STOCK PURCHASE AGREEMENT

EXHIBIT 10.22

STOCK PURCHASE AGREEMENT

among

LINCOLN TECHNICAL INSTITUTE, INC.,

NN ACQUISITION, LLC,

BRAD BARAN,

UGP EDUCATION PARTNERS, LLC,

MERION INVESTMENT PARTNERS, L.P.

and, for certain limited purposes only,

UGPE PARTNERS, INC.

Dated as of January 20, 2009

 

 

TABLE OF CONTENTS

 

Page

Exhibits

Exhibit A – Form of Assignment of Lease

Exhibit B – Form of General Release

 

 

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 ”) UGP EDUCATION PARTNERS, LLC, a Delaware limited liability company (“ UGP ”), MERION INVESTMENT PARTNERS, L.P., a Delaware limited partnership (“ Merion ”; each of Baran, UGP and Merion, a “ Seller ” and collectively, the “ Sellers ”), and, for certain limited purposes only, UGPE PARTNERS, INC., a Delaware corporation (“ UGPE ”).

WHEREAS, the Sellers own 100% of the issued and outstanding shares (the “ Shares ”) of common stock, $0.01 par value per share (the “ Clemens Common Stock ”), of Hospitality Acquisition Corporation (dba Clemens College), a Connecticut corporation (the “ Company ”);

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

WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser wishes to purchase from the Sellers, the Shares, upon the terms and subject to the conditions set forth herein (the “ Acquisition ”);

WHEREAS, the Sellers, UGPE Partners, Inc., Barbara Baran, the Parent and the Purchaser are simultaneously with the execution of this Agreement entering into a Stock Purchase Agreement (the “ BIT Agreement ”) for the purchase of all of the outstanding limited liability company interests of Hartford Urban Ventures, LLC, a Connecticut limited liability company (“ HUV ”), and all of the outstanding stock of Baran Institute of Technology, Inc., a Connecticut corporation (“ BIT ”; and together with the Company and HUV, the “ Companies ”), as well as its subsidiaries, 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 ”; and together with CCI and Americare, the “ Subsidiaries ”); and

WHEREAS, for certain limited purposes only, UGPE has agreed to be a party to this Agreement.

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 ABHES and the CIHE.

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

 “ 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.

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

“ 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.

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

“ Assets ” means the assets and properties of the Company.

“Assignments of Lease ” means the Assignment of Lease, in the form attached hereto as Exhibit A , with respect to each property set forth in 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.

“ 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.

“ CIHE ” means the Commission on Institutions of Higher Education of the New England Association of Schools and Colleges.

“ 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 Balance Sheet ” means the balance sheet (including the related notes and schedules thereto), dated as of the Closing Date, prepared and delivered by the Purchaser in accordance with Section 2.06 and setting forth the Net Working Capital with respect to the Company.

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

 

“ Company IP Licenses ” means those (a) licenses of Intellectual Property by the Company or an Affiliate of the Company to third parties, (b) licenses of Intellectual Property by third parties to the Company or an Affiliate of the Company and (c) agreements between the Company 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 Business.

“ 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 Institution.

“ 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 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 the Institution or to any campus or other facility operated by the Institution with respect to any aspect of the 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 the Institution or the application thereto of any Educational Law or with respect to any Educational Approval required to be held by the 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.

“ 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 balance sheet (including the related notes and schedules thereto) for the Company dated as of the Closing Date and prepared and delivered pursuant to Section 2.06(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 the Company or the 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 of the Companies or Subsidiaries 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 the Company is liable by reason of the Sellers, the Company being a member of a consolidated, combined, unitary, affiliated or similar group that includes any Person prior to the Closing, by reason of a Tax sharing, Tax indemnity or similar agreement entered into by the Company or any of its 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 the Company or any of its 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, in the form attached hereto as Exhibit B , to be executed by the Sellers at the Closing.

 

 

“ 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, (i) the Institution, (ii) the post-secondary educational institution in Connecticut with one campus located in East Windsor, Connecticut owned and operated by BIT, (iii) Americare School of Nursing, a post-secondary educational institution in Florida with two campuses located in Fern Park, Florida and St. Petersburg, Florida owned and operated by Americare and (iv) the post-secondary educational institution in New Jersey with one campus located in South Plainfield, New Jersey owned and operated by Engine City, including, in each case, any campus or other facility at which any such institution offers any portion of an educational program.

“ 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 the Company 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.

“ Leased Real Property ” means the real property leased by the Company, as tenant, together with, to the extent leased by the Company, all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Company 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 the Company, an Affiliate of the Company, or the Institution and used or held for use in connection with the Business.

