STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT

among

LINCOLN TECHNICAL INSTITUTE, INC.,

NN ACQUISITION, LLC,

BRAD BARAN,

BARBARA BARAN,

UGP EDUCATION PARTNERS, LLC,

UGPE PARTNERS, INC.

and

MERION INVESTMENT PARTNERS, L.P.

Dated as of January 20, 2009

 

 

TABLE OF CONTENTS

 

Page

STOCK PURCHASE AGREEMENT (this “ Agreement ”), dated as of  January 20, 2009, among LINCOLN TECHNICAL INSTITUTE, INC., a New Jersey corporation (the “ Parent ”), NN ACQUISITION, LLC, a Delaware limited liability company and wholly owned subsidiary of the Parent (the “ Purchaser ”), BRAD BARAN (“ Baran ”), BARBARA BARAN, UGP EDUCATION PARTNERS, LLC, a Delaware limited liability company (“ UGP ”), MERION INVESTMENT PARTNERS, L.P., a Delaware limited partnership (“ Merion ”) and UGPE PARTNERS, INC., a Delaware corporation (“ UGPE ”; each of Baran, Barbara Baran, UGP, Merion and UGPE, a “ Seller ” and collectively, the “ Sellers ”).

WHEREAS, the Sellers own 100% of the issued and outstanding shares (the “ BIT Shares ”) of common stock, no par value per share (the “ BIT Common Stock ”), of Baran Institute of Technology, Inc., a Connecticut corporation (“ BIT ”);

WHEREAS, Baran, UGPE and Merion own 100% of the limited liability company interests (the “ HUV Interests ”) of Hartford Urban Ventures, LLC, a Connecticut limited liability company (“ HUV ”);

WHEREAS, BIT owns 100% of each of Connecticut Culinary Institute, Inc., a Connecticut corporation (“ CCI ”), Americare Acquisition LLC, a Delaware limited liability company (“ Americare ”), and Engine City Technical Institute, a New Jersey corporation (“ Engine City ”);

WHEREAS, BIT owns and operates a post-secondary educational institution in Connecticut with one campus located in East Windsor, Connecticut (the “ BIT Institution ”), that is engaged in the business of providing educational services with respect to, among other things, autobody, automotive, commercial driver’s license training, motorcycle technology, diesel technology, electrical technology, heating, ventilation, air conditioning and refrigeration technology and welding technology (the “ BIT Business ”);

WHEREAS, HUV is engaged in the business of leasing space to the Institutions (the “ HUV Business ”);

WHEREAS, CCI owns and operates a post-secondary educational institution in Connecticut with two campuses located in Hartford, Connecticut and Suffield, Connecticut (the “ CCI Institution ”), that is engaged in the business of providing educational services with respect to, among other things, culinary arts (the “ CCI Business ”);

WHEREAS, Americare owns and operates Americare School of Nursing, a post-secondary educational institution in Florida with two campuses located in Fern Park, Florida and St. Petersburg, Florida (the “ Americare Institution ”), that is engaged in the business of providing educational services with respect to, among other things, healthcare careers (the “ Americare Business ”);

WHEREAS, Engine City owns and operates a post-secondary educational institution in New Jersey with one campus located in South Plainfield, New Jersey (the “ Engine City Institution ”), that is engaged in the business of providing educational services with respect to, among other things, diesel mechanics (the “ Engine City Business ”);

 

 

WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase from the Sellers, the Shares (as hereinafter defined) and the HUV Interests, upon the terms and subject to the conditions set forth herein;

WHEREAS, Baran, UGP, Merion, the Parent and the Purchaser are simultaneously with the execution of this Agreement entering into a Stock Purchase Agreement (the “ Clemens Agreement ”) for the purchase of all of the outstanding stock of Hospitality Acquisition Corporation (dba Clemens College), a Connecticut corporation (“ Clemens ”); and

WHEREAS, the employees of Educational Properties, LLC are used in connection with the Businesses and the parties wish to transfer such employees and certain liabilities in connection therewith to the Purchaser.

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01   Certain Defined Terms .  For purposes of this Agreement:

“ ABHES ” means the Accrediting Bureau of Health Education Schools.

“ Accounting Principles ” means the guidelines, rules and procedures described on Section 1.01(a) of the Disclosure Schedule .

“ Accrediting Body ” means any entity or organization, whether governmental, private or quasi-private, whether foreign or domestic, which engages in the granting or withholding of accreditation of post-secondary institutions in accordance with standards and requirements relating to the performance, operations, financial condition, and/or academic standards of such institutions, including the ACCSCT, the ACFF, the ABHES and the ADA.

“ ACCSCT ” means the Accrediting Commission of Career Schools and Colleges of Technology.

“ ACFF ” means the American Culinary Federation Foundation.

“ Acquisition Documents ” means this Agreement, the Ancillary Agreements and any certificate, report or other document delivered pursuant to this Agreement or the transactions contemplated by this Agreement.

“ Acquisition Obligations ” means the obligations (financial or otherwise) of BIT under the Americare Agreement and the Engine City Agreement.

“ Action ” means any Claim, action, suit, arbitration, proceeding or investigation by or before any Governmental Authority or Educational Agency.

 

 

“ ADA ” means the American Dental Association.

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“ Americare Agreement ” means the Asset Purchase Agreement dated August 8, 2007, as amended, by and among BIT, Americare School of Nursing, Inc., Americare School of Nursing of St. Pete, LLC Gerald Newman and Americare.

“ Ancillary Agreements ” means the Escrow Agreement, the General Release, the Lease and the Assignments of Lease.

“ Assets ” means the assets and properties of the Companies and the Subsidiaries.

“ Assignments of Lease ” means the Assignment of Lease with respect to each property set forth on Section 1.01(b) of the Disclosure Schedule and entered into by the Purchaser and the entity/entities listed opposite each such property on Section 1.01(b) of the Disclosure Schedule .

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York, New York.

“ Businesses ” means, collectively, the BIT Business, the HUV Business, the CCI Business, the Americare Business and the Engine City Business.

