MEMBERSHIP INTEREST PURCHASE AGREEMENT


BY AND AMONG

 

ADTALEM GLOBAL EDUCATION INC.

 

 

AND



SAN JOAQUIN VALLEY COLLEGE, INC.



DATED AS OF JUNE 28, 2018

 

 

 

 

ARTICLE 1 DEFINITIONS		1
1.1	Definitions	1
1.2	Interpretive Provisions	14
ARTICLE 2 PURCHASE PRICE AND PAYMENT; PURCHASE AND SALE OF THE MEMBERSHIP INTERESTS		15
2.1	Calculation of the Purchase Price	15
2.2	Sale of the Membership Interests	15
2.3	Transactions to be Effected at the Closing	16
2.4	Purchase Price Adjustment	17
ARTICLE 3 THE CLOSING		20
3.1	Closing; Closing Date	20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER		20
4.1	Organization	20
4.2	Binding Obligations	20
4.3	No Defaults or Conflicts	21
4.4	No Governmental Authorization Required	21
4.5	Capitalization	21
4.6	Litigation	21
4.7	Brokers	21
4.8	Exclusivity of Representations	21
ARTICLE 5 REPRESENTATIONS AND WARRANTIES RELATING TO THE CARRINGTON ENTITIES		22
5.1	Organization and Qualification	22
5.2	Capitalization of the Carrington Entities	22
5.3	No Subsidiaries	22
5.4	Binding Obligation	22
5.5	No Defaults or Conflicts	22
5.6	No Governmental Authorization Required	23
5.7	Financial Statements; No Undisclosed Liabilities; Financial Accounts	23
5.8	Intellectual Property	24
5.9	Compliance with the Laws	25
5.10	Contracts	26
5.11	Litigation	27
5.12	Taxes	28
5.13	Employee Benefit Plans	29
5.14	Employee and Labor Matters	31
5.15	Environmental Compliance	32
5.16	Insurance	32
5.17	Real Property	32
5.18	Affiliate Transactions	33
5.19	Absence of Certain Developments	33

5.20	Brokers	34
5.21	Education Regulatory Matters	34
5.22	No Other Representations And Warranties	37
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER		38
6.1	Organization	38
6.2	Binding Obligation	38
6.3	No Defaults or Conflicts	38
6.4	No Authorization or Consents Required	38
6.5	Sufficient Funds; Solvency	39
6.6	Brokers	39
6.7	Litigation	39
6.8	Education Regulatory Matters	39
6.9	Acknowledgements by the Purchaser	40
ARTICLE 7 COVENANTS		41
7.1	Conduct of the Carrington Entities Prior to the Closing	41
7.2	Regulatory Filings; Consents; Etc.	44
7.3	Third Party Approvals and Permits	46
7.4	Access to Information; Confidentiality	46
7.5	Use of Adtalem Name; License to Use the Carrington Marks	47
7.6	Books and Records; Officer and Director Indemnification	48
7.7	Legal Proceedings; Production of Witness; Privileged Matters	48
7.8	Schedule Supplements	49
7.9	Employee Matters	49
7.10	Post-Closing Financial Statements	50
7.11	Mail and Other Communications; Accounts	50
7.12	Public Announcements	51
7.13	Transition of System Operations; Lease Transfers; Affiliate Transactions	51
7.14	System Guarantees	53
7.15	Appropriate Actions; Further Assurances	53
7.16	General Release	53
7.17	Post-Closing Compliance Audits	55
ARTICLE 8 TAX MATTERS		55
8.1	Tax Returns for Periods Ending on or Before the Closing Date Filed after the Closing Date and Straddle Periods	55
8.2	Refunds	56
8.3	No Closing Date Actions	56
8.4	Tax Cooperation	56
8.5	Other Actions	57
8.6	Transfer Taxes	57
ARTICLE 9 CONDITIONS TO CLOSING		57
9.1	Conditions to the Parties’ Obligations	57
9.2	Conditions to the Obligations of the Purchaser	58
9.3	Conditions to the Obligations of the Seller	59
9.4	Frustration of Closing Conditions	59
ARTICLE 10 TERMINATION		59
10.1	Termination; Effect of Termination	59

ARTICLE 11 INDEMNIFICATION		61
11.1	Survival	61
11.2	Indemnification by the Seller; Indemnification by the Purchaser	61
11.3	Limitations on Indemnification	61
11.4	Indemnification Claim Process	63
11.5	Indemnification Procedures for Non-Third Party Claims	64
11.6	Exclusive Remedy	64
11.7	Tax Treatment of Indemnity Payments	65
11.8	Subrogation	65
ARTICLE 12 MISCELLANEOUS		65
12.1	Expenses	65
12.2	Amendment	65
12.3	Entire Agreement	65
12.4	Headings	65
12.5	Notices	65
12.6	Exhibits and Schedules	66
12.7	Waiver	67
12.8	Binding Effect; Assignment	67
12.9	No Third Party Beneficiary	67
12.10	Counterparts	67
12.11	[Intentionally Omitted]	67
12.12	Governing Law	67
12.13	Arbitration	67
12.14	WAIVER OF JURY TRIAL	68
12.15	[Intentionally Omitted]	68
12.16	Specific Performance	68
12.17	Severability	68
12.18	Conflict of Interest	68

 

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of June 28,  2018, is entered into by and between Adtalem Global Education Inc., a Delaware corporation (the “Seller”), and San Joaquin Valley College, Inc., a California corporation (the “Purchaser”, and together with the Seller, the “Parties”).

