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Sample Business ContractsHome: Sample Business Contracts:
AGREEMENT AND PLAN OF MERGER
AMONG
CAREER EDUCATION CORPORATION,
CCA ACQUISITION, LLC
AND
CALIFORNIA CULINARY ACADEMY, INC.
DATED AS OF DECEMBER 6, 1999
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and
entered into as of December 6, 1999 among Career Education Corporation, a
Delaware corporation ( "PARENT"), CCA Acquisition, LLC, a Delaware limited
liability company and an indirect wholly-owned subsidiary of Parent ( "MERGER
SUB"), and California Culinary Academy, Inc., a California corporation (the
"COMPANY").
RECITALS
A. The Board of Directors of each of the Company and Parent and the Manager
of Merger Sub each believes that it is in the best interests of each company
and their respective stockholders or member, as the case may be, that the
Company and Merger Sub combine into a single company through the merger of
Merger Sub with and into the Company (the "MERGER") and, in furtherance
thereof, has approved the Merger.
B. Pursuant to the Merger, among other things, each outstanding share of
common stock, no par value, of the Company shall be converted into the right
to receive cash, as set forth herein.
C. The Company, Parent and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. THE MERGER
1.1 THE MERGER . At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Corporations Code of the State of California (
"CALIFORNIA LAW") and the Delaware Limited Liability Company Act ( "DELAWARE
LAW"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease and the Company shall continue
as the surviving corporation. The Company as the surviving corporation after
the Merger is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
1.2 EFFECTIVE TIME . Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing the
agreement of merger of Merger Sub and the Company (the "AGREEMENT OF MERGER")
with the Secretary of State of the State of California,
2
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in accordance with the relevant provisions of California Law and a
certificate of merger with the Secretary of State of the State of Delaware
(the "CERTIFICATE OF MERGER"), (the time of such filings being the "EFFECTIVE
TIME") and make all other recordings or filings required by law in connection
with the Merger, including any filings with the California Franchise Tax
Board, as soon as practicable on or after the Closing Date (as herein
defined). The closing of the Merger (the "CLOSING") shall take place at the
offices of Parent at a time and date to be specified by the parties, which
shall be no later than the fifth business day after the satisfaction or
waiver (if permissible) of the conditions set forth in Article 6 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions), or at such other
time, date and location as the parties hereto agree (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER . At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable
provisions of California Law and Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time,
without other transfer, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 NAME; CERTIFICATE OF INCORPORATION; BYLAWS.
(a) The name of the Surviving Corporation will be the Company's name.
(b) The Amended and Restated Articles of Incorporation of the Company,
as in effect immediately prior to the Effective Time, (the "COMPANY
ARTICLES") shall be the Articles of Incorporation of the Surviving
Corporation at the Effective Time until thereafter amended.
(c) The Bylaws of the Company, as in effect immediately prior to the
Effective Time, (the "COMPANY BYLAWS") shall be the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The Manager of Merger Sub shall be the
director of the Surviving Corporation, until its respective successor or
successors are duly elected or appointed and qualified. The officers of
Merger Sub shall be the officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK . At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of Company Capital Stock (as defined below):
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(a) CONVERSION OF COMPANY CAPITAL STOCK. Each share of Common Stock,
no par value, of the Company (the "COMPANY CAPITAL STOCK") issued and
outstanding immediately prior to the Effective Time (other than any
shares of Company Capital Stock to be canceled pursuant to Section
1.6(b)) will be converted into the right to receive $5.25 in cash,
without interest (the "MERGER CONSIDERATION"), upon surrender of the
certificate or certificates which immediately prior to the Effective
Time represented such Company Capital Stock. All shares of Company
Capital Stock, when converted, shall no longer be outstanding and
shall automatically be canceled and retired and each holder of a
certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive such
Merger Consideration.
(b) CANCELLATION OF PARENT-OWNED STOCK. Each share of Company
Capital Stock owned by the Company, Merger Sub, Parent, or any direct
or indirect subsidiary of Parent or the Company, including without
limitation, any shares of Company Capital Stock held as treasury stock
of the Company or any direct or indirect subsidiary of the Company,
shall, by virtue of the Merger and without any action on the part of
the holder thereof, be canceled and extinguished without any
conversion thereof.
1.7 DISSENTERS' RIGHTS . Subject to ss.1300 of California Law and
notwithstanding Section 1.6 of thiS Agreement, shares of Company Capital
Stock outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such shares of Company Capital
Stock in accordance with California Law shall not be converted into a right
to receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses his, her or its right to appraisal. If, after
the Effective Time, such holder fails to perfect or withdraws or loses his
right to appraisal, such shares of Company Capital Stock shall be treated as
if it had been converted as of the Effective Time into a right to receive the
Merger Consideration. The Company shall give Parent prompt written notice of
any demands received by the Company for appraisal of shares of Company
Capital Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
1.8 SURRENDER OF CERTIFICATES .
(a) PAYING AGENT. The Harris Trust and Savings Bank, or another
similar institution selected by Parent and reasonably acceptable to
the Company, shall act as the paying agent (the "PAYING AGENT") in
the Merger.
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(b) PARENT TO PROVIDE MERGER CONSIDERATION. Promptly after the
Effective Time, Parent shall deposit immediately available funds with
the Paying Agent in a separate fund established for the benefit of the
holders of shares of Company Capital Stock at the Effective Time for
payment of the Merger Consideration in accordance with this Article 1
through the Paying Agent (the "PAYMENT FUND"). For purposes of
determining the Merger Consideration to be deposited, Parent shall
assume that no holder of Company Capital Stock will perfect his, her or
its right to appraisal of shares of Company Capital Stock. The Paying
Agent shall, pursuant to irrevocable instruction, pay the Merger
Consideration out of the Payment Fund.
(c) PAYMENT PROCEDURES. Promptly after the Effective Time, the Paying
Agent shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately
prior to the Effective Time represented outstanding shares of Company
Capital Stock whose shares were converted into a right to receive the
Merger Consideration pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such
customary form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of
Certificates in exchange for Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent, together with such
letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the
Merger Consideration into which the shares represented by the
surrendered Certificate shall have been converted at the Effective Time
pursuant to this Article 1, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding
Certificate will be deemed from and after the Effective Time, for all
corporate purposes, to evidence the right to receive Merger
Consideration. From and after the date which is one year following the
Closing Date, any portion of the Payment Fund that remains
undistributed to the holders of Certificates shall be promptly
delivered to Parent upon demand, and any holder of Certificates who has
not theretofore complied with this Section 1.8 shall thereafter look
only to the Surviving Corporation for delivery of the Merger
Consideration, subject in all events to applicable abandoned property,
escheat or similar laws.
(d) TRANSFERS OF OWNERSHIP. If any portion of the Merger
Consideration is to be paid to a person other than the person in
whose name the Certificate surrendered in exchange therefor is
registered, it will be a condition of the payment therefor that
the Certificate so surrendered will be properly endorsed and otherwise
in proper form for transfer and that the person requesting such
exchange will have (i) paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the payment to a
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person other than the registered holder of the Certificate
surrendered or (ii) established to the reasonable satisfaction of
Parent or any agent designated by it that such tax has been paid or
is not payable.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.8, none of the Paying Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of Company Capital Stock or a
payee of Merger Consideration for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
1.9 EXISTING OPTIONS .
(a) Prior to the Closing Date, the Company shall take all action
necessary, including, without limitation, satisfying any applicable
notice requirements, so that each existing option to purchase Company
Capital Stock which is outstanding at the Effective Time (each an
"EXISTING OPTION") that is not then vested and exercisable shall become
vested and exercisable. Immediately prior to the Closing Date, the
Company shall exchange each Existing Option for, and the holder of each
such Existing Option will be entitled to receive, immediately prior to
the Closing upon surrender of such Existing Option for cancellation,
cash equal to the product of (i) the positive difference, if any,
between the Merger Consideration less the exercise price of each such
Existing Option, and (ii) the number of shares of Company Capital Stock
covered by such Existing Option.
(b) The Company shall take all actions reasonably necessary to ensure
that from and after the Effective Time the Surviving Corporation will
not be bound by any options, warrants, rights or agreements which would
entitle any person, other than Parent or Merger Sub, to beneficially
own shares of Surviving Corporation or Parent or receive any payments
(other than as set forth in this Section 1.9(a)) in respect of such
options, warrants, rights or agreements. The Company shall take all
actions necessary to terminate each plan with respect to Existing
Options as of the Effective Time.
1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK . All
Merger Consideration paid upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof shall be deemed to
have been paid in full satisfaction of all rights pertaining to such shares
of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in this Article 1.
