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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
among
DOMINICA MANAGEMENT, INC.,
its STOCKHOLDERS and OPTIONHOLDERS,
ROSS UNIVERSITY SERVICES, INC.,
ROSS UNIVERSITY MANAGEMENT, INC.
and
DeVRY INC.
MARCH 19, 2003
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TABLE OF CONTENTS
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ARTICLE I
PURCHASE AND SALE OF SHARES AND
CANCELLATION OF OPTIONS 2
1.01 Purchase and Sale of Shares 2
1.02 Cancellation of Options 3
1.03 Calculation of Common Share Proceeds and Closing Common
Share Proceeds. 4
1.04 Payment for and Surrender of Shares and Cancellation of
Options; Repayment of Indebtedness; Deposit of Escrow
Amount. 4
1.05 Estimated Working Capital Calculation 6
1.06 Final Working Capital Calculation. 7
1.07 The Closing 8
1.08 Withholding of Tax 8
ARTICLE II
CONDITIONS TO CLOSING 9
2.01 Conditions to Buyer's Obligations 9
2.02 Conditions to the Sellers' Obligations 12
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF EACH SELLER 14
3.01 Organization; Authority 14
3.02 Execution and Delivery; Valid and Binding Agreement 14
3.03 Noncontravention 14
3.04 Ownership of Capital Stock 15
3.05 Brokers Fees 15
3.06 Governmental Consents, etc. 15
3.07 Litigation 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 16
4.01 Organization and Corporate Power 16
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4.02 Subsidiaries 16
4.03 Authorization; No Breach; Valid and Binding Agreement 17
4.04 Capital Stock 17
4.05 Financial Statements 18
4.06 Absence of Certain Developments 18
4.07 Title to Properties. 20
4.08 Tax Matters 22
4.09 Contracts and Commitments. 23
4.10 Intellectual Property 25
4.11 Litigation 25
4.12 Governmental Consents, etc. 26
4.13 Employee Benefit Plans. 26
4.14 Insurance 27
4.15 Compliance with Laws 28
4.16 Environmental, Health and Safety Matters 28
4.17 Affiliated Transactions 29
4.18 Employees 29
4.19 Brokerage 29
4.20 Regulatory Compliance 30
4.21 Undisclosed Liabilities 32
4.22 Claims Against Officers and Directors 32
4.23 Improper Payments 32
4.24 Prior Operations 32
4.25 Disclosure 32
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER 33
5.01 Organization and Power 33
5.02 Authorization; Valid and Binding Agreement 33
5.03 No Breach 33
5.04 Governmental Consents, etc. 33
5.05 Litigation 34
5.06 Brokerage 34
5.07 Investment Representation 34
5.08 Financing 35
5.09 Solvency 35
5.10 Regulatory Qualifications 36
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ARTICLE VI
PRE-CLOSING COVENANTS 36
6.01 Conduct of the Business. 36
6.02 Access to Books and Records 36
6.03 Consents and Approvals; Regulatory Filings 37
6.04 Conditions 37
6.05 Exclusive Dealing 37
6.06 Notification 38
6.07 Regulation S-X 38
6.08 Termination of Expense Reimbursement 39
ARTICLE VII
COVENANTS OF BUYER 39
7.01 Access to Books and Records 39
7.02 Notification 39
7.03 Director and Officer Liability and Indemnification. 40
7.04 Regulatory Filings 40
7.05 Conditions 40
7.06 Buyer's Solvency 41
7.07 Employee Benefits. 41
ARTICLE VIII
TERMINATION 42
8.01 Termination 42
8.02 Effect of Termination 43
ARTICLE IX
INDEMNIFICATION 43
9.01 Survival of Representations and Warranties 43
9.02 Indemnification by the Sellers for the Benefit of Buyer. 44
9.03 Indemnification by Buyer for the Benefit of the Sellers. 47
9.04 Manner of Payment; Release 48
9.05 Defense of Third Party Claims 49
9.06 Determination of Loss Amount 50
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ARTICLE X
STOCKHOLDER REPRESENTATIVE 50
10.01 Designation 50
10.02 Authority 50
10.03 Authority; Indemnification 51
10.04 Exculpation 52
10.05 Action by the Stockholders Representatives 52
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS 53
11.01 Disclosure Generally 53
11.02 Acknowledgment by Buyer 53
11.03 Tax Matters 54
11.04 Litigation Support 56
11.05 Further Assurances 57
11.06 Confidentiality 57
11.07 Regulatory Notifications and Approvals 58
11.08 Seller Retained Actions. 58
ARTICLE XII
DEFINITIONS 61
12.01 Definitions 61
12.02 Cross-Reference of Other Definitions 67
ARTICLE XIII
MISCELLANEOUS 69
13.01 Press Releases and Communications 69
13.02 Expenses 70
13.03 Notices 70
13.04 Assignment 72
13.05 Severability 72
13.06 References 72
13.07 No Strict Construction 73
13.08 Amendment and Waiver 73
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13.09 Complete Agreement 73
13.10 Counterparts 73
13.11 Governing Law 73
13.12 No Third-Party Beneficiaries 73
13.13 J.W. Childs Equity Partners II, L.P. 73
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Closing Certificate of the Company
Exhibit C Closing Certificate of the Stockholder Representatives
Exhibit D Form of Estoppel Certificate
Exhibit E Closing Certificate of Buyer
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SCHEDULES
Section Reference
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Accreditations, Licenses and Permits Schedule 4.20(a)
Affiliated Transactions Schedule 4.17
Authorization Schedule 4.03, 4.12
Contracts Schedule 4.09(a)
Developments Schedule 4.06
Employee Benefits Schedule 4.13
Employee Schedule 4.18
Environmental Matters Schedule 4.16
Filings Schedule 11.07
Financial Statements Schedule 4.05
Indebtedness Schedule 1.04(f), 12.01
Insurance Schedule 4.14
Intellectual Property Schedule 4.10
Leased Real Property Schedule 4.07(b)
Liens Schedule 4.07(a)
Litigation Schedule 4.11
Owned Real Property Schedule 4.07(c), (i), (iii)
Schedule of Common Percentages 1.03(a)
Schedule of Permitted Exceptions 6.01
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Stockholders Schedule Preamble, 1.01(b)(ii), 2.01(g)(iv), 3.04, 4.04
Subsidiary Schedule 4.02
Taxes Schedule 4.08
Terminated Contracts Schedule 2.01(h), 3.04
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
March 19, 2003, by and among DeVry Inc., a Delaware corporation ("Buyer"),
Dominica Management, Inc., a New York corporation (the "Company"), Ross
University Services, Inc., a Delaware corporation ("RUSI"), Ross University
Management, Inc., a St. Lucia corporation ("RUMI"), the Persons indicated on
the attached Stockholders Schedule as holding Shares (the "Stockholders") and
the Persons indicated on the attached Stockholders Schedule as holding
Options (the "Optionholders" and together with the Stockholders, the
"Sellers"). Capitalized terms used and not otherwise defined herein have the
meanings set forth in Article XII.
WHEREAS, (i) the Stockholders own all of the issued and
outstanding shares of capital stock of the Company, which as of the date
hereof consists of 40,224.125 shares of Class A Preferred Stock, par value
$0.01 per share (the "Class A Preferred"), 25,000 shares of Class B Preferred
Stock, par value $0.01 per share (the "Class B Preferred" and together with
the Class A Preferred, the "Preferred Shares"), and 1,042,937 shares of
Common Stock, par value $0.01 per share (the "Common Shares" and together
with the Preferred Shares, the "Shares"), and (ii) the Optionholders own all
of the issued and outstanding options to acquire shares of capital stock of
the Company (the "Options");
WHEREAS, (i) the Company owns all of the issued and outstanding
shares of capital stock of RUSI, and (ii) RUSI owns all of the issued and
outstanding shares of capital stock of RUMI (the "RUMI Shares");
WHEREAS, prior to Closing, Buyer will form a new subsidiary
organized under the laws of Barbados ("BarbCo") and a new subsidiary
organized under the laws of Delaware ("DelCo");
WHEREAS, immediately prior to Closing, (i) Buyer and BarbCo will
own all of the issued and outstanding shares of capital stock of DelCo (all
of DelCo's shares owned by BarbCo hereinafter referred to as the "BarbCo
DelCo Shares"), and (ii) DelCo will own all of the issued and outstanding
shares of capital stock of BarbCo;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires to acquire from the Stockholders all of the Common Shares and
the Stockholders desire to sell to Buyer all of the Common Shares;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires to acquire from the Stockholders all of the Preferred Shares
and the Stockholders desire to sell to Buyer all of the Preferred Shares;
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WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires that the Options which are not incentive stock options within
the meaning of Section 422(b) of the Code (the "Nonqualified Options") be
canceled, and the Optionholders who hold Nonqualified Options desire to
cancel such options, in exchange for receiving a portion of the total
consideration as determined herein;
WHEREAS, subject to the terms and conditions of this Agreement,
Buyer desires that the holders of Options which are incentive stock options
within the meaning of Section 422(b) of the Code (the "ISOs") exercise such
Options immediately prior to the Closing Date, and the Optionholders who hold
ISOs desire to exercise such Options immediately prior to the Closing Date
and to sell to Buyer all shares of capital stock issuable upon such exercise;
and
WHEREAS, subject to the terms and conditions of this Agreement,
and in furtherance of Buyer's strategy to use BarbCo to create an efficient
holding structure for Buyer's expanding non-United States-based operations,
and immediately prior to Buyer's acquisition of the Common Shares and the
Preferred Shares and the cancellation of the Options, Buyer desires to cause
BarbCo to acquire from RUSI all of the RUMI Shares, and RUSI desires to
transfer to BarbCo all of the RUMI Shares.
NOW, THEREFORE, in consideration of the premises, representations
and warranties and mutual covenants contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND
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CANCELLATION OF OPTIONS
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1.01 Purchase and Sale of Shares.
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(a) On the Closing Date and immediately prior to the
transactions described in clause (b) below, upon the terms and subject to the
conditions set forth in this Agreement, Buyer shall cause BarbCo to sell,
assign, transfer and convey to RUSI 1,000 shares of DelCo common stock, and,
in exchange, RUSI shall sell, assign, transfer and convey to BarbCo all of
the issued and outstanding capital stock of RUMI.
(b) On the Closing Date and immediately after the completion of
the transaction described in clause (a) above:
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(i) upon the terms and subject to the conditions set forth in
this Agreement, the Stockholders shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from the
Stockholders, all of the Common Shares, free and clear of Liens other
than applicable federal and state securities law restrictions, against
payment by Buyer for the Common Shares to each Stockholder of an amount
in cash equal to such Stockholder's Common Share Proceeds (as defined
in Section 1.03(a)). The portion of the Common Share Proceeds to be
paid at the Closing to each of the Stockholders will be an amount in
cash equal to such Stockholder's Closing Common Share Proceeds (as
defined in Section 1.03(b)); and
(ii) upon the terms and subject to the conditions set forth in
this Agreement, the Stockholders shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from the
Stockholders, all of the Preferred Shares, free and clear of Liens
other than applicable federal and state securities law restrictions,
against payment by Buyer for the Preferred Shares to each Stockholder
of an amount (such amount, the "Preferred Share Proceeds") in cash
equal to (i) the number of Preferred Shares indicated on the
Stockholders Schedule as being owned by such Stockholder multiplied by
(ii) the Preferred Share Purchase Amount.
1.02 Cancellation and Exercise of Options.
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(a) The Company shall cause the Nonqualified Options to be canceled,
as of the Closing Date, in exchange for each Optionholder being entitled to
receive payment by Buyer of an amount in cash equal to (i) such
Optionholder's Common Share Proceeds, minus (ii) the aggregate exercise price
for all shares of Common Stock issuable upon exercise of the Nonqualified
Options held by such Optionholder (the "Final Option Proceeds"). The portion
of the Final Option Proceeds to be paid at the Closing to each such
Optionholder will be an amount in cash equal to (x) such Optionholder's
Closing Common Share Proceeds minus (y) the aggregate exercise price for all
shares of Common Stock issuable upon exercise of the Nonqualified Options
held by such Optionholder (such Optionholder's "Closing Option Proceeds").
(b) Immediately prior to the Closing, each Optionholder shall exercise
the ISOs held by such Optionholder in their entirety and, at the time
specified in Section 1.01(b)(i), shall sell, assign, transfer and convey to
Buyer, and Buyer shall purchase and acquire from such Optionholder, all of
the shares of capital stock otherwise issuable to the Optionholder upon such
exercise (the "ISO Shares") free and clear of all Liens other than applicable
federal and state securities law restrictions, against payment by Buyer for
the ISO Shares of an amount in cash equal to such Optionholder's Common Share
Proceeds applicable to the ISO Shares. The amount to be paid at the Closing
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to each such Optionholder with respect to the ISO Shares will be an amount in
cash equal to such Optionholder's Closing Common Share Proceeds. The Company
shall not make any change to any ISO after the date hereof which change would
constitute a material modification of the ISO (as defined in Section 424(h)
of the Code).
1.03 Calculation of Common Share Proceeds and Closing Common Share
Proceeds.
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(a> For purposes of this Agreement, "Aggregate Final Common
Share Price" shall mean an amount equal to (i) $310,000,000 (the "Base
Consideration"), minus (ii) the outstanding amount of Indebtedness as of the
Closing, minus (iii) the Aggregate Preferred Share Purchase Amount, plus (iv)
the aggregate exercise price for all shares of Common Stock issuable upon
exercise of the Nonqualified Options, plus (v) Working Capital, if Working
Capital is positive, minus (vi) Working Capital, if Working Capital is
negative, minus (vii) the amount of any Seller Expenses paid by the Company
at the Closing, minus (viii) the Escrow Amount, plus (ix) the aggregate
distributions, if any, to the Sellers pursuant to the Escrow Agreement. Each
Seller's "Common Share Proceeds" shall be equal to the Aggregate Final Common
Share Price multiplied by the percentage set forth next to such Seller's name
on the Schedule of Common Percentages (such Seller's "Common Percentage").
(b) For purposes of this Agreement, "Aggregate Closing Common
Share Price" shall mean an amount equal to (i) the Base Consideration, minus
(ii) the outstanding amount of Indebtedness as of the Closing, minus (iii)
the Aggregate Preferred Share Purchase Amount, plus (iv) the aggregate
exercise price for all shares of Common Stock issuable upon exercise of the
Nonqualified Options, plus (v) Estimated Working Capital, if Estimated
Working Capital is positive, minus (vi) Estimated Working Capital, if
Estimated Working Capital is negative, minus (vii) the amount of any Seller
Expenses paid by the Company at the Closing, minus (viii) the Escrow Amount.
Each Seller's "Closing Common Share Proceeds" shall be equal to the Aggregate
Closing Common Share Price multiplied by such Seller's Common Percentage.
1.04 Payment for and Surrender of Shares and Cancellation of Options;
Repayment of Indebtedness; Deposit of Escrow Amount.
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(a) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Stockholders, payment by Buyer of the amount in
cash equal to the aggregate Closing Common Share Proceeds payable pursuant to
Section 1.01(b)(i) in exchange for the delivery by each Stockholder to Buyer
of stock certificates evidencing such Stockholder's Common Shares duly
endorsed for transfer or accompanied by appropriate transfer documents.
Payment for the Common Shares shall be made by wire transfer of immediately
available funds on the Closing Date to an account or accounts specified by
the Stockholder Representatives at least two days prior to the Closing.
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Promptly after receipt of the amounts due pursuant to this Section 1.04(a),
the Stockholder Representatives shall distribute to each Stockholder an
amount equal to such Stockholder's Closing Common Share Proceeds by wire
transfer of immediately available funds to an account specified by each
Stockholder at least two days prior to the Closing.
(b) At the Closing, the Stockholder Representatives shall
receive, on behalf of each Stockholder holding Preferred Shares, payment by
Buyer of the amount in cash equal to the Aggregate Preferred Share Purchase
Amount in exchange for the delivery by each Stockholder holding Preferred
Shares to Buyer of stock certificates evidencing such Stockholder's Preferred
Shares duly endorsed for transfer or accompanied by appropriate transfer
documents. Payment for the Preferred Shares shall be made by wire transfer
of immediately available funds on the Closing Date to an account or accounts
specified by the Stockholder Representatives at least two days prior to the
Closing. Promptly after receipt of the Aggregate Preferred Share Purchase
Amount, the Stockholder Representatives shall distribute to each Stockholder
holding Preferred Shares an amount equal to such Stockholder's Preferred
Share Proceeds by wire transfer of immediately available funds to an account
specified by each such Stockholder at least two days prior to the Closing.
(c) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Optionholders holding Nonqualified Options, payment
by Buyer of an amount in cash equal to the Aggregate Closing Option Proceeds
in exchange for the delivery by each Optionholder to the Company, for
cancellation, of all of such Optionholder's outstanding Nonqualified Options
and, upon such delivery, such Nonqualified Options shall be deemed canceled.
Payment at the Closing in consideration of cancellation of the Options shall
be made by wire transfer of immediately available funds on the Closing Date
to an account or accounts specified by the Stockholder Representatives at
least two business days prior to the Closing. Promptly after receipt of the
Aggregate Closing Option Proceeds, the Stockholder Representatives shall
distribute to each Optionholder holding Nonqualified Options an amount equal
to such Optionholder's Closing Option Proceeds by wire transfer of
immediately available funds to an account specified by each Optionholder at
least two days prior to the Closing.
(d) At the Closing, the Stockholder Representatives shall
receive, on behalf of the Optionholders who exercise ISOs immediately prior
to the Closing, payment by Buyer of the amount in cash equal to the aggregate
Closing Common Share Proceeds payable pursuant to Section 1.02(b) in exchange
for the delivery by such Optionholder to Buyer of appropriate transfer
documents effecting the transfer of such Optionholder's ISO shares. Payment
for the ISO Shares shall be made by wire transfer of immediately available
funds on the Closing Date to an account or accounts specified by the
Stockholder Representatives at least two days prior to the Closing. Promptly
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after receipt of the amounts due pursuant to this Section 1.04(d), the
Stockholder Representatives shall distribute to each Optionholder an amount
equal to such Optionholder's Closing Common Share Proceeds by wire transfer
of immediately available funds to an account specified by each Optionholder
at least two days prior to the Closing.
(e) Notwithstanding anything to the contrary contained in
Sections 1.04(a)-(c), the Stockholder Representatives may retain a portion of
the amounts delivered to the Stockholder Representatives pursuant to such
sections to satisfy potential future obligations of the Sellers (in the
aggregate, the "Holdback Amount"); provided that the portion of the Holdback
Amount retained by the Stockholder Representatives on behalf of each Seller
shall be determined pro rata according to each Seller's Common Percentages.
The Holdback Amount shall be retained by the Stockholder Representatives for
such time as the Stockholder Representatives shall determine in their sole
discretion. Any amounts distributed from the Holdback Amount shall be
distributed to the Sellers pro rata based upon their Common Percentages.
(f) Simultaneously with the consummation of the purchase and
sale transaction contemplated by Section 1.01, Buyer shall repay, or cause to
be repaid, on behalf of the Company and its Subsidiaries, the then
outstanding balance of Indebtedness by wire transfer of immediately available
funds as set forth on, and in accordance with, the Payoff Letters delivered
by the Company pursuant to Section 2.01(f).
(g) Simultaneously with the consummation of the purchase and
sale transaction contemplated by Section 1.01, Buyer shall deposit, for the
benefit of the Sellers, the Escrow Amount, which will be available to satisfy
any amounts owed to Buyer pursuant to Section 1.06(b) and Section 9.02(a),
(b) and (d), in an escrow account (the "Escrow Account") established pursuant
to the terms and conditions of an escrow agreement (the "Escrow Agreement"),
by and among the Escrow Agent, Buyer and the Stockholder Representatives
substantially in the form of Exhibit A.