“ Material Adverse Effect ” means any circumstance, change in or effect on the Business, the Institution, or the Company that, individually or in the aggregate with all other circumstances, changes in or effects on the Business, the Institution, or the Company, 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 the Institution or the Company; provided , however , that in no event shall any of the following be deemed to constitute a Material Adverse Effect: (a) circumstances, changes or effects resulting from (i) 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 (A) 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 (B) the consummation of the transactions contemplated hereby, (ii) acts of war, sabotage, terrorism, military actions or the escalation thereof, (iii) a change in applicable Laws, regulations or accounting rules after the date hereof, (iv) a change in general economic, political or financial market conditions, (v) a change in conditions generally applicable to the industry in which the Institution or Company operates except, in the case of the foregoing clauses (ii), (iii), (iv) and (v) where such circumstances, changes or effects affect the Institution or the Company in a manner materially disproportionate to other Persons in the industries in which the Institution and the Company conducts their business or (b) circumstances, changes or effects that do not or would not reasonably be expected to result in aggregate Losses to the Company or the Institution of less than One Million Dollars ($1,000,000).

“ Net Working Capital ” means the excess of Current Assets over Current Liabilities for the Company, 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 the Company, an Affiliate of the Company, or the Institution and used or held for use in connection with the Business.

“ Owned Real Property ” means the real property owned by the Company, 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 the Company 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 the Company 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 the Company 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 A Preferred Stock of the Company and Series B Convertible Preferred Stock of the Company 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 Business 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.

“ 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 the Company’s accounts receivable for student tuition, fees and institutional charges (including U.S. DOE accounts receivable) with respect to students currently attending the Institution as of the Closing Date, as determined in accordance with GAAP applied on a basis consistent with the past practices of the Company.

“ Target Working Capital ” means $185,683.

“ 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 the 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 Shares .  Upon the terms and subject to the conditions of this Agreement, at the Closing, the Sellers shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, the Shares, and the Purchaser shall purchase the Shares.

 

Section 2.02   Purchase Price .  Subject to the adjustments set forth in Section 2.06 , the purchase price for the Shares and the covenants contained in Section 5.10 shall be an amount in cash equal to Three Million Dollars ($3,000,000) (the “ Purchase Price ”) which shall be allocated $2,800,000 to the Shares and $200,000 to the covenants contained in Section 5.10 .

 

Section 2.03   Closing .  Subject to the terms and conditions of this Agreement, the sale and purchase of the Shares contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York at 10:00 A.M., New York time (a) within the first five Business Days of the month following the month in which the satisfaction or waiver of the conditions to the obligations of the parties set forth in Article VII has occurred, or (b) at such other time or on such other date as the Sellers and the Purchaser may mutually agree upon in writing (the date on which the Closing takes place being the “ Closing Date ”).

 

Section 2.04   Deliveries by the Sellers .  (a)  On or prior to the Closing Date, the Sellers shall have delivered or caused to be delivered to the Purchaser:

 

 

 

Section 2.05    Deliveries by the Purchaser .  (a)  On or prior to the Closing Date, the Purchaser shall have delivered or caused to be delivered to the Sellers:

 

 

(b)       On the date hereof (and pursuant to the BIT Agreement), 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 2.06   Adjustment of Purchase Price .  The Purchase Price shall be subject to adjustment on and after the date hereof as specified in this Section 2.06 :

(a)        Estimated Closing Balance Sheet .  At least five Business Days prior to the Closing Date, the Sellers shall deliver to the Purchaser the Estimated Closing Balance Sheet.  The Sellers shall prepare 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 Net Working Capital of the Company as of the Closing Date.  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, then the Purchase Price payable by the Purchaser at the Closing shall be adjusted upwards in an amount equal to such excess.  If the Net Working Capital reflected on the Estimated Closing Balance Sheet is less than the Target Working Capital, then the Purchase Price payable by the Purchaser at the Closing shall be adjusted downward in an amount equal to such deficiency.

(b)        Closing Balance Sheet .  Within 30 Business Days following the Closing Date, 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 Net Working Capital with respect to the Company as of the Closing Date.  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 Closing Date, 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 2.06(c)(i) , by the Sellers’ Accountants and the Purchaser’s Accountants and (C) the resolution of all disputes, pursuant to Section 2.06(c)(ii) , by the Independent Accounting Firm.

