Exhibit 2.1
EXECUTION VERSION
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
EM ACQUISITION CORPORATION
AND
EDUCATION MANAGEMENT CORPORATION
DATED AS OF MARCH 3, 2006
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER..................................................... 1
1.01 The Merger....................................................... 1
1.02 Closing.......................................................... 1
1.03 Effective Time................................................... 2
1.04 Effect of the Merger............................................. 2
1.05 Articles of Incorporation; Bylaws................................ 2
1.06 Directors........................................................ 2
ARTICLE 2 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............. 2
2.01 Conversion of Securities......................................... 2
2.02 Exchange of Certificates......................................... 3
2.03 Stock Transfer Books............................................. 5
2.04 Company Stock Options............................................ 5
2.05 No Dissenters' Rights............................................ 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 6
3.01 Organization and Qualification; Subsidiaries..................... 6
3.02 Articles of Incorporation and Bylaws............................. 7
3.03 Capitalization................................................... 7
3.04 Authority Relative to this Agreement............................. 9
3.05 No Conflict; Required Filings and Consents....................... 10
3.06 Compliance with Law and Permits; Education Department
Compliance.................................................... 11
3.07 Sarbanes-Oxley Compliance; Internal Controls..................... 16
3.08 Governmental Entity or Accrediting Body Approval................. 16
3.09 SEC Filings; Financial Statements; Undisclosed Liabilities....... 16
3.10 Information Supplied............................................. 17
3.11 Absence of Certain Changes or Events............................. 17
3.12 Absence of Litigation............................................ 18
3.13 Employee Benefit Plans........................................... 18
3.14 Labor and Employment Matters..................................... 21
3.15 Real Property.................................................... 21
3.16 Intellectual Property............................................ 22
3.17 Taxes............................................................ 23
3.18 Environmental Matters............................................ 25
3.19 Specified Contracts.............................................. 26
3.20 Insurance........................................................ 28
3.21 Board Approval; Vote Required.................................... 28
3.22 Company Rights Agreement......................................... 29
3.23 Interested Party Transactions.................................... 29
3.24 Opinions of Financial Advisors................................... 29
3.25 Brokers.......................................................... 29
3.26 State Takeover Statutes.......................................... 29
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF MERGER CO.................... 30
4.01 Corporate Organization........................................... 30
4.02 Articles of Incorporation and Bylaws............................. 30
4.03 Authority Relative to this Agreement............................. 30
4.04 No Conflict; Required Filings and Consents....................... 30
4.05 Information Supplied............................................. 31
4.06 Absence of Litigation............................................ 31
4.07 Operations of Merger Co.......................................... 32
4.08 Financing........................................................ 32
4.09 Guaranty......................................................... 32
4.10 Brokers.......................................................... 33
4.11 Solvency......................................................... 33
4.12 Governmental Entity or Accrediting Body Approval................. 33
4.13 Status of Investors and Borrowers................................ 33
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER......................... 34
5.01 Conduct of Business by the Company Pending the Merger............ 34
5.02 Conduct of Business by Merger Co Pending the Merger.............. 36
ARTICLE 6 ADDITIONAL AGREEMENTS.......................................... 37
6.01 Proxy Statement; Other Filings................................... 37
6.02 Company Shareholders' Meeting.................................... 37
6.03 Access to Information; Confidentiality........................... 38
6.04 No Solicitation of Transactions.................................. 39
6.05 Directors' and Officers' Indemnification and Insurance........... 41
6.06 Employee Benefits Matters........................................ 43
6.07 Notification of Certain Matters.................................. 44
6.08 Financing........................................................ 45
6.09 Further Action; Reasonable Best Efforts.......................... 48
6.10 Public Announcements............................................. 49
6.11 Resignations..................................................... 50
6.12 State Takeover Statutes.......................................... 50
6.13 Permits.......................................................... 50
6.14 Credit Agreement................................................. 50
6.15 Section 16 Matters............................................... 50
6.16 Restructuring.................................................... 50
6.17 Intellectual Property............................................ 51
ARTICLE 7 CONDITIONS TO THE MERGER....................................... 51
7.01 Conditions to the Obligations of Each Party...................... 51
7.02 Conditions to the Obligations of Merger Co....................... 52
7.03 Conditions to the Obligations of the Company..................... 54
ARTICLE 8 TERMINATION, AMENDMENT, AND WAIVER............................. 54
8.01 Termination...................................................... 54
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8.02 Effect of Termination............................................ 56
8.03 Fees and Expenses................................................ 56
8.04 Amendment........................................................ 58
8.05 Waiver........................................................... 58
ARTICLE 9 GENERAL PROVISIONS............................................. 58
9.01 Non-Survival of Representations, Warranties, and Agreements...... 58
9.02 Notices.......................................................... 58
9.03 Certain Definitions.............................................. 59
9.04 Severability..................................................... 61
9.05 Disclaimer of Other Representations and Warranties; Disclosure... 61
9.06 Entire Agreement; Assignment..................................... 62
9.07 Remedies; Specific Performance................................... 62
9.08 Parties in Interest.............................................. 63
9.09 Governing Law.................................................... 63
9.10 Waiver of Jury Trial............................................. 63
9.11 Headings......................................................... 63
9.12 Counterparts..................................................... 63
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COMPANY DISCLOSURE SCHEDULE
Section 3.01(a) Organization and Qualification
Section 3.01(b) Subsidiaries
Section 3.01(c) Investments
Section 3.02 Material Subsidiaries
Section 3.03(a) Stock Options and Restricted Shares
Section 3.03(b) Agreements Relating to Equity Securities
Section 3.03(c) Subsidiary Stock
Section 3.03(d) Indebtedness
Section 3.05(a) No Conflicts
Section 3.05(b) Required Filings and Consents
Section 3.05(b)(vii) Pre-Closing Education Consents and Post-Closing
Education Consents
Section 3.06(a) Permits; Compliance with Law
Section 3.06(b) Education Permits and Compliance
Section 3.06(b)(i) Cohort Default Rates
Section 3.06(b)(iii) Institutional Refunds
Section 3.06(b)(iv) Accreditation and Licensing
Section 3.06(b)(v) Title IV Program Funds
Section 3.06(b)(vi) Policy Guidelines
Section 3.06(b)(vii) Reports and Audits
Section 3.06(b)(viii) Financial Aid Disbursements
Section 3.06(b)(ix) Status of Company and Subsidiaries
Section 3.06(b)(xi) Financial Assistance Programs
Section 3.06(b)(xiii) Financial Responsibility
Section 3.07 Internal Controls
Section 3.09(a) SEC Filings
Section 3.09(b) GAAP
Section 3.09(c) Contingent Liabilities
Section 3.11 Certain Changes and Events
Section 3.12 Litigation
Section 3.13(a) Employee Benefit Plans
Section 3.13(b) Change in Control Agreements
Section 3.13(d) Post-Termination Welfare Benefits
Section 3.13(g) Actions Related to Plans
Section 3.13(h) Foreign Benefit Plans
Section 3.14 Labor and Employment Matters
Section 3.15(a) Real Property
Section 3.15(b) Leased Property
Section 3.16(a) Intellectual Property
Section 3.16(b) Scheduled Intellectual Property
Section 3.17(a) Tax Returns
Section 3.17(b) Tax Deficiencies
Section 3.17(c) Tax Audits
Section 3.17(d) Certain Tax Agreements
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Section 3.18 Environmental Matters
Section 3.19(a) Enforceability of Specified Contracts
Section 3.19(b) Specified Contracts
Section 3.20 Insurance Policies
Section 3.23 Interested Party Transactions
Section 5.01 Conduct of Business by the Company
Section 6.05(c) Director and Officer Insurance
Section 6.06(d) Post-Closing Employment Obligations
Section 6.17 Domain Names
Section 9.03(a) Company Knowledge
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INDEX OF DEFINED TERMS
DEFINED TERM LOCATION OF DEFINITION
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Accrediting Body Section 3.05(a)
Acquisition Proposal Section 6.04(e)
Action Section 3.12
Affiliate Section 9.03(a)
Agreement Preamble
Alternative Financing Section 6.08(a)
Articles of Merger Section 1.03
Bankruptcy and Equity Exception Section 3.04
Business Day Section 9.03(a)
Capitalization Date Section 3.03(a)
Certificates Section 2.02(b)
Change in Board Recommendation Section 6.04(c)
Change in Control Agreement Section 3.13(b)
Closing Section 1.02
Closing Date Section 1.02
Code Section 3.13(b)
Commitment or Commitments Section 4.08
Company Preamble
Company Board Recitals
Company Board Recommendation Section 3.21(a)
Company Common Stock Recitals
Company Disclosure Schedule Article 3
Company Employee Section 3.13(a)
Company Financial Advisors Section 3.24
Company Material Adverse Effect Section 9.03(a)
Company Preferred Stock Section 3.03(a)
Company Rights Agreement Section 3.03(b)
Company Stock Option Plans Section 2.04(a)
Company Stock Options Section 2.04(a)
Company Shareholders' Meeting Section 6.02
Company Termination Fee Section 8.03(d)
Company Waiver Request Section 6.08(d)
Compliant Section 6.08(a)
Confidentiality Agreement Section 6.03(b)
Contract Section 3.05(a)
control Section 9.03(a)
Credit Agreement Section 3.03(d)
Debt Commitment Letter Section 4.08
DOE Section 3.05(a)
DOE Growth Restrictions Section 7.02(f)(ii)
DOE Request Letter Section 4.08
Education Department Section 3.05(b)
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DEFINED TERM LOCATION OF DEFINITION
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Education Permit Section 3.06(b)
Effective Time Section 1.03
Employee Section 6.06(a)
Environmental Laws Section 3.18(b)
Environmental Permits Section 3.18(b)
Equity Commitment Letter Section 4.08
Equity Investors Section 4.08
ERISA Section 3.13(a)
ERISA Affiliate Section 3.13(b)
ESPP Section 6.06(e)
Exchange Act Section 3.05(b)
Exchange Fund Section 2.02(a)
Expenses Section 8.03(a)
FASB Section 5.01(h)
Foreign Benefit Plan Section 3.13(h)
GAAP Section 3.09(b)
Governmental Entity Section 3.05(b)
Guaranty Section 4.09
Guarantor Section 4.09
Hazardous Substances Section 3.18(b)
HEA Section 3.06(b)
HSR Act Section 3.05(b)
Indemnified Parties Section 6.05(b)
Institution Section 9.03(a)
Intellectual Property Section 3.16(c)
Investments Section 3.01(c)
IRS Section 3.13(a)
Knowledge Section 9.03(a)
Law Section 3.05(a)
Lease(s) Section 3.15(b)
Leased Properties Section 3.15(b)
Lender MAC Section 6.08(a)
Liens Section 3.15(a)
Losses Section 6.05(b)
Market MAC Section 6.08(d)
Market MAC Notice Section 6.08(d)
Marketing Period Section 6.08(a)
Material Subsidiary Section 3.02
Merger Recitals
Merger Co Preamble
Merger Co Termination Fee Section 8.03(d)
Merger Co Waiver Notice Section 6.08(d)
Merger Consideration Section 2.01(a)
Merrill Lynch Section 3.24
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DEFINED TERM LOCATION OF DEFINITION
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Multiemployer Plan Section 3.13(b)
Multiple Employer Plan Section 3.13(b)
NASD Section 3.05(b)
Non-DOE Deficiencies Section 7.02(g)
Notice of Superior Proposal Section 8.01(h)
OCDR Section 3.06(b)
OPCO I Section 6.16
OPCO II Section 6.16
Option Amount Section 2.04(a)
Other Transactions Section 3.04
Other Filings Section 3.10
Owned Real Property Section 3.15(a)
PA Anti-Takeover Statutes Section 3.26
Paying Agent Section 2.02(a)
PBCL Section 1.01
Permit Section 3.05(a)
Permitted Liens Section 3.15(a)
person Section 9.03(a)
Plans Section 3.13(a)
Policy Guidelines Section 3.06(b)
Post-Closing Education Consents Section 6.09(c)
Pre-Closing Education Consents Section 6.09(c)
Proxy Statement Section 3.05(b)
Pre-Closing Deficiencies Section 7.02(f)
Purchaser Welfare Benefit Plans Section 6.06(c)
Real Property Section 3.15(b)
Representatives Section 6.03(a)
Required Information Section 6.08(b)
Requisite Response Period Section 6.08(d)
Restricted Shares Section 2.01(a)
Rights Section 3.03(b)
Sarbanes-Oxley Act Section 3.07
Schools Section 3.05(a)
SEC Section 3.05(b)
SEC Reports Section 3.09(a)
Securities Act Section 3.09(a)
Section 409A Section 3.13(f)
Shareholder Approval Section 3.21(b)
Shares Section 2.01(a)
Specified Contract Section 3.19(b)
Student Financial Assistance Programs Section 3.06(b)
Subsidiary Section 9.03(a)
Substantial Control Section 3.06(b)
Superior Proposal Section 9.03(a)
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DEFINED TERM LOCATION OF DEFINITION
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Surviving Corporation Section 1.01
Tax or Taxes Section 3.17(i)
Tax Returns Section 3.17(i)
Termination Date Section 8.01
Title IV Programs Section 3.06(b)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 3, 2006 (this
"Agreement"), is by and between EM Acquisition Corporation, a Pennsylvania
corporation ("Merger Co"), and Education Management Corporation, a Pennsylvania
corporation (the "Company").
RECITALS
A. The respective Boards of Directors of each of the Company and
Merger Co deem it in the best interests of their respective companies and
shareholders to consummate the merger (the "Merger"), on the terms and subject
to the conditions set forth in this Agreement, of Merger Co with and into the
Company, and such Boards of Directors have approved this Agreement and declared
its advisability (and, in the case of the Board of Directors of the Company (the
"Company Board"), unanimously recommended that this Agreement be adopted by the
Company's shareholders).
B. Upon consummation of the Merger, each issued and outstanding share
of common stock, par value $.01 per share, of the Company (the "Company Common
Stock"), will be converted into the right to receive $43 per share in cash, upon
the terms and subject to the conditions of this Agreement.
C. Certain capitalized terms used in this Agreement that are not
otherwise defined in context are defined in Section 9.03(a).
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, and agreements contained herein, and
intending to be legally bound hereby, Merger Co and the Company hereby agree as
follows:
ARTICLE 1
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions set
forth in Article 7, and in accordance with the Pennsylvania Business Corporation
Law of 1988, as amended (the "PBCL"), at the Effective Time, Merger Co shall be
merged with and into the Company. At the Effective Time, the separate corporate
existence of Merger Co shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Merger Co in accordance
with the PBCL.
1.02 Closing. Unless this Agreement shall have been terminated in
accordance with Section 8.01, and subject to the satisfaction or waiver of the
conditions set forth in Article 7, the closing of the Merger (the "Closing")
will take place at 10:00 a.m., New York time, on the Business Day immediately
following the satisfaction or waiver of the conditions set forth in Article 7
(other than those that by their terms are to be satisfied or waived at the
Closing) that is the earlier of (a) a date during the Marketing Period to be
specified by Merger Co on no less than three Business Days' notice to the
Company and (b) the final day of the Marketing Period, at the
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offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New
York, unless another time, date, and/or place is agreed to in writing by Merger
Co and the Company (the "Closing Date"); provided, however, that if the Closing
does not occur on or before the tenth (10th) day of any month, the Closing shall
occur on the first Business Day of the subsequent month.
1.03 Effective Time. Upon the terms and subject to the conditions set
forth in this Agreement, on the Closing Date, the parties hereto shall (a) file
articles of merger (the "Articles of Merger") executed and acknowledged in
accordance with the relevant provisions of the PBCL and (b) make all other
filings or recordings required under the PBCL to effect the Merger. The Merger
shall become effective at such date and time as the Articles of Merger are duly
filed with the Secretary of State of the Commonwealth of Pennsylvania, or at
such subsequent date and time as Merger Co and the Company shall agree and
specify in the Articles of Merger. The date and time at which the Merger becomes
effective is referred to in this Agreement as the "Effective Time".
1.04 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in Section 1929 of the PBCL.
1.05 Articles of Incorporation; Bylaws.
(a) The Articles of Merger shall provide that, at the Effective Time,
the Articles of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with the provisions thereof
and as provided by Law.
(b) At the Effective Time, the Bylaws of Merger Co, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by Law and the Articles of
Incorporation and the Bylaws of the Surviving Corporation.
1.06 Directors. The directors of Merger Co immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualified or until the earlier of their death, resignation, or
removal.
ARTICLE 2
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Co, the Company, or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock (all issued and outstanding shares of Company Common Stock collectively
referred to as the "Shares") issued and outstanding immediately prior to the
Effective Time (other than any
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Shares to be cancelled pursuant to Section 2.01(b) and Shares owned by
Subsidiaries of the Company), including Shares subject to restrictions or
forfeiture conditions relating to time, performance, or otherwise (the
"Restricted Shares"), shall be cancelled and shall be converted automatically
into the right to receive $43 in cash, without interest (the "Merger
Consideration"), payable upon surrender of the certificate that formerly
evidenced such Share in the manner provided in Section 2.02.
(b) Cancellation of Treasury Stock and Merger Co Owned Stock. Each
Share held in the treasury of the Company and each Share owned by Merger Co or
any direct or indirect Subsidiary of Merger Co immediately prior to the
Effective Time shall automatically be cancelled without any conversion thereof,
and no payment or distribution shall be made with respect thereto.
(c) Capital Stock of Merger Co. Each share of common stock, par value
$.01 per share, of Merger Co issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully
paid, and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation. Following the Effective Time, each certificate evidencing
ownership of shares of Merger Co common stock shall evidence ownership of such
shares of the Surviving Corporation.
(d) Adjustments. If, between the date of this Agreement and the
Effective Time, there is a reclassification, recapitalization, stock split,
stock dividend, subdivision, combination or exchange of shares with respect to,
or rights issued in respect of, the Shares, the Merger Consideration shall be
adjusted accordingly, without duplication, to provide the holders of Shares the
same economic effect as contemplated by this Agreement prior to such event.
2.02 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, the Company shall (i)
appoint and designate Mellon Investor Services LLC or a bank or trust company
reasonably acceptable to Merger Co as the paying agent (the "Paying Agent") and
(ii) enter into a paying agent agreement with such Paying Agent for the payment
of the Merger Consideration in accordance with this Article 2. At the Effective
Time, the Surviving Corporation shall deposit with the Paying Agent, for the
benefit of the holders of Shares, cash in an amount sufficient to pay the
aggregate Merger Consideration required to be paid pursuant to Section 2.01(a)
(such cash amount referred to as the "Exchange Fund"). The Exchange Fund shall
not be used for any other purpose. The Exchange Fund shall be invested by the
Paying Agent as directed by the Surviving Corporation; provided, however, that
such investments shall be in obligations of or guaranteed by the United States
of America or any agency or instrumentality thereof and backed by the full faith
and credit of the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements, or banker's acceptances of commercial banks with capital exceeding
$1 billion (based on the most recent financial statements of such bank which are
then publicly available). Any net profit resulting from, or interest or income
produced by, such investments shall be payable to the Surviving Corporation.
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(b) Exchange Procedures. As promptly as practicable after the
Effective Time (but no later than ten Business Days after the Effective Time),
the Surviving Corporation shall cause the Paying Agent to mail to each person
who was, at the Effective Time, a holder of record of Shares entitled to receive
the Merger Consideration pursuant to Section 2.01(a): (i) a letter of
transmittal (which shall be in customary form and containing customary terms and
shall specify that delivery shall be effected, and risk of loss and title to the
certificate(s) evidencing such Shares (the "Certificates") shall pass, only upon
proper delivery of the Certificates, to the Paying Agent) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender to the Paying Agent of a Certificate for
cancellation, together with such letter of transmittal, duly completed, and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration that such holder has the right to receive in respect of the Shares
formerly represented by such Certificate pursuant to Section 2.01(a), and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, payment of the Merger Consideration may be made to a person
other than the person in whose name the Certificate so surrendered is registered
if the Certificate representing such Shares shall be properly endorsed or
otherwise be in proper form for transfer, and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of such
Certificate or establish to the reasonable satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02, each Certificate shall be deemed at all
times after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration to which the holder of such Certificate is
entitled pursuant to this Article 2. No interest shall be paid or will accrue on
any cash payable to holders of Certificates pursuant to the provisions of this
Article 2.
(c) No Further Rights. From and after the Effective Time, holders of
Certificates shall cease to have any rights as shareholders of the Company,
except as provided herein or by applicable Law.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Shares for one year after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any holders of Shares who have not theretofore complied with this Article 2
shall thereafter look only to the Surviving Corporation for, and the Surviving
Corporation shall remain liable for, payment of their claim for the Merger
Consideration. Any portion of the Exchange Fund remaining unclaimed by holders
of Shares as of a date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Entity shall,
to the extent permitted by applicable Law, become the property of the Surviving
Corporation free and clear of any claims or interest of any person previously
entitled thereto.
(e) No Liability. None of the Paying Agent, Merger Co, or the
Surviving Corporation shall be liable to any holder of Shares for any such
Shares (or dividends or distributions with respect thereto), or cash delivered
to a public official pursuant to any abandoned property, escheat, or similar
Law.
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(f) Withholding Rights. Each of the Paying Agent, the Surviving
Corporation, and Merger Co shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to
such payment under all applicable Tax Laws and pay such withholding amount over
to the appropriate taxing authority. To the extent that amounts are so properly
withheld by the Paying Agent, the Surviving Corporation, or Merger Co, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Paying Agent, the Surviving
Corporation, or Merger Co, as the case may be.
(g) Lost Certificates. If any Certificate shall have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen, or destroyed, and, if reasonably
required by the Surviving Corporation, the posting by such person of a bond, in
such reasonable and customary amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall pay in respect of such lost, stolen, or
destroyed Certificate, the Merger Consideration to which the holder thereof is
entitled pursuant to Section 2.01(a).