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1.11 LOST, STOLEN OR DESTROYED CERTIFICATES . In the event any
Certificates shall have been lost, stolen or destroyed, the Paying Agent
shall pay in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration payable in exchange for such lost, stolen or destroyed
Certificates; provided, however, that Parent may, in its discretion and as a
condition precedent to the payment thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a customary bond in such sum as
it may reasonably direct as indemnity against any claim that may be made
against Parent, the Surviving Corporation or the Paying Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION . If, at any time
after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Surviving Corporation are fully authorized in
the name of and on behalf of the Company and Merger Sub to take, and will
take, all such lawful and necessary action, so long as such action is
consistent with this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub,
subject to the exceptions disclosed in writing in the disclosure letter
supplied by the Company to Parent (the "COMPANY DISCLOSURE LETTER") which
identifies the Section and Subsection numbers hereof to which the disclosures
pertain and which is dated as of the date hereof, as follows:
2.1 ORGANIZATION OF THE COMPANY . The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, has the corporate power and authority to own, lease and
operate its property and to carry on its business as now being conducted, and
is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which such qualification is required by
virtue of the nature of the activities conducted by it, except to the extent
that the failure to be so qualified and in good standing could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company (as hereinafter defined). The Company has no
subsidiaries as of the date hereof. Except as set forth in Section 2.1 of the
Company Disclosure Letter, the Company does not, directly or indirectly, own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any interest in, any corporation,
partnership, joint venture or other business association or entity. The
Company is not, and for the past five (5) years has not been, engaged in any
business other than the operation of the California Culinary Academy located
in San Francisco, California (the "SCHOOL"), the development of a campus in
New Orleans, Louisiana and the operation and development of various Colleges
of Food in San Francisco, San Diego, Garden Grove and
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Salinas, California and activities directly related thereto. The Company has
delivered or made available to Parent a true, complete and correct copy of
the Company Articles and Company Bylaws, each as amended to the date hereof.
In this Agreement, the term "MATERIAL ADVERSE EFFECT" used in reference to
the Company means any event, change, circumstance, condition or effect which,
when considered with all other events, changes, circumstances, conditions and
effects, has, or any development that could be reasonably expected to have, a
material adverse effect on the results of operations, financial condition,
assets, liabilities, business or prospects of the Company, other than general
changes in economic conditions or the educational services industry, each
considered alone without regard to any other effects, changes, events,
circumstances or conditions, and other than any adverse change, event or
effect that is demonstrated by the Company to be primarily caused by the
pendency of the Merger or the transactions contemplated hereby.
2.2 COMPANY CAPITAL STRUCTURE . The authorized capital stock of
the Company consists of 20,000,000 shares of Common Stock, no par value, of
which there were 3,815,431 shares issued and outstanding as of December 2,
1999, and 5,000,000 shares of Preferred Stock, no par value (the "COMPANY
PREFERRED STOCK"). No shares of Company Preferred Stock are issued and
outstanding as of the date hereof and there will be no such shares
outstanding as of the Effective Time. All outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute,
the Company Articles or Company Bylaws or any agreement or document to which
the Company is a party or by which it is bound. As of the date hereof, the
Company had reserved (i) 835,595 shares of Company Capital Stock for issuance
to employees pursuant to the Company's 1992 Stock Option Plan (the "1992
PLAN"), under which options are outstanding for 237,080 shares of Company
Capital Stock minus any options exercised on the date hereof, (ii) 240,000
shares of Company Capital Stock for issuances to directors pursuant to the
Company's 1997 Directors' Non-Qualified Stock Option Plan (the "1997 PLAN"),
under which options are outstanding for 240,000 shares of Company Capital
Stock minus any option of exercised on the date hereof and (iii) 300,000
shares of Company Capital Stock for issuances to employees pursuant to the
Company's 1998 Stock Option Plan (the "1998 PLAN"), under which options are
outstanding for 156,000 shares of Company Capital Stock minus options
exercised on the date hereof. The 1992 Plan, 1997 Plan and 1998 Plan are
collectively referred to herein as the "COMPANY OPTION PLANS." All shares of
Company Capital Stock subject to issuance pursuant to the Company Option
Plans, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly
issued, fully paid and nonassessable. Section 2.2 of the Company Disclosure
Letter includes a list for each outstanding option as of the date hereof, of
the following: (i) the name of the holder of such option (ii) the number of
shares subject to such option, and (iii) the exercise price of such option.
1.4
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2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK . Except as set
forth in Section 2.2 hereof, as of the date hereof, there are no equity
securities of any class of the Company, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2 hereof and Section 2.3 of the
Company Disclosure Letter, as of the date hereof, there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement.
Except as set forth in Section 2.3 of the Company Disclosure Letter, to the
knowledge of the Company, there are no voting trusts, proxies or other
agreements or understandings with respect to the shares of capital stock of
the Company.
2.4 VOTING DEBT . As of the date of this Agreement, (i) no bonds,
debentures, notes or other indebtedness of the Company having the right to
vote under ordinary circumstances are issued or outstanding and (ii) there
are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company.
2.5 LISTING . As of the date hereof, the Company Capital Stock is
listed for trading on the Nasdaq National Market. As of the date hereof, no
other securities of the Company are listed or quoted for trading on any U.S.
or foreign securities exchange.
2.6 AUTHORITY; NO CONFLICTS .
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to obtaining requisite
shareholder approval, to consummate the Merger and other transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the Merger and other transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of the Company, subject only to the approval of the principal
terms of this Agreement and the Merger by the vote of the holders of at
least a majority of the Company Capital Stock. This Agreement has been
duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub,
constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles
of equity.
(b) Except as set forth in Section 2.6(b) of the Company Disclosure
Letter, the execution and delivery of this Agreement by the Company
does not, and the
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consummation of the Merger and other transactions contemplated
hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the
Company Articles or Company Bylaws, (ii) any mortgage, indenture,
lease, contract or other agreement to which the Company is a party
or by which the Company or the assets of the Company is bound,
except for any such conflict, violation, default, right or loss
which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect or (iii) any permit,
concession, franchise, license (including, without limitation, any
liquor license), judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company, or its properties or
assets, or any standard or requirement of any Accrediting Body (as
defined below), except for any such conflict, violation, default,
right or loss which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
For purposes of this Agreement, "ACCREDITING BODY" means any
entity or organization, whether governmental, government-chartered,
private or quasi-private, which engages in the granting or withholding
of accreditation of private post secondary schools in accordance with
standards and requirements relating to the performance, operations,
financial condition and/or academic standards of such schools
including, without limitation, ACCSCT and ACFEI (as defined in Section
2.18(d)).
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, arbitrator, administrative
agency or commission or other governmental authority or instrumentality
of the United States or any domestic or foreign state, county, city or
other political subdivision ( "GOVERNMENTAL/REGULATORY ENTITY") or
Accrediting Body, is required by or with respect to the Company or the
School in connection with the execution and delivery of this Agreement
or the consummation of the Merger and other transactions contemplated
hereby, except (i) in connection, or in compliance, with the provisions
of the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended
( "HSR ACT"), the Securities Act of 1933, as amended (the "SECURITIES
ACT") and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), including without limitation the filing of the Proxy
Statement (as herein defined) with the Securities and Exchange
Commission, (ii) the filing of the Agreement of Merger with the
California Secretary of State, the Certificate of Merger with the
Delaware Secretary of State, and appropriate documents with the
relevant authorities of other states in which the Company is qualified
to do business, (iii) those consents and approvals set forth in Section
2.6 of the Company Disclosure Letter and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not
reasonably be
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expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
2.7 SEC FILINGS; COMPANY FINANCIAL STATEMENTS .
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC since June 30, 1997. All such
required forms, reports and documents are referred to herein as the
"COMPANY SEC REPORTS." Except as set forth in Section 2.7(c) of the
Company Disclosure Letter, as of their respective dates, or if
amended, as of the date of such last amendment, the Company SEC
Reports (i) complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of the last of such filings) contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(b) Each of the financial statements (including, in each case, any
related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including any Company SEC Reports filed after
the date hereof until the Closing, and the audited balance sheet of the
Company as of June 30, 1999 and the audited statements of operations
and cash flows for the fiscal year then ended, true and correct copies
of which were delivered to the Parent prior to the date hereof (the
"COMPANY JUNE 30TH FINANCIALS"), and the unaudited balance sheet and
unaudited statements of operations and cash flows for the Company as of
September 30, 1999, (x) complies or complied, as the case may be, as to
form in all respects with the published rules and regulations of the
SEC with respect thereto, (y) was prepared (or will be prepared, as the
case may be) in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes thereto)
and (z) fairly presented (or will fairly present, as the case may be)
in all material respects the financial position of the Company as at
the respective dates thereof and the results of its operations and cash
flows for the periods indicated, except that the unaudited financial
statements do not include footnote disclosure of the type associated
with audited financial statements and were or are subject to normal and
recurring year-end adjustments and to any other adjustments described
therein. The audited balance sheet of the Company included in the
Company June 30th Financials is hereinafter referred to as the "COMPANY
BALANCE SHEET."
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(c) As of the date hereof, except as set forth in Section 2.7(c)
of the Company Disclosure Letter, there are no amendments or
modifications to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to
the Securities Act or the Exchange Act or any other agreements,
documents or other instruments, which have not yet been filed with
the SEC but which are or will be required to be filed by the Company.