1.05 Estimated Working Capital Calculation.
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At least three business days prior to the Closing Date, the Stockholder
Representatives shall deliver to Buyer (i) a balance sheet of the Company and
its Subsidiaries projected as of the Closing Date immediately prior to Closing
(the "Preliminary Closing Balance Sheet"), together with reasonable supporting
information, and (ii) based on the Preliminary Closing Balance Sheet, their
good faith calculation of their estimate of the Working Capital as of the
Closing Date immediately prior to Closing (the "Estimated Working Capital")
calculated in accordance with the Working Capital Schedule attached hereto,
and, if Buyer indicates at least one business day prior to Closing that such
estimate is not reasonably acceptable to Buyer, then "Estimated Working
Capital" shall be calculated by
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the Stockholder Representatives based on the latest financial statements
delivered to Buyer pursuant to the second sentence of Section 6.02.
1.06 Final Working Capital Calculation.
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(a> As promptly as possible, but in any event within 60 days
after the Closing Date, Buyer will deliver to the Stockholder Representatives
(i) an audited balance sheet of the Company and its Subsidiaries as of the
Closing Date immediately prior to Closing (the "Closing Balance Sheet") and
(ii) its calculation of the Working Capital as of the Closing Date
immediately prior to Closing (the "Preliminary Working Capital Statement")
based on the Closing Balance Sheet and calculated in accordance with the
Working Capital Schedule. After delivery of the Preliminary Working Capital
Statement, the Stockholder Representatives and their accountants shall be
permitted reasonable access to review the Company's and its Subsidiaries'
books and records and work papers related to the preparation of the
Preliminary Working Capital Statement. The Stockholder Representatives and
their accountants may make reasonable inquiries of Buyer, the Company, its
Subsidiaries and their respective accountants regarding questions concerning
or disagreements with the Preliminary Working Capital Statement arising in
the course of their review thereof, and Buyer shall use its, and shall cause
the Company and its Subsidiaries to use their, reasonable best efforts to
cause any such accountants to cooperate with and respond to such inquiries.
If the Stockholder Representatives have any objections to the Preliminary
Working Capital Statement, the Stockholder Representatives shall deliver to
Buyer a statement setting forth in reasonable detail their objections thereto
(an "Objections Statement"). If an Objections Statement is not delivered to
Buyer within 45 days after delivery of the Preliminary Working Capital
Statement, the Preliminary Working Capital Statement shall be final, binding
and non-appealable on the parties hereto. The Stockholder Representatives
and Buyer shall negotiate in good faith to resolve any such objections, but
if they do not reach a final resolution within 30 days after the delivery of
the Objections Statement, the Stockholder Representatives and Buyer shall
submit such dispute to an independent office of KPMG LLP not used by the
Company, Buyer, Sellers or any of their Affiliates (the "Independent
Auditor"). The Stockholder Representatives and Buyer shall use their
commercially reasonable efforts to cause the Independent Auditor to resolve
all disagreements as soon as practicable. The resolution of the dispute by
the Independent Auditor shall be final, binding and non-appealable on the
parties hereto. The costs and expenses of the Independent Auditor shall be
paid equally by Buyer and the Sellers. The Preliminary Working Capital
Statement, as revised, if at all, and as finally determined pursuant to this
Section 1.06(a), shall be referred to as the "Final Working Capital
Statement."
(b) Post-Closing Adjustment Payments.
--------------------------------
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(i) If Working Capital as finally determined pursuant to
Section 1.06(a) is greater than Estimated Working Capital, (A) Buyer
shall pay such excess (plus simple interest on such amount at a rate of
4.25% per annum from the Closing Date through the date of payment) to
the Stockholder Representatives (on behalf of the Sellers) by wire
transfer of immediately available funds to an account or accounts
designated by the Stockholder Representatives (to be promptly
distributed to the Sellers pro rata based upon each Seller's Common
Percentage) and (B) the Stockholder Representatives and Buyer shall
jointly instruct the Escrow Agent to release to the Stockholder
Representatives, on behalf of the Sellers, $3,500,000 from the Escrow
Account (to be promptly distributed to the Sellers pro rata based upon
each Seller's Common Percentage).
(ii) If Working Capital as finally determined pursuant to
Section 1.06(a) is less than Estimated Working Capital, the Stockholder
Representatives and Buyer shall jointly instruct the Escrow Agent (A)
to distribute to Buyer such shortfall (plus simple interest on such
amount at a rate of 4.25% per annum from the Closing Date through the
date of payment) and (B) to distribute to the Stockholder
Representatives, on behalf of the Sellers, the amount, if any, by which
$3,500,000 exceeds the amount distributed to Buyer pursuant to the
foregoing clause (A) (to be promptly distributed to the Sellers pro
rata based upon each Seller's Common Percentage).
1.07 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis located at 153 East 53rd Street New York, New York at 10:00 a.m. on May
15, 2003 or, if any of the conditions to the Closing set forth in Article II
(other than those to be satisfied at the Closing) have not been satisfied or
waived by the party entitled to the benefit thereof, then on or prior to the
third business day following satisfaction or waiver of all of the closing
conditions set forth in Article II (other than those to be satisfied at the
Closing) or on such other date as is mutually agreeable to Buyer and the
Stockholder Representatives. The date and time of the Closing are referred
to herein as the "Closing Date."
1.08 Withholding of Tax. Buyer will be entitled to deduct and
withhold from (a) any proceeds payable to Sellers pursuant to this Agreement
with respect to Common Shares and Preferred Shares that were issued in a
compensatory transaction and from which Buyer is required to withhold amounts
under any provision of federal, state or local or foreign or Tax law and (b)
any Closing Option Proceeds payable to Sellers pursuant to this Agreement
such amounts as Buyer shall determine in good faith it is required to deduct
and withhold with respect to the making of such payment under any provision
of federal, state, local or foreign Tax law. To the extent that amounts are
so withheld by Buyer, such withheld amounts will be treated for all purposes
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of this Agreement as having been paid to the Seller in respect of whom such
deduction and withholding were made by Buyer. Promptly (and in any event
within three business days) after receiving a request from the Stockholder
Representatives therefor, Buyer shall provide to the Stockholder
Representatives a schedule of all amounts deducted and withheld pursuant to
this Section 1.08 setting forth the amount deducted and withheld hereunder
for each Seller.
ARTICLE II
CONDITIONS TO CLOSING
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2.01 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) The representations and warranties set forth in
Articles III and IV shall be true and correct in all material respects at and
as of the Closing Date as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such
representations and warranties (other than those representations and
warranties that address matters as of particular dates, which shall be true
and correct at and as of such particular date), in each case, except to the
extent that such representations and warranties are qualified by terms such
as "material" and "Material Adverse Effect," in which case such
representations and warranties shall have been true and correct in all
respects at and as of such date;
(b) The Company and the Sellers shall have performed and
complied with, in all material respects, all of the covenants and agreements
required to be performed and complied with by them under this Agreement
through the Closing, except to the extent that such covenants and agreements
are qualified by terms such as "material" and "Material Adverse Effect," in
which case the Company and the Sellers shall have performed and complied
with, in all respects, such covenants and agreements through the Closing;
(c) All filings under the HSR Act shall have been made, and the
applicable waiting periods, if any, thereunder shall have expired or been
terminated;
(d) (i) The submission of the notifications and applications
described in Section 11.07, except for submission of the DOE Application,
shall have been made in accordance with the provisions of Section 11.07, and
Buyer shall not have received written or direct oral notice (x) from an
employee, agent or representative of the DOE either that the DOE will not
approve the DOE Application or that the DOE will approve the DOE Application,
but subject to material adverse conditions, (y) from an employee, agent or
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representative of the government of the Commonwealth of St. Kitts-Nevis that
the St. Kitts Agreement will not remain in full force and effect in
accordance with its terms after the consummation of the transactions
contemplated hereby; or (z) from an employee, agent or representative of the
government of the Commonwealth of Dominica that the teaching and clinical
aspects of the Medical School's relationship with the Princess Margaret
Hospital will not continue in substantially the same manner and on
substantially the same terms as set forth in the Princess Margaret Hospital
Agreement and, in the case of any of clauses (x), (y) or (z), such notice
shall not have been rescinded by an applicable employee, agent or
representative;
(ii) Either the approval of the Dominica Medical Board shall
have been obtained, which approval shall not be subject to any material
adverse conditions, or written notice shall have been received from the
Dominica Medical Board indicating that its approval will not be required
prior to the Closing;
(e) No action, suit or proceeding before any court or
government body shall be pending or threatened in writing (where such threat
is reasonably likely to result in an action, suit or proceeding) wherein an
unfavorable judgment, decree, ruling, injunction or order would prevent the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded, or materially and
adversely affect the right of Buyer to own the Shares (and no such judgment,
decree, ruling, injunction or order shall be in effect);
(f) The Stockholder Representatives and the Escrow Agent shall
have executed and delivered the Escrow Agreement;
(g) The Company, the Sellers or the Stockholder Representatives
(on behalf of the Sellers), as the case may be, shall have delivered to Buyer
each of the following:
(i) a certificate of the Company in the form set forth in
Exhibit B, dated the Closing Date, stating that the preconditions
specified in subsections (a), (b) and (e), as they relate to the
Company, have been satisfied;
(ii> a certificate of the Stockholder Representatives (on behalf
of the Sellers) in the form of Exhibit C, dated the Closing Date,
stating that the preconditions specified in subsections (a), (b) and
(e), as they relate to the Sellers, have been satisfied;
(iii) evidence of the governmental consents and filings described
in subsection (d) and the Payoff Letters;
25
(iv) the stock certificates representing the Shares indicated on
the Stockholders Schedule, in each case, free and clear of Liens (other
than applicable federal and state securities law restrictions), and
duly endorsed for transfer or accompanied by duly executed stock powers
or transfer documents;
(v) all minute books, stock books, ledgers and registers,
corporate seals, if any, and other corporate records relating to the
organization, ownership and maintenance of each of the Company and its
Subsidiaries, if not already located on the premises of the Company or
its Subsidiaries;
(vi) resignations effective as of the Closing Date from all
directors of the Company and its Subsidiaries and from such officers
thereof as Buyer shall have requested in writing and delivered to the
Stockholder Representatives not less than five days prior to the
Closing Date;
(vii) a copy of the certificate of incorporation of the Company,
certified by the Secretary of State of New York, and a certificate of
good standing from New York for the Company dated within ten days of
the Closing Date;
(viii) copies of the certificate of incorporation (or
comparable document) for each Subsidiary, in each case certified by the
Secretary of State (or comparable officer) of the jurisdiction of the
respective Subsidiary;
(ix) certified copies of the by-laws of the Company and of each
Subsidiary;
(x) copies of good standing certificates for the Company and
for each Subsidiary from the Secretary of State (or comparable officer)
of the jurisdiction of each Person's organization, dated within ten
days before the Closing Date;
(xi) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby, and the consummation of all transactions contemplated hereby
and thereby;
(xii) evidence (in form and substance reasonably satisfactory to
Buyer) of the termination of the Management Agreement; and
26
(xiii) evidence (in form and substance reasonably
satisfactory to Buyer) that the Dominica Agreement will remain in full
force and effect in accordance with its terms after the consummation of
the transactions contemplated hereby;
(xiv) audited financial statements for the Company and its
Subsidiaries as of and for the fiscal years ended December 31, 2002,
December 31, 2001 and December 31, 2000 as described in Section 6.07.
(h) There shall have been made available to Buyer the debt
financing contemplated by the Commitment Letter (including the market flex
language of the Fee Letter), or other debt financing on economic and other
material terms no less favorable to Buyer than those set forth in the term
sheets that are part of the Commitment Letter, in either case, in an amount
sufficient to provide the debt financing necessary to consummate the
transactions contemplated hereby;
(i) The Company shall have obtained and delivered to Buyer an
estoppel certificate (in substantially the form attached hereto as Exhibit D)
with respect to the Leased Real Property located in Edison, NJ, dated no more
than 30 days prior to the Closing Date, from the other party to such Lease;
(j) The Company and its Subsidiaries shall provide Buyer with
an opinion of St. Kitts legal counsel regarding the Company's or a
Subsidiary's title to the Owned Real Property identified on the Owned Real
Property Schedule;
(k) The Company shall have terminated those contracts,
agreements, arrangements and leases listed on the Terminated Contracts
Schedule; and
(l) No Material Adverse Change shall have occurred since the
date of the Latest Balance Sheet.
If the Closing occurs, all closing conditions set forth in this Section 2.01
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by Buyer.
2.02 Conditions to the Sellers' Obligations. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V
shall be true and correct in all material respects at and as of the Closing
27
Date as though then made and as though the Closing Date were substituted for
the date of this Agreement throughout such representations and warranties
(other than those representations and warranties that address matters as of
particular dates, which shall be true and correct at and as of such
particular date), in each case, except to the extent that such
representations and warranties are qualified by terms such as "material" and
"Material Adverse Effect," in which case such representations and warranties
shall have been true and correct in all respects at and as of such date;
(b) Buyer shall have performed and complied with, in all
material respects, all of the covenants and agreements required to be
performed and complied with by it under this Agreement through the Closing,
except to the extent that such covenants and agreements are qualified by
terms such as "material" and "Material Adverse Effect," in which case Buyer
shall have performed and complied with, in all respects, such covenants and
agreements through the Closing;
(c) All filings under the HSR Act shall have been made, and the
applicable waiting periods, if any, thereunder shall have expired or been
terminated;
(d) No action, suit or proceeding before any court or
government body shall be pending or threatened in writing (where such threat
is reasonably likely to result in an action, suit or proceeding) wherein an
unfavorable judgment, decree, ruling, injunction or order would prevent the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement, cause such transactions to be rescinded, or materially and
adversely affect the right of Buyer to own the Shares (and no such judgment,
decree, ruling, injunction or order shall be in effect);
(e) Buyer shall have delivered to the Stockholder
Representatives certified copies of the resolutions duly adopted by Buyer's
board of directors authorizing the execution, delivery and performance of
this Agreement and the other agreements contemplated hereby, and the
consummation of all transactions contemplated hereby and thereby;
(f) Buyer shall have delivered to the Stockholder
Representatives (on behalf of the Sellers) a certificate in the form set
forth as Exhibit E, dated the Closing Date, stating that the preconditions
specified in subsections (a), (b) and (d) have been satisfied;
(g) Buyer shall have delivered to the Stockholder
Representatives a solvency certificate signed by Buyer, substantially in the
form as delivered pursuant to the consummation of the transactions
contemplated by the Commitment Letter, addressed to the Sellers and entitling
the Sellers to rely thereon; and
28
(h) The submission of the notifications and applications
described in Section 11.07, except for submission of the DOE Application,
shall have been made in accordance with the provisions of Section 11.07.
If the Closing occurs, all closing conditions set forth in this Section 2.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by the Sellers.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF EACH SELLER
-------------------------
Each Seller, solely for such Seller (on a several, and not joint
basis), represents and warrants to Buyer as follows:
3.01 Organization; Authority. Such Seller (if a limited partnership
or other entity) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation or organization. Such
Seller has all requisite power and authority (including, if a limited
partnership, full partnership power and authority) and full legal capacity to
execute and deliver this Agreement and to perform such Seller's obligations
hereunder.
3.02 Execution and Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement by such Seller (if a
limited partnership or other entity) and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
action, and no other proceedings on the part of such Seller are necessary to
authorize its execution, delivery or performance. This Agreement has been
duly executed and delivered by such Seller, and assuming that this Agreement
is the valid and binding agreement of Buyer, this Agreement constitutes the
valid and binding obligation of such Seller, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy laws, other
similar laws affecting creditors' rights and general principles of equity
effecting the availability of specific performance and other equitable
remedies.
3.03 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, law, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which such Seller is subject or,
if such Seller is a limited partnership or other entity, any provision of its
charter or bylaws or similar organizational documents or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
29
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which such Seller is a party or by which
such Seller is bound or to which any of such Seller's assets is subject.
3.04 Ownership of Capital Stock. Such Stockholder or Optionholder, as
the case may be, is the record and beneficial owner of the number of Shares
or Options, as applicable, as set forth opposite such Person's name on the
attached Stockholders Schedule, in each case, free and clear of any and all
Liens, options, proxies, voting trusts or agreements and other restrictions
and limitations of any kind, other than applicable federal and state
securities law restrictions, except as set forth on the Stockholders
Schedule. On the Closing Date, and assuming termination of those agreements
listed on the attached Terminated Contracts Schedule, such Stockholder shall
transfer to Buyer good title to such Shares and such Optionholder shall
transfer to the Company for cancellation such Options, in each case, free and
clear of all Liens, proxies, voting trusts or agreements and other
restrictions and limitations of any kind, other than applicable federal and
state securities law restrictions.
3.05 Brokers Fees. Except for the fees and expenses of SunTrust
Robinson Humphrey, Leeds Weld & Co. and J.W. Childs Associates, Inc. and
their respective Affiliates, such Seller has no liability or an obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement, or any other transaction,
for which Buyer could become liable or obligated. Neither Buyer nor any
Affiliate of Buyer (including, after the Closing, the Company and its
Subsidiaries) has or shall have any liability or otherwise suffer or incur
any Losses as a result of, or in connection with, any brokerage or finder's
fee or other commission of any Person retained by such Seller in connection
with any of the transactions contemplated by this Agreement or any other
transaction (including, without limitation, SunTrust Robinson Humphrey, Leeds
Weld & Co. and J.W. Childs Associates, Inc. and their respective Affiliates).
3.06 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and the matters set forth on the Filings
Schedule, such Seller is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution,
delivery or performance by it of this Agreement or the consummation of the
transactions contemplated hereby. Except for the matters set forth on the
Filings Schedule, no consent, approval or authorization of any governmental
or regulatory authority or any other party or Person is required to be
obtained by such Seller in connection with its execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Such Seller is not subject to any outstanding judgment,
order or decree of any court or governmental body which would adversely
affect such Seller's performance under this Agreement or the consummation of
30
the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded or
materially and adversely affect the right of Buyer to own the Shares.
3.07 Litigation. There are no actions, suits or proceedings pending
or, to such Seller's knowledge, threatened against or affecting such Seller
at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would adversely affect such
Seller's performance under this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Buyer that:
4.01 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted. The
Company is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of its businesses as now conducted
requires it to qualify, except where the failure to be so qualified would not
have a Material Adverse Effect. Each of RUSI and RUMI is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4.02 Subsidiaries.
------------
(a) Except as set forth on the attached Subsidiary Schedule,
neither the Company nor any of its Subsidiaries owns or holds the right to
acquire any stock, partnership interest, joint venture interest or other
equity ownership interest in any other Person. Each Subsidiary is either
wholly owned by the Company, a Subsidiary or Subsidiaries as indicated on the
Subsidiary Schedule. The Company and/or one of its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each
Subsidiary, free and clear of any restrictions on transfer, taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands (other than restrictions under federal, state and foreign
securities laws).
(b) Each of the Subsidiaries identified on the Subsidiary
Schedule is validly existing and in good standing under the laws of the
31
jurisdiction of its incorporation or organization (as set forth on the
Subsidiary Schedule), has all requisite corporate, limited liability company,
limited partnership or unlimited liability company, as the case may be, power
and authority and all authorizations, licenses and permits necessary to own
its properties and to carry on its businesses as now conducted. Each of the
Subsidiaries identified on the Subsidiary Schedule is qualified to do
business in every jurisdiction in which its ownership of property or the
conduct of its business as now conducted requires it to qualify, except where
the failure to be so qualified would not have a Material Adverse Effect.
