relates to (A) any written notice that any Educational
Approval is not in full force and effect according to its terms, or that
an
event has occurred which constitutes or, with the giving or notice or the
passing of time or both, would be expected to result in the revocation
of such
Educational Approval; (B) any written notice that any Institution or School
has
violated or is violating any legal requirement, regulation, rule, standard
or
requirement related to maintaining and retaining in full force and effect
any
Educational Approval; (C) any audits, program reviews, investigations or
site
visits conducted by an Educational Agency reviewing compliance by the Company,
any Institution or any School with the statutory, regulatory or other
requirements of an Educational Agency or an Educational Approval; (D) any
written notice of any intent to limit, show cause, suspend, terminate,
revoke,
cancel, not renew or condition (including any action placing any Institution
or
any School on probation) the accreditation of any Institution, any School
or any
location thereof; (E) any written notice of an intent or threatened intent
to condition the provision of Title IV Program funds to the Company, any
Institution or any School on the posting of a letter of credit or other
surety
in favor of the DOE or any documentation reflecting that such letter of
credit
is or was posted; (F) any written notice of an intent to provisionally
certify the eligibility of any Institution to participate in the Title IV
Programs or a copy of such a Provisional Program Participation Agreement;
(G) the placement or removal of any Institution or any School on or from
the reimbursement or cash monitoring method of payment under the Title
IV
Programs; and (H) any matter or proceeding disclosed in the Company
Disclosure Schedule.
The
Company has also made available to Buyer true and correct copies of its
annual
independent compliance audits regarding each Institution’s participation in the
Title IV programs, as submitted to the DOE in accordance with 34 C.F.R.
§
668.23, since the Compliance Date.
(i) Financial
Statements.
The
Company has provided or made available to Buyer the financial statements
submitted to the DOE on behalf of the Institutions and Schools since the
Compliance Date.
6.22 Student
Financial Assistance Programs.
(a) Section 6.22(a)
of the Company Disclosure Schedule lists each Student Financial Assistance
Program pursuant to which student financial assistance, grants or loans
are
provided to or on behalf of any School’s students.
(b) Since
the
Compliance Date, the Company, its Subsidiaries and each of Institutions
and
Schools have been and are in compliance in all material respects with any
and
all applicable Laws relating to any form of Student Financial Assistance
Program
funds, including the program participation, financial responsibility and
administrative capability requirements defined by DOE at 34 C.F.R. §§ 668.14,
668.15-16, 668.171-175, as well as the student eligibility requirements
defined
by DOE
at 34
C.F.R. §§ 668.31-39, and all other statutory and regulatory provisions related
to any Institution’s or any School’s participation in Student Financial
Assistance Programs.
35
(c) Section
6.22(c) of the Company Disclosure Schedule lists the “composite score” for each
Institution or School, as applicable, as calculated by the Company’s auditors
pursuant to 34 C.F.R. § 668.172 and 34 C.F.R Part 668, Subpart L, Appendix A for
the fiscal years ending December 31, 2002; December 31, 2003; December
31, 2004;
and December 31, 2005.
(d) Since
the
Compliance Date, each Institution or School, as applicable, has been in
compliance in all material respects with all Educational Agency requirements
and
regulations, including the DOE requirements at 34 C.F.R. § 668.22, related to
(i) fair and equitable refunds policies and (ii) the calculation and timely
repayment of federal and nonfederal funds, and any and all refunds required
thereunder as of the date of this Agreement have been timely paid by the
Company, each Institution and each School, as applicable. For the purposes
of
DOE requirements and regulations on timely repayment of federal funds as
referenced in the preceding sentence, materiality shall be determined in
accordance with the compliance thresholds at 34 C.F.R. §
668.173(c).
(e) Since
the
Compliance Date, neither the Company nor any Institution or School, as
applicable, has received notice from any other Educational Agency that
either
the Company or any School or Institution, as applicable, lacked financial
responsibility or administrative capability for any period under the Educational
Agency’s Law or standards in effect in such period.
(f) Since
the
Compliance Date, except as set forth in Schedule 6.22(f) of the Company
Disclosure Schedule, neither the Company, any Institution or any School
has
received any written notice of (i) any alleged violation of any Law related
to
any Student Financial Assistance Program, or of any standard of any applicable
Educational Agency, or of any Law related to maintaining and retaining
in full
force and effect any and all Educational Approvals necessary for any
Institution’s or any School’s existing operations and receipt of Student
Financial Assistance Program funds; or (ii) any investigation, audit or
review
of its operation or administration of any Student Financial Assistance
Program.
(g) Since
the
Compliance Date, all Student Financial Assistance Program funds provided
to any
student by any Institution or School, as applicable, have been calculated
and
made by the Company and its Schools in compliance in all material respects
with
applicable Laws and regulations, and all disbursements and record keeping
thereto have been completed by the Company and the Schools, in compliance
in all
material respects with applicable Law, and there are no material deficiencies
in
respect thereto.
(h) Since
the
Compliance Date, neither the Company nor any Institution or School, as
applicable, have received notice of a request by any Educational Agency
that any
Institution or School post a letter of credit or other form of surety for
any
reason, including any request for a letter of credit based on late refunds
pursuant to 34 C.F.R. § 668.173,
nor has
the DOE placed any Institution or School, as applicable, on either the
cash
monitoring or reimbursement payment methods.
36
6.23 Takeover
Statutes and Provisions.
The Company has taken all steps necessary to approve and irrevocably exempt
the
Transactions from any applicable takeover Law of any jurisdiction. Without
limiting the generality of the foregoing, the Board of Directors of the
Company
has approved this Agreement, the Voting Agreements, the Merger and the
Transactions in such manner as is sufficient to render the restrictions
of
Section 203 of the DGCL inapplicable to this Agreement, the Voting Agreements,
the Merger and the Transactions.
6.24 Labor
Matters.
Except for any limitations of general application which may be imposed
under
applicable employment Laws, the Company and each of its Subsidiaries have
the
right to terminate the employment of each of the Employees and to terminate
the
engagement of any of its independent contractors without payment to such
Employee or independent contractor other than for services rendered through
termination and without incurring any penalty or liability. The Company
and each
of its Subsidiaries is in compliance in all material respects with all
applicable Laws relating to employment, including those governing employment
practices, the terms and condition of employment, compensation, payment
of
wages, health and safety, labor relations and plant closings, including
the
Americans with Disabilities Act, the Age Discrimination in Employment Act,
ERISA, the Equal Pay Act, the Fair Labor Standards Act, the Family and
Medical
Leave Act, the National Labor Relations Act, the Occupational Safety and
Health
Act and Title VII of the Civil Rights Act of 1964, as amended (collectively,
“Labor
Laws”).
There
is no Proceeding relating to any Employee pending by any Governmental Authority
against the Company or any of its Subsidiaries for the enforcement of any
such
Labor Law; and, to the Knowledge of the Company, there is no other Proceeding,
investigation or inquiry pending or threatened by any Governmental Authority
against the Company or any of its Subsidiaries for the enforcement of any
such
Labor Law. Neither the Company nor any of its Subsidiaries is a party to
or
bound by any union or labor organization collective bargaining agreement,
nor is
any such agreement currently in effect or being negotiated by or on behalf
of
the Company or any of its Subsidiaries. There is no notice, activity or
Proceeding by any labor union, labor organization or other group seeking
to
represent Employees of the Company or any of its Subsidiaries or to organize
any
such Employees. Neither the Company nor any of its Subsidiaries is the
subject
of any pending, or to the Knowledge of the Company, threatened Proceeding,
investigation or inquiry asserting that the Company or any of its Subsidiaries
has committed any material unfair labor practice or seeking to compel it
to
bargain with any labor union, labor organization or other group with respect
to
the Employees of the Company; nor is there pending, or to the Knowledge
of the
Company, threatened, any labor strike, material dispute, walk out, work
stoppage, slow down or lockout involving any Employees. Except as set forth
in
Section 6.24 of the Company Disclosure Schedule, to the Knowledge of the
Company
no Employee is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other agreement that may have an adverse effect
on
(i) the performance by such Employee of any of his duties or responsibilities
as
an Employee or (ii) any of the businesses or operations of the Company
or any of
its Subsidiaries.
6.25 Affiliate
Transactions.