“ CCI Lease ” means the Lease, dated as of July 12, 2007, by and between Farmington Imlay Associates LLC and CCI.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System, as updated through the Closing.

“ Claims ” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements, but excluding Educational Claims.

“ Closing ” means the closing of the transactions contemplated by this Agreement.

“ Closing Balance Sheet ” means the balance sheet (including the related notes and schedules thereto), dated as of the date hereof, prepared and delivered by the Purchaser in accordance with Section 2.05 and setting forth the consolidated Net Working Capital with respect to the Companies and the Subsidiaries.

“ Closing Date ” means the date on which the Closing occurs.

 

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Companies ” means, collectively, BIT and HUV.  Each such company is referred to individually as a “ Company ”.

 

“ Companies IP Licenses ” means those (a) licenses of Intellectual Property by any Company or any Subsidiary or an Affiliate of any Company or any Subsidiary to third parties, (b) licenses of Intellectual Property by third parties to any Company or any Subsidiary or an Affiliate of any Company or any Subsidiary and (c) agreements between any Company or any Subsidiary and third parties relating to the development or use of Intellectual Property, the development or transmission of data, or the use, modification, framing, linking advertisement, or other practices with respect to Internet web sites, in each case, that are used or held for use in connection with the Businesses.

“ Compliance Date ” means January 1, 2005.

“ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

“ Conveyance Taxes ” means all sales, use, value-added, transfer, stamp, stock transfer, real property transfer or gains and similar Taxes and any transfer, recording, registration and similar fees.

“ Current Assets ” means cash, accounts receivable, inventories, prepaid expenses and other assets that could be converted to cash in less than one year, in accordance with GAAP and GAGAS.

“ Current Liabilities ” means amounts owed for accounts payable, notes payable, line of credit, capital lease obligations, unearned tuition, student deposits, deferred meal plan, deferred housing costs, deferred promotional income, accrued expenses, deferred tax liability and income tax payable and other liabilities that are due within one year, in accordance with GAAP and GAGAS.

 

“ Disclosure Schedule ” means the Disclosure Schedule, dated as of the date hereof, delivered by the Sellers to the Purchaser in connection with this Agreement.

 

“ ECAR ” means Eligibility and Certification Approval Report(s) issued to the Institutions.

“ Educational Agency ” means any Person, entity or organization, whether governmental, government chartered, private, or quasi-private, that engages in granting or withholding Educational Approvals for, administers financial assistance to or for students of, or otherwise regulates, private post-secondary schools in accordance with standards relating to performance, recruiting, operation, financial condition or academic standards of such schools, including U.S. DOE, any Accrediting Body, the Commission for Independent Education of the Florida Department of Education, the State of New Jersey Department of Education and New Jersey Department of Labor and Workforce Development, the State of Connecticut Board of Governors for Higher Education, the Immigration and Naturalization Service of the United States Department of Justice and the Department of Homeland Security.

 

 

“ Educational Approval ” means any license, permit, consent, franchise, approval, authorization, certificate, U.S. DOE Approval or accreditation issued or required to be issued by an Educational Agency to an Institution or to any campus or other facility operated by such Institution with respect to any aspect of such Institution’s operations subject to the oversight of such Educational Agency.

“ Educational Claims ” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, program reviews, audits, proceedings, consent orders or consent agreements arising out of the operation of an Institution or the application thereto of any Educational Law or with respect to any Educational Approval required to be held by such Institution under any Educational Law.

“ Educational Law ” means any Law, regulation or binding standard issued or administered by, or related to, any Educational Agency.

“ Encumbrance ” means any security interest, pledge, hypothecation, mortgage, lien (including environmental and Tax liens), violation, charge, lease, license, encumbrance, servient easement, adverse claim, reversion, reverter, preferential arrangement or restrictive covenant, condition or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

“ Engine City Agreement ” means the Stock Purchase Agreement, dated as of April 29, 2008, by and among Daniel Kasper, Engine City and BIT.

“ Environment ” means surface waters, groundwaters, sediment, soil, subsurface strata and outdoor or indoor ambient air.

“ Environmental Claims ” means any Claims relating to any Environmental Law or any Environmental Permit, including (a) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (b) any and all Claims by any Person seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the Environment.

“ Environmental Laws ” means all Laws and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the Environment, health, safety, natural resources or Hazardous Materials, including CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. ; the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq. ; the Clean Water Act, 33 U.S.C. § 1251 et seq. ; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. ; the Clean Air Act, 42 U.S.C. § 7401 et seq. ; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. ; the Atomic Energy Act, 42 U.S.C. § 2011 et seq. ; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq. ; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301 et seq .

 

 

“ Environmental Permits ” means all permits, approvals, identification numbers, licenses and other authorizations required under or issued pursuant to any applicable Environmental Law.

“ Escrow Account ” means the account established, designated and maintained by the Escrow Agent pursuant to the terms of the Escrow Agreement.

“ Escrow Agent ” means JPMorgan Chase Bank, National Association.

“ Escrow Agreement ” means the Escrow Agreement executed by the Purchaser, the Seller’s Representative and the Escrow Agent.

“ Escrow Amount ” means $2,000,000.

“ Estimated Closing Balance Sheet ” means the consolidated balance sheet (including the related notes and schedules thereto) of the Companies and the Subsidiaries dated as of the date hereof and prepared and delivered pursuant to Section 2.05(a) .

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Taxes ” means (a) all Income Taxes owed by the Sellers or any of their Affiliates for any period; (b) all Taxes relating to the Assets or any Company, Subsidiary or Institution for any Pre-Closing Period, including the portion of a Straddle Period ending on the Closing Date; (c) Taxes imposed on the Purchaser or any of its Affiliates or any Company or Subsidiary as a result of any breach by the Sellers or any of their present or past Affiliates of a warranty or misrepresentation, or breach of any covenant relating to Taxes; (d) all Taxes for which the Purchaser, its Affiliates or any Company or Subsidiary is liable by reason of the Sellers, any Company or any Subsidiary being a member of a consolidated, combined, unitary, affiliated or similar group that includes any Person (other than a Company or a Subsidiary) prior to the Closing, by reason of a Tax sharing, Tax indemnity or similar agreement entered into by any Company, Subsidiary or any of their present or past Affiliates prior to the Closing (other than this Agreement) or by reason of transferee or successor Liability arising in respect of a transaction undertaken by any Company, Subsidiary or any of their present or past Affiliates prior to the Closing; and (e) fifty percent (50%) of all Conveyance Taxes payable in connection with the transactions contemplated by this Agreement.