 

 

WHEREAS, as of the date hereof, the Seller is the record owner of all of the issued and outstanding Equity Interests (as defined herein) of U.S. Education Holdings LLC, a Delaware limited liability company (the “Company”);

 

WHEREAS, the Company and the Company Subsidiaries (as defined herein) are engaged in the operation and management of a regionally-accredited, Title IV Program-participating, for-profit post-secondary higher education institution that has been issued Office of Postsecondary Education Identification Numbers 009748, 021006, 022180 and 030425 by the DOE, providing certificate and associate degree programs in the allied health, nursing, dental, veterinary and criminal justice fields (collectively, the “System”); and

 

WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, all of the Equity Interests of the Company (the “Membership Interests”) upon the terms and conditions set forth herein.

 

NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Article 1

DEFINITIONS

 

 

“401(k) Plan” means any Benefit Plan that is intended to be qualified under Section 401(a) of the Code which includes a cash or deferred arrangement that is intended to qualify under Section 401(k) of the Code.

 

“Accounting Firm” has the meaning set forth in Section 2.4(c).

 

“Accounting Principles” means the principles and methodology set forth on Exhibit A.

 

“ACCJC” means the Accrediting Commission for Community and Junior Colleges, Western Association of Schools and Colleges.

 

“Accrediting Body” means any non-governmental entity, including institutional and specialized accrediting agencies, whether foreign or domestic, that engages in the granting or withholding of accreditation of postsecondary institutions or their educational programs in accordance with standards and requirements relating to the performance, operations, financial condition or academic standards of such institutions, including the ACCJC.

 

“Action” means any action, claim, suit, arbitration, investigation or proceeding.

 

“Adtalem Name” means the word “Adtalem” alone or in combination with other words.

 

“Adverse Regulatory Condition” shall mean any term or condition  that would materially impede Purchaser from operating the System or any School in the same manner that it is currently being operated by Seller, or that is not customary in the context of a transaction that constitutes a change in ownership or control; provided, however, that an Adverse Regulatory Condition shall exclude any term or condition imposed if the responsible Educational Agency cites as the basis for the term or condition facts or circumstances attributable predominantly to Purchaser.

 

 “Affiliate” means, as to any Person, (a) any Person that directly or indirectly controls, is controlled by or is under common control with such Person and (b) any Person who is a director, officer, partner or principal of such Person or of any Person that directly or indirectly controls, is controlled by or is under common control with such Person.  For purposes of this definition, “control” of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by ownership of voting stock, by contract or otherwise.

 

“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Ancillary Agreements” means the Transition Services Agreement, the Lease Transfer Agreements and each other agreement, document, instrument or certificate, other than this Agreement, to be executed and delivered in connection with the consummation of the transactions contemplated by this Agreement.

 

“Balance Sheet” means the unaudited statement of financial position of the Carrington Entities as of the Balance Sheet Date.

 

“Balance Sheet Date” means May 31, 2018.

 

“Base Amount” means an amount equal to $1.00.

 

“Basket Amount” has the meaning set forth in Section 11.3(b).

 

“Benefit Plans” has the meaning set forth in Section 5.13(a).

 

“Books and Records” has the meaning set forth in Section 7.6.

 

“Borrower Defense Rule” means the regulations published in the Federal Register on November 1, 2016 at 81 FR 75296, as amended from time to time, and any successor regulation promulgated by the DOE.

 

“Business Data” means all data and personal information processed, collected, stored or disseminated by the Carrington Entities, including any Personally Identifiable Information.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on which banking institutions in Chicago, Illinois are authorized or required by Law or executive order to close.

 

“California Civil Code” has the meaning set forth in Section 7.16(b).

 

“Cap” has the meaning set forth in Section 11.3(a).

 

“Carrington Entities” or “Carrington Entity” means, collectively or individually, as applicable, the Company and the Company Subsidiaries.

 

“Carrington Marks” means the name “Carrington College” and any derivation thereof, and anything confusingly similar thereto, and their translations into languages other than English, including, any trade names, logos, Internet addresses and Domain Names, Trademarks and related registrations and applications, in each case, that consist of or contain such names, whether or not in combination with other names.

 

“Claims Notice” has the meaning set forth in Section 11.4(b).

 

“Closing” has the meaning set forth in Section 3.1.

 

“Closing Contribution” is an amount equal to (i) $11,500,000, (ii) minus the Base Amount and (iii) plus the Estimated Working Capital Shortfall (if any) or minus the Estimated Working Capital Excess (if any).

 

“Closing D&A Compensation” means the Deferred and Accrued Compensation determined as of the Effective Time.

 

“Closing Date” has the meaning set forth in Section 3.1.

 

“Closing Indebtedness” means the Indebtedness of the Carrington Entities on a consolidated basis, determined as of the Effective Time.

 

“Closing Statement” has the meaning set forth in Section 2.4(b).

 

“Closing Transaction Expenses” means the Transaction Expenses determined as of the Effective Time.

 

“Closing Working Capital” means the Working Capital, determined in accordance with the Accounting Principles, as of the Effective Time.

 

“COBRA” has the meaning set forth in Section 5.13(c).

 

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

 

“Company” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Company IT Systems” has the meaning set forth in Section 5.8(h).

 

“Company Subsidiaries” or “Company Subsidiary” means, collectively or individually, as applicable, EdCOA Inc., a California corporation, Carrington College, Inc., an Arizona corporation, and American Institute of Health Technology, Inc., an Idaho corporation.