4.03 Authorization; No Breach; Valid and Binding Agreement.
-----------------------------------------------------
(a) The Company and each of RUSI and RUMI has full corporate
power and authority to execute and deliver this Agreement and to perform its
respective obligations hereunder. This Agreement has been duly authorized,
executed and delivered by each of the Company, RUSI and RUMI.
(b) Except as set forth on the attached Authorization Schedule,
neither the execution and delivery of this Agreement, nor the performance of
this Agreement by the Company, RUSI and RUMI and the consummation of the
transactions contemplated hereby will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or
other restriction of any government, governmental agency or court to which
the Company or any of its Subsidiaries is subject or any provision of the
charter or bylaws of the Company or any of its Subsidiaries or (b) conflict
with or result in any breach of, constitute a default under, result in a
violation of, result in the acceleration of, result in the creation of any
Lien upon any assets of the Company or any of its Subsidiaries, or require
any authorization, consent, approval, exemption or other action by or notice
to any court or other governmental body, under any agreement, contract,
lease, license, instrument or other arrangement to which the Company or any
of its Subsidiaries is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition or creation of a Lien upon or
with respect to any of its assets).
(c) Assuming that this Agreement is a valid and binding
obligation of Buyer, this Agreement constitutes a valid and binding
obligation of each of the Company, RUSI and RUMI, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy laws,
other similar laws affecting creditors' rights and general principles of
equity effecting the availability of specific performance and other equitable
remedies.
4.04 Capital Stock. The authorized number of shares of capital stock
of the Company consists of (a) 110,000 shares of Class A Preferred, of which
40,224.125 shares are issued and outstanding and owned of record as set forth
in the Stockholders Schedule, (b) 25,000 shares of Class B Preferred of which
32
25,000 shares are issued and outstanding and owned of record as set forth in
the Stockholders Schedule and (c) 110,000,000 shares of Common Stock of which
1,042,937 shares are issued and outstanding and owned of record as set forth
on the Stockholders Schedule, and of which 96,288 shares are reserved for
issuance upon exercise of the Options. The Stockholders Schedule sets forth
(x) the number of authorized shares of capital stock of each Subsidiary and
(y) the number of shares of capital stock issued and outstanding with respect
to each Subsidiary, including the name of the holder thereof and the number
of shares held by such holder. All Shares and all of the issued and
outstanding shares of capital stock of each Subsidiary have been duly
authorized and are validly issued, fully paid and nonassessable. Except as
set forth on the Stockholders Schedule, neither the Company nor any
Subsidiary has any other capital stock, equity securities or securities
containing any equity features authorized, issued or outstanding, and there
are no agreements, options, warrants or other rights or arrangements existing
or outstanding which provide for the sale or issuance of any of the foregoing
by the Company or any Subsidiary. Except as set forth on the Stockholders
Schedule, and except for the Options, there are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
sell or purchase or otherwise acquire any shares of capital stock or other
equity securities of the Company or any Subsidiary of any kind. Except as
set forth on the Stockholders Schedule, (i) there are no agreements or other
obligations (contingent or otherwise) which require the Company or any
Subsidiary to repurchase or otherwise acquire any shares of the Company's or
any Subsidiary's capital stock or other equity securities and (ii) there are
no voting trusts, proxies or other agreements or understandings with respect
to the voting of the capital stock of the Company or any Subsidiary.
4.05 Financial Statements. The Company has furnished Buyer with
copies of its (i) audited consolidated balance sheet with respect to the
Company and its Subsidiaries as of December 31, 2002 (the "Latest Balance
Sheet"), and the related statement of income for the fiscal year then ended
and (ii) audited consolidated balance sheets and statements of income with
respect to the Company and its Subsidiaries as of and for the fiscal years
ended December 31, 2001 and December 31, 2000. Except as set forth on the
attached Financial Statements Schedule, such financial statements have been
based upon the information concerning the Company and its Subsidiaries
contained in the Company's and its Subsidiaries' books and records, and
present fairly in all material respects the financial condition and results
of operations of the Company and its Subsidiaries (taken as a whole) as of
the times and for the periods referred to therein in accordance with GAAP.
4.06 Absence of Certain Developments. Since the date of the Latest
Balance Sheet, there has not been any Material Adverse Change. Without
limiting the generality of the foregoing, except as set forth on the attached
Developments Schedule and except as expressly contemplated by this Agreement,
33
since the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has:
(a) borrowed any amount or incurred, assumed, guaranteed or
become subject to any liabilities (other than liabilities incurred in the
ordinary course of business consistent with past practice, liabilities under
contracts entered into in the ordinary course of business consistent with
past practice and borrowings from banks (or similar financial institutions)
necessary to meet ordinary course working capital requirements consistent
with past practice);
(b) mortgaged, pledged or subjected to any Lien any portion of
its assets, except Permitted Liens;
(c) sold, leased, assigned or transferred any portion of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice;
(d) accelerated, terminated or canceled any agreement,
contract, lease or license that either is listed on the Contracts Schedule or
would be required to be listed on the Contracts Schedule if such agreement,
contract, lease or license had not been terminated or canceled;
(e) sold, assigned, granted or transferred any Intellectual
Property, or granted a license or sublicense to any rights thereunder or with
respect thereto to a third party, except in the ordinary course of business
consistent with past practice;
(f) suffered any extraordinary losses or waived any rights of
material value;
(g) made any capital investment in, or any material loan to,
any other Person outside the ordinary course of business consistent with past
practice;
(h) made or authorized any change to its charter or bylaws;
(i) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or
other equity securities or warrants, options or other rights to acquire its
capital stock or other equity securities, or any bonds or debt securities;
(j) declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of its capital stock,
except for dividends or distributions made by Subsidiaries to their
respective parents in the ordinary course of business consistent with past
practice;
34
(k) made any capital expenditures or commitments therefor, in
each case, except in the ordinary course of business consistent with past
practice;
(l) taken any action within such Person's control to delay in
any material respect any capital expenditure contemplated to be made in the
Company's budget for fiscal year 2003 approved by the Company's board of
directors;
(m) made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the ordinary
course of business consistent with past practice; \
(n) entered into any employment contract with payments
exceeding $100,000 per year or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(o) adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(p) made any other change in employment terms (including
compensation) for any of its directors or officers or for any employees
having employment contracts with annual payments exceeding $100,000 per year,
in each case, outside the ordinary course of business consistent with past
practice; or
(q) committed to any of the foregoing.
4.07 Title to Properties.
-------------------
(a) Except as set forth on the Liens Schedule and except for
such property and assets transferred or otherwise disposed of in the ordinary
course of business consistent with past practice, the Company and its
Subsidiaries own good and marketable title to, or hold pursuant to valid and
enforceable leases, all of the personal property and assets used by them,
located on their premises or shown to be owned by it on the Latest Balance
Sheet, free and clear of all Liens, except for Permitted Liens.
(b) The real property demised by the leases described on the
attached Leased Real Property Schedule (the "Leased Real Property")
constitutes all of the real property leased by the Company and its
Subsidiaries. Except as set forth on the attached Leased Real Property
35
Schedule, each Leased Real Property lease (i) is legal, valid, binding and
enforceable against the Company or its Subsidiaries (as applicable) and, to
the Company's knowledge, against the other parties thereto and (ii) is in
full force and effect, in each case subject to proper authorization and
execution of such lease by the other party and the application of any
bankruptcy or creditor's rights laws or general principles of equity. The
Company has delivered or made available to Buyer true, complete and accurate
copies of each of the leases described on the Leased Real Property Schedule,
and none of the leases have been modified in any respect, except to the
extent that such modifications are disclosed by the copies delivered or made
available to Buyer. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any other party, is in default in any respect under any
of such leases, and to the Company's knowledge, no event has occurred or
circumstance exists which, with the delivery of notice, the passage of time
or both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such leases. No
security deposit or portion thereof deposited with respect to any such lease
has been applied in respect of a breach or default under such lease which has
not be been redeposited in full. Neither the Company nor any Subsidiary has
subleased, licensed or otherwise granted any other party the right to use or
occupy such Leased Real Property or any portion thereof. Except as set forth
on the attached Authorizations Schedule the transaction contemplated by this
Agreement does not require the consent of any other party to any of such
leases for the Leased Real Property, will not result in a breach of or
default under such lease, and will not otherwise cause such lease to cease to
be legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing.
(c) Except as set forth on the attached Owned Real Property
Schedule, neither the Company nor any of its Subsidiaries owns any real
property. With respect to each parcel of real property listed on the Owned
Real Property Schedule (the "Owned Real Property"):
(i) either the Company or a Subsidiary owns good and marketable
title to such parcel of real property, free and clear of all Liens as
of the Closing Date, other than Permitted Liens and other encumbrances
and exceptions set forth on the Owned Real Property Schedule;
(ii) the Company has received no written notice of, and, to the
Company's knowledge, there do not exist and there has not been
threatened, any pending condemnation or eminent domain proceedings,
lawsuits or administrative actions relating to Owned Real Property
which would adversely affect the current use, occupancy or value
thereof;
(iii) except as set forth on the Owned Real Property Schedule,
and except for Permitted Liens, there are no leases, subleases,
licenses, concessions or other agreements to which the Company or any
36
of its Subsidiaries is a party granting to any party or parties the
right of use or occupancy of any portion of such parcel of real
property;
(iv) there are no outstanding options or rights of first refusal
to purchase such parcel of Owned Real Property, any portion thereof or
interest therein;
(v) to the Company's knowledge, the Owned Real Property has
direct access to a public street adjoining such property or has access
to a public street via valid easements benefiting such Owned Real
Property, and such access is not dependent on any land or other real
property interest which is not included in the Owned Real Property.
None of the Owned Real Property, including the improvements and
fixtures thereon, is dependent for its access, use or operation on any
land, building, improvement or other real property interest which is
not included in the Owned Real Property; and
(vi> to the Company's knowledge, the current use and occupancy
of the Owned Real Property and the operation of the business of the
Company and its Subsidiaries as currently conducted does not violate in
any material respect any easement, covenant, condition, restriction or
similar provision in any instrument of record or other unrecorded
agreement affecting the Owned Real Property.
(d) All buildings, improvements and fixtures, and components of
the Owned Real Property and Leased Real Property are in good condition and
repair and sufficient for the continued operation of the business as
presently conducted.
(e) To the Company's knowledge, except as set forth on the
Leased Real Property Schedule, all water, oil, gas, electrical,
telecommunications, sewer, storm and waste water systems and other utility
services or systems for the Owned Real Property and the Leased Real Property
have been installed and are operational and sufficient for the operation of
the business presently conducted.
4.08 Tax Matters.
-----------
(a) The Company and its Subsidiaries have filed or sent in a
timely manner all federal, foreign, state, county and local income, excise,
property and other Tax Returns which are required to be filed or sent by them
under applicable laws (taking into account any extensions of time to file or
send which have been duly perfected). Except as set forth on the attached
Taxes Schedule, all Taxes shown as owing by the Company and its Subsidiaries
on all such Tax Returns have been timely paid in full or properly accrued.
All such Tax Returns are true and correct, and the provision for accrued and
unpaid Taxes on the Final Working Capital Statement is sufficient for all
37
accrued and unpaid Taxes as of the date thereof. All Taxes which the Company
or any Subsidiary is obligated to withhold or collect, including without
limitation, from amounts owing to any employee, creditor or third party, have
been timely paid in full or properly accrued.
(b) Except as set forth on the Taxes Schedule, no Tax Return of
the Company or any Subsidiary currently is under audit or examination by any
Taxing Authority, no written or unwritten notice of such an audit or
examination has been received by the Company or any Subsidiary, no deficiency
has resulted from any prior audit or examination relating to Taxes of the
Company or a Subsidiary, and no material issues relating to Taxes have been
raised in any completed audit or examination of the Company or a Subsidiary.
(c) Except as set forth on the Taxes Schedule, neither the
Company nor any Subsidiary is party to or bound by any tax sharing agreement
or tax indemnity obligation.
(d) Except as set forth on the Taxes Schedule, there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any Tax Returns required to be filed with respect to
the Company or any Subsidiary and the Company and its Subsidiaries have not
requested any extension of time within which to file any Tax Return.
(e) Except as set forth on the Taxes Schedule, neither the
Company nor any Subsidiary will be required to include in a taxable period
ending after the Closing Date taxable income attributable to income that
accrued in a taxable period ending on or before the Closing Date but that was
not recognized in such taxable period as a result of the installment method
of accounting, the long-term contract method of accounting, the cash method
of accounting or Section 481 of the Code or any comparable provision of
state, local or foreign Tax law, or for any other reason.
(f) Except as set forth in the Taxes Schedule, neither the
Company nor any Subsidiary has taken any action that has caused or would
cause, or failed to take any action when failure to act would have caused or
would cause, either the Company or any Subsidiary to be (i) subject to any
Tax that would be payable to or collectable by the nation of St. Lucia, or
(ii) no longer eligible for the benefits of the Treaty Establishing the
Caribbean Community (signed July 4, 1973), as amended through the date
hereof.
4.09 Contracts and Commitments.
-------------------------
(a) Except as set forth on the attached Contracts Schedule,
neither the Company nor any Subsidiary is party to any: (i) agreement
relating to any completed business acquisition by the Company or any
38
Subsidiary within the last two years; (ii) collective bargaining agreement or
contract with any labor union; (iii) written bonus, pension, profit sharing,
retirement or other form of deferred compensation plan, other than as
described in Section 4.13 or the schedules relating thereto; (iv) stock
purchase, stock option or similar plan; (v) contract for the employment of
any officer, individual employee or other person on a full-time or consulting
basis with payments in excess of $100,000; (vi) agreement or indenture
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a Lien on any material portion of the Company's or any Subsidiary's
assets other than Permitted Liens; (vii) guaranty of any obligation for
borrowed money or other material guaranty; (viii) lease or agreement under
which it is lessee of, or holds or operates any personal property owned by
any other party, for which the annual rental exceeds $100,000; (ix) lease or
agreement under which it is lessor of, or permits any third party to hold or
operate any property, real or personal, for which the annual rental exceeds
$100,000; (x) contract or group of related contracts with the same party for
the purchase of products or services, under which the undelivered balance of
such products and services has a selling price in excess of $150,000; (xi)
contract or group of related contracts with the same party for the sale of
products or services under which the undelivered balance of such products or
services has a sales price in excess of $150,000; (xii) contract which
prohibits the Company or any Subsidiary from freely engaging in business
anywhere in the world; (xiii) clinical affiliation agreement with a hospital
or university (an "Affiliated Hospital or University") pursuant to which such
Affiliated Hospital or University has accepted 25 or more students during the
fiscal year ended December 31, 2002 from either Institution for clinical
rotations; (xiv) contract with any of the Sellers or their Affiliates (other
than the Company and its Subsidiaries); (xv) contract under which it has
advanced or loaned any amount to any of its directors, officers and
employees; (xvi) contract or group of related contracts under which the
Company or any of its Subsidiaries has advanced or loaned any other Persons
amounts in the aggregate exceeding $100,000; (xvii) contract under which the
Company or its Subsidiaries has granted any Person any registration rights;
or (xviii) contract for the construction of buildings, improvements or other
infrastructure in connection with the Owned Real Property or the Leased Real
Property.
(b) Buyer either has been supplied with, or has been given
access to, a true, correct and complete copy of all written contracts which
are referred to on the Contracts Schedule, together with all material
amendments, waivers or other changes thereto.
(c) With respect to each contract listed on the Contracts
Schedule, except as set forth on Contracts Schedule, (i) the agreement is
legal, valid, binding and enforceable against the Company or its Subsidiaries
(as applicable) and, to the Company's knowledge, against the other parties
thereto, and such agreement is in full force and effect; (ii) neither the
Company nor its Subsidiaries is in breach or default and, to the Company's
knowledge, no other party to such agreement is in breach or default, and, to
39
the Company's knowledge, no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and, (iii) to the
Company's knowledge, no party has repudiated any provision of the agreement.
(d) The Company and its Subsidiaries have provided Buyer with
true and accurate copies of (i) the agreement by and between the Government
of St. Kitts and Nevis and Ross University, dated March 28, 1983, (ii) the
agreement by and between the Government of St. Kitts and Nevis and Ross
University School of Medicine School of Veterinary Medicine (St. Kitts)
Limited, dated March 6, 2003 (the agreements referred to in clauses (i) and
(ii) hereinafter referred to collectively as the "St. Kitts Agreement"). The
St. Kitts Agreement is, and as of the Closing Date, will be, fully in effect
and neither the Company nor any Subsidiary has taken any action that has
caused, or failed to take any action when failure to act has caused, the St.
Kitts Agreement to be terminated, amended in any respect that would have a
material detrimental effect on Buyer or its Subsidiaries, or otherwise to be
no longer fully effective in accordance with the terms thereof.
4.10 Intellectual Property. The term "Company Intellectual Property"
shall include all trademarks, service marks, whether registered or existing
at common law, copyrights, patents, trade secrets, confidential information
and know-how used in connection with the Company or Subsidiary. The attached
Intellectual Property Schedule contains a complete list of all applications
and registrations for the Company Intellectual Property. Except as set forth
on the Intellectual Property Schedule: (i) the Company or one of its
Subsidiaries owns all of the Company Intellectual Property, free and clear of
all Liens and security interests; (ii) neither the Company nor any Subsidiary
has, or has received any notice alleging that it has, interfered with,
infringed upon, misappropriated or violated any Intellectual Property right
of any third party; and (iii) to the Company's knowledge, no third party has
interfered with, infringed upon or misappropriated any of the Company
Intellectual Property.
4.11 Litigation. Except as set forth on the attached Litigation
Schedule, neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body, and
(i) there are no actions, suits or proceedings pending or, to the Company's
knowledge, threatened against the Company or any Subsidiary and (ii) there
have been no such actions, suits or proceedings against the Company or any
Subsidiary during the past two years, in each case, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
40
4.12 Governmental Consents, etc. Except as set forth on the
Authorization Schedule, and except for the applicable requirements of the HSR
Act, no permit, consent, approval or authorization of, or declaration to or
filing with, any governmental or regulatory authority is required in
connection with any of the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of any other
transaction contemplated hereby.
4.13 Employee Benefit Plans.
----------------------
(a) Except as listed on the attached Employee Benefits
Schedule, neither the Company nor any Subsidiary maintains, contributes to or
has any liability under or with respect to any "employee benefit plan" (as
defined under Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or any retirement or deferred compensation plan,
incentive compensation plan, stock plan, retention plan or agreement,
unemployment compensation plan, vacation pay, change in control, severance
pay, bonus or benefit arrangement, insurance or hospitalization program or
any fringe benefit arrangements for any current or former employee, director,
consultant or agent, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an employee benefit plan
(collectively referred to as the "Plans"). Each of the Plans that is
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), has received a favorable determination letter
from the Internal Revenue Service that covers all amendments thereto, or is
within the applicable remedial amendment period. The Plans comply in form
and in operation in all material respects with their terms and with the
requirements of the Code and ERISA and all other applicable laws.
(b) With respect to the Plans, all required contributions have
been made or properly accrued.
(c) None of the Plans or any employee benefit plan maintained,
sponsored or contributed to by any ERISA Affiliate is subject to Title IV of
ERISA or is a multiemployer plan (as defined in Section 3(37) of ERISA).
(d) With respect to the Plans, the Company has furnished to
Buyer true and complete copies (as applicable) of (i) the most recent
determination letter received from the Internal Revenue Service, (ii) the
latest Form 5500 annual reports, (iii) the Plan documents (or, in the case of
any Plan that is not written, an accurate description thereof), (iv) all
trust agreements relating thereto, and (v) summary plan description.