2.8 ACCOUNTING RECORD . The accounting books and records of the
Company: (i) are correct and complete in all material respects, (ii) are
current in a manner consistent with past practice; and (iii) have recorded
therein all the material properties, assets and liabilities of the Company.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS . Since September 30,
1999, except with respect to the actions contemplated by this Agreement, the
Company has conducted its business only in the ordinary course and in a
manner consistent with past practice and, since such date, except as set
forth in Section 2.9 of the Company Disclosure Letter, there has not been (i)
any Material Adverse Effect on the Company; (ii) any property damage,
destruction or loss (whether or not covered by insurance) on the Company that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company; (iii) any change by the
Company in its accounting methods, principles or practices; (iv) any
revaluation by the Company of any of its assets, including, without
limitation, writing down the value of deferred tax assets or writing off
notes or accounts receivable other than in the ordinary course of business;
(v) to the Company's knowledge, any labor dispute or charge of unfair labor
practice, which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, or any activity or
proceeding by a labor union or representative thereof to organize any
employee of the Company or any campaign being conducted to solicit
authorization from employees to be represented by such labor union; (vi) any
waiver by the Company of any rights of material value; (vii) any declaration,
setting aside or payment of any dividend or any distribution in respect of
the Company Capital Stock or any direct or indirect redemption, purchase or
other acquisition of any such stock by the Company; or (viii) any other
action or event that would have required the consent of the Parent pursuant
to Section 4 had such action or event occurred after the date of this
Agreement.
2.10 LIABILITIES . Except (a) for normal or ordinary recurring
liabilities incurred in the ordinary course of business consistent with past
practice, (b) for transaction expenses incurred in connection with this
Agreement, (c) for liabilities set forth on the Company Balance Sheet, or (d)
as set forth in Section 2.10 of the Company Disclosure Letter, since
September 30, 1999, the Company has not incurred any liabilities that either
(i) would be required to be reflected or reserved against in a balance sheet
of the Company prepared in accordance with generally accepted accounting
principles as applied in preparing the Company
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Balance Sheet, or (ii) could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
2.11 TAXES .
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or
"TAXES" refers to any and all Federal, state, local and foreign, taxes,
assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured
by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts
and including any liability for taxes of a predecessor entity. For
purposes of this Agreement, a "TAX AGREEMENT" is any agreement to which
the Company is a party under which the Company could reasonably be
expected to be liable to another party under such agreement in respect
of Taxes payable by such other party to any taxing authority.
(b) TAX RETURNS AND AUDITS. Except as set forth in Section 2.11 of
the Company Disclosure Letter:
(i) The Company has timely filed all Federal, state, local and
foreign returns, information statements and reports relating
to Taxes ( "RETURNS") required by applicable Tax law to be
filed by the Company, except for any such failures to file
that could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
All Taxes owed by the Company to a taxing authority, or for
which the Company is liable, whether to a taxing authority or
to other persons or entities under a Tax Agreement, as of the
date hereof, have been paid and, as of the Effective Time,
will have been paid, except for any such failure to pay that
could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The
Company has made (A) accruals for Taxes on the Company Balance
Sheet and (B) with respect to periods after the date of the
Company Balance Sheet, provisions on a periodic basis
consistent with past practice on the Company's books and
records or financial statements, in each case which are
adequate to cover any Tax liability of the Company determined
in accordance with generally accepted accounting principles
through the date of the Company Balance Sheet or the date of
the provision, as the case may be, except where failures to
make such accruals or provisions could not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
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(ii) Except to the extent that any such failure to withhold
could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company, the
Company has withheld with respect to its employees all Federal
and state income taxes, FICA, FUTA and other Taxes required to
be withheld.
(iii) There is no Tax deficiency outstanding, proposed or
assessed against the Company, except any such deficiency that,
if paid, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has not executed or requested any
waiver of any statute of limitations on or extending the
period for the assessment or collection of any Federal or
material state Tax.
(iv) No Federal or state Tax audit or other examination of the
Company is presently in progress, and the Company has not been
notified in writing of any request for such Federal or
material state Tax audit or other examination, except in all
cases for Tax audits and other examinations which could not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(v) The Company has not filed any consent agreement under
Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "CODE"), or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the
Company.
(vi) The Company is not a party to (A) any agreement with a
party other than the Company providing for the allocation or
payment of Tax liabilities or payment for Tax benefits with
respect to a consolidated, combined or unitary Return which
Return includes or included the Company or any subsidiary or
(B) any Tax Agreement other than any Tax Agreement described
in (A).
(vii) The Company has not ever been a member of an affiliated
group of corporations within the meaning of Sections 1504 of
the Code other than an affiliated group of which it was the
common parent.
(viii) The Company has not agreed to make, and it is not
required to make, any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
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(ix) The Company is not, and has not at any time within the
last five years been, a "UNITED STATES REAL PROPERTY HOLDING
CORPORATION" within the meaning of Section 897(c)(2) of
the Code.
(x) The Company has not made any payments, is obligated to
make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments,
that will not be deductible under Section 280G of the Code.
(xi) The Company has federal and California net operating loss
carryforwards, for tax return purposes, of $3,800,000 and
$1,350,000, respectively, as of September 30, 1999.
(xii) The Company does not have any deferred intercompany
gains as defined in the federal consolidated tax return
regulations which, as a result of the transactions
contemplated herein, will result in the recognition of taxable
income.
2.12 RESTRICTIONS ON BUSINESS ACTIVITIES . Except as set forth in
Section 2.12 of the Company Disclosure Letter, there is no agreement,
judgment, injunction, order or decree binding upon the Company or its
properties (including, without limitation, its Intellectual Property and
Curricula (each as defined below)) which has or would reasonably be expected
to have the effect of prohibiting or impairing the conduct of any business by
the Company in a manner which would reasonably be expected to have a Material
Adverse Effect on the Company.
2.13 ABSENCE OF LIENS AND ENCUMBRANCES . The Company has good,
valid, and marketable title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of its properties and assets
(whether real, personal or mixed, and whether tangible or intangible),
necessary for the conduct of its business, free and clear of any liens and
encumbrances, except (i) as reflected in the Company balance sheet as of
September 30, 1999, (ii) liens for Taxes not yet due and payable, (iii) such
liens and encumbrances listed on Section 2.13 of the Company Disclosure
Letter, and (iv) such liens and encumbrances as do not materially impair the
use of the properties or assets subject thereto or affected thereby
(collectively, "PERMITTED LIENS").
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2.14 REAL ESTATE
(a) OWNED REAL PROPERTY. Section 2.14(a) of the Company
Disclosure Letter sets forth a correct and complete list of each parcel
of real property owned by the Company (the "OWNED REAL Estate"),
including a street address. The Company is the sole and exclusive legal
and equitable owner of all right, title and interest in and has good,
marketable and insurable title in fee simple absolute to, and is in
possession of, all Owned Real Estate, including the buildings,
structures and improvements situated thereon and appurtenances thereto,
in each case free and clear of all liens other than Permitted Liens.
Except as set forth in Section 2.14(a) of the Company Disclosure
Letter, the Owned Real Estate is in compliance, in all material
respects, with all applicable zoning ordinances and amendments thereto,
including, without limitation, any ordinances with respect to permitted
or prohibited uses. The purposes for which the Owned Real Estate is
currently used, including without limitation, dormitory, restaurant and
school and office use, are allowed under the zoning classification
applicable to the Owned Real Estate.
(b) LEASED PROPERTIES. Section 2.14(b) of the Company
Disclosure Letter lists all real property that is used or occupied by
the Company in connection with its business but not owned by the
Company (the "RENTAL REAL ESTATE") and the leases, subleases and
agreements by which such Rental Real Estate is used and occupied (the
"LEASES"), correct and complete copies of which have been delivered to
the Parent. Except as otherwise specifically set forth in Section
2.14(b) of the Company Disclosure Letter, (i) assuming that the Leases
have been duly and validly executed and delivered by or on behalf of
the respective other party thereto, which party has the power to enter
into and perform its obligations thereunder, the Leases are legal,
valid, binding, enforceable and in full force and effect; (ii) to the
Company's knowledge, all building, improvements and other property on
the Rental Real Estate have received all approvals of governmental
authorities (including certificates of occupancy, permits and licenses)
required in connection with the operation thereof and have been
operated and maintained in accordance with all applicable legal
requirements and are not in violation of any applicable zoning,
building code or subdivision ordinance, regulations, order or law or
restrictions or covenants of record (iii) all buildings, improvements
and other property thereon are supplied with utilities and other
services necessary for the operation thereof (including gas,
electricity, water, telephone, sanitary and storm sewers and access to
public roads); (iv) to the Company's knowledge, the land of the Rental
Real Estate does not serve any adjoining property for any purpose
inconsistent with the use of the land, and the Rental Real Estate is
not located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use
thereof have not been obtained; (v) there are not leases, subleases,
licenses, concessions, or other agreements to which the Company is a
party, whether written or
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oral, granting to any Person the right of use or occupancy of any
portion of the Rental Real Estate; and (vi) no Person (other than
the Company) is in possession of such the Rental Real Estate.
(c) The buildings, structures and improvements situated on the
Real Estate (as defined below) and appurtenances thereto are in good
condition (subject to normal wear and tear), and as such are adequate
to conduct the business as present conducted. "REAL ESTATE" shall mean
the Owned Real Estate and the portions of the Rental Real Estate leased
or otherwise possessed or used by the Company. Neither the whole nor
any portion of any Real Estate has been, or, to the Company's
knowledge, is threatened to be, condemned, requisitioned or otherwise
taken by any public authority, and no notice of any such condemnation,
requisition or taking has been received. There are no public
improvements pending or, to the Company's knowledge, threatened which
may result in special assessments against or otherwise affect the Real
Estate.
