6
EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
among
DOMINICA MANAGEMENT, INC.,
its STOCKHOLDERS and OPTIONHOLDERS,
▇▇▇▇ UNIVERSITY SERVICES, INC.,
▇▇▇▇ UNIVERSITY MANAGEMENT, INC.
and
DeVRY INC.
MARCH 19, 2003
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF SHARES AND
CANCELLATION OF OPTIONS 2
1.01 Purchase and Sale of Shares 2
1.02 Cancellation of Options 3
1.03 Calculation of Common Share Proceeds and Closing Common
Share Proceeds. 4
1.04 Payment for and Surrender of Shares and Cancellation of
Options; Repayment of Indebtedness; Deposit of Escrow
Amount. 4
1.05 Estimated Working Capital Calculation 6
1.06 Final Working Capital Calculation. 7
1.07 The Closing 8
1.08 Withholding of Tax 8
ARTICLE II
CONDITIONS TO CLOSING 9
2.01 Conditions to Buyer's Obligations 9
2.02 Conditions to the Sellers' Obligations 12
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF EACH SELLER 14
3.01 Organization; Authority 14
3.02 Execution and Delivery; Valid and Binding Agreement 14
3.03 Noncontravention 14
3.04 Ownership of Capital Stock 15
3.05 Brokers Fees 15
3.06 Governmental Consents, etc. 15
3.07 Litigation 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 16
4.01 Organization and Corporate Power 16
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4.02 Subsidiaries 16
4.03 Authorization; No Breach; Valid and Binding Agreement 17
4.04 Capital Stock 17
4.05 Financial Statements 18
4.06 Absence of Certain Developments 18
4.07 Title to Properties. 20
4.08 Tax Matters 22
4.09 Contracts and Commitments. 23
4.10 Intellectual Property 25
4.11 Litigation 25
4.12 Governmental Consents, etc. 26
4.13 Employee Benefit Plans. 26
4.14 Insurance 27
4.15 Compliance with Laws 28
4.16 Environmental, Health and Safety Matters 28
4.17 Affiliated Transactions 29
4.18 Employees 29
4.19 Brokerage 29
4.20 Regulatory Compliance 30
4.21 Undisclosed Liabilities 32
4.22 Claims Against Officers and Directors 32
4.23 Improper Payments 32
4.24 Prior Operations 32
4.25 Disclosure 32
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER 33
5.01 Organization and Power 33
5.02 Authorization; Valid and Binding Agreement 33
5.03 No Breach 33
5.04 Governmental Consents, etc. 33
5.05 Litigation 34
5.06 Brokerage 34
5.07 Investment Representation 34
5.08 Financing 35
5.09 Solvency 35
5.10 Regulatory Qualifications 36
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ARTICLE VI
PRE-CLOSING COVENANTS 36
6.01 Conduct of the Business. 36
6.02 Access to Books and Records 36
6.03 Consents and Approvals; Regulatory Filings 37
6.04 Conditions 37
6.05 Exclusive Dealing 37
6.06 Notification 38
6.07 Regulation S-X 38
6.08 Termination of Expense Reimbursement 39
ARTICLE VII
COVENANTS OF BUYER 39
7.01 Access to Books and Records 39
7.02 Notification 39
7.03 Director and Officer Liability and Indemnification. 40
7.04 Regulatory Filings 40
7.05 Conditions 40
7.06 Buyer's Solvency 41
7.07 Employee Benefits. 41
ARTICLE VIII
TERMINATION 42
8.01 Termination 42
8.02 Effect of Termination 43
ARTICLE IX
INDEMNIFICATION 43
9.01 Survival of Representations and Warranties 43
9.02 Indemnification by the Sellers for the Benefit of Buyer. 44
9.03 Indemnification by Buyer for the Benefit of the Sellers. 47
9.04 Manner of Payment; Release 48
9.05 Defense of Third Party Claims 49
9.06 Determination of Loss Amount 50
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ARTICLE X
STOCKHOLDER REPRESENTATIVE 50
10.01 Designation 50
10.02 Authority 50
10.03 Authority; Indemnification 51
10.04 Exculpation 52
10.05 Action by the Stockholders Representatives 52
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS 53
11.01 Disclosure Generally 53
11.02 Acknowledgment by Buyer 53
11.03 Tax Matters 54
11.04 Litigation Support 56
11.05 Further Assurances 57
11.06 Confidentiality 57
11.07 Regulatory Notifications and Approvals 58
11.08 Seller Retained Actions. 58
ARTICLE XII
DEFINITIONS 61
12.01 Definitions 61
12.02 Cross-Reference of Other Definitions 67
ARTICLE XIII
MISCELLANEOUS 69
13.01 Press Releases and Communications 69
13.02 Expenses 70
13.03 Notices 70
13.04 Assignment 72
13.05 Severability 72
13.06 References 72
13.07 No Strict Construction 73
13.08 Amendment and Waiver 73
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13.09 Complete Agreement 73
13.10 Counterparts 73
13.11 Governing Law 73
13.12 No Third-Party Beneficiaries 73
13.13 ▇.▇. Childs Equity Partners II, L.P. 73
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Closing Certificate of the Company
Exhibit C Closing Certificate of the Stockholder Representatives
Exhibit D Form of Estoppel Certificate
Exhibit E Closing Certificate of Buyer
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SCHEDULES
Section Reference
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Accreditations, Licenses and Permits Schedule 4.20(a)
Affiliated Transactions Schedule 4.17
Authorization Schedule 4.03, 4.12
Contracts Schedule 4.09(a)
Developments Schedule 4.06
Employee Benefits Schedule 4.13
Employee Schedule 4.18
Environmental Matters Schedule 4.16
Filings Schedule 11.07
Financial Statements Schedule 4.05
Indebtedness Schedule 1.04(f), 12.01
Insurance Schedule 4.14
Intellectual Property Schedule 4.10
Leased Real Property Schedule 4.07(b)
Liens Schedule 4.07(a)
Litigation Schedule 4.11
Owned Real Property Schedule 4.07(c), (i), (iii)
Schedule of Common Percentages 1.03(a)
Schedule of Permitted Exceptions 6.01
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Stockholders Schedule Preamble, 1.01(b)(ii), 2.01(g)(iv), 3.04, 4.04
Subsidiary Schedule 4.02
Taxes Schedule 4.08
Terminated Contracts Schedule 2.01(h), 3.04
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
March 19, 2003, by and among DeVry Inc., a Delaware corporation ("Buyer"),
Dominica Management, Inc., a New York corporation (the "Company"), ▇▇▇▇
University Services, Inc., a Delaware corporation ("RUSI"), ▇▇▇▇ University
Management, Inc., a St. Lucia corporation ("▇▇▇▇"), the Persons indicated on
the attached Stockholders Schedule as holding Shares (the "Stockholders") and
the Persons indicated on the attached Stockholders Schedule as holding
Options (the "Optionholders" and together with the Stockholders, the
"Sellers"). Capitalized terms used and not otherwise defined herein have the
meanings set forth in Article XII.
WHEREAS, (i) the Stockholders own all of the issued and
outstanding shares of capital stock of the Company, which as of the date
hereof consists of 40,224.125 shares of Class A Preferred Stock, par value
$0.01 per share (the "Class A Preferred"), 25,000 shares of Class B Preferred
Stock, par value $0.01 per share (the "Class B Preferred" and together with
the Class A Preferred, the "Preferred Shares"), and 1,042,937 shares of
Common Stock, par value $0.01 per share (the "Common Shares" and together
with the Preferred Shares, the "Shares"), and (ii) the Optionholders own all
of the issued and outstanding options to acquire shares of capital stock of
the Company (the "Options");
WHEREAS, (i) the Company owns all of the issued and outstanding
shares of capital stock of RUSI, and (ii) RUSI owns all of the issued and
outstanding shares of capital stock of ▇▇▇▇ (the "▇▇▇▇ Shares");
WHEREAS, prior to Closing, Buyer will form a new subsidiary
organized under the laws of Barbados ("BarbCo") and a new subsidiary
organized under the laws of Delaware ("DelCo");
WHEREAS, immediately prior to Closing, (i) Buyer and BarbCo will
own all of the issued and outstanding shares of capital stock of DelCo (all
of DelCo's shares owned by BarbCo hereinafter referred to as the "BarbCo
DelCo Shares"), and (ii) DelCo will own all of the issued and outstanding
shares of capital stock of BarbCo;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires to acquire from the Stockholders all of the Common Shares and
the Stockholders desire to sell to Buyer all of the Common Shares;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires to acquire from the Stockholders all of the Preferred Shares
and the Stockholders desire to sell to Buyer all of the Preferred Shares;
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WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires that the Options which are not incentive stock options within
the meaning of Section 422(b) of the Code (the "Nonqualified Options") be
canceled, and the Optionholders who hold Nonqualified Options desire to
cancel such options, in exchange for receiving a portion of the total
consideration as determined herein;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires that the holders of Options which are incentive stock options
within the meaning of Section 422(b) of the Code (the "ISOs") exercise such
Options immediately prior to the Closing Date, and the Optionholders who hold
ISOs desire to exercise such Options immediately prior to the Closing Date
and to sell to Buyer all shares of capital stock issuable upon such exercise;
and
WHEREAS, subject to the terms and conditions of this Agreement,
and in furtherance of Buyer's strategy to use BarbCo to create an efficient
holding structure for Buyer's expanding non-United States-based operations,
and immediately prior to Buyer's acquisition of the Common Shares and the
Preferred Shares and the cancellation of the Options, Buyer desires to cause
BarbCo to acquire from RUSI all of the ▇▇▇▇ Shares, and RUSI desires to
transfer to BarbCo all of the ▇▇▇▇ Shares.
NOW, THEREFORE, in consideration of the premises, representations
and warranties and mutual covenants contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND
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CANCELLATION OF OPTIONS
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1.01 Purchase and Sale of Shares.
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(a) On the Closing Date and immediately prior to the
transactions described in clause (b) below, upon the terms and subject to the
conditions set forth in this Agreement, Buyer shall cause BarbCo to sell,
assign, transfer and convey to RUSI 1,000 shares of DelCo common stock, and,
in exchange, RUSI shall sell, assign, transfer and convey to BarbCo all of
the issued and outstanding capital stock of ▇▇▇▇.
(b) On the Closing Date and immediately after the completion of
the transaction described in clause (a) above:
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(i) upon the terms and subject to the conditions set forth in
this Agreement, the Stockholders shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from the
Stockholders, all of the Common Shares, free and clear of Liens other
than applicable federal and state securities law restrictions, against
payment by Buyer for the Common Shares to each Stockholder of an amount
in cash equal to such Stockholder's Common Share Proceeds (as defined
in Section 1.03(a)). The portion of the Common Share Proceeds to be
paid at the Closing to each of the Stockholders will be an amount in
cash equal to such Stockholder's Closing Common Share Proceeds (as
defined in Section 1.03(b)); and
(ii) upon the terms and subject to the conditions set forth in
this Agreement, the Stockholders shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from the
Stockholders, all of the Preferred Shares, free and clear of Liens
other than applicable federal and state securities law restrictions,
against payment by Buyer for the Preferred Shares to each Stockholder
of an amount (such amount, the "Preferred Share Proceeds") in cash
equal to (i) the number of Preferred Shares indicated on the
Stockholders Schedule as being owned by such Stockholder multiplied by
(ii) the Preferred Share Purchase Amount.
1.02 Cancellation and Exercise of Options.
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(a) The Company shall cause the Nonqualified Options to be canceled,
as of the Closing Date, in exchange for each Optionholder being entitled to
receive payment by Buyer of an amount in cash equal to (i) such
Optionholder's Common Share Proceeds, minus (ii) the aggregate exercise price
for all shares of Common Stock issuable upon exercise of the Nonqualified
Options held by such Optionholder (the "Final Option Proceeds"). The portion
of the Final Option Proceeds to be paid at the Closing to each such
Optionholder will be an amount in cash equal to (x) such Optionholder's
Closing Common Share Proceeds minus (y) the aggregate exercise price for all
shares of Common Stock issuable upon exercise of the Nonqualified Options
held by such Optionholder (such Optionholder's "Closing Option Proceeds").