2.03 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of Shares thereafter on the records of the Company. From and after
the Effective Time, the holders of Certificates representing Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided in this Agreement or by
Law. On or after the Effective Time, any Certificates presented to the Paying
Agent or Merger Co for any reason shall be cancelled against delivery of the
Merger Consideration to which the holders thereof are entitled pursuant to
Section 2.01(a).
2.04 Company Stock Options.
(a) Immediately prior to the Effective Time, all options then
outstanding to purchase shares of Company Common Stock (the "Company Stock
Options") granted under any plan, arrangement, or agreement set forth in Section
3.13(a) of the Company Disclosure Schedule (collectively, the "Company Stock
Option Plans") shall become fully vested and exercisable (whether or not then
vested or subject to any time or performance condition that has not been
satisfied). At the Effective Time, each Company Stock Option not previously
exercised shall be cancelled and converted into the right to receive, as
promptly as practicable thereafter (and in any event within ten Business Days),
an amount of cash (without interest) (the "Option Amount") equal to the product
of (i) the total number of shares of Company Common Stock subject to such
Company Stock Option multiplied by (ii) the excess of the amount of the per
share Merger Consideration over the exercise price per share of Company Common
Stock under such Company Stock Option (with the aggregate amount of such payment
rounded to the nearest cent) less applicable Taxes, if any, required to be
withheld with respect to such payment. In the event the amount of the per share
Merger Consideration over the exercise price per share of the Company Common
Stock is zero or a negative number with respect to any Company Stock Option, the
holder of such Company Stock Option shall receive no payment in connection with
the cancellation of such Company Stock Option under this Agreement. After the
Effective Time, any Company Stock Option cancelled in accordance with this
Section 2.04(a) shall no longer be
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exercisable by the former holder thereof, but shall only entitle such holder to
the payment described in this Section 2.04(a).
(b) Prior to the Effective Time, the Company Board, or, where
appropriate, the applicable administrative committee under each Company Stock
Option Plan and the ESPP, shall take all actions reasonably necessary and
appropriate (including the adoption of any necessary resolutions, plan
amendments, and/or the obtaining of any necessary consents) to make such
adjustments and amendments to, or make such determinations with respect to, the
Company Stock Option Plans and Company Stock Options to implement the foregoing
provisions of this Section 2.04 and the provisions of Section 6.06(e), including
the cancellation, subject to and effective on and as of the Effective Time, of
all Company Stock Options without further obligation of the Company or its
Affiliates (other than payment of the Option Amount pursuant to Section 2.04).
2.05 No Dissenters' Rights. In accordance with Section 1571 of the
PBCL, holders of Shares shall not have the right to dissent in connection with
the Merger or the Other Transactions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Merger Co prior to or concurrently with the execution and delivery of
this Agreement (the "Company Disclosure Schedule"), which Company Disclosure
Schedule identifies the section (or if applicable, the subsection) to which such
exception relates (provided, that disclosure of any fact or item in any section
or subsection of the Company Disclosure Schedule shall, should the existence of
such fact or item be relevant to any other section or subsection, be deemed to
be disclosed with respect to that other section or subsection so long as the
relevance of such disclosure to such other section or subsection is reasonably
apparent from the nature of such disclosure), the Company hereby represents and
warrants to Merger Co as follows:
3.01 Organization and Qualification; Subsidiaries.
(a) Except as set forth in Section 3.01(a) of the Company Disclosure
Schedule, the Company and each Subsidiary of the Company is a corporation,
limited partnership, or limited liability company (as applicable) duly
organized, validly subsisting or existing, and in good standing under the laws
of the jurisdiction of its organization and has the requisite power and
authority to own, lease, and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
subsisting or existing, or in good standing or to have such power and authority
would not have a Company Material Adverse Effect. Each of the Company and each
Subsidiary is duly qualified or licensed as a foreign corporation, limited
partnership, or limited liability company (as applicable) to do business, and is
in good standing, in each jurisdiction where the character of the properties
owned, leased, or operated by it or the nature of its business makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not have a Company Material
Adverse Effect.
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(b) A true and complete list of all Subsidiaries of the Company,
together with the jurisdiction of organization of each Subsidiary of the Company
and the percentage of the outstanding capital stock (or other equity interest)
of each Subsidiary of the Company owned by the Company, each other Subsidiary of
the Company, and any other person, is set forth in Section 3.01(b) of the
Company Disclosure Schedule.
(c) Section 3.01(c) of the Company Disclosure Schedule lists any and
all persons of which the Company directly or indirectly owns an equity or
similar interest, or an interest convertible into or exchangeable or exercisable
for an equity or similar interest, of less than 50% (collectively, the
"Investments"). Except as set forth in Section 3.01(c) of the Company Disclosure
Schedule, the Company or one of its Subsidiaries, as the case may be, owns all
Investments free and clear of all Liens, and there are no outstanding
contractual obligations of the Company or any of its Subsidiaries permitting the
repurchase, redemption or other acquisition of any of its interest in the
Investments or requiring the Company or any of its Subsidiaries to provide funds
to, make any investment (in the form of a loan, capital contribution or
otherwise) in, provide any guarantee with respect to, or assume, endorse or
otherwise become responsible for the obligations of, any Investment.
3.02 Articles of Incorporation and Bylaws. The Company has made
available to Merger Co a complete and correct copy of the Articles of
Incorporation and the Bylaws (or similar organizational documents), each as
amended to date, of the Company and each Subsidiary. Such Articles of
Incorporation and Bylaws (or similar organizational documents) are in full force
and effect as of the date hereof. Neither the Company nor any Subsidiary set
forth on Section 3.02 of the Company Disclosure Schedule (each a "Material
Subsidiary") is in violation of any of the provisions of its Articles of
Incorporation or Bylaws (or similar organizational documents). No Subsidiary of
the Company (other than the Material Subsidiaries, which are subject to the
immediately preceding sentence) is in violation of any of the provisions of its
Articles of Incorporation or Bylaws (or similar organizational documents),
except for violations that would not have a Company Material Adverse Effect. The
Company has made available to Merger Co complete and correct copies of the
minutes of all meetings of the Company Board (and each committee thereof) (other
than the portion of any minutes regarding the deliberations of the Company Board
(or any committee thereof) in connection with entering into this Agreement or
pursuing other strategic alternatives or that would be reasonably expected to
violate or result in the loss or impairment of any attorney-client or
work-product privilege), and of the shareholders of the Company, in each case
since January 1, 2002.
3.03 Capitalization.
(a) The authorized capital stock of the Company consists of (i) one
hundred twenty million (120,000,000) shares of Company Common Stock and (ii) ten
million (10,000,000) shares of preferred stock, par value $.01 per share
("Company Preferred Stock"). Except as set forth on Section 3.03(a) of the
Company Disclosure Schedule, as of February 24, 2006 (the "Capitalization
Date"), (i) 76,280,769 shares of Company Common Stock were issued and
outstanding (excluding shares of Company Common Stock held in the treasury of
the Company but including the Restricted Shares), all of which were duly
authorized, validly issued, fully paid and nonassessable and were issued free of
preemptive (or similar) rights, (ii) 190,234 shares of Company Common Stock were
held in the treasury of the Company, (iii) no shares of
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Company Common Stock were held by the Company's Subsidiaries, and (iv)
10,202,275 shares of Company Common Stock were reserved for future issuance in
connection with the Company Stock Option Plans (including shares issuable
pursuant to outstanding Company Stock Options). Section 3.03(a) of the Company
Disclosure Schedule sets forth, as of the Capitalization Date, the number of
shares of Company Common Stock issuable upon exercise of outstanding Company
Stock Options granted under each Company Stock Option Plan, and the number of
Restricted Shares outstanding and, as of the Capitalization Date, there are no
other Company Stock Options or Restricted Shares outstanding. Prior to the date
hereof, the Company has provided a true, complete, and correct list of all
Company Stock Options and Restricted Shares outstanding as of the Capitalization
Date, including the per share exercise price, the date of grant, the vesting
commencement date, and the vesting schedule thereof. The Company Common Stock is
traded on the NASDAQ National Market. No other securities of the Company are
listed or quoted for trading on any United States domestic or foreign securities
market. Since the Capitalization Date, (i) no shares of Company Common Stock
have been issued, except for shares of Company Common Stock issued pursuant to
the exercise of Company Stock Options outstanding as of the Capitalization Date
or except as otherwise disclosed in Section 3.03(a) of the Company Disclosure
Schedule and (ii) no Company Stock Options have been issued or granted.
(b) Except as set forth in Section 3.03(b) of the Company Disclosure
Schedule and for the rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of October 1, 1996, as amended by the Amendment No. 1 to
Rights Agreement, dated as of November 9, 1999 (the "Company Rights Agreement"),
between the Company and Mellon Bank, N.A., as rights agent, in respect of which
no Distribution Date (as defined in the Company Rights Agreement) has occurred,
there are no (i) subscriptions, calls, contracts, options, warrants, or other
rights, agreements, arrangements, understandings, restrictions, or commitments
of any character to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound relating to the issued
or unissued capital stock of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue or sell any shares of
capital stock of, other equity interests in or debt securities of the Company or
any of its Subsidiaries, (ii) securities of the Company or securities
convertible, exchangeable or exercisable for shares of capital stock or voting
securities of the Company, or (iii) equity equivalents, stock appreciation
rights, phantom stock, ownership interests in the Company or any of its
Subsidiaries or similar rights. All shares of Company Common Stock subject to
issuance as set forth in Section 3.03(b) of the Company Disclosure Schedule,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. Except as set
forth in Section 3.03(b) of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem, or otherwise acquire any outstanding securities of the
Company or any of its Subsidiaries, to vote or to dispose of any shares of
Company Common Stock or any capital stock of any Company Subsidiary or to
provide funds to or make any investment (in the form of a loan, capital
contribution, or otherwise) in, any Subsidiary of the Company or any other
person. Except as set forth in Section 3.03(b) of the Company Disclosure
Schedule, none of the Company or any of its Subsidiaries is a party to any
shareholders' agreement, voting trust agreement, or registration rights
agreement relating to any equity securities of the Company or any of its
Subsidiaries or any other Contract relating to disposition, voting, or dividends
with respect to any equity securities of the Company or of any its Subsidiaries.
No cash dividends on the Company
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Common Stock have been declared or have accrued since December 1, 2003. To the
Knowledge of the Company, all of the Shares have been issued by the Company in
compliance in all material respects with all applicable securities laws
including the Securities Act and "blue sky" laws.
(c) Except as set forth in Section 3.03(c) of the Company Disclosure
Schedule, each outstanding share of capital stock (or other equity interest) of
each Subsidiary of the Company is duly authorized, validly issued, fully paid,
and nonassessable and was issued free of preemptive (or similar) rights, and
each such share is owned by the Company or another Subsidiary of the Company
(except for, in the case of certain non-United States Subsidiaries, nominal
numbers of shares held by a director, officer or other agent of a Company
Subsidiary in trust for such Company Subsidiary) free and clear of all options,
rights of first refusal, agreements, limitations on the Company's or of its
Subsidiaries' voting, dividend or transfer rights, charges, and other Liens of
any nature whatsoever.
(d) As of the date hereof, the only principal amount of outstanding
indebtedness for borrowed money of the Company and its Subsidiaries (not
including intercompany amounts or operating or capital leases) is (i) borrowings
that would be permitted under Section 5.01 if incurred after the date hereof,
(ii) $2,710,963 for letters of credit under the Company's $250,000,000 Second
Amended and Restated Credit Agreement, dated as of August 18, 2003, as amended,
among the Company, as Borrower, National City Bank of Pennsylvania, as Agent,
Wachovia Bank, as Syndication Agent, SunTrust Bank, as Syndication Agent, Fleet
National Bank, as Documentation Agent, and JPMorgan Chase Bank, as Documentation
Agent, and the other parties thereto (the "Credit Agreement"), and (iii) amounts
set forth in Section 3.03(d) of the Company Disclosure Schedule.
3.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the Merger and the other
transactions contemplated by this Agreement to be consummated by the Company
(the "Other Transactions"). The execution, delivery, and performance of this
Agreement by the Company and the consummation by the Company of the Merger and
the Other Transactions have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the Merger or such
Other Transactions (other than the adoption of this Agreement by the affirmative
vote of a majority of the votes cast by all holders of Company Common Stock
entitled to vote thereon and the filing and recordation of appropriate merger
documents, including the Articles of Merger, as required by the PBCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution, and delivery by Merger Co,
constitutes a legal, valid, and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity and an implied
covenant of good faith and fair dealing (the "Bankruptcy and Equity Exception").
-9-
3.05 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 3.05(a) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company and the consummation by the
Company of the Merger and the Other Transactions will not, (i) conflict with,
violate, or result in a breach of the Articles of Incorporation or Bylaws (or
similar organizational documents) of the Company or any of its Subsidiaries,
(ii) assuming that all consents, approvals, and other authorizations described
in Section 3.05(b) have been obtained and that all filings and other actions
described in Section 3.05(b) have been made or taken, violate any federal,
state, local or foreign governmental statute, law, ordinance, regulation, rule,
code, executive order, judgment, decree or requirement, including any rule,
regulation and order promulgated thereunder and any order, decree, writ,
settlement, stipulation, injunction, award, consent or judgment of any
Governmental Entity ("Law") applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any Subsidiary is bound or
affected, (iii) assuming that all consents, approvals, and other authorizations
described in Section 3.05(b) have been obtained and that all filings and other
actions described in Section 3.05(b) have been made or taken, result in any
breach or violation of or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, require consent, or
result in a material loss of a material benefit under, give rise to a right or
obligation to purchase or sell assets or securities under, give to others any
right of termination, amendment, acceleration, or cancellation of, or cause
additional fees to be due under or result in the creation of a Lien on any
property or asset of the Company or any Subsidiary pursuant to any note, bond,
mortgage, indenture, contract (written or oral), obligation, Plan, undertaking,
arrangement, agreement, lease, license, permit, franchise or other binding
commitment, instrument, or obligation (each, a "Contract") to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any Subsidiary is bound
or affected, (iv) assuming that all consents, approvals, and other
authorizations described in Section 3.05(b) have been obtained and that all
filings and other actions described in Section 3.05(b) have been made or taken,
violate any permits, licenses, accreditations, certificates, approvals,
exemptions, orders, franchises, permissions, agreements, qualifications,
authorizations, and registrations required by Law (each, a "Permit") of the
Company or any of its Subsidiaries or any of the schools regulated as such by
the United States Department of Education (the "DOE") or other Education
Department or Accrediting Body and owned and operated by the Company or any of
its Subsidiaries (the "Schools") or any Law applicable to the Company or any of
its Subsidiaries or the Schools, or (v) assuming that all consents, approvals,
and other authorizations described in Section 3.05(b) have been obtained and
that all filings and other actions described in Section 3.05(b) have been made
or taken, violate any standard or requirement of any entity or organization,
whether private or quasi-private, whether foreign or domestic, which engages in
the granting or withholding of accreditation of post-secondary schools or their
educational programs in accordance with standards and requirements relating to
the performance, operations, financial condition and/or academic standards of
such schools (each such entity or organization, an "Accrediting Body"), except,
with respect to clauses (ii), (iii), (iv), and (v) above, for any such
violations, conflicts, breaches, defaults, or other occurrences which would not
have a Company Material Adverse Effect.
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(b) Except as set forth in Section 3.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company and the consummation by the
Company of the Merger and the Other Transactions will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
supranational, national, provincial, federal, state, local, or foreign
government, court, arbitral tribunal, non-educational administrative agency or
commission or other non-educational governmental or regulatory authority or
non-educational administrative agency or commission (each, a "Governmental
Entity"), or any federal or state education regulatory bodies having specific
jurisdiction over the operation of or provision of Student Financial Assistance
Programs funds to or on behalf of the students of post-secondary educational or
training institutions or guaranteeing student loans to students at such
institutions (each, an "Education Department") or any Accrediting Body, except
for (i) applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the pre-merger notification requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the competition or merger control Laws of any other applicable
jurisdiction, (iii) the filing with the Securities and Exchange Commission (the
"SEC") of a proxy statement relating to the adoption of this Agreement by the
Company's shareholders (as amended or supplemented from time to time, the "Proxy
Statement"), (iv) any required filing with, and any required approval of, the
National Association of Securities Dealers, Inc. or its wholly owned Subsidiary,
NASD Regulation, Inc., or any successor entity or entities thereto
(collectively, the "NASD"), including requirements of the NASDAQ National
Market, (v) any filings with, and approvals from, relevant state securities
administrators or related to the blue sky laws of various states, (vi) the
filing and recordation of appropriate merger documents as required by the PBCL,
including the Articles of Merger, and appropriate documents with the relevant
authorities of other states in which the Company or any of its Material
Subsidiaries is qualified to do business, (vii) the Pre-Closing Education
Consents and the Post-Closing Education Consents set forth on Section
3.05(b)(vii) of the Company Disclosure Schedule, (viii) filings required as a
result of facts or circumstances solely attributable to Merger Co's or any
Equity Investor's (as opposed to any other third party's) participation in the
transactions contemplated by this Agreement, or (ix) where the failure to obtain
such consents, approvals, authorizations, or permits, or to make such filings or
notifications, would not have a Company Material Adverse Effect.
3.06 Compliance with Law and Permits; Education Department Compliance.
(a) Permits; Compliance with Law. As of the date hereof, except (i) as
set forth in Section 3.06(a) of the Company Disclosure Schedule and (ii) for
Education Permits and educational Laws and regulations which are exclusively
provided for in Section 3.06(b), all Permits of the Company or any of its
Subsidiaries which are necessary to the conduct of the business of the Company
and the Schools are in full force and effect and neither the Company nor any of
its Subsidiaries are in violation of any Permit or Law, other than where such
failures to be in full force or effect or such violations would not have a
Company Material Adverse Effect.
(b) Education Permits and Compliance. Unless otherwise specifically
indicated, the representations and warranties contained in this Section 3.06(b)
apply to the period from July 1, 2002, through the date hereof. Except as set
forth in Section 3.06(b) of the Company
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Disclosure Schedule, each School has maintained without interruption in all
material respects all Permits issued by any Education Department or Accrediting
Body and necessary for the operation of the School, including each location,
site and educational program thereof, as conducted at such time, including the
receipt of funding under Student Financial Assistance Programs (each such
Permit, an "Education Permit"), except where the failure to have such an
Education Permit would not have a Company Material Adverse Effect. The Company
has made available to Merger Co a copy of each Education Permit listed on
Section 3.06(b) (under schedule references 1(a), 1(b) and 1(c)) of the Company
Disclosure Schedule. Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have operated the
Schools in compliance with all Education Permits, Accrediting Body approvals and
applicable Laws pertaining to Student Financial Assistance Programs or
administered by an Education Department, except where such noncompliance would
not have a Company Material Adverse Effect. Without limiting the generality of
the foregoing and except as set forth in Section 3.06(b) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries are in compliance
in all material respects with the regulations and requirements of the DOE
governing each Institution's eligibility to participate in and administration of
the federal student financial assistance programs authorized by Title IV (the
"Title IV Programs") of the Higher Education Act of 1965, as amended, 20
U.S.C.A. Section 1070 et seq., and any amendments or successor statutes thereto
(the "HEA"), including the regulations and requirements regarding compensation
(34 C.F.R. Section 668.14(b)(22)) and any other program authorized by the HEA
and administered by the DOE, as well as any state student assistance grant or
loan programs or other government-sponsored student assistance program
(collectively the "Student Financial Assistance Programs"), except to the extent
that any noncompliance would not have a Company Material Adverse Effect. Except
as set forth in Section 3.06(b) of the Company Disclosure Schedule, the Company
does not have any Knowledge of any pending or threatened program review, survey,
investigation, or any audit by any Education Department or Accrediting Body with
respect to compliance with any Education Permit or any requirements of any
Student Financial Assistance Program. In addition, and without limiting the
generality of the foregoing:
(i) Cohort Default Rate. Section 3.06(b)(i) of the Company
Disclosure Schedule sets forth each Institution's official cohort default rate
("OCDR") for Federal Family Education Loan Program loans or Federal Direct Loan
Program loans, as published by the DOE, for the federal fiscal years 2002
through 2003, each Institution's draft cohort default rate for Federal Family
Education Loan Program loans or Federal Direct Loan Program loans for the
federal fiscal year 2004, and each Institution's OCDR on Federal Perkins Loan
Program loans for the federal award years ended June 30, 2003 through June 30,
2005 for each Institution which participated in such loan program. The Company
has made available to Merger Co true and correct copies of the notices issued by
the DOE with respect to all such OCDRs, to the extent available.
(ii) Compliance with Definition of Proprietary Institution of
Higher Education. Each Institution is, and since July 1, 2003 has been, duly
qualified as a "proprietary institution of higher education" as defined by the
DOE.
(iii) Institutional Refunds. Since July 1, 2002, except as set
forth in Section 3.06(b)(iii) of the Company Disclosure Schedule, (A) the
Company and each of its Subsidiaries are in compliance in all material respects
with Education Department and
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Accrediting Body requirements and regulations relating to (x) the implementation
of a fair and equitable refund policy and (y) the implementation of DOE's
"return of Title IV funds" requirements, and (B) any and all refunds or returns
required thereunder have been accurately calculated and timely paid.
(iv) Accreditation and Licensing. Since July 1, 2002, except as
set forth in Section 3.06(b)(iv) of the Company Disclosure Schedule or as would
not have a Company Material Adverse Effect, the Schools are (A) accredited by,
and in good standing with, and in compliance in all material respects with the
requirements of their respective applicable Accrediting Bodies and (B) licensed
to operate by, in good standing with, and in compliance in all material respects
with the requirements of the Education Departments in the states or foreign
jurisdictions in which they operate; and, in each case, the Schools have not
received written notice of, and the Company has no Knowledge of, any facts or
circumstances which would materially interfere with or jeopardize such license
or accreditation.