(d) The Owned Real Estate and the portions of the Rental Real
Estate leased or otherwise possessed or used by the Company are in
material compliance with, include all rights necessary to assure
compliance with, and all buildings, structures, other improvements and
fixtures on such Real Estate and the operations of the Company in or
about any Real Estate therein conducted, conform in all material
respects to, all applicable health, fire, safety, zoning and building
rules. The Company has all easements and rights necessary or
appropriate to conduct its operations as they are currently being
conducted.
2.15 INTELLECTUAL PROPERTY AND CURRICULA .
(a) There are no claims, demands or proceedings instituted,
pending or, to the knowledge of the Company, threatened by any
person contesting or challenging the right of the Company to use any
of the Intellectual Property or Curricula (each as defined below)
currently used by it in the operation of its business, and, to the
knowledge of the Company, no person is infringing upon the Company's
Intellectual Property or Curricula;
(b) Except as set forth in Section 2.15 of the Company Disclosure
Letter, each trademark registration, service mark registration,
copyright registration and patent which is owned by or licensed to the
Company and, with respect to those owned by the Company, has been
maintained in good standing and, with respect to those licensed to the
Company, to the Company's knowledge, has been maintained in good
standing, except where the failure to so maintain would not reasonably
be expected to have a Material Adverse Effect on the Company;
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(c) There are no Intellectual Property or Curricula owned by a person
which the Company is using without license to do so, other than which
use would not reasonably be expected to have a Material Adverse Effect
on the Company;
(d) The Company owns or possesses adequate licenses or other rights
to use all Intellectual Property and Curricula the Company
reasonably believes are necessary to conduct its business as now
conducted;
(e) The consummation of the Merger and the transactions
contemplated by this Agreement will not impair the validity,
enforceability, ownership or right of the Company or the Surviving
Corporation to use its Intellectual Property or Curricula.
(f) For purposes of this Agreement, "INTELLECTUAL PROPERTY" means
patents and patent rights, trademarks and trademark rights, trade names
and trade name rights, service marks and service mark rights, service
names and service name rights, brand names, inventions, processes,
copyrights and copyright rights, trade dress, business and product
names, logos, trade secrets, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
For purposes of this Agreement, "CURRICULA" means curricula, course
materials, instructional video tapes, tape recordings and visual aids.
2.16 AGREEMENTS, CONTRACTS AND COMMITMENTS . Except as set forth in
Section 2.16 of the Company Disclosure Letter or in the Exhibits to the
Company SEC Reports filed prior to the date of this Agreement, as of the date
of this Agreement, the Company is not a party to, nor is it or its assets
bound by, any Material Contract. For purposes of this Agreement, "MATERIAL
CONTRACT" means:
(a) any collective bargaining agreements;
(b) any employment or consulting agreement, contract or binding
commitment providing for compensation or payments in excess of $50,000
in any year not terminable by the Company on thirty days notice without
liability, except to the extent general principles of wrongful
termination or other employment law may limit the Company's ability to
terminate employees at will;
(c) any Company Plan (as defined in Section 2.28(c)), any of the
benefits of which will be increased, or the vesting of benefits of
which will be accelerated or the right to benefits will be created, by
the occurrence of the Merger or any of the transactions contemplated by
this Agreement;
(d) any agreement of indemnification or guaranty not entered
into in the ordinary course of business with any party in excess of
$50,000 individually or in the
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aggregate, and any agreement of indemnification or guaranty between
the Company and any of its officers or directors, irrespective of
the amount of such agreement or guaranty;
(e) Any agreement, contract or binding commitment containing any
covenant directly or indirectly limiting the freedom of the Company to
engage in any line of business, compete with any person, or sell any
product, or which, following the consummation of the Merger, would so
limit Parent or the Surviving Corporation;
(f) any agreement, contract or binding commitment relating to
capital expenditures and involving future obligations in excess of
$50,000;
(g) any agreement, contract or binding commitment relating to
the disposition or acquisition of material assets not in the
ordinary course of business (since June 30, 1999) or any ownership
interest in any corporation, partnership, joint venture or other
business enterprise;
(h) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit (other than extensions
of credit in the ordinary course of business from vendors);
(i) any Leases;
(j) other than in connection with the Merger and other
transactions contemplated by this Agreement, any other agreement,
contract or binding commitment (excluding real and personal property
leases) which involves payment by the Company of $50,000 or more in
any twelve (12) month period or $50,000 in the aggregate and which
cannot be terminated on 30 days notice without cost or expense to
the Company or its subsidiaries;
(k) any agreements to register the Company's securities; or
(l) any other material agreements, contracts or binding
commitments.
The numerical thresholds set forth in this Section 2.16 shall not be deemed
in any respects to define materiality for other purposes of this Agreement.
The Company has provided or made available to Parent true and complete copies
of all Material Contracts as amended to date.
2.17 NO DEFAULT . Except as set forth in Section 2.17 of the
Company Disclosure Letter, the Company has not breached, or received in
writing any claim or threat that it has
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breached, in any material respect, any Material Contract, and, to the
knowledge of the Company, no event has occurred or state of circumstances or
facts exists which, with the passage of time or the giving of notice or both,
could reasonably be expected to constitute such a breach. Each Material
Contract that has not expired or been terminated in accordance with its terms
is in full force and effect, except for such Material Contracts for which the
failure to be in full force and effect could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company and constitutes the legal and binding obligation of the Company and,
to the knowledge of the Company, constitutes the legal and binding obligation
of the other parties thereto.
2.18 COMPLIANCE WITH LAWS; LICENSES .
(a) Except as set forth in Section 2.18(a) of the Company Disclosure
Letter, neither the Company nor the School is in violation of any legal
requirement (including, without limitation, any liquor control or
similar laws) or Accrediting Body standard or requirement which
violation could reasonably be expected to have a Material Adverse
Effect on the Company or the School, and neither the Company nor the
School has received notice of any such violation. The Company and the
School have filed all material reports, documents, information,
applications and returns required to be filed by them on or prior to
the date hereof with Governmental/Regulatory Entities and Accrediting
Bodies.
(b) The Company currently maintains all licenses, accreditations,
certificates, permits, consents, authorizations, and other
governmental or regulatory approvals (the "LICENSES") necessary to
conduct the business and operations of the Company and the School as
presently being conducted, except where the failure to maintain any
such Licenses would not have a Material Adverse Effect on the
Company. Section 2.18(b) of the Company Disclosure Letter contains a
true, correct and complete list of all Licenses of the Company and
the School. No application made by the Company or the School for any
License during the last five (5) years has been denied. The Licenses
are in full force and effect, and no proceedings for the suspension
or cancellation of any of them is pending or, to the Company's
knowledge, threatened. The Company has delivered to Purchaser copies
of all such Licenses. Neither the Company nor the School has
received notice that any of the Licenses will not be renewed and, to
the Company's knowledge, there is no basis for nonrenewal of any
License.
(c) For the fiscal year ended June 30, 1999 and as of the date of
this Agreement, the School has no more than ninety percent (90%) of
its revenues derived from the Title IV Programs or pursuant to the
Title IV Programs as determined in accordance with 34 C.F.R. Section
600.5(d). The School has not had more than eighty-five
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percent (85%) of its revenues so derived for any of the last four
(4) fiscal years prior to the fiscal year ended June 30, 1999. For
purposes of this Section 2.18, "revenues" does not include any loans
or scholarships issued by the Company, the School or any of their
affiliates. "TITLE IV PROGRAM" means any program of student
financial assistance administered pursuant to Subchapter IV of the
Higher Education Act of 1965, as amended, 20 U.S.C.A. Section 1070 et
seq. ( "TITLE IV"), and any amendments or successor statutes thereto.
(d) The School has all accreditations required to conduct the
business of the School as presently conducted, is certified by the
Department of Education ( "DOE") as an eligible institution under
Title IV and is a party to, and in compliance with, a valid program
participation agreement with the DOE with respect to the operations
of the School, except where any failure to comply with a valid
program participation agreement could not reasonably be expected to
have Material Adverse Effect on the Company. Without limitation of
the foregoing, the Company has all accreditations required to be
issued by the Accrediting Commission of Career Schools and Colleges
of Technology ( "ACCSCT"), and the California Department of Consumer
Affairs necessary to operate the School as presently operated in
accordance with applicable legal requirements. Additionally, the
School is accredited by the American Culinary Federation Educational
Institute ( "ACFEI"). Except as set forth in Section 2.18(d) of the
Company Disclosure Letter, neither the Company nor the School has
received any notice with respect to any alleged violation of a legal
requirement, rule, regulation or standards of the DOE or other
Governmental/Regulatory Entity, or any applicable Accrediting Body
in respect of the School, including with respect to recruitment,
sales and marketing activities, or the terms of any program
participation agreement to which the School or the Company is or was
a party. Section 2.18(d) of the Company Disclosure Letter contains a
list of any such notice received by the Company and a description of
the dispositions of such notice. Except as set forth in Section
2.18(d) to the Company Disclosure Letter, the Company is not aware
of any investigation, audit or review of the Company's or the
School's student financial aid programs or any review of
accreditation of the School by any Governmental/Regulatory Entity or
Accrediting Body.
