<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1998.
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
COMPUTER LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3501869
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
--------------------------
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
(703) 359-9333
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
CHARLES L. COSGROVE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
COMPUTER LEARNING CENTERS, INC.
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
(703) 359-9333
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
DAVID SYLVESTER
WILLIAM F. WINSLOW
HALE AND DORR LLP
1455 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, DC 20004
(202) 942-8400
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. / / __________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / __________________________
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE(1)
<S> <C> <C> <C> <C>
Common Stock, $.01 par value
per share(1).................................... 200,148 shares $30.00 (1) $6,004,440 (1) $1,771.31
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) and based upon the average of the high and low
prices for the Common Stock on January 16, 1998 reported on the NASDAQ
National Market.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION DATED JANUARY 22, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
200,148 SHARES
COMPUTER LEARNING CENTERS, INC.
COMMON STOCK
----------------
All of the shares of common stock, $.01 par value per share ("Common
Stock"), of Computer Learning Centers, Inc. (the "Company") offered hereby (the
"Shares") are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Selling Stockholders." The shares covered by this
Prospectus were issued to the Selling Stockholders in connection with the
purchase of substantially all of the assets of Boston Education Corporation,
Inc. ("BEC") and The CLC Training Group, Inc. ("CTG") by the Company completed
on December 23, 1997.
The Company will bear all expenses incurred in effecting the registration of
the Shares covered by this Prospectus, including all registration and filing
fees, listing fees and fees and expenses of counsel and accountants for the
Company but excluding (i) any brokerage fees, selling commissions or
underwriting discounts incurred by the Selling Stockholders in connection with a
sale under the Registration Statement of which this Prospectus is a part and
(ii) the fees and expenses of any counsel that were retained by the Selling
Stockholders.
The Shares covered by this Prospectus may be sold from time to time by the
Selling Stockholders, or by their pledgees, donees, transferees or other
successors in interest, on the NASDAQ National Market, in the over the counter
market, through the writing of options on the Shares, in ordinary brokerage
transactions, in negotiated transactions, or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution".
The Selling Stockholders and intermediaries through whom the Shares are sold
may be deemed "underwriters" within the meaning of Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Shares offered, and any
profits realized or commissions received may be deemed underwriting
compensation. The Company and the Selling Stockholders have agreed to certain
indemnification arrangements with respect to the offering. See "Plan of
Distribution".
The Common Stock is traded on the NASDAQ National Market under the symbol
"CLCX". On January 16, 1998, the closing sale price of the Common Stock on the
NASDAQ National Market was $30.19 per share.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998
<PAGE>
TABLE OF CONTENTS
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PAGE
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Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 2
Special Note Regarding Forward-looking Information......................................................... 3
The Company................................................................................................ 3
Risk Factors............................................................................................... 4
Use of Proceeds............................................................................................ 7
The Acquisition............................................................................................ 7
Selling Stockholders....................................................................................... 7
Plan of Distribution....................................................................................... 7
Legal Matters.............................................................................................. 8
Experts.................................................................................................... 8
</TABLE>
<PAGE>
AVAILABLE INFORMATION
Computer Learning Centers, Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company with the
Commission pursuant to the informational requirements of the Exchange Act may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Common Stock of
the Company is traded on the NASDAQ National Market. Reports and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 with respect to the Shares (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, as certain items are omitted in accordance with the rules and
regulations of the Commission. For further information pertaining to the Company
and the Shares, reference is made to such Registration Statement and the
exhibits and schedules thereto, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates. The
Commission also makes electronic filings publicly available in the Internet
within 24 hours of acceptance. The Commission's Internet address is
http://www.sec.gov. The Commission's Web site also contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
BE UNLAWFUL. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
April 30, 1997; July 31, 1997 and October 31, 1997;
(3) The Company's Notice, Proxy Statement and Proxy for the Annual Meeting
of Stockholders held on July 10, 1997 filed with the Commission on May 30, 1997;
(4) The Company's Current Reports on Form 8-K filed September 30, 1996 and
January 20, 1998.
2
<PAGE>
(5) The Company's Registration Statement on Form 8-A filed May 9, 1995,
registering the Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of the Common Stock registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents incorporated by reference into this Prospectus
(without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). Requests for such copies should
be directed to Computer Learning Centers, Inc., 11350 Random Hills Road, Suite
240, Fairfax, Virginia 22030, Attention: Chief Financial Officer, telephone
(703) 359-9333.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Prospectus and in the documents incorporated
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 2B of the Exchange Act. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and similar
expressions are intended to identify a forward-looking statement. Any statements
contained herein or incorporated herein that are not statements of historical
fact may be deemed to be forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements. These
factors include those set forth under the heading "Risk Factors" herein.
THE COMPANY
The Company provides information and computer-related education and training
at Learning Centers in the United States ("Learning Centers"). The Company
designs programs and courses to meet current information technology education
needs, offering instruction in technologies such as client server, databases,
networking and object-oriented programming. The Company's Advantec Institutes
offer intensive, two-two-six week programs to enhance the skills of information
technology professionals in such areas as Unix System Administration, C and C++
and Java and PERL internet programming languages.
The Company was incorporated in Delaware in March 6, 1987. The Company's
principal executive offices are located at 11350 Random Hills Road, Suite 240,
Fairfax, Virginia 22030, and the telephone number is (703) 359-9333.
All share numbers in this Prospectus give effect to the two-for-one stock
split effected by the Company in the form of a stock dividend distributed
January 8, 1998.
3
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RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION
INCLUDED OR INCORPORATED BY A REFERENCE IN THIS PROSPECTUS BEFORE PURCHASING THE
SHARES OFFERED HEREBY.
POTENTIAL ADVERSE EFFECTS OF REGULATION
As educational institutions that participate in various federal and state
financial aid programs, the Company and the Learning Centers are subject to
extensive governmental regulation. In particular, the Higher Education Act of
1965, as amended ("HEA"), and the regulations promulgated thereunder, subject
the Company, the Learning Centers and all other higher education institutions
eligible to participate in the various Title IV Programs to significant
regulatory scrutiny. The termination or material limitation of the ability of
the Company or any of the Learning Centers to participate in the Title IV
Programs would have a material adverse effect on the Company.
Because certain statutory and regulatory provisions impose significant
requirements on the Company and the Learning Centers and because the agency
administering these regulations, the United States Department of Education, has
not fully developed administrative interpretations of certain of the statutory
and regulatory provisions, it is not clear how the requirements imposed by
statute and regulations or other applicable laws, rules or regulations could
have a material adverse effect on the accreditation, authorization to operate in
various states, permissible activities or costs of doing business of the Company
or one or more of the Learning Centers. The failure to maintain or renew any
required regulatory approvals, accreditations or authorizations by the Company
or any of the Learning Centers would have a material adverse effect on the
Company.
The violation of federal requirements governing participation in the Title
IV Programs or of state or accrediting agency requirements governing the
provision of educational services by the Company or any Learning Center could
result in the restriction or loss by the Company or a Learning Center of its
ability to participate in government funding programs or to offer education and
training programs. Any such loss or restriction would have a material adverse
effect on the Company. Furthermore, current statutes or regulations or statutory
or regulatory standards that become effective in the future may be applied or
interpreted by the government in ways that will delay or change the Company's
expansion plans or otherwise adversely affect the operation of the Learning
Centers and their participation in the Title IV Programs. In addition, all
government-provided student financial aid programs, including the Title IV
Programs, are subject to the effects of federal and state budgetary processes
and the possible elimination or consolidation of the Department of Education,
and there can be no assurance that government funding for the financial aid
programs in which the Company's students participate will continue to be
available or be maintained at current levels. The loss of funding or a reduction
in funding levels for the Title IV Programs would have a material adverse effect
on the Company.
CONTROL BY GENERAL ATLANTIC ENTITIES; POTENTIAL ADVERSE REGULATORY EFFECTS OF
CHANGE OF CONTROL
General Atlantic Corporation ("GAC"), General Atlantic Partners II, L.P.
("GAP") and GAP-CLC Partners, L.P. ("GAP-CLC") (collectively, the "General
Atlantic Entities") beneficially own approximately 18.1% of the outstanding
shares of Common Stock. Consequently, the General Atlantic Entities, and GAC in
particular, will continue to have significant influence over the policies and
affairs of the Company and may be in a position to determine the outcome of
corporate actions requiring stockholder approval, including the election of
directors, the adoption of amendments to the Company's Certificate of
Incorporation and the approval of mergers and sales of the Company's assets.
Because of the control position of the General Atlantic Entities, any
disposition of CLC's common stock by the General Atlantic Entities or issuance
of stock by the Company that results in a loss of control by the General
Atlantic Entities may have material adverse consequences for the Company under
4
<PAGE>
applicable federal and state regulations and accrediting agency requirements,
including potential loss of eligibility to participate in the Title IV Programs.
Upon a change of ownership resulting in a change of control of the Company, as
defined in the HEA and the Department of Education's regulations, each Learning
Center would lose its eligibility to participate in the Title IV Programs for an
indeterminate period of time while it applies to regain eligibility, with the
likely loss of a portion of its Title IV funding during the reapproval period. A
change of control also could have significant regulatory consequences for the
Company at the state level and could affect the accreditation of the Learning
Centers.
The HEA and the Department of Education's regulations include the sale of a
controlling interest of common stock of an institution or its parent corporation
in the definition of a change of control. For a publicly traded corporation such
as the Company, Department of Education regulations specify that a change of
control arises at the same time that a report on Form 8-K is required to be
filed with the Securities and Exchange Commission reporting a change of control.
Most states and accrediting agencies have similar requirements, but they do not
uniformly define a change of control. A change of control of the Company that
exceeds the threshold set by the Department of Education would have a material
adverse effect on the Company.
COMPETITION
The postsecondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. The
Company competes for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax-deductible contributions or
other financial resources not available to proprietary institutions.
DEPENDENCE ON NEW PROGRAMS AND LOCATIONS; RISKS ASSOCIATED WITH CHANGES IN
TECHNOLOGY AND GROWTH
The market for the Company's programs and services is characterized by
rapidly changing requirements and characteristics, and the Company's ability to
develop and offer new programs and services and to open new locations is subject
to extensive state and federal regulation and accrediting agency requirements.
If the Company is unable, for financial, regulatory or other reasons, to develop
and offer new programs and services in a timely manner in response to changes in
the industry, or if programs and services offered by the Company fail to gain or
maintain widespread commercial acceptance, the Company's business may be
materially and adversely affected.
The Company offers training programs and services for rapidly changing
information technology. The introduction of information products embodying new
technologies and the emergence of new information system standards or services
may adversely affect the Company's ability to market its programs and services.
This may require the Company to make substantial expenditures to develop new
programs and services and to acquire new faculty, equipment and facilities. If
the Company is unable, for financial, regulatory or other reasons, to make those
expenditures or acquisitions, the Company's business may be materially and
adversely affected.
The Company's ability to meet its future operating and financial goals will
depend upon the Company's ability to successfully implement its growth strategy,
which will include the introduction of new locations as well as the potential
acquisition of assets and programs complementary to the Company's operations.
The Company's success in this area will depend on its ability to integrate
successfully such new locations, assets and businesses. There can be no
assurance that the Company will be able to implement or manage expansion
effectively.
5
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DEPENDENCE UPON KEY EMPLOYEES
The Company's success depends to a significant extent upon the continued
service of its executive officers and other key personnel. None of the Company's
executive officers or key employees, other than the President and Chief
Executive Officer and Chief Financial Officer, is subject to an employment or
non-competition agreement. The loss of the services of any of its executive
officers, or other key employees could have a material adverse effect on the
Company. The Company's future success will depend in part upon its continuing
ability to attract and retain highly qualified personnel. There can be no
assurance that the Company will be successful in attracting and retaining such
personnel.
ANTITAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND OTHER PROVISIONS; POSSIBLE
ISSUANCE OF PREFERRED STOCK
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation ("Certificate of Incorporation") and Amended and Restated Bylaws
("Bylaws") may be deemed to have anti-takeover effects and may discourage, delay
or prevent a takeover attempt that might be considered to be in the best
interests of the stockholders of the Company. These provisions, among other
things, (i) classify the Company's Board of Directors into three classes, each
of which serves for different three-year periods, (ii) provide that only the
Board of Directors, Chairman or President may call special meetings of the
stockholders, (iii) establish certain advance notice procedures for nominations
of candidates for election as directors and for stockholder proposals to be
considered at stockholders' meetings, (iv) provide that directors may be removed
by the stockholders only for cause and (v) require a vote of the holders of more
than two-thirds of the shares entitled to vote in order to amend the foregoing
and certain other provisions of the Certificate of Incorporation and Bylaws. In
addition, the Board of Directors, without further action of the stockholders, is
permitted to issue and fix the terms of preferred stock which may have rights
senior to those of the Common Stock. The Company is subject to the "business
combination" provisions of the Delaware General Corporation Law which may be
deemed to have anti-takeover effects and may discourage, delay or prevent a
takeover attempt that might be considered in the best interests of the
stockholders of the Company. The business combination provisions of the Delaware
General Corporation Law will, subject to certain exceptions, prohibit the
Company from engaging in certain "business combinations" with an "interested
stockholder," unless the business combination is approved in a prescribed
manner.
VOLATILITY OF MARKET PRICE
From time to time after this offering, there may be significant volatility
in the market price of the Common Stock. The Company believes that the current
market price of the Common Stock reflects expectations that the Company will be
able to continue to operate its programs profitably and to develop additional
and new programs at a significant rate and operate them profitably. If the
Company is unable to operate its programs profitably or develop programs at a
pace that reflects the expectations of the market, investors could sell shares
of Common Stock at or after the time that it becomes apparent that such
expectations may not be realized, resulting in a decrease in the market price of
the Common Stock. In addition to the operating results of the Company, changes
in earnings estimates by analysts, changes in general conditions in the economy
or the financial markets or other developments affecting the Company or the
educational services industry could cause the market price of the Common Stock
to fluctuate substantially. In recent years, the stock market prices of
securities issued by many companies have fluctuated for reasons unrelated to
their operating performance.
POSSIBLE LACK OF RESOURCES OF SELLING STOCKHOLDERS
The Selling Stockholders may be deemed to be "underwriters" pursuant to the
Securities Act, and in that regard may become liable to the purchasers of the
Common Stock offered hereby pursuant to the terms of the Securities Act if
certain provisions of the Securities Act are not complied with by them. There
6
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can be no assurance that any of the Selling Stockholders have the financial
resources to discharge any such liability.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders or by their respective pledgees, donees, transferees or
other successors in interest.
THE ACQUISITION
Pursuant to an Asset Purchase Agreement dated November 7, 1997 by and among
the Company, BEC, CTG, David F. Carney and Sandra E. Carney (the "Purchase
Agreement"), on December 23, 1997 the Company acquired substantially all of the
rights, title and interest in the assets of, and assumed substantially all of
the liabilities of BEC and CTG, in exchange for unissued shares of CLC Common
Stock. Pursuant to the terms of the Purchase Agreement, BEC and CTG were issued
a total of 186,140 and 14,008 shares of Common Stock, respectively. Under the
terms of the Purchase Agreement, 10% of such shares (20,015 shares) are to be
held in escrow until December 23, 1999 to satisfy any post-closing adjustments
as indemnification obligations of the Selling Stockholders under the Purchase
Agreement. The Selling Stockholders also agreed not to sell or otherwise dispose
of their shares until such time as the Company shall have publicly released a
report, such as an earnings report or periodic report filed with the Commission,
taking into account at least 30 days of combined operations of the Company, BEC
and CTG.
SELLING STOCKHOLDERS
All of the shares of Common Stock of the Company offered hereby are being
sold by the Selling Stockholders named below. None of the Selling Stockholders
beneficially owns 5% or more of the Company's outstanding Common Stock and,
except as set forth in the next sentence, none of the Selling Stockholders has
held any office or maintained any material relationship with the Company or its
predecessors or affiliates over the past three years. On December 22, 1997 the
Company signed a six month consulting agreement with David F. Carney to provide
advice and counseling to the Company with respect to its operations in
Massachusetts and New Hampshire.
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Stockholders as of January
22, 1998 and the number of such shares included for sale in this Prospectus,
assuming the sale of all Shares being offered by this Prospectus.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR SHARES SHARES OWNED
SELLING STOCKHOLDERS TO OFFERING OFFERED HEREBY AFTER OFFERING
- -------------------------------------------------------------- ------------------ -------------- -----------------
<S> <C> <C> <C>
Boston Education Corporation.................................. 186,140 186,140 --
The CLC Training Corporation.................................. 14,008 14,008 --
</TABLE>
PLAN OF DISTRIBUTION
The Shares may be offered and sold from time to time by the Selling
Stockholders, or by their pledgees, donees, transferees or other successors in
interest. The Selling Stockholders will act independently of the Company in
making decisions with respect to the timing, manner and size of each sale. Such
sales may be made in the over-the-counter market or otherwise, at prices related
to the then current market price or in negotiated transactions, including
pursuant to one or more of the following methods: (a) purchase by a
broker-dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (b) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (c) block trades in
which the broker-dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction. The Company has been advised by the Selling Stockholders that they
have not made any arrangements relating to the
7
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distribution of the Shares covered by this Prospectus. In effecting sales,
broker-dealers engaged by the Selling Stockholders, or by their pledgees,
donees, transferees or other successors in interest, may arrange for other
broker-dealers to participate. Broker-dealers will receive commissions or
discounts from the Selling Stockholders, or their pledgees, donees transferees
or other successors in interest, in amounts to be negotiated immediately prior
to the sale.
In offering the Shares, the Selling Stockholders and any broker-dealers and
any other participating broker-dealers who execute sales for the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any profits realized by the
Selling Stockholders and the compensation of such broker-dealer may be deemed to
be underwriting discounts and commissions. In addition, any of the Shares which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus. None of the Shares presently qualify for sale
pursuant to Rule 144.
The Selling Stockholders have acknowledged that during such time as they may
be engaged in a distribution of Common Stock included herein, they are required
to comply with the Securities Act, any rule or regulation under the Securities
Act, and Regulation M under the Exchange Act.
The Company has agreed to indemnify the Selling Stockholders against certain
liabilities set forth in Section 9.7(a) of the Purchase Agreement in connection
with the offer and sale of the Shares, including liabilities under the
Securities Act. Each of the Selling Stockholders has agreed to indemnify in
certain circumstances the Company and certain related persons against certain
liabilities set forth in Section 9.7(b) of the Purchase Agreement, including
liabilities under the Securities Act.
The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus is a part effective until the
earlier of December 23, 2000 or such time as the Selling Stockholders are
eligible to sell all their shares according to Rule 144 under the Securities Act
in the three month period immediately preceding the termination of the
effectiveness of the Registration Statement. The Company intends to de-register
any of the Shares not sold by the Selling Stockholders and any other shares
remaining unsold at the end of such period. The Company may, under specified
circumstances set forth in Section 9.5 of the Purchase Agreement, suspend the
Registration Statement of which this Prospectus is a part after effectiveness
and require that sales of shares pursuant to such Registration Statement cease
immediately.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Hale and Dorr LLP, Washington, D.C.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended January 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All these expenses will be paid by the
Company.