 

“Contract” means any written agreement, contract, lease, license, instrument, commitment or arrangement.

 

“COTS License” means (a) a “shrink-wrap,” “click-through,” or “off-the-shelf” software license, or (b) any other software license that is commercially available to the public generally and used by the Carrington Entities without customization.

 

“Counsel” has the meaning set forth in Section 12.18(c).

 

“Cut-Off Date” has the meaning set forth in Section 11.1.

 

“D&O Indemnification Obligations” has the meaning set forth in Section 7.6(b).

 

“Deferred and Accrued Compensation” means the following amounts, to the extent either (a) not included within Working Capital, Transaction Expenses, or Indebtedness, (b) not fully funded, or (c) for which an adequate reserve, determined in accordance with GAAP, has not been established therefor on the Financial Statements: (i) any compensation (excluding Transaction Expenses) which has been earned by any employees, consultants, or independent contractors of the Carrington Entities under any Contract, program, policy or arrangement but the actual payment of which has been deferred to a date beyond the month or year in which it was earned, including the Company’s share of Taxes payable with respect to all such amounts; or (ii) (x) earned payroll and earned paid time off/vacation and (y) any bonus or incentive compensation, in each case of clauses (x) and (y), which is attributable to or in respect of any time period ending on or before the Closing Date and, in each case of clauses (x) and (y), which is payable by the Carrington Entities, or will become payable by the Carrington Entities, to any current or former employees, consultants, or independent contractors of the Carrington Entities under any Contract, program, policy or arrangement, including the Carrington Entities’ share of Taxes payable with respect to all such amounts.

 

“Disclosure Schedules” means the Schedules which are numbered to correspond to the representations and warranties contained in Article 4 and Article 5.

 

“Disputes” has the meaning set forth in Section 12.18(a).

 

“DOE” means the U.S. Department of Education or any successor agency.

 

“Domain Name” means, collectively, the top-level domain located at a specified address on the Internet, and registration thereof, as identified in the “WHOIS” online domain name registration database, and all lower-level Internet domain names, in each case, for which the domain name owner is the Seller or any Carrington Entity, whether in the form of an address for use in electronic mail transfer, a Universal Resource Locator (URL), a file transfer protocol (FTP) location, or other form suitable for specifying the location of an electronic data file over the Internet.

 

“Educational Agency” means any Person, entity or organization, whether governmental, government-chartered, private or quasi-private, that engages in granting or withholding Educational Approvals for, administers Student Financial Assistance to or for students of, or otherwise regulates private postsecondary schools in accordance with standards relating to the performance, operation, financial condition or academic standards of such schools, including the DOE and any Accrediting Body.

 

“Educational Approval” means any license, permit, certification, accreditation, approval, registration, consent or authorization issued or required to be issued by an Educational Agency to the Carrington Entities with respect to any aspect of the Carrington Entities’ operations subject to the oversight of such Educational Agency, including any such approval for the Carrington Entities to participate in any program of Student Financial Assistance offered by such Educational Agency, but excluding any licenses or similar approval issued with respect to the Carrington Entities’ employees on an individual basis.

 

“Educational Consent” means any filing, notice, report, consent, registration, approval, permit or authorization required to be made with or obtained from any Educational Agency in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated by this Agreement, whether before or after the Closing, in order to maintain, continue or reinstate any Educational Approval presently held by the System or any School or the Carrington Entities relating to the System or any School.

 

“Educational Law” means any federal, state, municipal, foreign or other law, regulation, order, Accrediting Body standard or other requirement applicable thereto, issued or administered by, or related to, any Educational Agency or any Student Financial Assistance program.

 

“Effective Time” has the meaning set forth in Section 3.1.

 

“Encumbrance” means any and all liens, deeds of trust, encumbrances, charges, mortgages, options, pledges, restrictions on transfer, security interests, hypothecations, easements, equity interests, options, rights-of-way, encroachments, preemptive rights, rights of first refusal or restrictions on use or transfer.

 

“Environmental Claims” means any written claims, notice of noncompliance or violation or Action by any Governmental Authority or Person alleging material Liability arising under any Environmental Law.

 

“Environmental Laws” means any applicable Law and any judicial or administrative interpretation thereof, including any Order or consent decree relating to the use, transportation, storage, Release or threatened Release of any Hazardous Substance.

 

“Equitable Exceptions” means (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies and (b) general principles of equity.

 

“Equity Interests” means (a) any shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, (b) any ownership interests in a Person other than a corporation, including membership interests, limited liability company interests, partnership interests, joint venture interests and beneficial interests, and (c) any warrants, options, convertible or exchangeable securities, subscriptions, rights (including any preemptive or similar rights), calls or other rights to purchase or acquire any of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Estimated Closing D&A Compensation” means the Seller’s good faith estimate of the Closing D&A Compensation, as set forth on the Pre-Closing Statement.

 

“Estimated Closing Indebtedness” means the Seller’s good faith estimate of the Closing Indebtedness, as set forth on the Pre-Closing Statement.

 

“Estimated Closing Transaction Expenses” means the Seller’s good faith estimate of the Closing Transaction Expenses, as set forth on the Pre-Closing Statement.

 

“Estimated Purchase Price” has the meaning set forth in Section 2.1.

 

“Estimated Working Capital” means the Seller’s good faith estimate of the Closing Working Capital, as set forth on the Pre-Closing Statement.

 

“Estimated Working Capital Excess” means the amount by which the Estimated Working Capital exceeds the Working Capital Target.