(v) Title IV Program Funds. No Institution has derived more than
ninety percent (90%) of its revenues from Title IV Program funds, as determined
in accordance with DOE's "90/10 Rule" as codified at 34 C.F.R. Section
600.5(a)(8), for any reporting period required by the DOE ended on or after June
30, 2002. Section 3.06(b)(v) of the Company Disclosure Schedule sets forth the
percentage of Title IV Program funds received by each Institution, as calculated
pursuant to such "90/10 Rule" for each fiscal year ended on or after June 30,
2002 and for the period from July 1, 2005 through the date hereof.
(vi) Policies and Procedures. The Company has provided to Merger
Co true and correct copies of all readily available policy manuals and other
statements of procedures of the Company, any Subsidiary or any School currently
in effect and relating to: (A) recruitment of students for the Schools,
including procedures for assisting in the application by prospective students
for Student Financial Assistance Program funds; (B) admissions procedures,
including any descriptions of procedures for ensuring compliance with Education
Department or Accrediting Body requirements applicable to such procedures; (C)
procedures for encouraging and verifying attendance, minimum required attendance
policies, and other relevant criteria relating to course performance
requirements and completion; and (D) procedures for processing, disbursing and
returning Student Financial Assistance Program funds (collectively, the "Policy
Guidelines"). The applicable operations of the Schools have been conducted in
substantial compliance with the Policy Guidelines, which comply in all material
respects with Law, Education Department requirements and Accrediting Body
standards applicable to the Schools, except as set forth in Section 3.06(b)(vi)
of the Company Disclosure Schedule or to the extent that noncompliance would not
have a Company Material Adverse Effect.
(vii) Reports and Audits. Since July 1, 2002, except as set forth
in Section 3.06(b)(vii) of the Company Disclosure Schedule, the Company and each
of its Subsidiaries and Schools have submitted on a timely basis all reports,
audits, and other information, whether periodic in nature or pursuant to
specific requests, for the Company, any of its Subsidiaries, and the Schools to
all Education Departments and Accrediting Bodies with which such filings are
required relating to its compliance with (A) applicable Education Department and
Accrediting Body requirements or (B) Student Financial Assistance Program
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requirements, except, in the case of each of the foregoing clauses, where the
failure to submit such reports, audits, and other information would not have a
Company Material Adverse Effect.
(viii) Financial Aid Disbursements. Except as set forth in
Section 3.06(b)(viii) of the Company Disclosure Schedule, since July 1, 2002,
each School has calculated and made all Student Financial Assistance Program
disbursements in compliance with all Education Department requirements and
Accrediting Body standards, except where any such noncompliance would not have a
Company Material Adverse Effect.
(ix) Status of Company and Subsidiaries. Neither the Company, nor
any person or entity that exercises Substantial Control over the Company, any of
its Subsidiaries, or the Schools (as the term "Substantial Control" is used in
34 C.F.R. Section 668.174(b) and (c)), or member of such person's family (as the
term "family" is defined in 34 C.F.R. Section 600.21(f)), alone or together, (A)
exercises or exercised Substantial Control over an institution other than the
Schools or over a third-party servicer (as that term is defined in 34 C.F.R.
Section 668.2) that owes a liability for a violation of a Title IV Program or
other HEA program requirement, or (B) owes a liability for a Title IV Program or
other HEA program violation. At no time has the Company, any of its
Subsidiaries, or the Schools, nor any person or entity that exercises
Substantial Control over any of them, filed for relief in bankruptcy or had
entered against it an order for relief in bankruptcy. None of the Company, any
of its Subsidiaries, or the Schools, nor any person or entity that exercises
Substantial Control over any of them, has pled guilty to, has pled nolo
contendere to, or has been found guilty of a crime involving the acquisition,
use, or expenditure of funds under the Title IV Programs or has been judicially
determined to have committed fraud involving funds under the Title IV Programs.
Except as set forth in Section 3.06(b)(ix) of the Company Disclosure Schedule,
to the Company's Knowledge, neither the Company, nor any of its Subsidiaries, or
Schools have employed any individual or entity in a capacity that involves the
administration or receipt of funds under the Title IV Programs, or contracted
with any institution or third-party servicer, which has been terminated under
the Title IV Programs for a reason involving the acquisition, use, or
expenditure of federal, state or local government funds, or has been convicted
of, or has pled nolo contendere or guilty to, a crime involving the acquisition,
use or expenditure of federal, state, or local government funds, or has been
administratively or judicially determined to have committed fraud or any other
material violation of law involving federal, state, or local government funds.
Other than as would not have a Company Material Adverse Effect, no school not
then a School or any third-party servicer (as that term is defined at 34 C.F.R.
Section 668.2) is, or since July 1, 2002 has been, administered commonly,
jointly, or in conjunction with the Company or any School, and no other school
or organization not then a School has provided educational services on behalf of
the Company or any School, except for instruction provided under clinical
affiliation, externship, internship, or similar agreements. Other than as would
not have a Company Material Adverse Effect, neither the Company nor any School
provides, or since July 1, 2002, has provided, any educational instruction for
students of a school not then a School for which students could qualify for
Title IV Program funding on behalf of any other institution or organization of
any sort.
(x) Delivery of Documents. The Company has provided to Merger Co
true and complete copies of all correspondence (excluding general correspondence
routinely sent to or received from any Education Department or Accrediting Body)
received from or sent by or on behalf of the Company, any Subsidiary, or any
School to any Education Department or any
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Accrediting Body, to the extent such correspondence is readily available and was
sent or received within the past two years or relates to any issue which remains
pending, and relates to: (A) any notice that any Education Permit is not in full
force and effect or that an event has occurred which constitutes or, with the
giving of notice or the passage of time or both, would reasonably be expected to
constitute a breach or violation thereunder; (B) any written notice that the
Company, any Subsidiary, or any School has violated or are violating any Law
administered by any Education Department or any applicable Accrediting Body; (C)
any audits, program reviews, investigations, or site visits conducted by any
Education Department or any Accrediting Body, or any independent auditor
reviewing compliance by the Company, any of its Subsidiaries, or any School with
the statutory, regulatory or other requirements of the Title IV Programs; (D)
any written notice of an intent to limit, suspend, terminate, revoke, cancel,
not renew, or condition any Education Permit of the Company, any of its
Subsidiaries, or any School; (E) any written notice of an intent or threatened
intent to condition the provision of Title IV Program funds to the Company, any
of its Subsidiaries, or any School or the continued operation of any of the
Schools on the posting of a letter of credit or other surety in favor of the DOE
or any Education Department, and any documentation indicating that such letter
of credit is or was posted; (F) any written notice of an intent to provisionally
certify the eligibility of any Schools to participate in the Title IV Programs;
(G) the placement or removal of any Schools on or from the reimbursement or cash
monitoring method of payment under Title IV Programs; or (H) any matter or
proceeding disclosed under Sections 3.06, 3.07, 3.09 or 3.11 of the Company
Disclosure Schedule. The Company has made available to Merger Co the audited
financial statements of the Company, any Subsidiary and any School, for any
fiscal year ended on or after June 30, 2002, to the extent filed with the DOE.
(xi) Financial Assistance Programs. Section 3.06(b)(xi) of the
Company Disclosure Schedule lists each material Student Financial Assistance
Program, and the Company has made available to Merger Co true and complete
copies of each available contract or agreement listed in Section 3.06(b)(xi) of
the Company Disclosure Schedule.
(xii) Distance Education. For each year ended on or after June
30, 2002, each Institution has complied in all material respects with the
applicable regulations codified at 34 C.F.R. Section 600.7 with respect to
offering telecommunications programs and enrolling students in
telecommunications programs, as those terms are used at 34 C.F.R. Section 600.7.
To the extent readily available, the Company has provided to Merger Co the
back-up data to support the compliance of each Institution with these distance
education requirements in each such year, including any material consortium or
articulation agreements related to the provision of online education
instruction.
(xiii) Financial Responsibility. Except as set forth in Section
3.06(b)(xiii) of the Company Disclosure Schedule, since July 1, 2002, neither
the Company nor any Institution or School, as applicable, has received written
notice from any Education Department, Accrediting Body or other Governmental
Entity that any Institution or School owned by the Company or any of its
Subsidiaries at the time lacked financial responsibility or was required to post
a letter of credit or other form of surety for any reason, including any request
for a letter of credit based on late refunds pursuant to 34 C.F.R. Section
668.173.
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3.07 Sarbanes-Oxley Compliance; Internal Controls. The Company has
made all certifications and statements required by Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002, as amended, and the related rules and regulations
promulgated thereunder (the "Sarbanes-Oxley Act") with respect to the Company's
filings pursuant to the Exchange Act. The Company has established and maintains
disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange
Act) designed to ensure that material information relating to the Company,
including its Material Subsidiaries, is made known on a timely basis to the
individuals responsible for the preparation of the Company's filings with the
SEC and other public disclosure documents. Except as would not have a Company
Material Adverse Effect or as set forth in Section 3.07 of the Company
Disclosure Schedule, (a) the Company has established and maintains a system of
internal accounting control over financial reporting sufficient to comply with
all legal and accounting requirements applicable to the Company, (b) the Company
has disclosed, based on its most recent evaluation of internal controls, to the
Company's auditors and its audit committee, (i) any significant deficiencies and
material weaknesses in the design or operation of its internal accounting
controls which are reasonably likely to materially and adversely affect the
Company's ability to record, process, summarize, and report financial
information, and (ii) any fraud known to the Company that involves management or
other employees who have a significant role in internal controls, and (c) the
Company has not received any complaint, allegation, assertion, or claim in
writing regarding the accounting practices, procedures, methodologies, or
methods of the Company or its internal accounting controls over financial
reporting, including any such complaint, allegation, assertion, or claim that
the Company has engaged in questionable accounting or auditing practices.
3.08 Governmental Entity or Accrediting Body Approval. As of the date
hereof, there exists no fact or circumstance attributable to the Company, any of
its Subsidiaries, or any of the Schools, which would reasonably be expected to
have a material adverse impact on Merger Co's or the Company's ability to obtain
any authorization, consent, or similar approval from the DOE or any other
Education Department, Governmental Entity, or Accrediting Body whose
authorization, consent, or similar approval is contemplated in connection with
this Agreement, including, without limitation, any authorization, consent, or
similar approval which must be obtained following the Closing from the DOE or
any Education Department or Accrediting Body in order to continue the operations
of the Schools as presently conducted.
3.09 SEC Filings; Financial Statements; Undisclosed Liabilities.
(a) Except as set forth in Section 3.09(a) of the Company Disclosure
Schedule, the Company has filed all forms, reports, statements, schedules, and
other documents required to be filed by it with the SEC since July 1, 2003
(together with all exhibits and schedules thereto and all information
incorporated therein by reference, the "SEC Reports"). The SEC Reports (i) were
prepared in accordance with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act, the Sarbanes-Oxley
Act and, in each case, the rules and regulations promulgated thereunder, and
(ii) did not, at the time they were filed, or, if amended prior to the date
hereof, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is required to file any form, report, or other document with the SEC.
The Company has made available to Merger Co all material
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correspondence between the SEC, on the one hand, and the Company, on the other
hand, since July 1, 2003 through the date of this Agreement.
(b) Except as set forth in Section 3.09(b) of the Company Disclosure
Schedule, each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports, when filed, complied with
applicable accounting requirements and with published rules and regulations of
the SEC with respect thereto, was prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the consolidated
financial position, results of operations, and changes in cash flows of the
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject to footnotes and other
presentation items, and, in the case of pro forma financial statements, to the
qualifications stated therein, and, in the case of unaudited statements, normal
and recurring year-end adjustments). All of the Company's Subsidiaries are
consolidated for GAAP purposes.
(c) Except as and to the extent set forth in Section 3.09(c) of the
Company Disclosure Schedule or specifically accrued or reserved against in the
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 2005 (including the notes thereto) included in the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 2005, neither the
Company nor any its Subsidiaries has any liability or obligation of any nature
(whether direct, indirect, accrued, absolute, unasserted, contingent, known or
unknown, determined or determinable, matured or unmatured or otherwise), except
for liabilities and obligations (i) incurred in connection with the transactions
contemplated hereby, (ii) incurred in the ordinary course of business and in a
manner consistent with past practice after December 31, 2005, (iii) reasonable
fees and expenses incurred by the Company in connection with the Merger and the
Other Transactions, or (iv) that would not have a Company Material Adverse
Effect.
3.10 Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement or any other document filed
with the SEC in connection with the Merger (the "Other Filings") will, in the
case of the Proxy Statement, at the date it is first mailed to the Company's
shareholders or at the time of the Company Shareholders' Meeting or at the time
of any amendment or supplement thereof, or, in the case of any Other Filing, at
the date it is first filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Merger Co or
any Affiliate of Merger Co in connection with the preparation of the Proxy
Statement or the Other Filings for inclusion or incorporation by reference
therein. The Proxy Statement and the Other Filings that are filed by the Company
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
3.11 Absence of Certain Changes or Events. Since June 30, 2005, there
has not been any Company Material Adverse Effect. Since June 30, 2005 and prior
to the date hereof,
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except as expressly contemplated by this Agreement or as set forth in Section
3.11 of the Company Disclosure Schedule, (a) the Company and its Subsidiaries
have conducted their businesses only in the ordinary course of business and in a
manner consistent with past practice, (b) neither the Company nor any of its
Subsidiaries has suffered any damage, destruction or loss (whether or not
covered by insurance), other than in the ordinary course of business, that would
have a Company Material Adverse Effect, and (c) neither the Company nor any of
its Subsidiaries has taken any action that would materially breach any of the
prohibitions set forth in clauses (a) through (r) of Section 5.01 if taken after
the date hereof.
3.12 Absence of Litigation. Except as set forth in Section 3.12 of the
Company Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding, hearing, petition, grievance, complaint, or investigation (an
"Action") pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any property or asset of the Company or
any of its Subsidiaries, before any Governmental Entity or arbitrator, except
such Actions that would not have a Company Material Adverse Effect. To the
Knowledge of the Company, the Company knows of no valid basis for any other
Actions that would have a Company Material Adverse Effect. As of the date of
this Agreement, no executive officer or director of the Company is a defendant
in any Action in connection with his status as an executive officer or director
of the Company or any of its Subsidiaries. Except as set forth in Section 3.12
of the Company Disclosure Schedule, other than pursuant to Certificates of
Incorporation, Bylaws, and other organizational documents, no Contracts between
the Company or any Material Subsidiary and any current or former director or
officer exists that provides for indemnification. Neither the Company nor any of
its Subsidiaries nor any material property or material asset of the Company or
any Subsidiary is subject to any continuing order of, consent decree, settlement
agreement, or other similar written agreement with, or, to the Knowledge of the
Company, continuing investigation by, any Governmental Entity, or any order,
writ, judgment, injunction, decree, determination, settlement, stipulation or
award of, any Governmental Entity. Except as set forth in Section 3.12 of the
Company Disclosure Schedule, there are no outstanding orders, judgments,
injunctions, settlements, stipulations, awards, or decrees of any Governmental
Entity or Accrediting Body against the Company, its Subsidiaries, or the Schools
that would have a Company Material Adverse Effect.
3.13 Employee Benefit Plans.
(a) Section 3.13(a) of the Company Disclosure Schedule lists all
material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance (other than Contracts with individual members of the faculty of the
Schools), consulting, change-in-control, collective bargaining, termination, or
other benefit plans, programs, arrangements and material Contracts to which the
Company or any of its Subsidiaries is a party (whether legally binding or not
and whether subject to ERISA or not), which are maintained, contributed to or
sponsored by the Company or any of its Subsidiaries for the benefit of any
current or former employee, consultant, officer or director of the Company or
any of its Subsidiaries (each, a "Company Employee") or pursuant to which the
Company or any of its Subsidiaries has or may reasonably be expected to have any
material obligations or material liabilities of any nature (whether direct,
indirect, accrued, absolute, contingent,
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determined or determinable, matured or unmatured or otherwise). All such plans,
programs, arrangements and Contracts, whether material or not, shall be
collectively referred to as the "Plans". The Company has made available to
Merger Co a true and complete copy (where applicable) of (A) each Plan (or,
where a Plan has not been reduced to writing, a summary of all material Plan
terms of such Plan), (B) each trust or funding arrangement prepared in
connection with each such Plan, (C) the three most recently filed annual reports
on Internal Revenue Service ("IRS") Form 5500 (with attached Schedules) for each
Plan, (D) the most recently received IRS determination letter and all material
communications with any Governmental Entity for each such Plan, (E) the three
most recently prepared actuarial reports and financial statements in connection
with each such Plan, and (F) the most recent summary plan description, any
summaries of material modification, any employee handbooks, and any material
written communications (or a description of any material oral communications) by
the Company or its Subsidiaries to any Company Employee concerning the extent of
the benefits provided under a Plan.
(b) None of the Company or any of its Subsidiaries or any other person
or entity that, together with the Company or any of its Subsidiaries, is or was
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, together with the Company and any of its Subsidiaries, an "ERISA
Affiliate") has now or at any time within the past six years (and in the case of
any such other person or entity, only during the period within the past six
years that such other person or entity was an ERISA Affiliate) contributed to,
sponsored, or maintained: (i) a pension plan (within the meaning of Section 3(2)
of ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multiemployer Plan"); or (iii) a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which an ERISA Affiliate would
incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"). Except as set forth in Section 3.13(b) of the Company Disclosure
Schedule (each, a "Change in Control Agreement"), no Plan exists that would
result in the payment to any Company Employee of any money or other property or
accelerate or provide any other rights or benefits to any Company Employee as a
result of the consummation of the Merger or any other transaction contemplated
by this Agreement (whether alone or in connection with any other event). Except
as set forth in Section 3.13(b) of the Company Disclosure Schedule, there is no
Plan covering any Company Employee that, individually or collectively, would
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G or Section 162(m) of the United States Internal
Revenue Code of 1986, as amended (the "Code").
(c) Each Plan that is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS covering all
of the material provisions applicable to the Plan for which determination
letters are currently available that the Plan is so qualified, and each trust
established in connection with any Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and, to the Knowledge of
the Company, no fact or circumstance exists that would result in the revocation
of such letter.
(d) Each Plan has been established and administered in accordance with
its terms, and in compliance with the applicable provisions of ERISA, the Code
and other applicable Laws, except to the extent such noncompliance would not
have a Company Material Adverse Effect,
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and except as set forth in Section 3.13(d) of the Company Disclosure Schedule,
no Plan provides post-termination or retiree welfare benefits, and neither the
Company nor any of its Subsidiaries has any obligation to provide any
post-termination or retiree welfare benefits other than health care continuation
as required by Section 4980B of the Code.
(e) All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been made to each
pension plan (as defined in Section 3(2) of ERISA), and to the extent not due
have been appropriately accrued on the financial statements described in Section
3.09 in accordance with GAAP. All premiums or other payments which are due have
been paid with respect to each welfare plan or fringe benefit plan, and to the
extent such amounts are owed with respect to periods prior to the Closing Date
but are not yet payable, have been appropriately accrued on the financial
statements described in Section 3.09 in accordance with GAAP.
(f) Each plan that is a "non-qualified deferred compensation plan" (as
defined in Section 409A(d)(1) of the Code) and is otherwise subject to the
requirements of Section 409A of the Code (together with the guidance and
proposed regulations promulgated thereunder, "Section 409A") has been operated
and administered in good faith compliance in all material respects with Section
409A since January 1, 2005.
(g) Except as set forth in Section 3.13(g) of the Company Disclosure
Schedule, with respect to any Plan, (i) no Actions (other than routine claims
for benefits in the ordinary course) are pending or, to the Knowledge of the
Company, threatened, except for those that would not be material to the Company,
(ii) to the Knowledge of the Company, no facts or circumstances exist that would
give rise to any such Actions, and (iii) no administrative investigation, audit
or other administrative proceeding by the Department of Labor, the IRS, or other
Governmental Entity, is pending, in progress or, to the Knowledge of the
Company, threatened, except for those that would not be material to the Company.
(h) With respect to each Plan that is not subject to United States Law
(a "Foreign Benefit Plan"), except as set forth in Section 3.13(h) of the
Company Disclosure Schedule or as would not have a Company Material Adverse
Effect: (i) all employer and employee contributions to each Foreign Benefit Plan
required by Law or by the terms of such Foreign Benefit Plan have been made or,
if applicable, accrued in accordance with normal accounting practices; (ii) the
fair market value of the assets of each funded Foreign Benefit Plan, the
liability of each insurer for any Foreign Benefit Plan funded through insurance
or the book reserve established for any Foreign Benefit Plan, together with any
accrued contributions, is sufficient to procure or provide for the accrued
benefit obligations with respect to all current and former participants in such
plan, according to the actuarial assumptions and valuations most recently used
and consistent with applicable Law and normal accounting practices to determine
employer contributions to such Foreign Benefit Plan, and no transaction
contemplated by this Agreement shall cause such assets, reserve or insurance
obligations to be less than such benefit obligations; (iii) each Foreign Benefit
Plan required to be registered has been registered and has been maintained in
good standing with applicable regulatory authorities; and (iv) each Foreign
Benefit Plan is in compliance in all material respects with all applicable Laws.
-20-
3.14 Labor and Employment Matters. Except as set forth in Section 3.14
of the Company Disclosure Schedule, neither the Company nor any of its Material
Subsidiaries is a party to any collective bargaining agreement or other labor
union agreements applicable to persons employed by the Company or any of its
Material Subsidiaries nor, to the Knowledge of the Company, are there any formal
activities or proceedings of any labor union to organize any such employees.
