Agreement and Plan of Merger - Career Education Corp. and California Culinary Academy Inc.
AGREEMENT AND PLAN OF MERGER
AMONG
CAREER EDUCATION CORPORATION,
CCA ACQUISITION, LLC
AND
CALIFORNIA CULINARY ACADEMY, INC.
DATED AS OF DECEMBER 6, 1999
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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):
<PAGE>
EXECUTION COPY
(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.
<PAGE>
EXECUTION COPY
(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
<PAGE>
EXECUTION COPY
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.
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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."
<PAGE>
EXECUTION COPY
(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
<PAGE>
EXECUTION COPY
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.
<PAGE>
EXECUTION COPY
(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.
<PAGE>
EXECUTION COPY
(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").
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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;
<PAGE>
EXECUTION COPY
(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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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%,
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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.
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
"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.
<PAGE>
EXECUTION COPY
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
<PAGE>
EXECUTION COPY
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.
<PAGE>
EXECUTION COPY
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;
<PAGE>
EXECUTION COPY
(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
<PAGE>
EXECUTION COPY
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;
<PAGE>
EXECUTION COPY
(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.
<PAGE>
EXECUTION COPY
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.
<PAGE>
EXECUTION COPY
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
Company, (iv) transaction with the Company in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act), or the right to acquire beneficial ownership,
or any "group" (as such term is defined under the Exchange Act) shall
have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the outstanding shares of
Company Capital Stock, (v) liquidation, dissolution, or other similar
type of transaction with respect to Company or any subsidiary of
Company or (vi) transaction with the Company which is similar in form,
substance or purpose to any of the foregoing transactions, provided,
however, that the term Acquisition Proposal shall not include the
Merger and the transactions contemplated thereby. The Company will and
will cause all its Affiliates to immediately cease any and all existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. For purposes of this
Section 5.5, the term "AFFILIATE" shall mean, in relation to the
Company, any entity directly or indirectly controlling, controlled by
or under common control with the Company; PROVIDED, HOWEVER, that the
term Affiliate shall exclude any of Theodore G. Crocker, Thomas C.
Green or William Demar, or any entity directly or indirectly controlled
by any of the foregoing.
(b) Notwithstanding the provisions of Section 5.5(a) above, if a
corporation, limited liability company, limited liability partnership,
partnership, person or other
<PAGE>
EXECUTION COPY
entity or group (a "THIRD PARTY") after the date of this Agreement
submits to the Company's Board of Directors an unsolicited, bona
fide, written Acquisition Proposal, and the Company's Board of
Directors reasonably determines in good faith, after receipt of
written advice from outside legal counsel that the failure to engage
in discussions with the Third Party concerning such Acquisition
Proposal would cause the Company's Board of Directors to breach its
fiduciary duties to the Company and its shareholders, and after
consultation with Sutter Securities Incorporated, or any other
nationally recognized investment bank, then, in such case, (i) the
Company may (x) furnish information about its business, properties
and assets to the Third Party under protection of an appropriate
confidentiality agreement and (y) negotiate and participate in
discussions and negotiations with such Third Party and (ii) if the
Company's Board of Directors determines that such an Acquisition
Proposal is a Superior Proposal (as defined below), the Company's
Board of Directors may (subject to the provisions of this Section
5.5(c)) (x) withdraw or adversely modify its approval or
recommendation of the Merger and recommend such Superior Proposal or
(y) terminate this Agreement, in each case, at any time after the
fifth business day following delivery of written notice to Parent (a
"NOTICE OF SUPERIOR PROPOSAL") advising Parent that the Company's
Board of Directors has received a Superior Proposal and specifying
the material terms and conditions of such Superior Proposal. The
Company may take any of the foregoing actions pursuant to the
preceding sentence if, and only if, an Acquisition Proposal that was
a Superior Proposal continues to be a Superior Proposal in light of
any improved proposal submitted by Parent, considered in good faith
by the Company, prior to the expiration of the five business day
period specified in the preceding sentence. The Company shall
provide Parent with a final written notice, at least twenty-four
(24) hours, before accepting any Superior Proposal. For purposes of
this Agreement, "SUPERIOR PROPOSAL" means any unsolicited, bona
fide, written Acquisition Proposal for consideration consisting of
cash and/or securities, and otherwise on terms which the Company's
Board of Directors determines (based on the written advice of a
financial advisor of nationally recognized reputation, including,
without limitation, Sutter Securities Incorporated) are more
favorable to the Company's shareholders from a financial point of
view than the Merger (or other proposal submitted by Parent as
contemplated above), after consultation with its outside legal
counsel. Nothing contained herein shall prohibit the Company from
taking, and disclosing to its shareholders, a position required by
Rule 14d-9(e) under the Exchange Act prior to the fifth business day
following Parent's receipt of a Notice of Superior Proposal,
provided that the Company does not withdraw or modify its position
with respect to the Merger or approve or recommend an Acquisition
Proposal.