2.19 RECRUITMENT; ADMISSIONS PROCEDURES; ATTENDANCE REPORTS .
(a) Section 2.19 of the Company Disclosure Letter contains a complete
list of all policy manuals and other statements of procedures or
instructions relating to (a) recruitment of students for the School,
including procedures for assisting in the application by prospective
students for direct or indirect student financial assistance; (b)
admissions procedures, including any descriptions of procedures for
insuring compliance with legal requirements or Accrediting Body
requirements and standards
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applicable to such procedures; (c) procedures for encouraging and
verifying attendance, minimum required attendance policies, and
other relevant criteria relating to course performance requirements
and completion and (d) procedures for processing, disbursing and
refunding student financial assistance funds (collectively, the
"POLICY GUIDELINES"). The Company has delivered to Parent true,
correct and complete copies of all Policy Guidelines.
(b) The operations of the Company and the School have been
conducted in all material respects in accordance with the Policy
Guidelines and all relevant standards and requirements imposed by
applicable Accrediting Bodies, and other agencies administering any
student financial assistance programs in which the Company or the
School participates, and other applicable legal requirements.
(c) The Company has submitted all reports, audits, and other
information, whether periodic in nature or pursuant to specific
requests, for the Company and the School to all agencies,
Governmental/Regulatory Entities or other entities with which such
filings are required in order to be in compliance with (i) applicable
accreditation standards and requirements, (ii) legal requirements
governing programs pursuant to which the School or its students receive
student financial assistance funding, and (iii) all articulation
agreements between the Company or School and degree granting colleges
and universities in effect as of the date hereof, except where failure
to submit such reports, audits and other information would not have a
Material Adverse Effect on the Company.
(d) All student financial assistance grants and loans have been
calculated and made and all disbursements and record keeping relating
thereto have been completed, in compliance with legal requirements, and
there are no material deficiencies in respect thereto. To the knowledge
of the Company or the School, and except as previously disclosed in
prior audits or reviews by DOE or any Accrediting Body, no student at
the School has been funded prior to the date for which such student was
eligible for such funding or in any amount other than an amount such
student was eligible to receive, and such student records conform in
form and substance to all legal requirements.
2.20 COHORT DEFAULT RATE . Section 2.20 of the Company Disclosure
Letter sets forth the published and draft cohort default rate for the School,
calculated by the DOE and issued to the School pursuant to 30 C.F.R. Section
668.17 or a predecessor regulation, for the federal fiscal years September
30, 1994 through and including September 30, 1997. Such schedule is
materially accurate in all respects. As of the date of this Agreement,
neither the Company nor the School has received any notice from DOE or any
guaranty agency as to the calculation or issuance of a published or draft
cohort default rate for the School for the year ended September 30, 1998. The
School has official cohort default rates of 25.0%, 15.6%,
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2.8%, 12.5% and 28.57% on Federal Perkins Loans for award years, 1995, 1996,
1997, 1998 and 1999, respectively.
2.21 DELIVERY OF DOCUMENTS . The Company has delivered to Parent
true and complete copies of all correspondence (excluding general
correspondence routinely sent to or received from the DOE or any Accrediting
Body) received from or sent by or on behalf of the Company or the School to
the DOE or any Accrediting Body to the extent such correspondence (i) was
sent or received within the past five (5) years or relates to any issue which
remains pending, and (ii) relates to (a) any notice that any accreditation or
License is not in full force and effect or that an event has occurred which
constitutes or, with the giving of notice or the passage of time or both,
would constitute a breach or violation thereunder; (b) any written notice
that the Company or the School have violated or are violating any legal
requirement, regulation, rule, standard or requirement related to the Title
IV Programs, or any standard or requirement of any applicable Accrediting
Body, or any legal requirement, regulation, rule, standard or requirement
related to the maintaining and retaining in full force and effect any
accreditations; (c) any audits, program reviews, investigations or site
visits conducted by the DOE, any Accrediting Body, any guaranty agency, any
other Governmental/Regulatory Entity or any independent auditor reviewing
compliance by the Company or the School with the statutory, regulatory or
other requirements of the Title IV Programs; (d) any written notice of an
intent to limit, suspend, terminate, revoke, cancel, not renew or condition
the accreditation of the Company or the School; (e) any written notice of an
intent or threatened intent to condition the provision of Title IV Program
funds to the Company or the School on the posting of a letter of credit or
other surety in favor of the DOE; (f) any written notice of an intent to
provisionally certify the eligibility of the School to participate in the
Title IV Programs; and (g) the placement or removal of the School on or from
the reimbursement or cash monitoring method of payment under Title IV
Programs.
2.22 STUDENT RECRUITING . Since January 31, 1994, no admissions
representative, agent or any other person or entity engaged, directly or
indirectly, in any student recruiting or admission activities or in making
decisions regarding the awarding of Title IV Program funds for or on behalf
of the Company or the School has been paid, provided or contracted for any
commission, bonus or other incentive payment based directly or indirectly on
success in securing enrollments or financial aid.
2.23 CONTROL MATTERS . Except as set forth in Section 2.23 of the
Company Disclosure Letter, to the Company's knowledge, since July 31, 1994,
no person who exercises substantial control over the Company or the School
(as the term "substantial control" is defined at 34 C.F.R. Section 600.30) is
or has been a principal, affiliate, shareholders or trustee or has held an
ownership interest, whether legal or equitable, in any other institution
(whether or not participating in the Title IV Programs) or any third party
servicer (as that term is defined at 34 C.F.R. Section 668.2). Except as set
forth in Section 2.23 of the Company Disclosure Letter, no
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person who exercises substantial control over the Company or the School (as
the term "substantial control" is defined at 34 C.F.R. Section 600.30) or any
member or members of that person's family, alone or together, exercises, or
since July 1, 1994, exercised substantial control over another institution or
a third-party servicer (prior to or during the period such person exercised
substantial control over the Company or the School) that owes a liability for
a violation of any requirement of the Title IV Programs. To the Company's
knowledge, since July 1, 1994, no person who exercises substantial control
over the Company or the School (as the term "substantial control" is defined
at 34 C.F.R. Section 600.30) has pled guilty to, has pled nolo contendre to,
or has been found guilty of, a crime involving the acquisition, use or
expenditure of funds under the Title IV Programs or has been judicially
determined to have committed fraud involving funds under the Title IV
Programs. Since July 1, 1994, neither the Company nor the School nor any
affiliate of the Company or the School that has the power, by contract or
ownership interest, to direct or cause the direction of the management of
policies of the School, has filed for relief in bankruptcy or has entered
against it an order for relief in bankruptcy. Neither the Company nor the
School employs, and, since July 1, 1994 has employed, any individual or
entity in a capacity that involves the administration or receipt of funds
under the Title IV Programs, or contracted with any institution or
third-party servicer, which has been terminated under the Higher Education
Act for a reason involving the acquisition, use or expenditure of federal,
state or local government funds, or has been convicted of, or has pled nolo
contendre or guilty to, a crime involving the acquisition, use or expenditure
of federal, state or local government funds, or has been administratively or
judicially determined to have committed fraud or any other material violation
of law involving federal, state or local government funds. No institution
(whether or not participating in the Title IV Programs) or any third-party
servicer (as that term is defined at 34 C.F.R. 668.2) is, or since July 1,
1994 has been, administered commonly, jointly or in conjunction with the
Company or the School, and no other institution or organization of any sort
has provided educational services on behalf of the Company or the School.
2.24 FINANCIAL ASSISTANCE PROGRAMS .
(a) Section 2.24 of the Company Disclosure Letter lists each program,
including institutional or private programs, pursuant to which student
financial assistance, grants or loans ( "FINANCIAL ASSISTANCE") are
provided to or on behalf of the School's students.
(b) Section 2.24 of the Company Disclosure Letter lists all
agreements between the Company or the School and the DOE or any
guaranty agency relating to Financial Assistance. Each such
agreement is in full force and effect, is a valid and binding and
enforceable obligation by or against the Company or the School and
the other party or parties thereto and no event has occurred which
constitutes or, with the giving of notice or the passage of time or
both would constitute, a default or breach
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thereunder. The Company has delivered to the Parent true, correct
and complete copies of each contract or agreement listed.
2.25 LITIGATION . Except as set forth in Section 2.25 of the
Company Disclosure Letter, there is no suit, action, arbitration, demand,
claim or proceeding pending, or, to the knowledge of the Company, threatened
against the Company, except for suits, actions, arbitrations, demands, claims
and proceedings which would not be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company; there are no
such suits, actions or proceedings pending or, to the knowledge of the
Company, threatened, against the Company which question the legality or
validity of the Agreement, the Merger and the other transactions contemplated
by this Agreement; nor is there any judgment, decree, injunction, award, rule
or order of any Governmental/Regulatory Entity or arbitrator outstanding
against the Company. The Company has made available to Parent or its counsel
correct and complete copies of all correspondence prepared by Company's
counsel for the Company's auditors in connection with the last three
completed audits of the Company's financial statements and any such
correspondence since the date of the last such audit.
2.26 INSURANCE . Section 2.26 of the Company Disclosure Letter
lists all of the existing insurance policies of the Company and all
outstanding claims against each insurance policy. The Company has not
received notice of cancellation, termination or premium increase with respect
to such insurance policies. The Company maintains in full force and effect
insurance on its assets and its business and operations against loss or
damage, risks, hazards, and liabilities of any kinds on and in the amounts
customarily insured against by corporations engaged in the same or similar
businesses.