 

 

 

Section 2.07    Escrow .  In accordance with the terms of the Escrow Agreement, on the date hereof (and pursuant to the BIT Agreement) 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 2.08    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 AND UGPE

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) and (d) , pursuant to which each Seller represents and warrants each statement therein only to the extent directly applicable to such Seller), and, solely with respect to Section 3.01(e) , UGPE hereby, represents and warrants to the Purchaser and the Parent as follows:

 

Section 3.01   Organization, Authority and Qualification .  (a)  The 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 Business as it has been and is currently conducted.  The 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 the 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 the 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 the Company have been duly authorized, and the Company has not 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 the Company, each in effect on the date hereof, have been delivered or made available by the Sellers to the Purchaser.

 

 

(b)      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).

(c)      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).

 

 

(d)      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 he is a party, to perform his 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 is a party will be, duly and validly executed and delivered by Baran 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, enforceable against 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).  The failure of the spouse of Baran to be a party or signatory to this Agreement shall not (i) prevent Baran from performing his obligations and consummating the transactions contemplated hereunder or (ii) prevent this Agreement from constituting the legal, valid and binding obligation of Baran in accordance with its terms.

(e)      (i)  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).

 

 

(ii)      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 UGPE of this Agreement and the Ancillary Agreements to which it 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 UGPE, (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 UGPE or any of its 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 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 UGPE is a party or by which any of the Shares 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 (1) 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 UGPE is a party or (2) otherwise have a Material Adverse Effect.

(iii)      Except for the Required Consents, the execution, delivery and performance by UGPE of this Agreement and each Ancillary Agreement to which it is a party 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 UGPE, there is no reason why all the Required Consents will not be received.

 

Section 3.02   Subsidiaries .  There are no other corporations, partnerships, joint ventures, associations or other entities in which the Company owns, of record or beneficially, any direct or indirect equity or other interest or any right (contingent or otherwise) to acquire the same.  The Company is not a member of (nor is any part of the Business conducted through) any partnership and the Company is not a participant in any joint venture or similar arrangement.

 

Section 3.03   Capitalization .  (a)  The authorized capital stock or other ownership interests of the 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 the Company are duly authorized, validly issued, fully paid and nonassessable.  None of the issued and outstanding Shares were issued in violation of any preemptive rights.  Except for the Preferred Stock and 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 or obligating any Seller or the Company to issue or sell any Shares, or any other interest in, the Company.  There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Clemens Common Stock 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 constitute all of the issued and outstanding capital stock or other ownership interests of the Company 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.  Upon consummation of the transactions contemplated by this Agreement and registration of the Shares in the name of the Purchaser in the stock or other records of the Company, the Purchaser, assuming it shall have purchased the Shares 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 the Company free and clear of all Encumbrances, other than Permitted Encumbrances.  Upon consummation of the transactions contemplated by this Agreement, the Shares 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.

 

 

(b)      The stock or other register of the Company accurately records:  (i) the name and address of each Person owning shares of capital stock or other ownership interests of the Company and (ii) the certificate number of each certificate evidencing shares of capital stock or other ownership interests issued by the 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.

 

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 or the Company, (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 or the Company 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 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 any Seller or the Company is a party or by which any of the Shares 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 or the Company 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 or the Company 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 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 (1) the unaudited balance sheet of the Company for the fiscal year ended December 31, 2007, and the related unaudited statements of income, retained earnings, shareholders’ equity and changes in financial position of the Company, together with all related notes and schedules thereto and (2) the unaudited balance sheet of the Company for the nine-month period ending September 30, 2008 and the related financial statements of the Company, together with all related notes and schedules thereto (collectively referred to herein as the “ Financial Statements ”) have been delivered or made available by the Sellers to the Purchaser.  The Financial Statements (A) were prepared in accordance with the books of account and other financial records of the Company, (B) present fairly, in all material respects, the financial condition and results of operations of the Company as of the dates thereof or for the period covered thereby, (C) have been prepared in accordance with GAAP and GAGAS, on a basis consistent with the Accounting Principles and the past practices of the Company, 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 the Company and the results of the operations of the Company as of the dates thereof or for the period covered thereby.

(b)      The books of account and other financial records of the Company:  (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 Company, 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 Company 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 Company have been provided or made available to the Purchaser and are complete and accurate in all material respects.