(c) The Company will notify Parent within 24 hours if (i) a bona fide
Acquisition Proposal is made or is modified in any respect (including
the principal terms and conditions of any such Acquisition Proposal or
modification thereto and the
<PAGE>
EXECUTION COPY
identity of the offeror) or (ii) the Company furnishes non-public
information to, or enters into discussions or negotiations with
respect to an Acquisition Proposal with, any Third Party.
(d) It is understood and agreed that, without limitation of the
Company's obligations hereunder, any violation of this Section 5.5
by any director, officer, Affiliate, investment bank, financial
advisor, accountant, attorney or other advisor or representative of
the Company, whether or not such person or entity is purporting to
act on behalf of the Company, shall be deemed to be a breach of this
Section 5.5 by the Company. The Company agrees that, as of the date
hereof, it, its Affiliates and their respective directors, officers,
employees, agents and representatives, shall immediately cease and
cause to be terminated any existing activities, discussions and
negotiations with any Third Party (other than Parent and its
representatives) conducted heretofore with respect to any
Acquisition Proposal.
5.6 EXPENSES .
(a) Except as set forth in Section 5.6(b) and Section 5.7, all fees and
expenses incurred in connection with this Agreement, the Merger and any
other transaction contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated.
(b) In connection with any claim, dispute, disagreement or other
conflict involving the enforcement of this Article 5, the parties agree
that the prevailing party shall be reimbursed by the other party for
all reasonable attorneys' fees and costs and expenses associated with
such conflict.
5.7 BREAK-UP FEE .
(a) If this Agreement is terminated pursuant to Section 7.1(b)(ii),
7.1(b)(iii) or 7.1(b)(iv), 7.1(b)(i) as a result of any willful breach
by the Company of any representation, warranty, covenant or agreement
of the Company set forth in this Agreement (a "QUALIFYING SECTION
7.1(b)(i) TERMINATION "), Section 7.1(c)(ii) or Section 7.1(d)(iii) and
Parent is not then in breach of this Agreement (taking into account any
cure periods), then the Company shall (i) on the date specified in the
proviso to this sentence in the case of a termination of this Agreement
pursuant to Section 7.1(d)(iii) or (ii) simultaneously with a
termination of this Agreement in the case of a termination of this
Agreement as a result of a Qualifying Section 7.1(b)(i) Termination or
pursuant to Section 7.1(b)(ii), 7.1(b)(iii) or 7.1(b)(iv) or
7.1(c)(ii), pay to Parent (by wire transfer of immediately available
funds to an account designated by Parent) a break-up fee of (x)
$500,000 plus the reimbursement of all of Parent's
<PAGE>
EXECUTION COPY
Expenses, in the event of a Qualifying Section 7.1(b)(i)
Termination, or (y) $1,250,000 plus all of Parent's Expenses, in the
event of a termination pursuant to Section 7.1(b)(ii), 7.1(b)(iii),
7.1(b)(iv), 7.1(c)(ii) or 7.1(d)(iii); provided, however, that the
Company shall not be obligated to pay such fee to the Parent if this
Agreement is terminated pursuant to Section 7.1(d)(iii) unless and
until (I) at the time of the Company Shareholders' Meeting the
Company has received a bona fide Acquisition Proposal or a Third
Party has made or has publicly announced its intention to make a
bona fide Acquisition Proposal and (II) within twelve months after
the termination of this Agreement an Acquisition Proposal is
consummated by the Company with any Third Party.
(a) "EXPENSES" shall mean all of the reasonable out-of-pocket expenses
of Parent, including, but not limited to, attorneys' fees, accounting
fees, filing fees and fees and expenses of financial advisors, in each
case incurred in connection with this Agreement and the Merger,
provided, however, that Parent shall have provided reasonable
supporting documentation (such as invoices and receipts) to the Company
for such Expenses; and provided further, that in no event shall the
aggregate amount of Expenses payable by the Company pursuant to this
Section 5.7 exceed $250,000.
5.8 PUBLIC DISCLOSURE . Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with
a national securities exchange or the Nasdaq National Market (but such party
shall use its reasonable best efforts to consult with the other party as to
all such public announcements).
5.9 AUDITORS' LETTERS . The Company shall use its reasonable
efforts to cause to be delivered to the Company (with a copy to Parent) a
letter of Rooney Ida Nolt & Ahern, independent auditors to the Company, dated
a date within two business days before the date on which the Proxy Statement
is first mailed to the Company stockholders, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with Securities and
Exchange Commission filings similar to the Proxy Statement.
5.10 REGULATORY REQUIREMENTS . The Company will (a) cooperate with
Parent to take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to solicit input from
Governmental/Regulatory Entities regarding the process of obtaining
regulatory, Accrediting Body approvals and DOE approvals, obtain all
regulatory, Accrediting Body approvals and DOE approvals, make all filings
with and give all notices to Governmental/Regulatory Entities, and obtain all
licenses required of the Company to
<PAGE>
EXECUTION COPY
consummate the Merger and other transactions contemplated hereby, including
without limitation those described in the Company Disclosure Letter, (b)
provide such other information and communications to such
Governmental/Regulatory Entities or other persons as Parent or such
Governmental/Regulatory Entities may request and (c) cooperate with Parent as
promptly as practicable in obtaining all regulatory, Accrediting Body
approvals and DOE approvals, making all filings with and giving all notices
to Governmental/Regulatory Entities and obtaining all licenses required of
Parent to consummate the Merger and other transactions contemplated hereby.