41
(e) None of the assets of any Plan are invested in employer
securities or employer real property.
(f) There have been no non-exempt "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with respect
to any Plan, and none of the Company, the Subsidiaries or any of their
respective ERISA Affiliates has engaged in any non-exempt prohibited
transaction that could reasonable be expected to result in a liability to the
Company or any of the Subsidiaries.
(g) There have been no acts or omissions by the Company, the
Subsidiaries or any of their respective ERISA Affiliates which have given
rise to or could reasonably be expected to give rise to fines, penalties,
taxes or related charges under Section 502 of ERISA or Chapters 43, 47, 68 or
100 of the Code for which the Company or any of the Subsidiaries may be
liable.
(h) None of the payments contemplated by the Plans would, in
the aggregate, constitute excess parachute payments (as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof)) or would
exceed the amount deductible pursuant to Section 162(m) of the Code.
(i) There are no actions, suits or claims (other than routine
claims for benefits) pending or threatened involving any Plan or the assets
thereof and no facts exist which could reasonably be expected to give rise to
any such actions, suits or claims (other than routine claims for benefits).
(j) None of the Company or any of its Subsidiaries has any
liability or contingent liability for providing, under any Plan or otherwise,
any post-retirement medical or life insurance benefits, other than statutory
liability for providing group health plan continuation coverage under Part 6
of Title I of ERISA and Section 4980B of the Code or applicable state law.
(k) Notwithstanding anything to the contrary in Sections 4.01,
4.02, 4.12, 4.15 or any other provision of this Agreement, the
representations and warranties contained in this Section 4.13 are the sole
and exclusive representations and warranties of the Company with respect to
any matters relating to any Plan.
4.14 Insurance. The attached Insurance Schedule lists each insurance
policy maintained by the Company and its Subsidiaries, or to which the
Company or any of its Subsidiaries is a party, a named insured or otherwise a
beneficiary of coverage. All of such insurance policies are in full force
and effect, and neither the Company nor any Subsidiary is in default with
respect to its obligations under any of such insurance policies.
42
4.15 Compliance with Laws. The Company and each Subsidiary is in
compliance with all applicable laws and regulations of foreign, federal,
state and local governments and all agencies thereof, and no action, suit,
proceeding, investigation, charge, complaint, claim, demand or notice has
been received by, or, to the Company's knowledge, filed or commenced against,
any of them alleging failure to so comply.
4.16 Environmental, Health and Safety Matters. Except as set forth on
the attached Environmental Matters Schedule:
(a) The Company and each of its Subsidiaries has complied, and
is in compliance with all Environmental, Health and Safety Requirements.
(b) Without limiting the generality of the foregoing, the
Company and each of its Subsidiaries has obtained, has complied, and is in
compliance with all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business.
(c) Neither the Company nor any Subsidiary has received any
written or oral notice from any applicable governmental authority or third
party regarding any actual or alleged violation of Environmental, Health and
Safety Requirements or any liability arising under Environmental, Health and
Safety Requirements, including any investigatory, remedial or corrective
obligation, relating to the Company, its Subsidiaries or their facilities.
(d) To the Company's knowledge, none of the following exists at
any property or facility owned or operated by the Company or its
Subsidiaries: (1) underground storage tanks, (2)asbestos-containing material
in any friable and damaged form or condition, (3) materials or equipment
containing polychlorinated biphenyls, or (4) landfills, surface impoundments,
or disposal areas.
(e) To the Company's knowledge, neither the Company nor any of
its Subsidiaries, nor any of their respective predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance in a manner that has given or would give rise to
liabilities, including any liability for response costs, corrective action
costs, personal injury, property damage or natural resources damages,
pursuant to Environmental, Health, and Safety Requirements.
43
(f) Notwithstanding the foregoing, to the Company's knowledge,
there is no condition or occurrence with respect to matters related to the
environment, public health and safety, and worker health and safety, that
would give rise to any material liability.
4.17 Affiliated Transactions. Except as set forth on the attached
Affiliated Transactions Schedule, no officer, director, Stockholder,
Affiliate of a Stockholder or, to the Company's knowledge, Affiliate of the
Company or any individual in such officer's, director's or Stockholder's
immediate family is a party to any arrangement, agreement, contract,
commitment or transaction (whether oral or written) with the Company or its
Subsidiaries or has any interest in any property used by the Company or its
Subsidiaries, or has been involved in any such relationship or held such an
interest within the past twelve months.
4.18 Employees. Except as set forth on the attached Employee
Schedule, none of the Company and its Subsidiaries has experienced any strike
or grievance, claim of unfair labor practices, or other collective bargaining
dispute within the past two years. None of the Company and its Subsidiaries
has committed any unfair labor practice. Except as set forth on the Employee
Schedule, neither the Company nor any Subsidiary has received any written
notice regarding an organizational effort by or on behalf of any labor union
with respect to employees of any of the Company and its Subsidiaries, and to
the Company's knowledge, no such organizational effort is presently being
made or threatened. Except as set forth on the Employee Schedule, to the
Company's knowledge, there is no employment-related charge, complaint,
grievance, investigation or inquiry of any kind pending or threatened in any
forum relating to an alleged violation or breach by the Company (or its
agents) of any law, regulation or contract.
4.19 Brokerage. Except for the fees and expenses of SunTrust Robinson
Humphrey, Leeds Weld & Co. and J.W. Childs Associates, Inc. and their
respective Affiliates, and except as set forth on the Brokerage Schedule,
there are no claims against the Company or any of its Subsidiaries for
brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement, or any other
transaction, and neither the Company nor any of its Subsidiaries has any
liability or obligation to pay any such fees, except for the fees of SunTrust
Robinson Humphrey, all of which fees shall be paid by the Company and its
Subsidiaries on or prior to the Closing Date. Except as set forth on the
Brokerage Schedule, neither Buyer nor any Affiliate of Buyer (including,
after the Closing, the Company and its Subsidiaries) has or shall have any
liability or otherwise suffer or incur any Losses as a result of, or in
connection with, any brokerage or finder's fee or other commission of any
Person retained by, or on behalf of, the Company in connection with any of
the transactions contemplated by this Agreement or any other transaction
44
(including, without limitation, SunTrust Robinson Humphrey, Leeds Weld & Co.
and J.W. Childs Associates, Inc. and their respective Affiliates).
4.20 Regulatory Compliance.
---------------------
(a) The attached Accreditations, Licenses and Permits Schedule
contains a complete and accurate statement of the Accreditations, Licenses
and Permits granted to the Company, its Subsidiaries and the Institutions,
the date each Accreditation, License or Permit was last granted and the
current term of each Accreditation, License or Permit. Each Accreditation,
License and Permit set forth in the Accreditations, Licenses and Permits
Schedule is in full force and effect, and is a valid, binding and enforceable
obligation by or against the Company, its Subsidiaries and the Institutions,
as applicable. No event has occurred that limits or, with the giving of
notice or the passage of time, or both, would limit the legal effect or
validity of such Accreditation, License or Permit. No action or proceeding
for the suspension or cancellation of any Accreditation, License or Permit is
pending or, to the Company's knowledge, is threatened, and there are no
material facts, circumstances or omissions concerning the Company, its
Subsidiaries or the Institutions that would likely lead to any such action or
proceeding. Each Institution has received and maintained without
interruption, in all material respects, all necessary Accreditations,
Licenses and Permits for each Institution's operation and receipt of all
student financial assistance including those Accreditations, Licenses and
Permits required for each Institution to offer educational programs, and to
offer student financial assistance, including Title IV Program Funds, to the
students enrolled in such educational programs.
(b) Except as set forth on the Accreditations, Licenses and
Permits Schedule, neither the Company, any of its Subsidiaries nor any of
the Institutions is on probation or warning or is in material violation of
any of the terms or conditions of any of the Accreditations, Licenses and
Permits or has received notice that any of the Accreditations, Licenses and
Permits will not be renewed and, to the Company's knowledge, there is no
basis for nonrenewal of any of the Accreditations, Licenses and Permits.
(c) U.S. Department of Education Certification and Eligibility.
(i) Seller has provided Buyer with a copy of each Institution's
most recent DOE Application for Institutional Participation in Programs
Under the Higher Education Act of 1965, as amended (the "Higher
Education Act"), and Institutional Eligibility and Certification for
Title IV Student Financial Aid. Each Institution is certified by the
DOE as, and meets the criteria to be, an eligible institution under
Title IV, pursuant to 20 U.S.C. S. 1002 and 34 C.F.R. SS. 600.51-600.57,
and is a party to, and in compliance with, a valid program
45
participation agreement with the DOE. To the Company's knowledge,
neither Institution is subject to any limitation, suspension or
termination proceeding, or subject to any other action or proceeding by
the DOE that would likely result in the loss of certification or
eligibility or a liability or fine. Except as set forth on the DOE
Compliance Schedule, to the Company's knowledge, there are no facts,
circumstances, or omissions concerning either Institution that would
lead to such an action by the DOE.
(ii) The Company has accurately disclosed to the DOE the
ownership of each Institution to the extent, and in the manner,
required by DOE regulations.
(iii) Except as set forth on the DOE Compliance Schedule, to the
Company's knowledge, each Institution is in material compliance with
all rules, regulations and requirements established by the DOE
pertaining to its eligibility and participation in Title IV of the
Higher Education Act. Except as set forth on the DOE Compliance
Schedule, to the Company's knowledge, there are no facts,
circumstances, or omissions concerning either Institution that would
likely result in a finding of material non-compliance with regard to
such rules, regulations and requirements. Without limiting the
foregoing:
(A) Except as set forth on the DOE Compliance Schedule,
each Institution materially satisfies the DOE standards of
financial responsibility, as set forth at 34 C.F.R. S. 668.171-
175, and administrative capability, as set forth at 34 C.F.R.
S. 668.16, including all requirements pertaining to satisfactory
academic progress. Further, each program offered by the
Institutions is an eligible program in accordance with the
requirements of 34 C.F.R. S. 668.8.
(B) Except as set forth on the DOE Compliance Schedule,
each Institution provides refunds substantially in accordance
with applicable governmental and regulatory refund policies and
as required pursuant to 34 C.F.R. S. 668.22.\
(C) Neither Institution received for the fiscal year
ending December 31, 2002, greater than ninety percent (90%) of
its revenues from Title IV or other federal student financial aid
funds and each Institution satisfies the requirements regarding
tuition revenue established by the DOE as set forth at 34 C.F.R.
S. 600.5. The Department of Education Schedule contains a correct
statement of each Institution's percentage of revenue from such
federal funding sources.
(D) The cohort default rates published by the DOE for
fiscal years 1999 and 2000 for each Institution are listed on
the Department of Education Schedule. Based on the preliminary
cohort default rates supplied by the DOE for fiscal year 2001,
46
neither Institution will have cohort default rates attributed to
it of 25% or over for three consecutive years and neither
Institution could be declared ineligible to participate in
Federal Family Education Loan ("FFEL") programs.
(d) Notwithstanding anything to the contrary in Sections 4.01,
4.02, 4.12, 4.15 or any other provision of this Agreement, the
representations and warranties in this Section 4.20 are the sole and
exclusive representations and warranties with respect to any matters relating
to the regulatory compliance matters covered by this Section 4.20 (including,
without limitation, all matters relating to Necessary Regulatory Authorities
and related regulations).
4.21 Undisclosed Liabilities. Except as set forth on the attached
Liabilities Schedule, neither the Company nor any of its Subsidiaries has any
liabilities required to be set forth on a balance sheet prepared in
accordance with GAAP except for (i) liabilities reflected or reserved against
in the Latest Balance Sheet, (ii) current liabilities incurred in the
ordinary course of business consistent with past practice since the date of
the Latest Balance Sheet, and (iii) liabilities incurred after the date
hereof and expressly permitted by Section 6.01.
4.22 Claims Against Officers and Directors. There are no pending or,
to the Company's knowledge, threatened claims against any director or officer
of the Company or any Subsidiary which could reasonably be expected to give
rise to any claim for indemnification against the Company or any Subsidiary.
4.23 Improper Payments. Except as set forth on Improper Payments
Schedule, none of the Company, any Subsidiary or any director or officer of
the Company or any Subsidiary (acting on behalf of and in such Person's
capacity as a director or officer of the Company or any Subsidiary), nor, to
the Company's knowledge, any Person acting on behalf of any them, has: (a) to
the Company's knowledge, made, paid or received any unlawful bribes,
kickbacks or other similar payments to or from any Person during the last
five years or (b) made any improper payments (as defined in the United States
Foreign Corrupt Practices Act).
4.24 Prior Operations. During the last five years, neither the
Company nor any Subsidiary has carried on any trade or business, other than
the business in which it is currently engaged and other education-related
businesses, and neither has held any assets or incurred any liabilities,
other than with respect to its current business or other education-related
businesses.
4.25 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
47
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Sellers and the Company
that:
5.01 Organization and Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to enter into this Agreement and
perform its obligations hereunder. On the Closing Date, each of DelCo and
BarbCo will be duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority to and perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all requisite action (including corporate action), and no other corporate
proceedings on its part are necessary to authorize its execution, delivery or
performance of this Agreement. On the Closing Date, the consummation of the
transactions contemplated hereby by each of DelCo and BarbCo shall be duly
and validly authorized by all requisite action and no other proceedings on
its part are necessary to authorize its performance of this Agreement. This
Agreement has been duly executed and delivered by Buyer and, assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy laws, other similar laws affecting creditors' rights and general
principles of equity effecting the availability of specific performance and
other equitable remedies.
5.03 No Breach. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws or similar organizational documents,
any applicable law, or rule or regulation of any governmental authority, or
any material agreement or instrument, or any license, franchise or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated in any material respect by its execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
5.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and the matters set forth on the Filings
Schedule, Buyer is not required to submit any notice, report or other filing
with any governmental authority in connection with the execution, delivery or
performance by it of this Agreement or the consummation of the transactions
contemplated hereby, and after incorporation, neither DelCo nor BarbCo shall
be required to submit any notice, report or other filing with any
48
governmental authority in connection with the consummation of the
transactions contemplated hereby. Except for the matters set forth on the
Filings Schedule, no consent, approval or authorization of any governmental
or regulatory authority or any other party or Person is required to be
obtained (i) by Buyer in connection with its execution, delivery and
performance or consummation of this Agreement or (ii) after incorporation, by
DelCo or BarbCo in connection with the performance or consummation of the
transactions contemplated hereby. Buyer is not, and after incorporation,
neither of DelCo or BarbCo will be, subject to any outstanding judgment,
order or decree of any court or governmental body which would adversely
affect Buyer's performance under this Agreement or the consummation of the
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded or
materially and adversely affect the right of Buyer to own the Shares.
5.05 Litigation. There are no actions, suits or proceedings pending
or, to Buyer's knowledge, threatened against or affecting Buyer at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would adversely affect Buyer's performance under this
Agreement or the consummation of the transactions contemplated hereby.
5.06 Brokerage. Except for the fees and expenses of Credit Suisse
First Boston Corporation, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement or any other transaction based on any
arrangement or agreement made by or on behalf of Buyer. No Seller nor any
Affiliate of any Seller has or shall have any liability or otherwise suffer
or incur any Losses as a result of, or in connection with, any brokerage or
finder's fee or other commission of any Person retained by Buyer in
connection with any of the transactions contemplated by this Agreement or any
other transaction (including, without limitation, Credit Suisse First Boston
Corporation).
5.07 Investment Representation. Buyer is purchasing the Shares for
its own account with the present intention of holding such securities for
investment purposes and not with a view to or for sale in connection with any
public distribution of such securities in violation of any federal or state
securities laws. Buyer is an "accredited investor" as defined in Regulation
D promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Securities Act"). Buyer acknowledges that it
is informed as to the risks of the transactions contemplated hereby and of
ownership of the Shares. Buyer acknowledges that the Shares have not been
registered under the Securities Act or any state or foreign securities laws
and that the Shares may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of unless such sale, transfer, assignment,
offer, pledge, hypothecation or other disposition is pursuant to the terms of
49
an effective registration statement under the Securities Act and are
registered under any applicable state or foreign securities laws or pursuant
to an exemption from registration under the Securities Act and any applicable
state or foreign securities laws.
5.08 Financing. Subject to the terms and conditions of the Commitment
Letter (as defined below), Buyer shall have at the Closing sufficient cash
and committed credit facilities to make the payments required to be made by
it in connection with the transactions contemplated hereby (including the
repayment of Indebtedness pursuant to Section 1.04(f) and payment of any
purchase price adjustment pursuant to Section 1.06) and to pay all of its
related fees and expenses, and has obtained a financing commitment letter
(together with the term sheets, annexes and appendices, the "Commitment
Letter"), a true, correct and complete copy (other than redacted portions of
the Fee Letter) of which has been provided to Sellers, providing for, subject
to those conditions set forth therein, commitments to provide all funds
necessary to consummate the transactions contemplated hereby. Buyer has no
reason to believe that the conditions set forth in the Commitment Letter will
not be satisfied, and Buyer has not made any material misrepresentation or
omitted to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading, in connection with obtaining such Commitment Letter. There are
no conditions to the financing contemplated by the Commitment Letter other
than those set forth in the Commitment Letter and the market flex language
contained in the Fee Letter. Buyer has paid all fees currently owed by Buyer
and its affiliates under the Commitment Letter and the Fee Letter. Buyer has
not entered into any other agreements, commitments, side letters or other
agreements with Bank of America, N.A., Banc of America Securities LLC, any of
their affiliates or any other lenders solely in connection with the
transactions contemplated by this Agreement or the financing contemplated by
the Commitment Letter other than the Commitment Letter and its related
documents.
5.09 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Company and each of its Subsidiaries
shall be able to pay their respective debts as they become due and shall own
property which has a fair saleable value greater than the amounts required to
pay their respective debts (including a reasonable estimate of the amount of
all contingent liabilities). Immediately after giving effect to the
transactions contemplated by this Agreement, the Company and each of its
Subsidiaries shall have adequate capital to carry on their respective
businesses. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement
with the intent to hinder, delay or defraud either present or future
creditors of the Company or its Subsidiaries.
50
5.10 Regulatory Qualifications. To Buyer's knowledge, there are no
facts or circumstances attributable to Buyer that would likely cause the DOE,
or any other Necessary Regulatory Authority, whose authorization, consent or
similar approval is required in connection with the transactions contemplated
by this Agreement, to refuse to deliver such authorization, consent or
similar approval.
ARTICLE VI
PRE-CLOSING COVENANTS
---------------------
6.01 Conduct of the Business.
-----------------------
(a) From the date hereof until the Closing Date, the Company
shall carry on its and its Subsidiaries' businesses in the ordinary course of
business consistent with past practice (including, without limitation, with
respect to capital expenditures), except (i) as otherwise provided in the
Schedule of Permitted Exceptions or (ii) if Buyer shall have consented in
advance in writing, which consent will not be unreasonably withheld or
delayed; provided that, the foregoing notwithstanding, the Company may use
all available cash to repay any Indebtedness prior to the Closing.
(b) Without limiting the generality of the foregoing, from the
date hereof until the Closing Date, except as otherwise provided for by this
Agreement or in the Schedule of Permitted Exceptions or consented to in
writing by Buyer, which consent will not be unreasonably withheld or delayed,
the Company shall not, and shall not permit any Subsidiary to, (i) issue or
sell any shares of its or any Subsidiary's capital stock, (ii) issue or sell
any securities convertible into, or options with respect to, warrants to
purchase or rights to subscribe for any shares of its or any Subsidiary's
capital stock, (iii) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capitalization, (iv) amend its or
any Subsidiary's certificate or articles of incorporation or bylaws or
equivalent organizational documents or (v) take any action or enter into any
transaction described in Section 4.06 (except for the first part of clause
(f) thereof).