Except as set forth in the Company SEC Reports, there is no Material Contract
or
other contract, agreement, commitment or arrangement (whether written or
oral)
between (a) the Company or any of its Subsidiaries, on the one hand, and
(b) any
(i) officer or director of the Company or of any of its Subsidiaries, (ii)
record or beneficial owner of five percent (5%) or more of any class of
the
voting securities of the Company or (iii) Affiliate of any such officer,
director or beneficial owner, on the other hand. There is no contract,
agreement, commitment, arrangement or understanding between (a) the Company
or
any of its Subsidiaries, on the one hand, and (b) any officer or director
of the
Company or any of its Subsidiaries, on the other hand, relating to the
Transactions.
37
6.26 Broker’s
Fees.
Except for the fees and expenses payable to BMO Capital Markets and ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company, Incorporated, the Company’s financial advisors, which
are reflected in their agreements with the Company, true and correct copies
of
which have been furnished to Buyer, neither the Company nor any of its
Subsidiaries has employed or retained any investment bank, broker, finder,
consultant or other intermediary, which would be entitled to any fee or
commission from the Company in connection with the Transactions.
6.27 Opinions
of Financial Advisors. The
Board of Directors of the Company has received an opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
& Company, Incorporated to the effect that the Merger Consideration is fair
to the stockholders of the Company from a financial point of view, a true
and
correct copy of which has been provided to Buyer.
ARTICLE
VII
REPRESENTATIONS
AND WARRANTIES OF BUYER
AND MERGER SUB
Except
as
disclosed in the Buyer Disclosure Schedule (each Section of which qualifies
the
numbered representation and warranty only), Buyer and Merger Sub hereby
represent and warrant to the Company as follows:
7.1 Corporate
Organization, Qualification and Power. Each
of Buyer and its Subsidiaries is a corporation duly organized, validly
existing
and in good standing under the Laws of the jurisdiction of its incorporation
and
is duly qualified to conduct its business in every other jurisdiction in
which
its business is conducted, except where failure to be so qualified or licensed
would not, individually or in the aggregate, have a Buyer Material Adverse
Effect. Each of Buyer and its Subsidiaries has the corporate power to own
or
lease its respective properties and to carry on its business as now being
conducted, wherever located. Except as disclosed on the Buyer Disclosure
Schedule, Buyer does not own any interest in any corporation, partnership,
proprietorship or any other business entity. Buyer has heretofore made
available
to the Company true and correct copies of their respective Certificates/Articles
of Incorporation and Bylaws.
7.2 Authorization
of Agreement and Merger. Buyer
and Merger Sub have the requisite corporate power and authority to approve,
authorize, execute and deliver this Agreement and to consummate the
Transactions. This Agreement, and the consummation by Buyer and Merger
Sub of
the Merger and the other Transactions have been duly and validly authorized
by
the respective Board of Directors of Buyer and Merger Sub and no other
corporate
proceedings on the part of Buyer or Merger Sub are necessary to authorize
this
Agreement or to consummate the Transactions.
7.3 Enforceable
Agreement. This
Agreement has been duly and validly executed and delivered by Buyer and
Merger
Sub and, assuming it constitutes the valid and binding agreement of the
Company,
constitutes a valid and binding obligation of Buyer and Merger Sub, enforceable
against each of them according to its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws affecting
the
enforceability of contractual obligations and creditor’s rights generally and by
the application of equitable principles by courts of competent jurisdiction,
sitting at law or in equity.
38
7.4 No
Conflicts, Violations, Breaches or Defaults. The
execution and delivery of this Agreement and the performance of the obligations
hereunder by Buyer and Merger Sub, including the execution, delivery and
performance of any Additional Agreements to which they are a party and
the
consummation of the Transactions, do not (a) conflict with or result in any
breach of any provision of the Certificate/Articles of Incorporation or
Bylaws
of Buyer or Merger Sub; (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority,
including under the HSR Act, except (i) as requested by an Educational
Agency; (ii) pursuant to the applicable requirements of the Securities Act
and the Exchange Act, and the rules and regulations promulgated thereunder;
(iii) the filing of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in
which
Buyer or any of its Subsidiaries is authorized to do business; or
(iv) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not, individually
or in
the aggregate, have a Buyer Material Adverse Effect; (c) except as would
not, individually or in the aggregate, have a Buyer Material Adverse Effect,
conflict with or result in a breach or violation of, or constitute a default
under, or result in (or create in any party the right to cause) the acceleration
of any performance of Buyer or its Subsidiaries under, (i) any Judgment or
Law to which they are subject or bound (subject to any consents, approvals,
authorizations, permits, filings or notifications required under (b) above)
or
(ii) any mortgage, bond, indenture, agreement, contract, license or other
instrument or obligations to which Buyer and/or its Subsidiaries are subject
or
bound or (d) result in the creation of any Lien on any of the assets of
Buyer or its Subsidiaries which, individually or in the aggregate, would
have a
Buyer Material Adverse Effect.
7.5 Status
of Buyer; Control Matters. To
the Knowledge of the Buyer, there exist no facts or circumstances attributable
to the Buyer or any of its Subsidiaries or its Affiliates set forth in
Section
7.5 of the Buyer Disclosure Schedule which would reasonably be expected
to cause
DOE, or any other Educational Agency whose authorization, consent, or similar
approval is required for the consummation of the Transactions or the operation
of any Institution or School after the date of Closing, to refuse to deliver
such authorization, consent or similar approval, or to impose a condition
on
such authorization, consent, or similar approval that would cause a failure
of
the conditions set forth in Section 9.1(c) to be satisfied. Neither the
Buyer
nor any of its Subsidiaries or its Affiliates set forth in Section 7.5
of the
Buyer Disclosure Schedule, nor the respective employees thereof, have been
or
are subject to any actions, suits, proceedings, investigations, audits,
program
reviews or claims that would reasonably be expected to prevent or delay
the
approval of the change in ownership of the Institutions and Schools by
any
Educational Agency that is required to approve the change or issue an
Educational Approval to the Buyer, the Institutions or the Schools as a
result
of such a change, or to impose a condition on such authorization, consent,
or
similar approval that would cause a failure of the conditions set forth
in
Section 9.1(c) to be satisfied. Except as set forth in Section 7.5 of the
Buyer
Disclosure Schedule, neither Buyer nor any person who exercises substantial
control over Buyer (as the term “substantial control” is defined at
34 C.F.R. §§ 600.30) exercises or has exercised substantial control
over a postsecondary educational institution. Neither Buyer nor any person
who
exercises substantial control over Buyer exercises or has exercised substantial
control over a postsecondary educational institution or any third-party
servicer
(as that term is defined at 34 C.F.R. §§ 668.2) that owes a liability for a
violation of any requirements of the Title IV Programs. Neither Buyer nor
any
person who exercises substantial control over Buyer has pled nolo contendere
to,
or has been found guilty of, a crime involving the acquisition, use or
expenditure of funds under the Title IV Programs or has been judicially
determined to have committed fraud involving funds under the Title IV
Programs. Neither Buyer nor any affiliate of Buyer that has the power,
by
contract or ownership interest, to direct or cause the direction of the
management of policies of Buyer has filed for relief in bankruptcy or has
entered against it an order for relief in bankruptcy. Buyer does not, and,
since
the Compliance Date has not, knowingly employed, any individual or entity
in a
capacity that involves the administration or receipt of funds under the
Title IV
Programs, or knowingly contracted with any institution or third-party servicer,
which has been terminated under the Higher Education Act of 1965, as amended,
for a reason involving the acquisition, use or expenditure of federal,
state or
local government funds, or has been convicted of, or has pled nolo contendere
or
guilty to, a crime involving the acquisition, use or expenditure of federal,
state or local government funds, or has been administratively or judicially
determined to have committed fraud or any other material violation of law
involving, federal, state or local government funds.
39
7.6 Proxy
Statement. None
of the information supplied or to be supplied by Buyer for inclusion or
incorporation by reference in the Proxy Statement required to be filed
in
connection with the Transactions (or any amendment or supplement thereto)
will
at the time of the mailing of the Proxy State-ment and at the time of the
Company’s Stockholder Meeting contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under
which
they are made, not misleading.