<TABLE>
<CAPTION>
NATURE OF EXPENSE
- ---------------------------------------------------------------------------------------------------
<S> <C>
SEC registration fee............................................................................... $ 1,771.31
Legal and accounting fees and expenses............................................................. 20,000.00*
Miscellaneous...................................................................................... $ 3,228.69
-------------
TOTAL.......................................................................................... $ 25,000.00*
-------------
-------------
</TABLE>
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 ("Section 145") of the Delaware General Corporation Law, as
amended, provides a detailed statutory framework covering indemnification of
officers and directors against liabilities and expenses arising out of legal
proceedings brought against them by reason of their being or having been
directors or officers. Section 145 generally provides that a director or officer
of a corporation (i) shall be indemnified by the corporation for all expenses of
such legal proceedings when he is successful on the merits, (ii) may be
indemnified by the corporation for expenses, judgments, fines and amounts paid
in settlement of such proceedings (other then a derivative suit), even if he is
not successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, and (iii) may be
indemnified by the corporation for the expenses of a derivative suit (a suit by
a stockholder alleging a breach by a director or officer of a duty owed to the
corporation), even if he is not successful on the merits, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. No indemnification may be made under clause (iii)
above, however, if the director or officer is adjudged liable for negligence or
misconduct in the performance of his duties to the corporation, unless a
corporation determines that, despite such adjudication, but in view of all the
circumstances, he is entitled to indemnification. The indemnification described
in clauses (ii) and (iii) above may be made only upon a determination that
indemnification is proper because the applicable standard of conduct has been
met. Such a determination may be made by a majority of a quorum of disinterested
directors, independent legal counsel, the stockholders or a court of competent
jurisdiction.
The indemnification of directors and officers is provided for by Article
SEVENTH of the Registrant's Second Amended and Restated Certificate of
Incorporation, which provides in substance that, to the fullest extent permitted
by Delaware law as it now exists or as amended, each director and officer shall
be indemnified against reasonable costs and expenses, including attorney's fees,
and any liabilities which he may incur in connection with any action to which he
may be a party by reason of his being or having been a director or officer of
the Registrant. The indemnification provided by the Registrant's Second Amended
and Restated Certificate of Incorporation is not deemed exclusive of or intended
in any way to limit any other rights to which any person seeking indemnification
may be entitled.
II-1
<PAGE>
Article NINTH of the Registrant's Second Amended and Restated Certificate of
Incorporation provides for the elimination of personal liability of a director
for breach of fiduciary duty, as permitted by Section 102(b)(7) of the Delaware
General Corporation Law.
The Company has agreed to indemnify the Selling Stockholders against certain
liabilities set forth in Section 9.7(a) of the Purchase Agreement in connection
with the offer and sale of the Shares, including liabilities under the
Securities Act. Each of the Selling Stockholders has agreed to indemnify in
certain circumstances the Company and certain related persons against certain
liabilities set forth in Section 9.7(b) of the Purchase Agreement, including
liabilities under the Securities Act.
ITEM 16. EXHIBITS.
See the Exhibit Index included immediately preceding the Exhibits to this
Registration Statement, which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference in this
Registration Statement.
(2) That, for the purposes of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial BONA FIDE offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be
II-2
<PAGE>
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fairfax, Virginia, on this 22nd day of January, 1998.
<TABLE>
<S> <C> <C>
COMPUTER LEARNING CENTERS, INC.
By: /s/ REID R. BECHTLE
-----------------------------------------
Reid R. Bechtle
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned officers and directors of Computer Learning Centers,
Inc., hereby severally constitute Reid R. Bechtle, Charles L. Cosgrove, David
Sylvester and William F. Winslow, any of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-3 filed herewith and any and all subsequent amendments to said
Registration Statement (including post-effective amendments, exhibits thereto
and other documents in connection therewith) and any subsequent registration
statement filed by the Registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
Computer Learning Centers, Inc. to comply with all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by said attorneys, or any of them, to said
Registration Statement and any and all amendments thereto.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President Chief Executive
/s/ REID R. BECHTLE Officer and Director
- ------------------------------ (Principal Executive January 22, 1998
Reid R. Bechtle Officer)
Vice President
/s/ CHARLES L. COSGROVE and Chief Financial
- ------------------------------ Officer January 22, 1998
Charles L. Cosgrove (Principal Financial
Officer)
/s/ MARK M. NASSER
- ------------------------------ Controller (principal January 22, 1998
Mark M. Nasser Accounting Officer)
/s/ HARRY H. GAINES
- ------------------------------ Director January 22, 1998
Harry H. Gaines
/s/ IRA D. COHEN
- ------------------------------ Director January 22, 1998
Ira D. Cohen
/s/ STEPHEN P. REYNOLDS
- ------------------------------ Director January 22, 1998
Stephen P. Reynolds
/s/ RALPH W. CLARK
- ------------------------------ Director January 22, 1998
Ralph W. Clark
/s/ JOHN L. CORSE
- ------------------------------ Director January 22, 1998
John L. Corse
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT PAGE
- ----------- ------------------------------------------------------------------------------------------- ---------
<C> <C> <S> <C>
2 -- Asset Purchase Agreement dated November 7, 1997, by and among the Company, BEC, CTG, David
F. Carney and Sandra E. Carney. II-7
4.1 -- Second Amended and Restated Certificate of Incorporation (incorporated herein by reference
to Exhibit 3.1 to the Registrant's report on Form 10-Q for the quarter ended July 31,
1997). --
4.2 -- Amended and Restated By-Laws of the Registrant (incorporated herein by reference to Exhibit
3.4 to the Registrant's Registration Statement on Form S-1, as amended (File No.
33-90716)(the "Form S-1")). --
4.3 -- Specimen Certificate of Common Stock of the Registrant (incorporated herein by reference to
Exhibit 4.1 to the Form S-1). --
5 -- Opinion of Hale and Dorr LLP. II-59
10 -- Severance Agreement, dated January 15, 1998, by and between Charles L. Cosgrove and the
Registrant. II-60
23.1 -- Consent of Hale and Dorr LLP (included in Exhibit 5). II-59
23.2 -- Consent of Price Waterhouse LLP. II-67
24.1 -- Power of Attorney (included in the signature pages of this Registration Statement). II-4
</TABLE>
II-6
<PAGE>
EXHIBIT 2
ASSET PURCHASE AGREEMENT
dated as of November 7, 1997
II-7
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.............................................................
1.1 Defined Terms.....................................................
2. PURCHASE AND SALE OF ASSETS.............................................
2.1 Transfer of Assets................................................
2.2 Excluded Assets...................................................
2.3 Assumed Liabilities...............................................
2.4 Excluded Liabilities..............................................
2.5 Purchase Price....................................................
2.6 Post-Closing Adjustment...........................................
2.7 Escrowed Shares...................................................
2.8 Accounting and Tax Treatment......................................
3. CLOSING.................................................................
3.1 Time and Place....................................................
3.2 Deliveries by the Sellers.........................................
3.3 Deliveries by the Buyer...........................................
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND SELLERS'
SHAREHOLDERS...........................................................
4.1 Organization......................................................
4.2 Power and Authority...............................................
4.3 Authority for Agreement...........................................
4.4 No Violation to Result............................................
4.5 Capitalization....................................................
4.6 Financial Statements..............................................
4.7 Liabilities and Obligations.......................................
4.8 Adverse Changes...................................................
4.9 Employee Benefit Plans; Employee Matters..........................
4.10 Taxes.............................................................
4.11 Title to Assets...................................................
4.12 Property..........................................................
4.13 Contracts.........................................................
4.14 Litigation........................................................
4.15 Compliance with Laws..............................................
4.16 Compliance with Title IV Programs.................................
4.17 Institutional Approval and Accreditation..........................
4.18 Environmental and Safety Matters..................................
4.19 Insurance.........................................................
4.20 Trademarks, Patents and Copyrights................................
4.21 Accounts Receivable...............................................
4.22 Liability to Affiliates...........................................
II-8
<PAGE>
4.23 Securities Law Matters............................................
4.24 Pooling of Interest...............................................
4.25 Brokers...........................................................
4.26 Disclosure........................................................
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER.............................
5.1 Organization and Capitalization of Buyer..........................
5.2 Authority for Agreement...........................................
5.3 No Violation to Result............................................
5.4 CLC Shares........................................................
5.5 Pooling of Interest...............................................
6. COVENANTS...............................................................
6.1 Access to Properties and Records..................................
6.2 Accounting Treatment..............................................
6.3 Confidentiality...................................................
6.4 Interim Covenants of the Sellers..................................
6.5 Information.......................................................
6.6 Public Announcements..............................................
6.7 No Solicitation...................................................
6.8 Financial Statements..............................................
6.9 Notification of Certain Matters...................................
6.10 Tax Returns; Sales, Use and Transfer Taxes........................
6.11 Name Change.......................................................
6.12 Hiring of the Sellers' Employees..................................
6.13 Actions After The Closing.........................................
6.14 Bulk Transfer Provisions..........................................
6.15 Reasonable Efforts................................................
6.16 Further Assurances................................................
6.17 Disbursement of Title IV Funds....................................
6.18 Payment of Loans..................................................
7. CONDITIONS TO THE BUYER'S OBLIGATIONS...................................
7.1 Representations and Warranties True at the Closing Date...........
7.2 The Sellers' Performance..........................................
7.3 No Litigation.....................................................
7.4 Opinion of the Sellers' Counsel...................................
7.5 Securities Laws...................................................
7.6 Pooling Letters...................................................
7.7 Acknowledgment of Pooling Restrictions and Receipt of
Commission Filings...............................................
7.8 Stock Powers......................................................
7.9 No Material Adverse Change........................................
7.10 Assignment of Contracts...........................................
7.11 Certificates......................................................
7.12 Stockholder Distributions.........................................
II-9
<PAGE>
7.13 Bank Debt and Certificates of Deposit.............................
7.14 Buyer's Review....................................................
7.15 Delivery of Good Standing Certificates; Corporate Resolutions.....
7.16 Consulting and Employment Agreements..............................
7.17 Escrow Agreement..................................................
8. CONDITIONS TO THE SELLERS' OBLIGATIONS..................................
8.1 Representations and Warranties True at the Closing Date...........
8.2 Buyer's Performance...............................................
8.3 Authority.........................................................
8.4 No Litigation.....................................................
8.5 Delivery of Good Standing Certificates; Corporate Resolutions.....
8.6 Buyer Release.....................................................
8.7 Opinion of Buyer's Counsel........................................
8.8 Consulting and Employment Agreements..............................
8.9 Escrow Agreement..................................................
9. REGISTRATION RIGHTS.....................................................
9.1 Registration Rights for Republic Shares; Filing of
Registration Statement...........................................
9.2 Expenses of Registration..........................................
9.3 Furnishing of Documents...........................................
9.4 Amendments and Supplements........................................
9.5 Duration..........................................................
9.6 Further Information...............................................
9.7 Indemnification...................................................
9.8 Rule 144..........................................................
10. TERMINATION.............................................................
10.1 Termination.......................................................
10.2 Additional Right of Buyer to Terminate............................
10.3 Effect of Termination.............................................
11. INDEMNITY...............................................................
11.1 Indemnification by Sellers and Sellers' Shareholder...............
11.2 Indemnification by Buyer..........................................
11.3 Limitations.......................................................
11.4 Survival..........................................................
11.5 Exclusive Remedy..................................................
11.6 Notices, Participation, and Settlement............................
11.7 Offset............................................................
12. SECURITIES LAW MATTERS..................................................
12.1 Disposition of Shares.............................................
12.2 Agreement to Retain Shares........................................
12.3 Trading in CLC Common Stock.......................................
II-10
<PAGE>
12.4 Legend............................................................
13. COVENANT NOT TO COMPETE.................................................
13.1 Non-Competition...................................................
13.2 Competing Enterprise..............................................
13.3 Enforceability....................................................
13.4 Essential Elements................................................
14. MISCELLANEOUS...........................................................
14.1 Successors, Assigns and Third Parties.............................
14.2 Governing Law.....................................................
14.3 Specific Enforcement..............................................
14.4 Severability......................................................
14.5 Certain Words.....................................................
14.6 Notices...........................................................
14.7 Expenses..........................................................
14.8 Absence of Third Party Beneficiary Rights.........................
14.9 Mutual Drafting...................................................
14.10 Further Representations...........................................
14.11 Amendment; Waiver.................................................
14.12 Gender............................................................
14.13 Headings..........................................................
14.14 Counterparts......................................................
14.15 Arbitration.......................................................
14.16 Facsimile Signatures..............................................
II-11
<PAGE>
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of November 7,
1997 by and among Computer Learning Centers, Inc., a Delaware corporation ("CLC"
or the "Buyer"), Boston Education Corporation, Inc. a Delaware corporation
("BEC"), The CLC Training Group, Inc., a Massachusetts corporation ("CTG") (BEC
and CTG are together referred to herein as the "Sellers"), David F. Carney and
Sandra E. Carney, individuals residing in the State of New Jersey (the "Sellers'
Shareholders").
WHEREAS, BEC owns and operates the BEC "Computer Learning Center" schools
in Somerville and Methuen, Massachusetts and CTG owns and operates the CLC
Training Group in Bedford, New Hampshire and operates facilities which are
adjunct to the Massachusetts schools owned and operated by BEC (collectively,
the "Business");
WHEREAS, the Sellers' Shareholders own one hundred percent (100%) of the
outstanding capital stock of each of the Sellers;
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to Buyer, all of the Sellers' rights, title and interest in the
assets of Sellers utilized in the conduct and operations of the Business (except
for certain excluded assets as set forth herein);
WHEREAS, the Sellers' Shareholders desire that the Sellers and the Buyer
enter into this Agreement;
WHEREAS, for accounting purposes, it is intended that the transaction
contemplated by this Agreement shall be accounted for as a pooling-of-interests
business combination and for tax purposes it is intended that the transaction
shall be treated as a tax-free reorganization; and
WHEREAS, the parties hereto desire to set forth herein the terms and
provisions of their understandings and agreements.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of these terms, unless the context otherwise requires,
may be used in the singular or plural depending upon the reference.
"ACCOUNTS" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, insurance claims and proceeds and
notes receivable of the Sellers.
"ACCOUNTS PAYABLE" shall mean bona fide trade accounts payable which are
not outstanding more than ninety (90) days from the date of the event which gave
rise to the trade accounts payable, whether or not recorded on such date, and
were incurred in the ordinary course of business.
II-12
<PAGE>
"ACCREDITATION" shall mean accreditation, Licenses, Permits,
certifications, approvals, and other governmental and regulatory authorizations
required under all laws, rules and regulations applicable to or affecting the
Sellers or the Institutions, exclusive of Certification.
"ACCREDITING BODY" shall mean any governmental, non-governmental or
quasi-governmental body that provides Accreditation, including but not limited
to the Accrediting Council for Independent Colleges and Schools and the
Commonwealth of Massachusetts Department of Education.
"AFFILIATE" means as to any party, any entity which directly or
indirectly, is in control of, is controlled by, or is under common control with,
such party, including any person who would be treated as a member of a
controlled group under Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code"), and any officer or director of such party. For purposes of
this definition, an entity shall be deemed to be "controlled by" a person if the
person possesses, directly or indirectly, power either to (i) vote 10% or more
of the securities (including convertible securities) having ordinary voting
power or (ii) direct or cause the direction of the management or policies of
such entity whether by contract or otherwise; and, as to a party who is a
natural person, such person's spouse, parents, siblings and lineal descendants.
"BOOKS AND RECORDS" shall mean all records pertaining to the Assets, the
Assumed Liabilities, customers, or suppliers of the Sellers or the Institutions,
including, without limitation, all books and records required to be maintained
pursuant to the provisions of the Higher Education Act of 1965, as amended, and
its implementing regulations.
"CERTIFICATION" shall mean a Program Participation Agreement issued and
counter-signed by the Secretary of the U.S. Department of Education certifying
an institution for participation (including participation on a provisional
basis) in the programs of Federal student financial assistance administered
pursuant to Title IV of the Higher Education Act of 1965, as amended.
"CONTRACT" shall mean with respect to the Sellers, the Institutions or the
Business any of the agreements, contracts, Leases, notes, loans, evidences of
indebtedness, purchase orders, letters of credit, franchise agreements,
undertakings, covenants not to compete, employment agreements, licenses,
instruments, obligations or commitments to which either of the Sellers, the
Sellers' Shareholders or any of the Institutions is a party or to which any of
their assets are subject, whether oral or written, express or implied.
"CONTRACT RIGHTS" shall mean with respect to the Sellers, the Institutions
or the Business all of the Sellers', Sellers' Shareholders' or Institutions'
rights and obligations under the Contracts, to the extent such obligations are
assumed by Buyer pursuant to Section 2.3 hereof.
"ED" shall mean the U.S. Department of Education.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance, mortgage or other right.
II-13
<PAGE>
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment, spare parts, supplies, vehicles and other
tangible personal property owned by the Sellers as of the date hereof plus all
additions, replacements or deletions since the date hereof in the ordinary
course of Sellers' business.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time as applied in a manner
consistent with past practices of the Sellers.
"HEA" shall mean the Higher Education Act of 1965, as amended, 20 U.S.C.
ss.1001 et seq.
"INSTITUTIONS" shall mean the BEC "Computer Learning Center" schools
located in Somerville and Methuen, Massachusetts (with the Methuen school being
an additional location of the Somerville school and both campuses collectively
comprising one Institution referred to herein as "the BEC Institution") and the
CTG "CLC Training Group" which is located in Bedford, New Hampshire and
facilities which are adjunct to the BEC Institution.
"INSURANCE POLICIES" shall mean with respect to the Sellers the insurance
policies relating to the Assets (as defined in Section 2.1).
"INVENTORY" shall mean all of Sellers' inventory and supplies and all
other materials utilized in connection with the Assets.
"LEASES" shall mean all of the leases of the Sellers listed on the
Schedules hereto and all other leases relating to the Assets (as defined in
Section 2.1) which are not required to be scheduled pursuant to this Agreement.
"LICENSE" shall mean any authorization, approval, licensure, Accreditation
or Certification issued by the federal government or any state, governmental
department or agency, or non-governmental or quasi-governmental body, including
the Accrediting Council for Independent Colleges and Schools, the Commonwealth
of Massachusetts Department of Education and the U.S. Department of Education.
"MATERIAL ADVERSE EFFECT" shall mean with respect to the Sellers or the
Institutions a material adverse effect on (i) the Assets (as defined in Section
2.1), the business or the condition (financial or otherwise), properties,
liabilities, reserves, working capital, earnings, technology, prospects or
relations with customers, students, suppliers, distributors, employees or
regulators of the Sellers or the Institutions, or (ii) the right or ability of
the Sellers to consummate the transactions contemplated hereby.
"MISCELLANEOUS ASSETS" shall mean all employee records maintained by the
Sellers relating to those employees to be employed by the Buyer as of the
Closing (as defined in Section 3.1); all student records for students presently
or historically enrolled at any of the Institutions; all accounting information
pertaining to the continued operations of the Sellers and all media in which or
on which any of the information, knowledge, data or other records relating to
the Assets may be related or stored which are necessary for the operation of the
Business; all computer software
II-14
<PAGE>
relating to accounting and operations systems to the extent assignable by
Sellers; all office and other supplies; all warranties, claims and causes of
action other than tax refunds and claims or rights attributable to Excluded
Assets (as defined in Section 2.2) (and the benefit of any and all collateral or
security given in connection therewith) inuring to the benefit of the Sellers
relating to the Assets; and all other assets used or useful in connection with
the Business not otherwise described in this Agreement of any character
whatsoever, whether personal, tangible or intangible, wherever located, owned or
possessed by the Sellers and related to the Business (other than the Excluded
Assets).
"OTHER RIGHTS" shall mean all assignable or conveyable rights under
Licenses, Permits, approvals, qualifications or the like relating directly or
indirectly to the business of the Sellers issued or to be issued prior to the
Closing by any government or by any governmental unit, agency, body or
instrumentality whether Federal, State, local, foreign or other.
"PERMITS" shall mean all Licenses, permits and other governmental
authorizations necessary to carry on the Business as presently conducted.