 

“Estimated Working Capital Shortfall” means the amount by which the Working Capital Target exceeds the Estimated Working Capital.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Extended Representations” has the meaning set forth in Section 11.1.

 

“Final Closing D&A Compensation” has the meaning set forth in Section 2.4(b).

 

“Final Closing Indebtedness” has the meaning set forth in Section 2.4(b).

 

“Final Closing Transaction Expenses” has the meaning set forth in Section 2.4(b).

 

“Final Purchase Price” has the meaning set forth in Section 2.1(b).

 

“Final Working Capital” has the meaning set forth in Section 2.4(b).

 

“Financial Statements” has the meaning set forth in Section 5.7.

 

“Fraud” means actual fraud, and not constructive fraud or recklessness, with respect to the making of the representations and warranties pursuant to Article 4, Article 5 or Article 6 (as applicable).

 

“Fundamental Representations” means each of the representations and warranties set forth in Section 4.1 (Organization), Section 4.2 (Binding Obligations), Section 4.5 (Capitalization), Section 4.7 (Brokers), Section 5.1 (Organization and Qualification), Section 5.2 (Capitalization of the Carrington Entities), Section 5.3 (No Subsidiaries), Section 5.4 (Binding Obligation) and Section 5.20 (Brokers).

 

“GAAP” means United States generally accepted accounting principles, consistently applied in accordance with the Carrington Entities’ historical practices.

 

“Gainful Employment Rule” means the rule codified at 34 C.F.R. Part 668 Subparts Q and R, as amended from time to time, and any successor regulation promulgated by the DOE.

 

“Governmental Authority” means any nation or government, any state, province or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administration functions of or pertaining to government, or any government authority, agency, department, board, tribunal, commission or instrumentality of the United States, any foreign government, any state of the United States, or any municipality or other political subdivision thereof or of any other government in any jurisdiction, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any governmental or non-governmental self-regulatory organization, agency or authority in any jurisdiction, excluding any Educational Agency.

 

“Hazardous Substance” means any substance defined by or regulated under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., the Clean Water Act, 33 U.S.C. §1251 et seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Safe Drinking Water Act, 42 U.S.C. §300f et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1801 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. §11001 et seq., the Oil Pollution Act, 15 U.S.C. §2601 et seq., and any state or local equivalents thereof.

 

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

 

“Indebtedness” means, as of any time and without duplication, the following obligations of the Carrington Entities (whether or not then due and payable): (a) all obligations (including the principal amount thereof or, if applicable, the accreted amount thereof and the amount of accrued and unpaid interest thereon) for the repayment of money borrowed, whether owing to banks, financial institutions, on equipment leases or otherwise; (b) all obligations (including the principal amount thereof or, if applicable, the accreted amount thereof and the amount of accrued and unpaid interest thereon) evidenced by notes, bonds, debentures or similar instruments (whether or not convertible); (c) all obligations to pay the deferred purchase price of property, assets or services purchased (including purchase price adjustments, “holdback” or similar payments, and the maximum amount of any potential earn-out payments); (d) all obligations to pay rent or other payment amounts under a lease which is required to be classified as a capital lease or a liability on the face of a balance sheet prepared in accordance with GAAP or conditional sales Contracts or similar title retention instruments; (e) all obligations relative to the maximum amount of any letter of credit or letter of guaranty, bankers’ acceptance or similar instrument issued or created for the account of any Carrington Entity, in each case solely to the extent drawn; (f) all obligations to pay any amounts to a third party under any Contract pursuant to which any Carrington Entity sold any of its businesses, assets or properties outside the ordinary course of business; (g) all obligations secured by any Encumbrances (other than Permitted Encumbrances); (h) all guaranties, sureties, assumptions and other contingent obligations in respect of, or to purchase or to otherwise acquire, Indebtedness or indebtedness of others; (i) all obligations under any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement or other financial agreement or arrangement entered into for the purpose of limiting or managing interest rate risks; (j) all obligations under any pension, retiree medical or non-qualified retirement plan, program or arrangement; (k) all outstanding obligations, whether interest bearing or otherwise, owed to the Seller and/or any Affiliate of the Seller, other than obligations arising under this Agreement; (l) negative cash balances; (m) accounts payable, trade debt and trade payables that are past due in accordance with their applicable invoice or other terms governing the timing of payment; (n) all obligations in respect of premiums, penalties, “make whole amounts,” breakage costs, change of control payments, costs, expenses and other payment obligations, in each case, that would arise if all Indebtedness referred to in the foregoing clauses (a) through (m) was prepaid (or, in the case of any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement, or other financial agreement or arrangement entered into for the purpose of limiting or managing interest rate risks, unwound and settled) in full at such time; and (o) to the extent any item of Indebtedness referred to in the foregoing clauses (a) through (m) cannot be repaid at such time (e.g., as a result of an irrevocable advance notice requirement), all interest on and other accretion of such Indebtedness that occurs between such time and the earliest time that repayment may occur (e.g., if notice was delivered at such time).  For the avoidance of doubt, Indebtedness shall not include (i) trade payables (except as set forth in subpart (m) above), (ii) any Indebtedness incurred by the Purchaser and its Affiliates (and subsequently assumed by any of the Carrington Entities) on the Closing Date or (iii) any obligations solely between or among one or more of the Carrington Entities.

 

“Indemnitee” has the meaning set forth in Section 11.2(b).