(b) Immediately prior to the Closing, each Optionholder shall exercise
the ISOs held by such Optionholder in their entirety and, at the time
specified in Section 1.01(b)(i), shall sell, assign, transfer and convey to
Buyer, and Buyer shall purchase and acquire from such Optionholder, all of
the shares of capital stock otherwise issuable to the Optionholder upon such
exercise (the "ISO Shares") free and clear of all Liens other than applicable
federal and state securities law restrictions, against payment by Buyer for
the ISO Shares of an amount in cash equal to such Optionholder's Common Share
Proceeds applicable to the ISO Shares. The amount to be paid at the Closing
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to each such Optionholder with respect to the ISO Shares will be an amount in
cash equal to such Optionholder's Closing Common Share Proceeds. The Company
shall not make any change to any ISO after the date hereof which change would
constitute a material modification of the ISO (as defined in Section 424(h)
of the Code).
1.03 Calculation of Common Share Proceeds and Closing Common Share
Proceeds.
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(a> For purposes of this Agreement, "Aggregate Final Common
Share Price" shall mean an amount equal to (i) $310,000,000 (the "Base
Consideration"), minus (ii) the outstanding amount of Indebtedness as of the
Closing, minus (iii) the Aggregate Preferred Share Purchase Amount, plus (iv)
the aggregate exercise price for all shares of Common Stock issuable upon
exercise of the Nonqualified Options, plus (v) Working Capital, if Working
Capital is positive, minus (vi) Working Capital, if Working Capital is
negative, minus (vii) the amount of any Seller Expenses paid by the Company
at the Closing, minus (viii) the Escrow Amount, plus (ix) the aggregate
distributions, if any, to the Sellers pursuant to the Escrow Agreement. Each
Seller's "Common Share Proceeds" shall be equal to the Aggregate Final Common
Share Price multiplied by the percentage set forth next to such Seller's name
on the Schedule of Common Percentages (such Seller's "Common Percentage").
(b) For purposes of this Agreement, "Aggregate Closing Common
Share Price" shall mean an amount equal to (i) the Base Consideration, minus
(ii) the outstanding amount of Indebtedness as of the Closing, minus (iii)
the Aggregate Preferred Share Purchase Amount, plus (iv) the aggregate
exercise price for all shares of Common Stock issuable upon exercise of the
Nonqualified Options, plus (v) Estimated Working Capital, if Estimated
Working Capital is positive, minus (vi) Estimated Working Capital, if
Estimated Working Capital is negative, minus (vii) the amount of any Seller
Expenses paid by the Company at the Closing, minus (viii) the Escrow Amount.
Each Seller's "Closing Common Share Proceeds" shall be equal to the Aggregate
Closing Common Share Price multiplied by such Seller's Common Percentage.
1.04 Payment for and Surrender of Shares and Cancellation of Options;
Repayment of Indebtedness; Deposit of Escrow Amount.
----------------------------------------------------------------
(a) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Stockholders, payment by Buyer of the amount in
cash equal to the aggregate Closing Common Share Proceeds payable pursuant to
Section 1.01(b)(i) in exchange for the delivery by each Stockholder to Buyer
of stock certificates evidencing such Stockholder's Common Shares duly
endorsed for transfer or accompanied by appropriate transfer documents.
Payment for the Common Shares shall be made by wire transfer of immediately
available funds on the Closing Date to an account or accounts specified by
the Stockholder Representatives at least two days prior to the Closing.
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Promptly after receipt of the amounts due pursuant to this Section 1.04(a),
the Stockholder Representatives shall distribute to each Stockholder an
amount equal to such Stockholder's Closing Common Share Proceeds by wire
transfer of immediately available funds to an account specified by each
Stockholder at least two days prior to the Closing.
(b) At the Closing, the Stockholder Representatives shall
receive, on behalf of each Stockholder holding Preferred Shares, payment by
Buyer of the amount in cash equal to the Aggregate Preferred Share Purchase
Amount in exchange for the delivery by each Stockholder holding Preferred
Shares to Buyer of stock certificates evidencing such Stockholder's Preferred
Shares duly endorsed for transfer or accompanied by appropriate transfer
documents. Payment for the Preferred Shares shall be made by wire transfer
of immediately available funds on the Closing Date to an account or accounts
specified by the Stockholder Representatives at least two days prior to the
Closing. Promptly after receipt of the Aggregate Preferred Share Purchase
Amount, the Stockholder Representatives shall distribute to each Stockholder
holding Preferred Shares an amount equal to such Stockholder's Preferred
Share Proceeds by wire transfer of immediately available funds to an account
specified by each such Stockholder at least two days prior to the Closing.
(c) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Optionholders holding Nonqualified Options, payment
by Buyer of an amount in cash equal to the Aggregate Closing Option Proceeds
in exchange for the delivery by each Optionholder to the Company, for
cancellation, of all of such Optionholder's outstanding Nonqualified Options
and, upon such delivery, such Nonqualified Options shall be deemed canceled.
Payment at the Closing in consideration of cancellation of the Options shall
be made by wire transfer of immediately available funds on the Closing Date
to an account or accounts specified by the Stockholder Representatives at
least two business days prior to the Closing. Promptly after receipt of the
Aggregate Closing Option Proceeds, the Stockholder Representatives shall
distribute to each Optionholder holding Nonqualified Options an amount equal
to such Optionholder's Closing Option Proceeds by wire transfer of
immediately available funds to an account specified by each Optionholder at
least two days prior to the Closing.
(d) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Optionholders who exercise ISOs immediately prior
to the Closing, payment by Buyer of the amount in cash equal to the aggregate
Closing Common Share Proceeds payable pursuant to Section 1.02(b) in exchange
for the delivery by such Optionholder to Buyer of appropriate transfer
documents effecting the transfer of such Optionholder's ISO shares. Payment
for the ISO Shares shall be made by wire transfer of immediately available
funds on the Closing Date to an account or accounts specified by the
Stockholder Representatives at least two days prior to the Closing. Promptly
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after receipt of the amounts due pursuant to this Section 1.04(d), the
Stockholder Representatives shall distribute to each Optionholder an amount
equal to such Optionholder's Closing Common Share Proceeds by wire transfer
of immediately available funds to an account specified by each Optionholder
at least two days prior to the Closing.
(e) Notwithstanding anything to the contrary contained in
Sections 1.04(a)-(c), the Stockholder Representatives may retain a portion of
the amounts delivered to the Stockholder Representatives pursuant to such
sections to satisfy potential future obligations of the Sellers (in the
aggregate, the "Holdback Amount"); provided that the portion of the Holdback
Amount retained by the Stockholder Representatives on behalf of each Seller
shall be determined pro rata according to each Seller's Common Percentages.
The Holdback Amount shall be retained by the Stockholder Representatives for
such time as the Stockholder Representatives shall determine in their sole
discretion. Any amounts distributed from the Holdback Amount shall be
distributed to the Sellers pro rata based upon their Common Percentages.
(f) Simultaneously with the consummation of the purchase and
sale transaction contemplated by Section 1.01, Buyer shall repay, or cause to
be repaid, on behalf of the Company and its Subsidiaries, the then
outstanding balance of Indebtedness by wire transfer of immediately available
funds as set forth on, and in accordance with, the Payoff Letters delivered
by the Company pursuant to Section 2.01(f).
(g) Simultaneously with the consummation of the purchase and
sale transaction contemplated by Section 1.01, Buyer shall deposit, for the
benefit of the Sellers, the Escrow Amount, which will be available to satisfy
any amounts owed to Buyer pursuant to Section 1.06(b) and Section 9.02(a),
(b) and (d), in an escrow account (the "Escrow Account") established pursuant
to the terms and conditions of an escrow agreement (the "Escrow Agreement"),
by and among the Escrow Agent, Buyer and the Stockholder Representatives
substantially in the form of Exhibit A.
1.05 Estimated Working Capital Calculation.
-------------------------------------
At least three business days prior to the Closing Date, the Stockholder
Representatives shall deliver to Buyer (i) a balance sheet of the Company and
its Subsidiaries projected as of the Closing Date immediately prior to Closing
(the "Preliminary Closing Balance Sheet"), together with reasonable supporting
information, and (ii) based on the Preliminary Closing Balance Sheet, their
good faith calculation of their estimate of the Working Capital as of the
Closing Date immediately prior to Closing (the "Estimated Working Capital")
calculated in accordance with the Working Capital Schedule attached hereto,
and, if Buyer indicates at least one business day prior to Closing that such
estimate is not reasonably acceptable to Buyer, then "Estimated Working
Capital" shall be calculated by
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the Stockholder Representatives based on the latest financial statements
delivered to Buyer pursuant to the second sentence of Section 6.02.
1.06 Final Working Capital Calculation.
---------------------------------
(a> As promptly as possible, but in any event within 60 days
after the Closing Date, Buyer will deliver to the Stockholder Representatives
(i) an audited balance sheet of the Company and its Subsidiaries as of the
Closing Date immediately prior to Closing (the "Closing Balance Sheet") and
(ii) its calculation of the Working Capital as of the Closing Date
immediately prior to Closing (the "Preliminary Working Capital Statement")
based on the Closing Balance Sheet and calculated in accordance with the
Working Capital Schedule. After delivery of the Preliminary Working Capital
Statement, the Stockholder Representatives and their accountants shall be
permitted reasonable access to review the Company's and its Subsidiaries'
books and records and work papers related to the preparation of the
Preliminary Working Capital Statement. The Stockholder Representatives and
their accountants may make reasonable inquiries of Buyer, the Company, its
Subsidiaries and their respective accountants regarding questions concerning
or disagreements with the Preliminary Working Capital Statement arising in
the course of their review thereof, and Buyer shall use its, and shall cause
the Company and its Subsidiaries to use their, reasonable best efforts to
cause any such accountants to cooperate with and respond to such inquiries.
If the Stockholder Representatives have any objections to the Preliminary
Working Capital Statement, the Stockholder Representatives shall deliver to
Buyer a statement setting forth in reasonable detail their objections thereto
(an "Objections Statement"). If an Objections Statement is not delivered to
Buyer within 45 days after delivery of the Preliminary Working Capital
Statement, the Preliminary Working Capital Statement shall be final, binding
and non-appealable on the parties hereto. The Stockholder Representatives
and Buyer shall negotiate in good faith to resolve any such objections, but
if they do not reach a final resolution within 30 days after the delivery of
the Objections Statement, the Stockholder Representatives and Buyer shall
submit such dispute to an independent office of KPMG LLP not used by the
Company, Buyer, Sellers or any of their Affiliates (the "Independent
Auditor"). The Stockholder Representatives and Buyer shall use their
commercially reasonable efforts to cause the Independent Auditor to resolve
all disagreements as soon as practicable. The resolution of the dispute by
the Independent Auditor shall be final, binding and non-appealable on the
parties hereto. The costs and expenses of the Independent Auditor shall be
paid equally by Buyer and the Sellers. The Preliminary Working Capital
Statement, as revised, if at all, and as finally determined pursuant to this
Section 1.06(a), shall be referred to as the "Final Working Capital
Statement."
(b) Post-Closing Adjustment Payments.
--------------------------------
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(i) If Working Capital as finally determined pursuant to
Section 1.06(a) is greater than Estimated Working Capital, (A) Buyer
shall pay such excess (plus simple interest on such amount at a rate of
4.25% per annum from the Closing Date through the date of payment) to
the Stockholder Representatives (on behalf of the Sellers) by wire
transfer of immediately available funds to an account or accounts
designated by the Stockholder Representatives (to be promptly
distributed to the Sellers pro rata based upon each Seller's Common
Percentage) and (B) the Stockholder Representatives and Buyer shall
jointly instruct the Escrow Agent to release to the Stockholder
Representatives, on behalf of the Sellers, $3,500,000 from the Escrow
Account (to be promptly distributed to the Sellers pro rata based upon
each Seller's Common Percentage).
(ii) If Working Capital as finally determined pursuant to
Section 1.06(a) is less than Estimated Working Capital, the Stockholder
Representatives and Buyer shall jointly instruct the Escrow Agent (A)
to distribute to Buyer such shortfall (plus simple interest on such
amount at a rate of 4.25% per annum from the Closing Date through the
date of payment) and (B) to distribute to the Stockholder
Representatives, on behalf of the Sellers, the amount, if any, by which
$3,500,000 exceeds the amount distributed to Buyer pursuant to the
foregoing clause (A) (to be promptly distributed to the Sellers pro
rata based upon each Seller's Common Percentage).
1.07 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. on May
15, 2003 or, if any of the conditions to the Closing set forth in Article II
(other than those to be satisfied at the Closing) have not been satisfied or
waived by the party entitled to the benefit thereof, then on or prior to the
third business day following satisfaction or waiver of all of the closing
conditions set forth in Article II (other than those to be satisfied at the
Closing) or on such other date as is mutually agreeable to Buyer and the
Stockholder Representatives. The date and time of the Closing are referred
to herein as the "Closing Date."