7.7 Financing.
Buyer
and Merger Sub have received a letter from ▇▇▇▇▇▇ ▇.▇. (the “Bank
Commitment Letter”)
confirming its commitment, subject to the terms and conditions thereof,
to lend
up to $35.0 million to Merger Sub. The proceeds from the financing pursuant
to
the Bank Commitment Letter may be used by Buyer and Merger Sub for purposes
of,
among other things, consummating the Transactions and providing working
capital
to the Surviving Company. Buyer and Merger Sub have received a letter (together
with the Bank Commitment Letter, the “Financing
Commitments”)
providing, subject to the terms and conditions thereof, for an aggregate
equity
contribution by Liberty Capital Partners, Inc. of $76.5 million. A true
and
correct copy of the Financing Commitments has been delivered to the Company.
In
the event that the borrowings or amounts subscribed pursuant to the Financing
Commitments in amounts sufficient to permit consummation of the Merger
under the
terms of this Agreement are unavailable for any reason, Buyer and Merger
Sub
shall use their respective Commercially Reasonable Efforts to obtain replacement
financing from alternative sources on terms and conditions that are commercially
reasonable.
7.8 Broker’s
Fees. Buyer
has not employed or retained any investment bank, broker, finder, consultant
or
other intermediary, which would be entitled to any fee or commission from
Buyer
in connection with the Transactions.
40
ARTICLE
VIII
CONDUCT
PENDING THE CLOSING AND COVENANTS
8.1 Conduct
of Business by Company. The
Company covenants and agrees that prior to the Effective Time, unless Buyer
agrees in writing or as otherwise contemplated by this Agreement, it will
conduct its business and day to day operations (including those of any
Subsidiary) in the ordinary and usual course of business, consistent with
its
past custom and practice, and the Company shall use, and cause each of
its
Subsidiaries to use, Commercially Reasonable Efforts to preserve intact
the
present business organization, keep available the services of its present
officers and key Employees, and preserve the existing business relationships
of
the Company and its Subsidiaries. Without limiting the generality of the
foregoing, except as set forth in Section 8.1 of the Company Disclosure
Schedule, the Company specifically agrees that, prior to the Effective
Time,
unless Buyer otherwise agrees in writing or as otherwise contemplated by
this
Agreement, neither the Company nor any of the Company’s Subsidiaries
will:
(a) except
(i) upon the exercise pursuant to the Option Plans of Options that have
been
granted prior to the date hereof and are set forth in Section 6.2 of the
Company
Disclosure Schedule and (ii) up to 1,500 shares of Company Stock to be
issued
pursuant to the Company’s 2003 Restated Employee Stock Purchase Plan in respect
of elections made prior to the date hereof, authorize for issuance, issue,
deliver, sell or dispose of, pledge or otherwise encumber (A) any
additional shares of capital stock of any class, or any securities or rights
convertible into, exchangeable for or creating the right to subscribe for
any
share of capital stock, or any rights, warrants, options, calls, or any
other
agreement of any kind to purchase or acquire any share of capital stock
or such
securities, or (B) any securities exchangeable for, in respect of, or in
substitution for Company Stock, including, in the case of clauses (A) and
(B),
under the Company’s 2003 Restated Employee Stock Purchase Plan, it being
understood that from and after the date hereof, no such shares or securities
in
excess of 1,500 shares of Company Stock shall be issued under the Company’s 2003
Restated Employee Stock Purchase Plan;
(b) except
pursuant to existing employee benefit plans, redeem, purchase or otherwise
acquire any of its outstanding capital stock;
(c) split,
combine, subdivide or reclassify any share of its capital stock, or declare,
set
aside or pay any dividend, or make any distribution, on its capital
stock;
(d) amend
the
Company’s Certificate of Incorporation or Bylaws;
(e) adopt
a
plan of liquidation, dissolution, merger (other than the Merger), consolidation,
restructuring, or other reorganization of the Company, or any Subsidiary,
or
alter in any manner the corporate structure or ownership of the Company
or any
Subsidiary;
(f) except
acquisitions that are not individually or in the aggregate material to
the
Company or any Subsidiary of the Company and in the ordinary course of
business,
consistent with past practice, make any acquisition, through merger,
consolidation or otherwise;
41
(g) (i)
incur, assume, modify or prepay any indebtedness, obligations or liabilities
for
borrowed money, (ii) incur, assume, modify or prepay any other obligations
or
liabilities which exceed $250,000 individually or $1,000,000 in the aggregate,
(iii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other
Person other than a Subsidiary of the Company or (iv) make any loans, advances
or capital contributions to, or investments in, any other Person, other
than to
any Subsidiary of the Company;
(h) transfer,
lease, license, sell, mortgage, pledge, dispose of, encumber or subject
to any
Lien, any assets outside the ordinary course of business and consistent
with
past practice, other than any dispositions that are not individually or
in the
aggregate material to the Company or any Subsidiary of the Company;
(i) take
any
action which would render, or which reasonably may be expected to render,
any
representation or warranty made by it in this Agreement untrue in any material
respect at the Effective Time;
(j) except
as
permitted by Section 8.2, take any action that would, or that would
reasonably be expected to, cause any condition to Closing, as set forth
in
Article IX hereof, to not be satisfied;
(k) pay,
satisfy, discharge or, except as required by Law, settle any material claim,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other
than in the ordinary course of business and consistent with past practice
or
pursuant to mandatory terms of any Material Contract in effect on the date
hereof;
(l) modify
or
amend, or waive any material benefit under any Material Contract;
(m) permit
any material insurance policy naming the Company or any Subsidiary of the
Company as a beneficiary or a loss payee to be canceled or terminated other
than
in the ordinary course of business and consistent with past
practice;
(n) adopt,
enter into, terminate or, except as required by Law, amend any employee
plan,
agreement, contract, arrangement or other Company Benefit Plan (provided
that
nothing herein is intended to prevent the Company or any of its Subsidiaries
from hiring or firing Employees in the ordinary course of business and
consistent with past practice), (ii) increase in any material manner the
compensation or fringe benefits of, or pay any material bonus to, any director,
officer or Employee of the Company or any of its Subsidiaries, or (iii)
except
pursuant to Section 5.2 hereof, take any action to fund or in any other
way
secure, or to accelerate or otherwise remove restrictions with respect
to, the
payment of compensation or benefits under any Company Benefit Plan;
(o) make
any
material change in its accounting or Tax policies or procedures, except
as
required by changes in U.S. GAAP or as required by Law;
42
(p) settle
any Proceeding which such settlement results in payments to or by the Company
and its Subsidiaries in excess of $75,000 individually or $100,000 in the
aggregate;
(q) except
in
the ordinary course of business, incur any costs or make any expenditures
relating to or in connection with advertising and promotion, research and
development or any capital expenditures relating to the business of the Company;
(r) make
or
change any election, change an annual accounting period, adopt or change
any
accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim
a
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment, or take any other similar action
relating to the filing of any Tax Return or the payment of any Tax, if
such
election, adoption, change, amendment, agreement, settlement, surrender,
consent
or other action would have the effect of increasing the Tax liability of
the
Company or any of its Subsidiaries for any period ending after the Effective
Time or decreasing any Tax attribute of the Company or its Subsidiaries
existing
on the Effective Time; or
(s) authorize,
propose or announce an intention to do any of the foregoing, or enter into
any
contract or agreement to do any of the foregoing.
8.2 Acquisition
Proposals.