 

“Indemnitor” means any Party from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

 

“Insurance Policies” means all policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other forms of insurance covering the Carrington Entities, including self-insurance, in each case held by the Carrington Entities or any other Person and any rights to applicable claims and proceeds thereof.

 

“Intellectual Property” means any and all of the following in any jurisdiction throughout the world: (a) patents and patent applications, including reissues, divisions, continuations, continuations-in-part, extensions and reexaminations thereof; (b) works of authorship and copyrights, and registrations and applications for registration thereof; (c) Trademarks and service marks, trade names, copyrights, trade secrets, (d) trade secrets and proprietary business, technical and know-how information; (e) rights of publicity; (f) computer software and firmware, including source code, object code, files, documentation and other materials related thereto; (g) proprietary databases and data compilations; (h) registered Domain Names and applications for registration thereof; (i) any other intellectual property; and (j) rights in any of the foregoing, including rights to sue or recover and retain damages for past, present, and future infringement, dilution, misappropriation or other violation of any of the foregoing.

 

“IP License” has the meaning set forth in Section 5.8(b).

 

“IRS” means the United States Internal Revenue Service.

 

“knowledge of the Purchaser” or any similar phrase means the actual knowledge of any of Michael Perry, Michael Abril, Russ Lebo, and Joseph Holt and after reasonable inquiry (it being understood that the “reasonable inquiry” of an individual shall consist exclusively of making inquiries of such individual’s direct internal reports having responsibility for the subject matter of such representation or warranty).

 

“knowledge of the Seller” or any similar phrase means the actual knowledge of any of Lisa W. Wardell, Patrick J. Unzicker, Donna Jennings, Christopher Nash, Lisa Sodeika, Donna M. Loraine, Shelly C. Dubois and Danika Bowen and after reasonable inquiry (it being understood that the “reasonable inquiry” of an individual shall consist exclusively of making inquiries of such individual’s direct internal reports having responsibility for the subject matter of such representation or warranty).

 

“Law” means any federal, state, local or foreign law (including common law), treaty, statute, code, ordinance, rule, regulation, written order or other requirement or guideline of any Governmental Authority, including any Order, but excluding any Educational Laws.

 

“Lease” means each agreement for the lease, sublease, license, holding, use, occupancy or operation of the Leased Real Property to which any Carrington Entity is a Tenant Party as of the date hereof, including all amendments, renewals, extensions or other modifications thereto.

 

“Leased Exclusive Property” means the real property, other than the Leased Shared Property, that, as of the date hereof, is leased or subleased from a third party, as landlord or sublandlord, to Seller or any Carrington Entity, as tenant or subtenant, and is material to and used or held for use in the conduct of the System as currently conducted.

 

“Leased Real Property” means, collectively, the Leased Exclusive Property and the Leased Shared Property.

 

“Leased Shared Property” means the real property that, as of the date hereof, (a) is leased or subleased from a third party, as landlord or sublandlord, to the Seller or any Carrington Entity, as tenant or subtenant, and is material to and used or held for use in the conduct of a combination of (i) the System as currently conducted and (ii) the Retained Businesses and/or (b) is subleased from a third party, as landlord or sublandlord, to the Seller or any Carrington Entity, as tenant or subtenant, and is (i) used or held for use in the conduct of the System as currently conducted and (ii) located within a building or campus containing other real property that is subleased or held for sublease from Seller, as sublandlord, to one or more third parties, as subtenant(s).

 

“Liability” means any debt, obligation, duty, commitment or liability of any nature whatsoever (including any unknown, unaccrued, unasserted, or contingent liability), regardless of whether such debt, obligation, duty, commitment or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty, commitment or liability is immediately due and payable.

 

 “Loss” or “Losses”, in respect of any matter, means any loss, damage, injury, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees), charge, cost (including reasonable costs of investigation) or expense.

 

“Material Adverse Effect” means a material adverse effect on the System or the results of operations and assets of the System, taken as a whole; provided, however, that “Material Adverse Effect” shall not include the impact on the System or the results of operations and assets of the System to the extent arising out of or attributable to (a) conditions or effects that generally affect the industries in which the System operates (including legal and regulatory changes), (b) general economic conditions affecting the United States or any other country in which the System operates, (c) effects resulting from changes affecting equity or debt market conditions in the United States or any other country in which the System operates (including in each of clauses (a), (b) and (c) above, any effects or conditions resulting from an outbreak or escalation of hostilities, acts of terrorism, political instability or other national or international calamity, crisis or emergency, or any governmental or other response to any of the foregoing, in each case whether or not involving the United States or any other country in which the System operates), (d) acts of God (including earthquakes, storms, fires, floods and natural catastrophes), (e) effects arising from changes or proposed changes in Laws, Educational Laws or accounting principles (including GAAP) or the interpretation or enforcement of any of the foregoing, (f) effects relating to or arising from the announcement of the execution of this Agreement or the transactions contemplated hereby or the identity of the Purchaser or its Affiliates, including the loss of any customers, suppliers or employees, (g) effects resulting from compliance with the terms and conditions of this Agreement by the Seller, the Company or the Company Subsidiaries, or consented to in writing by the Purchaser, including the effects of any actions required to be taken under applicable Law or Educational Law or with respect to Contracts disclosed in the Schedules, (h) any failure of the System to meet, with respect to any period or periods, any internal forecasts or projections, estimates of earnings or revenues or business plans and (i) any act or omission of the Purchaser; except in the case of clauses (a), (b), (c) and (e), only to the extent such condition or effect does not have a materially disproportionate effect on the System relative to other participants in the industry in which the System operates; and furthermore, in the case of clause (e), except for conditions or effects resulting from either currently pending proposed legislation affecting Educational Laws or currently pending proposed draft regulatory language related to the Gainful Employment Rule or the Borrower Defense Rule, for all other conditions or effects in clause (e), “other participants in the industry in which the System operates” shall mean all other higher education institutions (including non-profit and for-profit higher education institutions) and not solely for-profit higher education institutions.  For the avoidance of doubt, a Material Adverse Effect shall be measured only against past performance of the System and not against any forward-looking statements, plans, financial projections or forecasts of the System.