1.08 Withholding of Tax. Buyer will be entitled to deduct and
withhold from (a) any proceeds payable to Sellers pursuant to this Agreement
with respect to Common Shares and Preferred Shares that were issued in a
compensatory transaction and from which Buyer is required to withhold amounts
under any provision of federal, state or local or foreign or Tax law and (b)
any Closing Option Proceeds payable to Sellers pursuant to this Agreement
such amounts as Buyer shall determine in good faith it is required to deduct
and withhold with respect to the making of such payment under any provision
of federal, state, local or foreign Tax law. To the extent that amounts are
so withheld by Buyer, such withheld amounts will be treated for all purposes
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of this Agreement as having been paid to the Seller in respect of whom such
deduction and withholding were made by Buyer. Promptly (and in any event
within three business days) after receiving a request from the Stockholder
Representatives therefor, Buyer shall provide to the Stockholder
Representatives a schedule of all amounts deducted and withheld pursuant to
this Section 1.08 setting forth the amount deducted and withheld hereunder
for each Seller.
ARTICLE II
CONDITIONS TO CLOSING
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2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in
Articles III and IV shall be true and correct in all material respects at and
as of the Closing Date as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such
representations and warranties (other than those representations and
warranties that address matters as of particular dates, which shall be true
and correct at and as of such particular date), in each case, except to the
extent that such representations and warranties are qualified by terms such
as "material" and "Material Adverse Effect," in which case such
representations and warranties shall have been true and correct in all
respects at and as of such date;
(b) The Company and the Sellers shall have performed and
complied with, in all material respects, all of the covenants and agreements
required to be performed and complied with by them under this Agreement
through the Closing, except to the extent that such covenants and agreements
are qualified by terms such as "material" and "Material Adverse Effect," in
which case the Company and the Sellers shall have performed and complied
with, in all respects, such covenants and agreements through the Closing;
(c) All filings under the HSR Act shall have been made, and the
applicable waiting periods, if any, thereunder shall have expired or been
terminated;
(d) (i) The submission of the notifications and applications
described in Section 11.07, except for submission of the DOE Application,
shall have been made in accordance with the provisions of Section 11.07, and
Buyer shall not have received written or direct oral notice (x) from an
employee, agent or representative of the DOE either that the DOE will not
approve the DOE Application or that the DOE will approve the DOE Application,
but subject to material adverse conditions, (y) from an employee, agent or
24
representative of the government of the Commonwealth of St. Kitts-Nevis that
the St. Kitts Agreement will not remain in full force and effect in
accordance with its terms after the consummation of the transactions
contemplated hereby; or (z) from an employee, agent or representative of the
government of the Commonwealth of Dominica that the teaching and clinical
aspects of the Medical School's relationship with the Princess ▇▇▇▇▇▇▇▇
Hospital will not continue in substantially the same manner and on
substantially the same terms as set forth in the Princess ▇▇▇▇▇▇▇▇ Hospital
Agreement and, in the case of any of clauses (x), (y) or (z), such notice
shall not have been rescinded by an applicable employee, agent or
representative;
(ii) Either the approval of the Dominica Medical Board shall
have been obtained, which approval shall not be subject to any material
adverse conditions, or written notice shall have been received from the
Dominica Medical Board indicating that its approval will not be required
prior to the Closing;
(e) No action, suit or proceeding before any court or
government body shall be pending or threatened in writing (where such threat
is reasonably likely to result in an action, suit or proceeding) wherein an
unfavorable judgment, decree, ruling, injunction or order would prevent the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded, or materially and
adversely affect the right of Buyer to own the Shares (and no such judgment,
decree, ruling, injunction or order shall be in effect);
(f) The Stockholder Representatives and the Escrow Agent shall
have executed and delivered the Escrow Agreement;
(g) The Company, the Sellers or the Stockholder Representatives
(on behalf of the Sellers), as the case may be, shall have delivered to Buyer
each of the following:
(i) a certificate of the Company in the form set forth in
Exhibit B, dated the Closing Date, stating that the preconditions
specified in subsections (a), (b) and (e), as they relate to the
Company, have been satisfied;
(ii> a certificate of the Stockholder Representatives (on behalf
of the Sellers) in the form of Exhibit C, dated the Closing Date,
stating that the preconditions specified in subsections (a), (b) and
(e), as they relate to the Sellers, have been satisfied;
(iii) evidence of the governmental consents and filings described
in subsection (d) and the Payoff Letters;
25
(iv) the stock certificates representing the Shares indicated on
the Stockholders Schedule, in each case, free and clear of Liens (other
than applicable federal and state securities law restrictions), and
duly endorsed for transfer or accompanied by duly executed stock powers
or transfer documents;
(v) all minute books, stock books, ledgers and registers,
corporate seals, if any, and other corporate records relating to the
organization, ownership and maintenance of each of the Company and its
Subsidiaries, if not already located on the premises of the Company or
its Subsidiaries;
(vi) resignations effective as of the Closing Date from all
directors of the Company and its Subsidiaries and from such officers
thereof as Buyer shall have requested in writing and delivered to the
Stockholder Representatives not less than five days prior to the
Closing Date;
(vii) a copy of the certificate of incorporation of the Company,
certified by the Secretary of State of New York, and a certificate of
good standing from New York for the Company dated within ten days of
the Closing Date;
(viii) copies of the certificate of incorporation (or
comparable document) for each Subsidiary, in each case certified by the
Secretary of State (or comparable officer) of the jurisdiction of the
respective Subsidiary;
(ix) certified copies of the by-laws of the Company and of each
Subsidiary;
(x) copies of good standing certificates for the Company and
for each Subsidiary from the Secretary of State (or comparable officer)
of the jurisdiction of each Person's organization, dated within ten
days before the Closing Date;
(xi) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby, and the consummation of all transactions contemplated hereby
and thereby;
(xii) evidence (in form and substance reasonably satisfactory to
Buyer) of the termination of the Management Agreement; and
26
(xiii) evidence (in form and substance reasonably
satisfactory to Buyer) that the Dominica Agreement will remain in full
force and effect in accordance with its terms after the consummation of
the transactions contemplated hereby;
(xiv) audited financial statements for the Company and its
Subsidiaries as of and for the fiscal years ended December 31, 2002,
December 31, 2001 and December 31, 2000 as described in Section 6.07.
(h) There shall have been made available to Buyer the debt
financing contemplated by the Commitment Letter (including the market flex
language of the Fee Letter), or other debt financing on economic and other
material terms no less favorable to Buyer than those set forth in the term
sheets that are part of the Commitment Letter, in either case, in an amount
sufficient to provide the debt financing necessary to consummate the
transactions contemplated hereby;
(i) The Company shall have obtained and delivered to Buyer an
estoppel certificate (in substantially the form attached hereto as Exhibit D)
with respect to the Leased Real Property located in Edison, NJ, dated no more
than 30 days prior to the Closing Date, from the other party to such Lease;
(j) The Company and its Subsidiaries shall provide Buyer with
an opinion of St. Kitts legal counsel regarding the Company's or a
Subsidiary's title to the Owned Real Property identified on the Owned Real
Property Schedule;
(k) The Company shall have terminated those contracts,
agreements, arrangements and leases listed on the Terminated Contracts
Schedule; and
(l) No Material Adverse Change shall have occurred since the
date of the Latest Balance Sheet.
If the Closing occurs, all closing conditions set forth in this Section 2.01
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by Buyer.
2.02 Conditions to the Sellers' Obligations. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V
shall be true and correct in all material respects at and as of the Closing
27
Date as though then made and as though the Closing Date were substituted for
the date of this Agreement throughout such representations and warranties
(other than those representations and warranties that address matters as of
particular dates, which shall be true and correct at and as of such
particular date), in each case, except to the extent that such
representations and warranties are qualified by terms such as "material" and
"Material Adverse Effect," in which case such representations and warranties
shall have been true and correct in all respects at and as of such date;
(b) Buyer shall have performed and complied with, in all
material respects, all of the covenants and agreements required to be
performed and complied with by it under this Agreement through the Closing,
except to the extent that such covenants and agreements are qualified by
terms such as "material" and "Material Adverse Effect," in which case Buyer
shall have performed and complied with, in all respects, such covenants and
agreements through the Closing;
(c) All filings under the HSR Act shall have been made, and the
applicable waiting periods, if any, thereunder shall have expired or been
terminated;
(d) No action, suit or proceeding before any court or
government body shall be pending or threatened in writing (where such threat
is reasonably likely to result in an action, suit or proceeding) wherein an
unfavorable judgment, decree, ruling, injunction or order would prevent the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded, or materially and
adversely affect the right of Buyer to own the Shares (and no such judgment,
decree, ruling, injunction or order shall be in effect);
(e) Buyer shall have delivered to the Stockholder
Representatives certified copies of the resolutions duly adopted by Buyer's
board of directors authorizing the execution, delivery and performance of
this Agreement and the other agreements contemplated hereby, and the
consummation of all transactions contemplated hereby and thereby;
(f) Buyer shall have delivered to the Stockholder
Representatives (on behalf of the Sellers) a certificate in the form set
forth as Exhibit E, dated the Closing Date, stating that the preconditions
specified in subsections (a), (b) and (d) have been satisfied;
(g) Buyer shall have delivered to the Stockholder
Representatives a solvency certificate signed by Buyer, substantially in the
form as delivered pursuant to the consummation of the transactions
contemplated by the Commitment Letter, addressed to the Sellers and entitling
the Sellers to rely thereon; and
28
(h) The submission of the notifications and applications
described in Section 11.07, except for submission of the DOE Application,
shall have been made in accordance with the provisions of Section 11.07.
If the Closing occurs, all closing conditions set forth in this Section 2.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by the Sellers.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF EACH SELLER
-------------------------
Each Seller, solely for such Seller (on a several, and not joint
basis), represents and warrants to Buyer as follows:
3.01 Organization; Authority. Such Seller (if a limited partnership
or other entity) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation or organization. Such
Seller has all requisite power and authority (including, if a limited
partnership, full partnership power and authority) and full legal capacity to
execute and deliver this Agreement and to perform such Seller's obligations
hereunder.
3.02 Execution and Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by such Seller (if a
limited partnership or other entity) and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
action, and no other proceedings on the part of such Seller are necessary to
authorize its execution, delivery or performance. This Agreement has been
duly executed and delivered by such Seller, and assuming that this Agreement
is the valid and binding agreement of Buyer, this Agreement constitutes the
valid and binding obligation of such Seller, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy laws, other
similar laws affecting creditors' rights and general principles of equity
effecting the availability of specific performance and other equitable
remedies.
3.03 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, law, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which such Seller is subject or,
if such Seller is a limited partnership or other entity, any provision of its
charter or bylaws or similar organizational documents or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
29
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which such Seller is a party or by which
such Seller is bound or to which any of such Seller's assets is subject.
3.04 Ownership of Capital Stock. Such Stockholder or Optionholder, as
the case may be, is the record and beneficial owner of the number of Shares
or Options, as applicable, as set forth opposite such Person's name on the
attached Stockholders Schedule, in each case, free and clear of any and all
Liens, options, proxies, voting trusts or agreements and other restrictions
and limitations of any kind, other than applicable federal and state
securities law restrictions, except as set forth on the Stockholders
Schedule. On the Closing Date, and assuming termination of those agreements
listed on the attached Terminated Contracts Schedule, such Stockholder shall
transfer to Buyer good title to such Shares and such Optionholder shall
transfer to the Company for cancellation such Options, in each case, free and
clear of all Liens, proxies, voting trusts or agreements and other
restrictions and limitations of any kind, other than applicable federal and
state securities law restrictions.
3.05 Brokers Fees. Except for the fees and expenses of SunTrust
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Leeds Weld & Co. and ▇.▇. Childs Associates, Inc. and
their respective Affiliates, such Seller has no liability or an obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement, or any other transaction,
for which Buyer could become liable or obligated. Neither Buyer nor any
Affiliate of Buyer (including, after the Closing, the Company and its
Subsidiaries) has or shall have any liability or otherwise suffer or incur
any Losses as a result of, or in connection with, any brokerage or finder's
fee or other commission of any Person retained by such Seller in connection
with any of the transactions contemplated by this Agreement or any other
transaction (including, without limitation, SunTrust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Leeds
Weld & Co. and ▇.▇. Childs Associates, Inc. and their respective Affiliates).
3.06 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and the matters set forth on the Filings
Schedule, such Seller is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution,
delivery or performance by it of this Agreement or the consummation of the
transactions contemplated hereby. Except for the matters set forth on the
Filings Schedule, no consent, approval or authorization of any governmental
or regulatory authority or any other party or Person is required to be
obtained by such Seller in connection with its execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Such Seller is not subject to any outstanding judgment,
order or decree of any court or governmental body which would adversely
affect such Seller's performance under this Agreement or the consummation of
30
the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded or
materially and adversely affect the right of Buyer to own the Shares.