“ GAAP ” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

“ GAGAS ” means generally accepted government auditing standards.

“ General Release ” means the General Release and Discharge executed by the Sellers.

 

 

“ Governmental Authority ” means any United States federal, state, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body, but excluding any Educational Agency.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Hazardous Materials ” means (a) petroleum and petroleum products, radioactive materials, asbestos-containing materials, mold, urea formaldehyde foam insulation, transformers or other equipment that contain polychlorinated biphenyls and radon gas; (b) any other chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants” or “pollutants,” or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance which is regulated by, or with respect to which liability may be imposed under, any Environmental Law.

 

“ HEA ” means the Higher Education Act of 1965, as amended, 20 U.S.C. § 1001 et seq., any amendments or successor statutes thereto, and its implementing regulations.

“ Income Taxes ” means Taxes imposed on or measured by reference to gross or net income or receipts, and franchise, net worth, capital or other doing business Taxes.

“ Indebtedness ” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services; (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (d) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases; (e) all obligations, contingent or otherwise, of such Person under acceptance, Letter of Credit or similar facilities; (f) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (g) all Indebtedness of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person; and (h) all Indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.  For the avoidance of doubt, “Indebtedness” shall not include any intercompany indebtedness among the Companies, the Subsidiaries and/or the Institutions.

“ Indemnified Party ” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

 

 

“ Indemnifying Party ” means the Sellers or the Indemnifying Purchasers, as the case may be.

“ Indemnifying Purchasers ” means the Purchaser and the Parent.

“ Institutions ” means, collectively, the BIT Institution, the CCI Institution, the Americare Institution and the Engine City Institution, including, in each case, any campus or other facility at which any such Institution offers any portion of an educational program.  Each such institution is referred to individually as an “ Institution ”.

“ Intellectual Property ” means:  (a) patents and patent applications; (b) trademarks, service marks, domain names, trade dress, logos, trade names, corporate names and slogans, together with the goodwill associated therewith; (c) copyrights; (d) Software, data, databases, data rights and Internet websites; (e) confidential and proprietary information, including trade secrets and know-how; (f) advertising and promotional rights and rights to privacy and publicity; (g) registrations and applications for registration of the foregoing, including reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof; (h) all common law rights thereto; and (i) proprietary rights in curricula, course design and educational services.

“ Inventory ” means all inventory, merchandise, goods and other personal property maintained, held or stored by or for any Company or Subsidiary at the Closing, and any prepaid deposits for any of the same.

“ IRS ” means the Internal Revenue Service of the United States.

“ Knowledge of the Sellers ” means the actual knowledge, after due inquiry, of Baran, Barbara Baran, Stephen Schwartz, John Milne, Robert Miner, George Cinquegrana, Stan Lau and Randy Rock.

“ Law ” means any United States federal, state, local or similar statute, law, ordinance, regulation, rule, code, order, or Accrediting Body standard, including any Educational Law.

“ Lease ” means the lease agreement, between the Educational Properties, LLC and the Purchaser with respect to the property located at 1760 Mapleton Avenue, Suffield, Connecticut.

“ Leased Real Property ” means the real property leased by any Company or Subsidiary, as tenant, together with, to the extent leased by any Company or Subsidiary, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of any Company or Subsidiary attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

“ Letter of Credit ” means any instruments or documents issued by a bank guaranteeing the payment of a customer’s drafts up to a stated amount for a specified period.

 

 

“ Liabilities ” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, asserted or unasserted, matured or unmatured or determined or determinable, including those arising under any Law (including any Environmental Law or Educational Law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

“ Licensed Intellectual Property ” means Intellectual Property licensed to any Company or Subsidiary, an Affiliate of any Company or Subsidiary, or any Institution and used or held for use in connection with the Businesses.

“ Material Adverse Effect ” means any circumstance, change in or effect on any Business, Institution, Company or Subsidiary that, individually or in the aggregate with all other circumstances, changes in or effects on any Business, Institution, Company or Subsidiary, is or is reasonably likely to be materially adverse to the business, operations, assets, liabilities, results of operations or the condition (financial or otherwise) of any Institution, Company or Subsidiary; provided , however , that in no event shall any of the following be deemed to constitute a Material Adverse Effect: circumstances, changes or effects resulting from (a) the announcement of the execution of this Agreement or compliance with the terms of, or the taking of any action required by, this Agreement other than (i) pursuant to any requirement to operate in the ordinary course of business consistent with past practice or to make the representations and warranties of the Sellers accurate or (ii) the consummation of the transactions contemplated hereby, (b) acts of war, sabotage, terrorism, military actions or the escalation thereof, (c) a change in applicable Laws, regulations or accounting rules after the date hereof, (d) a change in general economic, political or financial market conditions, or (e) a change in conditions generally applicable to the industry in which any Institution, Company or Subsidiary operates except, in the case of the foregoing clauses (b), (c), (d) and (e) where such circumstances, changes or effects affect such Institution, Company or Subsidiary in a manner materially disproportionate to other Persons in the industries in which the Institutions, Companies and Subsidiaries conduct their business.

“ Net Working Capital ” means the excess of consolidated Current Assets over consolidated Current Liabilities for the Companies and the Subsidiaries, in accordance with GAAP and GAGAS, as shown on the Estimated Closing Balance Sheet or the Closing Balance Sheet, as the case may be.

“ Owned Intellectual Property ” means Intellectual Property owned by any Company or any Subsidiary, an Affiliate of any Company or any Subsidiary, or the Institutions and used or held for use in connection with the Businesses.