 

“Material Contracts” has the meaning set forth in Section 5.10.

 

“Membership Interests” has the meaning set forth in the recitals.

 

“Multiemployer Plan” has the meaning set forth in Section 5.13(a).

 

“Non-Assignable Contracts” has the meaning set forth in Section 7.3(a).

 

“Notice of Disagreement” has the meaning set forth in Section 2.4(c).

 

“Order” means any judgment, writ, decree, compliance agreement, injunction or judicial or administrative order or legally binding determination from any Governmental Authority.

 

“Ordinary Course of Business” means an action taken by or on behalf of one or more of the Carrington Entities if such action is generally consistent with such Carrington Entity’s operation of the System and consistent with past practice.

 

“Parties” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Permits” has the meaning set forth in Section 5.9.

 

“Permitted Encumbrances” means, (a) Encumbrances disclosed in the Financial Statements or any Schedules to this Agreement, (b) Encumbrances for Taxes, assessments and other government charges not yet due and payable or which are being contested in good faith by appropriate proceedings, provided an adequate reserve, determined in accordance with GAAP, has been established therefor on the Financial Statements, (c) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Encumbrances (including Encumbrances created by operation of laws) incurred in the Ordinary Course of Business, provided an adequate reserve, determined in accordance with GAAP, has been established therefor on the Financial Statements, (d) Encumbrances under generally applicable securities laws, (e) with respect to real property only, Encumbrances in respect of easements, permits, licenses, rights of way, restrictive covenants, reservations or encroachments or defects or irregularities in, and other similar exceptions to, title and any conditions with respect to real property or any other condition that would be disclosed by a physical inspection of the property or a current survey or title report or other public record, or that do not have a material adverse effect on the current use of the underlying asset, (f) Encumbrances in respect of pledges or deposits under workers’ compensation laws or similar legislation, unemployment insurance or other types of social security or to secure government Contracts and similar obligations, (g) with respect to real property only, municipal bylaws, development restrictions or regulations, facility costs, sharing and servicing Contracts, and zoning building or planning restrictions or regulations, (h) with respect to real property only, Encumbrances in favor of any landlord of real property leased by any of the Company or Company Subsidiaries, (i) with respect to real property only, Encumbrances created by any ground lease or mortgage of any landlord of real property leased by the Company or any Company Subsidiary, (j) Encumbrances listed on Schedule 1.1(b), and (k) Encumbrances created by the acts of the Purchaser or its Affiliates.

 

“Person” means any individual, corporation (including any not-for-profit corporation), general or limited partnership, limited liability partnership, joint venture, estate, trust, firm, company (including any limited liability company or joint stock company), association, organization, entity or Governmental Authority.

 

“Personally Identifiable Information” means any specific and unique information associated with an identified or readily identifiable natural Person (such as name, postal address, email address, telephone number, date of birth, Social Security number (or its equivalent), driver’s license number, account number, credit or debit card number or identification number) that is subject to applicable Laws related to the privacy or protection of such information.

 

“Post-Closing Educational Consent” means any of those Educational Consents which, pursuant to applicable Educational Law, must be effectuated or obtained following the Closing, as set forth in Schedule 5.21(d)(ii).

 

 “PPA” means a program participation agreement issued to a postsecondary educational institution and countersigned or to be countersigned by or on behalf of the secretary of the DOE, evidencing certification of that institution to participate in the Title IV Programs.

 

“PPPA” means a provisional PPA issued to a School, and countersigned or to be countersigned by or on behalf of the secretary of the DOE, for the purposes of certifying the School to continue its Title IV Program participation following consummation of the transactions contemplated by this Agreement.

 

“PPSV” has the meaning set forth in Section 12.18.

 

“Pre-Closing Educational Consent” means any of those Educational Consents which, pursuant to applicable Educational Law, must be effectuated or obtained prior to the Closing, as set forth in Schedule 5.21(d)(i) hereof.

 

“Pre-Closing Period” means any taxable period ending on or before the Closing Date and that portion of any Straddle Period ending on (and including) the Closing Date.

 

“Pre-Closing Statement” has the meaning set forth in Section 2.4(a).

 

“Preacquisition Review Application” means a materially complete electronic application to the DOE with respect to the transactions contemplated hereby, marked for preacquisition review, together with any required exhibits or attachments.

 

“Privileged Communications” has the meaning set forth in Section 12.18(c).

 

“Protected Material” has the meaning set forth in Section 12.18(d).

 

“Protected Work Product” has the meaning set forth in Section 12.18(d).

 

“Purchaser” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Purchaser Adjustment Amount” has the meaning set forth in Section 2.4(d).

 

“Purchaser Designated Replacement Contracts” has the meaning set forth in Section 7.13(a).

 

“Purchaser Designated Shared Assets and Systems” has the meaning set forth in Section 7.13(a).