There are no material unfair labor practice complaints pending against the
Company or any of its Material Subsidiaries before the National Labor Relations
Board or any other Governmental Entity or any current union representation
questions involving employees of the Company or any of its Material
Subsidiaries. There is no strike, controversy, slowdown, work stoppage or
lockout in progress, or, to the Knowledge of the Company, threatened in writing,
by or with respect to any employees of the Company or any of its Material
Subsidiaries.
3.15 Real Property.
(a) Section 3.15(a) of the Company Disclosure Schedule contains a true
and complete list of each parcel of real property owned by the Company or any of
its Subsidiaries and sets forth the entity owning such property (the "Owned Real
Property"). The Company or the applicable entity identified on Section 3.15(a)
of the Company Disclosure Schedule has good and marketable fee simple title to
all of the Owned Real Property, in each case free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
options, rights of first offer, rights of first refusal, charges or other claims
of third parties of any kind, including any easements or rights-of-way, or other
encumbrances (collectively, "Liens"), other than (i) Liens for current taxes not
yet due and payable, and water, sewer and other assessments not yet due and
payable, (ii) ordinary course inchoate mechanics' and materialmen's Liens for
construction in progress with respect to amounts not yet overdue, (iii) ordinary
course workmen's, repairmen's, warehousemen's and carriers' Liens, (iv) Liens
securing debt reflected as secured debt on the financial statements included or
incorporated by reference in the SEC Reports or otherwise disclosed in Section
3.15(a) of the Company Disclosure Schedule, and (v) Liens, matters of record,
including, without limitation, easements, rights-of-way, covenants,
restrictions, conditions, setbacks, encroachments, gaps and gores, and other
imperfections of title, that are typical for the applicable property type and
locality, none of which, individually or in the aggregate, materially impairs
the use, value or operations of the affected property or materially interferes
with the conduct of the business of the Company and its Subsidiaries, taken as a
whole, as presently conducted, (collectively, "Permitted Liens"). Copies of
title insurance policies obtained by the Company for each parcel of Owned Real
Property have been made available to Merger Co to the extent existing and
readily available.
(b) Section 3.15(b) of the Company Disclosure Schedule lists by
address each parcel of real property leased or subleased by the Company or any
of its Subsidiaries (the "Leased Properties," and, together with the Owned Real
Property, the "Real Property"), with the name of the entity holding such
leasehold interest, the date of the lease or sublease, any guaranty given by the
Company or any of its Subsidiaries in connection therewith and each material
amendment to any such lease or sublease. True, correct, and complete copies of
all documents pursuant to which the Company or its Subsidiaries lease or
sublease the Leased Properties, including all assignments, material amendments
and modifications thereto (each a "Lease," and collectively, the "Leases") have
been made available to Merger Co. Except as would not have a Company Material
Adverse Effect or as disclosed on Section 3.15(b) of the Company Disclosure
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Schedule, the Company or one of its Subsidiaries, as applicable, has (i) the
exclusive right to the use and occupancy of the Leased Properties, subject to
the terms of the applicable lease or sublease relating thereto and (ii) a valid
leasehold estate in all Leased Properties free and clear of all Liens, other
than Permitted Liens.
(c) Each Lease is in full force and effect and is valid and
enforceable against the Company or the applicable Subsidiary of the Company,
and, to the Knowledge of the Company, any counterparty thereto, in accordance
with its terms, and there is no material default under any Lease either by the
Company or one of its Subsidiaries party thereto or, to the Company's Knowledge,
by any other party thereto and, to the Company's Knowledge, no event has
occurred that, with the lapse of time or the giving of notice or both, would
constitute a material default by the Company or any of its Subsidiaries
thereunder.
(d) There does not exist any pending or, to the Company's Knowledge,
threatened condemnation or eminent domain proceedings with respect to any parcel
of Real Property and, to the Company's Knowledge, neither the Company nor any of
its Subsidiaries have received any written notice of the intention of a
Governmental Entity or other Person to take or use any parcel of Real Property.
(e) To the Knowledge of the Company, there are no latent defects or
adverse physical conditions affecting any parcel of Real Property or the
improvements thereon that would materially interfere with the operation of the
Real Property.
3.16 Intellectual Property.
(a) Except as set forth in Section 3.16(a) of the Company Disclosure
Schedule or as would not have a Company Material Adverse Effect, (i) there are
no Actions instituted or pending against the Company or any of its Subsidiaries
or, to the Knowledge of the Company, threatened by any person contesting or
challenging the right of the Company or any of its Subsidiaries to use any of
their Intellectual Property, and to the Knowledge of the Company, no person is
infringing or otherwise violating the Intellectual Property of the Company or
any of its Subsidiaries; (ii) each trademark registration, service mark
registration, copyright registration, domain name registration, and patent,
which is owned by the Company or any of its Subsidiaries has been maintained in
good standing and, with respect to those licensed to the Company or any of its
Subsidiaries, has, to the Knowledge of the Company, been maintained in good
standing; (iii) there is no Intellectual Property owned by a third party which,
to the Company's Knowledge, the Company or any of its Subsidiaries are using
without a license; (iv) the Company and each of its Subsidiaries own or possess
adequate licenses or other rights to use all Intellectual Property necessary to
conduct the Company's business as now conducted; (v) neither the Company nor any
of its Subsidiaries has received any written, or to the Company's Knowledge,
oral notice claiming that it has infringed or otherwise violated any
Intellectual Property of any third parties; (vi) the Company and its
Subsidiaries make reasonable efforts to protect and maintain their Intellectual
Property and the security of their systems and software; and (vii) to the
Company's Knowledge, the consummation of the Merger and the Other Transactions
contemplated by this Agreement will not impair the validity, enforceability,
ownership or right of the Company or any of its Subsidiaries to use its
Intellectual Property. To the Knowledge of the Company, the Company and its
Subsidiaries are in compliance in all
-22-
material respects with applicable Laws relating to data protection and privacy
and their own privacy policies.
(b) Section 3.16(b) of the Company Disclosure Schedule sets forth all
registered trademarks and registered service marks, trademark and service mark
applications, and to the Knowledge of the Company, all patents and patent
applications, currently owned by the Company and its Subsidiaries that are
material to the business of the Company and its Subsidiaries, taken as a whole.
(c) For purposes of this Agreement, "Intellectual Property" means (i)
all inventions or discoveries (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all United States and
foreign patents, patent applications, and patent disclosures; (ii) all trade
names, trade dress, logos, slogans, brand names, corporate names, domain names,
trademarks, service marks and other source indicators, and all goodwill
associated therewith; (iii) all copyrightable works (including files, computer
programs, software, firmware, Internet site content, databases and compilations,
advertising and promotional materials, curricula, course materials,
instructional video tapes, tape recordings, visual aids and textual works) and
copyrights; and (iv) all trade secrets and confidential, proprietary, or
non-public business information (including ideas, research and development,
know-how, technology, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals).
3.17 Taxes.
(a) Except as set forth in Section 3.17(a) of the Company Disclosure
Schedule, (i) the Company and its Subsidiaries have timely filed or caused to be
filed or will timely file or cause to be filed (taking into account any
extension of time to file granted or obtained) all Tax Returns required to be
filed by them, and any such filed Tax Returns are true, correct and complete,
(ii) the Company and its Subsidiaries have timely paid (or have had paid on
their behalf) or will timely pay any Taxes due and payable except to the extent
that such Taxes are being contested in good faith and for which the Company or
the appropriate Subsidiary of the Company has set aside adequate reserves in
accordance with GAAP, other than reserves for deferred Taxes reflecting the
differences between book and Tax bases and liabilities and (iii) adequate
reserves in accordance with GAAP have been established by the Company and its
Subsidiaries for all Taxes not yet due and payable in respect of taxable periods
ending on the date hereof. To the Knowledge of the Company, no claim for unpaid
Taxes has become a Lien against the property of the Company or any of its
Subsidiaries or is being asserted against the Company or any of its
Subsidiaries. All material amounts of Tax required to be withheld by the Company
and its Subsidiaries have been or will be timely withheld and paid over to the
appropriate Tax authority.
(b) Except as set forth in Section 3.17(b) of the Company Disclosure
Schedule, no deficiency for any material amount of Tax has been asserted or
assessed by any Governmental Entity in writing against the Company or any of its
Subsidiaries (or, to the Knowledge of the Company, has been threatened or
proposed), except for deficiencies which have been satisfied by payment, settled
or been withdrawn or which are being contested in good
-23-
faith and are Taxes for which the Company or the appropriate Subsidiary of the
Company has set aside adequate reserves in accordance with GAAP, other than
reserves for deferred Taxes reflecting the differences between book and Tax
bases and liabilities.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure
Schedule, (i) there are no pending or, to the Knowledge of the Company,
threatened audits, examinations, investigations or other proceedings in respect
of a material amount of Taxes of the Company or any of its Subsidiaries with
respect to which the Company or a Subsidiary of the Company has been notified in
writing and (ii) neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect of a material amount of Taxes or agreed to any
extension of time with respect to an assessment or deficiency for a material
amount of Taxes (other than pursuant to extensions of time to file Tax Returns
obtained in the ordinary course).
(d) Except as set forth in Section 3.17(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
indemnification, allocation, or sharing agreement, with respect to Taxes that
would give rise to a material payment or indemnification obligation (other than
agreements among the Company and its Subsidiaries and customary Tax
indemnifications contained in credit or other commercial agreements the primary
purpose of which does not relate to Taxes).
(e) Neither the Company nor any of its Subsidiaries is required to
make any disclosure to the IRS with respect to a "listed transaction" pursuant
to Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the
Code.
(f) Neither the Company nor any of its Subsidiaries (i) is or has ever
been a member of an affiliated group (other than a group the common parent of
which is the Company) filing a consolidated federal income Tax Return or (ii)
has any liability for Taxes of any person arising from the application of
Treasury Regulation Section 1.1502-6 or any analogous provision of state, local
or foreign law, or as a transferee or successor, by contract or otherwise.
(g) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(h) The Company will not be required to include amounts in income, or
exclude items of deduction, in a taxable period beginning after the Closing Date
as a result of (i) a change in method of accounting occurring prior to the
Closing Date, (ii) an installment sale or open transaction arising in a taxable
period (or portion thereof) ending on or before the Closing Date, (iii) a
prepaid amount received prior to the Closing Date or (iv) deferred gains arising
prior to the Closing Date.
(i) For purposes of this Agreement:
"Tax" or "Taxes" mean any and all federal, state, local and foreign
income, gross receipts, payroll, employment, excise, stamp, customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
real property, personal property, sales, use, transfer, value added, alternative
or add-on minimum, estimated, or other taxes (together with interest,
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penalties and additions to tax imposed with respect thereto) imposed by any
Governmental Entity.
"Tax Returns" means returns, declarations, claims for refund, or
information returns or statements, reports, and forms, relating to Taxes filed
or required to be filed with any Governmental Entity (including any schedule or
attachment thereto) with respect to the Company or its Subsidiaries, including
any amendment thereof.
3.18 Environmental Matters.
(a) Except as set forth in Section 3.18 of the Company Disclosure
Schedule: (i) none of the Company or any of its Subsidiaries is in violation in
any material respect of any Environmental Law or, except for any violation that
has been fully resolved, has violated in any material respect in the past any
Environmental Law; (ii) the Company has not released, and to the Knowledge of
the Company, there is and has been no release of Hazardous Substances which
would reasonably be expected to give rise to a material liability of, or
otherwise result in material costs to the Company or any of its Subsidiaries at,
on or under any of the properties currently or formerly owned by the Company or
any of its Subsidiaries, or at any other location (including, without
limitation, any location to which Hazardous Substances have been sent by or on
behalf of the Company for re-use, recycling, treatment, storage or disposal;
(iii) the Company and its Subsidiaries have obtained and are in compliance in
all material respects with all required Environmental Permits and, except for
any noncompliance that has been fully resolved, have been in the past in
compliance in all material respects with such Environmental Permits; (iv) there
are no claims or notices issued to, or pending against, or, to the Knowledge of
the Company, threatened against, the Company or any of its Subsidiaries alleging
material violations of or material liability under any Environmental Law or
otherwise concerning the presence, release, or management of Hazardous
Substances; (v) neither the Company nor any of its Subsidiaries has received any
written request for information, or been notified that it is a potentially
responsible party under or relating to the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or
with respect to any Hazardous Substances; and (vi) neither the Company nor any
of its Subsidiaries has assumed or retained, by contract or operation of law,
any material liabilities of any kind, fixed or contingent, known or unknown,
under any Environmental Law or with respect to any Hazardous Substances.
(b) For purposes of this Agreement:
"Environmental Laws" means any Laws relating to (A) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment, storage,
emission, discharge or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (C) pollution or protection of the environment or
protection of human health and safety as such is affected by Hazardous
Substances or materials containing Hazardous Substances.
"Environmental Permits" means any permit, license, registration,
approval, notification, exemption or any other authorization required under or
pursuant to Environmental Law.
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"Hazardous Substances" means those substances, materials, or wastes,
defined as toxic, hazardous, acutely hazardous, pollutants or contaminants, in
or regulated under any of the following United States federal statutes: the
Hazardous Substances Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act;
comparable Laws of any other Governmental Entity; and any regulations under any
of the foregoing; and includes, without limitation, any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea formaldehyde insulation, asbestos, molds,
pollutants, contaminants, radioactivity, and any other harmful or deleterious
substance that would reasonably be expected to have an adverse effect on human
health or the environment.
3.19 Specified Contracts.
(a) Except as set forth in Section 3.19(a) of the Company Disclosure
Schedule, (i) each Specified Contract is a legal, valid, and binding obligation
of the Company or a Subsidiary, as applicable, in full force and effect and
enforceable against the Company or a Subsidiary, as applicable, in accordance
with its terms, subject to the Bankruptcy and Equity Exception, (ii) the Company
has not received written notice, and has no reason to believe, that any
Specified Contract is not a legal, valid, and binding obligation of the
counterparty thereto, in full force and effect and enforceable against such
counterparty in accordance with its terms, subject to the Bankruptcy and Equity
Exception, (iii) neither the Company nor any of its Subsidiaries is and, to the
Company's Knowledge, no counterparty is in breach or violation of, or default
under, in any material respect, any Specified Contract, (iv) none of the Company
or any of its Subsidiaries have received any claim of default under any
Specified Contract, and (v) to the Company's Knowledge, no event has occurred
which would result in a material breach or material violation of, or a material
default under, any Specified Contract (in each case, with or without notice or
lapse of time or both).
(b) For purposes of this Agreement, the term "Specified Contract"
means any of the following Contracts (together with all exhibits and schedules
thereto) to which the Company or any of its Subsidiaries is a party as of the
date hereof:
(i) any limited liability company agreement, joint venture, or
other similar agreement or arrangement relating to the formation, creation,
operation, management or control of any partnership or joint venture that is
material to the business of the Company and its Subsidiaries, taken as a whole,
other than any such limited liability company, partnership or joint venture that
is a Subsidiary of the Company;
(ii) any Contract (other than among consolidated Company
Subsidiaries or capital or operating leases) relating to (A) indebtedness for
borrowed money and having an outstanding principal amount in excess of
$3,000,000 or (B) conditional sale arrangements or obligations secured by a
Lien, in each case in connection with which the aggregate actual or contingent
obligations of the Company and its Subsidiaries under such Contract are greater
than $3,000,000;
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(iii) any Contract filed or required to be filed as an exhibit to
the Company's Annual Report on Form 10-K pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act or disclosed or required to be disclosed
by the Company in a Current Report on Form 8-K, other than Plans disclosed in
Section 3.13(a) of the Company Disclosure Schedule;
(iv) any Contract that purports to limit the right of the Company
or its Material Subsidiaries (A) to engage or compete in any line of business or
(B) to compete with any person or operate in any location, in the case of each
of (A) and (B), in any respect material to the business of the Company and its
Subsidiaries, taken as a whole;
(v) any Contract entered into after September 30, 2005 or not yet
consummated for the acquisition or disposition, directly or indirectly (by
merger or otherwise), of assets constituting a business or business unit or of
capital stock or other equity interests of another person for aggregate
consideration under such Contract in excess of $5,000,000;
(vi) any lease of real or personal property providing for annual
rentals of $1,000,000 or more;
(vii) any Contract providing for the sale or exchange of, or
option to sell or exchange, any Real Property, or for the purchase or exchange
of, or option to purchase or exchange any real estate;
(viii) any Contract which by its terms calls for aggregate
payments by the Company and its Subsidiaries under such Contract of more than
$5,000,000 over the remaining term of such Contract;
(ix) any acquisition Contract pursuant to which the Company or
any of its Subsidiaries has (A) continuing indemnification that would reasonably
be likely to result in aggregate payments in excess of $2,000,000 or (B)
"earn-out" or other contingent payment obligations that would reasonably be
likely to result in aggregate payments in excess of $1,000,000;
(x) collective bargaining agreements;
(xi) Contracts containing covenants restricting the payment of
dividends;
(xii) any Contract for the purchase of materials, supplies,
goods, services, equipment or other assets that is not terminable without
material penalty on 90 days notice by the Company or its Subsidiaries and that
provides for or is reasonably likely to require either (A) annual payments to or
from the Company and its Subsidiaries of $2,000,000 or more, or (B) aggregate
payments to or from the Company and its Subsidiaries of $5,000,000 or more;
(xiii) any license, royalty or other Contract concerning material
Intellectual Property owned, held or used by the Company or its Subsidiaries
that cannot be terminated on 90 days notice and provides for or is reasonably
likely to require either (A) annual payments to or from the Company and its
Subsidiaries of $750,000 or more, or (B) aggregate payments to or from the
Company and its Subsidiaries of $1,500,000 or more; and
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(xiv) any advertising or other promotional Contract that (A)
provides for or is reasonably likely to require either (1) annual payments to or
from the Company and its Subsidiaries of $1,000,000 or more, or (2) aggregate
payments to or from the Company and its Subsidiaries of $2,000,000 or more, and
(B) cannot be terminated on 90 days notice.
A true and complete list of the Specified Contracts is set forth in Section
3.19(b) of the Company Disclosure Schedule. The Company has made available to
Merger Co true and complete copies of all of the Specified Contracts including
any amendments thereto.
(c) Except as disclosed in the Company's SEC Reports, there are no
Contracts between the Company or any Subsidiary, on the one hand, and any (i)
officer or director of the Company or any Subsidiary, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company, or (iii)
associate (as defined in 12b-2 under the Exchange Act) or affiliate of any such
officer, director or record or beneficial owner, on the other hand, except those
of a type available to employees generally.
3.20 Insurance. Section 3.20 of the Company Disclosure Schedule sets
forth a complete and correct list of all material insurance policies or fidelity
bonds owned, held by or for the benefit of the Company, each Subsidiary of the
Company or any of their assets, businesses, operations, employees, officers or
directors, true and complete copies of which have been made available to Merger
Co. With respect to each such insurance policy, except as forth in Section 3.20
of the Company Disclosure Schedule or as would not have a Company Material
Adverse Effect: (a) the policy is legal, valid, binding, and enforceable in
accordance with its terms and, except for policies that have expired under their
terms in the ordinary course, is in full force and effect; (b) neither the
Company nor any of its Subsidiaries is in material breach or default (including
any such breach or default with respect to the payment of premiums or the giving
of notice), and, to the Company's Knowledge, no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination or modification, under the policy; (c) to the Knowledge of
the Company, no insurer on the policy has been declared insolvent or placed in
receivership, conservatorship or liquidation; (d) no notice of cancellation or
termination has been received other than in connection with ordinary renewals;
and (e) the policy is sufficient for compliance in all material respects with
the requirements of Law and of all Contracts to which the Company or its
Subsidiaries are parties or otherwise bound.
3.21 Board Approval; Vote Required.
(a) The Company Board, by resolutions duly adopted at a meeting duly
called and held, has (i) determined that this Agreement, the Merger and the
Other Transactions are fair to and in the best interests of the Company and its
shareholders, (ii) approved this Agreement, the Merger and the Other
Transactions and declared their advisability, and (iii) recommended that the
shareholders of the Company adopt this Agreement and directed that this
Agreement be submitted for consideration by the Company's shareholders at the
Company Shareholders' Meeting (collectively, the "Company Board
Recommendation").
(b) The only vote of the holders of any class or series of capital
stock or other securities of the Company necessary to adopt this Agreement or
consummate the Other Transactions is the affirmative vote of the holders of a
majority of the votes cast by all holders of
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Company Common Stock entitled to vote thereon in favor of the adoption of this
Agreement (the "Shareholder Approval").
3.22 Company Rights Agreement. The Company has amended, and the
Company and the Company Board have taken all necessary action to amend, the
Company Rights Agreement to render the Rights inapplicable to the execution and
delivery of this Agreement and consummation of the Merger and to ensure that (a)
neither Merger Co nor any of its wholly owned Subsidiaries is an Acquiring
Person (as defined in the Company Rights Agreement) pursuant to the Company
Rights Agreement, and (b) a Shares Acquisition Date or Distribution Date (in
each case defined in the Company Rights Agreement) does not occur solely by
reason of the execution of this Agreement, the Merger, or the Other
Transactions. The Company and the Company Board have taken all actions necessary
to ensure that the Rights shall expire immediately prior to the Effective Time,
without the payment of any money or other consideration.
3.23 Interested Party Transactions. Since the date of the Company's
last definitive proxy statement for its annual meeting of its shareholders and
except as disclosed in Section 3.23 of the Company Disclosure Schedule, no event
has occurred that would be required to be reported by the Company pursuant to
Item 404 of Regulation S-K promulgated by the SEC.
3.24 Opinions of Financial Advisors. The Company has received the
opinions of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
and Lazard Freres & Co. LLC (together with Merrill Lynch, the "Company Financial
Advisors"), to the effect that, as of the date of this Agreement, the Merger
Consideration to be received by the holders of Company Common Stock is fair,
from a financial point of view, to such holders. Executed copies of such
opinions were delivered to Merger Co on the date hereof.