3.07 Litigation. There are no actions, suits or proceedings pending
or, to such Seller's knowledge, threatened against or affecting such Seller
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect such
Seller's performance under this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Buyer that:
4.01 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted. The
Company is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of its businesses as now conducted
requires it to qualify, except where the failure to be so qualified would not
have a Material Adverse Effect. Each of RUSI and ▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4.02 Subsidiaries.
------------
(a) Except as set forth on the attached Subsidiary Schedule,
neither the Company nor any of its Subsidiaries owns or holds the right to
acquire any stock, partnership interest, joint venture interest or other
equity ownership interest in any other Person. Each Subsidiary is either
wholly owned by the Company, a Subsidiary or Subsidiaries as indicated on the
Subsidiary Schedule. The Company and/or one of its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each
Subsidiary, free and clear of any restrictions on transfer, taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands (other than restrictions under federal, state and foreign
securities laws).
(b) Each of the Subsidiaries identified on the Subsidiary
Schedule is validly existing and in good standing under the laws of the
31
jurisdiction of its incorporation or organization (as set forth on the
Subsidiary Schedule), has all requisite corporate, limited liability company,
limited partnership or unlimited liability company, as the case may be, power
and authority and all authorizations, licenses and permits necessary to own
its properties and to carry on its businesses as now conducted. Each of the
Subsidiaries identified on the Subsidiary Schedule is qualified to do
business in every jurisdiction in which its ownership of property or the
conduct of its business as now conducted requires it to qualify, except where
the failure to be so qualified would not have a Material Adverse Effect.
4.03 Authorization; No Breach; Valid and Binding Agreement.
-----------------------------------------------------
(a) The Company and each of RUSI and ▇▇▇▇ has full corporate
power and authority to execute and deliver this Agreement and to perform its
respective obligations hereunder. This Agreement has been duly authorized,
executed and delivered by each of the Company, RUSI and ▇▇▇▇.
(b) Except as set forth on the attached Authorization Schedule,
neither the execution and delivery of this Agreement, nor the performance of
this Agreement by the Company, RUSI and ▇▇▇▇ and the consummation of the
transactions contemplated hereby will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or
other restriction of any government, governmental agency or court to which
the Company or any of its Subsidiaries is subject or any provision of the
charter or bylaws of the Company or any of its Subsidiaries or (b) conflict
with or result in any breach of, constitute a default under, result in a
violation of, result in the acceleration of, result in the creation of any
Lien upon any assets of the Company or any of its Subsidiaries, or require
any authorization, consent, approval, exemption or other action by or notice
to any court or other governmental body, under any agreement, contract,
lease, license, instrument or other arrangement to which the Company or any
of its Subsidiaries is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition or creation of a Lien upon or
with respect to any of its assets).
(c) Assuming that this Agreement is a valid and binding
obligation of Buyer, this Agreement constitutes a valid and binding
obligation of each of the Company, RUSI and ▇▇▇▇, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy laws,
other similar laws affecting creditors' rights and general principles of
equity effecting the availability of specific performance and other equitable
remedies.
4.04 Capital Stock. The authorized number of shares of capital stock
of the Company consists of (a) 110,000 shares of Class A Preferred, of which
40,224.125 shares are issued and outstanding and owned of record as set forth
in the Stockholders Schedule, (b) 25,000 shares of Class B Preferred of which
32
25,000 shares are issued and outstanding and owned of record as set forth in
the Stockholders Schedule and (c) 110,000,000 shares of Common Stock of which
1,042,937 shares are issued and outstanding and owned of record as set forth
on the Stockholders Schedule, and of which 96,288 shares are reserved for
issuance upon exercise of the Options. The Stockholders Schedule sets forth
(x) the number of authorized shares of capital stock of each Subsidiary and
(y) the number of shares of capital stock issued and outstanding with respect
to each Subsidiary, including the name of the holder thereof and the number
of shares held by such holder. All Shares and all of the issued and
outstanding shares of capital stock of each Subsidiary have been duly
authorized and are validly issued, fully paid and nonassessable. Except as
set forth on the Stockholders Schedule, neither the Company nor any
Subsidiary has any other capital stock, equity securities or securities
containing any equity features authorized, issued or outstanding, and there
are no agreements, options, warrants or other rights or arrangements existing
or outstanding which provide for the sale or issuance of any of the foregoing
by the Company or any Subsidiary. Except as set forth on the Stockholders
Schedule, and except for the Options, there are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
sell or purchase or otherwise acquire any shares of capital stock or other
equity securities of the Company or any Subsidiary of any kind. Except as
set forth on the Stockholders Schedule, (i) there are no agreements or other
obligations (contingent or otherwise) which require the Company or any
Subsidiary to repurchase or otherwise acquire any shares of the Company's or
any Subsidiary's capital stock or other equity securities and (ii) there are
no voting trusts, proxies or other agreements or understandings with respect
to the voting of the capital stock of the Company or any Subsidiary.
4.05 Financial Statements. The Company has furnished Buyer with
copies of its (i) audited consolidated balance sheet with respect to the
Company and its Subsidiaries as of December 31, 2002 (the "Latest Balance
Sheet"), and the related statement of income for the fiscal year then ended
and (ii) audited consolidated balance sheets and statements of income with
respect to the Company and its Subsidiaries as of and for the fiscal years
ended December 31, 2001 and December 31, 2000. Except as set forth on the
attached Financial Statements Schedule, such financial statements have been
based upon the information concerning the Company and its Subsidiaries
contained in the Company's and its Subsidiaries' books and records, and
present fairly in all material respects the financial condition and results
of operations of the Company and its Subsidiaries (taken as a whole) as of
the times and for the periods referred to therein in accordance with GAAP.
4.06 Absence of Certain Developments. Since the date of the Latest
Balance Sheet, there has not been any Material Adverse Change. Without
limiting the generality of the foregoing, except as set forth on the attached
Developments Schedule and except as expressly contemplated by this Agreement,
33
since the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has:
(a) borrowed any amount or incurred, assumed, guaranteed or
become subject to any liabilities (other than liabilities incurred in the
ordinary course of business consistent with past practice, liabilities under
contracts entered into in the ordinary course of business consistent with
past practice and borrowings from banks (or similar financial institutions)
necessary to meet ordinary course working capital requirements consistent
with past practice);
(b) mortgaged, pledged or subjected to any Lien any portion of
its assets, except Permitted Liens;
(c) sold, leased, assigned or transferred any portion of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice;
(d) accelerated, terminated or canceled any agreement,
contract, lease or license that either is listed on the Contracts Schedule or
would be required to be listed on the Contracts Schedule if such agreement,
contract, lease or license had not been terminated or canceled;
(e) sold, assigned, granted or transferred any Intellectual
Property, or granted a license or sublicense to any rights thereunder or with
respect thereto to a third party, except in the ordinary course of business
consistent with past practice;
(f) suffered any extraordinary losses or waived any rights of
material value;
(g) made any capital investment in, or any material loan to,
any other Person outside the ordinary course of business consistent with past
practice;
(h) made or authorized any change to its charter or bylaws;
(i) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or
other equity securities or warrants, options or other rights to acquire its
capital stock or other equity securities, or any bonds or debt securities;
(j) declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of its capital stock,
except for dividends or distributions made by Subsidiaries to their
respective parents in the ordinary course of business consistent with past
practice;
34
(k) made any capital expenditures or commitments therefor, in
each case, except in the ordinary course of business consistent with past
practice;
(l) taken any action within such Person's control to delay in
any material respect any capital expenditure contemplated to be made in the
Company's budget for fiscal year 2003 approved by the Company's board of
directors;
(m) made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the ordinary
course of business consistent with past practice; \
(n) entered into any employment contract with payments
exceeding $100,000 per year or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(o) adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(p) made any other change in employment terms (including
compensation) for any of its directors or officers or for any employees
having employment contracts with annual payments exceeding $100,000 per year,
in each case, outside the ordinary course of business consistent with past
practice; or
(q) committed to any of the foregoing.
4.07 Title to Properties.
-------------------
(a) Except as set forth on the Liens Schedule and except for
such property and assets transferred or otherwise disposed of in the ordinary
course of business consistent with past practice, the Company and its
Subsidiaries own good and marketable title to, or hold pursuant to valid and
enforceable leases, all of the personal property and assets used by them,
located on their premises or shown to be owned by it on the Latest Balance
Sheet, free and clear of all Liens, except for Permitted Liens.
(b) The real property demised by the leases described on the
attached Leased Real Property Schedule (the "Leased Real Property")
constitutes all of the real property leased by the Company and its
Subsidiaries. Except as set forth on the attached Leased Real Property
35
Schedule, each Leased Real Property lease (i) is legal, valid, binding and
enforceable against the Company or its Subsidiaries (as applicable) and, to
the Company's knowledge, against the other parties thereto and (ii) is in
full force and effect, in each case subject to proper authorization and
execution of such lease by the other party and the application of any
bankruptcy or creditor's rights laws or general principles of equity. The
Company has delivered or made available to Buyer true, complete and accurate
copies of each of the leases described on the Leased Real Property Schedule,
and none of the leases have been modified in any respect, except to the
extent that such modifications are disclosed by the copies delivered or made
available to Buyer. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any other party, is in default in any respect under any
of such leases, and to the Company's knowledge, no event has occurred or
circumstance exists which, with the 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 leases. No
security deposit or portion thereof deposited with respect to any such lease
has been applied in respect of a breach or default under such lease which has
not be been redeposited in full. Neither the Company nor any Subsidiary has
subleased, licensed or otherwise granted any other party the right to use or
occupy such Leased Real Property or any portion thereof. Except as set forth
on the attached Authorizations Schedule the transaction contemplated by this
Agreement does not require the consent of any other party to any of such
leases for the Leased Real Property, will not result in a breach of or
default under such lease, and will not otherwise cause such lease to cease to
be legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing.
(c) Except as set forth on the attached Owned Real Property
Schedule, neither the Company nor any of its Subsidiaries owns any real
property. With respect to each parcel of real property listed on the Owned
Real Property Schedule (the "Owned Real Property"):
(i) either the Company or a Subsidiary owns good and marketable
title to such parcel of real property, free and clear of all Liens as
of the Closing Date, other than Permitted Liens and other encumbrances
and exceptions set forth on the Owned Real Property Schedule;
(ii) the Company has received no written notice of, and, to the
Company's knowledge, there do not exist and there has not been
threatened, any pending condemnation or eminent domain proceedings,
lawsuits or administrative actions relating to Owned Real Property
which would adversely affect the current use, occupancy or value
thereof;
(iii) except as set forth on the Owned Real Property Schedule,
and except for Permitted Liens, there are no leases, subleases,
licenses, concessions or other agreements to which the Company or any
36
of its Subsidiaries is a party granting to any party or parties the
right of use or occupancy of any portion of such parcel of real
property;
(iv) there are no outstanding options or rights of first refusal
to purchase such parcel of Owned Real Property, any portion thereof or
interest therein;
(v) to the Company's knowledge, the Owned Real Property has
direct access to a public street adjoining such property or has access
to a public street via valid easements benefiting such Owned Real
Property, and such access is not dependent on any land or other real
property interest which is not included in the Owned Real Property.
None of the Owned Real Property, including the improvements and
fixtures thereon, is dependent for its access, use or operation on any
land, building, improvement or other real property interest which is
not included in the Owned Real Property; and
(vi> to the Company's knowledge, the current use and occupancy
of the Owned Real Property and the operation of the business of the
Company and its Subsidiaries as currently conducted does not violate in
any material respect any easement, covenant, condition, restriction or
similar provision in any instrument of record or other unrecorded
agreement affecting the Owned Real Property.
(d) All buildings, improvements and fixtures, and components of
the Owned Real Property and Leased Real Property are in good condition and
repair and sufficient for the continued operation of the business as
presently conducted.
(e) To the Company's knowledge, except as set forth on the
Leased Real Property Schedule, all water, oil, gas, electrical,
telecommunications, sewer, storm and waste water systems and other utility
services or systems for the Owned Real Property and the Leased Real Property
have been installed and are operational and sufficient for the operation of
the business presently conducted.
4.08 Tax Matters.
-----------
(a) The Company and its Subsidiaries have filed or sent in a
timely manner all federal, foreign, state, county and local income, excise,
property and other Tax Returns which are required to be filed or sent by them
under applicable laws (taking into account any extensions of time to file or
send which have been duly perfected). Except as set forth on the attached
Taxes Schedule, all Taxes shown as owing by the Company and its Subsidiaries
on all such Tax Returns have been timely paid in full or properly accrued.