“ Owned Real Property ” means the real property owned by any Company or any Subsidiary, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of any Company or any Subsidiary attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

 

 

“ Permitted Encumbrances ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced and as to which no Company or Subsidiary is otherwise subject to civil or criminal liability due to its existence:  (a) (i) liens for Taxes, assessments and governmental charges or levies not yet due and payable or (ii) Taxes for which any Company or any Subsidiary is contesting in good faith, and for which in the case of (i) and (ii) adequate reserves have been maintained in accordance with GAAP; (b) Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) are not in excess of $5,000   in the case of a single property or $10,000 in the aggregate at any time; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) zoning laws and ordinances, minor survey exceptions, reciprocal easement agreements and other customary encumbrances on or defects in title to real or personal property that (i) were not incurred in connection with any Indebtedness, (ii) do not render title to the property encumbered thereby unmarketable and (iii) do not, individually or in the aggregate, materially adversely affect the value of or the use of such property for its current and anticipated purposes; and (e) liens securing rental payments under capital lease arrangements.

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

“ Pre-Closing Period ” means any taxable period (or portion of a taxable period) ending on or prior to the Closing Date.

“ Preferred Stock ” means issued and outstanding shares of Series D 11% Redeemable Cumulative Preferred Stock of BIT, Series E Convertible Preferred Stock of BIT and Series A Convertible Preferred Stock of Engine City to be redeemed immediately prior to the Closing.

“ Purchase Price Bank Accounts ” means the bank accounts in the United States to be designated by the Sellers in a written notice to the Purchaser at least one Business Day before the Closing.

“ Purchaser’s Accountants ” means Deloitte & Touche LLP, independent accountants of the Purchaser.

“ Real Property ” means the Leased Real Property and the Owned Real Property.

“ Receivables ” means any and all accounts receivable (including Student Accounts Receivable), notes and other amounts receivable from third parties, including customers and employees, arising from the conduct of the Businesses before the Closing Date, whether or not in the ordinary course, together with any unpaid financing charges accrued thereon.

“ Release ” means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and the like into or upon any land or water or air or otherwise entering into the Environment.

 

 

“ Remedial Action ” means “remove”, “removal”, “remedy” or “remedial action” as those terms are defined in Section 101(23) and (24) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Sellers’ Accountants ” means Knutte & Associates, P.C.

“ Shares ” means the BIT Shares.

“ Software ” means all (i) computer programs, applications, systems and code, including software implementations of algorithms, models and methodologies, and source code and object code, (ii) Internet and intranet websites, databases and compilations, including data and collections of data, whether machine-readable or otherwise, (iii) development and design tools, library functions and compilers, (iv) technology supporting websites, and the contents and audiovisual displays of websites, and (v) documentation, other works of authorship and media, including user manuals and training materials, relating to or embodying any of the foregoing or on which any of the foregoing is recorded.

“ Straddle Period ” means any taxable period beginning on or prior to and ending after the Closing Date.

“ Student Accounts Receivable ” means any Company’s or any Subsidiary’s accounts receivable for student tuition, fees and institutional charges (including U.S. DOE accounts receivable) with respect to students currently attending the Institutions as of the Closing Date, as determined in accordance with GAAP applied on a basis consistent with the past practices of the Companies and the Subsidiaries.

“ Subsidiaries ” means, collectively, CCI, Americare and Engine City.  Each such company is referred to individually as a “ Subsidiary ”.

“ Target Working Capital ” means $(6,240,651).

“ Tax ” or “ Taxes ” means any and all taxes and other fees, levies, duties, tariffs, imposts and other charges that are in the nature of taxes (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing authority, including:  taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added, or gains taxes.

“ Tax Returns ” means all returns, computations, reports and statements required to be filed with any Governmental Authority with respect to Taxes.

 

 

“ Title IV ” means Title IV of the HEA and all definitional and other provisions set forth elsewhere in the HEA that are referenced in Title IV or that relate to any Title IV provision.

 

“ Title IV Programs ” means the programs of federal student financial assistance administered pursuant to Title IV of the HEA.

 

“ TPPPA ” means a temporary provisional program participation agreement executed by the U.S. DOE and issued to an Institution following the Closing for an interim period allowing U.S. DOE’s further review of the Purchaser’s application for U.S. DOE Approval of the Institution following a change in ownership.

“ Treasury Regulations ” means the Treasury Regulations (including Temporary Treasury Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

“ U.S. ” and “ United States ” means the United States of America.

“ U.S. DOE ” means the United States Department of Education.

“ U.S. DOE Approval ” means a provisional program participation agreement issued and countersigned by the Secretary of U.S. DOE, or his designee, in conjunction with an accurate ECAR (but not including a TPPPA) that is complete and accurate in all material respects, certifying an institution for participation in the Title IV Programs that does not include any condition that would materially impair the Parent’s operations.

 

Section 1.02    Definitions .  The following terms have the meanings set forth in the Sections set forth below:

 

 

Section 1.03    Interpretation and Rules of Construction .  In this Agreement, except to the extent otherwise provided or indicated, or that the context otherwise requires:

 

 

(a)           when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement;

(b)           the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c)           whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d)           the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e)           all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f)           the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

(g)           any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

(h)           references to a Person are also to its successors and permitted assigns; and

(i)           the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

ARTICLE II

PURCHASE AND SALE

Section 2.01   Purchase and Sale of the BIT Shares and the HUV Interests .  Upon the terms and subject to the conditions of this Agreement, on the date hereof, the Sellers shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, the BIT Shares and the HUV Interests, and the Purchaser shall purchase the BIT Shares and the HUV Interests.

 

Section 2.02   Purchase Price .  Subject to the adjustments set forth in Section 2.05 , the purchase price for the Shares, the HUV Interests and the covenants contained in Section 5.06 shall be an amount in cash equal to Twenty-Eight Million Dollars ($28,000,000) (the “ Purchase Price ”) which shall be allocated $26,450,000 to the Shares, $250,000 to the HUV Interests and $1,300,000 to the covenants contained in Section 5.06 .