(d)      The Company has established and maintains a system of internal accounting controls (“ Internal Controls ”) sufficient to comply with all legal and accounting requirements applicable to the Company and the Institution 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 Company has 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 , neither the Company nor any of its 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 Company or its Internal Controls, including any complaint, allegation, assertion or claim that the Company has 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 Company, 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 Company 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 the Company or the 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 Company 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 Business has 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 , neither the Company nor the 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 the Company, or the Institution (or by or against any Seller or any Affiliate thereof and relating to the Business, the Company or the Institution) or affecting any of the Assets or the Business 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 Company or the Institution.  Neither the Sellers, the Company, or the Institution 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 Company and the Institution have conducted and continue to conduct the Business in accordance in all material respects with all Laws (excluding Educational Laws) and Governmental Orders applicable to the Company and the Institution or the Assets, and neither the Company nor the Institution is in violation in any material respect of any such Law or Governmental Order.  Neither the Company nor the Institution has, in the last three years, received any written communication from any Governmental Authority alleging that such Company or the 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 Company, the Institution 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 .

(a)       The Company and the Institution are in compliance in all material respects with all applicable Environmental Laws.  The Company and the Institution have all material Environmental Permits required under Environmental Law, all such permits are in full force and effect and the Company and the Institution are in material compliance therewith.

(b)       There has been no Release of any Hazardous Material (i) by the Company or the 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 the Company or the Institution during the period of the Company’s or the Institution’s lease, use or occupancy thereof, or (iv) on any property formerly owned by the Company or the Institution during the period of the Company’s or the 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 the Company or the 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 the Company or the Institution or any of its predecessors or with respect to previously owned or operated facilities.

(d)       The Company is not 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 Business, the Real Property or the Company in their possession, and (ii) all insurance policies issued at any time that may provide coverage to the Company or the Institution for environmental matters.

(i)        There are no underground storage tanks, surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on the Real Property by the Sellers.

(j)        Neither the execution of this Agreement or the Ancillary Agreements nor the consummation of the transactions contemplated hereby or thereby will require any Remedial Action or notice to or consent of any Governmental Authority or third party pursuant to any applicable Environmental Law or Environmental Permit.

(k)       Except with respect to Section 3.05 and Section 3.08 , the representations set forth in this Section 3.11 are the only representations with respect to environmental matters.

 

 

Section 3.12   No Preferential Rights .  There is no contract, agreement or other arrangement granting any Person any preferential right to purchase any of the Assets (other than in the ordinary course of business consistent with past practice), or any of the Shares.

 

Section 3.13   Material Contracts .  (a)   Section 3.13(a) of the Disclosure Schedule lists each of the following types of contracts and agreements (including oral agreements) of the Company and the Institution (such contracts and agreements, together with all contracts, agreements, leases and subleases concerning the use, occupancy, management or operation of any Leased Real Property (including all contracts, agreements, leases and subleases relating to Intellectual Property and all contracts, agreements, leases and subleases relating to Tangible Personal Property), being “ Material Contracts ”):

 

 

 

 

For purposes of this Agreement, the term “ lease ” shall include any and all leases, subleases, sale/leaseback agreements or similar arrangements.

(b)      Except as set forth in Section 3.13(b) of the Disclosure Schedule , each Material Contract:  (i) is valid and binding on the Seller, the Company or the Institution that is a party thereto and, to the Knowledge of Sellers, on the other parties thereto and is in full force and effect, (ii) does not require consent, approval or notice to any third party as a result of the transactions contemplated by this Agreement and the Ancillary Agreements, and (iii) assuming receipt of the Required Consents, upon consummation of the transactions contemplated by this Agreement and the Ancillary Agreements shall continue in full force and effect without penalty or other adverse consequence.  Neither the Company nor the is in breach of, or default under, any Material Contract and neither the Company nor the Institution has received written notice from any third party to any Material Contract alleging or asserting any such breach or default or any notice of termination or cancellation thereof.

(c)      To the Knowledge of the Sellers, no other party to any Material Contract is in material breach thereof or default thereunder, and neither the Company nor the Institution has given any notice of termination, cancellation, breach or default under any Material Contract.

(d)      The Sellers have made available to the Purchaser true and complete copies of all written Material Contracts and has provided to the Purchaser a summary of all oral Material Contracts (if any).

 

Section 3.14   Intellectual Property .  (a)   Section 3.14(a) of the Disclosure Schedule sets forth a true and complete list of (i) all patents and patent applications, registered trademarks and trademark applications, registered copyrights and copyright applications, and domain names included in the Owned Intellectual Property, if any (ii) all Company IP Licenses, other than commercially available off-the-shelf computer software products licensed pursuant to shrink-wrap or click-wrap licenses that are not material to the Business or any other “shrink-wrap” or “click-wrap” licenses or agreements that are included in the Company IP Licenses and that are not material to the Business, if any, and (iii) any other Owned Intellectual Property material to the Business.

(b)      The conduct of the Business as currently conducted does not infringe, misappropriate, or otherwise violate the Intellectual Property of any third party, and no Claim has