All such Tax Returns are true and correct, and the provision for accrued and
unpaid Taxes on the Final Working Capital Statement is sufficient for all
37
accrued and unpaid Taxes as of the date thereof. All Taxes which the Company
or any Subsidiary is obligated to withhold or collect, including without
limitation, from amounts owing to any employee, creditor or third party, have
been timely paid in full or properly accrued.
(b) Except as set forth on the Taxes Schedule, no Tax Return of
the Company or any Subsidiary currently is under audit or examination by any
Taxing Authority, no written or unwritten notice of such an audit or
examination has been received by the Company or any Subsidiary, no deficiency
has resulted from any prior audit or examination relating to Taxes of the
Company or a Subsidiary, and no material issues relating to Taxes have been
raised in any completed audit or examination of the Company or a Subsidiary.
(c) Except as set forth on the Taxes Schedule, neither the
Company nor any Subsidiary is party to or bound by any tax sharing agreement
or tax indemnity obligation.
(d) Except as set forth on the Taxes Schedule, there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Returns required to be filed with respect to
the Company or any Subsidiary and the Company and its Subsidiaries have not
requested any extension of time within which to file any Tax Return.
(e) Except as set forth on the Taxes Schedule, neither the
Company nor any Subsidiary will be required to include in a taxable period
ending after the Closing Date taxable income attributable to income that
accrued in a taxable period ending on or before the Closing Date but that was
not recognized in such taxable period as a result of the installment method
of accounting, the long-term contract method of accounting, the cash method
of accounting or Section 481 of the Code or any comparable provision of
state, local or foreign Tax law, or for any other reason.
(f) Except as set forth in the Taxes Schedule, neither the
Company nor any Subsidiary has taken any action that has caused or would
cause, or failed to take any action when failure to act would have caused or
would cause, either the Company or any Subsidiary to be (i) subject to any
Tax that would be payable to or collectable by the nation of St. Lucia, or
(ii) no longer eligible for the benefits of the Treaty Establishing the
Caribbean Community (signed July 4, 1973), as amended through the date
hereof.
4.09 Contracts and Commitments.
-------------------------
(a) Except as set forth on the attached Contracts Schedule,
neither the Company nor any Subsidiary is party to any: (i) agreement
relating to any completed business acquisition by the Company or any
38
Subsidiary within the last two years; (ii) collective bargaining agreement or
contract with any labor union; (iii) written bonus, pension, profit sharing,
retirement or other form of deferred compensation plan, other than as
described in Section 4.13 or the schedules relating thereto; (iv) stock
purchase, stock option or similar plan; (v) contract for the employment of
any officer, individual employee or other person on a full-time or consulting
basis with payments in excess of $100,000; (vi) agreement or indenture
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a Lien on any material portion of the Company's or any Subsidiary's
assets other than Permitted Liens; (vii) guaranty of any obligation for
borrowed money or other material guaranty; (viii) lease or agreement under
which it is lessee of, or holds or operates any personal property owned by
any other party, for which the annual rental exceeds $100,000; (ix) lease or
agreement under which it is lessor of, or permits any third party to hold or
operate any property, real or personal, for which the annual rental exceeds
$100,000; (x) contract or group of related contracts with the same party for
the purchase of products or services, under which the undelivered balance of
such products and services has a selling price in excess of $150,000; (xi)
contract or group of related contracts with the same party for the sale of
products or services under which the undelivered balance of such products or
services has a sales price in excess of $150,000; (xii) contract which
prohibits the Company or any Subsidiary from freely engaging in business
anywhere in the world; (xiii) clinical affiliation agreement with a hospital
or university (an "Affiliated Hospital or University") pursuant to which such
Affiliated Hospital or University has accepted 25 or more students during the
fiscal year ended December 31, 2002 from either Institution for clinical
rotations; (xiv) contract with any of the Sellers or their Affiliates (other
than the Company and its Subsidiaries); (xv) contract under which it has
advanced or loaned any amount to any of its directors, officers and
employees; (xvi) contract or group of related contracts under which the
Company or any of its Subsidiaries has advanced or loaned any other Persons
amounts in the aggregate exceeding $100,000; (xvii) contract under which the
Company or its Subsidiaries has granted any Person any registration rights;
or (xviii) contract for the construction of buildings, improvements or other
infrastructure in connection with the Owned Real Property or the Leased Real
Property.
(b) Buyer either has been supplied with, or has been given
access to, a true, correct and complete copy of all written contracts which
are referred to on the Contracts Schedule, together with all material
amendments, waivers or other changes thereto.
(c) With respect to each contract listed on the Contracts
Schedule, except as set forth on Contracts Schedule, (i) the agreement is
legal, valid, binding and enforceable against the Company or its Subsidiaries
(as applicable) and, to the Company's knowledge, against the other parties
thereto, and such agreement is in full force and effect; (ii) neither the
Company nor its Subsidiaries is in breach or default and, to the Company's
knowledge, no other party to such agreement is in breach or default, and, to
39
the Company's knowledge, no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and, (iii) to the
Company's knowledge, no party has repudiated any provision of the agreement.
(d) The Company and its Subsidiaries have provided Buyer with
true and accurate copies of (i) the agreement by and between the Government
of St. Kitts and Nevis and ▇▇▇▇ University, dated ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the
agreement by and between the Government of St. Kitts and Nevis and ▇▇▇▇
University School of Medicine School of Veterinary Medicine (St. Kitts)
Limited, dated March 6, 2003 (the agreements referred to in clauses (i) and
(ii) hereinafter referred to collectively as the "St. Kitts Agreement"). The
St. Kitts Agreement is, and as of the Closing Date, will be, fully in effect
and neither the Company nor any Subsidiary has taken any action that has
caused, or failed to take any action when failure to act has caused, the St.
Kitts Agreement to be terminated, amended in any respect that would have a
material detrimental effect on Buyer or its Subsidiaries, or otherwise to be
no longer fully effective in accordance with the terms thereof.
4.10 Intellectual Property. The term "Company Intellectual Property"
shall include all trademarks, service marks, whether registered or existing
at common law, copyrights, patents, trade secrets, confidential information
and know-how used in connection with the Company or Subsidiary. The attached
Intellectual Property Schedule contains a complete list of all applications
and registrations for the Company Intellectual Property. Except as set forth
on the Intellectual Property Schedule: (i) the Company or one of its
Subsidiaries owns all of the Company Intellectual Property, free and clear of
all Liens and security interests; (ii) neither the Company nor any Subsidiary
has, or has received any notice alleging that it has, interfered with,
infringed upon, misappropriated or violated any Intellectual Property right
of any third party; and (iii) to the Company's knowledge, no third party has
interfered with, infringed upon or misappropriated any of the Company
Intellectual Property.
4.11 Litigation. Except as set forth on the attached Litigation
Schedule, neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body, and
(i) there are no actions, suits or proceedings pending or, to the Company's
knowledge, threatened against the Company or any Subsidiary and (ii) there
have been no such actions, suits or proceedings against the Company or any
Subsidiary during the past two years, in each case, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
40
4.12 Governmental Consents, etc. Except as set forth on the
Authorization Schedule, and except for the applicable requirements of the HSR
Act, no permit, consent, approval or authorization of, or declaration to or
filing with, any governmental or regulatory authority is required in
connection with any of the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of any other
transaction contemplated hereby.
4.13 Employee Benefit Plans.
----------------------
(a) Except as listed on the attached Employee Benefits
Schedule, neither the Company nor any Subsidiary maintains, contributes to or
has any liability under or with respect to any "employee benefit plan" (as
defined under Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or any retirement or deferred compensation plan,
incentive compensation plan, stock plan, retention plan or agreement,
unemployment compensation plan, vacation pay, change in control, severance
pay, bonus or benefit arrangement, insurance or hospitalization program or
any fringe benefit arrangements for any current or former employee, director,
consultant or agent, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an employee benefit plan
(collectively referred to as the "Plans"). Each of the Plans that is
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), has received a favorable determination letter
from the Internal Revenue Service that covers all amendments thereto, or is
within the applicable remedial amendment period. The Plans comply in form
and in operation in all material respects with their terms and with the
requirements of the Code and ERISA and all other applicable laws.
(b) With respect to the Plans, all required contributions have
been made or properly accrued.
(c) None of the Plans or any employee benefit plan maintained,
sponsored or contributed to by any ERISA Affiliate is subject to Title IV of
ERISA or is a multiemployer plan (as defined in Section 3(37) of ERISA).
(d) With respect to the Plans, the Company has furnished to
Buyer true and complete copies (as applicable) of (i) the most recent
determination letter received from the Internal Revenue Service, (ii) the
latest Form 5500 annual reports, (iii) the Plan documents (or, in the case of
any Plan that is not written, an accurate description thereof), (iv) all
trust agreements relating thereto, and (v) summary plan description.
41
(e) None of the assets of any Plan are invested in employer
securities or employer real property.
(f) There have been no non-exempt "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with respect
to any Plan, and none of the Company, the Subsidiaries or any of their
respective ERISA Affiliates has engaged in any non-exempt prohibited
transaction that could reasonable be expected to result in a liability to the
Company or any of the Subsidiaries.
(g) There have been no acts or omissions by the Company, the
Subsidiaries or any of their respective ERISA Affiliates which have given
rise to or could reasonably be expected to give rise to fines, penalties,
taxes or related charges under Section 502 of ERISA or Chapters 43, 47, 68 or
100 of the Code for which the Company or any of the Subsidiaries may be
liable.
(h) None of the payments contemplated by the Plans would, in
the aggregate, constitute excess parachute payments (as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof)) or would
exceed the amount deductible pursuant to Section 162(m) of the Code.
(i) There are no actions, suits or claims (other than routine
claims for benefits) pending or threatened involving any Plan or the assets
thereof and no facts exist which could reasonably be expected to give rise to
any such actions, suits or claims (other than routine claims for benefits).
(j) None of the Company or any of its Subsidiaries has any
liability or contingent liability for providing, under any Plan or otherwise,
any post-retirement medical or life insurance benefits, other than statutory
liability for providing group health plan continuation coverage under Part 6
of Title I of ERISA and Section 4980B of the Code or applicable state law.
(k) Notwithstanding anything to the contrary in Sections 4.01,
4.02, 4.12, 4.15 or any other provision of this Agreement, the
representations and warranties contained in this Section 4.13 are the sole
and exclusive representations and warranties of the Company with respect to
any matters relating to any Plan.
4.14 Insurance. The attached Insurance Schedule lists each insurance
policy maintained by the Company and its Subsidiaries, or to which the
Company or any of its Subsidiaries is a party, a named insured or otherwise a
beneficiary of coverage. All of such insurance policies are in full force
and effect, and neither the Company nor any Subsidiary is in default with
respect to its obligations under any of such insurance policies.
42
4.15 Compliance with Laws. The Company and each Subsidiary is in
compliance with all applicable laws and regulations of foreign, federal,
state and local governments and all agencies thereof, and no action, suit,
proceeding, investigation, charge, complaint, claim, demand or notice has
been received by, or, to the Company's knowledge, filed or commenced against,
any of them alleging failure to so comply.
4.16 Environmental, Health and Safety Matters. Except as set forth on
the attached Environmental Matters Schedule:
(a) The Company and each of its Subsidiaries has complied, and
is in compliance with all Environmental, Health and Safety Requirements.
(b) Without limiting the generality of the foregoing, the
Company and each of its Subsidiaries has obtained, has complied, and is in
compliance with all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business.
(c) Neither the Company nor any Subsidiary has received any
written or oral notice from any applicable governmental authority or third
party regarding any actual or alleged violation of Environmental, Health and
Safety Requirements or any liability arising under Environmental, Health and
Safety Requirements, including any investigatory, remedial or corrective
obligation, relating to the Company, its Subsidiaries or their facilities.
(d) To the Company's knowledge, none of the following exists at
any property or facility owned or operated by the Company or its
Subsidiaries: (1) underground storage tanks, (2)asbestos-containing material
in any friable and damaged form or condition, (3) materials or equipment
containing polychlorinated biphenyls, or (4) landfills, surface impoundments,
or disposal areas.
(e) To the Company's knowledge, neither the Company nor any of
its Subsidiaries, nor any of their respective predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance in a manner that has given or would give rise to
liabilities, including any liability for response costs, corrective action
costs, personal injury, property damage or natural resources damages,
pursuant to Environmental, Health, and Safety Requirements.