2.27 LABOR MATTERS . The Company has complied in all material
respects with all applicable laws, and there is no allegation, charge or
complaint or proceeding pending or, to the Company's knowledge, threatened
against the Company or any of its officers, directors or employees, relating
to the employment of labor, including with respect to employment, equal
employment opportunity, discrimination, harassment, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
other taxes, workers compensation or long term disability. Except as set
forth in Section 2.27 of the Company Disclosure Letter, there has never been,
there is not presently pending or existing, and to the Company's knowledge
there is not threatened, any labor arbitration, or proceeding in respect of
the grievance of any employee, or other labor dispute against or affecting
the Company, or, to the knowledge of the Company, any strike, slowdown,
picketing, work stoppage, organizational activity or application or complaint
filed by an employee or union with the National Labor Relations Board or any
comparable governmental authority. The Company is not party to any collective
bargaining agreement, and no application for certification of a collective
bargaining agent is pending or, to the Company's knowledge, threatened. There
is no lockout of any employees by the Company, and no such action is
contemplated by the Company. Except as set
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forth in Section 2.27 of the Company Disclosure Letter, as of the date
hereof, the Company has not given to or received from any current officer,
key employee or director of the Company written notice of termination of
employment or has the knowledge that any such officer, manager, key employee
or director intends to terminate such employment.
2.28 EMPLOYEE BENEFITS .
(a) Section 2.28 of the Company Disclosure Letter contains a list of
each Company Plan (as hereinafter defined) maintained by the Company.
With respect to each Company Plan, the Company has delivered to Parent
prior to the date hereof, to the extent applicable, a true and correct
copy of (i) such Company Plan and all amendments thereto, (ii) each
trust agreement, insurance contract or administration agreement
relating to such Company Plan, (iii) the most recent summary plan
description for each Company Plan for which a summary plan description
is required, (iv) the most recent annual report (Form 5500) filed with
the IRS, (v) the most recent determination letter, if any, issued by
the IRS with respect to any Company Plan intended to be qualified under
section 401(a) of the Code, (vi) any request for a determination
currently pending before the IRS and (vii) all correspondence with the
IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation relating to any outstanding controversy. Except as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, each Company Plan complies with
the Employment Retirement Income Security Act of 1974, as amended (
"ERISA"), the Code and all other applicable statutes and governmental
rules and regulations. At no time has the Company or any of its ERISA
Affiliates (as hereinafter defined) been required to contribute to, or
otherwise had any liability with respect to, a plan subject to Title IV
of ERISA or a "MULTIEMPLOYER PLAN" (as defined in Section 4001(a)(3) of
ERISA). All IRS Forms 5500 with respect to the Company Plans have been
(and for 1998 and 1999, will be) timely filed.
(b) There are no actions, suits or claims pending or, to the
knowledge of the Company, threatened (other than routine claims for
benefits) with respect to any Company Plan which could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. No prohibited transactions described
in Section 406 of ERISA or Section 4975 of the Code have occurred
which could reasonably be expected to result in material liability
to the Company or its subsidiaries. All Company Plans that are
intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be so qualified, and there is no reason
why, to the Company's knowledge, any Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to
provide life insurance or medical benefits after termination of
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employment to any employee or dependent other than as required by
Part 6 of Title I of ERISA or as disclosed in the Company Disclosure
Letter.
(c) As used herein, (i) "COMPANY PLAN" means a "PENSION PLAN" (as
defined in Section 3(2) of ERISA), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding, in each case
established, maintained or contributed to by the Company or any of its
ERISA Affiliates or as to which the Company or any of its ERISA
Affiliates or otherwise may have any liability and (ii) with respect to
any person, "ERISA AFFILIATE" means any trade or business (whether or
not incorporated) which is or within the last six years was under
common control or would be or have been considered a single employer
with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated thereunder or pursuant to Section
4001(b) of ERISA and the regulations thereunder.
(d) Section 2.28 of the Company Disclosure Letter contains a list of
all (i) severance and employment agreements with officers and employees
of the Company and each ERISA Affiliate, (ii) severance plans, programs
and policies of the Company with or relating to its employees and (iii)
plans, programs, agreements and other arrangements of the Company with
or relating to its employees which contain change of control or similar
provisions. The Company has provided to Parent a true and complete copy
of each of the foregoing. Except as set forth in Section 2.28(d) of the
Company Disclosure Letter, no such plan, program, agreement or
arrangement will trigger Section 280G of the Code.
(e) The Company has complied with all of its obligations under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ( "COBRA") and
the Health Insurance Portability and Accountability Act of 1996 (
"HIPAA"), and will not incur any liability in connection with benefit
continuation rights under COBRA with respect to its employees or former
employees or any other employees. No Plan is funded through a "welfare
benefit fund" as described in Section 419(e) of the Code.
2.29 ACCREDITATION AND STATE LICENSURE/APPROVAL . Except as set
forth in Section 2.18(a) of the Company Disclosure Letter, to the Company's
knowledge, there exists no fact or circumstance attributable to the Company
or the School which would prevent Parent from obtaining any authorization,
consent or similar approval from the DOE or any other Governmental/Regulatory
Agency or Accrediting Body whose authorization, consent or similar approval
is contemplated in connection with this Agreement, including, without
limitation, any authorization, consent or similar approval which must be
obtained prior to or following the
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Closing from the DOE, the State of California or ACCSCT in order to continue
the operations of the School as presently conducted. The Company has notified
ACCSCT that the School offers unaccredited programs through its College of
Food locations.
2.30 COMPUTER ROLLOUT . The Company has taken no action with
respect to its planned distribution/sale of laptop computers to students at
the School whether related to the School's programs or otherwise (the
"COMPUTER ROLLOUT"), including, without limitation, entering into any
agreement or otherwise making any purchasing commitments.
2.31 RELATIONSHIPS WITH RELATED PERSONS . Except as set forth in
Section 2.31 of the Company Disclosure Letter, there are no, and since
January 1, 1997 have not been any, undischarged contracts or agreements or
other material transactions between the Company, on the one hand, and any
director or executive officer of the Company or any of their respective
Related Persons (as defined below), on the other hand, and no director or
executive officer of the Company or any of their respective Related Persons
have any interest in any of the assets of the Company, other than as a
shareholder. For purposes hereof, the term "RELATED PERSONS" shall mean: (a)
each other member of such individual's Family and (b) any person or entity
that is directly or indirectly controlled by any one or more members of such
individual's Family. For purposes of this definition, the "FAMILY" of an
individual includes (i) such individual, (ii) the individual's spouse,
siblings, or ancestors (iii) any lineal descendant of such individual, or
their siblings, or ancestors or (iv) a trust for the benefit of the foregoing.
2.32 STATE "ANTI-TAKEOVER" STATUTES . The Board of Directors of the
Company has taken all necessary action so that neither Section 1203 of
California Law nor any other "fair price," "control share acquisition"
statute or anti-takeover laws or other similar statute or regulation will
apply to the Merger, this Agreement or the transactions contemplated hereby.
2.33 CHANGE OF CONTROL PAYMENTS . Except as set forth in Section
2.33 of the Company Disclosure Letter, and except as contemplated by this
Agreement, neither the execution and delivery of this Agreement nor the
consummation of the Merger and other transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any director, officer or employee of the Company from the Company, under
any Company Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Company Plan, (iii) result in the acceleration of
the time of payment or vesting of any such benefits, (iv) create a right to
receive payments upon a subsequent termination of employment or (v) result in
the acceleration of the time of payment of any of the Company's accounts
payable.
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2.34 ENVIRONMENTAL PROTECTION .
(a) Except as set forth on Section 2.34 of the Company Disclosure
Letter, the Company: (i) is in compliance with all applicable
Environmental Laws, except where noncompliance could not reasonably
be expected to have a Material Adverse Effect on the Company; (ii)
has not received any Environmental Claim or any communication
(written or oral), from a governmental authority or third party that
alleges that the Company or any current or former affiliate of the
Company is not in compliance with applicable Environmental Laws;
(iii) has not owned or operated any property that, to the Company's
knowledge, is contaminated with any Hazardous Material which may
reasonably be expected to require remediation under any
Environmental Law; (iv) to the Company's knowledge, is not subject
to liability for any off-site disposal or contamination; and (v) to
the Company's knowledge, is not subject to any other circumstance in
connection with any Environmental Law that could reasonably be
expected to result in any claims, liabilities, costs or restrictions
on the business or the ownership, use or transfer of any property.
(b) For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "ENVIRONMENTAL CLAIM" shall mean any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person alleging liability
(including, without limitation, liability for enforcement,
investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from: (A) the presence
or Environmental Release of any Hazardous Materials at any
parcel of real property; or (B) circumstances forming the
basis of any violation or alleged violation, of any
Environmental Law; or (C) any and all claims by any person
seeking damages, contribution, indemnification, cost,
recovery, compensation or injunctive relief resulting from the
presence or Environmental Release of any Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" shall mean any federal, state or
local statute, law, rule, ordinance, code, policy, rule of
common law and regulations, as in effect on the date hereof,
relating to pollution or protection of human health (including
those parts of OSHA relating to Hazardous Materials) or the
environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface
strata), including, without limitation, laws and
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regulations relating to Environmental Releases or threatened
Environmental Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution,
presence, use, treatment, storage, disposal, transport or
handling of Hazardous Materials;
(iii) "ENVIRONMENTAL RELEASE" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the atmosphere, soil,
surface water or groundwater; and
(iv) "HAZARDOUS MATERIALS" shall mean: (A) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam
insulation, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls above
regulated levels and radon gas; and (B) any chemicals,
materials or substances which as of the date hereof are
defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," or words of similar
import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which as
of the date hereof is prohibited, limited or regulated by any
governmental authority.