 

“Purchaser Designated Shared Contracts” has the meaning set forth in Section 7.13(a).

 

“Purchaser Financials” has the meaning set forth in Section 6.8(i).

 

“Purchaser Indemnitee” has the meaning set forth in Section 11.2(a).

 

“Purchaser Transition Notice” has the meaning set forth in Section 7.13(a).

 

“Reed Smith” has the meaning set forth in Section 12.18.

 

“Regulatory Approvals” has the meaning set forth in Section 7.2(a).

 

“Release” means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, deposit, disposal or dispersal of Hazardous Materials into the environment.

 

“Released Party” has the meaning set forth in Section 7.16(a).

 

“Releasing Party” has the meaning set forth in Section 7.16(a).

 

“Representatives” means, with respect to any Person, any director, officer, manager, agent, employee, general partner, member, stockholder, advisor or representative of such Person.

 

“Restricted Cash” has the meaning set forth in the Accounting Principles.

 

“Retained Businesses” means all businesses now, previously or hereafter conducted by Seller or any of its Affiliates, other than the System.

 

“Retention Agreements” means those certain Retention Agreements by and between the Company and certain employees of the Carrington Entities set forth in Schedule 5.14.

 

“Review Documents” has the meaning set forth in Section 5.22.

 

“Schedule” means each schedule to this Agreement delivered by any Party, including the Disclosure Schedules.

 

“Schedule Supplement” has the meaning set forth in Section 7.8.

 

“School” or “Schools” shall mean the group of one or more locations that have been designated by the DOE as an eligible institution, assigned an OPE ID number by the DOE, and consists of a main campus and each of its additional locations, branch campuses, and other facilities at which the institution provides all or part of an educational program, including facilities and programming that are not Title IV Program eligible.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Seller” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Seller Adjustment Amount” has the meaning set forth in Section 2.4(d).

 

“Seller Indemnitee” has the meaning set forth in Section 11.2(b).

 

“Settlement” means any settlement, compromise, or consent to the entry of judgment.

 

“Shared Assets and Systems” means the material assets and systems (including System Intellectual Property and Company IT Systems) relating to the operation of the Carrington Entities and the System that are not wholly owned, licensed or held by the Carrington Entities as of Closing, other than the Shared Contracts and the Leases.

 

“Shared Contracts” means the material Contracts relating to the operation of the Carrington Entities and the System for which the Seller or any of its Affiliates (other than or in addition to the Carrington Entities) is a party, other than the Leases.

 

“Straddle Period” has the meaning set forth in Section 8.1(b)(i).

 

“Student Financial Assistance” means any form of student financial assistance, grants or loans that is administered by any Educational Agency, which provided more than $150,000 to any individual campus location of any School in fiscal year 2017, including the Title IV Programs and any other program authorized by the HEA and administered by the DOE.

 

“Subsidiary” means, of a specified Person, any corporation, partnership, limited liability company, limited liability partnership, limited partnership, joint venture or other legal entity of which the specified Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, a majority of the voting stock or other Equity Interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body, of such legal entity or of which the specified Person controls the management.

 

“Substantial Control” means, with respect to a Person, (a) holding at least a 25% ownership interest in the Person, whether directly, indirectly, or together with family members (as that term is defined at 34 C.F.R. § 600.21(f)), (b) representing the holder or holders of at least a 25% ownership interest in the Person, including under a voting trust, power of attorney, proxy, or similar agreement, or (c) being a member of the board of directors, a general partner, the chief executive officer, or other executive officer of the Person or an entity that holds at least a 25% ownership interest in the Person, in each case as the term “ownership interest” is defined at 34 C.F.R. § 668.174(c)(1).

 

“System” has the meaning set forth in the recitals to this Agreement.

 

“System Employee” means (a) each employee of the Company and the Company Subsidiaries, (b) each individual whose name is set forth on Schedule 1.1(a), and (c) each individual who is hired by the Carrington Entities prior to the Closing to fill a position that is set forth on Schedule 1.1(a).

 

“System Intellectual Property” has the meaning set forth in Section 5.8(e).

 

“System Registered Intellectual Property” has the meaning set forth in Section 5.8(a).

 

“Tax” or “Taxes” means all federal, state, county, local, municipal, foreign and other taxes, including all interest, penalties and additions imposed with respect to such amounts, imposed by any Governmental Authority.

 

“Tax Returns” means any report, declaration, return, information return, claim for refund, election, disclosure, estimate or statement required to be supplied to a Governmental Authority in connection with Taxes, including any schedule or attachment thereto, and including any amendments thereof.

 

“Tenant Party” means the party in the role of tenant, subtenant, licensee or similar status under each Lease.

 

“Termination Date” has the meaning set forth in Section 10.1(a)(ii).

 

“Third Party Claim” means any claim or demand for which an Indemnitor may be liable to an Indemnitee hereunder which is asserted by a third party.

 

“Title IV” means Title IV of the HEA.

 

“Title IV Program” means a program of federal student financial assistance administered pursuant to Title IV.

 

“TPPPA” means a temporary provisional PPA issued to any School after Closing, and countersigned or to be countersigned by or on behalf of the Secretary of the DOE, for the purposes of continuing the School’s certification to participate in the Title IV Programs on an interim basis following the Closing.

 

“Trademarks” means trademarks, service marks, certification marks, collective marks, trade dress, logos, trade names, corporate names, and any other indication of source or origin, together with all goodwill associated therewith, and all applications, registrations and renewals therefore.