6.02 Access to Books and Records. From the date hereof until the
Closing Date, the Company shall provide Buyer and its authorized
representatives ("Buyer's Representatives") with full access at all
reasonable times and upon reasonable notice to the offices, properties,
personnel, books and records of the Company and its Subsidiaries in order for
Buyer to have the opportunity to make such investigation as it shall
reasonably desire to make of the affairs of the Company and its Subsidiaries.
From the date hereof until the Closing Date, the Company shall provide Buyer
with monthly financial statements that the Company prepares in the ordinary
51
course of business consistent with past practice, on or about each date on
which such financial statements are completed and provided to representatives
of the Company's stockholders. Buyer acknowledges that it remains bound by
the Confidentiality Agreement, dated November 19, 2002, with the Company (the
"Confidentiality Agreement").
6.03 Consents and Approvals; Regulatory Filings. The Company shall
use its reasonable best efforts to obtain the consents and approvals
identified with an asterisk on the Authorization Schedule. The Company shall
make or cause to be made all filings and submissions under the HSR Act and
any other material laws or regulations applicable to the Company and its
Subsidiaries for the consummation of the transactions contemplated herein,
except for filings and submissions with Necessary Regulatory Authorities
(which are governed exclusively by Section 11.07). The Company shall
coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. The Company shall use its reasonable best efforts to
cause the conditions set forth in Section 2.01 to be satisfied and to
consummate the transactions contemplated herein; provided that none of the
Company, any Subsidiary or any Seller shall be required to expend any funds
to obtain any governmental consents described in Section 2.01(c).
6.05 Exclusive Dealing. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01 hereof, neither the Company, nor any of its
Subsidiaries, nor any Seller shall take or permit any other Person (including
the Company or any of its Subsidiaries) on its behalf to take, and the
Company shall not, directly or indirectly:
(a) (i) solicit, engage or facilitate any inquiries, proposals or
offers from or with, (ii) respond to any inquiries, proposals or offers
relating to, (iii) participate in discussions or negotiations with, or (iv)
encourage or continue any discussions or negotiations which have been
undertaken heretofore with, in each case, any person or entity (other than
Buyer and its advisors) concerning any acquisition, disposition, merger,
business combination, consolidation, recapitalization, liquidation,
dissolution or similar transaction or sale of securities or assets which
could result in the sale of all or any portion of the Company or any of its
Subsidiaries (including all or any portion of the capital stock of the
Company or any of its Subsidiaries) to a person other than Buyer
(collectively, a "Prohibited Transaction");
(b) provide any non-public or confidential information to any person
(other than Buyer and its advisors) in furtherance of any Prohibited
Transaction (except and to the extent required by applicable law (including,
52
without limitation, pursuant to or in connection with a legal proceeding or
an investigation by a governmental authority));
(c) approve, or propose to approve, any proposal or offer relating to
any Prohibited Transaction, or execute or enter into any agreement with
respect to any Prohibited Transaction; or
(d) agree or commit to do any of the foregoing.
6.06 Notification. From the date hereof until the Closing Date, the
Company shall disclose to Buyer in writing in reasonable detail promptly
after coming to the Company's knowledge or the knowledge of the Stockholder
Representatives (a) any fact or event that causes or constitutes a material
breach of any of the representations or warranties contained in Article III
and Article IV, as applicable, made as of the date of this Agreement, or (b)
the occurrence after the date of this Agreement of any fact or event that
would cause or constitute a material breach of (i) any of the representations
or warranties contained in Article III and Article IV, as applicable, had
such representation or warranty been made as of the time of the occurrence or
discovery of such fact or event or (ii) any of the covenants in this
Agreement made by the Company or the Sellers. Notwithstanding any provision
in this Agreement to the contrary, unless Buyer provides the Company or the
Stockholder Representatives with a termination notice pursuant to Section
8.01 within five business days after delivery by the Company of a notice
pursuant to this Section 6.06, Buyer shall be deemed to have waived its right
to terminate this Agreement or prevent the consummation of the transactions
contemplated by this Agreement pursuant to Sections 2.01(a) and 2.01(b)
hereof. Subject to the preceding sentence, no information provided to Buyer
pursuant to this Section 6.06 shall be deemed to cure any misrepresentation
or breach of any representation, warranty or covenant made in this Agreement;
provided, however, that if the Closing does occur, information provided to
Buyer pursuant to clause (b) above shall be effective to cure and correct for
all purposes any breach of any representation, warranty or covenant made as
of the Closing Date which would have existed hereunder by reason of such fact
or event, and Buyer shall not have any claim (whether for indemnification or
otherwise) against the Company or Sellers as a result of such fact or event.
6.07 Regulation S-X. At or prior to Closing, the Company shall have
prepared and provided to Buyer financial statements of the Company and its
Subsidiaries as of and for the fiscal years ended December 31, 2002, December
31, 2001 and December 31, 2000 that comply with Regulation S-X promulgated by
the United States Securities and Exchange Commission (it being agreed that
the expenses incurred in connection with causing the foregoing financial
statements to be Regulation S-X compliant shall be paid by Buyer). Buyer
53
shall provide the Company with such assistance and information as the Company
reasonably requests from time to time in connection with preparing such
financial statements.
6.08 Termination of Expense Reimbursement. From and after the
Closing, the Company shall have no obligation to pay the fees or otherwise
indemnify any Seller for any damages, settlements, fees or expenses incurred
by any Seller arising out of the litigation described in the item marked with
an asterisk on the Affiliated Transactions Schedule.
ARTICLE VII
COVENANTS OF BUYER
------------------
7.01 Access to Books and Records. From and after the Closing, Buyer
shall, and shall cause the Company to, provide the Stockholder
Representatives, the Sellers and their authorized representatives with
reasonable access (for the purpose of examining and copying), during normal
business hours, to the books and records of the Company and its Subsidiaries
with respect to periods prior to the Closing Date in connection with any
matter whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby. Unless otherwise consented to in writing
by the Stockholder Representatives, Buyer shall not permit the Company or its
Subsidiaries, for a period of seven years following the Closing Date, to
destroy, alter or otherwise dispose of any books and records of the Company,
or any portions thereof, relating to periods prior to the Closing Date
without first giving reasonable prior written notice to the Stockholder
Representatives and offering to surrender to the Stockholder Representatives
(on behalf of the Stockholders) such books and records or such portions
thereof.
7.02 Notification. From the date hereof until the Closing Date, Buyer
shall disclose to the Company and the Stockholder Representatives in writing
in reasonable detail promptly after coming to Buyer's knowledge (a) any fact
or event that causes or constitutes a material breach of any of the
representations or warranties contained in Article V made as of the date of
this Agreement, or (b) the occurrence after the date of this Agreement of any
fact or event that would cause or constitute a material breach of (i) any of
the representations or warranties contained in Article V, had such
representation or warranty been made as of the time of the occurrence or
discovery of such fact or event or (ii) any of the covenants in this
Agreement made by Buyer. No information provided to the Company or the
Stockholder Representatives pursuant to this Section 7.02 shall be deemed to
cure any misrepresentation or breach of any representation, warranty or
covenant made in this Agreement; provided, however, that if the Closing does
occur, information provided to the Stockholder Representatives pursuant to
clause (b) above shall be effective to cure and correct for all purposes any
breach of any representation, warranty or covenant made as of the Closing
Date which would have existed hereunder by reason of such fact or event, and
54
the Sellers shall not have any claim (whether for indemnification or
otherwise) against Buyer as a result of such fact or event. From the date
hereof until the Closing Date, if, to Buyer's knowledge, (x) any of the
representations and warranties of the Sellers or the Company in this
Agreement are not true and correct in all material respects, or (y) there are
any material errors in, or omissions from, the schedules to this Agreement of
Sellers or the Company, then, in each case, Buyer shall promptly notify the
Stockholder Representatives thereof.
7.03 Director and Officer Liability and Indemnification.
--------------------------------------------------
(a) For a period of six years after the Closing, Buyer shall
not, and shall not permit the Company or any of its Subsidiaries to amend,
repeal or modify any provision in the Company's or any of its Subsidiaries'
certificate or articles of incorporation or bylaws (or equivalent
organizational documents) relating to the exculpation or indemnification of
any officers and directors (unless required by law), it being the intent of
the parties hereto that the officers and directors of the Company and its
Subsidiaries shall continue to be entitled to such exculpation and
indemnification to the full extent of the law.
(b) For a period of six years after the Closing, Buyer shall,
or shall cause the Company and its Subsidiaries to, maintain director and
officer liability insurance which insurance shall provide coverage for the
individuals who were officers and directors of the Company and its
Subsidiaries prior to Closing comparable to the policy or policies maintained
by Buyer for the benefit of the officers and directors of Buyer's
subsidiaries.
7.04 Regulatory Filings. Buyer shall make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated herein, except for filings and submissions with
Necessary Regulatory Authorities (which are governed exclusively by Section
11.07), and Buyer shall be responsible for all filing fees under the HSR Act
and such other laws or regulations as are applicable to Buyer. Buyer shall
coordinate and cooperate with the Company in exchanging such information and
assistance as the Company may reasonably request in connection with all of
the foregoing.
7.05 Conditions.
----------
(a) Buyer shall use its reasonable best efforts to cause the
conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated herein.
(b) Buyer will promptly notify the Stockholder Representatives
of any proposal by the lender named in the Commitment Letter to withdraw,
terminate or make a material change in the amount of financing contemplated
55
by, or the terms of, the Commitment Letter. In addition, upon the reasonable
request of the Stockholder Representatives, Buyer shall advise and update the
Stockholder Representatives with respect to the status, proposed closing date
and material terms of the proposed financing. Buyer shall not consent to any
amendment, modification or early termination of the Commitment Letter or the
Fee Letter. As part of the transactions contemplated hereby, Buyer shall not
enter into any agreement with the parties to the Commitment Letter, other
than the Commitment Letter, the Fee Letter and the definitive documentation
contemplated by the Commitment Letter. Buyer shall, and shall cause its
Affiliates to, use all commercially reasonable efforts to (i) maintain the
effectiveness of the Commitment Letter, (ii) cause the financing in the
aggregate principal amount contemplated by the Commitment Letter to be
available to Buyer on economic and other material terms no less favorable in
the aggregate to Buyer than the terms reflected in the term sheets attached
to the Commitment Letters and (iii) to the extent within Buyer's control,
satisfy all funding conditions to the financing set forth in the definitive
documentation with respect to the financing contemplated by the Commitment
Letter. Buyer shall provide to the Stockholder Representatives promptly
after the receipt thereof with any commitments of any lenders to participate
in the financing contemplated by the Commitment Letter, including pursuant to
any syndication efforts in connection therewith.
7.06 Buyer's Solvency. Buyer shall deliver to the Sellers at the
Closing a solvency certificate signed by Buyer, substantially in the form as
delivered pursuant to the consummation of the transactions contemplated by
the Commitment Letter, addressed to the Sellers and entitling the Sellers to
rely thereon.
7.07 Employee Benefits.
-----------------
(a) For vesting and eligibility purposes (but not benefit
accrual purposes) under the employee benefit plans of Buyer and its
Affiliates providing benefits after the Closing Date, each Non-Union Employee
who is as of the Closing Date an employee of the Company or any of its
Subsidiaries shall be credited with his or her years of service with the
Company or its Subsidiary, as applicable, determined as of the Closing Date,
to the same extent as such Non-Union Employee was entitled, before the
Closing Date, to credit for such service under any similar Plans, except to
the extent such credit would result in a duplication of benefits. In
addition, and without limiting the generality of the foregoing, for purposes
of each employee benefit plan sponsored by Buyer and its Affiliates for the
benefit of Non-Union Employees (such plans, collectively the "New Plans"),
which provide medical, dental, pharmaceutical or vision benefits to any
Non-Union Employee, Buyer shall cause such Non-Union Employee (and his or her
covered dependents) to be given credit for his service with the Company and
its Subsidiaries as of the Closing Date for purposes of satisfying all
56
pre-existing condition exclusions and actively-at-work requirements, and
Buyer shall cause any eligible expenses incurred by such employee and his or
her covered dependents under a Plan during the portion of the plan year in
which the Closing Date occurs to be taken into account under a corresponding
New Plan for purposes of satisfying all deductible, coinsurance and maximum
out-of-pocket requirements applicable to such employee and his or her covered
dependents for the applicable plan year as if such amounts had been paid in
accordance with such New Plan.
(b) Buyer has reviewed the Dominica Collective Bargaining
Agreement presently in effect, and understands and acknowledges its
obligations thereunder effective as of the Closing Date. Buyer shall cause
the Company and its Subsidiaries to employ or continue to employ each Union
Employee consistent with the Dominica Collective Bargaining Agreement at the
wages and on the terms and conditions of employment as required by the
Dominica Collective Bargaining Agreement. Additionally, Buyer acknowledges
its obligation to continue the Plans and other benefit arrangements existing
as of the Closing Date with respect to each Union Employee to the extent
required by the Dominica Collective Bargaining Agreement. Buyer acknowledges
that the Dominica Collective Bargaining Agreement may be extended or replaced
after the date hereof and prior to Closing and further acknowledges that
Buyer's obligations with respect to the Dominica Collective Bargaining
Agreement (including, without limitation, as described in this Section
7.07(b)) will apply to any such extension or replacement; provided, however,
that the Company shall provide Buyer information reasonably requested by
Buyer from time to time regarding the Company's discussions with Union
Employees or their representatives regarding the extension or replacement of
the Dominica Collective Bargaining Agreement.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Buyer and the Stockholder
Representatives (on behalf of the Sellers);
(b) by Buyer, if there has been a violation or breach by the
Company or the Sellers of any covenant, representation or warranty contained
in this Agreement which has prevented or made impossible, or would prevent or
make impossible, the satisfaction of any condition to the obligations of
Buyer at the Closing as set forth in Section 2.01, and such violation or
57
breach has not been waived by Buyer or, in the case of a covenant breach,
cured by the Company or the Sellers within ten days after written notice
thereof from Buyer;
(c) by the Stockholder Representatives (on behalf of the
Sellers), if there has been a violation or breach by Buyer of any covenant,
representation or warranty contained in this Agreement which has prevented or
made impossible, or would prevent or make impossible, the satisfaction of any
condition to the obligations of the Sellers at the Closing as set forth in
Section 2.02, and such violation or breach has not been waived by the
Stockholder Representatives (on behalf of the Sellers) or, in the case of a
covenant breach, cured by Buyer within ten days after written notice thereof
by the Stockholder Representatives (provided that neither a breach by Buyer
of Section 5.08 nor the failure of Buyer to deliver the consideration
pursuant to Section 1.04 at the Closing as required hereunder shall be
subject to cure hereunder unless otherwise agreed to in writing by the
Stockholder Representatives); or
(d) by either Buyer or the Stockholder Representatives (on
behalf of the Sellers) if the transactions contemplated hereby have not been
consummated by June 30, 2003; provided that neither Buyer nor the Stockholder
Representatives shall be entitled to terminate this Agreement pursuant to
this Section 8.01(d) if such Person's (or the Company's or any Seller's, in
the case of the Stockholder Representatives) knowing or willful breach of
this Agreement has prevented the consummation of the transactions
contemplated hereby.
8.02 Effect of Termination. In the event of termination of this
Agreement by either Buyer or the Stockholder Representatives as provided
above, the provisions of this Agreement shall immediately become void and of
no further force and effect (other than Section 3.05 (Brokers Fees), Section
4.19 (Brokerage), Section 5.06 (Brokerage), this Section 8.02 and Article
XIII and the Confidentiality Agreement, which shall survive the termination
of this Agreement), and there shall be no liability on the part of any of
Buyer, the Company or the Sellers to one another, except for knowing or
willful breaches of this Agreement prior to the time of such termination and
claims of, or causes of action arising from, fraud.
ARTICLE IX
INDEMNIFICATION
---------------
9.01 Survival of Representations and Warranties. The representations
and warranties in this Agreement shall survive the Closing as follows:
(a) the representations and warranties in Section 3.01
(Authority), Section 3.02 (Execution and Delivery; Valid and Binding
58
Agreement), Section 3.04 (Ownership of Capital Stock), Section 3.05 (Brokers
Fees), Section 4.01 (Organization and Corporate Power), Section 4.02 (a)
(Subsidiaries), Section 4.03(a) and (c) (Authorization; No Breach; Valid and
Binding Agreement) and Section 4.19 (Brokerage) shall not terminate;
(b) the representations and warranties in Section 4.08 (Tax
Matters) shall survive the Closing and continue in full force and effect
until 90 days after the expiration of any applicable statutes of limitations
(after giving effect to any extensions or waivers), and the representations
and warranties in Section 4.16 (Environmental, Health and Safety Matters)
shall survive the Closing and continue in full force and effect until the
expiration of eighteen months from the date hereof; and
(c) all other representations and warranties in this Agreement
shall terminate on the earlier of (x) 30 days after the date on which the
audit of the consolidated financial statements for the Company and the
Subsidiaries as of, and for the fiscal year ended, June 30, 2004 is delivered
to Buyer and (y) October 31, 2004.
No claim for indemnification hereunder for breach of any such representations
or warranties may be made after the expiration of the survival period
applicable to such claims; provided that any representation or warranty in
respect of which indemnity may be sought under Section 9.02 or under Section
9.03, and the indemnity with respect thereto, shall survive (with respect to
any claim that has been made) the time at which it would otherwise terminate
pursuant to this Section 9.01 if notice of breach or potential breach thereof
giving rise to such right or potential right of indemnity shall have been
given to the Person against whom such indemnity may be sought prior to such
time.
9.02 Indemnification by the Sellers for the Benefit of Buyer.
-------------------------------------------------------
(a) Each Seller, severally and not jointly, shall indemnify
Buyer and its Affiliates (including, after the Closing, the Company and its
Subsidiaries), and their respective officers, directors, partners, members,
employees, agents, representatives and successors (collectively, the "Buyer
Indemnified Parties") (it being understood that no Person shall be a Buyer
Indemnified Party due solely to such Person holding any amount of Buyer's
equity or debt securities) and save and hold them harmless against any loss,
liability, action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, injunction, judgment, order, decree, ruling,
penalty, fine, cost, obligation, Tax, Lien, fee, damage or expense, including
court costs and reasonable attorneys' fees and expenses (collectively,
"Losses"), which the Buyer Indemnified Parties may suffer or sustain
resulting from, arising out of, or caused by: (i) any breach by such Seller
of any representation or warranty made by it under Article III, or of the
certification in the certificate delivered by the Stockholder Representatives
(on behalf of the Sellers) to Buyer pursuant to Section 2.01(g)(ii) (solely
59
as to the certification that the representations and warranties made by such
Seller in Article III are true and correct in all material respects at and as
of the Closing Date), and (ii) any nonfulfillment or breach of any covenant,
agreement or other provision by such Seller.