43
(f) Notwithstanding the foregoing, to the Company's knowledge,
there is no condition or occurrence with respect to matters related to the
environment, public health and safety, and worker health and safety, that
would give rise to any material liability.
4.17 Affiliated Transactions. Except as set forth on the attached
Affiliated Transactions Schedule, no officer, director, Stockholder,
Affiliate of a Stockholder or, to the Company's knowledge, Affiliate of the
Company or any individual in such officer's, director's or Stockholder's
immediate family is a party to any arrangement, agreement, contract,
commitment or transaction (whether oral or written) with the Company or its
Subsidiaries or has any interest in any property used by the Company or its
Subsidiaries, or has been involved in any such relationship or held such an
interest within the past twelve months.
4.18 Employees. Except as set forth on the attached Employee
Schedule, none of the Company and its Subsidiaries has experienced any strike
or grievance, claim of unfair labor practices, or other collective bargaining
dispute within the past two years. None of the Company and its Subsidiaries
has committed any unfair labor practice. Except as set forth on the Employee
Schedule, neither the Company nor any Subsidiary has received any written
notice regarding an organizational effort by or on behalf of any labor union
with respect to employees of any of the Company and its Subsidiaries, and to
the Company's knowledge, no such organizational effort is presently being
made or threatened. Except as set forth on the Employee Schedule, to the
Company's knowledge, there is no employment-related charge, complaint,
grievance, investigation or inquiry of any kind pending or threatened in any
forum relating to an alleged violation or breach by the Company (or its
agents) of any law, regulation or contract.
4.19 Brokerage. Except for the fees and expenses of SunTrust ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Leeds Weld & Co. and ▇.▇. Childs Associates, Inc. and their
respective Affiliates, and except as set forth on the Brokerage Schedule,
there are no claims against the Company or any of its Subsidiaries for
brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement, or any other
transaction, and neither the Company nor any of its Subsidiaries has any
liability or obligation to pay any such fees, except for the fees of SunTrust
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, all of which fees shall be paid by the Company and its
Subsidiaries on or prior to the Closing Date. Except as set forth on the
Brokerage Schedule, neither Buyer nor any Affiliate of Buyer (including,
after the Closing, the Company and its Subsidiaries) has or shall have any
liability or otherwise suffer or incur any Losses as a result of, or in
connection with, any brokerage or finder's fee or other commission of any
Person retained by, or on behalf of, the Company in connection with any of
the transactions contemplated by this Agreement or any other transaction
44
(including, without limitation, SunTrust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Leeds Weld & Co.
and ▇.▇. Childs Associates, Inc. and their respective Affiliates).
4.20 Regulatory Compliance.
---------------------
(a) The attached Accreditations, Licenses and Permits Schedule
contains a complete and accurate statement of the Accreditations, Licenses
and Permits granted to the Company, its Subsidiaries and the Institutions,
the date each Accreditation, License or Permit was last granted and the
current term of each Accreditation, License or Permit. Each Accreditation,
License and Permit set forth in the Accreditations, Licenses and Permits
Schedule is in full force and effect, and is a valid, binding and enforceable
obligation by or against the Company, its Subsidiaries and the Institutions,
as applicable. No event has occurred that limits or, with the giving of
notice or the passage of time, or both, would limit the legal effect or
validity of such Accreditation, License or Permit. No action or proceeding
for the suspension or cancellation of any Accreditation, License or Permit is
pending or, to the Company's knowledge, is threatened, and there are no
material facts, circumstances or omissions concerning the Company, its
Subsidiaries or the Institutions that would likely lead to any such action or
proceeding. Each Institution has received and maintained without
interruption, in all material respects, all necessary Accreditations,
Licenses and Permits for each Institution's operation and receipt of all
student financial assistance including those Accreditations, Licenses and
Permits required for each Institution to offer educational programs, and to
offer student financial assistance, including Title IV Program Funds, to the
students enrolled in such educational programs.
(b) Except as set forth on the Accreditations, Licenses and
Permits Schedule, neither the Company, any of its Subsidiaries nor any of
the Institutions is on probation or warning or is in material violation of
any of the terms or conditions of any of the Accreditations, Licenses and
Permits or has received notice that any of the Accreditations, Licenses and
Permits will not be renewed and, to the Company's knowledge, there is no
basis for nonrenewal of any of the Accreditations, Licenses and Permits.
(c) U.S. Department of Education Certification and Eligibility.
(i) Seller has provided Buyer with a copy of each Institution's
most recent DOE Application for Institutional Participation in Programs
Under the Higher Education Act of 1965, as amended (the "Higher
Education Act"), and Institutional Eligibility and Certification for
Title IV Student Financial Aid. Each Institution is certified by the
DOE as, and meets the criteria to be, an eligible institution under
Title IV, pursuant to 20 U.S.C. S. 1002 and 34 C.F.R. SS. 600.51-600.57,
and is a party to, and in compliance with, a valid program
45
participation agreement with the DOE. To the Company's knowledge,
neither Institution is subject to any limitation, suspension or
termination proceeding, or subject to any other action or proceeding by
the DOE that would likely result in the loss of certification or
eligibility or a liability or fine. Except as set forth on the DOE
Compliance Schedule, to the Company's knowledge, there are no facts,
circumstances, or omissions concerning either Institution that would
lead to such an action by the DOE.
(ii) The Company has accurately disclosed to the DOE the
ownership of each Institution to the extent, and in the manner,
required by DOE regulations.
(iii) Except as set forth on the DOE Compliance Schedule, to the
Company's knowledge, each Institution is in material compliance with
all rules, regulations and requirements established by the DOE
pertaining to its eligibility and participation in Title IV of the
Higher Education Act. Except as set forth on the DOE Compliance
Schedule, to the Company's knowledge, there are no facts,
circumstances, or omissions concerning either Institution that would
likely result in a finding of material non-compliance with regard to
such rules, regulations and requirements. Without limiting the
foregoing:
(A) Except as set forth on the DOE Compliance Schedule,
each Institution materially satisfies the DOE standards of
financial responsibility, as set forth at 34 C.F.R. S. 668.171-
175, and administrative capability, as set forth at 34 C.F.R.
S. 668.16, including all requirements pertaining to satisfactory
academic progress. Further, each program offered by the
Institutions is an eligible program in accordance with the
requirements of 34 C.F.R. S. 668.8.
(B) Except as set forth on the DOE Compliance Schedule,
each Institution provides refunds substantially in accordance
with applicable governmental and regulatory refund policies and
as required pursuant to 34 C.F.R. S. 668.22.\
(C) Neither Institution received for the fiscal year
ending December 31, 2002, greater than ninety percent (90%) of
its revenues from Title IV or other federal student financial aid
funds and each Institution satisfies the requirements regarding
tuition revenue established by the DOE as set forth at 34 C.F.R.
S. 600.5. The Department of Education Schedule contains a correct
statement of each Institution's percentage of revenue from such
federal funding sources.
(D) The cohort default rates published by the DOE for
fiscal years 1999 and 2000 for each Institution are listed on
the Department of Education Schedule. Based on the preliminary
cohort default rates supplied by the DOE for fiscal year 2001,
46
neither Institution will have cohort default rates attributed to
it of 25% or over for three consecutive years and neither
Institution could be declared ineligible to participate in
Federal Family Education Loan ("FFEL") programs.
(d) Notwithstanding anything to the contrary in Sections 4.01,
4.02, 4.12, 4.15 or any other provision of this Agreement, the
representations and warranties in this Section 4.20 are the sole and
exclusive representations and warranties with respect to any matters relating
to the regulatory compliance matters covered by this Section 4.20 (including,
without limitation, all matters relating to Necessary Regulatory Authorities
and related regulations).
4.21 Undisclosed Liabilities. Except as set forth on the attached
Liabilities Schedule, neither the Company nor any of its Subsidiaries has any
liabilities required to be set forth on a balance sheet prepared in
accordance with GAAP except for (i) liabilities reflected or reserved against
in the Latest Balance Sheet, (ii) current liabilities incurred in the
ordinary course of business consistent with past practice since the date of
the Latest Balance Sheet, and (iii) liabilities incurred after the date
hereof and expressly permitted by Section 6.01.
4.22 Claims Against Officers and Directors. There are no pending or,
to the Company's knowledge, threatened claims against any director or officer
of the Company or any Subsidiary which could reasonably be expected to give
rise to any claim for indemnification against the Company or any Subsidiary.
4.23 Improper Payments. Except as set forth on Improper Payments
Schedule, none of the Company, any Subsidiary or any director or officer of
the Company or any Subsidiary (acting on behalf of and in such Person's
capacity as a director or officer of the Company or any Subsidiary), nor, to
the Company's knowledge, any Person acting on behalf of any them, has: (a) to
the Company's knowledge, made, paid or received any unlawful bribes,
kickbacks or other similar payments to or from any Person during the last
five years or (b) made any improper payments (as defined in the United States
Foreign Corrupt Practices Act).
4.24 Prior Operations. During the last five years, neither the
Company nor any Subsidiary has carried on any trade or business, other than
the business in which it is currently engaged and other education-related
businesses, and neither has held any assets or incurred any liabilities,
other than with respect to its current business or other education-related
businesses.
4.25 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
47
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Sellers and the Company
that:
5.01 Organization and Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to enter into this Agreement and
perform its obligations hereunder. On the Closing Date, each of DelCo and
BarbCo will be duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority to and perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all requisite action (including corporate action), and no other corporate
proceedings on its part are necessary to authorize its execution, delivery or
performance of this Agreement. On the Closing Date, the consummation of the
transactions contemplated hereby by each of DelCo and BarbCo shall be duly
and validly authorized by all requisite action and no other proceedings on
its part are necessary to authorize its performance of this Agreement. This
Agreement has been duly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy laws, other similar laws affecting creditors' rights and general
principles of equity effecting the availability of specific performance and
other equitable remedies.
5.03 No Breach. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws or similar organizational documents,
any applicable law, or rule or regulation of any governmental authority, or
any material agreement or instrument, or any license, franchise or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated in any material respect by its execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
5.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and the matters set forth on the Filings
Schedule, Buyer is not required to submit any notice, report or other filing
with any governmental authority in connection with the execution, delivery or
performance by it of this Agreement or the consummation of the transactions
contemplated hereby, and after incorporation, neither DelCo nor BarbCo shall
be required to submit any notice, report or other filing with any
48
governmental authority in connection with the consummation of the
transactions contemplated hereby. Except for the matters set forth on the
Filings Schedule, no consent, approval or authorization of any governmental
or regulatory authority or any other party or Person is required to be
obtained (i) by Buyer in connection with its execution, delivery and
performance or consummation of this Agreement or (ii) after incorporation, by
DelCo or BarbCo in connection with the performance or consummation of the
transactions contemplated hereby. Buyer is not, and after incorporation,
neither of DelCo or BarbCo will be, subject to any outstanding judgment,
order or decree of any court or governmental body which would adversely
affect Buyer's performance under this Agreement or the consummation of the
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded or
materially and adversely affect the right of Buyer to own the Shares.
5.05 Litigation. There are no actions, suits or proceedings pending
or, to Buyer's knowledge, threatened against or affecting Buyer at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would adversely affect Buyer's performance under this
Agreement or the consummation of the transactions contemplated hereby.
5.06 Brokerage. Except for the fees and expenses of Credit Suisse
First Boston Corporation, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement or any other transaction based on any
arrangement or agreement made by or on behalf of Buyer. No Seller nor any
Affiliate of any Seller has or shall have any liability or otherwise suffer
or incur any Losses as a result of, or in connection with, any brokerage or
finder's fee or other commission of any Person retained by Buyer in
connection with any of the transactions contemplated by this Agreement or any
other transaction (including, without limitation, Credit Suisse First Boston
Corporation).
5.07 Investment Representation. Buyer is purchasing the Shares for
its own account with the present intention of holding such securities for
investment purposes and not with a view to or for sale in connection with any
public distribution of such securities in violation of any federal or state
securities laws. Buyer is an "accredited investor" as defined in Regulation
D promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Securities Act"). Buyer acknowledges that it
is informed as to the risks of the transactions contemplated hereby and of
ownership of the Shares. Buyer acknowledges that the Shares have not been
registered under the Securities Act or any state or foreign securities laws
and that the Shares may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of unless such sale, transfer, assignment,
offer, pledge, hypothecation or other disposition is pursuant to the terms of
49
an effective registration statement under the Securities Act and are
registered under any applicable state or foreign securities laws or pursuant
to an exemption from registration under the Securities Act and any applicable
state or foreign securities laws.