3.25 Brokers. No broker, finder, or investment banker other than the
Company Financial Advisors is entitled to any brokerage, finder's, or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company. The Company has furnished to
Merger Co a complete and correct copy of any Contract between the Company and
each Company Financial Advisor pursuant to which the Company Financial Advisor
would be entitled to any payment from the Company relating to the transactions
contemplated hereby.
3.26 State Takeover Statutes. The Company has previously taken all
necessary action to render the provisions of the Pennsylvania anti-takeover
statutes in Sections 2538 through 2588 inclusive of the PBCL (the "PA
Anti-Takeover Statutes"), that may be applicable to the Merger and the Other
Transactions, inapplicable to Merger Co and any of its Subsidiaries and their
respective Affiliates, and to this Agreement, the Merger, and the Other
Transactions. No other "control share acquisition," "fair price" or other
anti-takeover regulations apply to the Merger and the Other Transactions.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERGER CO
Merger Co hereby represents and warrants to the Company that:
4.01 Corporate Organization. Merger Co is a corporation duly
organized, validly subsisting, and in good standing under the laws of the
Commonwealth of Pennsylvania and has the requisite corporate power and authority
and all necessary governmental approvals to own, lease, and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, subsisting, or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, prevent or materially delay consummation of the Merger or the
Other Transactions or otherwise prevent or materially delay Merger Co from
performing its obligations under this Agreement.
4.02 Articles of Incorporation and Bylaws. Merger Co has delivered to
the Company a complete and correct copy of the Articles of Incorporation and
Bylaws of Merger Co, each as amended to date. Such Articles of Incorporation and
Bylaws are in full force and effect. Merger Co is not, nor has it been, in
violation of any of the provisions of its Articles of Incorporation or Bylaws.
4.03 Authority Relative to this Agreement. Merger Co has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the Merger and the Other
Transactions. The execution, delivery, and performance of this Agreement by
Merger Co and the consummation of the Merger have been duly and validly
authorized by all necessary corporate action, and no other corporate or other
proceedings on the part of Merger Co are necessary to authorize this Agreement
or to consummate the Merger. This Agreement has been duly and validly executed
and delivered by Merger Co and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid, and binding obligation of
Merger Co, enforceable against Merger Co in accordance with its terms, subject
to the Bankruptcy and Equity Exception.
4.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Merger Co do not,
and the performance of this Agreement by Merger Co and the consummation by
Merger Co of the Merger will not, (i) conflict with or violate its Articles of
Incorporation or Bylaws, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.04(b) have been obtained
and all filings and obligations described in Section 4.04(b) have been made,
violate any Law applicable to Merger Co or by which any material property or
material asset of Merger Co is bound or materially affected, or (iii) result in
any breach or violation of, or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, give others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any material property or material assets of Merger Co
or pursuant to any Contract to which Merger Co is a party or by which Merger Co
or any material property or material asset of Merger Co is bound or materially
affected, except, with respect to clauses (ii) and (iii), for any such
violations, breaches, defaults, or other occurrences which
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would not, individually or in the aggregate, prevent, or materially delay
consummation of the Merger or otherwise prevent or materially delay Merger Co
from performing its obligations under this Agreement.
(b) The execution and delivery of this Agreement by Merger Co do not,
and the performance of this Agreement by Merger Co and the consummation by
Merger Co of the Merger will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental Entity or
Education Department, except for (i) applicable requirements, if any, of the
Exchange Act, (ii) the pre-merger notification requirements of the HSR Act and
the competition or merger control Laws of any other applicable jurisdiction,
(iii) the filing and recordation of appropriate merger documents, including the
Articles of Merger, as required by the PBCL and appropriate documents with the
relevant authorities of other states in which the Company or any of the
Subsidiaries is qualified to do business, (iv) any required filing with, and any
required approval of, the NASD, (v) filings required as a result of facts or
circumstances solely attributable to the Company, or (vi) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate, prevent
or materially delay consummation of the Merger or otherwise prevent or
materially delay Merger Co from performing its obligations under this Agreement.
4.05 Information Supplied. None of the information supplied by Merger
Co or any Affiliate of Merger Co or by any Equity Investor for inclusion or
incorporation by reference in the Proxy Statement or the Other Filings will, in
the case of the Proxy Statement, at the date it is first mailed to the Company's
shareholders or at the time of the Company Shareholders' Meeting or at the time
of any amendment or supplement thereof, or, in the case of any Other Filing, at
the date it is first filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. No representation is
made by Merger Co with respect to statements made or incorporated by reference
therein based on information supplied by the Company in connection with the
preparation of the Proxy Statement or the Other Filings for inclusion or
incorporation by reference therein. All Other Filings that are filed by Merger
Co, if any, in connection with the Merger will comply as to form in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
4.06 Absence of Litigation. As of the date of this Agreement, there is
no Action pending or, to the Knowledge of Merger Co, threatened, against Merger
Co or any of its Affiliates or any Equity Investor before any Governmental
Entity or Education Department that would or seeks to materially delay or
prevent the consummation of the Merger. As of the date of this Agreement, none
of Merger Co, its Affiliates, or any Equity Investor is subject to any
continuing order of, consent decree, settlement agreement, or other similar
written agreement with, or, to the Knowledge of Merger Co, continuing
investigation by, any Governmental Entity or Education Department, or any order,
writ, judgment, injunction, decree, determination, or award of any Governmental
Entity or Education Department that would or seeks to delay or prevent the
consummation of the Merger.
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4.07 Operations of Merger Co. Merger Co was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities, and has conducted its operations only as contemplated
by this Agreement.
4.08 Financing. Merger Co has delivered, or caused to be delivered, to
the Company, correct, complete, and fully executed copies of (a) a signed
commitment letter from GS Capital Partners V Fund, L.P., GS Capital Partners V
Offshore Fund, L.P., GS Capital Partners V Institutional, L.P., GS Capital
Partners V GmbH & Co. KG, Providence Equity Partners V L.P. and Providence
Equity Partners V-A L.P. (collectively, the "Equity Investors"), to make or
cause to be made, an equity investment in Merger Co in the aggregate amount of
$1,338,785,494 (the "Equity Commitment Letter") and (b) a signed financing
commitment from Bank of America, N.A., Banc of America Bridge LLC, Banc of
America Securities LLC, Goldman Sachs Credit Partners L.P., Credit Suisse,
Credit Suisse Securities (USA) LLC, Merrill Lynch Capital Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Debt Commitment
Letter") to provide Merger Co, the Company, and certain existing or future
Subsidiaries or parents of Merger Co or the Company with (A) at least
$1,185,000,000 in senior secured debt financing and (B) at least $760,000,000 in
a combination of senior unsecured and senior subordinated financing (together
with the Equity Commitment Letter, referred to, collectively, as the
"Commitments," and individually, as a "Commitment"). Assuming consummation of
the financing transactions contemplated by the Commitments, Merger Co shall have
at the Closing and at the Effective Time proceeds in connection with the
Commitments in an aggregate amount sufficient to consummate the Merger upon the
terms contemplated by this Agreement. The equity contribution of the Equity
Investors in Merger Co immediately prior to the Effective Time will not be less,
and the debt of the Surviving Corporation immediately following the Effective
Time incurred as a result of the Merger and the Other Transactions will not be
greater, than the respective amount of equity and debt set forth in that certain
letter dated January 30, 2006 to the DOE describing the proposed terms,
structure, and financing of the Merger (the "DOE Request Letter"). The
Commitments comply with the terms, structure, and financing set forth in the DOE
Request Letter. Each of the Commitments, in the form so delivered, is a legal,
valid, and binding obligation of the parties thereto, has not been amended, and
is in full force and effect as of the date hereof. As of the date hereof, no
event has occurred which, with or without notice, lapse of time or both, would
constitute a default on the part of Merger Co under any Commitment. The
Commitments are subject to no contingency or conditions other than those set
forth in the copies of the Commitments delivered to the Company. Merger Co has
no reason to believe that it will be unable to satisfy on a timely basis any
term or condition of closing to be satisfied by it contained in any Commitment.
Merger Co has fully paid any and all commitment fees and other fees required by
the Commitments to be paid as of the date hereof.
4.09 Guaranty. Concurrently with the execution of this Agreement,
Merger Co has delivered to the Company a guaranty (the "Guaranty") from each of
the Equity Investors (each, a "Guarantor"). Each Guaranty, in the form delivered
to the Company, has been duly executed and delivered by the applicable Guarantor
and is a valid, legal, and binding obligation of each such Guarantor and is in
full force and effect, and no event has occurred which, with or without notice,
lapse of time or both, would constitute a breach or default on the part of any
Guarantor under its respective Guaranty.
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4.10 Brokers. The Company will not be responsible for any brokerage,
finder's or other fee or commission to any broker, finder or investment banker
in connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Merger Co.
4.11 Solvency. Assuming the accuracy of the representations and
warranties contained in Article 3 and compliance with the Company's obligations
in Section 5.01, at the Effective Time, the Surviving Corporation and each of
its Subsidiaries, after taking into account consummation of the Merger, the
transactions contemplated by the Commitments (and any Alternative Financing),
and the way Merger Co intends that the businesses of the Company and its
Subsidiaries be operated after the Effective Time (including transactions
contemplated by the Commitments), (a) will be able to pay its debts, including
its stated and contingent liabilities as they mature, (b) will not have
unreasonably small capital for the business in which it is and will be engaged,
and (c) will be solvent.
4.12 Governmental Entity or Accrediting Body Approval. As of the date
hereof, there exists no fact or circumstance attributable to Merger Co or any of
its Subsidiaries or any Equity Investor (or any person or entity that exercises
Substantial Control (as such term is defined in Section 4.13) over any of the
foregoing), which would reasonably be expected to have a material adverse impact
on the Company's or Merger Co's ability to obtain any authorization, consent, or
similar approval from the DOE or any other Education Department, Governmental
Entity, or Accrediting Body whose authorization, consent, or similar approval is
contemplated in connection with this Agreement, including, without limitation,
any authorization, consent, or similar approval which must be obtained following
the Closing from the DOE or any Education Department or Accrediting Body in
order to continue the operations of the Schools as presently conducted; provided
that no representation or warranty is made in this Section 4.12 with respect to
the effect of the expected leverage of the Company after the Effective Date.
4.13 Status of Investors and Borrowers. From July 1, 2002 to the date
hereof, or in the case of Merger Co, its formation date, none of Merger Co, any
person or entity that exercises Substantial Control over Merger Co or any Equity
Investor, or member of such person's family (as the term "family" is defined in
34 C.F.R. Section 600.21(f)), alone or together, (a) exercises or exercised
Substantial Control over a post-secondary institution or third-party servicer
(as that term is defined in 34 C.F.R. Section 668.2) that owes a liability for a
violation of a Title IV Program or other HEA program requirement, or (b) owes a
liability for a Title IV Program or other HEA program violation. At no time has
any of Merger Co, any person or entity that exercises Substantial Control over
Merger Co or any Equity Investor, filed for relief in bankruptcy or had entered
against it an order for relief in bankruptcy. None of Merger Co, any person or
entity that exercises Substantial Control over Merger Co or any Equity Investor,
has pled guilty to, has pled nolo contendere to, or has been found guilty of a
crime involving the acquisition, use, or expenditure of funds under the Title IV
Programs or has been judicially determined to have committed fraud involving
funds under the Title IV Programs. From July 1, 2002 to the date hereof, to
Merger Co's Knowledge, neither Merger Co nor any Equity Investor has employed
any individual or entity in a capacity that involves the administration or
receipt of funds under the Title IV programs, or contracted with any institution
or third-party servicer, which has been terminated under the Title IV Programs
for a reason involving the acquisition, use, or expenditure of federal, state or
local government funds, or has been convicted of, or has pled nolo contendere or
guilty to, a crime involving the acquisition, use or expenditure of
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federal, state, or local government funds, or has been administratively or
judicially determined to have committed fraud or any other material violation of
law involving federal, state, or local government funds.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.01 Conduct of Business by the Company Pending the Merger. Between
the date of this Agreement and the Effective Time (or the earlier termination of
this Agreement in accordance with Article 8), except as expressly contemplated
by this Agreement or as set forth in Section 5.01 of the Company Disclosure
Schedule, the businesses of the Company and its Subsidiaries shall be conducted
only in, and the Company and its Subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice and in compliance in all material respects with applicable Law, and the
Company shall, and shall cause each of its Subsidiaries to, use its reasonable
best efforts consistent with past practice to preserve substantially intact the
business organization of the Company and its Subsidiaries and to preserve the
assets and properties of the Company and its Subsidiaries in good repair and
condition and to preserve any material business relationships of the Company and
its Subsidiaries, in each case, in the ordinary course of business and in a
manner consistent with past practice. Without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement or as set forth in
Section 5.01 of the Company Disclosure Schedule, the Company agrees that neither
the Company nor any of its Subsidiaries shall, between the date of this
Agreement and the Effective Time (or the earlier termination of this Agreement
in accordance with Article 8), directly or indirectly, do any of the following
without the prior written consent of Merger Co (which consent shall not be
unreasonably withheld):
(a) amend or otherwise change its Articles of Incorporation or Bylaws
(or similar organizational documents);
(b) issue, sell, pledge, dispose of, grant, encumber or otherwise
subject to any Lien, or authorize such issuance, sale, pledge, disposition,
grant or encumbrance of or subjection to such Lien, (i) any shares of any class
of capital stock of the Company or any of its Subsidiaries, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, Rights, or any other ownership interest (including
any phantom interest), of the Company or any of its Subsidiaries except for the
issuance of Shares (and Rights associated with the Shares) issuable pursuant to
the exercise of any Company Stock Options outstanding on the date hereof under
Company Stock Option Plans as in effect as of the date hereof, or in connection
with Share purchases under the ESPP to the extent set forth in Section 6.06(e)
or (ii) any material assets of the Company or any Subsidiary of the Company,
except for the sale of obsolete or worn out assets in the ordinary course of
business and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for dividends by any direct or indirect wholly
owned Subsidiary of the Company to the Company or any other wholly-owned
Subsidiary of the Company;
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(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any capital stock of the Company or
any of its Subsidiaries, other than in connection with the exercise of employee
stock options or the withholding of shares of Company Common Stock by the
Company in satisfaction of personal income tax obligations in connection with
the vesting of Restricted Shares;
(e) (i) acquire (including by merger, consolidation, or acquisition of
stock or assets or any other business combination) any corporation, partnership,
other business organization or any division thereof, other than acquisitions in
the ordinary course of business in an existing line of business that do not have
a value (including the amount of any assumed indebtedness) in excess of
$7,500,000, individually, or $15,000,000, in the aggregate, (ii) repurchase,
repay, cancel or incur any indebtedness for borrowed money, other than (A)
capital leases in the ordinary course of business consistent with past practice
or (B) under the Credit Agreement in the ordinary course of business consistent
with past practice; (iii) grant any security interest in any of its assets; (iv)
issue any debt securities or assume, endorse, or otherwise become responsible
for, the obligations of any person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice; (v) except to the
extent the amount is reflected in the current operating budget of the Company
provided to Merger Co prior to the date hereof, authorize, or make any
commitment with respect to, any capital expenditure, other than capital
expenditures in the ordinary course of business and not in excess of $5,000,000,
individually, or $15,000,000 in the aggregate, for the Company and its
Subsidiaries taken as a whole; (vi) enter into any new line of business outside
of its current business segments; (vii) make investments in persons other than
wholly owned Subsidiaries, other than ordinary course investments in accordance
with the Company's existing written investment policy provided to Merger Co
prior to the date hereof; or (viii) acquire, enter into, or extend any option to
acquire, or exercise an option to acquire, real property, or commence
construction of, or enter into any contract to develop or construct, other real
estate projects;
(f) adopt or enter into a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization of the
Company or, except in the ordinary course of business, any Subsidiary of the
Company (other than the Merger);
(g) (i) except as required by Law or the Treasury Regulations
promulgated under the Code, make any change (or file any such change) in any
method of Tax accounting or (ii) make, change or rescind any material Tax
election, settle or compromise any material Tax liability, audit, claim, or
assessment, or surrender any right to claim for a Tax refund, file any amended
Tax Return involving a material amount of additional Taxes (except as required
by Law), enter into any closing agreement relating to Taxes, or waive or extend
the statute of limitations in respect of Taxes (other than pursuant to
extensions of time to file Tax Returns obtained in the ordinary course of
business);
(h) make any change to its methods of accounting in effect at December
31, 2005, except (i) as required by changes in GAAP (or any interpretation
thereof) or Regulation S-X of the Exchange Act, (ii) as may be required by a
change in applicable Law, or (iii) as disclosed in the SEC Reports filed after
December 31, 2005 and prior to the date hereof or as required by a Governmental
Entity or quasi-Governmental Entity (including the Financial Accounting
Standards Board (the "FASB") or any similar organization);
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(i) write up, write down, or write off the book value of any assets of
the Company and its Subsidiaries, other than (i) in the ordinary course of
business and consistent with past practice or (ii) as may be required by GAAP or
FASB;
(j) (i) take any action that would be reasonably likely to prevent or
materially delay satisfaction of the conditions contained in Section 7.01 or
7.02 or the consummation of the Merger or (ii) take any action that would have a
Company Material Adverse Effect;
(k) enter into any agreement that restricts the ability of the Company
or any of its Subsidiaries to engage or compete in any line of business;
(l) effectuate a "mass layoff," as such term is defined in the Worker
Adjustment and Retraining Notification Act of 1988;
(m) open any new Schools or undertake any other intentional activities
that would subject the Company or any School to the jurisdiction of a new
institutional Accrediting Body;
(n) except as required pursuant to existing written agreements or
Plans set forth on Section 5.01 of the Company Disclosure Schedule, in effect
prior to the execution of this Agreement, or as otherwise required by Law, (i)
increase the compensation payable or to become payable (including bonuses or
bonus opportunities) or the benefits provided to Company Employees, except for
increases in compensation in the ordinary course of business consistent with
past practice with respect to active Company Employees who are not executive
officers or directors; (ii) grant any retention, severance, termination or
similar pay to any Company Employee; (iii) establish, adopt, enter into, renew,
terminate or amend any Plan (whether or not such Plan would be a Plan on the
date hereof) for the benefit of any Company Employee, except amendments and
terminations required by applicable Law; or (iv) grant any equity or
equity-based awards;
(o) fail to maintain in full force and effect the existing insurance
policies (or comparable replacement policies) covering the Company and its
Subsidiaries and their respective properties, assets and businesses;
(p) amend, modify or consent to the termination of any Specified
Contract or enter into, amend or modify any agreement that would be required to
be set forth in Section 3.19(b) of the Company Disclosure Schedule if in effect,
as entered into, amended or modified, on the date of this Agreement pursuant to
Sections 3.19(b)(ii), (iii), (vi), (viii) and (xi);
(q) settle or compromise any material Action whether administrative,
civil or criminal, in law or in equity; or
(r) announce an intention, enter into any formal or informal agreement
or otherwise make a commitment, to do any of the foregoing.
5.02 Conduct of Business by Merger Co Pending the Merger. Between the
date of this Agreement and the Effective Time (or the earlier termination of
this Agreement in accordance with Article 8), Merger Co shall not, directly or
indirectly, take any action that would
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prevent or materially delay the satisfaction of the conditions contained in
Section 7.01 or 7.03 or the consummation of the Merger (it being understood that
nothing contained in this Section 5.02 shall prevent Merger Co from taking
actions in accordance with, and consistent with the time periods permitted by,
Section 6.08).
ARTICLE 6
ADDITIONAL AGREEMENTS
6.01 Proxy Statement; Other Filings. As promptly as practicable
following the date of this Agreement (but in any event within 15 Business Days
thereafter unless the parties shall otherwise agree), (a) the Company shall
prepare (in consultation with Merger Co) and file with the SEC the preliminary
Proxy Statement, and (b) each of the Company and the Merger Co shall, or shall
cause their respective Affiliates to, prepare and file with the SEC all Other
Filings that are required to be filed by such party in connection with the
transactions contemplated hereby. Each of the Company and Merger Co shall
furnish all information concerning itself and its Affiliates that is required to
be included in the Proxy Statement or, to the extent applicable, the Other
Filings, or that is customarily included in proxy statements or other filings
prepared in connection with transactions of the type contemplated by this
Agreement. Each of the Company and Merger Co shall use its respective reasonable
best efforts to respond as promptly as practicable to any comments of the SEC
with respect to the Proxy Statement or the Other Filings, and the Company shall
use its reasonable best efforts to cause the definitive Proxy Statement to be
mailed to the Company's shareholders as promptly as reasonably practicable after
the date of this Agreement. Each party shall promptly notify the other party
upon the receipt of any comments from the SEC or its staff or any request from
the SEC or its staff for amendments or supplements to the Proxy Statement or the
Other Filings and shall provide the other party with copies of all
correspondence between it and its Representatives, on the one hand, and the SEC
and its staff, on the other hand relating to the Proxy Statement or the Other
Filings. If at any time prior to the Company Shareholders' Meeting, any
information relating to the Company, Merger Co, or any of their respective
Affiliates, officers or directors, should be discovered by the Company or Merger
Co which should be set forth in an amendment or supplement to the Proxy
Statement or the Other Filings, so that the Proxy Statement or the Other Filings
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, the party which discovers such information shall promptly notify the
other parties, and an appropriate amendment or supplement describing such
information shall be filed with the SEC and, to the extent required by
applicable Law, disseminated to the shareholders of the Company. Notwithstanding
anything to the contrary stated above, prior to filing or mailing the Proxy
Statement or filing the Other Filings (or, in each case, any amendment or
supplement thereto) or responding to any comments of the SEC with respect
thereto, the party responsible for filing or mailing such document shall provide
the other party an opportunity to review and comment on such document or
response and shall include in such document or response comments reasonably
proposed by the other party.