 

 

Section 2.03   Deliveries by the Sellers .  (a)  On or prior to the date hereof, the Sellers shall have delivered or caused to be delivered to the Purchaser:

 

 

 

Section 2.04   Deliveries by the Purchaser .  (b)  On or prior to the date hereof, the Purchaser shall have delivered or caused to be delivered to the Sellers:

 

 

(b)           At the Closing, the Purchaser shall deliver or cause to be delivered to the Escrow Agent, in accordance with the Escrow Agreement, the Escrow Amount by wire transfer in immediately available funds to the Escrow Account.

 

Section 2.05   Adjustment of Purchase Price .  The Purchase Price shall be subject to adjustment on and after the date hereof as specified in this Section 2.05 :

(a)            Estimated Closing Balance Sheet .  At least three Business Days prior to the date hereof, the Sellers shall have delivered to the Purchaser the Estimated Closing Balance Sheet.  The Sellers shall have prepared the Estimated Closing Balance Sheet in accordance with GAAP and GAGAS, and the Estimated Closing Balance Sheet shall set forth the Sellers’ good faith estimate of the consolidated Net Working Capital with respect to the Companies and the Subsidiaries as of the date hereof.  The Sellers shall make available to the Purchaser the work papers used in preparing the Estimated Closing Balance Sheet.  If the Net Working Capital reflected on the Estimated Closing Balance Sheet exceeds the Target Working Capital (or is negative by a lesser amount than the Target Working Capital), then the Purchase Price payable by the Purchaser on the date hereof shall be adjusted upwards in an amount equal to such excess (or amount by which such Net Working Capital is a lesser negative amount than the Target Working Capital).  If the Net Working Capital reflected on the Estimated Closing Balance Sheet is less than the Target Working Capital (or is negative by a greater amount than the Target Working Capital), then the Purchase Price payable by the Purchaser on the date hereof shall be adjusted downward in an amount equal to such deficiency (or amount by which such Net Working Capital is a greater negative amount than the Target Working Capital).

(b)            Closing Balance Sheet .  On or prior to January 30, 2009, provided that the Purchaser provides the assistance necessary for Sellers to complete such statement, the Sellers shall deliver to the Purchaser a revised Estimated Closing Balance Sheet, prepared in accordance with GAAP and GAGAS and setting forth the Sellers’ good faith calculation of the consolidated Net Working Capital with respect to the Companies and the Subsidiaries as of the date hereof.  The Sellers shall make available to the Purchaser the work papers used in preparing such balance sheet.  As promptly as practicable, but in any event within 45 Business Days following the date hereof, the Purchaser shall prepare and deliver to the Sellers’ Representative the Closing Balance Sheet, prepared in accordance with GAAP and GAGAS.

 

 

(c)            Disputes .  (i) The Sellers’ Representative may dispute any amounts reflected on the Closing Balance Sheet delivered by the Purchaser, but only on the basis that the amounts reflected on such Closing Balance Sheet were not arrived at in accordance with GAAP and GAGAS or were arrived at based on mathematical or clerical error.  If the Sellers’ Representative intends to dispute any such amounts, the Sellers’ Representative shall notify the Purchaser and the Purchaser’s Accountants in writing of each disputed item, specifying the amount thereof in dispute and setting forth, in reasonable detail, the basis for such dispute, within 30 Business Days of the delivery by the Purchaser of the Closing Balance Sheet to the Sellers’ Representative.  In the event of such a dispute, the Sellers’ Representative and the Purchaser shall attempt to reconcile the disputed amounts, and any resolution agreed by them as to such disputed amounts shall be final, conclusive and binding on the parties hereto.

(d)            Purchase Price Adjustment .  (i) The Closing Balance Sheet shall be deemed final upon the earliest to occur of (A) the Sellers’ Representative’s failure to notify the Purchaser of a dispute by the 30 ^th Business Day after the Purchaser’s delivery of the Closing Balance Sheet to the Sellers’ Representative, (B) the resolution of all disputes, pursuant to Section 2.05(c)(i) , by the Sellers’ Accountants and the Purchaser’s Accountants and (C) the resolution of all disputes, pursuant to Section 2.05(c)(ii) , by the Independent Accounting Firm.

 

 

 

Section 2.06   Escrow .  In accordance with the terms of the Escrow Agreement, on the date hereof the Purchaser shall deposit the Escrow Amount in the Escrow Account.  The Escrow Account shall be managed and paid out by the Escrow Agent in accordance with the terms of the Escrow Agreement.

 

Section 2.07   Withholding .  The Purchaser shall be entitled at any time to deduct and withhold from any portion of the Purchase Price otherwise payable pursuant to this Agreement such amounts as Purchaser is required to deduct and withhold and pay over to applicable taxing authorities with respect to the making of such payment under the Code or any applicable provision of state or local Tax Law.  To the extent that amounts are so withheld by the Purchaser, the Purchaser shall pay over such amounts to the applicable taxing authorities.  To the extent that amounts are so withheld by the Purchaser and paid over to the applicable taxing authority, such amounts shall be treated for all purposes as having been paid to the Sellers.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

As an inducement to the Purchaser to enter into this Agreement, except as set forth in the Disclosure Schedule (each section of which qualifies the correspondingly numbered representation and warranty or covenant herein; provided , that the disclosure of any fact or item in any Section of the Disclosure Schedule shall, should the existence of such factor or item be relevant to any other Section, be deemed to be disclosed with respect to that Section, so long as the relevance of such disclosure to such other Section is reasonably apparent on the face of such disclosure), each of the Sellers hereby, jointly and severally (except with respect to Sections 3.01(b), (c), (d) and (e) , pursuant to which each Seller represents and warrants each statement therein only to the extent directly applicable to such Seller), represents and warrants to the Purchaser and the Parent as follows:

 

 

Section 3.01   Organization, Authority and Qualification .  (a)  Each Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Businesses as it has been and is currently conducted.  Each Company is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of any Institution makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (i) adversely affect the ability of such Company to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements to which it is a party or (ii) otherwise have a Material Adverse Effect.  All corporate actions taken by each Company have been duly authorized, and no Company has taken any action that in any respect conflicts with, constitutes a default under, or results in a violation of, any provision of its certificate of incorporation or by-laws.  True and correct copies of the certificate of incorporation and by-laws of each Company, each in effect on the date hereof, have been delivered or made available by the Sellers to the Purchaser.