(b) The Sellers, severally and not jointly (pro rata according
to each Seller's Common Percentage), shall indemnify the Buyer Indemnified
Parties and save and hold them harmless against any Losses which the Buyer
Indemnified Parties may suffer or sustain resulting from, arising out of or
caused by: (i) any breach of any representation or warranty of the Company
under Article IV, or of the certification in the certificate delivered by the
Company to Buyer pursuant to Section 2.01(g)(i) (solely as to the
certification that the representations and warranties made by the Company in
Article IV are true and correct in all material respects at and as of the
Closing Date), (ii) any nonfulfillment or breach of any covenant, agreement
or other provision by the Company prior to the Closing (other than Section
6.06), (iii) any breach of the covenants set forth in Section 11.03 (Tax
Matters), (iv) any breach of the covenant in Section 6.06 (Notification) and
(v) the Seller Retained Actions; provided, however, that, except for claims
for indemnification in respect of breaches of representations and warranties
contained in Section 4.01 (Organization and Corporate Power), Section 4.02(a)
(Subsidiaries), Section 4.03(a) and (c) (Authorization; No Breach; Valid and
Binding Agreement), Section 4.08 (Tax Matters); Section 4.09(d) (St. Kitts
Agreement) and Section 4.19 (Brokerage) (for which representations and
warranties the Sellers shall be responsible for all Losses from the first
dollar (subject to the Cap)), the Sellers shall have no liability under
clause (i) or clause (iv) above, unless the aggregate of (x) all Losses
relating thereto for which the Sellers would, but for this proviso, be liable
exceed on a cumulative basis an amount equal to $1,500,000 (the
"Deductible"), and then only to the extent such Losses exceed the Deductible;
provided further that the Sellers' aggregate liability under clauses (i),
(iii) and (iv) above shall in no event exceed $47,500,000 (the "Cap").
(c) Other than claims of, or causes of action arising from,
fraud, this Section 9.02 constitutes Buyer's sole and exclusive remedy for
any and all Losses or other claims relating to or arising from this Agreement
and the transactions contemplated hereby including, without limitation, with
respect to any breach of any representation, warranty or covenant of this
Agreement. Other than claims of, or causes of action arising from, fraud,
Buyer may not avoid the limitations on liability of the Sellers set forth in
this Section 9.02 by seeking damages for breach of contract, tort or pursuant
to any other theory of liability.
(d) If Buyer, on behalf of the Company, has repaid the then
outstanding balance of Indebtedness on the Closing Date as set forth on, and
in accordance with, the Payoff Letters, then the Sellers, severally and not
jointly (pro rata according to each Seller's Common Percentage), shall
60
indemnify the Buyer Indemnified Parties and save and hold them harmless
against any Losses which the Buyer Indemnified Parties may suffer or sustain
resulting from, arising out of, or caused by the failure of any Payoff Letter
to state accurately the amount required to be paid in order for such
Indebtedness to be paid in full as of the Closing Date. The indemnification
obligation of the Sellers in this Section 9.02(d) shall not be subject to the
Deductible.
<e) With respect to any claim for breach of any representation
or warranty, the Sellers shall have no obligation to indemnify the Buyer
Indemnified Parties from and against any Losses arising from the application
by DOE of regulations that become effective after the Closing Date or arising
from a new or revised interpretation and retroactive application by DOE after
the Closing Date of regulations existing as of the Closing Date.
(f) If a Seller is required to indemnify a Buyer Indemnified
Party pursuant to this Agreement as a result of a breach of a representation,
warranty or covenant by the Company, such Seller, on behalf of itself and its
Affiliates, hereby generally, irrevocably, unconditionally and completely
releases, acquits and forever discharges each of the Company and its
Subsidiaries, and each of their respective officers, directors, Affiliates,
partners, members, employees, agents, representatives and successors from,
and hereby irrevocably, unconditionally and completely waives and
relinquishes, each and every claim, demand, right, obligation, liability,
action or cause of action of every kind and nature that such Seller may then
have or may have in the future against each of the Company and its
Subsidiaries, and each of their respective officers, directors, Affiliates,
partners, members, employees, agents, representatives and successors, for the
recovery of such Losses from any of the foregoing Persons; provided that
nothing in this clause (f) shall constitute a waiver by such Seller of any
claims for contribution, indemnification or otherwise against any other
Seller.
(g) If any Buyer Indemnified Party recovers any amount from any
Seller in connection with such Seller's indemnification obligations under
this Agreement (including, without limitation, amounts collected by such
Buyer Indemnified Party from the Escrow Account), such Seller may, if such
Seller believes in good faith that a claim may be made by the Company
pursuant to the Recapitalization Agreement in connection with the claim
giving rise to the indemnification payment made by such Seller under this
Agreement, request the Stockholder Representatives in writing to request that
the Company, at such Seller's expense, seek indemnification under the
Recapitalization Agreement in connection with such claim. Promptly after
receiving such a written request, the Stockholder Representatives shall
request the Company in writing to seek such indemnification. Promptly after
the Company receives any such request, (i) Buyer shall promptly cause the
61
Company to pursue such indemnification claim under the Recapitalization
Agreement and to take all reasonable actions in furtherance thereof, (ii)
Buyer, the Stockholder Representatives and such Seller shall reasonably
cooperate in connection therewith (iii) and such Seller shall promptly pay
the expenses of the Company incurred in connection therewith upon receipt
from the Company of reasonable evidence of such expenses. Such Seller shall
provide the Company with such documents and information as the Company shall
reasonably request in order to pursue such indemnification. If the Company
recovers any amounts under the Recapitalization Agreement pursuant to such
indemnification claim, the Company shall pay such amounts to the Stockholder
Representatives, less any expenses incurred by the Company in connection with
the pursuit of such indemnification claim to the extent that such expenses
were not previously reimbursed to the Company by or on behalf of such Seller,
and the Stockholder Representatives shall promptly distribute such net amount
to the applicable Seller.
9.03 Indemnification by Buyer for the Benefit of the Sellers. Buyer
shall indemnify the Sellers and their officers, directors, partners, members,
employees, agents, representatives and successors (collectively, the "Seller
Indemnified Parties") and hold them harmless against any Losses which the
Seller Indemnified Parties may suffer or sustain, as a result of: (a) any
breach of any representation or warranty of Buyer under this Agreement, (b)
any nonfulfillment or breach of any covenant, agreement or other provision by
Buyer, (c) any claim or suit against any of the Seller Indemnified Parties
under the Worker Adjustment Retraining and Notification Act or any Legal
Requirement which relates to actions taken by Buyer or the Company or its
Subsidiaries at any time after the Closing Date with regard to any site of
employment or one or more facilities or operating units within any site of
employment of the Company or its Subsidiaries, (d) any claims by any employee
of the Company or its Subsidiaries against any of the Seller Indemnified
Parties relating to any breach or violation of, or noncompliance with (i) any
employment agreement or contract or similar arrangement between the Company
or its Subsidiaries on the one hand, and such employee, on the other, or (ii)
or any other bonus or incentive or similar plan or arrangement, in each case,
if and to the extent that the breach, violation or noncompliance giving rise
to such claims occur after the Closing Date and (e) any claim or suit brought
against any of the Seller Indemnified Parties at any time on or after the
Closing Date relating to actions taken by Buyer or the Company or its
Subsidiaries, in each case, at any time after the Closing Date, other than
any claim or action by Buyer pursuant to Section 9.02 relating to any breach
by any of the Seller Indemnified Parties, and other than any claim or action
to the extent that the Sellers are, or would be, obligated to indemnify Buyer
under Section 9.02. The indemnification paid for the benefit of each Seller
will be determined pro rata based upon the Common Percentages.
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(b) Other than claims of, or causes of action arising from,
fraud, this Section 9.03 constitutes each Sellers' sole and exclusive remedy
for any and all Losses or other claims relating to or arising from this
Agreement and the transactions contemplated hereby including, without
limitation, with respect to any breach of any representation, warranty or
covenant of this Agreement.
9.04 Manner of Payment; Release.
--------------------------
(a) Any indemnification of the Buyer Indemnified Parties
pursuant to Section 9.02 shall be paid on a several and not joint basis and
shall be effected as follows: (i) first, so long as funds remain in the
Escrow Account, payment shall be made from the Escrow Account on behalf of
the Sellers in accordance with the Escrow Agreement, and, (ii) thereafter, by
wire transfer of immediately available funds from the applicable individual
Seller to an account designated by Buyer within 15 days after the
determination thereof. Any indemnification of the Seller Indemnified Parties
pursuant to Section 9.03 shall be effected by wire transfer of immediately
available funds to an account designated by the Stockholder Representatives
within 15 days after the determination thereof (which amount shall be
promptly distributed to the Sellers pro rata based upon each Seller's Common
Percentage). Each indemnification payment made pursuant to this Article IX
shall, with respect to the Seller making or receiving such indemnification
payment and Buyer, be deemed to be an adjustment to the Common Share Proceeds
(or, to the extent such Seller has no Common Share Proceeds, the Final Option
Proceeds) of such Seller.
(b) Notwithstanding anything herein to the contrary, if any
indemnification due pursuant to Section 9.02(a) is satisfied from funds in
the Escrow Account (a "Seller Escrow Indemnification Claim"), the Stockholder
Representatives may equitably adjust distributions to the Sellers from the
Holdback Amount and from the Escrow Account (pursuant to the terms of the
Escrow Agreement) so that each Seller liable for a Seller Escrow
Indemnification Claim bears the full liability for such Seller's
indemnification obligations. After the Holdback Amount and the Escrow
Account have been depleted, if the distributions in connection with the
Holdback Amount and Escrow Account were not sufficient, with respect to each
Seller Escrow Indemnification Claim, to compensate each Seller other than the
indemnifying Seller in connection with such claim (such that only the
applicable indemnifying Seller bore the liability in connection with such
claim), then, such indemnifying Seller shall indemnify each other Seller for
distributions from the Escrow Account forgone by each other Seller due to
payments made to satisfy such Seller Escrow Indemnification Claim (to the
extent that such foregone distributions were not otherwise satisfied by an
equitable adjustment to the distribution of the Holdback Amount).
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(c) Effective as of the Closing, (i) Buyer and each Buyer
Indemnified Party hereby waives against each Seller Released Party, on behalf
of such releasing party's predecessors, successors, executors,
administrators, heirs, estate, and past, present and future assigns, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it or they may have against the Seller Released Parties
arising under or based upon, directly or indirectly, any circumstance,
contract or other agreement (whether express, implied, oral or written),
activity, action, omission, event, cause or matter occurring or existing on
or before the Closing Date, in each case, arising out of such Seller Released
Parties' actions or omissions as a stockholder, director, officer, employee
or agent of the Company or its Subsidiaries, in connection with the
Management Agreement or in connection with the transactions contemplated by
this Agreement (including, without limitation, the negotiations thereof, but
except as provided in clauses (x) and (y) below) and (ii) each Seller and
each Seller Indemnified Party hereby waives against each Buyer Released
Party, on behalf of such releasing party's predecessors, successors,
executors, administrators, heirs, estate, and past, present and future
assigns, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action it or they may have against the Buyer
Released Parties arising under or based upon, directly or indirectly, any
circumstance, contract or other agreement (whether express, implied, oral or
written), activity, action, omission, event, cause or matter occurring or
existing on or before the Closing Date in connection with the transactions
contemplated by this Agreement (including, without limitation, the
negotiations thereof, but except as provided in clauses (x) and (y) below),
except, in the case of clauses (i) and (ii), for (x) any and all rights,
claims and causes of action such releasing party may have under this
Agreement and (y) any and all rights, claims and causes of action arising out
of fraud.
9.05 Defense of Third Party Claims. Any Person making a claim for
indemnification under Section 9.02 or Section 9.03 (an "Indemnitee") shall
notify the indemnifying party (an "Indemnitor") of the claim in writing
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party), describing the
claim, the amount thereof (if known and quantifiable) and the basis thereof;
provided that the failure to so notify an Indemnitor shall not relieve the
Indemnitor of its obligations hereunder except to the extent that (and only
to the extent that) such failure shall have caused the damages for which the
Indemnitor is obligated to be greater than such damages would have been had
the Indemnitee given the Indemnitor prompt notice hereunder. Any Indemnitor
shall be entitled to participate in the defense of such action, lawsuit,
proceeding, investigation or other claim giving rise to an Indemnitee's claim
for indemnification at such Indemnitor's expense, and at its option shall be
entitled to assume the defense thereof by appointing a reputable counsel
reasonably acceptable to the Indemnitee to be the lead counsel in connection
with such defense; provided that the Indemnitee shall be entitled to
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participate in the defense of such claim and to employ counsel of its choice
for such purpose; provided however, that the fees and expenses of such
separate counsel shall be borne by the Indemnitee. If the Indemnitor shall
control the defense of any such claim then the Indemnitor shall be entitled
to settle such claim; provided that the Indemnitor shall obtain the prior
written consent of the Indemnitee (which consent shall not be unreasonably
withheld or delayed) before entering into any settlement of a claim or
ceasing to defend such claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief will be imposed
against the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and obligations
with respect to such claim, without prejudice except for payments that would
be required to be paid by Buyer representing the Deductible.
9.06 Determination of Loss Amount. The amount of any Loss subject to
indemnification under Section 9.02 or Section 9.03 shall be calculated net of
(i) any Tax Benefit actually received by the Indemnitee on account of such
Loss and (ii) any insurance proceeds actually received by the Indemnitee on
account of such Loss. If the Indemnitee actually receives a Tax Benefit
after an indemnification payment is made to it, the Indemnitee shall promptly
pay to the Person or Persons that made such indemnification payment the
amount of such Tax Benefit at such time or times as and to the extent that
such Tax Benefit is actually realized by the Indemnitee. For purposes
hereof, "Tax Benefit" shall mean any actual reduction in Taxes payable or an
actual refund of Taxes previously paid. The Indemnitee shall seek full
recovery under all insurance policies covering any Loss to the same extent as
they would if such Loss were not subject to indemnification hereunder. In
the event that an insurance or other recovery is made by any Indemnitee with
respect to any Loss for which any such Person has been indemnified hereunder,
then a refund equal to the aggregate amount of the recovery shall be made
promptly to the Person or Persons that provided such indemnity payments to
such Indemnitee.
ARTICLE X
STOCKHOLDER REPRESENTATIVE
--------------------------
10.01 Designation. Leeds Equity Partners III, L.P. and J.W. Childs
Associates, Inc. (the "Stockholder Representatives") are hereby designated by
each of the Sellers to serve as the representatives of the Sellers with
respect to the matters expressly set forth in this Agreement to be performed
by the Stockholder Representatives.
10.02 Authority. Each of the Sellers, by the execution of this
Agreement, hereby irrevocably appoints the Stockholder Representatives as the
agents, proxies and attorneys-in-fact for such Seller for all purposes of
this Agreement (including, without limitation, the full power and authority
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on such Seller's behalf (i) to consummate the transactions contemplated
herein; (ii) to pay such Seller's expenses incurred in connection with the
negotiation and performance of this Agreement (whether incurred on or after
the date hereof); (iii) to receive (on behalf of the Sellers) and disburse
any funds received hereunder or under the Escrow Agreement to such Seller and
each other Seller; (iv) to execute and deliver the Escrow Agreement and to
take the actions and consummate the transactions contemplated thereby; (v) to
endorse and deliver any certificates or instruments representing the Shares
and execute such further instruments of assignment as Buyer shall reasonably
request; (vi) to execute and deliver on behalf of such Seller any amendment
or waiver hereto or to the Escrow Agreement; (vii) to take all other actions
to be taken by or on behalf of such Seller in connection herewith and in
connection with the Escrow Agreement; (viii) to withhold funds delivered by
Buyer at the Closing representing the Holdback Amount, to retain such
Holdback Amount for such duration as the Stockholder Representatives shall
determine in their sole discretion and to use the funds constituting the
Holdback Amount to satisfy expenses and obligations of the Sellers including,
but not limited to, the Seller Expenses and (ix) to do each and every act and
exercise any and all rights which such Seller of the Sellers collectively are
permitted or required to do or exercise under this Agreement and the Escrow
Agreement). Each of the Sellers agrees that such agency and proxy are
coupled with an interest, are therefore irrevocable without the consent of
the Stockholder Representatives and shall survive the death, incapacity,
bankruptcy, dissolution or liquidation of any Seller. All decisions and
actions by the Stockholder Representatives (to the extent authorized by this
Agreement) shall be binding upon all of the Sellers, and no Seller shall have
the right to object, dissent, protest or otherwise contest the same.
Delivery to the Stockholder Representatives of any amount, notice, document
or instrument that is to be given, delivered or paid to any of the Sellers
shall be deemed to be (and shall be effective as) delivery to such Sellers
and Buyer shall have no further obligation or responsibility with respect
thereto.
10.03 Authority; Indemnification. Each Seller agrees that Buyer shall
be entitled to rely on any action taken by the Stockholder Representatives,
on behalf of Sellers, pursuant to Section 10.02 above (each, an "Authorized
Action"), and that each Authorized Action shall be binding on each Seller as
fully as if such Seller had taken such Authorized Action. Buyer agrees that
the Stockholder Representatives, as the Stockholder Representatives, shall
have no liability to Buyer for any Authorized Action, except to the extent
that such Authorized Action is found by a final order of a court of competent
jurisdiction to have constituted fraud or willful misconduct. Each Seller
hereby severally, for itself only and not jointly, agrees to indemnify and
hold harmless the Stockholder Representatives against all expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in settlement
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actually and reasonably incurred by the Stockholder Representatives in
connection with any action, suit or proceeding to which the Stockholder
Representatives are made a party by reason of the fact they are or were
acting as the Stockholder Representatives pursuant to the terms of this
Agreement.
10.04 Exculpation. The Stockholder Representatives shall not have by
reason of this Agreement a fiduciary relationship in respect of any Seller,
except in respect of amounts received on behalf of such Seller. The
Stockholder Representatives shall not be liable to any Seller for any action
taken or omitted by it or any agent employed by it hereunder or under any
other document entered into in connection herewith, except that the
Stockholder Representatives shall not be relieved of any liability imposed by
law for willful misconduct. The Stockholder Representatives shall not be
liable to the Sellers for any apportionment or distribution of payments made
by the Stockholder Representatives in good faith, and if any such
apportionment or distribution is subsequently determined to have been made in
error the sole recourse of any Seller to whom payment was due, but not made,
shall be to recover from other Sellers any payment in excess of the amount to
which they are determined to have been entitled. The Stockholder
Representatives shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions
of this Agreement. Neither the Stockholder Representatives nor any agent
employed by them shall incur any liability to any Seller by virtue of the
failure or refusal of the Stockholder Representatives for any reason to
consummate the transactions contemplated hereby or relating to the
performance of its other duties hereunder, except for actions or omissions
constituting fraud or bad faith.
10.05 Action by the Stockholders Representatives. Any actions or
decisions required or permitted to be taken or made by the Stockholder
Representatives pursuant to this Agreement (each a "Stockholder
Representative Action") shall be taken in accordance with the provisions of
this Section 10.05. Prior to taking any Stockholder Representative Action,
the Stockholder Representatives shall have mutually agreed in writing on the
manner in which the applicable Stockholder Representative Action will be
taken and shall designate either Stockholder Representative (the "Designated
Stockholder Representative") to act on behalf of the Stockholder
Representatives with respect to such Stockholder Representative Action. Once
the conditions in the immediately preceding sentence have been satisfied, the
Designated Stockholder Representative shall take the applicable Stockholder
Representative Action in the agreed manner. Buyer shall be entitled to rely,
in good faith and as provided in Section 10.03, upon the actions taken by
either Stockholder Representative in taking any Stockholder Representative
Action.