The Company will provide prompt notification to Parent when any such
regulatory, Accrediting Body or DOE approval or license referred to in clause
(a) above is obtained, taken, made or given, as applicable, and will promptly
advise Parent of any communications (and promptly provide copies of any such
communications that are in writing or filings) with any
Governmental/Regulatory Entity regarding the Merger or any of the
transactions contemplated by this Agreement. The Company and Parent will (i)
take all reasonable actions necessary to file as soon as practicable,
notifications under the HSR Act, (ii) comply at the earliest practicable date
with any request for additional information received from the Federal Trade
Commission or Antitrust Division of the Department of Justice pursuant to the
HSR Act, and (iii) request early termination of the applicable waiting period.
5.11 LEGAL REQUIREMENTS . Each of Parent, Merger Sub and the
Company will take all reasonable actions necessary or desirable to comply
promptly with all legal requirements which may be imposed on them with
respect to the consummation of the Merger and other transactions contemplated
by this Agreement (including furnishing all information required under the
HSR Act and in connection with approvals of or filings with any
Governmental/Regulatory Entity, and prompt resolution of any litigation
prompted hereby) and will promptly cooperate with and furnish information to
any party hereto necessary in connection with any such requirements imposed
upon any of them or their respective subsidiaries in connection with the
consummation of the Merger and other transactions contemplated by this
Agreement, and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with,
any Governmental/Regulatory Entity or other public or private third party
required to be obtained or made in connection with the Merger or taking of
any action contemplated by this Agreement. The obligations of Parent under
this Section 5.11 with respect to the HSR Act shall not require Parent to
obtain or attempt to obtain any such waiver, permit, consent, approval or
authorization if obtaining such waiver, permit, consent, approval or
authorization would require disposition of any assets of Parent.
5.12 REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES . Each of
the parties to this Agreement shall each use its reasonable commercial
efforts to effectuate the Merger and other transactions contemplated hereby
as expeditiously as reasonably practicable and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement (including
<PAGE>
EXECUTION COPY
promptly making their respective filings required and the resolution of any
litigation prompted hereby). Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of the Merger and other transactions
contemplated hereby.
5.13 INDEMNIFICATION .
(a) For six years from and after the Effective Time, Parent
shall, and shall cause the Surviving Corporation to, indemnify, defend
and hold harmless (and advance expenses to) all past and present
officers, directors and employees of the Company to the same extent
such persons are indemnified as of the date of this Agreement by the
Company pursuant to any agreements between the Company and any such
person and the Company's Certificate of Incorporation and By-Laws, for
any expenses, liabilities and losses (including reasonable attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred in connection with any claims, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to acts
or omissions occurring at or prior to the Effective Time (other than
any acts or omission related to violations of Section 4(w)), and shall
obtain, or continue the existing, Director and Officer Insurance for a
period of six years after the Effective Date with substantially the
same coverage as provided on the Effective Time provided, however, that
the Parent and the Surviving Corporation shall not be required to pay
an annual premium in excess of 150% of the aggregate annualized
premiums paid by the Company in 1999 (the "MAXIMUM AMOUNT"); provided,
further, that if the Surviving Corporation is unable to obtain the
insurance required by this Section 5.13 (a) it shall obtain as much
comparable insurance as possible for an annual premium equal to the
Maximum Amount. In the event of any dispute regarding whether a
director, officer or employee has met the standards of conduct set
forth therein, such question shall be conclusively determined by the
opinion of reputable disinterested legal counsel selected by the
Company's Board of Directors. Any heirs or legal representatives
entitled to the benefits of such indemnification shall be deemed
express third party beneficiaries of this Section 5.13.
(b) If Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 5.13.
<PAGE>
EXECUTION COPY
(c) The rights of each indemnified person under this Section
5.13 shall be in addition to any rights such person may have under any
indemnification contract between such indemnified person and the
Company, the Company Articles or Company Bylaws, or under California
Law or any other applicable laws. These rights shall survive
consummation of the Merger and are intended to benefit, and shall be
enforceable by, each indemnified person (and such person's heirs and
legal representatives) as intended third party beneficiaries of this
Section 5.13.
5.14 NOTIFICATION . Between the date of this Agreement and the
Effective Time, each party will promptly notify the other party in writing if
such party becomes aware of any development, fact or condition that causes or
constitutes a breach of any agreement or covenant under this Agreement
applicable to such party or of such party's representations and warranties as
of the date of this Agreement, or if such party becomes aware of the
occurrence after the date of this Agreement of any fact or condition that
would cause or constitute a breach of any such representation or warranty had
such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition.
5.15 COOPERATION REGARDING POST-SIGNING OPERATIONS . After the
execution of this Agreement, the Company shall cooperate with the Parent in
developing post-Closing transition policies with respect to management
information systems, marketing, admissions, personnel, outsourcing,
operations, regulatory matters and accounting, including, without limitation,
meeting regularly (at such times as shall be mutually agreed upon by the
Company and Parent) with on-site transition teams of Parent with respect to
marketing, management information systems, regulatory matters and accounting,
in accordance with Section 5.15 of the Company Disclosure Letter.