5.08 Financing. Subject to the terms and conditions of the Commitment
Letter (as defined below), Buyer shall have at the Closing sufficient cash
and committed credit facilities to make the payments required to be made by
it in connection with the transactions contemplated hereby (including the
repayment of Indebtedness pursuant to Section 1.04(f) and payment of any
purchase price adjustment pursuant to Section 1.06) and to pay all of its
related fees and expenses, and has obtained a financing commitment letter
(together with the term sheets, annexes and appendices, the "Commitment
Letter"), a true, correct and complete copy (other than redacted portions of
the Fee Letter) of which has been provided to Sellers, providing for, subject
to those conditions set forth therein, commitments to provide all funds
necessary to consummate the transactions contemplated hereby. Buyer has no
reason to believe that the conditions set forth in the Commitment Letter will
not be satisfied, and Buyer has not made any material misrepresentation or
omitted to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading, in connection with obtaining such Commitment Letter. There are
no conditions to the financing contemplated by the Commitment Letter other
than those set forth in the Commitment Letter and the market flex language
contained in the Fee Letter. Buyer has paid all fees currently owed by Buyer
and its affiliates under the Commitment Letter and the Fee Letter. Buyer has
not entered into any other agreements, commitments, side letters or other
agreements with Bank of America, N.A., Banc of America Securities LLC, any of
their affiliates or any other lenders solely in connection with the
transactions contemplated by this Agreement or the financing contemplated by
the Commitment Letter other than the Commitment Letter and its related
documents.
5.09 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Company and each of its Subsidiaries
shall be able to pay their respective debts as they become due and shall own
property which has a fair saleable value greater than the amounts required to
pay their respective debts (including a reasonable estimate of the amount of
all contingent liabilities). Immediately after giving effect to the
transactions contemplated by this Agreement, the Company and each of its
Subsidiaries shall have adequate capital to carry on their respective
businesses. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement
with the intent to hinder, delay or defraud either present or future
creditors of the Company or its Subsidiaries.
50
5.10 Regulatory Qualifications. To Buyer's knowledge, there are no
facts or circumstances attributable to Buyer that would likely cause the DOE,
or any other Necessary Regulatory Authority, whose authorization, consent or
similar approval is required in connection with the transactions contemplated
by this Agreement, to refuse to deliver such authorization, consent or
similar approval.
ARTICLE VI
PRE-CLOSING COVENANTS
---------------------
6.01 Conduct of the Business.
-----------------------
(a) From the date hereof until the Closing Date, the Company
shall carry on its and its Subsidiaries' businesses in the ordinary course of
business consistent with past practice (including, without limitation, with
respect to capital expenditures), except (i) as otherwise provided in the
Schedule of Permitted Exceptions or (ii) if Buyer shall have consented in
advance in writing, which consent will not be unreasonably withheld or
delayed; provided that, the foregoing notwithstanding, the Company may use
all available cash to repay any Indebtedness prior to the Closing.
(b) Without limiting the generality of the foregoing, from the
date hereof until the Closing Date, except as otherwise provided for by this
Agreement or in the Schedule of Permitted Exceptions or consented to in
writing by Buyer, which consent will not be unreasonably withheld or delayed,
the Company shall not, and shall not permit any Subsidiary to, (i) issue or
sell any shares of its or any Subsidiary's capital stock, (ii) issue or sell
any securities convertible into, or options with respect to, warrants to
purchase or rights to subscribe for any shares of its or any Subsidiary's
capital stock, (iii) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capitalization, (iv) amend its or
any Subsidiary's certificate or articles of incorporation or bylaws or
equivalent organizational documents or (v) take any action or enter into any
transaction described in Section 4.06 (except for the first part of clause
(f) thereof).
6.02 Access to Books and Records. From the date hereof until the
Closing Date, the Company shall provide Buyer and its authorized
representatives ("Buyer's Representatives") with full access at all
reasonable times and upon reasonable notice to the offices, properties,
personnel, books and records of the Company and its Subsidiaries in order for
Buyer to have the opportunity to make such investigation as it shall
reasonably desire to make of the affairs of the Company and its Subsidiaries.
From the date hereof until the Closing Date, the Company shall provide Buyer
with monthly financial statements that the Company prepares in the ordinary
51
course of business consistent with past practice, on or about each date on
which such financial statements are completed and provided to representatives
of the Company's stockholders. Buyer acknowledges that it remains bound by
the Confidentiality Agreement, dated November 19, 2002, with the Company (the
"Confidentiality Agreement").
6.03 Consents and Approvals; Regulatory Filings. The Company shall
use its reasonable best efforts to obtain the consents and approvals
identified with an asterisk on the Authorization Schedule. The Company shall
make or cause to be made all filings and submissions under the HSR Act and
any other material laws or regulations applicable to the Company and its
Subsidiaries for the consummation of the transactions contemplated herein,
except for filings and submissions with Necessary Regulatory Authorities
(which are governed exclusively by Section 11.07). The Company shall
coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. The Company shall use its reasonable best efforts to
cause the conditions set forth in Section 2.01 to be satisfied and to
consummate the transactions contemplated herein; provided that none of the
Company, any Subsidiary or any Seller shall be required to expend any funds
to obtain any governmental consents described in Section 2.01(c).
6.05 Exclusive Dealing. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01 hereof, neither the Company, nor any of its
Subsidiaries, nor any Seller shall take or permit any other Person (including
the Company or any of its Subsidiaries) on its behalf to take, and the
Company shall not, directly or indirectly:
(a) (i) solicit, engage or facilitate any inquiries, proposals or
offers from or with, (ii) respond to any inquiries, proposals or offers
relating to, (iii) participate in discussions or negotiations with, or (iv)
encourage or continue any discussions or negotiations which have been
undertaken heretofore with, in each case, any person or entity (other than
Buyer and its advisors) concerning any acquisition, disposition, merger,
business combination, consolidation, recapitalization, liquidation,
dissolution or similar transaction or sale of securities or assets which
could result in the sale of all or any portion of the Company or any of its
Subsidiaries (including all or any portion of the capital stock of the
Company or any of its Subsidiaries) to a person other than Buyer
(collectively, a "Prohibited Transaction");
(b) provide any non-public or confidential information to any person
(other than Buyer and its advisors) in furtherance of any Prohibited
Transaction (except and to the extent required by applicable law (including,
52
without limitation, pursuant to or in connection with a legal proceeding or
an investigation by a governmental authority));
(c) approve, or propose to approve, any proposal or offer relating to
any Prohibited Transaction, or execute or enter into any agreement with
respect to any Prohibited Transaction; or
(d) agree or commit to do any of the foregoing.
6.06 Notification. From the date hereof until the Closing Date, the
Company shall disclose to Buyer in writing in reasonable detail promptly
after coming to the Company's knowledge or the knowledge of the Stockholder
Representatives (a) any fact or event that causes or constitutes a material
breach of any of the representations or warranties contained in Article III
and Article IV, as applicable, made as of the date of this Agreement, or (b)
the occurrence after the date of this Agreement of any fact or event that
would cause or constitute a material breach of (i) any of the representations
or warranties contained in Article III and Article IV, as applicable, had
such representation or warranty been made as of the time of the occurrence or
discovery of such fact or event or (ii) any of the covenants in this
Agreement made by the Company or the Sellers. Notwithstanding any provision
in this Agreement to the contrary, unless Buyer provides the Company or the
Stockholder Representatives with a termination notice pursuant to Section
8.01 within five business days after delivery by the Company of a notice
pursuant to this Section 6.06, Buyer shall be deemed to have waived its right
to terminate this Agreement or prevent the consummation of the transactions
contemplated by this Agreement pursuant to Sections 2.01(a) and 2.01(b)
hereof. Subject to the preceding sentence, no information provided to Buyer
pursuant to this Section 6.06 shall be deemed to cure any misrepresentation
or breach of any representation, warranty or covenant made in this Agreement;
provided, however, that if the Closing does occur, information provided to
Buyer pursuant to clause (b) above shall be effective to cure and correct for
all purposes any breach of any representation, warranty or covenant made as
of the Closing Date which would have existed hereunder by reason of such fact
or event, and Buyer shall not have any claim (whether for indemnification or
otherwise) against the Company or Sellers as a result of such fact or event.
6.07 Regulation S-X. At or prior to Closing, the Company shall have
prepared and provided to Buyer financial statements of the Company and its
Subsidiaries as of and for the fiscal years ended December 31, 2002, December
31, 2001 and December 31, 2000 that comply with Regulation S-X promulgated by
the United States Securities and Exchange Commission (it being agreed that
the expenses incurred in connection with causing the foregoing financial
statements to be Regulation S-X compliant shall be paid by Buyer). Buyer
53
shall provide the Company with such assistance and information as the Company
reasonably requests from time to time in connection with preparing such
financial statements.
6.08 Termination of Expense Reimbursement. From and after the
Closing, the Company shall have no obligation to pay the fees or otherwise
indemnify any Seller for any damages, settlements, fees or expenses incurred
by any Seller arising out of the litigation described in the item marked with
an asterisk on the Affiliated Transactions Schedule.
ARTICLE VII
COVENANTS OF BUYER
------------------
7.01 Access to Books and Records. From and after the Closing, Buyer
shall, and shall cause the Company to, provide the Stockholder
Representatives, the Sellers and their authorized representatives with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date in connection with any
matter whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby. Unless otherwise consented to in writing
by the Stockholder Representatives, Buyer shall not permit the Company or its
Subsidiaries, for a period of seven years following the Closing Date, to
destroy, alter or otherwise dispose of any books and records of the Company,
or any portions thereof, relating to periods prior to the Closing Date
without first giving reasonable prior written notice to the Stockholder
Representatives and offering to surrender to the Stockholder Representatives
(on behalf of the Stockholders) such books and records or such portions
thereof.
7.02 Notification. From the date hereof until the Closing Date, Buyer
shall disclose to the Company and the Stockholder Representatives in writing
in reasonable detail promptly after coming to Buyer's knowledge (a) any fact
or event that causes or constitutes a material breach of any of the
representations or warranties contained in Article V made as of the date of
this Agreement, or (b) the occurrence after the date of this Agreement of any
fact or event that would cause or constitute a material breach of (i) any of
the representations or warranties contained in Article V, had such
representation or warranty been made as of the time of the occurrence or
discovery of such fact or event or (ii) any of the covenants in this
Agreement made by Buyer. No information provided to the Company or the
Stockholder Representatives pursuant to this Section 7.02 shall be deemed to
cure any misrepresentation or breach of any representation, warranty or
covenant made in this Agreement; provided, however, that if the Closing does
occur, information provided to the Stockholder Representatives pursuant to
clause (b) above shall be effective to cure and correct for all purposes any
breach of any representation, warranty or covenant made as of the Closing
Date which would have existed hereunder by reason of such fact or event, and
54
the Sellers shall not have any claim (whether for indemnification or
otherwise) against Buyer as a result of such fact or event. From the date
hereof until the Closing Date, if, to Buyer's knowledge, (x) any of the
representations and warranties of the Sellers or the Company in this
Agreement are not true and correct in all material respects, or (y) there are
any material errors in, or omissions from, the schedules to this Agreement of
Sellers or the Company, then, in each case, Buyer shall promptly notify the
Stockholder Representatives thereof.
7.03 Director and Officer Liability and Indemnification.
--------------------------------------------------
(a) For a period of six years after the Closing, Buyer shall
not, and shall not permit the Company or any of its Subsidiaries to amend,
repeal or modify any provision in the Company's or any of its Subsidiaries'
certificate or articles of incorporation or bylaws (or equivalent
organizational documents) relating to the exculpation or indemnification of
any officers and directors (unless required by law), it being the intent of
the parties hereto that the officers and directors of the Company and its
Subsidiaries shall continue to be entitled to such exculpation and
indemnification to the full extent of the law.
(b) For a period of six years after the Closing, Buyer shall,
or shall cause the Company and its Subsidiaries to, maintain director and
officer liability insurance which insurance shall provide coverage for the
individuals who were officers and directors of the Company and its
Subsidiaries prior to Closing comparable to the policy or policies maintained
by Buyer for the benefit of the officers and directors of Buyer's
subsidiaries.
7.04 Regulatory Filings. Buyer shall make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, except for filings and submissions with
Necessary Regulatory Authorities (which are governed exclusively by Section
11.07), and Buyer shall be responsible for all filing fees under the HSR Act
and such other laws or regulations as are applicable to Buyer. Buyer shall
coordinate and cooperate with the Company in exchanging such information and
assistance as the Company may reasonably request in connection with all of
the foregoing.
7.05 Conditions.
----------
(a) Buyer shall use its reasonable best efforts to cause the
conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated herein.