(b)           UGPE is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  UGPE is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (i) adversely affect the ability of UGPE to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements to which it is a party or (ii) otherwise have a Material Adverse Effect.  The execution and delivery by UGPE of this Agreement and the Ancillary Agreements to which it is a party, the performance by UGPE of its obligations hereunder and thereunder and the consummation by UGPE of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action.  This Agreement has been, and upon their execution the Ancillary Agreements to which UGPE is a party shall have been, duly executed and delivered by UGPE and (assuming due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and upon their execution such Ancillary Agreements shall constitute, legal, valid and binding obligations of UGPE, enforceable against UGPE in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally, now or hereafter in effect, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).

 

 

(c)           UGP is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary limited liability company power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  UGP is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (i) adversely affect the ability of UGP to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements to which it is a party or (ii) otherwise have a Material Adverse Effect.  The execution and delivery by UGP of this Agreement and the Ancillary Agreements to which it is a party, the performance by UGP of its obligations hereunder and thereunder and the consummation by UGP of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of UGP and its members.  This Agreement has been, and upon their execution the Ancillary Agreements to which UGP is a party shall have been, duly executed and delivered by UGP and (assuming due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and upon their execution such Ancillary Agreements shall constitute, legal, valid and binding obligations of UGP, enforceable against UGP in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally, now or hereafter in effect, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).

(d)           Merion is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  Merion is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (i) adversely affect the ability of Merion to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements to which Merion is a party or (ii) otherwise have a Material Adverse Effect.  The execution and delivery by Merion of this Agreement and the Ancillary Agreements to which Merion is a party, the performance by Merion of its obligations hereunder and thereunder and the consummation by Merion of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of Merion and its partners.  This Agreement has been, and upon their execution the Ancillary Agreements to which Merion is a party shall have been, duly executed and delivered by Merion, and (assuming due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and upon their execution such Ancillary Agreements shall constitute, legal, valid and binding obligations of Merion, enforceable against Merion in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally, now or hereafter in effect, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).

 

 

(e)           Each of Baran and Barbara Baran is an individual and has all requisite right, power and authority and full legal capacity to execute and deliver this Agreement and the Ancillary Agreements to which Baran or Barbara Baran is a party, to perform his or her obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and upon his execution the Ancillary Agreements to which Baran or Barbara Baran is a party will be, duly and validly executed and delivered by Baran or Barbara Baran, as the case may be, and (assuming due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and upon their execution such Ancillary Agreements shall constitute, legal, valid and binding obligations of Baran or Barbara Baran, enforceable against Baran or Barbara Baran in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency (including all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting creditors’ rights generally, now or hereafter in effect, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).

 

Section 3.02   Subsidiaries .  (a)   Section 3.02(a) of the Disclosure Schedule sets forth for each Subsidiary its name, type of entity, the jurisdiction and date of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the current ownership of such shares, partnership interests or similar ownership interests.

(b)           Except as set forth on Section 3.02(b) of the Disclosure Schedule , other than the Subsidiaries, there are no other corporations, partnerships, joint ventures, associations or other entities in which any Company or Subsidiary owns, of record or beneficially, any direct or indirect equity or other interest or any right (contingent or otherwise) to acquire the same.  Other than the Subsidiaries, no Company or Subsidiary is a member of (nor is any part of any Business conducted through) any partnership and no Company or Subsidiary is a participant in any joint venture or similar arrangement.

(c)           Each Subsidiary that is a corporation:  (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (x) adversely affect the ability of the Sellers to carry out their obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements or (y) otherwise have a Material Adverse Effect.  Each Subsidiary that is not a corporation:  (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified and in good standing would not (x) adversely affect the ability of the Sellers to carry out their obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements or (y) otherwise have a Material Adverse Effect.

 

 

(d)           All corporate or other actions taken by each Subsidiary have been duly authorized and no Subsidiary has taken any action that in any respect conflicts with, constitutes a default under, or results in a violation of any provision of its certificate of incorporation or by-laws (or similar organizational documents).  True and complete copies of the certificate of incorporation and by-laws (or similar organizational documents), in each case as in effect on the date hereof, of each Subsidiary have been delivered or made available by the Sellers to the Purchaser.

 

Section 3.03   Capitalization .  (a)  The authorized capital stock or other ownership interests of each Company is set forth in Section 3.03(a) of the Disclosure Schedule .  All of the issued and outstanding shares of capital stock or other ownership interests of each Company are duly authorized, validly issued, fully paid and nonassessable.  None of the issued and outstanding Shares or HUV Interests were issued in violation of any preemptive rights.  Except as set forth in Section 3.03(a) of the Disclosure Schedule , there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Shares, the HUV Interests or obligating any Seller or any Company to issue or sell any Shares or HUV Interests, or any other interest in, any Company.  There are no outstanding contractual obligations of BIT or HUV to repurchase, redeem or otherwise acquire any shares of BIT Common Stock or any HUV Interests, respectively, or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.  The Shares and the HUV Interests constitute all of the issued and outstanding capital stock or other ownership interests of the Companies and are owned of record and beneficially by the Sellers as set forth in Section 3.03(a) of the Disclosure Schedule free and clear of all Encumbrances, other than Permitted Encumbrances.  The Preferred Stock set forth in Section 3.03(a) of the Disclosure Schedule shall have been redeemed as of the date hereof.  Upon consummation of the transactions contemplated by this Agreement and registration of the Shares and the HUV Interests in the name of the Purchaser in the stock or other records of the Companies, the Purchaser, assuming it shall have purchased the Shares and the HUV Interests for value in good faith and without notice of any adverse claim, will own all the issued and outstanding capital stock or other ownership interests of each Company free and clear of all Encumbrances, other than Permitted Encumbrances.  Upon consummation of the transactions contemplated by this Agreement, the Shares and the HUV Interests will be fully paid and nonassessable.  There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Shares or the HUV Interests.