5.16 NEW ORLEANS PROJECT . The Company shall not take any action
whatsoever, including, without limitation, preparations for the commencement
of operations, signing contracts, making capital expenditures and hiring
personnel in connection with the Company's properties in New Orleans,
Louisiana (the "NEW ORLEANS Property"), except actions regarding the sale of
the New Orleans Property for not less than $3.1 million, and the Company
shall use its commercially reasonable efforts to complete such sale prior to
the Closing Date; provided any such actions shall be subject to the prior
written approval of Parent, which approval shall not unreasonably be
withheld. The Company shall promptly provide Parent with all material
documents relating to the negotiation and sale of the New Orleans Property.
5.17 TERMINATION OF 401(K) PLAN . Prior to the Closing Date, the Company's Board
of Directors shall adopt a resolution freezing and terminating each Company Plan
(as defined in Section 2.28(c)) which contains a cash or deferred arrangement
subject to Section 401(k) of the Code. As soon as practical after the Closing,
Parent may cause the terminated
<PAGE>
EXECUTION COPY
Company Plan to be filed with the Internal Revenue Service for a favorable
determination letter and shall take such other steps as it deems necessary in
its sole discretion with respect to the terminated Company Plan. Parent
agrees that it shall assume and be solely responsible for any obligations
under COBRA (as defined in Section 2.28(e)) associated with applicable
Company Plans.)
5.18 OPTION AGREEMENT . Prior to the Closing Date, Parent shall
have received Option Agreements, in the form attached as EXHIBIT A hereto
from each of Theodore G. Crocker, Thomas C. Green and William DeMar.
5.19 EMPLOYEE MATTERS . Following the Effective Time and until the
third anniversary thereof, Parent shall cause employees of the Company
immediately preceding the Effective Time ( "COMPANY EMPLOYEES") to be covered
under employee benefit plans that are substantially comparable, in the
aggregate, to the employee benefit plans provided by Parent to employees of
its other schools. Parent shall cause service with the Company to be
recognized as services for purposes of all employee benefit plans and
compensation arrangements applicable to Company Employees after the Effective
Time, to the extent such service is credited under comparable plans and
arrangements of the Parent's other schools.
5.20 REAL ESTATE DELIVERIES . The Company shall use commercially
reasonably efforts to deliver to Parent at least ten (10) days prior to the
Closing, the following with respect to each of the Leases: (i) an estoppel,
consent and amendment agreement from each of the landlords, joined by the
tenant thereof, in the form attached hereto as Exhibit B and (ii) a
subordination, nondisturbance and attornment agreement from each mortgagee or
trustee under a deed of trust or underlying or ground lessor in the form
attached hereto as Exhibit C. Additionally, the Company shall deliver to
Parent within 30 days after the date hereof, at no cost to Parent, with
respect to the Owned Real Estate (if such Owned Real Estate is still owned by
the Company at the Closing Date) and the Rental Real Estate (i) an ALTA
survey dated not earlier than one year from the date of this Agreement and
(ii) a fully paid for title insurance commitment from Chicago Title Insurance
Company insuring the Owned Real Estate (if such Owned Real Estate is still
owned by the Company at the Closing Date) and in the amount of its current
market value, and the leasehold estate for each Leased Real Estate in the
amount of $3,000,000 showing no exceptions to title reasonably objected to by
Parent, and including the following endorsements: access, zoning 3.1 issuing
compliance with land use regulations and the continued use for the purpose
use without authorization requirements, and coverage over the general policy
exceptions.
5.21 MARKETING MATTERS . The Company shall maintain its marketing
expenditures to the extent set forth in the Company's marketing budget
attached hereto as Section 5.21 of the Company Disclosure Letter.
<PAGE>
EXECUTION COPY
5.22 ADMISSIONS TRAINING . Parent shall provide to the Company, at
no cost, admissions training personnel to train the Company's admission staff
in connection with the Company's admissions policies and procedures, and the
Company agrees that all of its admissions personnel shall participate in such
training; provided, however, that such training shall not interrupt the
operations of the Company
5.23 ACCSCT AND DOE MATTERS . Parent and Merger Sub shall cooperate
with the Company to provide all reasonably requested information and use all
reasonable efforts to obtain ACCSCT and DOE approvals necessary to consummate
the Merger and the renewal of ACCSCT accreditation including, but not limited
to, providing financial assistance to the Company not to exceed $2,500,000 in
the form of a letter of credit or other financial commitment to be posted
after the Effective Time and all financial information, financial statements
or other documentation reasonably necessary to demonstrate to ACCSCT or the
DOE, or otherwise ensure, the Company's post-Closing compliance with
financial stability and responsibility requirements.
5.24 SEVERANCE AGREEMENTS . Parent shall honor, or cause the
Surviving Corporation to honor, all severance agreements and employment
agreements with the Company's directors, officers and employees which are
listed in Section 2.16 of the Company Disclosure Letter (the "SEVERANCE
AGREEMENTS"). Parent acknowledges that the consummation of the Merger
constitutes a "triggering event" for the Severance Agreement with Keith Keogh
and a "sale of the Company" under each of the other Severance Agreements.