6.02 Company Shareholders' Meeting. The Company shall duly call, give
notice of, convene, and hold a meeting of its shareholders (the "Company
Shareholders' Meeting") for the purpose of voting upon the adoption of this
Agreement as promptly as reasonably practicable
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after the date of the Agreement. Unless this Agreement shall have been
terminated in accordance with Section 8.01, the Company shall hold the Company
Shareholders' Meeting regardless of whether the Company Board has effected a
Change in Board Recommendation. Subject to Section 6.04(c), the Company Board
shall recommend to holders of the Shares that they adopt this Agreement and
shall include such recommendation in the Proxy Statement. Subject to Section
6.04(c), the Company will use reasonable best efforts to solicit from its
shareholders proxies in favor of the adoption of this Agreement and will take
all other action necessary or advisable to secure the vote or consent of its
shareholders required by the rules of the NASD or applicable Law to obtain such
approvals. The Company shall keep Merger Co updated with respect to proxy
solicitation results as reasonably requested by Merger Co.
6.03 Access to Information; Confidentiality.
(a) Except as otherwise prohibited by applicable Law or the terms of
any Contract entered into prior to the date hereof or as would reasonably be
expected to violate or result in the loss or impairment of any attorney-client
or work-product privilege (it being understood that the parties shall each use
reasonable best efforts to cause such information to be provided in a manner
that does not result in such violation, loss or impairment), from the date of
this Agreement until the Effective Time (or the earlier termination of this
Agreement in accordance with Article 8), the Company shall (and shall cause its
Subsidiaries to): (i) provide to Merger Co and to the officers, directors,
employees, accountants, legal counsel, investment bankers, financial advisors,
financing sources, and other agents and representatives (collectively,
"Representatives") of Merger Co reasonable access, during normal business hours
and upon reasonable prior notice and subject to reasonable confidentiality
restrictions by Merger Co, to the officers, employees, agents, properties,
offices, and other facilities of the Company and its Subsidiaries and to the
books and records thereof, and (ii) subject to Section 6.03(b), permit Merger Co
to make such copies and inspections thereof as Merger Co may reasonably request,
and (iii) furnish promptly to Merger Co such information concerning the
business, properties, contracts, assets, liabilities, personnel, and other
aspects of the Company and its Subsidiaries as Merger Co or its Representatives
may reasonably request; provided, however, that the Company shall not be
required to provide access or furnish any information in the event of any
litigation between the parties to this Agreement except pursuant to applicable
rules of discovery.
(b) Prior to the Closing, all information obtained by Merger Co or its
Representatives pursuant to this Section 6.03 or otherwise shall be kept
confidential in accordance with the confidentiality letter agreement, dated
January 21, 2006 (the "Confidentiality Agreement"), among GS Capital Partners V
Fund, L.P., Providence Equity Partners, Inc., the Company, and the other parties
thereto; provided, however, that Merger Co and its Representatives shall be
permitted to disclose information as necessary and consistent with customary
practices in connection with the Commitments; and provided, further, that the
Company hereby consents to the Equity Investors' disclosure of "Material" as
defined in the Confidentiality Agreement to any sources of debt or equity
financing, and that each such source of debt or equity financing executes and
delivers to the Company a representative's letter in the form attached as
Exhibit A to the Confidentiality Agreement.
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6.04 No Solicitation of Transactions.
(a) Neither the Company nor any of its Subsidiaries shall, nor shall
it authorize or permit the Representatives of the Company or its Subsidiaries
to, directly or indirectly, (i) solicit, initiate, propose or encourage, or
otherwise facilitate (including by way of furnishing information) the submission
of any Acquisition Proposal, (ii) initiate, participate in, or continue
discussions or negotiations regarding, or furnish to any person (other than
Merger Co or its Representatives) any non-public information in connection with,
or which would reasonably be expected to result in, any Acquisition Proposal,
(iii) otherwise cooperate in any way with, or knowingly assist or participate
in, or facilitate or encourage any effort or attempt by any person (other than
Merger Co or its Representatives) with respect to, or which would reasonably be
expected to result in, an Acquisition Proposal, or (iv) take any action (A) to
render the Rights issued pursuant to the terms of the Company Rights Agreement
inapplicable to an Acquisition Proposal or the transactions contemplated
thereby, exempt or exclude any person from the definition of an Acquiring Person
(as defined in the Company Rights Agreement) under the terms of the Company
Rights Agreement or, other than as contemplated by this Agreement in connection
with the Merger, to redeem the rights or allow the Rights to expire prior to
their expiration date, or (B) to render the provisions of the PA Anti-Takeover
Statutes inapplicable to any person (other than Merger Co or its Affiliates) or
group in connection with any Acquisition Proposal; provided, however, that,
prior to the adoption of this Agreement at the Company's Shareholders Meeting,
nothing contained in this Agreement or in this Section 6.04 shall restrict or
prevent the Company (acting at the direction of the Company Board) or the
Company Board from furnishing information to, or engaging in negotiations, or
discussions with, any person or group in connection with an unsolicited bona
fide Acquisition Proposal by such person or group received after the date
hereof, if and only to the extent that prior to taking such action the Company
Board determines in good faith (after consultation with its advisors) that such
Acquisition Proposal is, or could reasonably be expected to result in, a
Superior Proposal, and receives from such person or group an executed
confidentiality agreement, the terms of which are substantially similar to and
no less favorable to the Company than those contained in the Confidentiality
Agreement.
(b) The Company shall notify Merger Co as promptly as practicable (and
in any event within 24 hours) orally and in writing of the receipt by the
Company or any of its Subsidiaries, or any of its or their respective
Representatives, of any inquiries, proposals or offers, requests for information
or requests for discussions or negotiations regarding any Acquisition Proposal,
specifying the material terms and conditions thereof and the identity of the
person making such proposal, and shall provide to Merger Co, within such 24 hour
time frame, a copy of all written materials subsequently provided to or by the
Company or any of its Subsidiaries in connection with any such inquiries,
proposals or offers. The Company shall keep Merger Co reasonably informed of the
status of any such discussions or negotiations and shall notify Merger Co (as
promptly as practicable and in any event within 24 hours) orally and in writing
of any material modifications to the financial or other material terms of such
inquiries, proposals or offers and shall provide to Merger Co, within such 24
hour time frame, a copy of all written materials subsequently provided to or by
the Company or any of its Subsidiaries in connection with any such inquiries,
proposals or offers. The Company agrees that it shall not, and shall cause its
Subsidiaries not to, enter into any confidentiality agreement with any person
subsequent to the date of this Agreement which prohibits the Company from
providing such
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information to Merger Co. The Company agrees that neither it nor any of its
Subsidiaries shall terminate, waive, amend or modify any provision of any
existing standstill or confidentiality agreement to which it or any of its
Subsidiaries is a party and that it and its Subsidiaries shall enforce the
provisions of any such agreement. The Company shall, and shall cause its
Subsidiaries and its and their Representatives to, immediately cease and cause
to be terminated any discussions or negotiations with any parties that may be
ongoing with respect to any Acquisition Proposal as of the date hereof, shall
take reasonable steps to inform its and its Subsidiaries' Representatives of the
obligations undertaken in this Section 6.04, and shall request that all
confidential information previously furnished to any such third parties be
returned promptly.
(c) Except as set forth in this Section 6.04(c), the Company Board (or
any committee thereof) shall not, and shall not publicly propose to: (i)
withdraw, modify, or change in a manner adverse to Merger Co, the approval or
recommendation of this Agreement, the Merger or the Other Transactions by the
Company Board (or any committee thereof) or cause the representation and
warranty in Section 3.22 to be untrue in any material respects; (ii) approve,
adopt, recommend or take any action other than to recommend shareholders reject
any Acquisition Proposal; or (iii) approve or recommend, or allow the Company or
any of its Subsidiaries to enter into, any letter of intent, acquisition
agreement, or other similar agreement with respect to, or that is reasonably
expected to result in, any Acquisition Proposal (other than a confidentiality
agreement referred to in this Section 6.04). Notwithstanding the foregoing,
prior to the adoption of this Agreement at the Company Shareholders' Meeting, in
response to the receipt of an unsolicited bona fide written Acquisition
Proposal, if the Company Board determines in good faith (after consultation with
its advisors) that such Acquisition Proposal is a Superior Proposal, then the
Company Board may approve and recommend such Superior Proposal and, in
connection with such Superior Proposal, withdraw, modify, or change in a manner
adverse to Merger Co, the Company Board Recommendation (a "Change in Board
Recommendation"). The Company shall not effect a Change in Board Recommendation
unless the Company has complied with its obligations under Section 6.04(b).
(d) Nothing contained in this Agreement shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's shareholders if the Company Board (or any committee
thereof) determines in good faith (after consultation with its outside legal
counsel) that it is required to do so under applicable Law; provided, however,
that neither the Company nor the Company Board (nor any committee thereof) shall
(i) recommend that the shareholders of the Company tender their Shares in
connection with any such tender or exchange offer (or otherwise approve or
recommend any Acquisition Proposal) or take any position under Rule 14e-2(a)
other than recommending rejection of such tender or exchange offer, or (ii)
withdraw, modify, or change in a manner materially adverse to Merger Co, the
Company Board Recommendation, unless in each case the requirements of Section
6.04(c) shall have been satisfied.
(e) For purposes of this Agreement, "Acquisition Proposal" means any
proposal or offer (including any proposal from or to the Company's shareholders)
from any person or group other than Merger Co relating to: (i) any direct or
indirect acquisition or purchase, in a single transaction or series of related
transactions by such person or group acting in concert, of
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(A) more than 20% of the fair market value of the assets, securities, or other
ownership interests (including capital stock of the Company's Subsidiaries) of
the Company and its consolidated Subsidiaries, taken as a whole, or (B) more
than 20% of any class of equity securities of the Company; (ii) any tender offer
or exchange offer (including through the filing with the SEC of a Schedule TO),
as defined pursuant to the Exchange Act, that if consummated, would result in
any person or group beneficially owning 20% or more of any class of equity
securities of the Company; or (iii) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution, or other similar
transaction involving the Company as a result of which any person or group
acting in concert would acquire the assets, securities, or businesses described
in any of clauses (A) and (B) above.
6.05 Directors' and Officers' Indemnification and Insurance.
(a) The Articles of Incorporation of the Surviving Corporation shall
contain provisions no less favorable with respect to elimination or limitation
of liability and indemnification than are set forth in the Articles of
Incorporation and Bylaws of the Company as of the date hereof, which provisions
shall not be amended, repealed, or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who, at or prior to the Effective Time, were directors
or officers, of the Company or any of its Subsidiaries.
(b) From and after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable Law, indemnify, defend,
and hold harmless, each present and former director and officer of the Company
and each Subsidiary of the Company (collectively, the "Indemnified Parties")
against any and all costs and expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and settlement amounts
(collectively, "Losses") paid or incurred in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), whether civil, criminal, administrative or investigative, arising out of
or pertaining to any action or omission in their capacity as an officer,
director, or fiduciary occurring on or before the Effective Time, to the same
extent as provided in the Articles of Incorporation and Bylaws of the Company,
as amended to the date hereof, and without limiting any rights under any other
applicable contract or agreement. In the event of any such claim, action, suit,
proceeding or investigation, (i) the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received (provided the applicable
Indemnified Party provides an undertaking to repay all advanced expenses if it
is finally judicially determined that such Indemnified Party is not entitled to
indemnification) and (ii) the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without the Surviving
Corporation's written consent (which consent shall not be unreasonably withheld,
or delayed); provided, further, that the Surviving Corporation shall not be
obligated pursuant to this Section 6.05(b) to pay the fees and expenses of more
than one counsel (selected by a plurality of the applicable Indemnified Parties)
for all Indemnified Parties with respect to any single action or related actions
except to the extent that two or more of such Indemnified Parties shall have
conflicting interests in the outcome of such action; and provided, further,
that, in the event that any claim for indemnification is asserted or made within
such six year period from the Effective Time, all
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rights to indemnification in respect of such claim shall continue until the
disposition of such claim.
(c) Prior to the Effective Time, the Company shall endeavor to obtain
and fully pay (up to a maximum cost of 300% of the current annual premiums paid
for its existing coverage in the aggregate) for "tail" insurance policies with a
claims period of at least six years from the Effective Time with respect to
directors' and officers' liability insurance in amount and scope at least as
favorable as the Company's existing policies for claims arising from facts or
events that occurred on or prior to the Effective Time. If the Company is unable
to obtain such "tail" insurance prior to the Effective Time, the Surviving
Corporation shall, as soon as practicable after the Effective Time, either (i)
cause to be obtained and fully pay for retroactive to the Effective Time "tail"
insurance policies with a claims period of at least six years from the Effective
Time with respect to directors' and officers' liability insurance in amount and
scope at least as favorable as the Company's existing policies for claims
arising from facts or events that occurred on or prior to the Effective Time or
(ii) maintain in effect for six years from the Effective Time the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions that are not less
favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 6.05(c) more than an amount in the aggregate
equal to 300% of the current annual premiums paid by the Company for such
insurance; provided, further, that the Surviving Corporation shall be required
to obtain as much coverage as is possible under substantially similar policies
for such maximum annual amount. The Company represents that such current annual
premium amount is set forth in Section 6.05(c) of the Company Disclosure
Schedule.
(d) In the event Merger Co or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger, or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Merger Co or the
Surviving Corporation, as the case may be, shall succeed to the obligations set
forth in this Section 6.05.
(e) Merger Co shall cause the Surviving Corporation to perform all of
the obligations of the Surviving Corporation under this Section 6.05.
(f) If the Surviving Corporation refuses or fails to make any payment
to any Indemnified Party required by this Section 6.05, the Indemnified Party
shall be promptly indemnified by the Surviving Corporation against reasonable
expenses (including reasonable attorneys' fees, disbursements, and other
charges) actually and reasonably incurred by the Indemnified Party in connection
with the successful establishment of such Indemnified Party's right to
indemnification or advancement of expenses, in whole or in part, in an action in
a court of competent jurisdiction. The rights of each of the Indemnified Parties
under this Section 6.05 shall be in addition to any right such person might have
under the Articles of Incorporation or Bylaws of the Company, the Surviving
Corporation, or any of their respective Subsidiaries, or under any agreement or
insurance policies applicable to the Indemnified Party. The provisions
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of this Section 6.05 survive the consummation of the Merger and are intended to
be for the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their respective heirs and representatives.
6.06 Employee Benefits Matters.
(a) Until December 31, 2007, Merger Co shall, or it shall cause the
Surviving Corporation and its Subsidiaries to, (i) provide each employee of the
Company and its Subsidiaries as of the Effective Time (each, an "Employee") with
at least the same level of base salary that was provided to each such Employee
immediately prior to the Effective Time, and (ii) provide the Employees with
salary, employee benefits and annual incentive compensation opportunities that
are no less favorable in the aggregate than those provided to the Employees by
the Company and its Subsidiaries pursuant to the Plans set forth on Section
3.13(a) of the Company Disclosure Schedule (excluding, for this purpose, any
equity-based incentives) immediately prior to the Effective Time. From and after
the Effective Time, Merger Co shall cause the Surviving Corporation and its
Subsidiaries to honor in accordance with their terms (including, without
limitation, terms which provide for amendment or termination), all contracts,
agreements, arrangements, policies, plans and commitments of the Company and its
Subsidiaries as in effect immediately prior to the Effective Time that are
applicable to Employees, in each case, to the extent described or referenced in
Section 3.13(a) of the Company Disclosure Schedule. Subject to Section 6.06(d),
nothing in this Agreement shall be deemed to be a guarantee of employment for
any Employee, or to restrict the right of the Surviving Corporation to alter the
terms and conditions of employment of any Employee or to terminate, suspend,
modify or amend any Plan in accordance with its terms in effect immediately
prior to the Effective Time.
(b) Employees shall receive credit for all purposes (including for
purposes of eligibility to participate, vesting, benefit accrual and eligibility
to receive benefits, but excluding benefit accruals under any defined benefit
pension plan) under any employee benefit plan, program or arrangement
established or maintained by Merger Co, the Surviving Corporation, or any of
their respective Subsidiaries, under which each Employee may be eligible to
participate on or after the Effective Time to the same extent recognized by the
Company or any of its Subsidiaries under comparable Plans immediately prior to
the Effective Time; provided, however, that such crediting of service shall not
operate to duplicate any benefit or the funding of any such benefit. Such plan,
program or arrangement shall credit each such Employee for service accrued or
deemed accrued on or prior to the Effective Time with the Company or any
Subsidiary of the Company; provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any such benefit.
(c) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Merger Co or the
Surviving Corporation ("Purchaser Welfare Benefit Plans") in which an Employee
may be eligible to participate on or after the Effective Time, Merger Co shall
(i) waive, or use commercially reasonable efforts to cause its insurance carrier
to waive, all limitations as to preexisting and at-work conditions, if any, with
respect to participation and coverage requirements applicable to each Employee
under any Purchaser Welfare Benefit Plan to the same extent waived under a
comparable Plan, and (ii) provide credit to each Employee for any co-payments,
deductibles and out-of-pocket expenses
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paid by such Employee under the Plans during the relevant plan year, up to and
including the Effective Time.
(d) From and after the Effective Time, Merger Co shall (i) assume and
be bound by, or cause the Surviving Corporation to assume and be bound by all
agreements and arrangements of the Company and its Subsidiaries, including each
severance and separation pay plan, written employment, severance, retention,
incentive, change in control and termination agreement or arrangement, set forth
in Section 6.06(d) of the Company Disclosure Schedule and applicable to
Employees at the Effective Time, and (ii) honor or cause to be honored, in
accordance with their terms (including, without limitation, terms which provide
for amendment or termination), all such agreements and arrangements of the
Company and its Subsidiaries, in the same manner and to the same extent that the
Company would be required to perform and honor such agreements and arrangements
if the Merger had not been consummated.
(e) On and after the date hereof, no future offering periods will be
commenced under the Company's Employee Stock Purchase Plan ("ESPP"). All
offering periods in progress on the date hereof shall cease, and the Company
shall terminate the ESPP, on the NASDAQ National Market trading day immediately
prior to the Effective Time. On such date, all rights of each participating
Employee then outstanding shall be deemed to be automatically exercised and each
participating Employee will be credited with the number of Shares purchased for
his or her account(s) under the ESPP during such offering period. The Company
Board shall send written notice that the Merger will result in the termination
of the ESPP to all participating Employees not later than ten Business Days
after the date hereof. With respect to persons participating in the ESPP on the
date on which the offering period cease and the ESPP terminates (and who have
not withdrawn from or otherwise ceased participation in the Plan prior to such
date), accumulated contributions will be applied on such date to the purchase of
Company Common Stock in accordance with the ESPP's terms (treating the date of
termination as the last day of the relevant offering period). With respect to
matters described in this Section 6.06(e), the Company will communicate with
Merger Co prior to sending any material notices or other communication materials
to its employees (and reasonably consider Merger Co's comments with respect
thereto).
(f) For the avoidance of doubt, no provision of this Section 6.06
shall create any third party beneficiary rights in any Employee (or beneficiary
or dependent thereof) or shall create any right in respect of continued
employment or resumed employment, and no provision of this Section 6.06 shall
create any rights in any such persons in respect of any benefits that may be
provided, directly or indirectly, under any contract, agreement, arrangement,
policy, plan or commitment.
6.07 Notification of Certain Matters.
(a) The Company shall notify Merger Co promptly of any event, change,
occurrence, circumstance or development between the date of this Agreement and
the Effective Time which causes or is reasonably likely to cause the conditions
set forth in Sections 7.02(a) and 7.02(b) of this Agreement not to be satisfied.
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(b) Merger Co shall notify the Company promptly of any event, change,
occurrence, circumstance or development between the date of this Agreement and
the Effective Time which causes or is reasonably likely to cause the conditions
set forth in Sections 7.03(a) and 7.03(b) of this Agreement not to be satisfied.
(c) The delivery of any notice pursuant to this Section 6.07 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
(d) In addition, the Company shall give prompt written notice to
Merger Co, and Merger Co shall give prompt written notice to the Company, of any
notice or other communication (i) from any person and the response thereto of
the Company or its Subsidiaries or Merger Co, as the case may be, or its or
their Representatives alleging that the consent of such person is or may be
required in connection with this Agreement or the Merger, (ii) from any
Governmental Entity and the response thereto of the Company or its Subsidiaries
or Merger Co, as the case may be, or its or their Representatives in connection
with this Agreement or the Merger, and (iii) from or to the SEC, except in the
event the Company Board shall have effected a Change of Board Recommendation.
6.08 Financing.
(a) Merger Co shall use its reasonable best efforts to arrange and
consummate all of the Commitments, including using its reasonable best efforts
to (i) negotiate definitive agreements with respect thereto on terms and
conditions contained therein and (ii) to satisfy all conditions in such
definitive agreements that are within its control. In the event all or any
portion of the equity or debt financing under the Commitments becomes
unavailable on the terms and conditions contemplated in the Commitments,
including as a result of any Lender MAC (as defined below), Merger Co shall use
its reasonable best efforts to arrange to obtain any such financing from
alternative sources on terms not materially less favorable in the aggregate to
Merger Co (as determined in the reasonable good faith judgment of Merger Co) as
promptly as practicable following the occurrence of such event (the "Alternative
Financing"). Merger Co shall give the Company prompt notice of any material
breach by any party of any Commitments or any termination of any Commitments.