Neither the Company nor any Subsidiary of the Company nor any of their
respective officers, directors or Employees shall, and the Company shall
direct
and cause its and such Subsidiaries’ officers, directors and Employees not to,
directly or indirectly, (a) initiate, solicit, encourage or otherwise take
any action to facilitate any inquiries or the making of any proposal or
offer
with respect to an Acquisition Proposal or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have
any
discussions with, or afford access to any of the properties, assets or
books and
records of the Company or any of its Subsidiaries to, or enter into any
agreement, commitment or arrangement with, any Person relating to an Acquisition
Proposal; provided, however, that, so long as the Company has not breached
in
any material respect any of its obligations under this Section 8.2 or Section
8.3, nothing contained in this Agreement shall prevent the Company, its
directors, officers, or Representatives, prior to the approval and adoption
of
this Agreement and the transaction contemplated hereby at the Company’s
Stockholder Meeting, from
(i) providing information in response to a request therefor by a third
party who has made an unsolicited written bona fide
Acquisition Proposal to acquire all of the issued and outstanding Company
Stock,
or all or substantially all of the Company’s assets, if the Board of Directors
of the Company receives from the third party so requesting such information
an
executed confidentiality agreement and contemporaneously provides such
information to Buyer; (ii) engaging in any negotiations or discussions with
any third party who has made an Acquisition Proposal described in clause
(i)
above; or (iii) withdrawing or modifying in a manner adverse to Buyer or
Merger Sub its recommendation in favor of the Merger and this Agreement
or
recommending to the stockholders of the Company an Acquisition Proposal
described in clause (i) above if, in each such case referred to in
clause (i) or clause (ii) above, the Board of Directors of the Company
determines in good faith (after consultation with outside legal counsel)
that
taking such action is required in order to comply with the fiduciary duties
of
the members of the Board of Directors of the Company under applicable Law,
and
in each such case referred to in clause (iii) above, (A) the Board of Directors
of the Company determines in good faith (after consultation with outside
legal
counsel) that taking such action is required in order to comply with the
fiduciary duties of the members of the Board of Directors of the Company
under
applicable Law and (B) the Board of Directors of the Company determines in
good faith (after consultation with its financial advisor) that such Acquisition
Proposal referred to in clause (iii) above constitutes a Superior Proposal.
The
Company shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations by the Company or any Subsidiary
of the
Company, or any of their respective officers, directors or Employees with
any
parties conducted heretofore with respect to any Acquisition Proposal.
The
Company shall (y) as promptly as reasonably practicable (but in no event
later
than the day after receipt) notify Buyer if any such inquiries, proposals
or
offers are received by, any such information is requested from, or any
such
discussions or negotiations are sought to be initiated or continued with,
any
such third party and (z) identify the terms and conditions of any Acquisition
Proposal (including any subsequent changes, modifications and amendments
thereto) and the identity of the third party making such Acquisition Proposal.
Nothing contained in this Agreement shall prohibit the Company or the Board
of
Directors of the Company from taking and disclosing to the Company’s
stockholders a position with respect to a tender offer or exchange offer
by a
third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange
Act with respect to any Acquisition Proposal. During the period from the
date of
this Agreement through the Effective Time, the Company shall not terminate,
amend, modify or waive any provision of any confidentiality or standstill
agreement to which it or any of its Subsidiaries is a party.
43
8.3 Stockholders’
Approval.
(a) In
accordance with any applicable Law, the Company’s Certificate of Incorporation
and Bylaws, the Company shall call and hold the Company’s Stockholder Meeting,
and the Company shall hold such Company’s Stockholder Meeting as promptly as
reasonably practicable after the date on which the Proxy Statement is cleared
by
the SEC. The Company shall solicit from the stockholders of the Company
proxies
in favor of the Merger and shall take all other reasonable action necessary
or
advisable to secure the vote or consent of the stockholders of the Company
required by the DGCL and the Company’s Certificate of Incorporation and Bylaws
to approve and adopt this Agreement and the Merger. Except as permitted
by and
in accordance with the provisions of Section 8.2, the Board of Directors
of the
Company may not withdraw or modify in a manner adverse to Buyer or Merger
Sub
its approval or recommendation of this Agreement or the Merger, or state
publicly its intent to do so, or approve or recommend any Acquisition
Proposal to the stockholders of the Company, or state publicly its intent
to do
so, or resolve to take any of the foregoing actions. The Board of Directors
of
the Company shall submit this Agreement to the stockholders of the Company
for
approval and adoption whether or not the Board of Directors of the Company
at
any time withdraws or modifies its recommendation in favor of the Merger
and
this Agreement in compliance with this Agreement.
(b) As
promptly as reasonably practicable after the date of this Agreement, the
Company
shall prepare and file with the SEC, and shall use its Commercially Reasonable
Efforts to have cleared by the SEC, the Proxy Statement in connection with
the
Company’s Stockholder Meeting. The Company, Buyer and Merger Sub each shall
promptly and timely provide all information relating to its respective
businesses or operations necessary for inclusion in the Proxy Statement
to
satisfy all requirements of applicable state and U.S. federal securities
Laws.
The Company and Buyer (with respect to Buyer and Merger Sub) each shall
be
solely responsible for any statement, information or omission in the Proxy
Statement relating to it (and Merger Sub with respect to Buyer) or its
Affiliates based upon written information provided by it (or Merger Sub
with
respect to Buyer) for inclusion in the Proxy Statement. The Company, prior
to
filing the Proxy Statement or any amendment or supplement thereto, shall
have
received written approval from Buyer as to any provision which includes
any
information provided by Buyer pursuant to Section 7.6.
44
(c) The
Company shall notify Buyer of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall provide a
copy of
such comments or requests to Buyer promptly after receipt, and shall promptly
provide to Buyer copies of all correspondence between the Company or any
representative of the Company and the SEC. The Company shall give Buyer
and its
counsel the reasonable opportunity to review and comment on any proposed
responses to comments, which review shall be concluded as promptly as possible,
but in no event more than three (3) business days after the receipt by
Buyer of
the Company’s proposed responses to comments or other correspondence to the SEC.
If at any time after the date the Proxy Statement is mailed to stockholders
and
prior to the Company’s Stockholder Meeting any information relating to the
Company, Buyer or Merger Sub, or any of their respective Affiliates, officers
or
directors, is discovered by the Company, Buyer or Merger Sub, which is
required
to be set forth in an amendment or supplement to the Proxy Statement so
that the
Proxy Statement will not include any untrue statement of a material fact
or omit
to state any material fact necessary to make the statements therein, in
light of
the circumstances under which they were made, not misleading, the Party
that
discovers such information shall promptly notify the other Parties hereto
and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and to the extent required by applicable Law,
disseminated to the stockholders of the Company. As promptly as reasonably
practicable after the Proxy Statement has been cleared by the SEC (or sooner
if
permitted by applicable Law), the Company shall mail the Proxy Statement
to the
stockholders of the Company. Unless the Board of Directors of
the
Company shall
have withdrawn or modified its approval or recommendation of this Agreement
or
the Merger as permitted by and in accordance with the provisions of Section
8.2,
the Proxy Statement shall include the recommendation of the Board of Directors
of
the
Company in
favor
of the Merger and this Agreement.
8.4 All
Reasonable Efforts.
(a) Subject
to the terms and conditions herein, each of the Parties shall use all
Commercially Reasonable Efforts to take, or cause to be taken, all action
and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective as expeditiously as
practicable, the Transactions, including (i) using all Commercially Reasonable
Efforts to obtain all necessary or appropriate waivers, consents and approvals,
to effect all necessary registrations, filings and submissions, including
required approvals by any Educational Agency and under the applicable state
Laws
and to lift any injunction or other legal bar to the Merger (and, in such
case,
to proceed with the Merger as expeditiously as possible), subject, however,
to
the requisite votes of the stockholders of the Company;
(ii) providing such information and communications to Governmental
Authorities as they may reasonably request and (iii) executing and
delivering any additional certificates, agreements, instruments, reports,
schedules, statements, consents, documents and information necessary to
consummate the Merger, and fully carrying out the purposes of, this Agreement.
Each of the Company, Buyer and Merger Sub agrees that, except as otherwise
contemplated by this Agreement, it shall not take any action, or fail to
take
any action, which action or failure to act would reasonably be expected
to have
a Company Material Adverse Effect or Buyer Material Adverse Effect.
46
(b) In
furtherance of and without limitation of the foregoing, each of the Company,
Buyer and Merger Sub shall (i) respond as promptly as reasonably
practicable to any reasonable inquiries or requests received from any
Governmental Authority for additional information or documentation,
(ii) promptly notify the other Parties hereto of any written communication
to that Party or its Affiliates from any Governmental Authority and, subject
to
applicable Law, permit the other Parties to review in advance any proposed
written communication to any of the foregoing (and consider in good faith
the
views of the other parties in connection therewith), and (iii) provide the
other Parties hereto, subject to applicable Law, with copies of all material
correspondence, filings, and communications between them and their Affiliates
and their respective Representatives on the one hand, and any Governmental
Authority of their respective staffs on the other hand, with respect to
this
Agreement and the Merger; all with a view towards the prompt completion
of the
Merger and the other Transactions.