Parent agrees to pay, or cause the Surviving Corporation to pay, promptly
following the Effective Time, the specified severance amounts to the
specified persons as set forth on Section 2.16 of the Company Disclosure
Letter if due or payable. Nothing herein is intended to modify or amend the
Severance Agreements other than to specify the time of, and responsibility
for, payment of such severance payments. The Company agrees that such amounts
listed on Section 2.16 of the Company Disclosure Letter are the only payments
due to the specified persons under such Severance Agreements.
6. CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER .
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time
of the following conditions:
(a) SHAREHOLDER APPROVAL. The principal terms of this Agreement and the
Merger shall have been approved and adopted by the requisite vote under
applicable law of the shareholders of the Company.
<PAGE>
EXECUTION COPY
(b) PROXY STATEMENT. The Company shall have cleared all of the
Securities and Exchange Commission's comments to the Proxy Statement.
No proceeding preventing distribution of the Proxy Statement or any
part thereof shall have been initiated or threatened in writing by the
SEC, and all requests for additional information on the part of the SEC
shall have been complied with to the reasonable satisfaction of the
parties hereto.
(c) NO INJUNCTIONS. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(d) HSR ACT. Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(e) GOVERNMENTAL/REGULATORY CONSENTS. All consents, approvals, orders
or authorizations of, or registrations, declarations or filings with,
any Governmental/Regulatory Entity required by or with respect to the
Company, Parent or any of their respective subsidiaries in connection
with the execution and delivery of this Agreement or the consummation
of the Merger and other transactions contemplated hereby shall have
been obtained or made, except for (i) approval from the DOE and (ii)
such consents, approvals, orders, authorizations, registrations,
declarations or filings the failure to obtain or make could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or Material Adverse Effect on
the Parent or materially impair the Company's, Parent's or Merger Sub's
ability to consummate the Merger.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY . The
obligations of the Company to consummate and effect this Agreement and the
Merger and other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) REPRESENTATIONS AND WARRANTIES.
(i) The representations and warranties of
Parent set forth in this Agreement that are qualified
by materiality shall have been true and correct in
all respects as of the date of this Agreement and
shall be true and correct in all respects as of the
Closing Date as though made on and as of the Closing
Date (except to the extent such representations and
<PAGE>
EXECUTION COPY
warranties expressly speak as of an earlier date),
except for changes contemplated or permitted by this
Agreement;
(ii) The representations and warranties of
Parent that are not qualified by materiality shall
have been true and correct in all respects as of the
date of this Agreement and shall be true and correct
in all material respects as of the Closing Date as
though made on and as of the Closing Date (except to
the extent such representations and warranties
expressly speak as of an earlier date), except for
changes contemplated or permitted by this Agreement;
and
(iii) The Company shall have received a
certificate to the foregoing effect signed on behalf
of Parent by the President or Chief Financial Officer
of Parent.
(a) AGREEMENTS AND COVENANTS. Parent and Merger Sub
shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed
or complied with by them on or prior to the Effective Time, and the
Company shall have received a certificate to the foregoing effect
signed by the President or Chief Financial Officer of Parent.
(a) MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there shall not have occurred any Material Adverse Effect
on Parent.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate and effect this
Agreement and the Merger and other transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) REPRESENTATIONS AND WARRANTIES.
(i) The representations and warranties of the Company set
forth in this Agreement that are qualified by materiality
shall have been true and correct in all respects as of the
date of this Agreement and shall be true and correct in all
respects as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations
and warranties expressly speak as of an earlier date), except
for changes contemplated or permitted by this Agreement;
<PAGE>
EXECUTION COPY
(i) The representations and warranties of the Company that are
not qualified by materiality shall have been true and correct
in all respects as of the date of this Agreement and shall be
true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date (except to
the extent such representations and warranties expressly speak
as of an earlier date), except for changes contemplated or
permitted by this Agreement; and
(i) Parent and Merger Sub shall have received a certificate to
the foregoing effect signed on behalf of the Company by the
President and Chief Financial Officer of the Company.
(b) AGREEMENT AND COVENANTS. The Company shall have
performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied
with by it on or prior to the Effective Time, and the Parent and
Merger Sub shall have received a certificate to the foregoing effect
signed by the President and Chief Financial Officer of the Company.
(c) THIRD PARTY CONSENTS. Parent shall have received
all written consents, assignments, waivers, authorizations or other
certificates necessary to provide for the continuation in full force
and effect of any and all Material Contracts of the Company and for
the Company to consummate the Merger and other transactions
contemplated hereby, including, without limitation, the approval of
the California Department of Consumer Affairs and any other
applicable California Governmental/Regulatory Entities, except (1)
approval from the DOE and (2) where the failure to receive such
consents, assignments, waivers, authorizations or certificates would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
(d) MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, there shall not have occurred any Material Adverse Effect
on the Company.
(e) ACCSCT ACCREDITATION. The School shall have had
the renewal of its accreditation approved by ACCSCT and no "show
cause" order shall be outstanding.
7. TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION . This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
<PAGE>
EXECUTION COPY
(b) by Parent if:
(i) there has been a breach of any material representation,
warranty, covenant or agreement contained in this Agreement on
the part of the Company and such breach has not been cured
within twenty (20) days after written notice to the Company
(PROVIDED, that Parent is not in material breach of the terms
of this Agreement; and PROVIDED FURTHER, that no cure period
shall be required for a breach which by its nature cannot be
cured) such that the conditions set forth in Section 6.3(a) or
Section 6.3(b), as the case may be, will not be satisfied;
(ii) the Board of Directors of the Company (A) adversely
amends, withholds or withdraws its recommendation of the
Merger or (B) shall have resolved or publicly announced its
intention to recommend an agreement with respect to an
Acquisition Proposal;
(iii) a tender offer or exchange offer for twenty percent
(20%) or more of the outstanding shares of Company Capital
Stock shall have been commenced or a registration statement
with respect thereto shall have been filed (other than by
Parent of an affiliate thereof) and the Board of Directors
of Company shall, notwithstanding its obligations hereunder,
have (x) recommended that the shareholders of Company tender
their shares in such tender or exchange offer or (y) publicly
announced its intention to take no position with respect to
such tender offer; or
(iv) the Company is in material breach any of the provisions
of Section 5.5;
(c) by the Company:
(i) if there has been a breach of any material representation,
warranty, covenant or agreement contained in this Agreement on
the part of the Parent or Merger Sub and such breach has not
been cured within twenty (20) days after written notice to the
Parent (PROVIDED, that the Company is not in material breach
of the terms of this Agreement; and PROVIDED FURTHER, that no
cure period shall be required for a breach which by its nature
cannot be cured) such that the conditions set forth in Section
6.2(a) or Section 6.2(b), as the case may be, will not be
satisfied; or
(ii) in accordance with Section 5.5(b).
<PAGE>
EXECUTION COPY
(d) by any party hereto if:
(i) there shall be a final, non-appealable order of a Federal
or state court in effect preventing consummation of the
Merger;
(i) there shall be any final action taken, or any statute,
rule, regulation or order enacted, promulgated or issued and
deemed applicable to the Merger by any
Governmental/Regulatory Entity which would make consummation
of the Merger illegal or which would prohibit Parent's
ownership or operation of all or a material portion of the
business of the Company, or compel Parent to dispose of or
hold separately all or a material portion of the business
or assets of the Company or Parent as a result of the Merger;
or
(i) the Company's Shareholders do not approve the Merger
at the Company Shareholders' Meeting.
(e) by any party hereto if the Merger shall not have
been consummated by April 26, 2000 (the "Termination Date")
provided, however, that either party may extend the Termination Date
to any day up to, and including, June 30, 2000 in the event that as
of the Termination Date all of the conditions set forth in Section 6
of this Agreement have been satisfied other than approval of the
Merger by (i) the California Department of Consumer Affairs or (ii)
ACCSCT; provided, further, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available (i) to
any party whose willful failure to fulfill any material obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date or
(ii) to the Company or Parent during a cure period provided to the
Company under Section 7.1(b)(i) or Parent under Section 7.1(c)(i).
7.2 EFFECT OF TERMINATION . In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent,
Merger Sub, the Company or their respective officers, directors, stockholders
or affiliates, except to the extent that such termination results from the
breach by a party hereto of any of its representations, warranties, covenants
or agreements set forth in this Agreement, and, provided that the provisions
of Sections 5.6 and 5.7 and Article 8 of this Agreement shall remain in full
force and effect and survive any termination of this Agreement. The exercise
by either party of a termination right pursuant to Section 7.1 shall not be
deemed a breach of any provision of this Agreement.
7.3 NOTICE OF TERMINATION . Any termination of this Agreement
under Section 7.1 above will be effective immediately upon the delivery of
written notice of the
<PAGE>
EXECUTION COPY
terminating party to the other parties hereto upon satisfaction of the
requirements set forth in Section 7.1.
7.4 AMENDMENT . This Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on behalf
of each of the parties hereto.
7.5 EXTENSION; WAIVER . At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Failure of any party to
insist on full compliance with each and every representation, warranty,
covenant, condition or term shall not create an estoppel.
8. GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive beyond the Effective Time.
8.2 NOTICES . All communications or notices required or permitted
by this Agreement shall be in writing and shall be deemed to have been given
at the earlier of the date personally delivered or sent by telephonic
facsimile transmission (with a copy via regular mail) or one day after
sending via nationally recognized overnight courier or five days after
deposit in the United States mail, certified or registered mail, postage
prepaid, return receipt requested, and addressed as follows, unless and until
any of such parties notifies the others in accordance with this Section 8.2
of a change of address :
(a) if to Parent or Merger Sub, to:
Career Education Corporation
2800 West Higgins Road
Suite 790
Hoffman Estates, Illinois 60195
Attention: John M. Larson
Todd H. Steele
Telecopy No.: (847) 781-3610
with a copy to:
<PAGE>
EXECUTION COPY
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois
Attention: Lawrence D. Levin, Esq.