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ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
-----------------------------------
11.01 Disclosure Generally. All schedules attached hereto are
incorporated herein and expressly made a part of this Agreement as though
completely set forth herein. All references to this Agreement herein or in
any of the schedules shall be deemed to refer to this entire Agreement,
including all schedules. Except for the Liens Schedule, the Taxes Schedule,
the Litigation Schedule, the Environmental Schedule and the Liabilities
Schedule (which shall be the only schedules applicable to the subject matter
thereof), any item or matter required to be disclosed on a particular
schedule pursuant to this Agreement shall be deemed to have been disclosed if
information for such item or matter complying with such disclosure
requirements is set forth on another schedule under this Agreement to the
extent that it is reasonably apparent from a reading of such disclosure item
that it would also qualify or apply to such other schedule. The
specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
schedules hereto is not intended to imply that such amounts, or higher or
lower amounts, or the items so included, or other items, are or are not
required to be disclosed or are within or outside of the ordinary course of
business, and neither party shall use the fact of the setting forth of such
amounts or the fact of the inclusion of any such item in the schedules in any
dispute or controversy with any party as to whether any obligation, item or
matter not described herein or included in a schedule hereto is or is not
required to be disclosed (including, without limitation, whether such amounts
or items are required to be disclosed as material) or in the ordinary course
of business for the purposes of this Agreement. The information contained in
the schedules hereto is disclosed solely for the purposes of this Agreement,
and no information contained therein shall be deemed to be an admission by
any party hereto to any third party of any matter whatsoever, including of
any violation of law or breach of any agreement.
11.02 Acknowledgment by Buyer. Buyer acknowledges that it has
conducted to its satisfaction, an independent investigation and verification
of the financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company and its Subsidiaries and,
in making its determination to proceed with the transactions contemplated by
this Agreement, Buyer has relied on the results of its own independent
investigation and verification and the representations, warranties and
covenants of the Company and the Sellers expressly and specifically set forth
in this Agreement, including the schedules. SUCH REPRESENTATIONS, WARRANTIES
AND COVENANTS BY THE COMPANY AND THE SELLERS CONSTITUTE THE SOLE AND
EXCLUSIVE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY AND THE
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SELLERS TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY
DISCLAIMED BY THE COMPANY AND THE SELLERS. No claim shall be brought or
maintained by the Company, its Subsidiaries or Buyer or their respective
successors or permitted assigns against any officer, director or employee
(present or former) of the Company, its Subsidiaries, the Sellers or any
direct or indirect equityholder of the Sellers, and no recourse shall be
brought or granted against any of them, by virtue of or based upon any
alleged misrepresentation or inaccuracy in, or breach of any of the
representations, warranties or covenants of the Sellers set forth or
contained in, this Agreement or any certificate delivered hereunder, except
to the extent provided in Section 9.02 herein and except for knowing or
willful breaches of this Agreement (but only if claims related to such
breaches are made after a proper termination of this Agreement pursuant to
Section 8.01(b)) and claims of, or causes of action arising from, fraud (and
in the event of such fraud, such recourse shall be brought or granted solely
against the Person or Persons committing such fraud).
11.03 Tax Matters.
-----------
(a) Responsibility for Filing Tax Returns. Subject to Section
11.03(d), Buyer shall timely prepare and file or send (or cause to be timely
prepared and filed or sent) all Tax Returns for the Company and its
Subsidiaries required to be filed for all taxable periods ending prior to or
including the Closing Date which have not yet been filed as of the Closing
Date and shall timely pay (or cause to be timely paid) all Taxes due with
respect to such Tax Returns, provided, however, that, subject to the Cap,
Sellers shall reimburse Buyer (in the manner set forth in Section 9.04(a))
for the pre-Closing portion of such Taxes shown on such Tax Returns to the
extent the pre-Closing portion of such Taxes exceeds the amount (if any)
accrued, provided, or otherwise reserved for on the Final Working Capital
Statement with respect to such Tax Returns. The pre-Closing portion of Taxes
for any Tax Return for any Tax period that includes the Closing Date shall be
determined by closing the books of the Company and its Subsidiaries as of the
end of the day prior to the Closing Date and, for the avoidance of doubt,
calculated without taking into account any item of income, gain, loss or
deduction attributable to the transactions contemplated by this Agreement
(including the transactions described in Section 1.01(a) of this Agreement).
At least 30 days prior to the date on which each such Tax Return is due
(including extensions), Buyer shall submit such Tax Return to the Stockholder
Representatives for the Stockholder Representatives' comment. If the
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Stockholder Representatives reasonably expect that the filing of such Tax
Return, as prepared by Buyer, will adversely affect the Tax liability, the
amount received under this Agreement or the indemnification obligation, in
each case, of any Seller, the Stockholder Representatives shall, within 10
business days of receipt of such Tax Return, give notice to Buyer of their
objection and provide final written comments on such Tax Return. If the
parties cannot resolve any disputes with respect to the Stockholder
Representatives' written comments within 5 business days of receipt thereof,
the dispute shall be submitted to the Independent Auditor for resolution. If
the Independent Auditor cannot resolve any differences between the
Stockholder Representatives and Buyer with respect to such Tax Return or
calculation at least 5 business days prior to the due date of such Tax
Return, such Tax Return shall be filed as prepared by Buyer, and, thereafter,
to the extent the Independent Auditor resolves such dispute in a manner which
would require the amendment of such Tax Return, such Tax Return shall be
amended in a manner consistent with such resolution. Promptly upon
resolution by the Independent Auditor and the filing of an amended Tax
Return, the liability of the Sellers and Buyer for Taxes with respect to such
Tax Return shall be redetermined in a manner consistent with the provisions
of this Section 11.03, and any payments made between such parties prior to
the filing of such amended Tax Return shall be appropriately adjusted to
reflect such redetermination. The determination by such Independent Auditor
shall be final and binding on both the Buyer and the Sellers. The fees and
expenses of the Independent Auditor shall be borne one-half by the Buyer and
one-half by the Sellers.
(b) Transfer Taxes. Any real property transfer or gains Tax,
stamp Tax, stock transfer Tax, or other similar Tax incurred as a result of
the transactions contemplated by this Agreement (collectively, "Transfer
Taxes"), and any penalties or interest with respect to the Transfer Taxes
shall be paid one-half by Buyer and one-half by Sellers. The Sellers and
Buyer agree to cooperate with respect to the filing of any returns with
respect to the Transfer Taxes, including promptly supplying any information
in their possession reasonably necessary to complete such returns. Each
party shall use reasonable efforts to avail itself of any available
exemptions from any such Taxes or fees, and to cooperate with the other
parties in providing any information and documentation that may be necessary
to obtain such exemptions.
(c) Cooperation. Sellers and Buyer shall reasonably cooperate,
and shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and filing
all Tax Returns, including maintaining and making available to each other all
records necessary in connection with Taxes, resolving all disputes and audits
with respect to all taxable periods relating to Taxes and obtaining necessary
signatures of the Company and its Subsidiaries.
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(d) The Sellers shall, except as limited below, control audits,
examinations or other proceedings (each, a "Tax Proceeding") with respect to
Tax Returns of the Company or its Subsidiaries for Tax periods ending on or
before the Closing Date (whether or not such Tax Returns are filed before or
after the Closing Date), but only to the extent that any adjustment resulting
from such Tax Proceeding would give rise to an indemnification obligation of
Sellers under Section 9.02. The Sellers shall promptly notify Buyer of the
commencement of any such Tax Proceeding and shall allow Buyer and its counsel
to participate in such Tax Proceedings at Buyer's sole cost and expense.
However, nothing in this Section 11.03(d) will require Buyer, the Company or
any Subsidiary to make any claim or election, or take any action, that would
increase any Tax liability for which Buyer has no claim against Sellers under
this Agreement (unless the Deductible precludes such a claim) or that
otherwise would have, in Buyer's reasonable judgment, an adverse effect on
Buyer, the Company or any Subsidiary in any taxable period ending after the
Closing Date.
(e) Notwithstanding any other provision of this Agreement,
Sellers shall have no obligation to indemnify Buyer for (i) any Taxes that
result from the transactions described in Section 1.01(a) of this Agreement;
(ii) any Losses arising out of or caused by breach by any Seller of
representations, warranties or covenants set forth in this Agreement where
such breach would not have occurred but for the occurrence of the
transactions described in Section 1.01(a) of this Agreement; (iii) any
Transfer Taxes that result from the transactions described in Section 1.01(a)
of this Agreement; and (iv) any Taxes accrued, provided or otherwise reserved
for on the Final Working Capital Statement.
(f) Notwithstanding any other provision of this Agreement,
Buyer shall indemnify Sellers for any incremental Taxes imposed on the
Sellers that result from (i) the transactions described in Section 1.01(a) of
this Agreement in excess of Taxes that would have been imposed on the Sellers
had the transaction described in Section 1.01(a) not occurred and instead the
sale of the Company been structured as a transaction described in Section
1.01(b) of this Agreement and (ii) the failure of the Company to withhold
FICA and FUTA Taxes upon the exercise of ISOs pursuant to Section 1.02(b)
immediately prior to the Closing.
11.04 Litigation Support. In the event and for so long as any party to
this Agreement actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction
involving the Company or any of its Subsidiaries, each of the other parties
will reasonably cooperate with him, her, or it and his, her, or its counsel
in the contest or defense, make available their personnel at reasonable times
71
and on reasonable notice, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article IX hereof).
11.05 Further Assurances. From time to time, as and when requested by
any party hereto, any other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions, all at the sole cost
and expense of the requesting party (unless the requesting party is entitled
to indemnification therefor under Article IX of this Agreement), as the
requesting party may reasonably deem necessary or desirable to evidence and
effectuate the transactions contemplated by this Agreement.
11.06 Confidentiality. Each Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in
his, her, or its possession. In the event that any Seller is requested or
required pursuant to oral or written question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process to disclose any Confidential
Information, that Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 11.06. If any Seller is, on
the advice of counsel, compelled by law to disclose any Confidential
Information, that Seller may disclose the Confidential Information; provided,
however, that the disclosing Seller shall promptly notify Buyer of such
disclosure. "Confidential Information" shall mean all of the information in
the possession of such Seller that is currently treated by the Company or its
Subsidiaries as confidential, but does not include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by a Seller in breach of this Agreement, (ii) was or is
independently developed by a Seller without the use or knowledge of
information provided by or on behalf of the Company or its Subsidiaries, or
(iii) is or becomes available to a Seller on a non-confidential basis from a
source other than the Company or its Subsidiaries, provided that such source
is not known to such Seller to be bound by a confidentiality or other
agreement restricting disclosure or use of such information. Buyer
acknowledges that (1) certain Sellers make investments from time to time in
businesses in the for-profit education industry, (2) that representatives of
such Sellers have in the past participated, and will in the future
participate, in the management of such businesses and (3) that the use of
general knowledge regarding such industry acquired by Sellers or their
representatives before or during the Sellers' ownership of the Company shall
not violate this Section 11.06.
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11.07 Regulatory Notifications and Approvals. From and after the date
hereof, the parties hereto shall use their commercially reasonable efforts to
make the notifications to, or to secure authorizations, consents or similar
approvals from, as the case may be, the Necessary Regulatory Authorities as
set forth in the Filings Schedule. The parties shall reasonably coordinate
with each other regarding discussions with representatives of, and
notifications to, the DOE. The parties hereto shall use their commercially
reasonable efforts to make such notifications and requests for authorization,
consent or similar approval, as applicable, in the following manner:
(a) The filing of an application and other appropriate
documents requesting the Dominica Medical Board's approval of the change of
control shall be made no later than seven days from the date hereof;
(b) The filing of the appropriate notification to, and request
for acknowledgement of the change of ownership from, each of the Commonwealth
of Dominica and the Commonwealth of St. Kitts-Nevis shall be made no later
than seven days from the date hereof;
(c) The filing of notifications to the New Jersey Board of
Medicine, the New York Education Department, the California Medical Board and
the Florida Commission on Independent Education shall be made no later than
seven days from the date hereof;
(d) The filing with the DOE of an application for pre-
acquisition review of the change of ownership shall be made no later than
seven days from the date hereof. Any additional documents or changes to the
application for pre-acquisition review that are necessary to make the
application a DOE Application, and that are required to notify the DOE that
the Closing has occurred, shall be filed no later than ten days from the date
of the Closing; and
(e) To the extent such application was not previously filed
with the DOE prior to Closing as part of the pre-acquisition review
application required by Section 11.07(d) of this Agreement, the filing of the
DOE Application shall be made no later than ten days from the date of the
Closing.
11.08 Seller Retained Actions.
-----------------------
(a) Subject to the limitations set forth herein, after the
Closing, the Stockholder Representatives shall retain sole and absolute
responsibility and control for the actions, claims and matters (the "Seller
Retained Actions") identified on the Seller Retained Actions Schedule and the
Stockholder Representatives shall keep Buyer reasonably informed as to the
status of such matters.
73
(b) Sellers shall be responsible for all legal fees and other
costs, including costs of settlement or judgments, of the Company incurred in
connection with the Seller Retained Actions after the Closing Date
(including, without limitation, the costs incurred by the Company to make its
employees available to the Stockholder Representatives and to provide
documents and other support, but only to the extent that such costs were
required to be incurred in order to made such employees available and to
provide such documents and such other support).
(c) The Stockholder Representatives shall have the sole power
and authority to act on behalf of the Company in all matters with respect to
the Seller Retained Actions (including, without limitation, the retaining and
direction of legal counsel and approving and causing the filing of pleadings,
briefs, and other documents on behalf of the Company, in each case, as is
reasonably acceptable to Buyer), except that the Stockholder Representatives
shall not settle such matters for non-monetary consideration which would have
a material adverse effect on the Company or its Subsidiaries without the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Buyer shall, and Buyer shall cause the Company to promptly execute
and deliver all such documents and take all such actions in connection with
the Seller Retained Actions as the Stockholder Representatives shall
reasonably request.
(d) Buyer, on the one hand, and the Stockholder Representatives
(on behalf of the Sellers), on the other hand, shall each designate contact
persons, each reasonably acceptable to the other party, as a primary point
for communication between the parties and their representatives regarding the
Seller Retained Actions. The Stockholder Representatives and counsel
representing Sellers or any of its Affiliates may contact employees of the
Company regarding the Seller Retained Actions as reasonably necessary. Buyer
shall use its reasonable best efforts to cause the Company's employees to
cooperate with the Stockholder Representatives' reasonable requests in
connection with the Seller Retained Actions, including requests to provide
documents and requests to conduct interviews. Buyer shall use its reasonable
best efforts to cause the Company's employees to make themselves available
for depositions and trial testimony upon the Stockholder Representatives'
reasonable requests.
(e) Buyer shall cause the Company to maintain in good condition
and preserve all documentary information known or as reasonably should be
known to be relevant to the Seller Retained Actions. Buyer shall cause the
Company to make such documentary information available to the Stockholder
Representatives upon reasonable request.
(f) The parties agree and acknowledge that all information
communicated or exchanged regarding a Seller Retained Action ("Retained
Action Information") is communicated in confidence for the purposes of
securing or communicating legal advice and representation on matters as to
which the parties have a common interest, and therefore will be asserted to
74
be subject to the work product doctrine, attorney-client privilege and
contractual obligations of confidentiality.
(g) The parties further agree that to preserve the
confidentiality of Retained Action Information, neither party to this
Agreement shall, without the prior written consent of the other, make such
information available or communicate it in any way to any Person other than
(i) to their respective officers, directors or employees engaged in legal
matters relating to a Seller Retained Action, (ii) to attorneys for the
parties to this Agreement or the Company, (iii) to independent consultants or
experts retained by the parties to this Agreement; (iv) disclosures required
or appropriate in connection with the prosecution or defense of any Seller
Retained Action; and (v) as required by law; provided, however, that Sellers
agree to use commercially reasonable efforts to obtain confidential treatment
of, and a protective order for, any proprietary information of the Company
which Sellers believe it is required or appropriate to disclose pursuant to
terms of subsection (iv). If any other Person requests or demands (by
subpoena or otherwise) that Buyer or the Company produce Retained Action
Information, the Buyer contact person(s) shall promptly notify the Sellers
contact person(s) of such request or demand and Sellers, on behalf of the
Company, and the Company shall have the right to assert all applicable
privileges and protections.
(h) If any Seller (a "Retained Action Seller") incurs any Loss
resulting from, arising out of, or caused by any Seller Indemnified Action,
each other Seller (an "Other Seller"), severally and not jointly (pro rata
according to the ratio of each Other Seller's Common Percentage to the total
of Common Percentages of all Other Sellers) shall indemnify such Retained
Action Seller for all such Losses. Notwithstanding anything herein to the
contrary, the Stockholder Representatives may equitably adjust distributions
to the Sellers from the Holdback Amount and from the Escrow Account (pursuant
to the terms of the Escrow Agreement) to ensure that such Retained Action
Seller receives the full amount to which such Retained Action Seller is
entitled to be indemnified pursuant to this Section 11.08(h) and that each
Other Seller bears the indemnification obligation for which each such Other
Seller is obligated under this Section 11.08(h). If, for any reason, such
Retained Action Seller is not indemnified in full out of the Holdback Amount
or the Escrow Account, each indemnification under this Section 11.08(h) shall
be effected by wire transfer of immediately available funds from the
applicable Other Seller to an account designated by such Retained Action
Seller.
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ARTICLE XII
DEFINITIONS
-----------
12.01 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Accreditations, Licenses and Permits" means all certifications,
accreditations, licenses, permits and other authorizations, including Program
Participation Agreements, necessary to allow individuals enrolled in training
programs conducted by the Institutions to qualify for educational loans,
grants and other forms of student financial assistance from governmental
agencies and other sources referred to in the catalogs and advertising
literature of the Institutions, including, without limitation, all
certifications, accreditations, licenses, permits and other authorizations
necessary for the Institutions to participate in student financial aid
programs administered by the DOE pursuant to Title IV.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular
Person. For the purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct the management and policies of
a Person whether through the ownership of voting securities, contract or
otherwise.
"Affiliated Group" means an affiliated group as defined in
Section 1504 of the Code (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income Tax law) of which the
Company is or has been a member.
"Aggregate Closing Option Proceeds" means an amount equal to the
aggregate of the Closing Option Proceeds for all Optionholders.
"Aggregate Preferred Share Purchase Amount" means an amount equal
to (i) the aggregate liquidation value of the Preferred Shares plus (ii) the
aggregate accrued and unpaid dividends on the Preferred Shares determined as
of the Closing Date in accordance with the provisions of the Company's
certificate of incorporation.
"Buyer Released Parties" shall mean each of the persons set forth
on the Released Parties Schedule under the heading "Buyer Released Parties."
"Buyer's Knowledge" means the actual knowledge, after due
inquiry, of any of Daniel Hamburger Executive Vice President of Buyer;
Marilynn J. Cason, Senior Vice President, Corporate Secretary and General
76
Counsel of Buyer; Norman M. Levine, the Senior Vice President and Chief
Financial Officer of Buyer; or Gerald J. Wawrzynek, the Vice President of
Buyer. With respect to the representation and warranty in Section 5.10, in
addition to those persons listed in the preceding sentence, "Buyer's
Knowledge" also means the actual knowledge of Sharon Thomas Parrott, the Vice
President of External Relations and Regulatory Assurance of Buyer.
"Cash" means cash and cash equivalents (including marketable
securities and short term investments), determined on a consolidated basis,
calculated in accordance with GAAP applied on a basis consistent with the
preparation of the Latest Balance Sheet.
"Company's knowledge" means the actual knowledge, after due
inquiry, of any of Timothy E. Foster, the Chairman and Chief Executive
Officer of the Company; Neal S. Simon, the Secretary of the Company; John T.
St. James, the Vice President, Treasurer and Chief Financial Officer of the
Company; and Nancy Perri, the Dean of Clinical Science and Medicine. With
respect to the representations and warranties in Section 4.16, in addition to
those persons listed in the preceding sentence, the "Company's knowledge"
also means the actual knowledge of any of G. Michael Shires, Executive Dean
of the Veterinary School; Kristina Pueschel, Director of Administration and
University Services for the Medical School; or Rob Parsons, Facilities
Manager for the Medical School.