"REAL PROPERTY" shall mean the real property owned by the Sellers and
utilized in any manner in the business or operations of the Business, all of
which is described in Schedule 4.12 hereto.
"TAX" or "TAXES" shall mean all federal, state, local, foreign and other
taxes, assessments or other government charges, including, without limitation,
income, estimated income, business, occupation, franchise, property, sales,
transfer, use, employment, commercial rent or withholding taxes, including
interest, penalties and additions in connection therewith for which the Sellers
or the Sellers' Shareholders may be liable.
"TITLE IV PROGRAMS" shall mean the programs of Federal student financial
assistance administered pursuant to Title IV of the Higher Education Act of
1965, as amended.
2. PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions of
this Agreement and based upon the representations, warranties, covenants and
agreements made herein by each of the parties to the other, on the Closing Date
(as defined in Section 3.1), the Sellers hereby agree to sell, convey, assign,
transfer and deliver to the Buyer and the Buyer hereby agrees to purchase,
accept and take from the Sellers, all of the assets, properties and other rights
(excluding the Excluded Assets (as defined in Section 2.2)) owned or leased by,
licensed or used by, the Sellers or the Institutions relating to the Business
(the "Assets"), including without limitation, the following:
(a) all cash and cash equivalents of the Sellers, wherever located,
which shall include but is not limited to, cash held with or by the Institutions
and any certificates of deposit held by the Sellers;
(b) notes and notes receivable, Accounts, refunds or deposits and
prepaid expenses, including without limitation, any prepaid insurance premiums;
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(c) all Contract Rights;
(d) all Fixtures and Equipment
(e) all Real Property;
(f) all books and supplies;
(g) all Books and Records;
(h) the Insurance Policies to the extent Buyer desires such policies
to be assigned and to the extent such Insurance Policies are assignable;
(i) all of the Sellers' rights in and to trade and service names,
assumed names, marks, copyrights, patents, and all applications and
registrations with respect to any of the foregoing, and all telephone and fax
numbers, electronic addresses and passwords, including, without limitation, the
Intellectual Property set forth on Schedule 4.20;
(j) all Permits, Accreditations, program participation agreements,
and any other approvals from any applicable Accrediting Body, ED, guaranty
agency or board or agency or governmental entity from which approval is
necessary for the operations of the Institutions, to the extent such Permits,
Accreditations, program participation agreements and approvals are assignable;
(k) all Miscellaneous Assets;
(l) all Other Rights; and
(m) all goodwill of the Sellers, going concern value and business
appurtenant thereto.
2.2 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include the following properties, assets and other rights (the "Excluded
Assets") which shall be retained by the Sellers:
(a) the corporate seal, articles of incorporation, minute book,
stock book, tax returns, tax preparation work papers and other records relating
to the corporate organization of the Sellers; and
(b) the personal property of the Sellers' Shareholders set forth on
Schedule 2.2b.
2.3 Assumed Liabilities. As of the Closing, the Buyer shall assume,
discharge and perform when lawfully due only the following obligations, duties
and liabilities of the Sellers relating to the Business (collectively, the
"Assumed Liabilities"):
(a) all liabilities, obligations and commitments of the Sellers
arising on or after the Closing Date pursuant to the Leases and Contracts of
Sellers listed on Schedule 2.3, but expressly
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excluding any obligations or liabilities of the Sellers for any breach of or
default under any Leases or Contracts occurring on or prior to the Closing Date;
(b) the Closing Date Transaction Expenses;
(c) all bank debt of the Sellers reflected on the Current Balance
Sheet (as defined in Section 4.6 herein);
(d) all liabilities asserted or assessed by ED with respect to the
Title IV Programs to the extent required to be assumed under the HEA and its
implementing regulations;
(e) all accumulated sick leave and all vacation pay owed to the
employees of the Business reflected on the Closing Statement, except for sick
leave and vacation pay owed to any of the Sellers' Shareholders;
(f) all liabilities of the Business as reflected on the Current
Balance Sheet (as defined in Section 4.6) and any and all normal operating
expenses, indebtedness and liabilities incurred in the ordinary course of
business consistent with past practice after the date of the Current Balance
Sheet and prior to the Closing Date, less any such liabilities paid or
discharged by the Sellers prior to the Closing Date; and
(g) severance payments in the amount of no more than $14,000 payable
to David F. Carney, Jr. as reflected on the Closing Statement.
2.4 Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.3, Buyer shall not assume, or otherwise be responsible for, any obligations,
liabilities, liens or encumbrances of Sellers, whether actual or contingent,
matured or unmatured, liquidated or unliquidated, or known or unknown, whether
arising out of occurrences prior to, at or after the date hereof and
notwithstanding the fact that any such liability is identified herein or on the
schedules hereto (collectively, "Excluded Liabilities") including, without
limitation:
(a) any of the Sellers' or the Sellers' Shareholders' obligations
hereunder;
(b) any liability or obligation of the Sellers or any other person
or entity, known or unknown, (i) not reflected on the Current Balance Sheet (as
defined in Section 4.6) or (ii) not incurred in the ordinary course of business
consistent with past practice after the date of the Current Balance Sheet and
prior to the Closing Date;
(c) liens and encumbrances (other than permitted liens and
encumbrances identified on Schedule 2.4) to which the Assets are subject, which
are (i) not reflected on the Current Balance Sheet (as defined in Section 4.6)
or (ii) not incurred in the ordinary course of business consistent with past
practice after the date of the Current Balance Sheet and prior to the Closing
Date;
(d) any liability or obligation relating to Taxes, including any
interest or penalties related thereto;
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(e) any liability or obligation that constitutes a violation of the
Sellers' representations and warranties hereunder;
(f) any liability of the Sellers, the Institutions or the Sellers'
Shareholders arising out of or related to past, present or future litigation
involving the Sellers or the Institutions or the Sellers' Shareholders, whether
the relevant cause of action accrues before or after the Closing; and
(g) any liability or obligation, in tort or for violation of any
law, statute, rule or regulation by the Sellers or any officer, director,
employee or agent of the Sellers or the Institutions, that arises out of or
results from any act, omission, occurrence or state of facts on or prior to the
Closing Date.
2.5 Purchase Price.
(a) The purchase price for the Assets shall be Four Million Nine
Hundred Thirty-Six Thousand Dollars ($4,936,000) minus the amount of the Closing
Date Transaction Expenses (as defined in Section 14.7) (the "Purchase Price").
The Purchase Price is payable to the Sellers at Closing in a number of shares of
CLC Common Stock, par value $0.01 per share ("CLC Common Stock"), to be issued
by the Buyer to the Sellers at Closing, determined by dividing (x) the Purchase
Price by (y) the average of the closing prices of a share of CLC Common Stock on
the Nasdaq Stock Market for the thirty (30) consecutive trading days which
precede the date hereof, as reported by The Wall Street Journal (the "Purchase
Share Price"). As set forth in Section 3.3, the delivery of the shares of CLC
Common Stock is subject to the terms of the escrow provisions set forth in
Section 2.7 and the Escrow Agreement (as defined in Section 7.16)
(b) Sellers shall be responsible for any documentary transfer taxes
and any sales, use or other Taxes imposed by reason of the transfer of the
Assets, and the fees and costs of recording or filing all applicable
conveyancing instruments necessary to transfer the Assets. Buyer shall be
responsible for any transfer taxes, costs, or fees by reason of the issuance of
the shares of CLC Common Stock pursuant to this Section 2.5.
(c) The parties acknowledge and agree that the Purchase Price is
based upon the presumption that the Working Capital Balance (as defined below)
of the Business as of the Closing Date shall be at least equal to the amount set
forth in Schedule 2.5 as calculated on the Closing Date (the "Projected Working
Capital Balance"). As used herein, the term "Working Capital Balance" shall mean
the amount, if any, by which "Current Assets" exceed "Current Liabilities". As
used herein, (A) the term "Current Liabilities" shall mean the sum, as of the
close of business on the Closing Date, with respect to the Business, of (i)
trade accounts payable, (ii) accrued expenses and (iii) obligations accrued as
of the Closing Date under those liabilities to be assumed pursuant to Section
2.3 (excluding Sellers' deferred tuition obligations), in each case payable
within 12 months after the Closing Date and (B) the term "Current Assets" shall
mean the sum, as of the close of business on the Closing Date, with respect to
the Business, of (i) cash and cash equivalents, (ii) accounts receivable (net of
any bad debt reserve calculated in accordance with GAAP) and (iii) prepaid
expenses and other current assets that are reasonably expected to be realized or
to be sold or consumed within 12 months after the Closing Date. Current Assets
and Current Liabilities shall be determined as of the Closing Date in accordance
with GAAP.
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(d) The Purchase Price shall be subject to adjustment after the
Closing Date as specified in Section 2.6.
2.6 Post-Closing Adjustment. As soon as reasonably practicable after the
Closing, but in any event not later than thirty (30) days after the Closing, the
Sellers shall cause to be delivered to the Buyer (prepared with the Buyer's
reasonable assistance) a statement of Working Capital Balance (the "Closing
Statement"), which shall set forth the Working Capital Balance of the Business
as of the Closing Date as determined in accordance with GAAP. Within thirty (30)
days after the Buyer receives the Closing Statement, the Buyer shall give
written notice to the Sellers of any objections the Buyer has in respect of the
Closing Statement, which notice shall specify the basis for such objections. If
the Buyer does not notify the Sellers of any objections within such period then
the Buyer shall be deemed to have accepted the Closing Statement which shall
become final and binding on the parties. If the Buyer objects to the Closing
Statement as provided above, then the Buyer and the Sellers shall negotiate in
good faith to resolve such objections and arrive at an agreed upon Closing
Statement. Any objections of the Buyer which have not been resolved by the
parties within fifteen (15) days after the delivery of the Buyer's objections to
the Sellers shall be promptly presented for resolution to a mutually agreed
upon, nationally recognized, firm of certified public accountants (the
"Accountants"). The Accountants shall promptly resolve the disputed items in
accordance with GAAP and the determinations of the Accountants in respect
thereof shall be final and binding upon the parties. If the Working Capital
Balance set forth on the final Closing Statement is less than the Projected
Working Capital Balance, the Buyer shall receive from the Escrow Fund (as
defined in the Escrow Agreement) the number of shares of CLC Common Stock (or
other cash or property), valued at the Purchase Share Price, equal to the amount
by which the sum of (x) the Working Capital Balance and (y) $50,000 is less than
the Projected Working Capital Balance (if such result is a positive number). The
Buyer and Sellers shall send joint written instructions to the escrow agent in
the Escrow Agreement (the "Escrow Agent") instructing the Escrow Agent to
release to the Buyer the amounts determined pursuant to this Section 2.6. If the
Escrow Fund does not provide sufficient amounts due to the Buyer, such excess
amount due to the Buyer shall be deemed Indemnified Losses under Section 11
hereof (without regard to the deductible as set forth in Section 11.3). If the
Working Capital Balance set forth on the final Closing Statement is greater than
the Projected Working Capital Balance, the Buyer shall deliver to the Sellers
the number of shares of CLC Common Stock, valued at the Purchase Share Price,
equal to the amount by which the Working Capital Balance is greater than the sum
of (x) the Projected Working Capital Balance and (y) $50,000 (if such result is
a positive number).
2.7 Escrowed Shares.
(a) As collateral security for the payment of any post-Closing
adjustment to the Purchase Price under Section 2.6, and any indemnification
obligations of the Sellers and the Sellers' Shareholders pursuant to Section 11,
the Sellers and the Sellers' Shareholders shall deliver to the Escrow Agent,
pursuant to the terms of the Escrow Agreement: (i) ten percent (10%) of the
number of shares of CLC Common Stock comprising the Purchase Price (the
"Escrowed Shares"), and the certificates and instruments, if any, representing
or evidencing the Escrowed Shares; (ii) all securities hereafter delivered to
the Sellers with respect to or in substitution for the Escrowed Shares, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash
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dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event the Sellers receive any such property, the Sellers shall hold such
property in trust for the Buyer and shall immediately deliver such property to
the Buyer to be held hereunder as Escrowed Shares; and (iii) all cash and
non-cash proceeds of all of the foregoing property and all rights, titles,
interests, privileges and preferences appertaining or incident to the foregoing
property.
(b) Prior to the Release Date (as defined in Section 2.7(d)),
the Escrow Agent shall hold in escrow for use as collateral, as set forth
in Section 2.7(a), the cash proceeds from the Escrow Fund (as defined in
the Escrow Agreement). The Sellers shall exercise any voting powers
incident to the Escrowed Shares to the extent such shares remain in the
Escrow Fund.
(c) Each certificate, if any, evidencing Escrowed Shares
issued pursuant to this Agreement shall be delivered to the Escrow Agent
directly by the transfer agent.
(d) The Escrow Fund (which shall be deemed to include the
Escrowed Shares) shall be available to satisfy any post-Closing adjustment
to the Purchase Price pursuant to Section 2.6 and any indemnification
obligations of the Sellers pursuant to Section 11 until the date which is
one (1) year after the Closing Date (the "Release Date"). Promptly
following the Release Date, the Buyer shall return or cause to be returned
to the Sellers the Escrowed Shares and any other cash or property included
in the Escrow Fund, less Escrowed Shares (or such other cash or property)
having an aggregate value equal to the amount of (i) any post-Closing
adjustment to the Purchase Price under Section 2.6, (ii) any pending claim
for indemnification made by any Indemnified Party (as defined in Section
11), and (iii) any indemnification obligations finally resolved prior to
the Release Date in favor of the Buyer. For purposes of the preceding
sentence and Section 11, the CLC Common Stock held as Escrowed Shares
shall be valued at the Purchase Share Price.
2.8 Accounting and Tax Treatment. The Buyer, the Sellers and the Sellers'
Shareholders intend that the transactions contemplated by this Agreement be
treated for accounting purposes as a pooling of interest business combination
and for tax purposes as a reorganization under Section 368 (a)(1)(c) of the
Code. Each of the parties hereto will report in their respective federal income
tax return for the taxable year including the Effective Date that the Merger
qualified as a reorganization under Section 368, unless, by written opinion of
counsel, such party is advised that there is not a reasonable basis for such
position, and the other parties hereto are provided copies of such opinion.
3. CLOSING
3.1 Time and Place. Upon the terms and subject to the conditions set forth
herein, the closing of the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Tucker, Flyer and Lewis, 1615 L
Street, N.W., Suite 400, Washington, D.C. 20036, as soon as practicable after
all of the conditions set forth in Sections 7 and 8 shall have been satisfied or
waived, or at such other time and date as the parties hereto may mutually agree,
which date shall be referred to as the "Closing Date."
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3.2 Deliveries by the Sellers. To effect the transfer referred to in
Section 2.1 hereof, the Sellers shall, on the Closing Date, execute and deliver
to Buyer:
(a) bills of sale, in form and substance reasonably satisfactory to
Buyer, conveying in the aggregate all personal property included in the Assets;
(b) assignments of the real property leases (the "Property Leases")
of the Sellers together with the consents of landlords, if required by the terms
of such Property Leases;
(c) assignments in form and substance satisfactory to Buyer, with
all required consents of Leases and other Contracts which Buyer has agreed to
assume;
(d) such other instruments as shall be reasonably requested by Buyer
to vest in Buyer title in and to the Assets in accordance with the provisions
hereof; and
(e) all other previously undelivered documents required to be
delivered at or prior to the Closing.
At or prior to the Closing, the Buyer may, in its sole and absolute discretion,
instruct the Sellers to deliver the Assets to a direct or indirect wholly-owned
subsidiary of the Buyer.
3.3 Deliveries by the Buyer. At the Closing, the Buyer shall deliver:
(a) to the Sellers one or more certificates evidencing the shares of
CLC Common Stock issuable by the Buyer as the Purchase Price, except for those
shares set aside as the Escrowed Shares (the shares of CLC Common Stock
(including the Escrowed Shares) issuable by the Buyer as the Purchase Price are
sometimes referred to herein as the "CLC Shares");
(b) to the Escrow Agent the Escrowed Shares pursuant to Sections 2.5
and 2.7 herein;
(c) to the Sellers instruments of assumption evidencing Buyer's
assumption of the Assumed Liabilities; and
(d) to the Sellers all other previously undelivered documents
required to be delivered at or prior to the Closing.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND SELLERS' SHAREHOLDERS
To induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, the Sellers and Sellers'
Shareholders jointly and severally, represent and warrant to the Buyer, as of
the date hereof and as of the Closing Date, as set forth below:
4.1 Organization. Each of the Sellers is a corporation duly organized,
validly existing
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and in good standing under the laws of the state of its incorporation.
4.2 Power and Authority. Each of the Sellers has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as proposed to be conducted and is duly
qualified or licensed as a foreign corporation in good standing in each
jurisdiction in which the character of its properties or the nature of its
business activities requires such qualification.
4.3 Authority for Agreement. The Boards of Directors and the shareholders
of each of the Sellers have unanimously approved this Agreement, and have
authorized the execution and delivery and performance hereof. The ownership of
the capital stock of the Sellers is set forth on Schedule 4.3, hereto, which
shares constitute all of the issued and outstanding shares of capital stock of
the Sellers and are owned by the persons set forth on Schedule 4.3, free and
clear of any Encumbrances. The Sellers have full corporate power, authority and
legal right to enter into this Agreement and to consummate the transactions
contemplated hereby. The Sellers' Shareholders have the legal capacity to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement is a legal, valid and binding obligation of the Sellers and the
Sellers' Shareholders, enforceable against the Sellers and Sellers' Shareholders
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights in general.
4.4 No Violation to Result. Except as set forth on Schedule 4.4, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and the fulfillment of the terms hereof:
(i) are not in violation or breach of, do not conflict with or constitute a
default under, and will not accelerate or permit the acceleration of the
performance required by, any of the terms of the charter documents or by-laws
either of the Sellers or any Contract or Assumed Liability to which any of the
Sellers or Sellers' Shareholders is a party or which affects any of the Assets;
(ii) will not be an event which, after notice or lapse of time or both, will
result in any such violation, breach, conflict, default, or acceleration; (iii)
will not result in a violation under any law, judgment, decree, order, rule,
regulation, Permit or other legal requirement of any governmental authority,
court or arbitration tribunal whether federal, state, provincial, municipal or
local (within the U.S. or otherwise) at law or in equity, and applicable to the
Sellers, Sellers' Shareholders or the Institutions; and (iv) will not result in
the creation or imposition of any Encumbrance in favor of any person upon any of
the properties or assets of either of the Sellers, Sellers' Shareholders or the
Institutions.
4.5 Capitalization
(a) Schedule 4.5 sets forth, with respect to the Sellers, (i) the
number of authorized shares of each class of its capital stock, (ii) the number
of issued and outstanding shares of each class of its capital stock, (iii) the
number of shares of each class which are held in treasury. All of the issued and
outstanding shares of capital stock of each of the Sellers (x) have been duly
authorized and validly issued and are fully paid and non-assessable, (y) were
issued in compliance with all applicable state and federal laws and (z) were not
issued in violation of any preemptive rights or rights of first refusal. Except
as set forth in Schedule 4.5, no preemptive rights or rights of first refusal
exist with respect to the shares of capital stock of each of the Sellers, and no
such rights
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arise by virtue of or in connection with the transactions contemplated hereby;
and, to the extent permitted by law, the Sellers' Shareholders have waived (or
hereby waive) any and all such preemptive rights and rights of first refusal.
There are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require either of the Sellers
to issue or sell any shares of its capital stock (or securities convertible into
or exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to either of the Sellers. There are no proxies, voting rights or other
agreements or understandings with respect to the voting or transfer of the
capital stock of either of the Sellers. Neither of the Sellers is obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock. None
of the shares of either of the Sellers capital stock was issued pursuant to any
award, grant or bonus.