David J. Kaufman, Esq.
Telecopy No.: (312) 902-1061
(b) if to the Company, to:
California Culinary Academy
625 Polk Street
San Francisco, California 94102
Attention: Chief Executive Officer
Telecopy No.: (415) 775-5129
with a copy to:
Pillsbury Madison & Sutro LLP
Post Office Box 7880
San Francisco, California 94120
Attention: Blair W. White
Telecopy No.: (415) 983-1200
8.3 INTERPRETATION . When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include", "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. When reference is made herein to "the
business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and
indirect subsidiaries of such entity. References in this Agreement to
"knowledge" shall mean the knowledge of the officers and directors of the
Company or Parent, as the case may be.
8.4 COUNTERPARTS . This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
<PAGE>
EXECUTION COPY
8.5 ENTIRE AGREEMENT . This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by
or referred to herein, including the Company Disclosure Letter (a) constitute
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, it
being understood that the Confidentiality Agreement shall continue in full
force and effect until the Closing and shall survive any termination of this
Agreement; and (b) are not intended to confer upon any other person any
rights or remedies hereunder, except with respect to Article 1, Section 5.13
and Section 5.24.
8.6 SEVERABILITY . In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
8.7 OTHER REMEDIES . Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
8.8 GOVERNING LAW . This Agreement shall be governed by and
construed in accordance with the laws of the State of California, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof. Each of the parties hereto agrees that process may
be served upon them in any manner authorized by the laws of the State of
California for such persons and waives and covenants not to assert or plead
any objection which they might otherwise have to such jurisdiction and such
process.
8.9 RULES OF CONSTRUCTION . The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
8.10 ASSIGNMENT . No party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the parties.
<PAGE>
EXECUTION COPY
8.11 COMPANY DISCLOSURE LETTER . The Company Disclosure Letter is
part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses and the Company Disclosure Letter shall be
deemed references to such parts of this Agreement, unless the context shall
otherwise require. The inclusion of any information in the Company Disclosure
Letter shall not be deemed to be an admission or an acknowledgment by the
Company that such information is material to or outside the ordinary course
of business activity of the Company. The specification of any dollar amount
in the representations and warranties set forth in this Agreement shall not
be deemed to constitute an admission by the Company or otherwise imply that
any such amount is material for purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
EXECUTION COPY
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
CAREER EDUCATION CORPORATION CALIFORNIA CULINARY ACADEMY, INC.
By: /s/ Keith Keogh
By: /s/ John M. Larson ------------------------------
------------------------------- Name: Keith Keogh
Name: John M. Larson ----------------------------
----------------------------- Title: President/Chief Executive Officer
Title: CEO --------------------------------
----------------------------
CCA ACQUISITION, LLC
By: /s/ John M. Larson
-------------------------------
Name: John M. Larson
-----------------------------
Title: CEO
----------------------------
<PAGE>
EXECUTION COPY
TABLE OF CONTENTS
1. THE MERGER 1
1.1 The Merger 1
1.2 Effective Time 1
1.3 Effect of the Merger 2
1.4 Name; Certificate of Incorporation; Bylaws 2
1.5 Directors and Officers 2
1.6 Effect on Capital Stock 2
1.7 Dissenters' Rights 3
1.8 Surrender of Certificates 3
1.9 Existing Options 5
1.10 No Further Ownership Rights in Company Capital Stock 5
1.11 Lost, Stolen or Destroyed Certificates 5
1.12 Taking of Necessary Action; Further Action 5
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 6
2.1 Organization of the Company 6
2.2 Company Capital Structure 7
2.3 Obligations With Respect to Capital Stock 7
2.4 Voting Debt 7
2.5 Listing 8
2.6 Authority; No Conflicts 8
2.7 SEC Filings; Company Financial Statements 9
2.8 Accounting Record 10
2.9 Absence of Certain Changes or Events 10
2.10 Liabilities 11
2.11 Taxes 11
2.12 Restrictions on Business Activities13
2.13 Absence of Liens and Encumbrances 13
2.14 Real Estate 14