Merger Co shall keep the Company reasonably informed of the status of its
efforts to arrange the Commitments and shall promptly notify the Company orally
and in writing of any material modifications to the Commitments and shall not
permit any material amendment or modification to be made to, or any waiver of
any material provision or remedy under, any Commitment without first consulting
with the Company and no amendment, modification, or waiver which would be
inconsistent with the terms set forth in the DOE Request Letter shall be made or
given without the prior written consent of the Company. For purposes of this
Agreement, the term "Marketing Period" shall mean the first period of twenty
consecutive Business Days after the date hereof throughout which (A) Merger Co
shall have the Required Information pursuant to Section 6.08(b), which Required
Information is and remains Compliant (as defined below) and (B) the conditions
set forth in Sections 7.01(c) and (d) and 7.02 (other than 7.02(c) and (h))
shall be and remain satisfied (for this purpose, as of the date of the
commencement of the Marketing Period) and at the end of which all conditions set
forth in Section 7.01 and 7.02 shall be satisfied, provided that the Marketing
Period shall end on any earlier date which is the third Business Day following
the date the financing contemplated by the Commitment Letters is consummated.
"Compliant" shall mean, with respect to any Required
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Information, that such Required Information does not contain any untrue
statement of a material fact or omit to state any material fact regarding the
Company and it Subsidiaries necessary in order to make such Required Information
not misleading and is, and remains throughout the Marketing Period, compliant in
all material respects with all applicable requirements of Regulation S-K and
Regulation S-X and a registration statement on Form S-1 (or any applicable
successor form) under the Securities Act, in each case assuming such Required
Information is intended to be the information to be used for a public offering
of securities by the Company in connection with the debt financing contemplated
by the Debt Commitment Letter. For purposes of this Agreement, the term "Lender
MAC" shall mean (1) any restriction on lending imposed by a regulatory authority
on, or a petition of bankruptcy, insolvency, or reorganization (or similar
petition or initiation of proceedings under any debtor relief Law) filed by or
against, or the seeking of the appointment of a receiver or similar person by,
or the making of an assignment for the benefit of creditors by, any lender or
lenders providing at least 25% of the financing contemplated by the Debt
Commitment Letter or (2) any order, decree, or injunction of a court or agency
of competent jurisdiction, including any such lender's primary banking regulator
or regulators, prohibiting the consummation of the financing contemplated by the
Debt Commitment Letter affecting any lender or lenders providing at least 25% of
the financing contemplated by the Debt Commitment Letter, which, in each case,
prevents the lender or lenders from providing the financing contemplated by the
Debt Commitment Letter and which, in the case of any petition filed against any
such lender or lenders, is not dismissed within ten Business Days of being
filed.
(b) The Company shall provide, and shall cause its Subsidiaries and
its and their Representatives to provide, all cooperation in connection with the
arrangement of the equity and debt financing under the Commitments (or
Alternative Financing) as may be reasonably requested by Merger Co, including
(i) participation in meetings, presentations, drafting sessions, management
presentation sessions, "road shows," sessions with ratings agencies and due
diligence sessions, (ii) furnishing Merger Co and its financing sources with
financial statements and related information, including audited financial
statements for the Company for each of the three fiscal years ended June 30,
2005, June 30, 2004 and June 30, 2003 and other financial and pertinent
information regarding the Company as may be reasonably requested by Merger Co,
including all financial statements and financial data of the type required by
Regulation S-X and Regulation S-K under the Securities Act and of type and form
customarily included in the offering memoranda for private placements under Rule
144A of the Securities Act, to consummate the offerings of debt securities
contemplated by the Commitments at the time during the Company's fiscal year
such offerings will be made, (iii) assisting Merger Co and its financing sources
in the preparation of (A) an offering document for any financing contemplated by
the Commitments and (B) materials for rating agency presentations (collectively,
the "Required Information"), (iv) satisfying the conditions set forth in the
Commitments which require action by or cooperation of the Company, (v)
facilitating the pledging of collateral, (vi) using commercially reasonable
efforts to obtain accountants' comfort letters, legal opinions, surveys, and
title insurance as reasonably requested by Merger Co, (vii) assisting any tax or
other structural planning undertaken by Merger Co in connection with the
transactions contemplated hereby, (viii) executing and delivering any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing or other documents as may be reasonably requested by
Merger Co, including a certificate of the chief financial or other appropriate
officer of any of the Company or its Subsidiaries with respect to solvency and
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financial matters in customary form and substance reasonably acceptable to the
Company and its legal counsel, (ix) obtaining any necessary rating agencies'
confirmations or approvals for Merger Co's financing and (x) providing and
executing documents as may be reasonably requested by Merger Co in form and
substance reasonably acceptable to the Company; provided, however, that none of
the Company or any of its Subsidiaries shall be required to pay any commitment
or other similar fee or incur any other liability in connection with the equity
or debt financing under the Commitments prior to the Effective Time. Following
the termination of this Agreement pursuant to Sections 8.01(a), (c), or (e),
Merger Co shall (i) promptly upon request by the Company, reimburse the Company
for all reasonable out-of-pocket costs incurred by the Company or its
Subsidiaries in connection with such cooperation and (ii) indemnify, defend, and
hold harmless the Company, its Subsidiaries, and their respective
Representatives for and against any and all liabilities, losses, damages,
claims, costs, expenses, interest, awards, judgments and penalties suffered or
incurred by them in connection with any information utilized in connection with
the arrangement of the equity and debt financing under the Commitments (other
than information provided by the Company, it Subsidiaries or any of their
respective Representatives or contained in the SEC Reports).
(c) All non-public or otherwise confidential information regarding the
Company or its Subsidiaries obtained by Merger Co or its representatives
pursuant to Section 6.08(b) shall be kept confidential in accordance with the
Confidentiality Agreement; provided, however, that Merger Co and its
Representatives shall be permitted to disclose information as necessary or
consistent with customary practices in connection with the Commitments.
(d) Within fifteen Business Days of there having occurred after the
date of this Agreement (i) any general suspension of trading in, or limitation
on prices for, securities on the NYSE or NASD for three or more consecutive
Business Days, including but not limited to, as a result of actual or threatened
terrorist attacks, responses by the United States or its allies thereto, or the
effects thereof, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States generally for three or more
consecutive Business Days, (iii) the commencement or material escalation of a
war, armed hostilities or other international or national crisis or security
event involving the United States or any of its territories, including any acts
of terrorism, domestic or foreign or responses of the United States or its
allies, or a national or international economic or financial crisis, as a result
of which there has occurred any material disruption or material adverse change
in the United States commercial credit, debt, or capital securities markets
(including the market for leveraged loans or high yield securities) for a period
of three or more consecutive Business Days, or (iv) any limitation by any
governmental, regulatory, or administrative agency which prohibits the extension
of credit by banks or other lending institutions in the United States generally
in a manner that prevents a lender from providing the financing contemplated by
the Debt Commitment Letter for a period of three or more consecutive Business
Days, Merger Co shall deliver to the Company a certificate (the "Market MAC
Notice") to that effect signed by an officer of Merger Co, describing in
reasonable detail the nature of the Market MAC (any of the events specified in
clauses (i) through (iv) described in such Market MAC Notice being hereinafter
referred to as a "Market MAC"). At any time following its receipt of the Market
MAC Notice, the Company may request (by delivery of a written notice to Merger
Co to such effect (a "Company Waiver Request")) that Merger Co fully and
irrevocably waive its right to invoke the condition set forth in Section 7.02(d)
with respect to such Market MAC. In the event that Merger Co delivers to the
Company a written
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notice that Merger Co waives its right to invoke the condition set forth in
Section 7.02(d) with respect to such Market MAC (a "Merger Co Waiver Notice"),
then such Market MAC shall cease to be a basis for Merger Co not consummating
the Merger. In the event that Merger Co fails to deliver a Merger Co Waiver
Notice with respect to a Market MAC within the longer of (i) five Business Days
after Merger Co's receipt of the corresponding Company Waiver Request and (ii)
the number of days between the date on which Merger Co delivered to the Company
the corresponding Market MAC Notice and the date on which the Company delivered
to Merger Co the Company Waiver Request (the longer of such periods being
referred to herein as "Requisite Response Period"), then the Company shall be
entitled to terminate the Agreement pursuant to Section 8.01(i) within ten
Business Days after expiration of the Requisite Response Period. Notwithstanding
anything to the contrary in this Section 6.08(d), nothing shall release Merger
Co from continuing to be obligated to use its reasonable best efforts to obtain
(A) the financing contemplated by the Debt Commitment Letter or (B) the
Alternative Financing, in accordance with Section 6.08(a) in the event Merger Co
declines to timely waive its right to invoke the condition set forth in Section
7.02(d) with respect to a Market MAC.
6.09 Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto shall use its reasonable best efforts to (i) take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate the Merger and complete the Other Transactions, (ii) obtain from
Governmental Entities any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained by Merger Co or the Company or
any of their respective Subsidiaries in connection with the authorization,
execution, and delivery of this Agreement, and (iii) promptly make all necessary
filings, and thereafter make any other required submission, with respect to this
Agreement and the Merger required under the HSR Act or any other applicable
antitrust, competition or fair trade Laws with respect to the Merger. Subject to
appropriate confidentiality protections, the parties hereto shall have an
opportunity to review and approve in advance drafts of all applications,
notices, petitions, filings and other documents made or prepared in connection
with the items described in clauses (i) through (iii) above, which approval
shall not be unreasonably withheld, conditioned, or delayed, shall cooperate
with each other in connection with the prompt making of all such filings, shall
furnish to the other party such necessary information and assistance as such
other party may reasonably request with respect to the foregoing and shall
provide the other party with copies of all filings made by such party with any
applicable Government Entity, and, upon request, any other information supplied
by such party to a Governmental Entity in connection with this Agreement and the
Merger.
(b) Merger Co and the Company shall each use their respective
reasonable best efforts to obtain any third party consents (i) necessary, proper
or advisable to consummate the Merger and the Other Transactions, (ii) disclosed
in the Company Disclosure Schedule, or (iii) required to prevent a Company
Material Adverse Effect from occurring prior to or as a result of the Effective
Time. In the event that the Company shall fail to obtain any third party consent
described above, the Company shall use its reasonable best efforts, and shall
take such actions as are reasonably requested by Merger Co, to minimize any
adverse effect upon the Company and Merger Co and their respective businesses
resulting, or which would reasonably be expected to result, after the Effective
Time, from the failure to obtain such consent.
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(c) The Company and each of its Subsidiaries, with the cooperation of
Merger Co, will take all commercially reasonable steps, and proceed diligently
and in good faith to submit pre-acquisition review applications with the DOE
within 15 Business Days of the date of this Agreement and promptly to submit
other applications, notices and submissions with DOE and other Education
Departments and Accrediting Bodies which must be filed prior to the Closing in
order for the Company to obtain (i) all Education Department and Accrediting
Body approvals and permits which must be obtained prior to the Closing in order
for Merger Co to operate the Schools as they are currently operated and for the
Schools to participate in all of the Student Financial Assistance Programs,
including the Title IV Programs, under the ownership of Merger Co (collectively,
the "Pre-Closing Education Consents," identified as such in Section 3.05(b)(vii)
of the Company Disclosure Schedule), and (ii) all Education Department and
Accrediting Body approvals and permits which must be obtained after the Closing
in order for Merger Co to operate the Schools as they are currently operated and
for the Schools to participate in all of the Student Financial Assistance
Programs, including the Title IV Programs, under the ownership of Merger Co
(collectively, the "Post-Closing Education Consents" identified as such in
Section 3.05(b)(vii) of the Company Disclosure Schedule); provided, however,
that the Company (including any of its Subsidiaries) shall not file any
application, notice or other submission to the DOE, any Education Department or
any Accrediting Body without providing Merger Co a reasonable opportunity to
review such application, notice or other submission and without obtaining the
consent of Merger Co (which consent shall not be unreasonably withheld,
conditioned, or delayed). The Company and each of its Subsidiaries and Merger Co
will cooperate with each other and will take all commercially reasonable steps
to ensure that any response from the DOE to the DOE pre-acquisition review
application does not contain any of the conditions set forth in Section
7.02(f)(ii)(B).
(d) The Company and Merger Co will promptly and regularly advise each
other concerning the occurrence and status of any discussions or other
communications, whether oral or written, with any Education Department,
Accrediting Body, or other third party with respect to any Pre-Closing Education
Consents or Post-Closing Education Consents, including any material difficulties
or material delays experienced in obtaining any such consent, and of any adverse
conditions proposed, considered, or requested with respect to any such consent.
Merger Co will cooperate fully with the Company in its efforts to obtain any
such consent, including the timely submission of any information or materials
requested by an Education Department or Accrediting Body with respect to
obtaining such consents. The Company will allow Merger Co's Representatives to
participate in any meetings or telephone calls with any Education Department or
Accrediting Body to discuss the status of any such consent and will not engage
in any such meetings or telephone calls without such participation (unless
Merger Co elects not to participate or fails to make its Representatives
reasonably available in a timely manner), provided, however, that the Company
and its Representatives will confer in advance with Merger Co and its
Representatives to agree on issues to be discussed in such meetings or telephone
calls and neither party nor its Representatives will introduce any issues that
are not agreed to in advance and will not respond to any compliance issues first
introduced in such meetings or telephone calls.
6.10 Public Announcements. The initial press release relating to this
Agreement shall be a joint press release the text of which has been agreed to by
each of Merger Co and the Company. Thereafter, each of Merger Co and the Company
shall consult with each other before
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issuing any press release or otherwise making any public statements with respect
to this Agreement or the Merger, except to the extent public disclosure is
required by applicable Law or the requirements of the NASD, in which case the
issuing party shall use its reasonable best efforts to consult with the other
party before issuing any such release or making any such public statement.
6.11 Resignations. The Company shall use its reasonable best efforts
to obtain and deliver to Merger Co at the Closing evidence reasonably
satisfactory to Merger Co of the resignation effective, as of the Effective
Time, of those directors of the Company or any Subsidiary of the Company
designated by Merger Co to the Company in writing prior to the Closing.
6.12 State Takeover Statutes. The Company and the Company Board shall
ensure that the PA Anti-Takeover Statutes are not applicable to this Agreement,
the Merger, or any of the Other Transactions and, if any PA Anti-Takeover
Statute becomes applicable to this Agreement, the Merger, or any of the Other
Transactions, shall ensure that the Merger, including the Other Transactions,
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such PA Anti-Takeover Statute
on the Merger and the Other Transactions, including the transactions
contemplated by this Agreement.
6.13 Permits. The Company and each of its Subsidiaries shall provide
such additional assistance and cooperation to Merger Co as Merger Co shall
reasonably request in connection with the transfer, assignment, or conveyance of
any Permit, accreditation, authorization or approval to Merger Co hereunder.
6.14 Credit Agreement. The Company shall take all actions reasonably
necessary to terminate, effective as of the Closing Date, the Credit Agreement,
including the repayment of all outstanding revolving credit loans (other than
Letters of Credit issued under the Credit Agreement which will remain in full
force and effect after the Closing Date). Merger Co shall arrange for the
issuance of "back-to-back" Letters of Credit in favor of National City Bank of
Pennsylvania with terms acceptable to National City Bank of Pennsylvania with
respect to each Letter of Credit outstanding under the Credit Agreement on the
Closing Date.
6.15 Section 16 Matters. Prior to the Effective Time, the Company
shall use reasonable efforts to approve in advance in accordance with the
procedures set forth in Rule 16b-3 promulgated under the Exchange Act and the
Skadden, Arps, Slate, Meagher & Flom LLP SEC No-Action Letter (January 12, 1999)
any dispositions of Company Common Stock (including derivative securities with
respect to Company Common Stock) resulting from the transactions contemplated by
this Agreement by each officer or director of the Company who is subject to
Section 16 of the Exchange Act with respect to equity securities of the Company
that such disposition will be exempt under Rule 16b-3 promulgated under the
Exchange Act.
6.16 Restructuring. Prior to the Effective Time, the Company (a) shall
create a wholly owned subsidiary, in a form and jurisdiction directed by Merger
Co ("OPCO I"), and OPCO I shall create a wholly owned subsidiary, in a form and
jurisdiction directed by Merger Co ("OPCO II"), and (b) the Company shall
transfer (but effective only on and as of the
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Effective Time) all of its assets to OPCO II, and otherwise the Company shall
take all reasonable actions and cooperate with Merger Co in any restructuring or
similar organizational transaction required in order to consummate the financing
contemplated by the Commitments; provided, however, that the Company shall not
be required to take any action in contravention of, or that would reasonably be
expected to result in a violation or breach of, or a default under, any
organizational document, Specified Contract, or any Education Permit applicable
to the Company or any Subsidiary and any and all actions undertaken by the
Company at the direction of Merger Co pursuant to this Section 6.16 shall not
constitute a breach by the Company of any representation, warranty, or covenant
made by the Company pursuant to this Agreement. Following the termination of
this Agreement pursuant to Sections 8.01(a), (c), or (e), Merger Co shall (a)
promptly upon request by the Company, reimburse the Company for all reasonable
out-of-pocket costs incurred by the Company or its Subsidiaries in connection
with such action and cooperation and (b) indemnify, defend, and hold harmless
the Company, its Subsidiaries, and their respective Representatives from and
against any and all liabilities, losses, damages, claims, costs, expenses,
interest, awards, judgments and penalties suffered or incurred by them in
connection with any such actions taken by the Company at the direction of Merger
Co.
6.17 Intellectual Property. The Company shall use its commercially
reasonable best efforts (which shall not include expending any significant
monies or incurring indebtedness) to transfer to, or obtain for, the Company or
its Subsidiaries, at or prior to Closing, ownership of the registrations and/or
reservations for the domain names listed on Section 6.17 of the Company
Disclosure Schedule.
ARTICLE 7
CONDITIONS TO THE MERGER
7.01 Conditions to the Obligations of Each Party. The obligations of
the Company and Merger Co to consummate the Merger are subject to the
satisfaction or waiver in writing (where permissible) of the following
conditions:
(a) Company Shareholder Approval. This Agreement shall have been
adopted by the requisite affirmative vote of the shareholders of the Company in
accordance with the PBCL and the Company's Articles of Incorporation.
(b) Antitrust Approvals and Waiting Periods. Any waiting period (and
any extension thereof) applicable to the consummation of the Merger under
applicable United States and non-United States antitrust, merger control or
similar Laws, including the HSR Act, shall have expired or been terminated, and
any approvals required thereunder shall have been obtained.
(c) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any injunction, order, decree or ruling
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making consummation of the Merger illegal or otherwise preventing
or prohibiting consummation of the Merger.
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(d) DOE. The Company shall have received a written response from the
DOE to the pre-acquisition review applications filed with respect to the
Schools.
7.02 Conditions to the Obligations of Merger Co. The obligation of
Merger Co to consummate the Merger is subject to the satisfaction or waiver in
writing (where permissible) of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
respects (without giving effect to any limitation on any representation and
warranty indicated by a materiality qualification, including the words "Company
Material Adverse Effect," "material," "in all material respects" or like words,
except in the case of the first sentence of Section 3.11) as though made on and
as of the Closing Date (except for representations and warranties made as of an
earlier date, in which case as of such earlier date), except where the failure
of such representations and warranties to be so true and correct (without giving
effect to any limitation on any representation and warranty indicated by a
materiality qualification, including the words "Company Material Adverse
Effect," "material," "in all material respects" or like words, except in the
case of the first sentence of Section 3.11) would not, individually or in the
aggregate, have a Company Material Adverse Effect. In addition, the
representations and warranties set forth in Sections 3.03 and 3.04 shall be true
and correct in all material respects and the representations and warranties set
forth in the first sentence of Section 3.11 shall be true and correct in all
respects as of the Closing Date as though made on and as of the Closing Date
(except to the extent expressly made as of an earlier date in which case such
representations and warranties will be true and correct as of such earlier
date).
(b) Agreements and Covenants. The Company shall have performed in all
material respects or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Effective Time.
(c) Officer's Certificate. The Company shall have delivered to Merger
Co a certificate, dated the date of the Closing, signed by the Chief Executive
Officer of the Company and certifying as to the satisfaction of the conditions
specified in Sections 7.02(a) and 7.02(b).
(d) No Market MAC. No Market MAC (other than any Market MAC in respect
of which Merger Co has previously waived its right to invoke this Section
7.02(d) in accordance with the terms of Section 6.08(d)) shall have occurred
after the date of this Agreement. If any of the events specified in clauses (i)
and (ii) described in the first sentence of Section 6.08(d) has occurred for
less than three consecutive Business Days (without giving effect to the three
consecutive Business Day period already referenced with respect to the
applicable event in Section 6.08(d)), then Merger Co shall not be obligated to
consummate the Merger for so long as such event is continuing, and thereafter
Merger Co shall not be obligated to consummate the Merger to the extent such
event constitutes a Market MAC in accordance with Section 6.08(d) (other than
any Market MAC in respect of which Merger Co has previously waived its right to
invoke Section 7.02(d) in accordance with the terms of Section 6.08(d)).
(e) No Lender MAC. If any petition described in the last sentence of
Section 6.08(a) shall have been filed during the preceding ten days and not
dismissed, then Merger Co
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shall not be obligated to consummate the Merger for so long as such event is
continuing, and thereafter Merger Co shall not be obligated to consummate the
Merger to the extent such event constitutes a Lender MAC in accordance with
Section 6.08(a).
(f) Governmental and Education Consents.
(i) All consents, approvals, orders, or authorizations of, or
registrations, declarations or filings with any Governmental Entity required to
be obtained or made prior to the Closing by or with respect to the Company,
Merger Co, or any of their respective Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the Merger and
the Other Transactions contemplated hereby shall have been obtained or made,
except for (A) Pre-Closing Education Consents addressed in Section 7.02(f)(ii)
and (B) such consents, approvals, orders, authorizations, registrations,
declarations or filings the failure of which to be obtained or made would not
have a Company Material Adverse Effect.