(b) The Sellers' Shareholders are the sole holders of the issued and
outstanding shares of capital stock of each of the Sellers, and the Sellers'
Shareholders own such shares as is set forth on Schedule 4.5 free and clear of
any mortgage, security interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge, preference,
priority or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, conversion, put, call or other claim or right,
restriction on transfer (other than restrictions imposed by federal and state
securities laws), or preferential arrangement of any kind or nature whatsoever
(including any restriction on the transfer of any assets, any conditional sale
or other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction)
4.6 Financial Statements
(a) Schedule 4.6 includes true copies of (i) the audited balance
sheets of the Sellers as of the end of the periods identified on Schedule 4.6
(such dates being the end of the Sellers' three (3) most recently completed
fiscal years), audited statements of income, cash flows and retained earnings
for each of its three (3) most recently completed fiscal years and any
additional financial statements previously filed with ED on behalf of the
Sellers or any Institution on an individual basis as appropriate for each of its
three (3) most recently completed fiscal years (collectively, the "Annual
Financials"), and (ii) true, complete and correct copies of the Sellers'
unaudited interim balance sheet (the "Current Balance Sheet") as of September
30, 1997 (the "Balance Sheet Date") and the Sellers' unaudited statements of
income, cash flows and retained earnings and any financial statements filed with
ED on behalf of the Sellers or any Institution on an individual basis for that
period of the current fiscal year then ended (collectively, the "Interim
Financials" and together with the Annual Financials, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP consistently applied (subject, in the case of the Interim Financials, to
normal year-end audit adjustments, which individually or in the aggregate will
not be material, and subject to the omission of footnote information). Each of
the balance sheets included in the Financial Statements present fairly the
financial condition of the Sellers as of the dates indicated thereon, and each
of the statements of income, cash flows and retained earnings included in the
Financial Statements present fairly the results of its operations for the
periods indicated thereon. Since the end of the Sellers' recently completed
fiscal years, there has been no material change in the Sellers'
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accounting policies. There are no material, special or non-recurring items of
income or expense during the periods covered by the Financial Statements and the
balance sheets included in the Financial Statements do not reflect any write-up
or revaluation increasing the book value of any assets, except as specifically
disclosed in the notes thereto. The Financial Statements reflect all adjustments
necessary for a fair presentation of the financial information contained
therein.
(b) The Books and Records, minute books, stock record books, and
other records of the Sellers, all of which have been made available to the
Buyer, are complete and correct and have been maintained in accordance with
sound business practices. There have been no transactions involving the business
of the Sellers or the Business which properly should have been set forth in the
Financial Statements and which have not been accurately so set forth. The minute
books of the Sellers contain accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the Boards of Directors,
and committees of the Boards of Directors of the Sellers, and no meeting of any
such stockholders, Boards of Directors, or committee (other than actions taken
by written consent) has been held for which minutes have not been prepared as of
the date hereof and are not contained in such minute books.
4.7 Liabilities and Obligations
(a) Except as disclosed on Schedule 4.7, there are no liabilities or
obligations of the Sellers relating to the Business, other than: (i) those
liabilities reflected on the Current Balance Sheet and not previously paid or
discharged; and (ii) those liabilities incurred after the Balance Sheet Date
arising in the ordinary course of business, which were incurred consistent with
past practice of the Sellers. For purposes of this Section 4.7, the term
"liabilities" shall include, without limitation, any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss, damage, deficiency,
cost, expense, obligation or responsibility, either accrued, absolute,
contingent, mature, unmature or otherwise and whether known or unknown, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured.
(b) Schedule 4.7 sets forth a summary description of all advance
payments or deposits held by the Sellers and reflected in the Financial
Statements and the related obligations thereunder.
4.8 Adverse Changes. From December 31, 1996: (i) there has been no change
in the condition (financial or otherwise), business, net worth, assets,
properties, liabilities or obligations (fixed, contingent, known, unknown or
otherwise) of the Sellers or any Institution which has had or is likely to have
a Material Adverse Effect, and there has been no occurrence, circumstance or
combination thereof which might reasonably be expected to result in any such
Material Adverse Effect before or after the Closing Date; (ii) neither of the
Sellers has declared or paid any dividend or made any distribution in respect of
the capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of either of the Sellers and (iii) the
Sellers have complied with all of the covenants set forth in Section 6.4, to the
same extent as if this Agreement had been signed on December 31, 1996.
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4.9 Employee Benefit Plans; Employee Matters
(a) All employee benefit plans, policies and arrangements (whether
formal or informal, and whether maintained for the benefit of a single
individual or more than one individual) maintained or contributed to by the
Sellers for the benefit of any current or former employee of the Sellers or in
which such employees are entitled to participate are listed in Schedule 4.9 (the
"Benefit Plans"), and there have been delivered or made available to the Buyer
true, correct and complete copies of all such written plans and policies,
written descriptions of all such oral plans and policies, and all other
documentation relating to such plans and policies. Each Benefit Plan by its
terms complies, and has at all times complied, with the requirements of all
applicable law, including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of
1986, as amended (the "Code"), and each Benefit Plan intended to qualify under
section 401(a) of the Code so qualifies, and each trust which forms a part of
any such plan is tax-exempt under section 501(a) of the Code. No Benefit Plan
subject to Part 3 of Title I of ERISA has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code. No liability has been incurred or is expected to be incurred under Title
IV of ERISA to any party with respect to any Benefit Plan, or any other plan
presently or heretofore maintained or contributed to by the Sellers, any
predecessor to the Sellers, or any entity that is or at any time was a member of
a controlled group, as defined in section 412(n)(6)(B) of the Code, which
includes or included the Sellers ("Controlled Group Member"). Neither the
Sellers, nor any Controlled Group Member has incurred any liability for any Tax
imposed under section 4971 through 4980B of the Code or civil liability under
section 502(i) or (1) of ERISA. The "amount of unfunded benefit liabilities"
within the meaning of section 4001(a)(18) of ERISA does not exceed zero with
respect to any Benefit Plan subject to Title IV of ERISA. No Benefit Plan is a
multi-employer plan within the meaning of section 3 (37) of ERISA. No Benefit
Plan provides health or death benefit coverage to any employee or his dependents
beyond the termination of an employee's employment, except as required by Part 6
of Title I of ERISA or section 4980B of the Code. No "reportable event" (within
the meaning of section 4043 of ERISA) has occurred with respect to any Benefit
Plan or any plan maintained by a Controlled Group Member since the effective
date of said section 4043 and no "prohibited transaction" (within the meaning of
Section 406 of ERISA and Section 4975 of the Code) has occurred with respect to
any Benefit Plan. No suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
or are pending or threatened, against or with respect to any Benefit Plan. All
contributions to Benefit Plans that were required to be made under such Benefit
Plans have been made as of the Balance Sheet Date, and all benefits accrued
under any unfunded Benefit Plan will have been paid, accrued or otherwise
adequately reserved in accordance with GAAP as of such date and will be
reflected on the Closing Statement and the Sellers will have performed by the
Closing Date all obligations required to be performed as of such date under
Benefit Plans.
(b) Schedule 4.9 contains a complete and correct list of all
employees of the Sellers and the 1997 compensation paid or payable to each such
employee. Except as set forth in Schedule 4.9, (i) the terms of employment or
engagement of all directors, officers, employees, agents, consultants and
professional advisers of the Sellers are such that their employment or
engagement may be terminated upon not more than two weeks' notice given at any
time and without liability for payment of compensation or damages, and (ii)
there are no severance payments which are or could become payable by the Sellers
to any director, officer or other employee of the Sellers under the
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terms of any oral or written agreement or commitment or any law, custom, trade
or practice.
4.10 Taxes. The Sellers have prepared (or caused to be prepared) and have
timely and properly filed (or caused to be timely and properly filed) with the
appropriate federal, state, provincial, municipal or local authorities (within
the U.S. or otherwise) all tax returns, information returns and other reports
required to be filed and has paid or accrued (or caused to be so paid or
accrued) in full all Taxes, interest, penalties, assessments or deficiencies if
any, of the Business due to, or claimed to be due by, any taxing authority. The
balance sheets included in the Financial Statements and the Interim Financial
Statements include appropriate provisions for all Taxes, interest, penalties,
assessments or deficiencies, if any, for the periods indicated thereon to the
extent not theretofore paid. The Sellers have not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any Taxes. The Sellers are not a party to any pending action or proceeding,
nor is any such action or proceeding threatened, by any governmental authority
for the assessment or collection of Taxes, and no claim for assessment or
collection of Taxes has been asserted against the Sellers, and during the course
of any audit currently in process or not completed, no issues have been
suggested by any representative of any such governmental authority that, if
asserted, would result in a proposed assessment of Taxes, interest or penalties,
against the Sellers.
4.11 Title to Assets. Each of the Sellers has good and marketable title to
the Assets, free and clear of any and all Encumbrances and defects in title.
Each of the Sellers has the power to convey, transfer and assign ownership of
the Assets and the Assumed Liabilities without the necessity of any approvals or
consents of any other person or entity (except as to the consents set forth on
Schedule 4.11 which shall be obtained prior to Closing). As of the Closing Date,
the Sellers will transfer to Buyer or its designees by good and marketable title
the Assets, free and clear of any and all Encumbrances and defects in title. The
Assets, taken together, are adequate for the operation of the Business as it is
being currently conducted by the Sellers.
4.12 Property.
(a) Schedule 4.12 sets forth an accurate and complete list of all
real property and leaseholds of real property owned or leased by the Sellers or
to which the Sellers may have any ownership or leasehold rights (collectively,
the "Facilities"). Except as otherwise disclosed on Schedule 4.12, (i) there are
no outstanding written or oral leases, rights to occupancy, or tenancies of any
kind (including tenancies by sufferance and/or holdover tenancies arising under
expired written or oral leases) covering or in any way affecting the Facilities
or any part or parts thereof; (ii) no person, firm or corporation other than the
Sellers has any rights (including rights arising under an installment contract,
option to purchase, easement, right-of-way, or otherwise) with respect to the
Facilities or any part thereof; and (iii) there have been no improvements to,
construction on, work done at, and/or services or material supplied to, the
Facilities or any part or parts thereof for which payment in full has not been
made and which might give rise to mechanic's liens or other lien rights. All
leases set forth on Schedule 4.12 are in full force and effect and constitute
valid and binding agreements of the Sellers and, to the knowledge of the
Sellers, the other parties thereto in accordance with their respective terms.
(b) Schedule 4.12 sets forth an accurate list of all owned and
leased personal
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property included on the Current Balance Sheet and all other personal property
owned or leased by the Sellers relating to the Business (i) as of the Balance
Sheet Date, or (ii) acquired since the Balance Sheet Date, including in each
case true, complete and correct copies of leases for equipment and also
including an indication as to which assets are currently owned, or were formerly
owned, by any current or former stockholders of the Sellers or business or
personal affiliates of the Sellers or any current or former stockholder of
either of the Sellers. All of the vehicles and other material machinery and
equipment listed on Schedule 4.12 are in working order, ordinary wear and tear
excepted. All fixed assets used by the Sellers that are material to the
operation of the Business are either owned by the Sellers or leased under an
agreement listed on Schedule 4.12.
4.13 Contracts.
(a) Schedule 4.13 constitutes an accurate and complete list of each
Contract (other than agreements with students, in their capacity as students)
requiring aggregate payments by either of the Sellers, or receipt by the Sellers
or any of the Institutions, of in excess of $1,500 and to which either of the
Sellers or any of the Institutions is a party, or which affects either of the
Sellers or the Assets. Each of the Contracts listed in Schedule 4.13 and all
agreements with students are in full force and effect, are valid, binding and
enforceable obligations by or against the Sellers and the other parties thereto,
and to the best knowledge of the Sellers, no event has occurred which
constitutes or, with the giving of notice or passage of time, or both, would
constitute, a default or breach thereunder. None of such Contracts has a
provision for re-negotiation by governmental authorities. The Sellers have
delivered or caused to be delivered or made available to the Buyer correct and
complete copies of each Contract listed in Schedule 4.13 and all amendments
thereto, and every oral contract or agreement listed on Schedule 4.13, and all
amendments thereto, are correctly summarized in such Schedule. To the best
knowledge of the Sellers, no other party to any Contract is in default
thereunder. Except as set forth on Schedule 4.13, there exist no restrictive
covenants of any nature whatsoever in any of the Contracts.
(b) The Sellers have obtained, or will obtain prior to the Closing
Date, all necessary novations, consents, waivers and approvals of parties to any
Contracts which are required in connection with any of the transactions
contemplated by this Agreement, or as are required by any governmental agency or
other third party in order that any such Contract remain in effect without
modification after the consummation of the transactions contemplated by this
Agreement and without giving rise to any right to termination, cancellation or
acceleration or loss of any right or benefit ("Third Party Consents"). All Third
Party Consents and their status are listed on Schedule 4.13. True, correct and
complete copies of all Third Party Consents will be made available to the Buyer
prior to Closing.
(c) The relationships of the Sellers with its suppliers are good
commercial working relationships and, except as set forth on Schedule 4.13, no
supplier has terminated or threatened to terminate, its relationship with the
Sellers or the Business or has during the last 12 months decreased or limited or
threatened to decrease or limit, its services, supplies or materials to the
Sellers or the Business. Except as set forth on Schedule 4.13, no supplier is a
sole source of supply of any good or service to either of the Sellers or the
Business. The Sellers do not have any knowledge that any of the suppliers
intends to terminate or otherwise modify adversely to the Sellers its
relationship with the Sellers or the Business or to decrease or limit its
services, supplies or materials to the Sellers or
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the Business.
4.14 Litigation. Except as set forth in Schedule 4.14, there is no
litigation, suit, proceeding, action, claim, demand or investigation, at law or
in equity or otherwise, pending or to the best knowledge of the Sellers
threatened against or affecting the Sellers, the Sellers' Shareholders, the
Institutions or the Assets before any court, agency, authority or arbitration
tribunal, including, without limitation, any product liability, workers'
compensation or wrongful dismissal claims, or claims, actions, suits, demands or
proceedings relating to toxic materials, hazardous substances, pollution or the
environment. To the best knowledge of the Sellers, there are no facts that would
likely result in any such litigation, suit, proceeding, action, claim or
investigation. The Sellers are not subject to or in default with respect to any
notice, order, writ, injunction or decree of any court, agency, authority or
arbitration tribunal.
4.15 Compliance with Laws. The Sellers, the Sellers' Shareholders and the
Institutions have complied and are currently in compliance with all laws,
regulations, rules, orders, Permits, judgments, decrees and other requirements
and policies imposed by any governmental authority or Accrediting Body
applicable to them, their properties or the operation of the Business. None of
the Sellers, the Sellers' Shareholders or the Institutions have received any
notice or citation for noncompliance with any of the foregoing, and to the best
of their knowledge, there exists no condition, situation or circumstance, nor
has there existed such a condition, situation or circumstance, which, after
notice or lapse of time, or both, would constitute noncompliance with or give
rise to future liability with regard to any of the foregoing. The Sellers have
all Licenses, Permits, approvals, qualifications, Accreditations or the like,
from any government or any governmental unit, agency, body or instrumentality,
whether federal, state, provincial, municipal or local (within the U.S. or
otherwise) or any Accrediting Body or third party necessary for the conduct of
the Business as conducted by the Sellers and all such items are in full force
and effect.
4.16 Compliance with Title IV Programs.
(a) Schedule 4.16 lists all agreements between the Sellers, Sellers'
Shareholders or the Institutions and ED or any other governmental unit, agency,
body or instrumentality or any Accrediting Body or any guaranty agency relating
to any forms of student financial assistance, grants or loans, including the
Title IV Programs ("Financial Assistance"). Each of such agreements listed in
Schedule 4.16 is in full force and effect, is a valid, binding and enforceable
obligation by or against the Sellers or the Institutions and the other parties
thereto and no event has occurred which constitutes or, with the giving of
notice or the passage of time, or both, would constitute, a default or breach
thereunder. The Sellers have delivered or caused to be delivered to the Buyer
correct and complete copies of each contract or agreement listed in Schedule
4.16 and all amendments thereto.
(b) Schedule 4.16 also lists each program pursuant to which
Financial Assistance is provided to or on behalf of the Sellers, the
Institutions or the Institutions' students.
(c) Except as set forth on Schedule 4.16, there exists no fact or
set of facts which could have an adverse effect on the ability of the BEC
Institution to obtain Certification under the ownership of Buyer. The BEC
Institution has a final, official cohort default rate on Federal Family
Education Loan Program ("FFELP") loans, following the resolution of all
administrative appeals, of
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26.7%, 21.7% and 18.8%, for fiscal years 1992, 1993 and 1994, respectively, and
a preliminary draft cohort default rate on FFELP loans of 24.1% for fiscal year
1995, and an official cohort default rate on Federal Perkins loans of 67.8%,
41.7% and 6.2%, respectively for fiscal years ended June 30, 1994, 1995 and
1996, respectively.
(d) The Sellers have previously delivered to the Buyer, or will have
delivered to the Buyer at least seven days prior to the expiration of the review
period provided in Section 7.14, true and complete copies of all correspondence
received from or sent by or on behalf of the Sellers, Sellers' Shareholders or
any of the Institutions to ED, any Accrediting Body or any other governmental or
regulatory authority having jurisdiction over the provision, funding or approval
of Financial Assistance or the operation of any Institution to the extent such
correspondence was sent or received within the past three years or relates to
any issue which remains pending, including, without limitation (i) any
documentation relating to the agreements listed on Schedule 4.16; (ii) any
documentation relating to any audits or reviews conducted by ED, any Accrediting
Body, any guaranty agency or any other regulatory authority; (iii) notices or
correspondence concerning the qualification of the Sellers or any Institution
for the receipt of Financial Assistance; and (iv) notices or correspondence
indicating an intention to limit, suspend or terminate the Accreditation or the
provision of Financial Assistance to the Sellers or any Institution or its
students or to condition the provision of such Financial Assistance on the
posting of a letter of credit or other surety in favor of ED.
(e) Except as set forth on Schedule 4.16, the Sellers have complied
and are in compliance with any and all applicable laws, regulations and
requirements relating to Financial Assistance, including all statutory and
regulatory provisions related to the Title IV Programs, except to the extent
that non-compliance does not have a Material Adverse Effect and only has a
monetary impact.
(f) Since January 1, 1993, no principal, affiliate (as those terms
are defined in 34 C.F.R. Part 85), owner, stockholder, trustee, or any other
individual or entity holding an ownership interest in the Sellers, whether legal
or equitable, is or has been a principal, affiliate, owner, stockholder or
trustee or held an ownership interest, whether legal or equitable, in any other
institution (whether or not participating in the Title IV Programs) or any
third-party servicer (as that term is defined at 34 C.F.R. ss. 668.2). No
institution (whether or not participating in the Title IV Programs) or any
third-party servicer (as that term is defined at 34 C.F.R. ss. 668.2) is, or has
been, administered commonly, jointly or in conjunction with the Sellers, or any
of the Institutions, and no other institution or organization of any sort has
provided educational services on behalf of any of the Institutions.