2.15 Intellectual Property and Curricula15
2.16 Agreements, Contracts and Commitments 16
2.17 No Default 17
2.18 Compliance with Laws; Licenses 18
2.19 Recruitment; Admissions Procedures; Attendance Reports 19
2.20 Cohort Default Rate 20
2.21 Delivery of Documents 20
2.22 Student Recruiting 21
2.23 Control Matters 21
<PAGE>
EXECUTION COPY
2.24 Financial Assistance Programs 22
2.25 Litigation 22
2.26 Insurance 23
2.27 Labor Matters 23
2.28 Employee Benefits 23
2.29 Accreditation and State Licensure/Approval 25
2.30 Computer Rollout 25
2.31 Relationships with Related Persons 25
2.32 State "Anti-Takeover" Statutes 26
2.33 Change of Control Payments26
2.34 Environmental Protection 26
2.35 Vote Required 27
2.36 No Pending Transactions 27
2.37 Year 2000 28
2.38 Proxy Statement 28
2.39 Board Approval 28
2.40 Fairness Opinion 28
2.41 Brokers' and Finders' Fees29
2.42 ACCSCT and DOE Matters. 29
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
29
3.1 Organization of Parent/Merger Sub 29
3.2 Authority; No Conflict 30
3.3 Litigation. 31
3.4 Sufficient Funds. 31
3.5 Board Approval 31
3.6 Brokers' and Finders' Fees31
3.7 Operations of Merger Sub 31
3.8 Information Supplied 31
3.9 Agreements with Shareholders 31
4. CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE EFFECTIVE TIME
32
5. ADDITIONAL AGREEMENTS 35
5.1 Company Disclosure Letter 35
5.2 Proxy Statement 35
5.3 Meeting of Shareholders 35
5.4 Access to Information 36
5.5 No Solicitation 36
ii
<PAGE>
EXECUTION COPY
5.6 Expenses 38
5.7 Break-Up Fee 38
5.8 Public Disclosure 39
5.9 Auditors' Letters 39
5.10 Regulatory Requirements 40
5.11 Legal Requirements 40
5.12 Reasonable Commercial Efforts and Further Assurances 41
5.13 Indemnification 41
5.14 Notification 42
5.15 Cooperation Regarding Post-Signing Operations 42
5.16 New Orleans Project 42
5.17 Termination of 401(k) Plan42
5.18 Option Agreement 43
5.19 Employee Matters 43
5.20 Real Estate Deliveries 43
5.21 Marketing Matters 43
5.22 Admissions Training 43
5.23 ACCSCT and DOE Matters 44
5.24 Severance Agreements 44
6. CONDITIONS 44
6.1 Conditions to Obligations of Each Party to Effect the Merger 44
6.2 Additional Conditions to Obligations of The Company 45
6.3 Additional Conditions to Obligations of Parent and Merger Sub 46
7. TERMINATION, AMENDMENT AND WAIVER 47
7.1 Termination 47
7.2 Effect of Termination 49
7.3 Notice of Termination 49
7.4 Amendment 49
7.5 Extension; Waiver 49
8. GENERAL PROVISIONS 50
8.1 Non-Survival of Representations and Warranties. 50
8.2 Notices 50
8.3 Interpretation 51
8.4 Counterparts 51
8.5 Entire Agreement 51
8.6 Severability 51
8.7 Other Remedies 52
8.8 Governing Law 52
8.9 Rules of Construction 52
iii
<PAGE>
EXECUTION COPY
8.10 Assignment 52
8.11 Company Disclosure Letter 52
"1992 Plan" 7
"1997 Plan" 7
"1998 Plan" 7
"Accrediting Body" 8
"ACCSCT" 19
"ACFEI" 19
"Acquisition Proposal" 36, 37
"Affiliate" 37
"Agreement of Merger" 1
"Agreement" 1
"California Law" 1
"Certificate of Merger" 1
"Certificates" 4
"Closing Date" 2
"Closing" 2
"COBRA" 25
"Code" 12
"Company Articles" 2
"Company Balance Sheet." 10
"Company Bylaws" 2
"Company Capital Stock" 2
"Company Disclosure Letter" 6
"Company Employees" 43
"Company Financials" 9
"Company June 30th Financials" 10
"Company Option Plans." 7
"Company Plan" 24
"Company Preferred Stock" 7
"Company SEC Reports." 9
"Company Shareholders' Meeting" 28
"Company" 1
"Computer Rollout" 25
"Curricula" 16
"Delaware Law" 1
"DOE" 19
"Effective Time" 2
"Engagement Letter" 29
"Environmental Claim" 26
"Environmental Laws" 27
iv
<PAGE>
GLOSSARY OF DEFINED TERMS
"Environmental Release" 27
"ERISA Affiliate" 24
"ERISA" 24
"Exchange Act" 9
"Existing Option" 5
"Expenses" 39
"Family" 25
"Financial Assistance" 22
"Governmental/Regulatory Entity" 9
"Hazardous Materials" 27
"HIPAA" 25
"HSR Act" 9
"Intellectual Property" 16
"Leases" 14
"Licenses" 18
"Material Adverse Effect" 6, 29
"Material Contract" 16
"Maximum Amount" 41
"Merger Consideration" 3
"Merger Sub" 1
"Merger" 1
"multiemployer plan" 24
"New Orleans Property" 42
"Notice of Superior Proposal" 37
"Owned Real Estate" 14
"Parent" 1
"Paying Agent" 3
"Payment Fund" 3
"pension plan" 24
"Permitted Liens" 14
"Policy Guidelines" 19
"Proxy Statement" 28
"Qualifying Section 7.1(b)(i) Termination" 38
"Real Estate" 15
"Related Persons" 25
"Rental Real Estate" 14
"Returns" 11
"School" 6
"Securities Act" 9
"Severance Agreements" 44
"Superior Proposal" 37
"Surviving Company." 1
<PAGE>
GLOSSARY OF DEFINED TERMS
"Systems" 28
"Tax Agreement" 11
"Tax" or "Taxes" 11
"Third Party" 37
"Title IV Program" 18
"Title IV" 18
"United States Real Property Holding Corporation" 13