2.35 VOTE REQUIRED . The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Capital Stock entitled
to vote with respect to the Merger is the only vote of the holders of any
class or series of the Company's stock necessary to approve the Merger and
this Agreement.
2.36 NO PENDING TRANSACTIONS . Except for the Merger and other
transactions contemplated by this Agreement, the Company is not a party to or
bound by or the subject of any agreement, undertaking or commitment with any
person that could result in (i) the sale, merger, consolidation or
recapitalization of the Company, (ii) the sale of all or substantially all of
the assets of the Company, or (iii) a change of control of more than ten
percent (10%) of the outstanding capital stock of the Company.
2.37 YEAR 2000 . Except as set forth in Section 2.37 of the Company
Disclosure Letter, (i) all functions including, without limitation,
date-reliant (which includes year-reliant) functions of the information and
business systems of the Company (collectively, the "SYSTEMS") are capable of
continuing to operate up to, during and after the Year 2000, (ii) neither the
performance nor functionality of the Systems will be affected by any changes
to the field configuration which contains the date information within any
part of the System caused by the advent of the year 2000, and (iii) the
Systems will perform consistent with past
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performance and there shall be no faults in the processing of dates and
date-dependent information or data including, without limitation, in
calculations, comparisons and sequencing of information or data, except, in
each case, such failures to operate or perform that could not reasonably be
expected to have a Material Adverse Effect. Section 2.37 of the Company
Disclosure Letter sets forth, with respect to any exception, the nature of
such exception in detail, including the nature of the problem, the nature of
the steps undertaken and planned, and the Company's good faith estimate of
the cost to correct such problem and its projection of a date for project
completion.
2.38 PROXY STATEMENT . The proxy statement to be sent to the
shareholders of the Company in connection with the meeting of the Company's
shareholders to consider the Merger (the "COMPANY SHAREHOLDERS' MEETING")
(such proxy statement as amended or supplemented is referred to herein as the
"PROXY STATEMENT") shall not, on the date the Proxy Statement is first mailed
to the Company's shareholders, at the time of the Company Shareholders'
Meeting and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading. The Proxy
Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. If at any time prior
to the Effective Time any event relating to the Company or any of its
affiliates, officers or directors should be discovered by the Company which
should be set forth in a supplement to the Proxy Statement, the Company shall
promptly supplement the Proxy Statement and send such supplement to the
Company's shareholders and Parent. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied
by Parent or Merger Sub in writing specifically for inclusion in the Proxy
Statement.
2.39 BOARD APPROVAL . The Board of Directors of the Company, has,
on or prior to the date hereof, approved this Agreement, the Merger and the
other transactions contemplated hereby.
2.40 FAIRNESS OPINION . The Board of Directors of the Company has
received a written opinion from Sutter Securities Incorporated, dated no
later than the date hereof, that, as of the date of this Agreement, the
Merger Consideration is fair to the Company's shareholders from a financial
point of view and has delivered to Parent a copy of such opinion.
2.41 BROKERS' AND FINDERS' FEES . The Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection
with this Agreement, the Merger or any transaction contemplated hereby,
except for a fee due to Legg Mason Wood Walker Incorporated pursuant to an
agreement, a true, complete and correct copy of which has been provided to
Parent (the
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"ENGAGEMENT LETTER") and for a fee due to Sutter Securities Incorporated in
connection with the delivery of a fairness opinion pursuant to Section 2.40.
2.42 ACCSCT AND DOE MATTERS. Set forth in Section 2.42 of the
Company Disclosure Letter is a true and correct copy of the Company's
calculation of the cash, cash equivalents and the financial responsibility
composite ratio.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION OF PARENT/MERGER SUB . Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has the corporate power to carry on its business as now
being conducted, and is duly qualified to do business and in good standing as
a foreign corporation in each jurisdiction in which such qualification is
required by virtue of the nature of activities conducted by it, except to the
extent that the failure to be so qualified and in good standing could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. In this Agreement, the term "MATERIAL ADVERSE
EFFECT" used in reference to the Parent means any event, change,
circumstance, condition or effect which, when considered with all other
events, changes, circumstances, conditions or effects, has, or any
development that would reasonably be expected to have, a material adverse
effect on the results of operations, financial condition, assets,
liabilities, business or prospects of Parent and its subsidiaries, taken as a
whole, other than general changes in economic conditions or the educational
services industry, each considered alone without regard to any other effects,
changes, events, circumstances or conditions, and other than any adverse
change, event or effect that is demonstrated by Parent to be primarily caused
by the pendency of the Merger or the transactions contemplated hereby. Merger
Sub is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the company
power to carry on its business as now being conducted.
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3.2 AUTHORITY; NO CONFLICT .
(a) Parent and Merger Sub have all requisite corporate and company
power and authority, respectively, to enter into this Agreement and to
consummate the Merger and other transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Merger Sub and
the consummation of the Merger and other transactions contemplated
hereby have been duly authorized by all necessary corporate and company
action on the part of Parent and Merger Sub, respectively. This
Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by the
Company, constitutes the valid and binding obligations of Parent and
Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and
general principles of equity.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the consummation of the Merger and other transactions
contemplated hereby will not, conflict with, or result in any violation
of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under any (i)
provision of the Certificate of Incorporation or Bylaws of Parent or
the Articles of Organization or Operating Agreement of Merger Sub, (ii)
any mortgage, indenture, lease, contract or other agreement to which
Parent or Merger Sub is a party or by which Parent or Merger Sub or the
assets of Parent or Merger Sub is bound, except for any such conflict,
violation, default, right or loss which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect, or (iii) any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or Merger Sub, or their respective assets, except for any
such conflict, violation, default, right or loss which could not
reasonably be expected to have a Material Adverse Effect on Parent or
Merger Sub.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental/Regulatory Entity is
required by or with respect to Parent and Merger Sub in connection with
the execution and delivery of this Agreement by Parent and Merger Sub
or the consummation by Parent and Merger Sub of the Merger and other
transactions contemplated hereby, except for (i) the filing of a
pre-merger notification report under the HSR Act, (ii) the filing of
the Agreement of Merger with the California Secretary of State and the
Certificate of Merger with the Delaware Secretary of State, (iii) the
filing of a Form 8-K with the SEC, (iv) approval by California
Department of Consumer Affairs and the DOE and (v) such other consents,
authorizations, filings, approvals and registrations which if not
obtained or
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made could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent or materially
impair the ability of Parent or Merger Sub to consummate the Merger
and other transactions contemplated hereby.
3.3 LITIGATION. As of the date hereof, there are no actions,
suits, claims, litigation or proceedings pending or, to the knowledge of
Parent or Merger Sub, threatened, against Parent or its Subsidiaries by any
person which question the legality, validity or consummation of the Merger
and the other transactions contemplated by this Agreement or materially
impair the ability of Parent or Merger Sub to consummate the Merger and the
other transactions contemplated hereby.
3.4 SUFFICIENT FUNDS. Parent has, and will have at the Effective
Time, possession of, or has, and will have at the Effective Time, available
to it under existing lines of credit, sufficient funds to consummate the
Merger and the other transactions contemplated by this Agreement, including
payment of the Merger Consideration and all related costs and expenses and
will cause Merger Sub to have sufficient funds available to consummate the
Merger and the transactions contemplated hereby.
3.5 BOARD APPROVAL . The Board of Directors of Parent and the
Manager of Merger Sub have, as of the date hereof, approved this Agreement
and the Merger.
3.6 BROKERS' AND FINDERS' FEES . Parent has not incurred, and will
not incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Merger or any transaction contemplated hereby.
3.7 OPERATIONS OF MERGER SUB . Merger Sub is an indirect,
wholly-owned subsidiary of Parent, was formed solely for the purpose of
engaging in the Merger and other transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only
as contemplated hereby.
3.8 INFORMATION SUPPLIED . The information with respect to Parent
or Merger Sub that Parent furnishes to the Company in writing for use in the
Proxy Statement will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. If at any time prior to the Effective Time any event relating
to the Parent or Merger Sub or any of their respective affiliates, officers
or directors should be discovered by Parent or Merger Sub which should be set
forth in a supplement to the Proxy Statement, the Parent shall promptly
notify the Company and send all relevant information to the Company.
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3.9 AGREEMENTS WITH SHAREHOLDERS . Parent has provided the Company
with true and complete copies, or otherwise informed the Company with written
summaries, of all agreements, arrangements, contracts, binding commitments or
oral understandings between Parent or Merger Sub and any shareholder of the
Company, as amended to date.
4. CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE EFFECTIVE
TIME. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms and
the Effective Time, the Company agrees, except as set forth in Section 4 of
the Company Disclosure Letter or to the extent that Parent shall otherwise
consent in writing, to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to
pay timely its debts and Taxes, subject to good faith disputes over such
debts or taxes, and on the same payment terms such debts and taxes have
historically been paid, to collect its receivables in the same manner and on
the same terms such receivables have historically been collected, to timely
pay or perform other material obligations when due, and to use all
commercially reasonable efforts consistent with past practices and policies
to preserve intact the Company's present business organizations, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with the Company, to the end that the
Company's goodwill and ongoing businesses be unimpaired at the Effective
Time. The Company shall promptly notify Parent of any material event or
occurrence not in the ordinary course of business of the Company. Except as
expressly provided for by this Agreement or as set forth on the Company
Disclosure Letter, the Company shall not, prior to the Effective Time or
earlier termination of this Agreement pursuant to its terms, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld or delayed):
(a) Except as required by the Company Plans, accelerate, amend or
change the period of exercisability of options or restricted stock, or
reprice options granted under the Company Plans or authorize cash
payments in exchange for any options granted under any of such plans,
except as contemplated by Section 1.9 of this Agreement;
(b) Enter into any partnership agreements, joint development agreements
or strategic alliance agreements;
(c) Increase the pay or other compensation or grant any severance or
termination pay (i) to any executive officer or director or (ii) to any
other employee except payments made in connection with the termination
of employees who are not executive officers in amounts consistent with
Company's policies and past practices or pursuant to written agreements
in effect, or policies existing, on the date hereof and as disclosed in
Section 2.16 of the Company Disclosure Letter;
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(d) Except as set forth in Section 4(d) of the Company Disclosure
Letter, transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company Intellectual Property
or Curricula;
(e) Commence any litigation other than (i) for the routine collection
of bills, or (ii) in such cases where the Company in good faith
determines that failure to commence suit would result in the material
impairment of a valuable aspect of the Company's business, provided
that the Company consults with the Parent prior to the filing of such a
suit (except that the Company shall not require the approval of, and
shall not be required to consult with, Parent with respect to any
claim, suit or proceeding by the Company against Parent or any of its
affiliates);
(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of capital stock of the
Company;
(g) Redeem, repurchase or otherwise acquire, directly or indirectly,
recapitalize or reclassify any shares of its capital stock;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or
securities convertible into, or subscriptions, rights, warrants or
options to acquire, or enter into other agreements or commitments of
any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of Company
Capital Stock pursuant to the exercise of Company stock options
outstanding as of the date of this Agreement;
(i) Cause, permit or propose any amendments to the Company's Articles
or Company Bylaws, or amend any Material Contract;
(j) Except as permitted under Section 5.16 of this Agreement, sell,
lease, license, encumber or otherwise dispose of any of the Company's
properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary
course of business consistent with past practice, or liquidate, in
whole or in part;
(k) Incur any indebtedness for borrowed money in excess of $250,000 (in
the aggregate) (other than ordinary course trade payables or pursuant
to existing credit facilities in the ordinary course of business) or
guarantee any such indebtedness or issue
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or sell any debt securities or warrants or rights to acquire debt
securities of the Company or guarantee any debt securities of others;
(l) Adopt or amend any Company Plan or increase the salaries or wage
rates of any of its employees (except for wage increases in the
ordinary course of business and consistent with past practices),
including but not limited to (but without limiting the generality of
the foregoing), the adoption or amendment of any stock purchase or
option plan, the entering into of any employment contract not in the
ordinary course of business which would be a Material Contract pursuant
to Section 2.16 (b) of this Agreement or the payment of any special
bonus or special remuneration to any director or employee, other than
bonuses reflected on the Company Balance Sheet;
(m) Revalue any of the Company's assets, including without limitation
writing down the value of inventory, writing off notes or accounts
receivable other than in the ordinary course of business consistent
with past practice or waiving any right of material value;
(n) Commence any operations in connection with the Company's properties
in New Orleans, Louisiana;
(o) Pay, discharge or satisfy in an amount in excess of $50,000 (in any
one case) or $150,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), including, without limitation, under any employment
contract or with respect to any bonus or special remuneration, other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities of the type reflected or reserved against in
the Company June 30th Financials (or the notes thereto);
(p) Make or change any material election in respect of Taxes, adopt or
change in any material respect any accounting method in respect of
Taxes, file any amendment to a material Return, enter into any closing
agreement, settle any claim or assessment in respect of Taxes (except
settlements effected solely through payment of immaterial sums of
money), or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(q) Except as permitted under Section 5.16 of this Agreement, enter
into any Material Contract other than in the usual, regular and
ordinary course of business consistent with past practices and
policies;
(r) Amend or terminate any of the Company's insurance policies;
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(s) Except as set forth in Section 4(s) of the Company Disclosure
Letter, make any changes with respect to the tuition, fees, program
duration or Curricula of any of the programs offered by the School,
including, without limitation, implementing any foreign exchange
student programs;
(t) Take any action with respect to the establishment or development of
additional locations offering the School's College of Food programs,
except with respect to the Garden Grove campus;
(u) Take any action with respect to the Computer Rollout;
(v) Hire, fire (other than for cause) or change the responsibilities or
work location of any employee or prospective employee whose annual
compensation is greater than $75,000 and whose employment cannot be
terminated by the Company on thirty days notice without liability; or
(w) Enter into an agreement, agree to pay or cause to be paid
any fees for expenses of, discharge any debts to the Company owing from
or release or discharge any claims of the Company against any of the
individuals listed in Section 4(w) of the Company Disclosure Letter or
such individuals' affiliates, in connection with this Agreement or the
transactions contemplated hereby.
(x) Take, or agree in writing or otherwise to take, any of the
actions described in clauses (a) through (w) above, or any other action
which would cause or would be reasonably likely to cause any of the
conditions to the Merger set forth in Sections 6.1 or 6.3, not to be
satisfied.
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5. ADDITIONAL AGREEMENTS
5.1 COMPANY DISCLOSURE LETTER . The Company has delivered to
Parent the Company Disclosure Letter as provided in Article 2. The Company
Disclosure Letter shall be signed by the Chief Executive Officer and Chief
Financial Officer and Secretary of the Company and shall state that such
Company Disclosure Letter is the Company Disclosure Letter referred to in
this Agreement. The Company Disclosure Letter is deemed to constitute an
integral part of this Agreement and to modify, as specified, the
representations, warranties, covenants or agreements of the Company contained
in this Agreement.
5.2 PROXY STATEMENT . As promptly as practicable after the
execution of this Agreement, the Company shall prepare, and file with the
Securities and Exchange Commission, the Proxy Statement. The Proxy Statement
shall include the fairness opinion of Legg Mason Wood Walker, Incorporated,
referred to in Section 2.41 and shall conform to the requirements of Section
2.39.
5.3 MEETING OF SHAREHOLDERS . Promptly after the date hereof, the
Company shall take all action necessary in accordance with the California Law
and the Company Articles and Company Bylaws to convene the Company
Shareholders' Meeting to be held as promptly as practicable for the purpose
of voting upon approval of the principal terms of this Agreement and the
Merger. The Board of Directors of the Company shall recommend and declare
advisable such approval and the Company shall take all lawful action to
solicit from its shareholders proxies in favor of the approval of the
principal terms of this Agreement and the Merger, and use its best efforts to
obtain, such approval, subject to the fiduciary duties of the Company's
directors under California Law.
5.4 ACCESS TO INFORMATION . The Company shall afford the Parent
and its employees, accountants, legal counsel and other representatives
reasonable access during normal business hours during the period prior to the
Effective Time to all information concerning the business to inspect,
investigate and audit the contracts, operations and business of the Company
including, without limitation, providing financial aid/regulatory
information, providing access to regulatory compliance materials, conducting
a management information systems/Year 2000 audit and providing access to
accounting systems and audit controls. Parent and its representatives will
conduct the inspection and investigation in a reasonable manner during normal
business hours. The Company agrees to use its commercially reasonable efforts
to promptly and completely provide all disclosures requested by Parent or its
representatives. No information or knowledge obtained in any investigation
pursuant to this Section 5.4 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
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5.5 NO SOLICITATION .
(a) From and after the date of this Agreement until the Effective Time
or the earlier termination of this Agreement in accordance with its
terms, the Company will not, and will not permit its officers,
directors, employees, investment bankers, attorneys, accountants or
other representatives, agents or Affiliates to, directly or indirectly,
(i) solicit, initiate or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, any Acquisition
Proposal (as defined below), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or
entity in connection with, any Acquisition Proposal or (iii) agree to,
approve, recommend or otherwise endorse or support any Acquisition
Proposal. As used herein, the term "ACQUISITION PROPOSAL" shall mean
any proposal relating to a possible (i) merger, consolidation or
similar transaction involving the Company or any subsidiary of Company,
(ii) sale, lease or other disposition, directly or indirectly, by
merger, consolidation, share exchange or otherwise, of any assets of
Company or any subsidiary of the Company representing, in the
aggregate, 20% or more of the assets of Company on a consolidated
basis, (iii) issuance, sale or other disposition by the Company of
(including by way of merger, consolidation, share exchange or any
similar transaction) securities (or options, rights or warrants to
purchase or securities convertible into, such securities) representing
20% or more of the votes attached to the outstanding securities of |