8.5 Access
to/Confidentiality of Information. The
Company shall (and shall cause its Subsidiaries and its and their respective
officers and directors, and shall direct its Representatives to) afford
to Buyer
and its Representatives and financing sources, including lenders and potential
lenders, access, upon reasonable advance notice and during normal business
hours, throughout the period prior to the Effective Time to all of its
books,
environmental and other correspondence, documents, studies, reports and
records
and its properties, plants and personnel to do such investigation and
assessments as Buyer reasonably deems necessary and, during such period,
shall
provide promptly to Buyer a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of U.S. federal securities
Laws and such other documents as Buyer may reasonably request. Unless otherwise
required by Law, each Party agrees that it will not, and will cause its
Representatives (and in the case of Buyer, its financing sources) not to,
use
any information obtained pursuant to this Section 8.5 for any purpose
unrelated to the consummation of the Transactions. No representation or
warranty
of any Party contained in this Agreement or in any Additional Agreement
shall be
deemed waived or otherwise affected by any investigation made by any other
Party
hereto.
8.6 Publicity. The
Parties shall consult with each other and shall mutually agree upon any
press
releases or public announcement pertaining to the Merger and the other
Transactions and shall not issue any such press releases or make any such
public
announcements prior to such consultation and agreement, except as may be
required by applicable Law or by obligations pursuant to any listing agreement
with The NASDAQ Capital Market, in which case the Party proposing to issue
such
press release or make such public announcement shall use all Commercially
Reasonable Efforts to consult in good faith with the other Party before
any such
issuance or announcement. Notwithstanding any provision hereof to the contrary,
Buyer and Merger Sub may disclose any and all information relating to this
Agreement and the Transactions, including the Merger, the Company and its
Subsidiaries, to their financing sources, including lenders.
46
8.7 Indemnification.
(a) From
and
after the Effective Time, Buyer shall, and shall cause the Surviving Company
to,
indemnify, defend and hold harmless (and advance expenses to the fullest
extent
permitted under applicable Law provided the Person to whom expenses are
advanced
provides any undertaking required under applicable Law to repay such advances
if
it is ultimately determined by a final non-appealable judgment of a court
of
competent jurisdiction that such Person is not entitled to indemnification)
each
individual who is now, or has been at any time prior to the date hereof
or who
becomes prior to the Effective Time, an officer or director of the Company
(each
individually an “Indemnified
Party”
and,
collectively, the “Indemnified
Parties”)
to the
same extent such Persons are indemnified as of the date of this Agreement
by the
Company pursuant to any agreements between such Person and the Company
and the
Company Certificate of Incorporation and Bylaws against all losses, claims,
damages, costs, expenses (including reasonable attorneys’ fees and expenses),
liabilities or judgments or amounts that are paid in settlement with the
approval of the Indemnified Party (which shall not be unreasonably withheld
or
delayed) as a result of or in connection with any threatened or actual
claim,
action, suit, proceeding or investigation, whether criminal, civil or
administrative, based on or arising out of the fact that such Person is
a
director or officer of the Company or any of its Subsidiaries or out of
or in
connection with activities in such capacity, whether pertaining to any
matter
existing or occurring at or prior to the Effective Time and whether asserted
or
claimed prior to, or after, the Effective Time (“Indemnified
Liabilities”),
including all Indemnified Liabilities based on, or arising out of, or pertaining
to this Agreement or the Transactions; provided,
however, that Buyer and the Surviving Company shall have no obligation
hereunder
to any Indemnified Party when, as and if a court of competent jurisdiction
shall
determine in a final non-appealable judgment that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law. Without limiting the generality or effect of the foregoing, in the
event
any such claim, action, suit, proceeding or investigation is brought after
the
Effective Time against any Indemnified Parties (whether arising before
or after
the Effective Time) and, in the written opinion of counsel to an Indemnified
Party, under applicable standards of professional conduct, there may be
a
conflict of interest between the position of the Surviving Company or Buyer,
as
applicable, and an Indemnified Party, the Indemnified Parties may retain
counsel, which counsel shall be reasonably satisfactory to Buyer and Buyer
shall
cause the Surviving Company to pay all reasonable fees and expenses of
such
counsel for the Indemnified Parties promptly as statements therefore are
received, provided, however, that (i) the Company and the Indemnified
Parties will cooperate in the defense of any such matter and (ii) neither
Buyer, the Company nor the Surviving Company shall be liable for any settlement
effected without Buyer’s prior written consent (which shall not be unreasonably
withheld or delayed). Any Indemnified Party wishing to claim indemnification
under this Section 8.7, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify both Buyer and Company
(or,
after the Effective Time, the Surviving Company) (but the failure to so
notify
shall not relieve a party from any liability which it may have under this
Section 8.7 except and only to the extent such failure materially
prejudices such Party). An Indemnified Party shall not be entitled to the
indemnification rights provided for in this Section 8.7 with respect to any
claim, action, suit, proceeding or investigation against the Company brought
by
the Indemnified Party (other than a claim against the Company for
indemnification for matters brought by a party other than the Indemnified
Party
and wrongfully denied by the Company).
47
(b) This
Section 8.7 shall survive the consummation of the Merger at the Effective
Time, is intended to benefit the Company, the Surviving Company and the
Indemnified Parties, shall be binding on all successors and assigns of
Buyer and
the Surviving Company and shall be enforceable by the Indemnified
Parties.
(c) For
a
period of not less than six (6) years from the Effective Time, Buyer shall
maintain in effect the current policies of directors and officers liability
insurance maintained by the Company and its Subsidiaries (provided that
Buyer
may substitute therefore policies from a financially capable insurer of
at least
the same coverage and amount containing terms and conditions which are
substantially no less advantageous, or in the event such coverage is provided
through Buyer’s insurer it may be on terms and conditions (other than coverage
and amounts) consistent with Buyer’s current coverage, or in lieu thereof obtain
single limit tail coverage for such period (which shall be purchased by
the
Company immediately prior to Closing upon the written request of Buyer)),
with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that Buyer shall not be required to
pay an
annual premium for such insurance in excess of one hundred fifty percent
(150%)
of the last annual premium paid by the Company for such insurance prior
to the
date hereof (the “Maximum
Amount”)
(which
premium is set forth in Section 8.7(c) of the Company Disclosure Schedule)
and
if Buyer is unable to obtain the insurance required by this Section 8.7(c),
it
shall obtain as much comparable insurance as possible for an annual premium
equal to the Maximum Amount.
(d) The
obligations of the Company under this Section 8.7 shall not be terminated
or
modified in such a manner as to adversely affect any Indemnified Party
to whom
this Section applies without the written consent of such affected Indemnified
Party. The rights of each Indemnified Party under this Section 8.7 shall
be in
addition to any rights such Person may have under the Company Certificate
of
Incorporation or Bylaws, or under the DGCL or any other applicable Law
or under
any agreement of any Indemnified Party with the Company or any of its
Subsidiaries. All rights to indemnification and all limitations on liability
existing in favor of any Indemnified Party as provided in an agreement
between
any Indemnified Party and the Company or a Subsidiary of the Company as
in
effect as of the date hereof shall continue in full force and effect in
accordance with their terms after the Effective Time.
8.8 Certain
Benefit Plans.
The
Company’s Board of Directors has adopted resolutions to discontinue the purchase
after the date hereof of Company common stock under the Company’s 2003 Restated
Employee Stock Purchase Plan.
8.9 Regulatory
and Other Approvals.