4.17 Institutional Approval and Accreditation. Schedule 4.17 lists each
state and governmental department and/or agency, or nongovernmental or
quasi-governmental body, including any Accrediting Body or agency, that has
issued a License to any of the Institutions or any of their educational
programs, including, without limitation, the Accrediting Council for Independent
Colleges and Schools ("ACICS"), the Commonwealth of Massachusetts Department of
Education and ED. Except as otherwise set forth on Schedule 4.17 hereto, the
Institutions have received all necessary Licenses for their existing operations
and receipt of Financial Assistance, including, without limitation, any
authorization, approval or licensure issued by any state or any
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governmental, nongovernmental or quasi-governmental agency and Accreditation by
ACICS. As of the date hereof, the BEC Institution has no more than eighty-five
percent of its revenues derived from Title IV Program funds as determined in
accordance with 34 C.F.R. ss. 600.5(d) and has not had more than eighty-five
percent of its revenues so derived since July 1, 1995. Except as set forth on
Schedule 4.17, the Licenses are in full force and effect, and no proceeding for
the suspension, limitation, revocation, termination or cancellation of any of
them is pending or threatened. Except as set forth on Schedule 4.17, Sellers and
the Institutions have not received any notice that any of the Licenses will not
be renewed and there is no basis for any nonrenewal. The BEC Institution is
accredited by ACICS and is in compliance with the standards of ACICS and is
certified by ED as an eligible institution of higher education pursuant to Title
IV of the HEA. The BEC Institution is a party to a valid provisional program
participation agreement with ED, and is in compliance with every term thereof,
including compliance with any terms that involve posting a letter of credit or
other surety in favor of ED, except to the extent that non-compliance does not
have a Material Adverse Effect and only has a monetary impact. Except as set
forth in Schedule 4.17, Sellers and the Institutions have not received during
the last three (3) years, and do not have pending, any notice, including, but
not limited to, any letter from ACICS placing any Institution on reporting,
probationary or show cause status, or any finding in a compliance audit as
required by the provisions of 34 C.F.R. ss. 668.23 (1996) or any other review
related to any alleged violation of the HEA or the regulations governing the
Title IV Programs or the standards of any applicable Accrediting Body, including
ACICS, with respect to the Institutions, including sales and marketing
activities or the terms of any program participation agreement to which any of
the Institutions are or were a party. Except as set forth at Schedule 4.17,
Sellers, the Institutions and Sellers' Shareholders are not aware of any
investigation or review of the operation of the Institutions' Financial
Assistance programs or any review of the Accreditation or the Licenses by any
state or governmental, nongovernmental or quasi-governmental department and/or
agency, including by ACICS, ED, the Commonwealth of Massachusetts Department of
Education or any guaranty agency. Except as set forth on Schedule 4.17, the
Sellers, Sellers' Shareholder and the Institutions have complied and are in
compliance with the laws, rules and standards of or related to the Commonwealth
of Massachusetts Department of Education and the standards of the ACICS.
4.18 Environmental and Safety Matters
(a) For purposes of this Agreement, the term "Environmental and
Safety Requirements" shall mean all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations and all common law, in each case concerning public health and
safety, worker health and safety and pollution or protection of the environment
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation); "Release" shall have the meaning
set forth in CERCLA (as defined below); and "Environmental Lien" shall mean any
Lien, whether recorded or unrecorded, in favor of any governmental entity,
relating to any liability of the Sellers arising under any Environmental and
Safety Requirements.
(b) Except as set forth on Schedule 4.18:
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(i) To the best of Sellers' and Sellers' Shareholders'
knowledge, the Sellers have complied with and are currently in compliance with
all Environmental and Safety Requirements, and the Sellers have not received any
oral or written notice, report or information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to the Sellers or any of their properties or
facilities, except as described on Schedule 4.18.
(ii) Without limiting the generality of the foregoing, the
Sellers have obtained and complied with, and are currently in compliance with,
all permits, licenses and other authorizations that may be required pursuant to
any Environmental and Safety Requirements for the occupancy of their properties
or facilities or the operation of their businesses, except as described on
Schedule 4.18. A list of all such permits, licenses and other authorizations
which are material to the Sellers is set forth on the attached Schedule 4.18.
(iii) To the best of Sellers' and Sellers' Shareholders'
knowledge, neither this Agreement nor the consummation of the transactions
contemplated by this Agreement shall impose any obligations on the Sellers or
otherwise for site investigation or cleanup, or notification to or consent of
any governmental agencies or third parties under any Environmental and Safety
Requirements (including, without limitation, any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(iv) To the best of Sellers' and Sellers' Shareholders'
knowledge, none of the following exists at any property or facility owned,
occupied or operated by the Sellers: (1) underground storage tanks or surface
impoundments; (2) asbestos-containing materials in any form or condition; or (3)
materials or equipment containing polychlorinated biphenyls.
(v) Neither of the Sellers has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or Released any
substance (including, without limitation, any hazardous substance) or owned,
occupied or operated any facility or property, so as to give rise to liabilities
of the Sellers for response costs, natural resource damages or attorneys fees
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), as amended, or any other Environmental and Safety
Requirements.
(vi) Without limiting the generality of the foregoing, to the
best of Sellers' and Sellers' Shareholders' knowledge, no facts, events or
conditions relating to the past or present properties, facilities or operations
of the Sellers shall prevent, hinder or limit continued compliance with
Environmental and Safety Requirements, give rise to any corrective,
investigatory or remedial obligations pursuant to Environmental and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements (including, without limitation, those liabilities relating to
onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage, except for any such noncompliance, obligation or liability which has not
had or would not reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Sellers taken
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as a whole.
(vii) Except as provided in Schedule 4.18(b)(vii), either of
the Sellers has, either expressly or by operation of law, assumed or undertaken
any material liability or corrective, investigatory or remedial obligation of
any other Person relating to any Environmental and Safety Requirements.
(viii) Sellers have not received any notice of any
Environmental Lien which requires notice, attaching to any property, owned,
leased or operated by the Sellers. To the best of Sellers' knowledge, no
Environmental Lien has attached to any property owned, leased or operated by the
Sellers.
4.19 Insurance. Schedule 4.19 sets forth an accurate list, as of the
Balance Sheet Date, of all insurance policies carried by the Sellers (all of
which policies remain in full force and effect) and all insurance loss runs or
workers' compensation claims received for the past two (2) policy years. All
premiums due and payable under all such policies have been paid and the Sellers
are otherwise in full compliance with the terms of such policies (or other
policies providing substantially similar insurance coverage). Such policies of
insurance are of the type and in amounts customarily carried by persons
conducting businesses similar to that of the Sellers. The Sellers do not know of
any threatened termination of, or material premium increase with respect to, any
of such policies.
4.20 Trademarks, Patents and Copyrights. The Sellers own, or possess
adequate licenses, permits or other rights to use, any patents, trademarks,
service marks, trade names, service names, copyrights, applications therefor,
trade dress, logos, corporate names, computer software programs, source codes,
object codes, information systems, proprietary interfaces, routines, modules,
procedures, functions, program specifications and related documentation (the
"Intellectual Property") necessary to conduct the Business as now operated by
the Sellers. Schedule 4.20 sets forth all trademarks, trade names, service
marks, service names held or used by the Business. The Sellers are not a
licensor of any of the Intellectual Property. The Intellectual Property does not
infringe upon or conflict with any rights of third parties, and, no use by the
Sellers of any Intellectual Property violates the terms of any agreement
pursuant to which it is licensed or violates or infringes upon the asserted
rights of others. Except as disclosed on Schedule 4.20, the Intellectual
Property is assignable without the consent of any third party. All of the
Intellectual Property relating to the Business is or will be owned by, or
properly assigned or licensed to the Business at the Closing.
4.21 Accounts Receivable. The accounts receivable of the Sellers
transferred hereunder arose in the ordinary course of business from bona fide
transactions and are not subject to any setoff, counterclaim or defense. Except
for amounts reserved by Sellers consistent with past practices, the accounts
receivable shall be fully collectible in accordance with their terms.
4.22 Liability to Affiliates. Except as disclosed on Schedule 4.22, as of
the Closing the Assumed Liabilities will not include any amounts owed by the
Sellers to each other or any amounts owing to any other Affiliate of the Sellers
or any person acting as a transferee of any of them.
4.23 Securities Law Matters. The Sellers are acquiring or will acquire the
CLC Shares solely for their own account as an investment and not with a view to
any distribution or resale
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thereof within the meanings of such terms under the Securities Act. The Sellers
have been advised that the issuance of the CLC Shares has not been registered
under the Securities Act or under the provisions of any state securities or
"blue sky" law. The Sellers and Sellers' Shareholders are "Accredited Investors"
(as such term in defined in Rule 501 of Regulation D of the Securities Act). The
knowledge and experience of the Sellers in financial and business matters is
such that they are capable of evaluating the risk of the investment in the CLC
Shares. The Sellers and Sellers' Shareholders acknowledge that they have had
access to such financial and other information, including, but not limited to,
the Buyer's most recent reports on Forms 10-K, 10-Q and 8-K as filed with the
Securities and Exchange Commission (the "Commission"), and have been afforded
the opportunity to ask such questions of representatives of the Buyer and
receive answers thereto, as the Sellers have deemed necessary in connection with
their decision to acquire the CLC Shares, and that no representation or
warranties, express or implied, are being made by the Buyer with respect to the
Buyer or the CLC Shares, other than those expressly set forth herein.
4.24 Pooling of Interest. To the best of the Sellers knowledge, there have
been no transactions or events with respect to the Sellers which would, and the
ownership structure and attributes of the Sellers and the Sellers' Shareholders
would not, prevent the transactions contemplated hereby, if consummated, from
being considered as a pooling of interests business combination in accordance
with GAAP and the criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the Commission.
4.25 Brokers. Neither the Sellers nor the Sellers' Shareholders has
expressly or impliedly engaged any broker, finder or agent with respect to this
Agreement or any transaction contemplated hereby.
4.26 Disclosure. No representation or warranty by the Sellers and the
Sellers' Shareholders contained in this Agreement, and no representation,
warranty or statement contained in any list, certificate, Schedule or other
instrument, document, agreement or writing furnished or to be furnished to, or
made with, the Buyer pursuant hereto or in connection with the negotiation,
execution or performance hereof, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make any statement herein or therein not misleading. The Sellers and the
Sellers' Shareholders have no actual knowledge of any changes reasonably
expected to occur within one (1) year from the date of this Agreement to any of
the Sellers, the Business, the Assets, relations with employees, relations with
customers, competitive situation or relations with suppliers, or governmental
actions or laws affecting the Business.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER
To induce the Sellers to enter into this Agreement and to consummate the
transactions contemplated hereby, the Buyer represents and warrants to the
Sellers as of the date hereof and as of the Closing Date as set forth below:
5.1 Organization and Capitalization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is authorized to do business in all jurisdictions where such
authorization is necessary.
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5.2 Authority for Agreement. Subject to obtaining approval of this
Agreement by the Board of Directors of Buyer, (a) Buyer has full power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby; and (b) this Agreement has been duly executed
and delivered by Buyer and is a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights in general.
5.3 No Violation to Result. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby: (i) are not in
violation or breach of, do not conflict with or constitute a default under, and
will not accelerate or permit the acceleration of the performance required by,
any of the terms of the charter documents or by-laws of the Buyer or any note,
debt instrument, security agreement or mortgage, or any other contract or
agreement, written or oral, to which the Buyer is a party or by which the Buyer
is bound; (ii) will not be an event which, after notice or lapse of time or
both, will result in any such violation, breach, conflict, default, or
acceleration; (iii) will not result in violation under any law, judgment,
decree, order, rule, regulation or other legal requirement of any governmental
authority, court or arbitration tribunal whether federal, state, provincial,
municipal or local (within the U.S. or otherwise) at law or in equity, and
applicable to Buyer; and (iv) will not result in the creation or imposition of
any lien, possibility of lien, encumbrance, security agreement, equity, option,
claim, charge, pledge or restriction in favor of any third person upon any of
the properties or assets of the Buyer.
5.4 Third Party Consents. Prior to the Closing Date, the Buyer shall have
obtained or will obtain, all necessary novations, consents, waivers and
approvals of parties to any contracts which are required in connection with any
of the transactions contemplated by this Agreement, or as are required by any
governmental agency or other third party.
5.5 CLC Shares. Upon the consummation of the transactions contemplated by
this Agreement and the issuance and delivery of certificates representing the
CLC Shares to the Sellers, the CLC Shares will be validly issued, fully paid and
non-assessable shares of CLC Common Stock, and will be free of restrictions on
transfer except as provided herein or under applicable securities laws.
5.6 Pooling of Interest. There have been no transactions or events with
respect to the Buyer which would, and the ownership structure and attributes of
the Buyer would not, prevent the transactions contemplated hereby, if
consummated, from being considered as a pooling of interests business
combination in accordance with GAAP and the criteria of Accounting Principles
Board Opinion No. 16 and the regulations of the Commission.
6. COVENANTS
6.1 Access to Properties and Records. The Sellers shall afford to the
officers, employees, attorneys, accountants and other authorized representatives
of the Buyer, free and full access to all of the Sellers' assets, properties,
Books and Records, students and employees (with the consent of the Sellers,
which consent shall not be unreasonably withheld) in order to afford the Buyer
as full an opportunity of review, examination and investigation as the Buyer
shall desire to
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make of the affairs of the Sellers, and the Buyer shall be permitted to make
extracts from, or take copies of, the Books and Records (including the stock
record and minute books) or other documentation; and the Sellers shall furnish
or cause to be furnished to the Buyer such reasonable financial and operating
data and other information about the Sellers' business, properties and assets
which any of the Buyer's respective officers, employees, attorneys, accountants
or other authorized representatives may reasonably request; provided that Buyer
and its agents shall not unreasonably interfere with the normal business
operations of Sellers' business. No information or knowledge obtained in any
investigation pursuant to this Section 6.1, or otherwise, shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the transactions
contemplated by this Agreement or any other documentation ancillary to this
Agreement.
6.2 Accounting Treatment. The Buyer, the Sellers' Shareholders and the
Sellers shall each use their best efforts to cause the transaction contemplated
by this Agreement to be accounted for as a pooling of interests. Each of the
Buyer, the Sellers' Shareholders and the Sellers shall use their best efforts to
prevent its affiliates from taking any action that could preclude the
transactions contemplated hereby from receiving pooling of interests accounting
treatment in accordance with GAAP.
6.3 Confidentiality.
(a) The Sellers and the Sellers' Shareholders recognize and
acknowledge that they have in the past, currently have, and in the future may
possibly have, access to certain confidential information of the Sellers and/or
the Buyer, such as lists of customers, operational policies, and pricing and
cost policies, that are valuable, special and unique assets of the Sellers' or
the Buyer's respective businesses. The Sellers and the Sellers' Shareholders
agree that they will not disclose confidential information with respect to the
Sellers and/or the Buyer to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever (except to authorized
representatives of the Sellers and/or the Buyer and to counsel and other
advisers, provided that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 6.3), unless (i) such information
becomes known to the public generally through no fault of the Sellers or the
Sellers' Shareholders, (ii) disclosure is required by law or the order of any
court or governmental authority under color of law, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party or for Accreditation,
Certification or state licensure purposes; provided, that prior to disclosing
any information pursuant to clause (i), (ii) or (iii) above, the Sellers or the
Sellers' Shareholders shall, if possible, give prior written notice thereof to
the Buyer and provide the Buyer with the opportunity to contest such disclosure.
(b) The Buyer recognizes and acknowledges that it has in the past,
currently has, and in the future may possibly have, access to certain
confidential information of the Sellers, such as lists of customers, operational
policies, and pricing and cost policies, that are valuable, special and unique
assets of the Business. The Buyer agrees that prior to the Closing, and at all
times if Closing does not occur, it will not use for its own benefit nor will it
disclose confidential information with respect to the Sellers to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever (except to authorized representatives of the Sellers and/or the Buyer
and to
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counsel and other advisers, provided that such advisors (other than counsel)
agree to the confidentiality provisions of this Section 6.3), unless (i) such
information becomes known to the public generally through no fault of the Buyer,
(ii) disclosure is required by law or the order of any court or governmental
authority under color of law, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party or for Accreditation, Certification or state
licensure purposes; provided, that prior to disclosing any information pursuant
to clause (i), (ii) or (iii) above, the Buyer shall, if possible, give prior
written notice thereof to the Sellers or the Sellers' Shareholders and provide
the Sellers or the Sellers' Shareholders with the opportunity to contest such
disclosure.
6.4 Interim Covenants of the Sellers. From the date of this Agreement
until the Closing Date, except to the extent expressly permitted by this
Agreement or otherwise consented to by an instrument in writing signed by the
Buyer or as otherwise set forth in Schedule 6.4, the Sellers and the Sellers'
Shareholders shall (i) keep the Business and organization intact and shall not
take or permit to be taken or do or suffer to be done anything other than in the
ordinary course of its business as the same is presently being conducted, (ii)
shall use their reasonable best efforts to keep available the services of their
directors, officers, employees and agents and retain and maintain good
relationships with their students and maintain the Facilities in good condition,
(iii) shall perform their obligations under the Contracts and (iv) shall
maintain the goodwill and reputation associated with the Business. Without
limiting the generality of the foregoing, the Sellers and Sellers' Shareholders
shall not:
(a) purchase, sell, lease or dispose of or make any contract for the
purchase, sale, lease or disposition of or subject to lien or security interest
or any other Encumbrance any of their properties or assets, other than in the
ordinary and usual course of its business, consistent with the representations
and warranties contained herein, and not in breach of any of the provisions of
this Section 6, in each case for a consideration at least equal to the fair
value of such property or asset;
(b) except consistent with past compensation practices in the
ordinary course of business, grant any salary increase to, or increase the draw
of, any of their officers, directors, employees or agents, or enter into any
new, or amend or alter any existing, employment, bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, stock option, group
insurance, death benefit or other fringe benefit plan, trust agreement or other
similar or dissimilar arrangement, or any employment or consulting agreement;
(c) incur any bank indebtedness or borrowings, whether or not in the
ordinary course of its business, or issue any commercial paper;
(d) enter into any leases of real property;
(e) enter into any material leases of equipment and machinery except
in the ordinary course of business;
(f) enter into any contract, (i) which would be required to be
listed on Schedule 4.13 had it been entered into prior to the date hereof; or
(ii) in which any Affiliate of the Sellers has any beneficial interest;
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(g) redeem, purchase or otherwise acquire, directly or indirectly,
any shares of Sellers' capital stock or debt securities or any option, warrant
or other right to purchase or acquire any such shares, or declare or pay any
dividend or other distribution (whether in cash, stock or other property) with
respect to such capital stock;
(h) create, incur or assume any liability or indebtedness, except in
the ordinary course of business consistent with past practices; or postpone or
defer the creation, incurrence, or assumption of any liability or indebtedness
that would otherwise be created, incurred or assumed in the ordinary course of
business absent the execution of this Agreement;
(i) pay or apply any of their assets to the direct or indirect
payment, discharge, satisfaction or reduction of any amount, directly or
indirectly, to or for the benefit of the Sellers or any Affiliate thereof except
for payments to Sellers' Affiliates in accordance with past practice, provided
that any such transaction is on terms no less favorable to the Sellers than
terms generally available with third parties in arms length transactions; or
(j) solicit prospective or existing students of the Institutions to
complete their education elsewhere.
6.5 Information. The Sellers shall furnish the Buyer, upon request, with
all information concerning the Sellers reasonably required for inclusion in any
application made by the Buyer to the Commission, ED, any Accrediting Body, the
Commonwealth of Massachusetts Department of Education or any other governmental
or regulatory body in connection with the transactions contemplated by this
Agreement.
6.6 Public Announcements. Buyer and the Sellers shall agree with each
other as to the form and substance of any press release related to this
Agreement or the transactions contemplated hereby, and shall consult with each
other as to the form and substance of other public disclosures related thereto;
provided, however, that nothing contained herein shall prohibit any party hereto
from making any disclosure required by applicable laws or regulations, after
notice to the other party with the opportunity to comment to the extent that
delay of the disclosure is permitted under such laws or regulations.