 

“Transaction Expenses” shall mean all expenses of the Carrington Entities incurred or to be incurred prior to and through the Closing in connection with the negotiation, preparation and execution of this Agreement and the other agreements referred to herein and the consummation of the transactions contemplated hereby and thereby and the Closing, including costs, fees and disbursements of financial advisors, attorneys, accountants and other advisors and service providers, and any transaction bonus, discretionary bonus, change-of-control, retention, severance or other compensatory payment to any of the employees, officers, managers, directors or independent contractors of the Carrington Entities payable solely as a result of the consummation of the transactions contemplated by this Agreement, in each case, payable by the Carrington Entities and which have not been paid as of the Closing.

 

“Transition Identification Period” has the meaning set forth in Section 7.13(a).

 

“Transition Services Agreement” has the meaning set forth in Section 2.3(a)(iii).

 

“Working Capital” means the working capital of the Carrington Entities, as determined on a consolidated basis in accordance with the Accounting Principles set forth on Exhibit A and the Working Capital Example set forth on Exhibit B.

 

“Working Capital Example” means, the example Working Capital calculation prepared in accordance with the Accounting Principles and as set forth on Exhibit B.

 

“Working Capital Excess” means the amount by which the Closing Working Capital exceeds the Working Capital Target.

 

“Working Capital Shortfall” means the amount by which the Working Capital Target exceeds the Closing Working Capital.

 

“Working Capital Target” means $0.

 

 

 

 

 

 

 

 

 

 

 

 

 

Article 2

PURCHASE PRICE AND PAYMENT; PURCHASE AND SALE OF THE MEMBERSHIP INTERESTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Article 4

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

Except as set forth in the Disclosure Schedules, the Seller represents and warrants to the Purchaser as follows:

 

 

 

 

 

 

 

 

 

 

With respect to the Carrington Entities, the Seller hereby represents and warrants to the Purchaser as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE SELLER HEREBY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR INFORMATION MADE, COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO THE PURCHASER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO THE PURCASER BY ANY DIRECTOR, OFFICER, MANAGER, EMPLOYEE, AGENT, CONSULTANT OR REPRESENTATIVE OF THE CARRINGTON ENTITIES OR ANY OF THEIR AFFILIATES).  EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES TO THE PURCHASER REGARDING THE PROBABLE SUCCESS, PROFITABILITY OR VALUE OF ANY OF THE CARRINGTON ENTITIES OR THE SYSTEM.

 

 

The Purchaser represents and warrants to the Seller as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Article 7

COVENANTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Parties will, and will cause their respective Affiliates to, cooperate and use commercially reasonable efforts to fulfill any landlord or sublandlord consent or notice requirements for the Lease Assignment Agreements, the Lease Sublease Agreements and the Shared Services Agreements (collectively, the “Lease Transfer Agreements”).  The Parties will cooperate and provide each other with reasonable assistance in fulfilling any landlord or sublandlord consent or notice requirements for the Lease Transfer Agreements prior to the Closing and for a period of ninety (90) days following the Closing.  If the Parties are not able to fulfill any such requirements prior to the Closing, then, until the date that is ninety (90) days following the Closing or the earlier date on which such requirements are fulfilled, the Parties will use commercially reasonable efforts to institute alternative arrangements intended to put the Parties in a substantially similar economic position as if such requirements were fulfilled.

 

 

 

 

 

 

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

Notwithstanding the provisions of Section 1542 of the California Civil Code or any similar Law or common law principle in any applicable jurisdiction, and for the purpose of implementing a full and complete release and discharge of the Released Parties, the Seller, on behalf of itself and each Releasing Party, expressly acknowledges that the foregoing release is intended to include in its effect all claims which the Seller or any Releasing Party does not know or suspect to exist in his, her or its favor against any of the Released Parties (including, without limitation, unknown and contingent claims), and that the foregoing release expressly contemplates the extinguishment of all such claims (except to the extent expressly set forth herein).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If to the Seller:

 

Adtalem Global Education Inc.

500 W. Monroe St.

Chicago, Illinois 60661

Attention:  Stephen W. Beard

E-mail:  stephen.beard@adtalem.com

Facsimile No.:  (630) 515-4555

Attention:  Erin McGuire

E-mail:  erin.mcguire@adtalem.com

Facsimile No.:  (630) 515-4555

 

With a copy to (which copy shall not constitute notice):

 

Reed Smith LLP

10 South Wacker Drive

Chicago, Illinois 60606

Attention: Patricia Dondanville

Email: pdondanville@reedsmith.com

Facsimile No.: (312) 207-6400

 

If to the Purchaser:

 

San Joaquin Valley College, Inc.

3828 W. Caldwell Avenue

Visalia, CA 93277

Attention: Legal Department

Email: Mike.Abril@sjvc.edu

Facsimile No.: (559) 746-0324

 

With a copy to (which copy shall not constitute notice):

 

Jeffer Mangels Butler & Mitchell LLP

1900 Avenue of the Stars

7th Floor

Los Angeles, CA 90067

Attention: Barry Freeman

Email: BFreeman@jmbm.com

Attention: David Ma

Email: DLM@jmbm.com

Facsimile No.: (310) 712-3393

 

Such addresses may be changed, from time to time, by means of a notice given in the manner provided in this Section 12.5.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Remainder of page intentionally left blank]

 

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first above written.

 

 

PURCHASER:


SAN JOAQUIN VALLEY COLLEGE, INC.

 

 

 

SELLER:


ADTALEM GLOBAL EDUCATION INC.