(b)           The stock or other register of each Company accurately records:  (i) the name and address of each Person owning shares of capital stock or other ownership interests of such Company and (ii) the certificate number of each certificate evidencing shares of capital stock or other ownership interests issued by such Company, the number of shares or other ownership interests evidenced by each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation.

 

 

(c)           All the outstanding shares of capital stock of each Subsidiary that is a corporation are validly issued, fully paid, nonassessable and, except with respect to wholly owned Subsidiaries, free of preemptive rights and are owned by BIT, whether directly or indirectly, free and clear of all Encumbrances, other than Permitted Encumbrances.  There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of any Subsidiary or obligating any Seller, any Company or any Subsidiary to issue or sell any shares of capital stock of, or any other interest in, any Subsidiary.  Except as set forth on Section 3.03(c) of the Disclosure Schedule , there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of or any other interests in any Subsidiary.

(d)           The stock or other register of each Subsidiary accurately records:  (i) the name and address of each Person owning shares of capital stock or other ownership interests of such Subsidiary and (ii) the certificate number of each certificate evidencing shares of capital stock or other ownership interests issued by such Subsidiary, the number of shares or other ownership interests evidenced by each such certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation.

 

Section 3.04   No Conflict .  Assuming that all consents, approvals, authorizations filings, notifications and other actions described in Section 3.04 and Section 3.05 of the Disclosure Schedule have been obtained or made, the execution, delivery and performance by any Seller of this Agreement and the Ancillary Agreements to which any Seller is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or by-laws of any Seller, Company or Subsidiary, (b) conflict with or violate (or cause an event that could have a Material Adverse Effect as a result of) any Law or Governmental Order applicable to any Seller, Company or Subsidiary or any of their respective assets, properties or businesses or (c) conflict with, result in any breach of, constitute a default (or event that with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance, other than Permitted Encumbrances, on any of the Shares, the HUV Interests or the Assets pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which or any Seller, Company or Subsidiary is a party or by which any of the Shares, the HUV Interests or the Assets is bound or affected, except, in the case of this clause (c), to the extent that such conflicts, breaches, defaults or other matters would not (i) adversely affect the ability of any Seller, Company or Subsidiary to carry out its or his obligations under, and to consummate the transactions contemplated by, this Agreement and the Ancillary Agreements to which such Seller, Company or Subsidiary is a party or (ii) otherwise have a Material Adverse Effect.

 

 

Section 3.05   Governmental Consents and Approvals .  Except for the consents, approvals and notifications that must be obtained or given prior to the Closing as set forth on Section 3.05 of the Disclosure Schedule  (the “ Required Consents ”), the execution, delivery and performance by each Seller of this Agreement and each Ancillary Agreement to which the such Seller is a party, as the case may be, do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority or Educational Agency.  To the Knowledge of the Sellers, there is no reason why all the Required Consents will not be received.

 

Section 3.06   Financial Information; Books and Records; No Undisclosed Liabilities .  (a)  True and complete copies of (i) the audited consolidated balance sheet of the Companies and Clemens as of December 31, 2007, and the related audited consolidated statements of income, retained earnings, shareholders’ equity and changes in financial position of the Companies and Clemens, together with all related notes and schedules thereto, accompanied by the reports thereon, if any, of the Sellers’ Accountants (collectively referred to herein as the “ Audited Financial Statements ”) and (ii) the unaudited consolidated balance sheet of the Companies and Clemens for the nine-month period ending September 30, 2008 and the related consolidated financial statements of Companies and Clemens, together with all related notes and schedules thereto (collectively referred to herein as the “ Interim Financial Statements ”) have been delivered or made available by the Sellers to the Purchaser.  The Audited Financial Statements and the Interim Financial Statements are hereinafter collectively referred to as the “ Financial Statements ”.  The Financial Statements (A) were prepared in accordance with the books of account and other financial records of Clemens, the Companies and the Subsidiaries, (B) present fairly, in all material respects, the financial condition and results of operations of Clemens, the Companies and the Subsidiaries as of the dates thereof or for the period covered thereby (subject, in the case of the Interim Financial Statements, to normal year-end adjustments), (C) have been prepared in accordance with GAAP and GAGAS, on a basis consistent with the Accounting Principles and the past practices of Clemens, the Companies and the Subsidiaries, and (D) include all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation in all material respects of the financial condition of Clemens, the Companies and the Subsidiaries and the results of the operations of Clemens, the Companies and the Subsidiaries as of the dates thereof or for the period covered thereby.

(b)           The books of account and other financial records of the Companies and the Subsidiaries:  (i) reflect all items of income and expense and all assets and Liabilities required to be reflected therein in accordance with GAAP applied on a basis consistent with the past practices of the Companies and the Subsidiaries, respectively, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies and (iii) have been maintained in accordance with good business and accounting practices.

(c)           The minute books of the Companies and the Subsidiaries reflecting records of actions taken by the shareholders or members, boards of directors/managers and all committees of the boards of directors/managers of the Companies and the Subsidiaries have been provided or made available to the Purchaser and are complete and accurate in all material respects.

 

 

(d)           The Companies and the Subsidiaries have established and maintain a system of internal accounting controls (“ Internal Controls ”) sufficient to comply with all legal and accounting requirements applicable to the Companies, the Subsidiaries and the Institutions and to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and GAGAS, subject to the adjustments set forth in the Accounting Principles.  Except as set forth in Section 3.06(d) of the Disclosure Schedule , there are no significant deficiencies or material weaknesses in the design or operation of such Internal Controls, and the Companies and the Subsidiaries have not been advised by any independent auditor or other third party that any such significant deficiency or material weakness in such Internal Controls exists or existed.  Except as set forth in Section 3.06(d) of the Disclosure Schedule , no Company or any Subsidiary nor any of their respective directors, officers, employees, auditors, accountants or representatives has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Companies and the Subsidiaries or their respective Internal Controls, including any complaint, allegation, assertion or claim that the Companies and the Subsidiaries have engaged in questionable financial reporting, accounting or auditing practices.  There has not been any fraud, whether or not material, that involves management or other employees who have a significant role in the Internal Controls or, to the Knowledge of the Sellers, any allegations or investigations of any such fraud.