6.7 No Solicitation. Neither the Sellers, the Sellers' Shareholders, nor
any agent, officer, director or any representative thereof, shall during the
period commencing on the date of this Agreement and ending with the earlier to
occur of the Closing or the termination of this Agreement in accordance with its
terms, directly or indirectly: (a) solicit, encourage or initiate the submission
of proposals or offers from any person or entity for, (b) participate in any
discussions pertaining to, or (c) furnish any information to any person or
entity, other than the Buyer relating to, any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the Sellers or a
merger, consolidation or business combination involving the Sellers, the
Business or the Assets. If the Sellers or the Sellers' Shareholders receives any
unsolicited offer or proposal relating to any of the above, the Sellers or the
Sellers' Shareholders shall immediately notify the Buyer thereof, including the
identity of the party making such offer or proposal and the specific terms of
such offer or proposal.
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6.8 Financial Statements.
(a) Prior to the execution of this Agreement, Sellers have delivered
to Buyer true and correct copies of the complete, audited financial statements
as previously filed with ED on behalf of the Sellers or any Institution on an
individual basis, as appropriate, for each of the three fiscal years ended
December 31, 1994, 1995 and 1996.
(b) Sellers and Sellers' Shareholders shall cause their auditors,
working together with Buyer's auditors, to complete and deliver to Buyer a
complete set of unaudited financial statements of the Sellers, and each
individual Institution, as of and for the six months ending July 31, 1997. Such
financial statements shall be completed and delivered to Buyer no less than
twenty (20) days prior to the Closing Date.
(c) Sellers and Sellers' Shareholders shall cause their auditors, in
response to any request by Buyer's auditors, promptly to provide all information
necessary for Buyer's auditors to complete, as expeditiously as possible, an
audited balance sheet of the BEC Institution as of the Closing Date.
(d) Except as provided in Section 14.7, Sellers and Sellers'
Shareholders shall bear the costs and fees associated with the work performed by
its auditors and Buyer shall bear the costs and fees associated with the work
performed by its auditors to comply with any provision of this Section 6.8.
6.9 Notification of Certain Matters. The Sellers and Sellers' Shareholders
shall give prompt notice to the Buyer of (a) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Sellers contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (b) any
material failure of the Sellers to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by the Sellers
hereunder. The delivery of any notice pursuant to this Section 6.10 shall not,
without the express written consent of the Buyer, be deemed to (x) modify the
representations or warranties hereunder of the Sellers, (y) modify the
conditions set forth in Section 8 or (z) limit or otherwise affect the remedies
available hereunder to the Buyer.
6.10 Tax Returns; Sales, Use and Transfer Taxes.
(a) The Sellers and Sellers' Shareholders shall timely file all
federal and state income tax returns for taxable periods ending on or prior to
the Closing Date and have paid or will pay all Taxes attributable to such
periods. Such returns shall be prepared and filed in accordance with applicable
law and in a manner consistent with past practices.
(b) Sellers shall pay when due all Taxes, including, without
limitation, all sales, use, stamp, conveyance or transfer taxes, land transfer
taxes, registration fees and all recording or reporting fees and other similar
duties, taxes and fees, if any, imposed upon, arising out of or resulting from,
the consummation of the transactions contemplated by this Agreement shall be
paid by the Sellers.
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(c) The Buyer and the Sellers shall mutually agree upon an
allocation for the Assets and the Assumed Liabilities in accordance with Section
1060 of the Code. After such mutual determination, the Buyer, Sellers'
Shareholders and the Sellers shall not take any position in any Federal or state
tax filing, returns, proceedings, or audit which is inconsistent with such
allocation.
6.11 Name Change. Immediately after the Closing, the Sellers shall take
such action (at its sole expense), including, without limitation, filing an
amendment to its Articles of Incorporation, to cause the Sellers' names to be
changed to a name which does not include the words "BEC Business School" or
"Computer Learning Center" or "CLC Training Group, Inc." or the letters "CLC" or
a word or phrase confusingly similar thereto. The Sellers shall not use the
names "BEC Business School" or "Computer Learning Center" or "CLC Training
Group, Inc." or the letters "CLC" or any name similar to any of the foregoing
from and after the Closing.
6.12 Hiring of the Sellers' Employees. The Sellers agree that prior to the
Closing Date it will allow the Buyer to take applications of any Business
employee or any employee involved in providing support services to the Business
and to interview any of such employees for prospective employment with the Buyer
after the Closing. On or after the Closing, the Buyer shall be permitted to hire
any such employee of the Sellers as determined in the Buyer's sole discretion.
The Sellers will use all reasonable efforts to cause such employees to make
available their employment services to the Buyer. Notwithstanding the foregoing,
the Buyer shall not have any obligation to hire any such employee. The Sellers
shall be responsible for (i) any severance, termination payments, or other
amounts due to its employees by reason of their termination at or before
Closing, and (ii) any other liability arising from such termination. As to any
such employee offered employment by the Buyer, for a period of two (2) years
from the Closing Date, neither the Sellers nor any of its officers, directors or
Affiliates will solicit, offer to employ or retain the services of or otherwise
interfere with the relationship with any former employee of the Sellers employed
by or otherwise engaged to perform services for the Buyer. The Sellers covenant
that they will forever waive any rights under any non-competition,
non-disclosure, non-solicitation or similar provisions they have under any
employment, non-compete or other arrangements with any of the Sellers' former
employees who are to be employed by the Buyer after the Closing.
6.13 Actions After The Closing. Following the Closing, the Buyer shall
have the right to (i) receive and open all mail addressed to the Sellers and
deal with the contents thereof in its discretion to the extent that such mail
and the contents thereof relate to the Assets sold to the Buyer and any of the
obligations or liabilities assumed by the Buyer pursuant to this Agreement; and
(ii) collect for its own account all receivables and other items transferred to
the Buyer hereto and to endorse with the name of the Sellers any checks received
on account of such receivables or other items. The Sellers agree that they shall
promptly transfer and deliver to the Buyer any cash or property which the
Sellers may receive in respect of the Assets. From and after the Closing Date,
the Sellers shall prepare and deliver to the Buyer, on a weekly basis, true and
correct reports showing all collections by the Sellers and the customer
receivables against which such collections should be applied. The Buyer shall
have the right to audit such reports.
6.14 Bulk Transfer Provisions. The Sellers and the Buyer hereby waive
compliance with the provisions of any applicable bulk transfer law; provided,
however, that the Sellers agree (i)
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to pay and discharge when due or to contest or litigate all claims of creditors
which are asserted against the Buyer or the Assets (other than the Assumed
Liabilities) by reason of such noncompliance, (ii) to indemnify, defend and hold
harmless the Buyer from and against any and all such claims in the manner
provided in Section 11 and (iii) to take promptly all necessary action to remove
any lien or encumbrance which is placed on the Assets by reason of such
noncompliance.
6.15 Reasonable Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts
promptly to take, or cause to be taken, all actions and do or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
including the satisfaction of all conditions thereto and shall use their
reasonable efforts to obtain consents of all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement.
6.16 Further Assurances. Following the Closing, each of the parties shall,
from time to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be reasonably
necessary, or otherwise reasonably requested by the Buyer, Sellers or Sellers'
Shareholders, as the case may be, to confirm and assure the rights and
obligations provided for in this Agreement, including assisting the Buyer with
obtaining Certification for either Institution, and render effective the
consummation of the transactions contemplated hereby.
6.17 Disbursement of Title IV Funds. Sellers agree that immediately prior
to the Closing Date, Sellers shall disburse all Title IV funds to all students
then enrolled in the BEC Institution in the full amount for which each such
student is eligible and consistent with the Title IV Programs regulations so as
to maximize Buyer's opportunity, subsequent to the Closing Date, to make
subsequent disbursements of Title IV funds to each such student, pursuant to 34
C.F.R. ss. 668.26.
6.18 Payment of Loans. Simultaneously with the Closing, Buyer shall
discharge all bank debt assumed by the Buyer pursuant to Section 2.3 hereof and
as reflected on the Current Balance Sheet.
6.19 Repurchase of Insurance Policy. Within 30 days after the Closing
Date, David F. Carney will repurchase from the Buyer the Whole Life Insurance
policy, underwritten by Massachusetts Mutual Life Insurance Company insuring the
life and wellbeing of David F. Carney, for cash surrender value of such policy.
7. CONDITIONS TO THE BUYER'S OBLIGATIONS.
All obligations of the Buyer under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Closing Date
is scheduled to occur, of each of the following conditions precedent, any one or
more of which may be waived by the Buyer in writing.
7.1 Representations and Warranties True at the Closing Date. All of the
representations and warranties of the Sellers and Sellers' Shareholders
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date.
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7.2 The Sellers' Performance. All of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Sellers or Sellers' Shareholders on or before the Closing Date shall have been
duly complied with, performed or satisfied.
7.3 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
transactions or limiting or restricting the conduct or operation of the business
of the Sellers following the transactions shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against the Buyer or the Sellers, their
respective properties or any of their officers or directors, that could have a
Material Adverse Effect.
7.4 Opinion of the Sellers' Counsel. The Buyer shall have been furnished
opinions of counsel to the Sellers, dated the date of the Closing Date, in form
attached hereto as Annex Ia and Annex Ib.
7.5 Securities Laws. The Buyer shall have received all necessary consents
and otherwise complied with any Federal or state securities or "blue sky" laws
applicable to the issuance of the CLC Shares, in connection with the
transactions contemplated hereby.
7.6 Pooling Letters. The Buyer shall have received from Gramkow &
Carnevale, C.P.A., independent certified public accountants for the Sellers, a
letter dated the Effective Date, in form and substance acceptable to the Buyer,
confirming that, to their knowledge after due and diligent inquiry of
management, there have been no transactions or events with respect to the
Sellers which would, and the ownership structure and attributes of the Sellers
and the Sellers Shareholder would not, proscribe the transactions contemplated
hereby, if consummated, from being considered as a pooling of interests business
combination. The Buyer shall have received from Price Waterhouse LLP, a letter
dated the Effective Date, confirming that the transactions contemplated hereby,
if consummated, can properly be accounted for as a pooling of interests
combination in accordance with GAAP and the criteria of Accounting Principles
Board Opinion No. 16 and the regulations of the Commission.
7.7 Acknowledgment of Pooling Restrictions and Receipt of Commission
Filings. At or prior to the Closing, the Sellers' Shareholders shall have
delivered to the Buyer a letter agreement acknowledging his status as an
Affiliate of the Sellers, his agreement to comply with the "pooling of
interests" restrictions, and his receipt of Commission filings of the Buyer, in
form and substance satisfactory to the Buyer.
7.8 Stock Powers. At the Closing, each of the Sellers' Shareholders shall
have delivered to the Buyer, for use in connection with the Escrowed Shares, ten
stock powers executed in blank, with signatures guaranteed.
7.9 No Material Adverse Change. There shall have been, between December
31, 1996 and the Closing Date, (i) no material adverse change in the condition,
financial or otherwise, of the
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Sellers, or (ii) no resignations or terminations of, or indications of an
intention or plan to resign, employment by a number of employees or student
withdrawals or losses of enrollments such that the continued operations of the
Business would be materially and adversely affected.
7.10 Assignment of Contracts. The Sellers shall have received consents
under all Contracts, agreements, commitments, understandings and instruments
comprising the Assets to which the Sellers are a party or by which it is bound
which require the consent of any other party or person to the assignment thereof
either by the terms thereof or as a matter of law for their assumption or
performance by the Buyer.
7.11 Certificates. The Sellers shall have furnished the Buyer with such
certificates of the officers of the Sellers and others to evidence compliance
with the conditions set forth in this Section 7 as may be reasonably requested
by the Buyer.
7.12 Stockholder Distributions. The Buyer shall have received a schedule
and explanation of all distributions to any of the Sellers' Shareholders, made
by the Sellers from January 1, 1996 through the Closing Date, and the Buyer
shall have received confirmation from the Buyer's accountant that such
distributions did not exceed either historical amounts or amounts required by
the Sellers' Shareholders to pay taxes on Subchapter S earnings during this
period.
7.13 Bank Debt and Certificates of Deposit. The certificate of deposit
being purchased by the Buyer as part of the Assets (the "Certificate of
Deposit") shall have a value greater than $310,000 and the total amount of the
bank debt of the Sellers to be assumed by the Buyer shall not be greater than
the amount of the Certificate of Deposit.
7.14 Buyer's Review. The Buyer shall be fully satisfied in its sole and
absolute discretion with the results of its review of, and its other due
diligence investigations with respect to, the Business, operations, affairs,
prospects, properties, assets, existing and potential liabilities, obligations,
profits or condition (financial or otherwise) of the Sellers or the Institutions
(including, without limitation, investigation of the "preliminary" fiscal year
1995 student loan cohort default rate on FFELP loans and the projected fiscal
year 1996 student loan cohort default rate on FFELP loans); provided, however,
that Buyer's review of the Business shall be completed, and the foregoing
determination shall be formulated, within 30 days after the execution of this
Agreement.
7.15 Delivery of Good Standing Certificates; Corporate Resolutions. The
Buyer shall have received certificates of good standing with respect to the
Sellers issued by the Commonwealth of Massachusetts, the State of Delaware, the
State of New Hampshire and any other jurisdiction in which the Sellers conduct
business. The Buyer shall have received copies of the resolutions of the Boards
of Directors and stockholders of the Sellers approving the sale of the Assets
and the other transactions contemplated herein, certified by an appropriate
corporate officer.
7.16 Release Agreements. The Buyer shall have received a duly executed
release agreement from each of the officers and directors of the Sellers (in the
form attached hereto as Annex II).
7.17 Escrow Agreement. The Sellers and the Sellers' Shareholders shall
have delivered
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to the Buyer a duly executed Escrow Agreement (in the form attached hereto as
Annex III).
8. CONDITIONS TO THE SELLERS' OBLIGATIONS
All obligations of the Sellers under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Closing Date
is scheduled to occur, of each of the following conditions, any one or more of
which may be waived in writing by the Sellers.
8.1 Representations and Warranties True at the Closing Date. All of the
representations and warranties of the Buyer contained in this Agreement shall be
true, correct and complete on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
except to the extent affected by the transactions contemplated hereby, and at
the Closing Date, the Buyer shall have delivered to the Sellers a certificate to
such effect signed by the President and the Chief Financial Officer of the
Buyer.
8.2 Buyer's Performance. All of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Buyer on or before the Closing Date shall have been duly complied with,
performed or satisfied and at the Closing Date the Buyer shall have delivered to
the Sellers a certificate to such effect signed by the President and the Chief
Financial Officer of the Buyer.
8.3 Authority. All action required to be taken by, or on the part of, the
Buyer to authorize the execution, delivery and performance of this Agreement by
the Buyer and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors of the Buyer.
8.4 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
transactions or limiting or restricting the conduct or operation of the business
of the Sellers following the transactions shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against the Buyer or the Sellers, their
respective properties or any of their officers or directors, that could have a
Material Adverse Effect.
8.5 Delivery of Good Standing Certificates; Corporate Resolutions. The
Sellers shall have received certificates of good standing with respect to the
Buyer issued by the State of Delaware. The Sellers shall have received copies of
the resolutions of the Board of Directors of the Buyer approving the purchase of
the Assets and the other transactions contemplated herein, certified by an
appropriate corporate officer.
8.6 Buyer Release. At the Closing, the Buyer shall release the Sellers and
the Sellers' Shareholders from all claims, asserted or unasserted, arising from
infringement of trademark or tradename rights. Such release shall be in a form
reasonably satisfactory to the Sellers.
8.7 Opinion of Buyer's Counsel. The Sellers shall have been furnished an
opinion or
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opinions of counsel to the Buyer, dated the date of the Closing Date, in the
form attached hereto as Annex IV.
8.8 Consulting and Non-compete Agreements. The Buyer shall have entered
into (i) a consulting agreement from David F. Carney providing for consulting
services for up to six months with a total amount of consideration equal to
$100,000 for such services (in the form attached hereto as Annex V).
8.9 Escrow Agreement. The Buyer shall have delivered to the Sellers and
the Sellers' Shareholders an executed Escrow Agreement (in the form attached
hereto as Annex III).
8.10 Environmental Reports. The Buyers shall have delivered Phase II
environmental reports on the Sellers' Somerville and Methuen properties and such
reports shall not contain recommendations for current environment remediation in
excess of $100,000.
9. REGISTRATION RIGHTS.
The Sellers shall have the following registration rights with respect to
the CLC Shares issued to them hereunder:
9.1 Registration Rights for CLC Shares; Filing of Registration Statement.
The Buyer shall utilize reasonable best efforts to cause, as soon as practicable
following the Closing Date, a registration statement, on Form S-1, Form S-2 or
Form S-3 (or an equivalent general registration form then in effect), (the
"Registration Statement') to be filed under the Securities Act of 1933, as
amended (the "Securities Act"), for the purpose of registering the CLC Shares
for resale on a continuous basis from time to time by the Sellers or the
Sellers' Shareholders (the "Holders"), provided, that such Registration
Statement shall be filed no later than 30 days after the Closing Date.
Thereafter Buyer will use reasonable best efforts to have the Registration
Statement become effective and cause the CLC Shares to be registered under the
Securities Act, and registered, qualified or exempted under the state securities
laws of such jurisdictions as the Holders reasonably request, as soon as is
reasonably practicable.
9.2 Expenses of Registration. All expenses incident to the Buyer's
performance of or compliance with this Section 9, including, without limitation,
all registration and filing fees (including all expenses incident to filing with
Nasdaq or any other exchange), fees and expenses of complying with securities
and blue sky laws, printing and copying expenses, fees and expenses of the
Buyer's counsel and accountants, the fees and disbursements of all independent
public accountants (including the expenses of any audit and/or "cold comfort"
letter), and any other fees and disbursements of underwriters, if any,
customarily paid by issuers or sellers of securities shall be paid by the Buyer;
provided, however, that all underwriting discounts and selling commission
applicable to CLC Shares to be registered and fees and disbursements of counsel
for the Sellers or the Sellers' Shareholders shall be borne by the Sellers and
the Sellers' Shareholders, respectively.
9.3 Furnishing of Documents. The Buyer shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses as
are contained in the Registration Statement and such other documents, including
a preliminary prospectus, as the Holders
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may reasonably request in order to facilitate the offering of the CLC Shares.
The Registration Statement and any final prospectus contained therein shall
comply as to form with the Securities Act.
9.4 Amendments and Supplements. The Buyer shall prepare and promptly file
with the Commission and promptly notify the Holders of the filing of such
amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions if,
at the time when a prospectus relating to the CLC Shares is required to be
delivered under the Securities Act, any event shall have occurred as a result of
which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Buyer shall also advise the
Holders promptly after it shall receive notice or obtain knowledge thereof, of
the issuance of any stop order by the Commission suspending the effectiveness of
the Registration Statement or the initiation or threatening of any proceeding
for that purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued. If, after a Registration Statement becomes effective, the Holders
desire that the Registration Statement be amended or the Buyer advises the
Holders that the Buyer considers it appropriate that the Registration Statement
(and all other registration statements of the Buyer then effective and
outstanding) be amended, the Holders shall suspend any further sales of the CLC
Common Stock until the Buyer advises the Holders that the Registration Statement
has been amended. Buyer shall file, and use reasonable best efforts to cause to
become effective any such amendment as soon as reasonably practicable.
9.5 Duration. The Buyer shall maintain the effectiveness of the
Registration Statement until the earlier to occur of (i) such time as the Buyer
reasonably determines that the Holders were eligible to sell all of the CLC
Shares then owned by the Holders pursuant to Rule 144 under the Securities Act
in the three month period immediately preceding the termination of the
effectiveness of the Registration Statement and (ii) two (2) years from the
Closing Date. The Buyer's obligations contained in Sections 9.1, 9.3 and 9.4
shall terminate on the earlier to occur or (i) and (ii) of this Section 9.5.