"DOE" means the United States Department of Education.
"DOE Application" means a "materially complete application" (as
that term is defined at 34 C.F.R. S. 600.20(g)) for approval of the change of
ownership and provisional extension of certification to participate in the
Title IV HEA student financial assistance programs.
"Dominica Agreement" means, collectively, (a) the agreement by
and between the Government of the Commonwealth of Dominica and Ross
University School of Medicine, Veterinary Medicine Ltd., dated October 28,
1998, and (b) the letter from Roosevelt Douglas, Prime Minister of Dominica,
to Ross University School of Medicine, dated April 3, 2000.
"Dominica Collective Bargaining Agreement" means the collective
bargaining agreement covering the period from May 1, 2001 through April 30,
2003 between Ross University School of Medicine and the National Workers
Union in Dominica, as amended from time to time.
77
"Dominica Medical Board" means the Medical Board of the Ministry
of Health and Social Security of the Commonwealth of Dominica.
"Environmental, Health and Safety Requirements" means all
federal, state, local and foreign statutes, regulations, ordinances, treaties
and other provisions having the force or effect of law, all judicial and
administrative orders and determinations and all common law, concerning
employee health and safety and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, hazardous
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and
in effect.
"ERISA Affiliate" means, with respect to any Person, any
corporation, trade or business which, together with such person, is a member
of a controlled group of corporations or a group of trades or businesses
under common control within the meaning of section 414 of the Code.
"Escrow Agent" means Bank One, National Association.
"Escrow Amount" means $20,000,000.
"Fee Letter" means that certain fee letter agreement, dated on or
about the date hereof, among Buyer, Bank of America, N.A., Banc of America
Securities LLC and any other parties thereto.
"GAAP" means United States generally accepted accounting
principles applied in a manner consistent with that used in preparing the
Latest Balance Sheet.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indebtedness" means, without duplication, all obligations of the
Company and its Subsidiaries for borrowed money set forth on the Indebtedness
Schedule and any and all accrued interest, prepayment premiums or penalties
related thereto.
"Institutions" means the Ross University School of Medicine and
the Ross University School of Veterinary Medicine.
78
"Intellectual Property" means all of the following in any
jurisdiction throughout the world: (i) patents, patent applications and
patent disclosures; (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos and slogans (and all translations, adaptations,
derivations and combinations of the foregoing) and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyright and copyrightable works; (iv) registrations and applications of any
of the foregoing; (v) trade secrets, confidential information, know-how and
inventions and (vi) computer software (including, without limitation, source
code, executable code, data, databases and documentation).
"Lien" means any claim, pledge, security interest, lien, charge,
encumbrance or other restriction and limitation of any kind.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Management Agreement" means the Management Agreement by and
among J.W. Childs Associates, L.P., Leeds Equity Advisors, Inc. and the
Company.
"Material Adverse Effect" and "Material Adverse Change" each
means any change, effect, event, occurrence, state of facts or development
that is materially adverse to the business, assets, financial condition,
regulatory or tax status, results of operations or prospects of the Company
and its Subsidiaries taken as a whole or on the ability of any party hereto
to consummate timely the transactions contemplated hereby; provided, however,
that none of the following shall be deemed in themselves, either alone or in
combination, to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect or Material Adverse Change: (a) any adverse change, effect, event,
occurrence, state of facts or development solely attributable to the
announcement of the transactions contemplated by this Agreement (except to
the extent that such adverse change, effect, event, occurrence, state of
facts or development is directly related to regulatory approvals required
hereunder or the regulatory or tax status of the Company or its
Subsidiaries); (b) any adverse change, effect, event, occurrence, state of
facts or development directly attributable to conditions affecting the
industry in which the Company and its Subsidiaries participates, the U.S.
economy as a whole or the capital markets in general or the markets in which
the Company and its Subsidiaries operates; (c) any adverse change, effect,
event, occurrence, state of facts or development directly attributable to a
commencement of a war with Iraq, or other hostilities or armed hostilities
involving Iraq or (d) any adverse change, effect, event, occurrence, state of
facts or development arising from or relating to any change in GAAP after the
date hereof.
79
"Necessary Regulatory Authorities" means the DOE, the Ministry of
Health and Social Security of the Commonwealth of Dominica, the Commonwealth
of St. Kitts-Nevis, the New York State Education Department, the New Jersey
Board of Medicine, the California Board of Medicine and the Florida
Commission on Independent Education.
"Non-Union Employee" means an employee of the Company or its
Subsidiaries that is not a party to the Dominica Collective Bargaining
Agreement, including any extensions or replacements thereof.
"Payoff Letter" means a payoff letter from a holder of
Indebtedness setting forth the amount required to pay all obligations under
such Indebtedness in full, stating that all Liens placed by such holder on
the assets of the Company and its Subsidiaries will be released upon the
payment to such holder of such amount and confirming that such holder shall
forthwith execute and deliver to the Company or its Subsidiaries (as
applicable) any and all terminations and releases (including, without
limitation, UCC-3 termination statements) necessary to evidence the foregoing
release.
"Permitted Liens" means (i) statutory liens for current Taxes or
other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings by the
Company and its Subsidiaries; (ii) mechanics', carriers', workers',
repairers' and similar statutory liens arising or incurred in the ordinary
course of business consistent with past practice for amounts which are not
delinquent and which are not, individually or in the aggregate, significant;
(iii) zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Owned Real Property or
Leased Real Property, none of which materially impair the occupancy or use of
the Owned Real Property or Leased Real Property for the purposes for which it
is currently used or proposed to be used in connection with the Company's and
its Subsidiaries' businesses; (iv) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to the Owned
Real Property or Leased Real Property which do not create rights or easements
which underlie any improvements, and which do not materially impair the
occupancy or use of the Owned Real Property or Leased Real Property for the
purposes for which it is currently used or proposed to be used in connection
with the Company's and its Subsidiaries' businesses; (v) public roads and
highways; (vi) matters which would be disclosed by an inspection or accurate
survey of each parcel of real property, which matters do not create rights or
easements which underlie any improvements and which do not materially impair
the occupancy or use of the Owned Real Property for the purposes for which it
is currently used; (vii) liens arising under worker's compensation,
unemployment insurance, social security, retirement and similar legislation;
(viii) purchase money liens and liens securing rental payments under the
80
capital lease arrangements marked with an asterisk on the Leased Real
Property Schedule; and (ix) notice filings in connection with the operating
leases.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Preferred Share Purchase Amount" means, with respect to each
Preferred Share, an amount equal to (i) the liquidation value of such
Preferred Share as stated in the Company's certificate of incorporation plus
(ii) the accrued and unpaid dividends on such Preferred Share determined as
of the Closing Date in accordance with the provisions of the Company's
certificate of incorporation.
"Princess Margaret Hospital Agreement" means that certain
Agreement between Ross University and the Commonwealth of Dominica dated as
of August 8, 1996.
"Recapitalization Agreement" means that certain Recapitalization
Agreement, dated as of April 13, 2000, by and among the Company, the Ross
University School of Medicine, Ross University School of Medicine School of
Veterinary Medicine (St. Kitts) Limited, Dr. Robert Ross, Leeds Equity
Partners III, L.P., J.W. Childs Equity Partners II, LP and the "Investor
Representatives" identified therein.
"Seller Expenses" means all fees and expenses payable to SunTrust
Robinson Humphrey, Kirkland & Ellis, Ernst & Young, Drinker Biddle & Reath
LLP and counsel in St. Kitts and Dominica in connection with the transactions
contemplated by this Agreement and certain fees and expenses payable to Leeds
Weld & Co. and J.W. Childs Associates, Inc. and their respective Affiliates
at Closing.
"Seller Released Parties" shall mean each of the persons set
forth on the Released Parties Schedule under the heading "Seller Released
Parties."
"Subsidiaries" means RUMI; RUSI; Ross University School of
Medicine, a private company limited by shares organized under the laws of
Dominica; and Ross University School of Medicine School of Veterinary
Medicine (St. Kitts) Limited, a private company limited by shares organized
under the laws of St. Kitts-Nevis and includes, after the Closing, each
successor to each of the foregoing.
81
"Tax" or "Taxes" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum, add-on
minimum, sales, use, transfer, real property gains, registration, value
added, excise, natural resources, severance, stamp, occupation, premium,
windfall profit, environmental, customs, duties, real property, special
assessment, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing (or the non-payment of the
foregoing); the foregoing shall include any transferee or secondary liability
for a Tax and any liability assumed by agreement or arising as a result of
being (or ceasing to be) a member of any Affiliated Group (or by being
included (or required to be included) in any Tax Return relating thereto).
"Tax Returns" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or sent, or required to be filed or sent, with any governmental entity
or other authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Taxing Authority" means any domestic, foreign, national, state,
county or municipal or other local government, any subdivision, agency,
commission, or authority thereof, or any quasi-governmental body exercising
Tax regulatory authority.
"Title IV" means Title IV of the Higher Education Act of 1965, as
amended.
"Title IV Program Funds" means federal student financial
assistance funds authorized by the Higher Education Act of 1965, as amended,
20 U.S.C. S. 1071 et seq. or any other similar law.
"Union Employee" means an employee of Ross University and who is
a party to the Dominica Collective Bargaining Agreement, including any
extensions or replacements thereof.
"Working Capital" means, as of a given time, (i) the book value
of the current assets of the Company at such time minus (ii) the book value
of the current liabilities at such time (excluding such items that constitute
Indebtedness) of the Company, each such book value to be determined on a
consolidated basis in accordance with GAAP.
12.02 Cross-Reference of Other Definitions. Each capitalized
term listed below is defined in the corresponding Section of this Agreement:
82
Term Section No.
- ---- -----------
Affiliated Hospital or University 4.09(a)
Aggregate Closing Common Share Price 1.03(b)
Aggregate Final Common Share Price 1.03(a)
Agreement Preamble
Authorized Action 10.03
BarbCo Preamble
Base Consideration 1.03(a)
Buyer Preamble
Buyer's Representatives 6.02
Class A Preferred Recitals
Class B Preferred Recitals
Closing 1.07
Closing Common Share Proceeds 1.03(b)
Closing Date 1.07
Closing Option Proceeds 1.02
Code 4.13(a)
Commitment Letter 5.08
Common Percentage 1.03(a)
Common Share Proceeds 1.03(a)
Common Shares Recitals
Company Preamble
Confidentiality Agreement 6.02
Deductible 9.02(b)
DelCo Preamble
Designated Stockholder Representative 10.05
ERISA 4.13(a)
Estimated Working Capital 1.05
Final Option Proceeds 1.02
Holdback Amount 1.04(e)
Indemnitee 9.05
Indemnitor 9.05
Independent Auditor 1.06(a)
Latest Balance Sheet 4.05
Leased Real Property 4.07(b)
Losses 9.02(a)
New Plans 7.07(a)
83
Objections Statement 1.06(a)
Old Plans 7.07(a)
Optionholders Preamble
Options Recitals
Owned Real Property 4.07(c)
Plans 4.13(a)
Preferred Shares Recitals
Preferred Share Proceeds 1.01(b)(ii)
Preliminary Working Capital Statement 1.06
RUMI Preamble
RUSI Preamble
Securities Act 5.07
Seller Indemnified Parties 9.03
Sellers Preamble
Shares Recitals
Stockholder Representatives 10.01
Stockholder Representative Action 10.05
Stockholders Preamble
Tax Benefit 9.06
Tax Proceeding 11.03(d)
the Company's Knowledge 13.03
Transfer Taxes 11.03(b)
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Press Releases and Communications. No press release or public
announcement related to this Agreement or the transactions contemplated
herein, or prior to the Closing, any other announcement or communication to
the employees, customers or suppliers of the Company and its Subsidiaries,
shall be issued or made by any party hereto without the joint approval of
Buyer and the Stockholder Representatives; provided, however, that any party
may make any public disclosure that it is advised by counsel to be required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities, in which case Buyer and the Stockholder
Representatives shall have the right to review such press release,
announcement or communication prior to its issuance, distribution or
publication.
84
13.02 Expenses. Except as otherwise expressly provided herein, Buyer
shall pay all of its own expenses (including attorneys' and accountants' fees
and expenses) in connection with the negotiation of this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated by this Agreement (whether consummated or not).
The Sellers shall pay all Seller Expenses that are not paid by the Company at
the Closing.
13.03 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered or delivered by facsimile, one day after deposit with Federal
Express or similar reputable overnight courier service or three days after
being mailed by first class mail, return receipt requested. Notices, demands
and communications to Buyer, the Company, the Sellers and the Stockholder
Representatives shall, unless another address is specified in writing, be
sent to the addresses indicated below:
Notices to Buyer:
----------------
DeVry Inc.
1 Tower Lane
Oakbrook Terrace, Illinois 60181
Attn: Marilynn J. Cason
Facsimile: (630) 574-1693
with a copy to:
--------------
Mayer, Brown, Rowe & Maw
190 South LaSalle Street
Chicago, Illinois 60603
Attn: John R. Sagan
Facsimile: (312) 701-7711
Notices to Sellers or to the Stockholder Representatives:
--------------------------------------------------------
Leeds Weld & Co.
660 Madison Avenue, 15th Floor
New York, New York 10021
Attn: Jeffrey T. Leeds
Joshua Sorensen
Facsimile: (212) 835-2020
85
and
---
J.W. Childs Associates, Inc.
111 Huntington Avenue
Boston, Massachusetts 02199
Attn: Adam Suttin
Facsimile: (617) 753-1101
with a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Stephen L. Ritchie, P.C.
Facsimile: (312) 861-2200
Notices to Company:
------------------
Dominica Management, Inc.
499 Thornall Street, 10th Floor
Edison, New Jersey 08837
Attn: Timothy E. Foster
Facsimile: (732) 978-5304
with a copy to:
--------------
Leeds Weld & Co.
660 Madison Avenue, 15th Floor
New York, New York 10021
Attn: Jeffrey T. Leeds
Joshua A. Sorensen
Facsimile: (212) 835-2020
86
and
---
J.W. Childs Associates, Inc.
111 Huntington Avenue
Boston, Massachusetts 02199
Attn: Adam Suttin
Facsimile: (617) 753-1101
and:
---
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Stephen L. Ritchie, P.C.
Facsimile: (312) 861-2200
13.04 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by Buyer without the prior written consent of the
Stockholder Representatives.
13.05 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
13.06 References. The table of contents and the section and other
headings and subheadings contained in this Agreement and the exhibits hereto
are solely for the purpose of reference, are not part of the agreement of the
parties hereto, and shall not in any way affect the meaning or interpretation
of this Agreement or any exhibit hereto. All references to days or months
shall be deemed references to calendar days or months. All references to "$"
shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section," "Exhibit," or "schedule"
shall be deemed to refer to a section of this Agreement, exhibit to this
Agreement or a schedule to this Agreement, as applicable. The words
"hereof," "herein" and "hereunder" and words of similar import referring to
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.
87
13.07 No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction shall be applied
against any Person.
13.08 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits may be amended or waived only in a writing signed by
Buyer, the Company and the Stockholder Representatives. No waiver of any
provision hereunder or any breach or default thereof, whether intentional or
not, shall be valid unless the same shall be in writing and signed by the
party making such waiver, nor shall such waiver be deemed to extend to or
affect in any way any other provision or prior or subsequent breach or
default, and no failure or delay to enforce, or partial enforcement of, any
provision hereof shall operate as a waiver of such provision or of any other
provision.
13.09 Complete Agreement. This Agreement and the documents referred to
herein (including the Confidentiality Agreement and the schedules and
exhibits hereto) contain the complete agreement between the parties hereto
and supersede any prior understandings, agreements or representations by or
between the parties, written or oral, which may have related to the subject
matter hereof in any way.
13.10 Counterparts. This Agreement may be executed in multiple
counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
13.11 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of New York.
13.12 No Third-Party Beneficiaries. Subject to Article X, this
Agreement shall not confer any rights or remedies upon any Person other than
the parties hereto and their respective successors and permitted assigns.
13.13 J.W. Childs Equity Partners II, L.P.. J.W. Childs Equity
Partners II, L.P. hereby unconditionally and irrevocably guarantees the
obligations of JWC DMI Investments, L.L.C. under Sections 9.02(b) and 11.08
with respect to the Seller Retained Actions.
88
WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the day and year first above written.
COMPANY:
DOMINICA MANAGEMENT, INC.
By: /s/ Timothy E. Foster
-----------------------
Name: Timothy E. Foster
-----------------------
Its: Chief Executive Officer
-----------------------
SELLERS:
LEEDS EQUITY PARTNERS III, L.P.
By: Leeds Equity Associates, L.P.
Its: General Partner
By: Leeds Equity Management, L.L.C.
Its: General Partner
By: /s/ Jeffrey T. Leeds
-------------------------------
Name: Jeffrey T. Leeds
-------------------------------
Its: Member
-------------------------------
JWC DMI INVESTMENTS, L.L.C.
By: J.W. Childs Associates, Inc.
Its: Manager
By: /s/ Adam Suttin
----------------------------
Name: Adam Suttin
----------------------------
Its: Vice President
----------------------------
89
J.W. CHILDS EQUITY PARTNERS II, L.P.
(solely as set forth in Section 13.13)
By: J.W. Childs Advisors II, L.P.
Its: General Partner
By: J.W. Childs Associates, L.P.,
Its: General Partner
By: J.W. Childs Associates, Inc.
Its: General Partner
By: /s/ Adam Suttin
---------------
Name: Adam Suttin
---------------
Its: Vice President
---------------
/s/ Robert Ross
---------------
Dr. Robert Ross
INDOSUEZ CAPITAL CO-INVEST PARTNERS II,
L.P.
By: Indosuez CM II, Inc.
Its: General Partner
By: /s/ Michael Walsh
---------------------
Name: Michael Walsh
---------------------
Its: Vice President
---------------------
By: /s/ Thierry DeVergnes
---------------------
Name: Thierry DeVergnes
---------------------
Its: Vice President
---------------------
90
/s/ Timothy E. Foster
------------------------
Timothy E. Foster
/s/ Evan Angelakos
------------------------
Evan Angelakos
/s/ Steven Muller
------------------------
Steven Muller
/s/ John T. St. James
------------------------
John T. St. James
/s/ Wilfredo R. Raymundo
------------------------
Wilfredo R. Raymundo
/s/ Franklin Loew
------------------------
Franklin Loew
/s/ Benno Schmidt
------------------------
Benno Schmidt
/s/ William Weld
------------------------
William Weld
/s/ Thomas McLarty
------------------------
Thomas McLarty
/s/ Tom Gardner
------------------------
Tom Gardner
91
/s/ Nancy Perri
------------------------
Nancy Perri
/s/ Jorge Rios
------------------------
Jorge Rios
/s/ Gerald Grell
------------------------
Gerald Grell
/s/ Michael Shires
------------------------
Michael Shires
/s/ Bruce Wahlig
------------------------
Bruce Wahlig
/s/ Sally Stout
------------------------
Sally Stout
/s/ Linda Everrett
------------------------
Linda Everrett
/s/ Michelle Fried
------------------------
Michelle Fried
/s/ Martin Michel-Toure
------------------------
Martin Michel-Toure
92
/s/ Karyn Wright-Moore
------------------------
Karyn Wright-Moore
/s/ Richard Woodward
------------------------
Richard Woodward
BUYER:
DeVRY INC.
By: /s/ Dennis J. Keller
---------------------
Name: Dennis J. Keller
---------------------
Its: Chairman and Co-Chief
Executive Officer