(b) Buyer will promptly notify the Stockholder Representatives
of any proposal by the lender named in the Commitment Letter to withdraw,
terminate or make a material change in the amount of financing contemplated
55
by, or the terms of, the Commitment Letter. In addition, upon the reasonable
request of the Stockholder Representatives, Buyer shall advise and update the
Stockholder Representatives with respect to the status, proposed closing date
and material terms of the proposed financing. Buyer shall not consent to any
amendment, modification or early termination of the Commitment Letter or the
Fee Letter. As part of the transactions contemplated hereby, Buyer shall not
enter into any agreement with the parties to the Commitment Letter, other
than the Commitment Letter, the Fee Letter and the definitive documentation
contemplated by the Commitment Letter. Buyer shall, and shall cause its
Affiliates to, use all commercially reasonable efforts to (i) maintain the
effectiveness of the Commitment Letter, (ii) cause the financing in the
aggregate principal amount contemplated by the Commitment Letter to be
available to Buyer on economic and other material terms no less favorable in
the aggregate to Buyer than the terms reflected in the term sheets attached
to the Commitment Letters and (iii) to the extent within Buyer's control,
satisfy all funding conditions to the financing set forth in the definitive
documentation with respect to the financing contemplated by the Commitment
Letter. Buyer shall provide to the Stockholder Representatives promptly
after the receipt thereof with any commitments of any lenders to participate
in the financing contemplated by the Commitment Letter, including pursuant to
any syndication efforts in connection therewith.
7.06 Buyer's Solvency. Buyer shall deliver to the Sellers at the
Closing a solvency certificate signed by Buyer, substantially in the form as
delivered pursuant to the consummation of the transactions contemplated by
the Commitment Letter, addressed to the Sellers and entitling the Sellers to
rely thereon.
7.07 Employee Benefits.
-----------------
(a) For vesting and eligibility purposes (but not benefit
accrual purposes) under the employee benefit plans of Buyer and its
Affiliates providing benefits after the Closing Date, each Non-Union Employee
who is as of the Closing Date an employee of the Company or any of its
Subsidiaries shall be credited with his or her years of service with the
Company or its Subsidiary, as applicable, determined as of the Closing Date,
to the same extent as such Non-Union Employee was entitled, before the
Closing Date, to credit for such service under any similar Plans, except to
the extent such credit would result in a duplication of benefits. In
addition, and without limiting the generality of the foregoing, for purposes
of each employee benefit plan sponsored by Buyer and its Affiliates for the
benefit of Non-Union Employees (such plans, collectively the "New Plans"),
which provide medical, dental, pharmaceutical or vision benefits to any
Non-Union Employee, Buyer shall cause such Non-Union Employee (and his or her
covered dependents) to be given credit for his service with the Company and
its Subsidiaries as of the Closing Date for purposes of satisfying all
56
pre-existing condition exclusions and actively-at-work requirements, and
Buyer shall cause any eligible expenses incurred by such employee and his or
her covered dependents under a Plan during the portion of the plan year in
which the Closing Date occurs to be taken into account under a corresponding
New Plan for purposes of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and his or her covered
dependents for the applicable plan year as if such amounts had been paid in
accordance with such New Plan.
(b) Buyer has reviewed the Dominica Collective Bargaining
Agreement presently in effect, and understands and acknowledges its
obligations thereunder effective as of the Closing Date. Buyer shall cause
the Company and its Subsidiaries to employ or continue to employ each Union
Employee consistent with the Dominica Collective Bargaining Agreement at the
wages and on the terms and conditions of employment as required by the
Dominica Collective Bargaining Agreement. Additionally, Buyer acknowledges
its obligation to continue the Plans and other benefit arrangements existing
as of the Closing Date with respect to each Union Employee to the extent
required by the Dominica Collective Bargaining Agreement. Buyer acknowledges
that the Dominica Collective Bargaining Agreement may be extended or replaced
after the date hereof and prior to Closing and further acknowledges that
Buyer's obligations with respect to the Dominica Collective Bargaining
Agreement (including, without limitation, as described in this Section
7.07(b)) will apply to any such extension or replacement; provided, however,
that the Company shall provide Buyer information reasonably requested by
Buyer from time to time regarding the Company's discussions with Union
Employees or their representatives regarding the extension or replacement of
the Dominica Collective Bargaining Agreement.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Buyer and the Stockholder
Representatives (on behalf of the Sellers);
(b) by Buyer, if there has been a violation or breach by the
Company or the Sellers of any covenant, representation or warranty contained
in this Agreement which has prevented or made impossible, or would prevent or
make impossible, the satisfaction of any condition to the obligations of
Buyer at the Closing as set forth in Section 2.01, and such violation or
57
breach has not been waived by Buyer or, in the case of a covenant breach,
cured by the Company or the Sellers within ten days after written notice
thereof from Buyer;
(c) by the Stockholder Representatives (on behalf of the
Sellers), if there has been a violation or breach by Buyer of any covenant,
representation or warranty contained in this Agreement which has prevented or
made impossible, or would prevent or make impossible, the satisfaction of any
condition to the obligations of the Sellers at the Closing as set forth in
Section 2.02, and such violation or breach has not been waived by the
Stockholder Representatives (on behalf of the Sellers) or, in the case of a
covenant breach, cured by Buyer within ten days after written notice thereof
by the Stockholder Representatives (provided that neither a breach by Buyer
of Section 5.08 nor the failure of Buyer to deliver the consideration
pursuant to Section 1.04 at the Closing as required hereunder shall be
subject to cure hereunder unless otherwise agreed to in writing by the
Stockholder Representatives); or
(d) by either Buyer or the Stockholder Representatives (on
behalf of the Sellers) if the transactions contemplated hereby have not been
consummated by June 30, 2003; provided that neither Buyer nor the Stockholder
Representatives shall be entitled to terminate this Agreement pursuant to
this Section 8.01(d) if such Person's (or the Company's or any Seller's, in
the case of the Stockholder Representatives) knowing or willful breach of
this Agreement has prevented the consummation of the transactions
contemplated hereby.
8.02 Effect of Termination. In the event of termination of this
Agreement by either Buyer or the Stockholder Representatives as provided
above, the provisions of this Agreement shall immediately become void and of
no further force and effect (other than Section 3.05 (Brokers Fees), Section
4.19 (Brokerage), Section 5.06 (Brokerage), this Section 8.02 and Article
XIII and the Confidentiality Agreement, which shall survive the termination
of this Agreement), and there shall be no liability on the part of any of
Buyer, the Company or the Sellers to one another, except for knowing or
willful breaches of this Agreement prior to the time of such termination and
claims of, or causes of action arising from, fraud.
ARTICLE IX
INDEMNIFICATION
---------------
9.01 Survival of Representations and Warranties. The representations
and warranties in this Agreement shall survive the Closing as follows:
(a) the representations and warranties in Section 3.01
(Authority), Section 3.02 (Execution and Delivery; Valid and Binding
58
Agreement), Section 3.04 (Ownership of Capital Stock), Section 3.05 (Brokers
Fees), Section 4.01 (Organization and Corporate Power), Section 4.02 (a)
(Subsidiaries), Section 4.03(a) and (c) (Authorization; No Breach; Valid and
Binding Agreement) and Section 4.19 (Brokerage) shall not terminate;
(b) the representations and warranties in Section 4.08 (Tax
Matters) shall survive the Closing and continue in full force and effect
until 90 days after the expiration of any applicable statutes of limitations
(after giving effect to any extensions or waivers), and the representations
and warranties in Section 4.16 (Environmental, Health and Safety Matters)
shall survive the Closing and continue in full force and effect until the
expiration of eighteen months from the date hereof; and
(c) all other representations and warranties in this Agreement
shall terminate on the earlier of (x) 30 days after the date on which the
audit of the consolidated financial statements for the Company and the
Subsidiaries as of, and for the fiscal year ended, June 30, 2004 is delivered
to Buyer and (y) October 31, 2004.
No claim for indemnification hereunder for breach of any such representations
or warranties may be made after the expiration of the survival period
applicable to such claims; provided that any representation or warranty in
respect of which indemnity may be sought under Section 9.02 or under Section
9.03, and the indemnity with respect thereto, shall survive (with respect to
any claim that has been made) the time at which it would otherwise terminate
pursuant to this Section 9.01 if notice of breach or potential breach thereof
giving rise to such right or potential right of indemnity shall have been
given to the Person against whom such indemnity may be sought prior to such
time.
9.02 Indemnification by the Sellers for the Benefit of Buyer.
-------------------------------------------------------
(a) Each Seller, severally and not jointly, shall indemnify
Buyer and its Affiliates (including, after the Closing, the Company and its
Subsidiaries), and their respective officers, directors, partners, members,
employees, agents, representatives and successors (collectively, the "Buyer
Indemnified Parties") (it being understood that no Person shall be a Buyer
Indemnified Party due solely to such Person holding any amount of Buyer's
equity or debt securities) and save and hold them harmless against any loss,
liability, action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, injunction, judgment, order, decree, ruling,
penalty, fine, cost, obligation, Tax, Lien, fee, damage or expense, including
court costs and reasonable attorneys' fees and expenses (collectively,
"Losses"), which the Buyer Indemnified Parties may suffer or sustain
resulting from, arising out of, or caused by: (i) any breach by such Seller
of any representation or warranty made by it under Article III, or of the
certification in the certificate delivered by the Stockholder Representatives
(on behalf of the Sellers) to Buyer pursuant to Section 2.01(g)(ii) (solely
59
as to the certification that the representations and warranties made by such
Seller in Article III are true and correct in all material respects at and as
of the Closing Date), and (ii) any nonfulfillment or breach of any covenant,
agreement or other provision by such Seller.
(b) The Sellers, severally and not jointly (pro rata according
to each Seller's Common Percentage), shall indemnify the Buyer Indemnified
Parties and save and hold them harmless against any Losses which the Buyer
Indemnified Parties may suffer or sustain resulting from, arising out of or
caused by: (i) any breach of any representation or warranty of the Company
under Article IV, or of the certification in the certificate delivered by the
Company to Buyer pursuant to Section 2.01(g)(i) (solely as to the
certification that the representations and warranties made by the Company in
Article IV are true and correct in all material respects at and as of the
Closing Date), (ii) any nonfulfillment or breach of any covenant, agreement
or other provision by the Company prior to the Closing (other than Section
6.06), (iii) any breach of the covenants set forth in Section 11.03 (Tax
Matters), (iv) any breach of the covenant in Section 6.06 (Notification) and
(v) the Seller Retained Actions; provided, however, that, except for claims
for indemnification in respect of breaches of representations and warranties
contained in Section 4.01 (Organization and Corporate Power), Section 4.02(a)
(Subsidiaries), Section 4.03(a) and (c) (Authorization; No Breach; Valid and
Binding Agreement), Section 4.08 (Tax Matters); Section 4.09(d) (St. Kitts
Agreement) and Section 4.19 (Brokerage) (for which representations and
warranties the Sellers shall be responsible for all Losses from the first
dollar (subject to the Cap)), the Sellers shall have no liability under
clause (i) or clause (iv) above, unless the aggregate of (x) all Losses
relating thereto for which the Sellers would, but for this proviso, be liable
exceed on a cumulative basis an amount equal to $1,500,000 (the
"Deductible"), and then only to the extent such Losses exceed the Deductible;
provided further that the Sellers' aggregate liability under clauses (i),
(iii) and (iv) above shall in no event exceed $47,500,000 (the "Cap").
(c) Other than claims of, or causes of action arising from,
fraud, this Section 9.02 constitutes Buyer's sole and exclusive remedy for
any and all Losses or other claims relating to or arising from this Agreement
and the transactions contemplated hereby including, without limitation, with
respect to any breach of any representation, warranty or covenant of this
Agreement. Other than claims of, or causes of action arising from, fraud,
Buyer may not avoid the limitations on liability of the Sellers set forth in
this Section 9.02 by seeking damages for breach of contract, tort or pursuant
to any other theory of liability.
(d) If Buyer, on behalf of the Company, has repaid the then
outstanding balance of Indebtedness on the Closing Date as set forth on, and
in accordance with, the Payoff Letters, then the Sellers, severally and not
jointly (pro rata according to each Seller's Common Percentage), shall
60
indemnify the Buyer Indemnified Parties and save and hold them harmless
against any Losses which the Buyer Indemnified Parties may suffer or sustain
resulting from, arising out of, or caused by the failure of any Payoff Letter
to state accurately the amount required to be paid in order for such
Indebtedness to be paid in full as of the Closing Date. The indemnification
obligation of the Sellers in this Section 9.02(d) shall not be subject to the
Deductible.