Notwithstanding any provision of this Section 9 to the contrary, if the Board of
Directors of the Buyer in its good faith judgment, determines that any
registration of CLC Shares should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other material transaction involving the Buyer or
any of its subsidiaries (a "Valid Business Reason"), (x) the Buyer may postpone
filing the Registration Statement until such Valid Business Reason no longer
exists, but in no event for more than three months and (y) in case the
Registration Statement has been filed, (1) the Buyer may withhold efforts to
cause the Registration Statement to become effective, (2) the Buyer may cause
the Registration Statement to be withdrawn and its effectiveness terminated or
(3) the Buyer may postpone amending or supplementing such registration statement
until such Valid Business Reason no longer exists, but in no event for more than
three months (such period of postponement or withdrawal under sub clause (x) or
(y) above, the "Postponement Period"); and the Buyer shall give written notice
of its determination to postpone or withdraw a registration statement, or an
amendment or supplement thereto, and of the fact that the Valid Business Reason
for such postponement or withdrawal no longer exists, in each case promptly
after the occurrence thereof; provided, however, the Buyer shall not be
permitted to postpone or withdraw a registration statement within 90 days after
the expiration of any Postponement Period; provided, further, that the Buyer
shall not postpone or withdraw the Registration Statement if the Buyer does not
postpone or withdraw all other resale registration statements, which are
effective at
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such time, or which are effective during the Postponement Period (if any). The
Holders agree that, upon receipt of any notice from the Buyer that the Buyer has
determined to postpone or withdraw any registration statement, the Sellers will
discontinue any disposition of CLC Shares pursuant to such registration
statement and, if so directed by the Buyer, will deliver to the Buyer (at the
Buyer's expense) all copies, other than permanent file copies, then in such
Holders' possession of the prospectus covering such CLC Shares that was in
effect at the time of receipt of such notice. If the Buyer shall give any notice
of withdrawal or postponement of a registration statement, or an amendment or
supplement thereto, the Buyer shall, at such time as the Valid Business Reason
that caused such withdrawal or postponement no longer exists (but in no event
later than three months after the date of the postponement or withdrawal), use
its reasonable best efforts to effect the registration or file any required
amendment or supplement thereto as soon as reasonably practicable under the
Securities Act of CLC Shares covered by the withdrawn or postponed registration
statement in accordance with Section 9.1.
9.6 Further Information. The Holders shall furnish the Buyer such
information regarding the Holders as the Buyer may reasonably request and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
9.7 Indemnification.
(a) The Buyer will indemnify and hold harmless the Holders,
any underwriter (as that term in defined in the Securities Act) for the
Holders and each person, if any, who controls the Holders or underwriter
within the meaning of the Securities Act, from and against any and all
losses, damages, liabilities, costs and expenses to which the Holders or
any such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities, costs or
expenses are caused by (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
any prospectus contained therein or any amendment or supplement thereto,
or arise out of or based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) any violation by the Buyer of any
federal, state or common law, rule or regulation applicable to the Buyer
and relating to action required of or inaction by the Buyer in connection
with any such registration; provided, however, that, the Buyer will not be
liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of any
Holder or such controlling person in writing specifically for use in
connection with such registration; provided, further, that the
indemnification provisions set forth in this Section 9.7(a) shall not
apply to amounts paid in settlement of any such loss, damage or liability
if such settlement is effected without the consent of the Buyer, which
consent shall not be unreasonably withheld.
(b) Each of the Holders, jointly and severally, will indemnify
and hold harmless the Buyer and each person, if any, who controls the
Buyer within the meaning of the Securities Act, from and against any and
all losses, damages, liabilities, costs and expenses to which the Buyer or
any such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any
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prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon (i) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished
by or on behalf of any Holder specifically for use in connection with such
registration or (ii) any violation by the Holders of any federal, state or
common law, rule or regulation applicable to the Holders and relating to
action required of or inaction by the Holders in connection with any such
registration; provided, that in no event shall any indemnity under this
Section 9.7(b) exceed the gross proceeds obtained from the sale of CLC
Shares; provided, further, that the indemnification provisions set forth
in this Section 9.7(b) shall not apply to amounts paid in settlement of
any such loss, damage or liability if such settlement is effected without
the consent of the indemnifying Holders, which consent shall not be
unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is
to be made against the indemnifying party pursuant to the provisions of
said paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability which it may have hereunder unless
the indemnifying party has been materially prejudiced thereby nor will
such failure to so notify the indemnifying party relieve it from any
liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified
party, the indemnified party or parties shall have the right to select
separate counsel to participate in the defense of such action on behalf of
such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any
legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless: (i) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence; (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action; or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 9.7 is
held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such
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proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied
by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
9.8 Rule 144. The Buyer covenants that (i) so long as the Holders own the
CLC Common Stock issued hereunder and the Buyer remains subject to the reporting
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), it will timely file the reports required to be filed by it under the
Securities Act or the Exchange Act (including, but not limited to, the reports
under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph
(c)(1) of Rule 144 under the Securities Act) and (ii) will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Holder to sell CLC Shares without registration under
the Securities Act subject to Section 12 hereof and within the limitations of
the exemptions provided by (A) Rules 144 and 145 under the Securities Act, as
such Rules may be amended from time to time, or (B) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Buyer will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. TERMINATION.
10.1 Termination. Notwithstanding anything herein or elsewhere to the
contrary, this Agreement may be terminated and the transactions contemplated
hereunder abandoned:
(a) by the Buyer:
(i) if the Closing Date shall not have taken place on or prior
to December 31, 1997;
(ii) at any time prior to the Closing Date if:
(x) a material condition to the Buyer's performance
under this Agreement or a covenant of the Sellers or Sellers' Shareholders
contained herein shall not be fulfilled on or before the Closing Date or on such
other date specified for the fulfillment of such covenant or condition; or
(y) a default or breach of this Agreement including any
breach of any representation or warranty is made by the Sellers or Sellers'
Shareholders; or
(iii) if, at any time, within thirty (30) days of this
Agreement the Buyer is not satisfied with the results of its review of, and due
diligence investigation with respect to, the Business.
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(a) by the Sellers:
(i) if the Closing Date shall not have taken place on or prior
to December 31, 1997; or
(ii) at any time prior to the Closing Date if:
(x) a material condition to the Sellers' performance
under this Agreement or a covenant of the Buyer contained herein shall not be
fulfilled on or before the Closing Date or on such other date specified for the
fulfillment of such covenant or condition; or
(y) a material default or breach of this Agreement
including a breach of any representation or warranty is made by the Buyer.
10.2 Additional Right of Buyer to Terminate. Within fifteen (15) days
after execution of this Agreement, Buyer and/or Buyer's representative (with
Sellers and/or Sellers' representative, if Sellers so desire) shall meet with
officials from ED's Initial Participation Branch ("IPB") to inform IPB of this
Agreement and determine whether IPB reasonably anticipates that Buyer will be
able to obtain Certification for the BEC Institution subsequent to the Closing
Date. If, on the basis of the above-described meeting, Buyer reasonably believes
that Buyer will not be able to obtain Certification for the BEC Institution
under Buyer's ownership at any time or in a timely manner, then notwithstanding
any other provision of this Agreement to the contrary, Buyer may elect to
terminate this Agreement by notice to the Sellers given not less than fifteen
(15) days subsequent to the initial meeting with ED, including in such notice
the basis for the belief upon which the election is made.
10.3 Effect of Termination. In the event of the termination of this
Agreement pursuant to either Section 10.1 or Section 10.2, this Agreement shall
forthwith become void, and there shall be no liability or obligation on the part
of any party hereto; provided, however, the provisions of this Section 10.3, and
Sections 6.3 and 14.7 shall remain in full force and effect and survive any
termination of this Agreement.
11. INDEMNITY
11.1 Indemnification by Sellers and Sellers' Shareholders. Sellers and
Sellers' Shareholders shall, jointly and severally, defend, protect, indemnify
and hold harmless Buyer and its corporate affiliates, their officers, directors,
employees, shareholders, and agents, their successors and assigns (other than
the Sellers' Shareholders), and each of them (hereinafter collectively called
"Buyer's Indemnitees") against and in respect of any and all claims, losses,
damages, liabilities, costs and expenses, including reasonable attorneys' fees
and amounts paid in settlement (all of the foregoing being hereinafter called
"Indemnified Losses"), suffered or incurred by any Buyer's Indemnitee by reason
of, or arising out of: (i) any misrepresentation, breach of warranty or breach
or non-fulfillment of any agreement of the Sellers or the Sellers' Shareholders,
or any of them, contained in this Agreement or in any Schedule or other
instrument or document furnished or to be furnished by the Sellers or Sellers'
Shareholders, hereunder, including without limitation, any documents furnished
at the Closing; (ii) any environmental issues or any Environmental and Safety
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Requirements arising from or relating to the operation of the Business by the
Sellers prior to the Closing Date; (iii) any claim by any employee or former
employee of the Sellers or the Institutions relating to employment on or before
the Closing Date; (iv) any claim by any party arising under the bulk transfer
provisions of any applicable law; (v) any claim relating to Taxes; (vi) the
specific litigation matters set forth on Schedule 4.14; (vii) the business,
operations or assets of the Sellers on or before the Closing Date (except for
the Assumed Liabilities other than defaults existing prior to the Closing),
including any Title IV Program or other Financial Assistance liabilities related
to the operation of the Institutions prior to Closing and (viii) any and all
damages incident to any of the foregoing or to the enforcement of this Section
11.1.
11.2 Indemnification by Buyer. Buyer shall defend, indemnify and hold
harmless the Sellers, their officers, directors, employees, agents, and
shareholders, their successors and assigns, and each of them (hereinafter
collectively called "Sellers' Indemnitees") against and in respect of any and
all Indemnified Losses suffered or incurred by any Sellers' Indemnitee by reason
of, or arising out of: (i) any misrepresentation, breach of warranty or breach
or non-fulfillment of any agreement of Buyer contained in this Agreement or in
any Schedule or other instrument or document furnished or to be furnished by the
Buyer, hereunder, including without limitation, any documents furnished at the
Closing; (ii) Buyer's failure to pay or perform the Assumed Liabilities or
(iii), with respect to liabilities to third parties, Buyer's operation of the
Business after Closing.
11.3 Limitations. The indemnification obligations of the Sellers and
Sellers' Shareholders in the aggregate (on the one hand) and the Buyer (on the
other hand) under this Section 11 shall be limited to an aggregate amount of
$4,936,000. In the event of Indemnified Losses arising out of or resulting from
a breach of any representation, warranty, covenant or agreement by the Buyer,
the Sellers, or the Sellers' Shareholders, there shall be no liability for
Indemnified Losses (other than (i) any adjustments to Purchase Price pursuant to
Section 2.6, or (ii) failure to pay any Assumed Liabilities) unless, and solely
to the extent that, the aggregate amount of Indemnified Losses for the Sellers
and Sellers' Shareholders as a whole (on the one hand) or the Buyer (on the
other hand) exceeds $50,000.
11.4 Survival.
(a) The indemnification obligations under this Section 11, or under
any certificate or writing furnished in connection herewith, shall terminate as
follows:
(i) with respect to claims relating to or arising out of
specifically identified liabilities set forth on Schedule 11.4 (to be provided
by the Buyer prior to Closing): (x) the length of the appropriate statute of
limitations if the Claim is related to Taxes, (y) five (5) years after the
Closing Date if the Claim is related to the cost of investigating, containing,
removing, or remediating a release of Hazardous Material into the environment,
or (z) three (3) years after the Closing Date for any other Claim not covered by
clause (a)(i)(x) or (y) of this Section 11.4; or
(ii) with respect to the specific litigation matters
identified on Schedule 4.14, the date upon which such matters are fully and
finally adjudicated in a non-appealable manner; or
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(iii) with respect to claims other than those specified in
clauses (a)(i) or (ii) that are of a nature and of sufficient materiality
typically expected to be encountered in the audit process, on the completion of
the first independent audit of financial statements containing combined
operations of the Buyer and the Assets; or
(iv) with respect to all claims other than those referred to
in clause (a)(i), (ii) or (iii) of this Section 11.4, twelve (12) months after
the Closing (the "First Anniversary"); or
(b) Notwithstanding Section 11.4(a), the parties' indemnification
obligation with respect to claims or demands pending as of the expiration of
relevant dates described in clause (a) of this Section 11.4 shall continue until
the final resolution of such claims or demands.
11.5 Exclusive Remedy. Except as provided in Section 9.7, the
indemnification provided in this Section 11, subject to the limitations set
forth herein, shall be the exclusive post-closing remedy available to the Buyer;
provided, however, that nothing in this Section 11.5 or elsewhere in this
Agreement shall prevent the Buyer from bringing an action based upon fraud
and/or deceit against the Sellers or the Sellers' Shareholders.
11.6 Notices, Participation, and Settlement. Promptly after receipt by any
party of notice of a claim or commencement of any action (legal or
administrative) which, if successful, might require another party hereto to
indemnify such party, the party entitled to indemnification will give notice
thereof to the other party or parties; provided, that the failure of any party
to give such written notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent that the indemnifying party is
actually prejudiced by such failure. If a claim is so noticed, the indemnifying
party shall be entitled to participate in the resolution of such claim, and if
legal proceedings are commenced against any indemnified party, the indemnifying
party shall be entitled to participate in, but not to assume, the defense
thereof with counsel of its choice; provided, that in all events the indemnified
party shall control the negotiation, defense and settlement of any such claim.
With regard to claims of third parties for which indemnification is payable
hereunder, such indemnification shall be paid by the indemnifying party upon the
earlier to occur of: (i) the entry of a judgment against the indemnified party
and the expiration of any applicable appeal period, or if earlier, five days
prior to the date that the judgment creditor has the right to execute on the
judgment; (ii) the entry of an un-appealable judgment or final appellate
decision against the indemnified party; (iii) the issuance of an administrative
decision against the indemnified party and the expiration of any applicable
appeal period; or (iv) a settlement of the claim. Notwithstanding the foregoing,
no settlement of a claim shall be made without the consent of the indemnified
party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, expenses by counsel to the indemnified party shall be reimbursed as
invoiced by such counsel to the indemnifying party. With regard to other claims
for which indemnification is payable hereunder, such indemnification shall be
paid promptly by the indemnifying party upon demand by the indemnified party.
Any claim for indemnity shall be reduced by the amount of any insurance proceeds
received by the indemnified party.
11.7 Offset. In addition to any other rights of Buyer to recover
Indemnified Losses hereunder, Buyer shall have the right to offset any
Indemnified Loss incurred hereunder against the Escrow Fund in accordance with
the Escrow Agreement.
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12. SECURITIES LAW MATTERS.
The parties agree as follows with respect to the sale or other disposition
after the Closing Date of the CLC Shares:
12.1 Disposition of Shares. The Sellers and the Sellers' Shareholders
represent and warrant that the CLC Shares being acquired by them hereunder are
being acquired and will be acquired for their own respective accounts and will
not be sold or otherwise disposed of, except pursuant to: (a) an exemption from
the registration requirements under the Securities Act, which does not require
the filing by the Buyer with the Commission of any registration statement,
offering circular or other document, in which case, the Sellers or the Sellers'
Shareholders shall first supply to the Buyer an opinion of counsel (which
counsel and opinions shall be satisfactory to the Buyer) that such exception is
available; or (b) an effective registration statement filed by the Buyer with
the Commission under the Securities Act. In connection with any opinion
delivered pursuant to Section 12.1(a), the Buyer shall, if requested, certify to
its transfer agent the matters set forth in Rule 144(c) under the Securities
Act.
12.2 Agreement to Retain Shares. The Sellers agree not to transfer, sell,
or otherwise dispose of or direct or cause the sale, transfer or other
disposition of, or reduce the Sellers' risk relative to, any of the CLC Shares
or CLC Common Stock held by the Sellers or on the Sellers' behalf, whether owned
on the date hereof or after acquired, within the 30 days prior to the Closing
Date. The Sellers further agree not to transfer, sell or otherwise dispose of,
or direct or cause the sale, transfer or other disposition of, or reduce the
Sellers' risk relative to, any CLC Common Stock held by the Sellers or on the
Sellers' behalf or received by the Sellers or on the Sellers' behalf in or as a
result of this Agreement or otherwise, until after the date the Buyer shall have
publicly released a report in the form of a quarterly earnings report,
registration statement filed with the Commission, a report filed with the
Commission of Form 10-K, 10-Q or 8-K or any other public filing, statement or
public announcement which included the combined financial results (including
combined sales and net income) of the Buyer and the Assets for a period of at
least 30 days of combined operations of the Buyer and the Assets following the
Closing Date.
12.3 Trading in CLC Common Stock. Except as otherwise expressly consented
to by the Buyer, from the date of this Agreement until the Closing Date, the
Sellers and the Sellers' Shareholders (and any Affiliates thereof) will not
directly or indirectly purchase or sell (including short sales) any shares of
CLC Common Stock in any transaction effected on the Nasdaq Stock Market, or
otherwise.
12.4 Legend. The certificates representing the CLC Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR IN
ACCORDANCE WITH AN OPINION OF
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COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH THE
SECURITIES AND EXCHANGE COMMISSION'S ACCOUNTING SERIES RELEASES 130 AND
135.
The Buyer may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
13. COVENANT NOT TO COMPETE
13.1 Non-Competition. For a period of three (3) years after the Closing
Date, neither the Sellers nor either of Sellers' Shareholders shall directly or
indirectly:
(a) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than two percent (2%) of the
total outstanding stock of a publicly held company) own, manage, operate, join,
control, be employed by, or participate in the ownership, management, operation
or control of any Competing Enterprise (as defined in Section 13.2 of this
Agreement);
(b) recruit, solicit or induce, or attempt to induce, any employee
or employees of the Buyer to terminate their employment with, or otherwise cease
their relationship with, the Buyer;
(c) solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, of the Buyer; or
(d) publish any statement or make any statement (under circumstances
reasonably likely to become public) critical of the Buyer, or in any way
adversely affecting or otherwise maligning the reputation of the Buyer or any of
its Affiliates.
13.2 Competing Enterprises. For purposes of Section 13.1 of this
Agreement, the term "Competing Enterprise" shall mean any person, corporation,
partnership or other entity engaged in the technology, education or training
field and which is in competition with the business of the Buyer as conducted by
the Buyer from time to time. The phrase "engaged in any business" includes the
conduct of business in any respect, including, without limitation, sales
presentations, entering into contracts, and the billing or receipt of payment,
services or goods, and in regard to any person, including, without limitation,
the United States federal government, and any state government, and any
department or agency thereof.
13.3 Enforceability. If any restriction set forth in Section 13.1 of this
Agreement is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall then be interpreted to
extend only over the maximum period of time, range of activities or geographic
area as to which it may be enforceable.
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13.4 Essential Elements. It is understood by the parties hereto that the
covenants contained in this Section 13 are essential elements of this Agreement
and that, but for the agreement of the Sellers and Sellers' Shareholders to
comply with such covenants, the Buyer would not have agreed to enter into this
Agreement. The Sellers and Sellers' Shareholders and the Buyer have
independently consulted with their respective counsel and have been advised
concerning the reasonableness and propriety of such covenants with specific
regard to the nature of the business conducted by the Buyer. The Sellers and
Sellers' Shareholders hereby agree that all covenants contained in this Section
13 are reasonable and valid and waives all defenses to the strict enforcement
hereof by the Buyer.