(e)           There are no Liabilities of the Companies and the Subsidiaries, other than Liabilities (i) reflected or reserved against in the Financial Statements, (ii) set forth in Section 3.06(e) of the Disclosure Schedule , or (iii) incurred since September 30, 2008 in the ordinary course of business, consistent with the past practice of the Companies and the Subsidiaries and which do not and could not have a Material Adverse Effect.

 

Section 3.07   Receivables .  Set forth in Section 3.07 of the Disclosure Schedule is an aged list of the Receivables as of September 30, 2008.  All Receivables arising from the date thereof until the Closing have or will have arisen in the ordinary course of business from bona fide transactions and constitute or will constitute only valid, undisputed claims of any Company, Subsidiary or Institution, and no valid claims of setoff or other defenses or counterclaims have been formally asserted with respect thereto, other than normal cash discounts accrued in the ordinary course of business consistent with the past practices of the Companies and the Subsidiaries or as reserved for in the Financial Statements.

 

Section 3.08   Conduct in the Ordinary Course; Absence of Certain Changes, Events and Conditions .  Since December 31, 2007, the Businesses have been conducted in the ordinary course consistent with past practice.  As amplification and not limitation of the foregoing, since such date, except as set forth in Section 3.08 of the Disclosure Schedule , no Company, Subsidiary or Institution has:

 

 

 

 

 

 

 

Section 3.09   Litigation .  Except as set forth in Section 3.09 of the Disclosure Schedule , there are no Actions, Claims or Educational Claims by or against any Company, Subsidiary or Institution (or by or against any Seller or any Affiliate thereof and relating to the Businesses, the Companies, the Subsidiaries or the Institutions) or affecting any of the Assets or the Businesses pending before any Governmental Authority or Educational Agency (nor, to the Knowledge of the Sellers, threatened to be brought by or before any Governmental Authority or Educational Agency).  Timely claims for insurance with respect to all such Actions, Claims and Educational Claims set forth in Section 3.09 of the Disclosure Schedule have been submitted by or on behalf of the applicable Company, Subsidiary or Institution.  None of the Sellers, Companies, Subsidiaries or Institutions nor any of their respective assets and properties, including the Assets, is subject to any Governmental Order or order of any Educational Agency (nor, to the Knowledge of the Sellers, are any Governmental Orders or orders of any Educational Agency threatened to be imposed) that has or has had a Material Adverse Effect or could affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

 

Section 3.10   Compliance with Laws .  (a)  The Companies, the Subsidiaries and the Institutions have conducted and continue to conduct the Businesses in accordance in all material respects with all Laws (excluding Educational Laws) and Governmental Orders applicable to the Companies, the Subsidiaries and the Institutions or the Assets, and no Company, Subsidiary or Institution is in violation in any material respect of any such Law or Governmental Order.  No Company, Subsidiary or Institution has, in the last three years, received any written communication from any Governmental Authority alleging that such Company, Subsidiary or Institution is not in compliance in any material respect with any Law or Governmental Order that has not been resolved.

 

 

(b)            Section 3.10(b) of the Disclosure Schedule sets forth a brief description of each Governmental Order applicable to the Companies, the Subsidiaries, the Institutions or the Assets, and no such Governmental Order has or has had a Material Adverse Effect or could affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.

 

Section 3.11   Environmental and Other Permits and Licenses; Related Matters .  Except as set forth on Section 3.11(b)(ii) and (c) of the Disclosure Schedule :

(a)           Each Company, Subsidiary and Institution is in compliance in all material respects with all applicable Environmental Laws.  Each Company, Subsidiary and Institution has all material Environmental Permits required under Environmental Law, all such permits are in full force and effect and each Company, Subsidiary and Institution is in material compliance therewith.

(b)           There has been no Release of any Hazardous Material (i) by any Company, Subsidiary or Institution, (ii) to the Knowledge of the Sellers, on the Real Property, (iii) to the Knowledge of the Sellers, on any property formerly leased, used or occupied by any Company, Subsidiary or Institution during the period of any Company’s, Subsidiary’s or Institutions’ lease, use or occupancy thereof, or (iv) on any property formerly owned by any Company, Subsidiary or Institution during the period of any Company’s, Subsidiary’s or Institution’s ownership thereof, in the case of (i), (ii), (iii) and (iv), that requires any Remedial Action.

(c)           There are no Environmental Claims pending (or, to the Knowledge of the Sellers, threatened) against any Company, Subsidiary or Institution, and there are no circumstances that can reasonably be expected to form the basis of any such Environmental Claim, including, to the Knowledge of the Sellers, with respect to any off-site disposal location currently or formerly used by any Company, Subsidiary or Institution or any of its predecessors or with respect to previously owned or operated facilities.

(d)           No Company or Subsidiary is conducting, or has undertaken or completed or funded, any Remedial Action relating to any Release or threatened Release of any Hazardous Material at the Real Property or at any other site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law or Environmental Permit.

(e)           To the Knowledge of the Sellers, there is no asbestos or asbestos-containing material on any of the Real Property that requires abatement, removal or encapsulation pursuant to Environmental Law.

(f)            None of the Real Property is listed or proposed for listing, nor to the Knowledge of the Sellers does the Real Property adjoin any other property that is listed or proposed for listing, on the National Priorities List or CERCLIS or on any analogous federal, state or local list.

(g)           To the Knowledge of the Sellers, there are no wetlands or any areas subject to any legal requirement or restriction in any way related to wetlands (including requirements or restrictions related to buffer or transition areas or open waters) at or affecting the Real Property.

 

 

(h)           The Sellers have provided or made available to the Purchaser copies of (i) any environmental assessment or audit reports or other similar studies or analyses relating to the Busine