(a) The
Company, with the cooperation of Buyer as and when reasonably requested,
shall
use Commercially Reasonable Efforts necessary to (i) promptly following the
execution of this Agreement, submit a pre-acquisition application to DOE
for
approval of each Institution to participate in the Title IV Programs following
the Merger (“Pre-Closing
DOE Review Applications”),
(ii) obtain the Pre-Closing Educational Consents set forth in Section
6.6(a)(ii) of the Company Disclosure Schedule, (iii) make any other
required pre-closing filings or notifications pertaining to the continuation
or
renewal of any Educational Approvals following Closing, and (iv) provide
such other information and communications to such Governmental Authorities
and
Educational Agencies or other persons as such Governmental Authorities
and
Educational Agencies may request in connection with any Education Approval
or
Pre- or Post-Closing Educational Consent. Each Party will promptly and
regularly
advise the other Parties concerning the occurrence and status of any material
discussions or other communications, whether oral or written, with any
Educational Agency, other Governmental Authorities or other third party
with
respect to any Pre- or Post-Closing Educational Consent, including any
difficulties or delays experienced in obtaining any Consent and of any
conditions proposed, considered, or requested for any Consent. Buyer shall
not
contact any Educational Agency or Governmental Authority of the Company
prior to
Closing with respect to the proposed Merger without the participation and
prior
consent (which shall not unreasonably be withheld or delayed) of the
Company;
provided, however, that such prior consent of the Company shall not be
required
for the Buyer to contact any Educational Agency or Governmental Authority
regarding (i) any matters unrelated to the Transactions; or (ii) any matters
which pertain solely and exclusively to the Buyer and do not disclose the
Transactions. The Company shall provide Buyer, for prior review and comment,
each filing proposed to be submitted to any Educational Agency regarding
the
proposed Merger at least three (3) business days before submitting it to
the
Educational Agency. The Company and Buyer shall use Commercially Reasonable
Efforts to ensure that their respective appropriate officers and employees
shall
be available to attend, as any Educational Agency may reasonably request,
any
scheduled hearings or meetings in connection with obtaining any
Consent.
48
(b) Subject
to the terms and conditions herein provided, the Parties shall take all
commercially reasonable steps necessary or desirable, and proceed diligently
and
in good faith and use all Commercially Reasonable Efforts to obtain all
approvals required by any contract to consummate the Transactions.
8.10 Stockholder
Litigation. The
Parties shall cooperate and consult with one another in connection with
any
litigation against any of them or any of their respective directors, officers
or
employees relating to this Agreement or the Transactions. In furtherance
of and
without limiting the generality of the foregoing, (a) each of the Parties
shall
use its respective reasonable best efforts to prevail in any such litigation
so
as to permit the consummation of the Transactions in the manner contemplated
by
this Agreement, (b) the Company shall give Buyer prompt notice and the
opportunity to participate in the defense, compromise and settlement of
any such
litigation, and (c) the Company shall not compromise or settle any such
litigation without Buyer’s prior written consent.
8.11 Supplemental
Disclosure. Each
Party shall give prompt notice to the other such Parties of, to its Knowledge,
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (i) any representation
or
warranty of such Party contained in this Agreement to be untrue or incorrect
or
(ii) any covenant, condition or agreement of such Party contained in this
Agreement not to be complied with or satisfied and (b) any failure of such
Party
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery
of any
notice pursuant to this Section 8.11 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in
Article
IX of this Agreement (except as set forth in the next sentence) or otherwise
limit or affect the remedies available to any such Party hereunder. The
Company shall, from time to time prior to the Closing, promptly supplement
or
amend Section 6.21 or 6.22 of the Company Disclosure Schedule, or any subsection
thereof, with respect to (x) any matter that existed as of the date of
this
Agreement and should have been set forth in the Company Disclosure Schedule
and
(y) any matter hereafter arising which, if existing as of the date of this
Agreement, would have been required to be set forth in the Company Disclosure
Schedule in order to make any representation or warranty set forth in this
Agreement true and correct as of such date; provided, however, that, with
respect to clause (x) above, any such supplemental or amended disclosure
shall
not be deemed to have been disclosed as of the date of this Agreement for
any
purpose, unless expressly consented to in writing by Buyer, in Buyer’s sole and
absolute discretion; and provided further, that, with respect to clause
(y)
above, any such supplemental or amended disclosure with respect to any
matter
that, alone or together with any other matter previously disclosed, has
not had
and would not reasonably be expected to have a Company Material Adverse
Effect
shall be deemed to have been disclosed as of the date of this Agreement.
49
8.12 Waiver.
The
Company hereby unconditionally and irrevocably waives all of its rights,
remedies and interests in, to and under any and all agreements, arrangements,
contracts and understandings, whether written or otherwise, to or by which
the
Company or its assets or properties are subject or bound, which rights,
remedies
and interests, whether directly or indirectly, prohibit, restrict or otherwise
impair (or would reasonably be expected to prohibit, restrict or impair)
the
ability of the Company to perform its obligations hereunder or the ability
of
any party to the Voting Agreements to perform its obligations thereunder
or to
consummate the transactions contemplated hereby or thereby, including the
Merger.
ARTICLE IX
CONDITIONS
9.1 Conditions
to Each Party’s Obligation to Close.
The obligations of each of the Parties to consummate the Transactions are
subject to satisfaction or, to the extent permitted by Law, mutual waiver,
at or
prior to the Effective Time of each of the following conditions:
(a) Injunction.
There shall not be in effect any Law or any Judgment that prohibits or
otherwise
restricts consummation
of the
Transactions; provided, however, that prior to invoking this condition
each
Party shall use all Commercially Reasonable Efforts to have any such Judgment
vacated; and there shall have been no Law enacted or promulgated which
would
make consummation of the Transactions illegal.
(b) Stockholder
Approval.
This
Agreement and the Merger shall have been duly adopted and approved by the
stockholders of the Company in accordance with applicable Law and the Company
Certificate of Incorporation at the Company’s Stockholder Meeting.
(c) Educational
Approvals.
50
(i) The
Company shall have obtained written responses from DOE to the Pre-Closing
DOE
Review Applications which responses evidence, in the reasonable judgment
of both
the Company and Buyer, that (A) the Pre-Closing DOE Review Applications
are
materially complete; and (B) there is no material impediment to the issuance
of
a TPPPA to each Institution following the date of Closing; provided, however,
subject to Section 9.1(c)(ii), a material impediment shall not include
any
conditions that may be imposed by DOE concurrently with the issuance of
a TPPPA;
and provided further that prior to invoking this condition each Party shall
use
all Commercially Reasonable Efforts to obtain such written responses that
include such evidence.
(ii) The
Buyer
shall have received certain reasonable assurances from DOE, as set forth
in
Section 9.1(c)(ii) of the Buyer Disclosure Schedule, regarding the issuance
of a
TPPPA or PPPA to any Institution.
(iii) The
Company and each Institution or School, as appropriate, shall have obtained
all
Pre-Closing Educational Consents listed on Section 9.1(c)(iii) of the Company
Disclosure Schedule.
9.2 Additional
Conditions to the Obligations of Buyer and Merger Sub to Close.
The obligations of Buyer and Merger Sub to consummate the Transactions
are
subject to satisfaction or, to the extent permitted by Law, waiver at or
prior
to the Effective Time of each of
the
following conditions:
(a) Performance.
The
Company shall have performed all the obligations required to be performed
by it
under this Agreement at or prior to the Effective Time.
(b) Representations
and Warranties.
All the
representations and warranties made herein by the Company shall have been,
and
shall be, true and correct in all material respects when made and as of
the
Effective Time (other
than such (i) representations and warranties that are made as of a
particular date in which event such representations and warranties shall
be true
and correct as of such date
and (ii)
representations and warranties that are qualified by reference to materiality
or
Material Adverse Effect which shall be true and correct in all
respects).
(c) Limitation
of Dissenting Shares.
No more
than two percent (2%) of the outstanding Company Shares immediately prior
to the
Effective Time shall be deemed Dissenting Shares entitled to receive such
consideration as determined by Section 5.4.
(d) Material
Adverse Effect.
No
change, event, occurrence or state of facts shall exist or shall have occurred
that, individually or in the aggregate, has had or would reasonably be
expected
to have a Company Material Adverse Effect.
(e) Certain
Actions.
There
shall not have been instituted or be pending any suit, claim, action or
proceeding by or before any Governmental Authority as a result of this
Agreement
or the Transactions that would reasonably be expected to make consummation
of
the Transactions illegal or to materially impair the Surviving
Company’s ability to conduct its business.
51
(f) Financing.
Buyer
and Merger Sub shall have obtained, pursuant to the Financing Commitments
or
otherwise, the funds necessary to consummate the Transactions on the terms
set
forth herein, including amounts sufficient to pay the Merger Consideration
and
the Covered Expenses.
(g) Ratio.
The
Company shall have sufficient cash (without borrowing) so that the Acid
Test
Ratio of the Company at the close of business on the day immediately preceding
the date of Closing is greater than 1.0.
(h) Cash
on Hand.