14. MISCELLANEOUS
14.1 Successors, Assigns and Third Parties. This Agreement shall inure to
the benefit of and be binding upon Sellers and its respective successors and
assigns; provided, however, that any liquidation of BEC and/or CTG by the
Sellers' Shareholders may occur only after the release of the quarterly earnings
report, as set forth, as set forth in Section 12.2 herein. This Agreement or any
of the severable rights and obligations inuring to the benefit or to be
performed by Buyer hereunder may be assigned only with the prior written consent
of the Sellers or Sellers' Shareholders, which consent shall not be unreasonably
withheld, by Buyer to a third party, in whole or in part, and to the extent so
assigned, Sellers and Sellers' Shareholders hereby recognize said assignee as
the party-in-interest with respect to the rights and obligations assigned and
agrees to look solely to said assignee for the purpose of conferring benefits,
or requiring performance of obligations, assigned to it by Buyer. Except as
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person, firm or corporation, other than
the parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.2 Governing Law. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive laws
of the State of Delaware, disregarding principles of conflict of laws and the
like.
14.3 Specific Enforcement. All of the parties hereto acknowledge that the
parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any of the parties hereto, the
other parties shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without showing any actual damage, or a
decree for specific performance, in accordance with the provisions hereof.
14.4 Severability. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant and/or
provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect; provided, however that if such unlawful clause is so
material to the party for whose benefit the clause was originally included so
that such party would not have entered into this Agreement without such unlawful
clause, the severability of such clause shall be arbitrated pursuant to Section
14.15 hereof.
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14.5 Certain Words. Words such as "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular Section or subsection of this Agreement. Whenever the word
"including" is used herein, it shall be deemed to be followed by the words
"without limitation."
14.6 Notices. Except as otherwise expressly provided herein, any notice,
consent, or other communication required or permitted to be given hereunder
shall be in writing, delivered by certified mail or a national overnight
delivery services and shall be deemed to have been given when received, and
shall be addressed as follows:
(a) If to Buyer:
Computer Learning Centers, Inc.
11350 Random Hills Road, Suite 240
Fairfax, VA 22030
Attention: Mr. Charles L. Cosgrove
with a copy to:
Tucker, Flyer & Lewis
1615 L Street NW
Washington, DC 20036-5601
Attention: Jack L. Lewis
Lawrence T. Yanowitch
(b) If to Sellers of to Sellers' Shareholders:
David F. Carney and Sandra E. Carney
14 Stuyvesant Road
Montvale, NJ 07645
with a copy to:
Cole, Schotz, Meisel, Forman & Leonard
Court Plaza North
25 Main Street
P.O. Box 800
Hackensack, New Jersey 07602-0800
Attention: Henry M. Matri
or at such other address or addresses as the party addressed may from time to
time designate in writing. Any communication dispatched by telegram or telex
shall be confirmed by letter.
14.7 Expenses. Each party has and will pay the fees, expenses and
disbursements incurred by such party and its agents, representatives,
accountants and counsel in connection with
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the subject matter of this Agreement. Notwithstanding the previous sentence, if
the transactions contemplated by this Agreement are consummated, at the Closing
the Buyer shall pay the actual fees, expenses and disbursements of the Sellers,
and their agents, representatives, financial advisers, accountants and counsel
incurred in connection with the subject matter of this Agreement (the
"Transaction Expenses") to the extent that the amount of the Transaction
Expenses has been identified as of the Closing Date and notice thereof has been
given to the Buyer (the "Closing Date Transaction Expenses"); provided, however,
that the Closing Date Transaction Expenses shall not be greater than One Hundred
Sixty Thousand Dollars ($160,000). The Sellers shall pay all Transaction
Expenses other than Closing Date Transaction Expenses.
14.8 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee or partner of any party hereto or any
other person or entity.
14.9 Mutual Drafting. This Agreement is the mutual product of the parties
hereto, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of each of the parties, and shall not be construed for
or against any party hereto.
14.10 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the Tax or
securities consequences of the transactions contemplated by this Agreement and
is not relying on any representation or statements made by the other party as to
such Tax and securities consequences.
14.11 Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
14.12 Gender. Unless the context clearly indicates otherwise, where
appropriate the singular shall include the plural and the masculine shall
include the feminine or neuter, and vice versa, to the extent necessary to give
the terms defined herein and/or the terms otherwise used in this Agreement the
proper meanings.
14.13 Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
14.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute the same agreement.
14.15 Arbitration.
(a) Subject to Section 14.3 hereof, all claims or disputes hereunder
shall be submitted to arbitration under this Agreement ("Arbitrated Disputes")
shall be resolved by binding
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arbitration administered by the American Arbitration Association ("AAA") in
Washington, D.C. and, except as expressly provided in this Agreement, shall be
conducted in accordance with the Expedited Procedures under the Commercial
Arbitration Rules of the AAA, as such rules may be amended from time to time
(the "Rules"). The hearing locale shall be Washington, D.C. A single, neutral
arbitrator (the "Arbitrator") shall be appointed by the AAA, within five (5)
days after an Arbitrated Dispute is submitted for arbitration under this Section
14.15, to preside over the arbitration and resolve the Arbitrated Dispute. The
Arbitrator shall be selected from the AAA's Commercial Panel, and shall be
qualified to practice law in at least one jurisdiction in the United States and
have expertise in the interpretation of commercial contracts. The parties shall
have three (3) days to object in writing to the appointment of the Arbitrator,
the sole basis for such objection being an actual conflict of interest. The AAA,
in its sole discretion, shall determine within three (3) days the validity of
any objection to the appointment of the Arbitrator based on an actual conflict
of interest or disputes.
(b) The Arbitrator's decision (the "Decision") shall be binding, and
the prevailing party may enforce the Decision in any court of competent
jurisdiction.
(c) The parties shall use their best efforts to cooperate with each
other in causing the arbitration to be held in as efficient and expeditious a
manner as practicable, including but not limited to, providing such documents
and making available such of their personnel as the Arbitrator may request, so
that the Decision may be reached timely. The Arbitrator shall take into account
the parties' stated goal of expedited proceedings in determining whether to
authorize discovery and, if so, the scope of permissible discovery and other
hearing and pre-hearing procedures.
(d) The authority of the Arbitrator shall be limited to deciding
liability for, and the proper amount of, a claim, and the Arbitrator shall have
no authority to award punitive damages. The Arbitrator shall have such powers
and establish such procedures as are provided for in the Rules, so long as such
powers and procedures are consistent with this Section 14.15 and are necessary
to resolve the Arbitrated Dispute within the time periods specified in this
Agreement. The Arbitrator shall render a Decision within thirty (30) days after
being appointed to serve as Arbitrator (or such shorter period of time, to the
extent reasonable or practicable, as may be appropriate to conform to the
expiration of indemnities set forth in Section 11), unless the parties otherwise
agree in writing or the Arbitrator makes a finding that a party has carried the
burden of showing good cause for a longer period; provided, however, that in no
event may the Arbitrator, without the consent of each of the Sellers'
Shareholders and the Buyer, extend the time for rendering a Decision or
otherwise delay a Decision to a date that is later than the First Anniversary.
14.16 Facsimile Signatures. This Agreement and any document or schedule
required hereby may be signed by facsimile signature which shall be considered
legally binding for all purposes.
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IN WITNESS WHEREOF, the parties hereto have caused their signatures to be
affixed to this Agreement as of the date first above written.
SELLERS
Boston Education Corporation, a Delaware
corporation
By: /s/ David F. Carney
-----------------------------------------
Name: David F. Carney
Title: President/CEO
CLC Training Group, a Massachusetts
corporation
By: /s/ David F. Carney
-----------------------------------------
Name: David F. Carney
Title: President/CEO
SELLERS' SHAREHOLDERS
/s/ David F. Carney
--------------------------------------------
Name: David F. Carney
/s/ Sandra E. Carney
--------------------------------------------
Name: Sandra E. Carney
BUYER
Computer Learning Centers, Inc.,
a Delaware corporation
By: /s/ Charles L. Cosgrove
-----------------------------------------
Name: Charles L. Cosgrove
Title: VP-CFO
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Hale and Dorr LLP
Counsellors at Law
1455 Pennsylvania Avenue, N.W., Washington, DC 20004
202-942-8400 fax 202-942-8484
EXHIBIT 5
January 22, 1998
Computer Learning Centers, Inc.
11350 Random Hills Road, Suite 240
Fairfax, VA 22030
Ladies and Gentlemen:
We have assisted in the preparation of the Registration Statement on
Form S-3 (the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the registration of an aggregate of 200,148 shares of common stock, $.01 par
value per share (the "Shares"), of Computer Learning Centers, Inc., a
Delaware corporation (the "Company"), held by certain stockholders of the
Company.
We have examined the Certificate of Incorporation and By-laws of the
Company and all amendments thereto and have examined and relied on the
originals, or copies certified to our satisfaction, of such records of
meetings, written actions in lieu of meetings, or resolutions adopted at
meetings, of the directors of the Company and such other documents and
instruments as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
In our examination of the foregoing documents, we have assumed (i) the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals, (ii) the conformity to the originals of all documents
submitted to us as certified or photostatic copies, and (iii) the
authenticity of the originals of the latter documents.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly and validly authorized and issued and are fully paid
and non-assessable.
We hereby consent to the use of our name in the Registration Statement
and in the related Prospectus under the caption "Legal Matters" and to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Hale and Dorr LLP
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EXHIBIT 10
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement") made as of the 15th day of
January, 1998 by and between COMPUTER LEARNING CENTERS, INC., a Delaware
corporation (the "Company"), and CHARLES L. COSGROVE (the "Executive").
The Executive is presently employed by the Company as its Vice President
and Chief Financial Officer.
The Board of Directors of the Company (the "Board") desires to set forth
the nature and amount of compensation and other benefits to be provided to
the Executive and any of the rights of the Executive in the event of his
termination of employment with the Company. The Executive is willing to
commit himself to continue to serve the Company, on the terms and conditions
herein provided.
In order to effect the foregoing, the Company and the Executive wish to
enter into this Agreement under the terms and conditions set forth below.
Accordingly, in consideration of the promises and the respective covenants
and agreements of the parties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Employment. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to serve the Company,
on the terms and conditions set forth herein.
2. Term. The term of Executive's employment under Section 1 will
terminate upon the termination of Executive's employment with the Company for
any reason whatsoever. No such termination shall affect any of the Company's
other obligations under this Agreement arising at or after such termination
of employment.
3. Position and Duties. The Executive shall serve as Vice President
and Chief Financial Officer of the Company and shall have such
responsibilities and authority as may normally be exercised by a chief
financial officer of a company.
4. Place of Performance. The Executive shall be based at the current
principal executive offices of the Company in Northern Virginia, or in the
Company's headquarters, provided that such headquarters is not more than
thirty-five (35) miles from the location of the Company's principal executive
offices on the date hereof.
5. Compensation and Related Matters.
(a) Base Salary. During the Executive's employment with the
Company, the Company shall pay to the Executive a salary at a rate of not
less than One Hundred Sixty-Five Thousand Dollars ($165,000) per annum in
equal installments as nearly as practicable on the
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normal payroll periods for employees of the Company generally (the "Base
Salary"). The Base Salary may be increased from time to time and, if so
increased, shall not thereafter be decreased during the term of this
Agreement.
(b) Bonus. The Executive shall be eligible to receive an annual
bonus (the "Annual Bonus") payable under the Company's bonus plan in
accordance with the bonus criteria established by the Board for the Executive
on an annual basis.
(c) Expenses. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance with
the policies and procedures established by the Company.
(d) Benefits. During the term of the Executive's employment
hereunder, the Company shall maintain in full force and effect, and the
Executive shall be entitled to continue to participate in, all of its
employee benefit plans and arrangements in effect on the date hereof in which
the Executive participates or receives benefits, or plans or arrangements
providing the Executive with at least equivalent benefits thereunder. The
Company shall not make any changes in such plans and arrangements which would
adversely affect the Executive's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all officers of the Company
and does not result in a proportionately greater reduction in the rights of
or benefits to the Executive as compared with any other officers of the
Company. The Executive shall be entitled to participate in or receive
benefits under any employee benefit plan or arrangement made available by the
Company in the future to its officers and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of any amounts payable to the Executive
pursuant to this Section 5.
6. Termination and Definitions.
(a) Cause. This Agreement shall immediately be terminated and
neither party shall have any future obligation hereunder, except for the
Company's obligations in Section 7 hereof, and except for the Executive's
obligations in Section 8 hereof, if the Executive's employment is terminated
for Cause.
(b) Termination by the Executive. The Executive may terminate his
employment hereunder for Good Reason.
(c) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive shall be communicated by
written Notice of Termination to the other party hereto.
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(d) Definitions.
(i) For purposes of this Agreement, termination "for Cause"
shall arise where termination results from theft or dishonesty in the conduct
of the Company's business, or intoxication while on duty, or conviction of a
felony, in each case having a material adverse effect on the business of the
Company.
(ii) For purposes of this Agreement, "Good Reason" shall mean
(A) a Change in Control of the Company (as defined below), (B) a decrease in
the total amount of the Executive's Base Salary below its level in effect on
the date hereof, (C) a reduction in the importance of the Executive's job
responsibilities without the Executive's consent or (D) a geographical
relocation of the Executive without his consent.
(iii) For purposes of this Agreement, a "Change in Control" of
the Company shall be deemed to have occurred if (A) any person (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act"), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) of more of the combined
voting power of the Company's then outstanding securities, (B) during any
period of two (2) consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof, unless the election
of each director who was not a director at the beginning of such period has
been approved in advance by directors representing at least two-thirds of the
directors then in office who were directors at the beginning of the period,
(C) the shareholders of the Company approve a merger or consolidation
involving the Company resulting in a change of ownership of a majority of the
outstanding shares of capital stock of the Company, or (D) the shareholders
of the Company approve a plan of liquidation or dissolution of the Company or
the sale or disposition by the Company of all or substantially all of the
Company's assets.
(iv) For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
7. Compensation upon Termination.
(a) Termination for Cause or Resignation Without Good Reason. If
(i) the Executive's employment shall be terminated for Cause, or (ii) the
Executive voluntarily resigns from the employ of the Company and Good Reason
shall not have occurred, then the Company shall pay the Executive his Base
Salary through the date of delivery to him of a Notice of Termination at the
rate then in effect at the time and date the Notice of Termination is
delivered, and the Company shall have no further obligations to the Executive
under this Agreement.
(b) Termination Without Cause or Resignation for Good Reason. If
the
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Company shall terminate the Executive's employment other than pursuant to
section 6(a) hereof (it being understood that a purported termination
pursuant to section 6(a) hereof, which is disputed and finally determined not
to have been pursuant to section 6(a) shall be a termination by the Company
pursuant to this section 6(b)), then:
(i) the Company shall pay to the Executive (A) his Base
Salary through the date of termination at the rate in effect at the time
Notice of Termination is delivered, plus (B) his Annual Bonus pro rated
through the date of termination; and
(ii) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the date of termination, the Company
shall pay on the date of termination, as severance pay to the Executive, a
lump sum payment in an amount equal to one (1) times the Executive's Base
Salary in effect as of the date of termination.
(c) Termination Upon a Change in Control. If there is a Change in
Control of the Company or there has been a public announcement of a Change in
Control of the Company (provided, however, that consummation of the Change in
Control of the Company shall be a condition precedent to the effectiveness of
this provision) and at any time thereafter the employment of the Executive
under this Agreement is terminated other than pursuant to section 6(a) hereof
by the Company or a successor entity, then:
(i) the Company shall pay to the Executive (A) his Base
Salary through the date of termination at the rate in effect at the time
Notice of Termination is given, plus (B) his Annual Bonus pro rated through
the date of termination; and
(ii) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the date of termination, the Company
shall pay on the date of termination as severance pay to the Executive, a
lump sum payment in an amount equal to (A) one and one half (1 1/2) times the
Executive's Base Salary in effect as of the date of termination plus (B) one
and one half (1 1/2) times the Annual Bonus paid to the Executive in the
prior fiscal year of the Company or the current year target bonus, which ever
is larger.
(d) Continuation of Benefit Plans. Upon any termination of the
Executive's employment other than pursuant to section 6(a) hereof, the
Company shall maintain in full force and effect for the continued benefit of
the Executive for twelve (12) months, or eighteen (18) months if there has
previously occurred a Change in Control of the Company, all employee benefit
plans and programs in which the Executive was entitled to participate.
(e) Participation in Benefit Plans after Termination of
Employment. The Executive shall be entitled to continue to participate in
any benefit plan or program of the Company for twelve (12) months after the
expiration of the period provided for in 7(d), provided, that the Executive
pays the direct cost of any such benefit plan or program.
8. Covenants Not to Compete or Hire Employees. It is recognized and
understood by the parties hereto that Executive, through Executive's
association with the Company as an employee, shall acquire a considerable
amount of knowledge and goodwill with respect to the
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business of the Company, which knowledge and goodwill are extremely valuable
to the Company and which would be extremely detrimental to the Company if
used by Executive to compete with the Company. It is, therefore, understood
and agreed by the parties hereto that, because of the nature of the business
of the Company, it is necessary to afford fair protection to the Company from
such competition by Executive. Consequently, as a material inducement to the
Company to enter into this Agreement, Executive covenants and agrees that for
the period commencing with the date hereof and ending one (1) year after
Executive's termination of employment with the Company, Executive shall not
engage, directly, indirectly or in concert with any other person or entity,
in the information technology training industry in the geographical area of
the contiguous forty-eight (48) states of the United States. Executive
further covenants and agrees that for the period commencing on the date of
Executive's termination of employment for any reason whatsoever and ending
one (1) year after Executive's termination of employment with the Company,
Executive shall not, directly or indirectly, hire or engage or attempt to
hire or engage any individual who shall have been an employee of the Company
at any time during the one (1)-year period prior to the date of Executive's
termination of employment with the Company, whether for or on behalf of
Executive or for any entity in which Executive shall have a direct or
indirect interest (or any subsidiary or affiliate of any such entity),
whether as a proprietor, partner, co-venturer, financier, investor or
stockholder, director, officer, employer, employee, servant, agent,
representative or otherwise.
9. Successors; Binding Agreement.
(a) Successors. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company
as herein before defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
Section 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(b) Binding Agreement. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive
should die while any amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate.
10. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
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If to the Executive: Charles L. Cosgrove
9310 Robnel Place
Vienna, Virginia 22182
If to the Company: 11350 Random Hills Road
Suite 240
Fairfax, Virginia 22030
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
11. Prior Agreement. All prior agreements between the Company and the
Executive with respect to the employment of the Executive are hereby
superseded and terminated effective as of the date hereof and shall be
without further force or effect.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing signed by the Executive and duly authorized officer of the
Company. No waiver by either party hereto at any time of any breach by the
other hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Virginia.
13. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
14. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators, in Washington, D.C., in
accordance with the rules of the American Arbitration Association then in
effect. The expense of such arbitration shall be borne by the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written. COMPUTER LEARNING CENTERS, INC.
By: /s/ Harry Gaines
-------------------------------------
Harry Gaines, Chairman of the Board
EXECUTIVE:
/s/ Charles L. Cosgrove
-------------------------------------
Charles L. Cosgrove
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EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated March 14, 1997, except for Note 2 which was as of March 24, 1997, which
appears on page 28 of the 1997 Annual Report to Shareholders of Computer
Learning Centers, Inc., which is incorporated by reference in Computer
Learning Centers, Inc.'s Annual Report on Form 10-K for the year ended
January 31, 1997. We also consent to the incorporation by reference of our
report on the Financial Statement Schedules, which appears on page F-2 of
such Annual Report on Form 10-K. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
New York, New York
January 21, 1998
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