(ii) The Pre-Closing Education Consents marked with an asterisk in
Section 3.05(b)(vii) of the Company Disclosure Schedule shall have been obtained
without any limitations (other than any customary limitations generally imposed
by any Education Department or Accrediting Body in connection with its approval
of a change of ownership) (the "Pre-Closing Deficiencies") which taken together
with any Non-DOE Deficiencies and DOE Growth Limitations, would or would be
reasonably likely to, individually or in the aggregate, materially impair the
growth prospects of the Company and its Subsidiaries taken as a whole, and the
Company shall have received written responses from the DOE to the
pre-acquisition review applications and such written responses shall not include
(A) a statement of intention not to approve the post-Closing eligibility of any
Institution to participate in Title IV Programs, or (B) as a condition of the
post-Closing approval of the eligibility of any Institution to participate in
the Title IV Programs (1) any requirement that the Company or any Institution
post any letter of credit other than a standard letter of credit (anticipated to
not be in excess of 10% of the Title IV Program funds received by the Company
and the Institutions in their prior fiscal year), (2) any limitation (other than
any customary limitations imposed by DOE in connection with its approval of
change of ownership transactions as set forth in the standard form of
provisional program participation agreement) on an Institution's ability to open
new locations or add new educational programs or revise existing educational
programs (collectively under this clause (2), "DOE Growth Limitations") that,
taken together with any Pre-Closing Deficiencies and Non-DOE Deficiencies, would
or would be reasonably likely to, individually or in the aggregate, materially
impair the growth prospects of the Company and its Subsidiaries taken as a
whole, (3) any requirement that an Institution process its Title IV Program
funds under the DOE's reimbursement or heightened cash monitoring-level 2
procedures, or (4) any requirement that an Equity Investor assume any liability
for obligations arising out of the Company's or any Institutions participation
in or administration of the Title IV Programs;
(g) Post-Closing Education Consents. Neither Merger Co nor the Company
shall have been informed in writing by any Education Department or Accrediting
Body that issues a Post-Closing Education Consent marked with a double-asterisk
in Schedule 3.5(b)(vii) of the Company Disclosure Schedules (i) that it will not
or does not expect to be able to issue its Post-Closing Education Consent or
(ii) that such Post-Closing Education Consent will or is reasonably likely to
have any limitations (other than any customary limitations generally imposed by
any
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Education Department or Accrediting Body in connection with its approval of
change of ownership transactions) on any Institution (collectively under clauses
(i) and (ii), "Non-DOE Deficiencies"), which Non-DOE Deficiencies, taken
together with any Pre-Closing Deficiencies and DOE Growth Limitations, would or
would be reasonably likely to, individually or in the aggregate, materially
impair the growth prospects of the Company and its Subsidiaries taken as a
whole.
(h) Resignations. Any resignations requested by Merger Co pursuant to
Section 6.11 shall have been obtained.
7.03 Conditions to the Obligations of the Company. The obligations of
the Company to consummate the Merger are subject to the satisfaction or waiver
in writing (where permissible) of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of Merger Co contained in this Agreement shall be true and correct in all
respects (without giving effect to any limitation on any representation and
warranty indicated by the words "Company Material Adverse Effect," "material,"
"in all material respects" or like words) as though made on and as of the
Closing Date (except for representations and warranties made as of an earlier
date, in which case as of such earlier date), except where the failure of such
representations and warranties to be so true or correct (without giving effect
to any limitation on any representation and warranty indicated by the words
"Company Material Adverse Effect," "material," "in all material respects" or
like words) would not prevent the consummation of the Merger or prevent Merger
Co from performing its obligations under this Agreement.
(b) Agreements and Covenants. Merger Co shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time.
(c) Officer's Certificate. Merger Co shall have delivered to the
Company a certificate, dated the date of the Closing, signed by an officer of
Merger Co, certifying as to the satisfaction of the conditions specified in
Sections 7.03(a) and 7.03(b).
ARTICLE 8
TERMINATION, AMENDMENT, AND WAIVER
8.01 Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time by action taken or
authorized by the Board of Directors of the terminating party or parties,
notwithstanding any requisite adoption of this Agreement by the shareholders of
the Company, and whether before or after the Shareholder Approval, as follows
(the date of any such termination, the "Termination Date"):
(a) by mutual written consent of Merger Co and the Company;
(b) by either Merger Co or the Company if the Effective Time shall not
have occurred on or before the date that is six months from the date of this
Agreement; provided, however, that the right to terminate this Agreement under
this Section 8.01(b) shall not be
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available to the party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Merger Co or the Company if any Governmental Entity or
Education Department shall have enacted, issued, promulgated, enforced, or
entered any injunction, order, decree, or ruling or taken any other action
(including the failure to have taken an action) which has become final and
non-appealable and has the effect of making consummation of the Merger illegal
or otherwise preventing or prohibiting consummation of the Merger;
(d) by Merger Co if it is not in material breach of its obligations
under this Agreement, and if (i) any of the representations and warranties of
the Company herein are or become untrue or inaccurate such that Section 7.02(a)
would not be satisfied, or (ii) there has been a breach on the part of the
Company of any of its covenants or agreements herein such that Section 7.02(b)
would not be satisfied, and, in either such case, such breach has not been, or
cannot be, cured within 30 days after written notice to the Company;
(e) by the Company if it is not in material breach of its obligations
under this Agreement, and if (i) any of the representations and warranties of
Merger Co herein are or become untrue or inaccurate such that Section 7.03(a)
would not be satisfied, or (ii) there has been a breach on the part of Merger Co
of any of its covenants or agreements herein such that Section 7.03(b) would not
be satisfied, and, in either such case, such breach (other than as a result of a
breach by Merger Co to effect the Closing as and when required by Section 1.02)
has not been, or cannot be, cured within 30 days after written notice to Merger
Co;
(f) by either Merger Co or the Company if this Agreement shall fail to
receive the Shareholder Approval at the Company Shareholders' Meeting; provided,
however, that the Company may not terminate under this Section 8.01(f) if it is
in material breach of its obligations under Sections 6.01, 6.02, or 6.04;
(g) by Merger Co if the Company Board shall have (i) effected a Change
of Board Recommendation, (ii) recommended to its shareholders or approved any
Acquisition Proposal, (iii) within five Business Days of the date any
Acquisition Proposal is first published or sent or given, taken any position
contemplated by Rule 14e-2(a) of the Exchange Act other than recommending
rejection of such Acquisition Proposal or (iv) failed to include in the Proxy
Statement distributed to shareholders its recommendation that shareholders adopt
and approve this Agreement and the Merger, provided, however, it is understood
that any "stop-look-and-listen" communication by the Company Board to the
Company's shareholders pursuant to Section 14d-9(f) of the Exchange Act that
does not take a position with respect to an Acquisition Proposal shall not be
deemed to constitute a withdrawal, modification, or change of its recommendation
of this Agreement or the Merger;
(h) by the Company if, prior to the adoption of this Agreement at the
Company Shareholders' Meeting, the Company Board determines in good faith (after
consultation with its advisors) that an unsolicited bona fide Acquisition
Proposal is a Superior Proposal but only (i) after providing written notice to
Merger Co (a "Notice of Superior Proposal") advising Merger Co that the Company
Board has received a Superior Proposal, specifying in writing the material
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terms and conditions of such Superior Proposal and the identifying the person
making the proposal, and (ii) if Merger Co does not, within two Business Days of
Merger Co's receipt of the Notice of Superior Proposal, make an offer that the
Company Board determines, in its good faith judgment (after consultation with
its advisors) to be at least as favorable to the Company's shareholders as such
Superior Proposal; provided, however, that during such two Business Day period,
the Company shall cooperate and negotiate with Merger Co (to the extent Merger
Co wishes such cooperation) to enable Merger Co to make such an offer; provided,
further, that, in the event of any amendment to the financial or other material
terms of such Superior Proposal, the Company Board shall deliver to Merger Co an
additional written Notice of Superior Proposal, and the two Business Day period
referenced above shall be extended for an additional two Business Days after
Merger Co's receipt of such additional Notice of Superior Proposal; and
provided, further, that any such purported termination pursuant to this Section
8.01(h) shall be void and of no force and effect unless the Company concurrently
with such termination pays the Company Termination Fee as directed by the Merger
Co in writing in accordance with Section 8.03; or
(i) by the Company within ten Business Days after the expiration of a
Requisite Period, if Merger Co fails to deliver a Merger Co Waiver Notice prior
to the expiration of the Requisite Response Period with respect to any Market
MAC.
8.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.01, this Agreement shall forthwith become void,
except that (i) the provisions of Section 6.03(b), Section 6.08(b), Section
6.16, this Section 8.02, Section 8.03, and Article 9 and the Guaranties referred
to in Section 4.09 shall survive any such termination and (ii) subject to the
other provisions of this Agreement (including Section 9.07), no such termination
shall relieve any party of any liability resulting from any breach by that party
of this Agreement.
8.03 Fees and Expenses.
(a) Except as otherwise set forth in this Section 8.03, all Expenses
incurred in connection with this Agreement shall be paid by the party incurring
such expenses, whether or not the Merger is consummated. As used in this
Agreement, "Expenses" includes all reasonable out-of-pocket documented expenses
(including all fees and expenses of counsel, accountants, investment bankers,
financing sources, experts and consultants to a party hereto and their
Affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation, negotiation, execution, and performance of
this Agreement, the preparation, printing, filing, and mailing of the Proxy
Statement, the solicitation of the Shareholder Approval, financing, and all
other matters related to the Merger and the Other Transactions.
(b) If this Agreement shall be terminated:
(i) by Merger Co pursuant to Section 8.01(d), if (A) at or prior
to the Termination Date, an Acquisition Proposal shall have been publicly
announced or disclosed to the Company in writing and (B) no later than 12 months
after the Termination Date, the Company enters into, recommends or submits to
the shareholders of the Company for adoption or acceptance, an Acquisition
Proposal or an agreement with respect to such Acquisition
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Proposal (which in each case need not be the same Acquisition Proposal as the
Acquisition Proposal described above that shall have been publicly announced at
or prior to the Termination Date), and an Acquisition Proposal is consummated,
then the Company shall pay the Company Termination Fee as provided in Section
8.03(c);
(ii) by Merger Co or the Company pursuant to Section 8.01(f), if
(A) at or prior to the Termination Date, an Acquisition Proposal shall have been
publicly announced or disclosed to the Company in writing and (B) no later than
12 months after the Termination Date, the Company enters into, recommends or
submits to the shareholders of the Company for adoption or acceptance, an
Acquisition Proposal or an agreement with respect to such Acquisition Proposal
(which in each case need not be the same Acquisition Proposal as the Acquisition
Proposal described above that shall have been publicly announced at or prior to
the Termination Date), and an Acquisition Proposal is consummated, then the
Company shall pay the Company Termination Fee as provided in Section 8.03(c);
(iii) by Merger Co pursuant to Section 8.01(g), then the Company
shall pay the Company Termination Fee as provided in Section 8.03(c); or
(iv) by the Company pursuant to Section 8.01(h), then the Company
shall pay the Company Termination Fee as provided in Section 8.03(c).
(c) The Company Termination Fee shall be paid by the Company as
directed by Merger Co in writing in immediately available funds (i) concurrently
with and as a condition to the effectiveness of a termination of this Agreement
by the Company pursuant to Section 8.01(h) and (ii) within two Business Days
after the date of the event giving rise to the obligation to make such payment
in all other circumstances. The Merger Co Termination Fee (as defined below)
shall be paid by Merger Co as directed by the Company in writing in immediately
available funds within two Business Days after the date of the event giving rise
to the obligation to make such payment.
(d) For purposes of this Agreement, (i) "Company Termination Fee"
means an aggregate amount in cash equal to $84,000,000 and (ii) "Merger Co
Termination Fee" means an aggregate amount in cash equal to $84,000,000.
(e) If this Agreement shall be terminated by the Company (i) pursuant
to Section 8.01(e)(ii) as a result of a breach by Merger Co of its obligations
to effect the Closing if and when required by Section 1.02, then Merger Co shall
pay the Merger Co Termination Fee as provided in Section 8.03(c).
(f) Each of the Company and Merger Co acknowledges that the agreements
contained in this Section 8.03 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall fail to pay
the Company Termination Fee when due or Merger Co shall fail to pay Merger Co
Termination Fee when due, the Company or Merger Co, as the case may be, shall
reimburse the other party for all reasonable costs and expenses actually
incurred or accrued by such other party (including reasonable fees and expenses
of counsel) in connection with the collection under and enforcement of this
Section 8.03.
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8.04 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after the adoption of this
Agreement by the shareholders of the Company, no amendment shall be made except
as allowed under applicable Law. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
8.05 Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any inaccuracy in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. The failure of any party to assert any
right under this Agreement or otherwise shall not constitute a waiver of its
rights.
ARTICLE 9
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, and Agreements. The
representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall automatically terminate at the Effective Time.
This Section 9.01 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
9.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing in the English language and shall
be deemed given (a) on the date of delivery if delivered personally, (b) on the
first Business Day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth Business Day following the
date of mailing if delivered by registered or certified mail (postage prepaid,
return receipt requested) or (d) if sent by facsimile transmission, when
transmitted and receipt is confirmed. All notices under Section 6.04 or Article
8 shall be delivered by courier and facsimile transmission to the respective
parties at the addresses provided in accordance with this Section 9.02. All
notices hereunder shall be delivered to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Merger Co:
EM Acquisition Corporation
c/o Goldman Sachs Capital Partners
85 Broad Street
New York, NY 10004
Telephone: (212)902-3127
Telecopy: (212)357-5505
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Attention: Mr. Adrian Jones
c/o Providence Equity Partners
50 Kennedy Plaza, 18th Floor
Providence, RI 02903
Telephone: (401)751-6763
Telecopy: (401)751-1790
Attention: Mr. Paul J. Salem
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 455-2000
Telecopy: (212) 455-2502
Attention: Gary I. Horowitz. Esq.
Peter S. Malloy, Esq.
if to the Company:
Education Management Corporation
210 Sixth Avenue
Pittsburgh, Pennsylvania 15222
Telephone: (412)562-0900
Telecopy: (412) 562-0598
Attention: John R. McKernan, Jr.
with a copy to:
Kirkpatrick & Lockhart Nicholson Graham LLP
599 Lexington Avenue
New York, New York 10022-6030
Telephone: (212)536-3900
Telecopy: (212) 536-3901
Attention: Robert P. Zinn, Esq.
9.03 Certain Definitions.
(a) For purposes of this Agreement:
"Affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"Business Day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any
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payment is due, any day on which banks are not required or authorized to close
in the City of New York.
"Company Material Adverse Effect" means any event, circumstance,
development, change, condition or effect that, individually or in the aggregate
with all other events, circumstances, developments, conditions, changes, or
effects, (i) is or is reasonably likely to be materially adverse to the
business, properties, results of operations, assets, or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole or (ii) would
prevent the Company from consummating the Merger or would prevent the Company
from performing its material obligations under this Agreement; provided,
however, that in no event would any of the following, alone or in combination,
be deemed to constitute, nor shall any of the following be taken into account in
determining whether there has been, or will be, a "Company Material Adverse
Effect": any event, circumstance, development, condition, change, or effect
resulting from or relating to, directly or indirectly, (A) changes in GAAP (or
any interpretation thereof by a Governmental Entity or quasi-Governmental
Entity, including the FASB) after the date hereof, (B) general economic,
political, or financial market conditions, (C) terrorism or war (except, in the
case of (A), (B) or (C), where such event, circumstance, development, change, or
effect has had a disproportionate effect on the Company and its Subsidiaries,
taken as a whole, as compared to other persons in the industry in which the
Company and its Subsidiaries conduct their business), (D) any shareholder
litigation brought or threatened against the Company or any member of the
Company's Board in respect of this Agreement or the transactions contemplated
hereby, or (E) compliance with the terms of, or the taking of any action
required by, this Agreement (other than Section 6.09).
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
"Knowledge" means (i) with respect to the Company, the actual
knowledge of those individuals identified in Section 9.03(a) of the Company
Disclosure Schedule, and (ii) with respect to any other party, the actual
knowledge of any executive officer of such party.
"Institution" shall mean the School or Schools comprising a main
campus and its additional locations or branches, identified by a single Office
of Post-secondary Education Identification Number by DOE, and owned and operated
by the Company or any of its Subsidiaries.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
"Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Merger Co or any other person means any entity in respect of which
such person, directly or indirectly, beneficially owns 50% or more of the voting
securities or equity.
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"Superior Proposal" means any bona fide written Acquisition Proposal
not solicited or initiated in violation of Section 6.04(a) that (i) relates to
an acquisition by a person or group acting in concert of (A) more than 70% of
the outstanding Shares pursuant to a tender offer, merger, or otherwise, or (B)
all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, (ii) is on terms that the Company Board determines in its good
faith judgment (after consultation with its financial advisor and after taking
into account all the terms and conditions of the Acquisition Proposal) are more
favorable to the Company's shareholders (in their capacity as shareholders) from
a financial point of view than this Agreement (taking into account any
modifications to this Agreement proposed in writing by Merger Co in response
thereto), and (iii) which the Company Board determines in good faith (after
consultation with its financial advisors) is reasonably capable of being
consummated.
(b) The terms included in the Index of Defined Terms located at the
beginning of this Agreement have the respective meanings set forth in the
Sections indicated in the Index of Defined Terms.
(c) When a reference is made in this Agreement to Sections, Schedules,
or Exhibits, such reference shall be to a Section, Schedule, or Exhibit of this
Agreement, respectively, unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement. The term "or" is not exclusive. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms. References to a person are also to its permitted successors and
assigns. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. References to information or
documents made available to Merger Co includes such information or documents
that have been posted to the electronic data room.
9.04 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.
9.05 Disclaimer of Other Representations and Warranties; Disclosure.
(a) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT, NEITHER THE COMPANY NOR MERGER CO MAKES ANY OTHER REPRESENTATIONS OR
WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS AND WARRANTIES
MADE BY ITSELF OR ANY OF ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES OR AFFILIATES,
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WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE MERGER, OR THE
OTHER TRANSACTIONS, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER
PARTY OR THE OTHER PARTY'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY OF THE FOREGOING.
(b) The disclosure of any matter or item in the Company Disclosure
Schedule shall not be deemed to constitute an acknowledgment that such matter or
item is required to be disclosed therein or is material to a representation,
warranty, covenant, or condition set forth in this Agreement and shall not be
used as a basis for interpreting the terms "material," "materially," "Company
Material Adverse Effect," or any word or phrase of similar import and does not
mean that such matter or item would, with any other matter or item, have,
individually or in the aggregate, a Company Material Adverse Effect.
9.06 Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior or contemporaneous agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof and thereof. This Agreement shall not be assigned (whether pursuant to a
merger, by operation of law or otherwise), except with the prior written consent
of the parties hereto. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
9.07 Remedies; Specific Performance. To the extent that (a) the
Company has incurred losses or damages in connection with this Agreement, (i)
the maximum aggregate liability of Merger Co for such losses or damages shall be
limited to and shall in no event exceed the Merger Co Termination Fee in the
aggregate, (ii) in no event shall the Company seek to recover any money damages
in excess of such amount from Merger Co or its respective Representatives and
Affiliates in connection therewith, and (iii) the maximum liability of each
Guarantor shall be limited to the obligations of such Guarantor under its
respective Guaranty or (b) Merger Co has incurred losses or damages in
connection with this Agreement, (i) the maximum aggregate liability of the
Company for such losses or damages shall be limited to and shall in no event
exceed the Company Termination Fee in the aggregate, and (ii) in no event shall
Merger Co seek to recover any money damages in excess of such amount from the
Company or its respective Representatives and Affiliates in connection
therewith. The parties hereto acknowledge that irreparable damage would occur in
the event any provision of this Agreement were not performed by the Company in
accordance with the terms hereof and that Merger Co shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity (subject to the provisions of this Section 9.07). The parties
acknowledge that the Company shall not be entitled to an injunction or
injunctions to prevent breaches of this Agreement by Merger Co or to enforce
specifically the terms and provisions of this Agreement and that the Company's
sole and exclusive remedies with respect to any such breach shall be the
remedies set forth in this Section 9.07 and Sections 6.08(b) and 8.03; provided,
however, that the Company shall be entitled to specific performance against
Merger Co to prevent any breach by Merger Co of Sections 6.03(b) or 6.08(c). In
no event shall Merger Co be required to pay more than one Merger Co Termination
Fee and in no event shall the Company be required to pay more
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than one Company Termination Fee. Notwithstanding the foregoing, no party shall
be liable for any punitive, consequential, special, or exemplary damages.
9.08 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 9.07(a)(iii) and, if the Closing occurs, Section
6.05 (which is intended to be for the benefit of the persons covered thereby and
may be enforced by such persons).
9.09 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
executed in and to be performed in that State (other than those provisions set
forth herein that are required to be governed by the PBCL). All Actions arising
out of or relating to this Agreement shall be heard and determined exclusively
in any Pennsylvania state or federal court sitting in Pittsburgh, Pennsylvania.
The parties hereto hereby (a) submit to the exclusive jurisdiction of any state
or federal court sitting in Pittsburgh, Pennsylvania for the purpose of any
Action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and shall not to assert by way of motion, defense, or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Merger may not be enforced in or by any of the above-named
courts.
9.10 Waiver of Jury Trial. Each of the parties hereto hereby waives to
the fullest extent permitted by applicable Law any right it may have to a trial
by jury with respect to any Action directly or indirectly arising out of, under
or in connection with, this Agreement or the Merger. Each of the parties hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the Merger, as applicable, by, among other things, the mutual
waivers and certifications in this Section 9.10.
9.11 Headings. The descriptive headings contained in this Agreement or
the Company Disclosure Schedule are included for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement.
9.12 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, Merger Co and the Company have caused this
Agreement to be executed as of the date first written above by their respective
duly authorized officers.
EM ACQUISITION CORPORATION
By: /s/ Peter O. Wilde
--------------------------------
Name: Peter O. Wilde
Title: Secretary
EDUCATION MANAGEMENT CORPORATION
By: /s/ John R. McKernan, Jr.
--------------------------------
Name: John R. McKernan, Jr.
Title: Chief Executive Officer
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