The
Company shall have immediately prior to the Effective Time cash on hand
(which
for these purposes shall include amounts in respect of Covered Expenses
incurred
and paid by the Company in an amount up to $1,000,000) in an amount of
not less
than $6,500,000 in excess of the amount required to satisfy the Acid Test
Ratio
set forth in Section 9.2(g), and the Company shall have furnished to Buyer
a
certificate of its Chief Financial Officer, in form and substance satisfactory
to Buyer, certifying the fulfillment of the condition set forth in this
Section
9.2(h).
(i) Termination
of Agreements.
The
following agreements shall have been unconditionally terminated pursuant
to an
instrument or instruments in form and substance satisfactory to Buyer,
without
penalty or premium payable by the Company, the Surviving Company, Buyer
or
Merger Sub: (a) Convertible Preferred Stock Purchase Agreement by and among
the
Company, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. and
Strategic Associates, L.P. dated as of February 25, 1997; (b) Subordinated
Debenture and Warrant Purchase Agreements by and among the Company, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. and Strategic Associates, L.P. dated
as of
February 25, 1997; (c) Amended and Restated Stockholders’ Agreement between the
Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P, Strategic Associates,
L.P., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust Under Agreement Dated
December 28, 1989, dated as of November 25, 2002; and (d) Amended and Restated
Registration Rights Agreement between the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Strategic
Partners Fund, L.P. and Strategic Associates, L.P., dated January 10,
2003.
(j) Consents
and Approvals. Other
than with respect to Educational Approvals, which are governed by
Section 9.1(c), all consents, approvals and authorizations required to be
obtained to consummate the Transactions shall have been obtained by the
Company
from all Governmental Authorities
and other third parties, including those set forth in Section 9.2(j) of
the
Company Disclosure Schedule.
(k) Liens.
The
Company shall have obtained releases, in form and substance reasonably
satisfactory to Buyer, of all Liens on its or its Subsidiaries assets and
properties, including those set forth in Section 9.2(k) of the Company
Disclosure Schedule.
(l) Option
Waiver.
The
Company shall have obtained duly executed Option Cancellation and Termination
Waivers, in form and substance reasonably satisfactory to Buyer, from each
of
the holders of Options set forth in Section 9.2(l) of the Company Disclosure
Schedule.
9.3 Deliveries.
Buyer
shall have received at the Effective Time:
52
(a) a
certificate dated the Effective Time and executed by the President or a
Vice
President of the Company certifying to the fulfillment of the conditions
specified in Sections 9.2(a) and (b) and Section 9.1(b);
and
(b) certified
or verified copies of the Articles or Certificate of Incorporation, the
Bylaws,
and certificates of good standing for the Company and its Subsidiaries,
as Buyer
may reasonably request.
9.4 Additional
Conditions to the Company’s Obligation to Close.
The obligation of the Company to consummate the Transactions is subject
to
satisfaction or, to the extent permitted by Law, waiver at or prior to
the
Effective Time of each of the following conditions:
(a) Performance.
Buyer
and Merger Sub shall have performed, in all material respects, all the
obligations required to be performed by them under this Agreement at or
prior to
the Effective Time.
(b) Representations
and Warranties.
All the
representations and warranties made herein by Buyer and Merger Sub shall
have
been, and shall be, true and correct in all material respects when made
and as
of the Effective Time (other
than such (i) representations and warranties that are made as of a
particular date in which event such representations and warranties shall
be true
and correct as of such date
and (ii)
representations and warranties that are qualified by reference to materiality
or
Material Adverse Effect which shall be true and correct in all
respects).
9.5 Deliveries.
The
Company shall have received at or prior to the Effective Time:
(a) a
certificate dated the Effective Time and executed by the President or a
Vice
President of Buyer certifying as to Buyer to the fulfillment of the conditions
specified in Sections 9.4(a) and (b);
(b) a
certificate dated the Effective Time and executed by an authorized officer
of
Merger Sub certifying as to Merger Sub to the fulfillment of the conditions
specified in Sections 9.4(a) and (b); and
(c) an
executed copy of the Paying Agent Agreement pursuant to
Section 5.3.
ARTICLE
X
TERMINATION
AND REMEDIES
10.1 Termination. This
Agreement may be terminated and the Merger may be abandoned at any time
prior to
the Effective Time, before or after the approval by stockholders of the
Company
by written notice:
(a) by
the
mutual written consent of Buyer and the Company;
(b) by
either
Buyer or the Company, if:
53
(i) any
court
of competent jurisdiction in the U.S., or some other Governmental Authority,
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger
and such
order, decree, ruling or other action shall have become final and nonappealable;
provided, however, that the Party seeking to terminate this Agreement under
this
Section 10.1(b)(i) shall have used Commercially Reasonable Efforts to
remove such, order, decree ruling or action; or
(ii) if
there
shall be any Law enacted, promulgated or issued and deemed applicable to
the
Merger by any Governmental Authority which would make consummation of the
Merger
illegal; or
(iii) (A)
the
Merger shall not have been consummated prior to the date that is one hundred
eighty (180) days after the date of this Agreement, provided, that the
right to
terminate this Agreement pursuant to this Section 10.1(b)(iii)(A) shall not
be available to any Party whose failure to fulfill any of its obligations
under
this Agreement results in the failure of the Merger to occur on or before
such
date; provided further, that neither Party shall have the right to terminate
this Agreement under this Section 10.1(b)(iii)(A) if the Merger shall not
have been consummated by such date because (y) of the entering prior to
such
date of an order or any pending action commenced by any applicable federal
governmental antitrust authority seeking an order which would have the
effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger;
or (z) of the failure of the conditions set forth in
Section 9.1(c)(iii) to be satisfied by such date; or (B) the Merger shall
not have been consummated prior to the first anniversary of the date of
this
Agreement; or
(iv) if
the
Stockholders of the Company do not adopt and approve this Agreement and
Merger
at the Company’s Stockholder Meeting (including
any adjournment or postponement thereof; provided, however, that the right
to
terminate the Agreement pursuant to this Section 10.1(b)(iv) shall not
be
available to any Party whose action, failure to act or breach of this Agreement
has been a principal cause of or resulted in the failure of the stockholders
of
the Company to adopt and approve this Agreement and the Merger).
(c) by
Buyer,
if:
(i) there
has
been a misrepresentation or breach of warranty in any material respect
or a
failure to perform in any material respect a covenant on the part of the
Company
with respect to its representations, warranties and covenants set forth
in this
Agreement (A) of which the Company has been given notice in writing by
Buyer,
(B) which has not been cured by the Company within thirty (30) days of
such
notice and (C) which would give rise to the failure of any of the conditions
set
forth in Article IX of this Agreement; or
(ii) the
Board
of Directors of the Company (w) withdraws or modifies in a manner adverse
to Buyer or Merger Sub its approval or recommendation of this Agreement
or the
Merger, or states publicly its intent to do so, or fails to reconfirm such
recommendation within one business day of a written request by Buyer for
such
reconfirmation, (x) approves or recommends any Superior Proposal to the
Stockholders, or states publicly its intent to do so, (y) fails to
recommend against the acceptance of any tender offer or exchange offer
that
constitutes an Acquisition Proposal within ten (10) business days from
the
commencement thereof (including by means of taking no position with respect
to
the acceptance thereof by the stockholders), or (z) resolves to take any of
the foregoing actions.
54
(d) by
the
Company, if:
(i) there
has
been a misrepresentation or breach of warranty in any material respect
or a
failure to perform in any material respect a covenant on the part of Buyer
with
respect to its representations, warranties and covenants set forth in this
Agreement (A) of which Buyer has been given notice in writing by the Company,
(B) which has not been cured by Buyer within thirty (30) days of such notice
and
(C) which would give rise to the failure of any of the conditions set forth
in
Article IX of this Agreement;
or
(ii) prior
to
the approval and adoption of this Agreement and the Transactions at the
Company’s Stockholder Meeting, the Board of Directors of the Company authorizes
the Company to enter into a definitive acquisition, merger or similar agreement
with respect to any Superior Proposal; provided, however,
that the
Company may not terminate this Agreement pursuant to this
Section 10.1(d)(ii) unless (A) three (3) business days shall have elapsed
after delivery to Buyer of a written notice of such authorization by the
Board
of Directors of the Company and, during such three (3) business day period,
the
Company shall have reasonably cooperated with Buyer, including informing
Buyer
of the terms and conditions of such Superior Proposal and the identity
of the
Person or group making such Superior Proposal, with the intent of enabling
Buyer
to agree to a modification of the terms and conditions of this Agreement
so that
the Transactions may be effected, and (B) at the end of such three (3)
business
day period, the Board of Directors of the Company shall continue reasonably
to
believe that such Acquisition Proposal constitutes a Superior Proposal
and
promptly thereafter the Company shall enter into a definitive acquisition,
merger or similar agreement to effect such Superior Proposal; and provided,
further, that the Company may only exercise its right to terminate this
Agreement pursuant to this Section 10.1(d)(ii) only if the Company has
complied with its obligations under Section 8.2 and simultaneously paid
the
amounts payable under Section 10.2(b).
10.2 Effect
of Termination.
(a) In
the
event of the termination and abandonment of this Agreement pursuant to
Section 10.1, this Agreement shall become void and have no further effect,
without any liability on the part of any Party hereto or its Affiliates,
directors, officers or stockholders, provided that, notwithstanding the
foregoing, the provisions of Section 8.6, this Section 10.2 and
Article XI shall survive such termination and shall continue to be of
binding effect. Nothing contained in this Section 10.2 shall relieve any
Party from liability for any breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
55
(b) In
the
event of the termination of this Agreement by (i) the Company pursuant to
Section 10.1(d)(ii), (ii) the Company pursuant to
Section 10.1(b)(iii) or (iv) due to the failure of the Company’s
stockholders to approve and adopt this Agreement or the Merger or (iii)
Buyer
pursuant to Section 10.1(c)(ii) and, solely with respect to this clause
(iii), (A) at such time there exists an Acquisition Proposal from a third
party for the Company and (B) within twelve (12) months of the
termination of this Agreement, the Company enters into a definitive agreement
or
consummates a transaction with such third party with respect to an Acquisition
Proposal, then the Company shall pay to Buyer an amount equal to the sum
of
$3,250,000 plus the amount of Covered Expenses (up to $1.5 million) incurred
by
Buyer and Merger Sub. Any payment required to be paid pursuant to this
Section 10.2(b) shall be made: (x) in the case of termination pursuant to
Section 10.1(d)(ii), prior to, and as a condition precedent to the effectiveness
of the termination of this Agreement; (y) in the case of termination pursuant
to
any Section 10.1(c)(ii), within one business day after the Company enters
into a
definitive agreement or consummates a transaction; and (z) in the case
of any
other termination for which a payment is to be paid pursuant to this Section
10.2(b), within two (2) business days after such termination.
(c) In
the
event of a termination of this Agreement by the Company pursuant to Section
10.1(d)(i), Merger Sub shall pay to the Company, within five (5) business
days
after such termination, $500,000 in respect of the Covered Expenses incurred
by
the Company.
ARTICLE
XI
GENERAL
PROVISIONS
11.1 Expenses. Except
as otherwise provided in Section 10.2(b), all Covered Expenses shall be
paid by
the Party incurring such Covered Expenses.
11.2 Nonsurvival. None
of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except
for
those covenants and agreements contained herein and therein that by their
terms
apply or are to be performed in whole or in part after the Effective Time
and
this Article XI. Nothing in this Section 11.2 shall relieve any party
for any breach of any representation, warranty, covenant or other agreement
in
this Agreement occurring prior to termination.
11.3 Modification
or Amendment. This
Agreement may be amended by an instrument in writing executed and delivered
on
behalf of each of the parties hereto, at any time prior to the Effective
Time,
subject to the provisions of the DGCL; provided, however, that after approval
of
this Agreement by the stockholders of the Company, no amendment shall be
made
which by Law requires further approval by such stockholders without such
further
approval.
11.4 Waiver. The
conditions to each of the parties’ obligations to consummate the Merger are for
the sole benefit of such party and may be waived, at any time prior to
the
Effective Time, by such party in whole or in part to the extent permitted
by
Law. Any agreement on the part of a party hereto to any extension or waiver
shall be valid only if set forth in writing signed on behalf of such party,
and
shall not be inferred by the failure of any such party to assert any of
its
rights hereunder. Waiver of any provision of this Agreement or of any breach
hereof shall be a waiver of only said specific provision or breach and
shall not
be deemed a waiver of any other provision or any future breach
hereof.
56
11.5 Notices.
All notices, documents, or other communications to be given hereunder shall
be
in writing and shall be deemed validly given if delivered by messenger,
facsimile transmission (with a confirming copy sent by overnight courier),
or
express overnight delivery, or sent by certified mail, return receipt requested,
as follows:
If
to the
Company, to
▇▇▇▇
▇.
▇▇▇▇▇▇▇
President
and Chief Executive Officer
Concorde
Career Colleges, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
▇.
▇▇▇ ▇▇▇▇, Esquire
▇▇▇▇▇
▇▇▇▇ LLP
3500
One
Kansas City Place
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)
▇▇▇-▇▇▇▇
If
to
Buyer or Merger Sub, to
Liberty
Partners Holdings 28 LLC
c/o
Liberty Partners
1177
Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)
▇▇▇-▇▇▇▇
Attention: G.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇, Esquire
Blank
Rome LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Telecopier: (▇▇▇)
▇▇▇-▇▇▇▇
57
or
such
other Persons or addresses as may be designated in writing by the party
to
receive such notice. Any notice delivered by messenger shall be deemed
received
when such delivery is tendered; notices sent by facsimile transmission
shall be
deemed received upon faxed confirmation of receipt; notices mailed in the
manner
provided above, shall be deemed received on the third (3rd)
day
after such are postmarked; and notices delivered by other methods shall
be
deemed received when actually received by the addressee or its authorized
agent.
11.6 Governing
Law. This
Agreement shall be governed by, and construed and enforced in accordance
with,
the Laws of the State of Delaware, without giving effect to the principles
of
the conflicts of law thereof.
11.7 Entire
Agreement. This
Agreement, including the Additional Agreements, constitute the entire agreement
and understanding of the parties with respect to the Transactions and supersedes
any and all prior agreements and understandings relating to the subject
matter
hereof.
11.8 Binding
Effect. This
Agreement shall be binding upon and inure solely to the benefit of the
Parties,
and their respective successors and assigns, to the extent allowed hereby.
Nothing in this Agreement, express or implied is intended to or shall confer
upon any other Person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement; provided, however, that the provisions
of
Section 8.7 shall inure to the benefit of and be enforceable by the
Indemnified Parties.
11.9 Assignment.
Neither this Agreement nor any rights, interests, remedies or obligations
hereunder shall be assigned by any Party hereto (whether by operation of
Law or
otherwise) without the prior written consent of the other Parties hereto,
except
that (a) Buyer may assign any or all of its rights, interests, remedies,
or
obligations hereunder to any of its wholly owned Subsidiaries without the
prior
written consent of the other Parties hereto and (b) Buyer or Merger Sub
may
assign any or all of its rights, interests, remedies, or obligations hereunder
in connection with the financing contemplated by the Transactions without
the
prior written consent of the other Parties hereto.
11.10 Counterparts.
This Agreement may be executed in any number of separate counterparts,
each of
which shall be deemed to be an original, but which together shall constitute
one
and the same instrument.
5/
11.11 Severability.
The provisions of this Agreement shall be deemed severable and the invalidity
or
unenforceability of any provision shall not affect the validity or
enforceability or the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance,
is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefore in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
***************
59
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement and Plan
of
Merger to be executed and delivered by their respective duly authorized
officers
as of the date first above written.
COMPANY:
CONCORDE
CAREER COLLEGES, INC.
By:
Name: ▇▇▇▇
▇.
▇▇▇▇▇▇▇
|
Title:
|
President
and Chief Executive Officer
|
BUYER:
LIBERTY
PARTNERS HOLDINGS 28 LLC
By:
Liberty Partners, L.P., its Sole Manager
By:
PEB
Associates, Inc., its General Partner
By:
Name: G.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
MERGER
SUB:
TEACH
ACQUISITION CORPORATION
By:
Name: ▇▇▇▇▇▇
▇.
▇▇▇▇▇
Title: Vice
President and Secretary