EXHIBIT 10.53
AGREEMENT REGARDING REGISTRATION RIGHTS
AND AMENDMENT TO WARRANT
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This Agreement Regarding Registration Rights and Amendment to Warrant (this
"Agreement") is entered into as of this 7th day of January, 1999, by and among
Corinthian Colleges, Inc., a Delaware corporation (the "Company"), Primus
Capital Fund III Limited Partnership ("Primus"), Banc One Capital Partners II,
LLC and BOCP II, Limited Liability Company (together "Banc One" and collectively
with Primus, the "Investors"), The Prudential Insurance Company of America
("Prudential") and Xxxxx X. Xxxxx, Xxxx St. Pierre, Xxxxx X. XxXxxx, Xxxxxx X.
Xxxxxxxx and Xxxxx X. Xxxxxxx (such individuals being referred to collectively
as the "Executives" and individually as an "Executive," and each of the
Executives, Prudential and the Investors being referred to as the
"Stockholders"),
RECITALS
WHEREAS, the Company and Prudential are parties to that certain Note
Purchase and Revolving Credit Agreement dated as of October 17, 1996 (as
heretofore amended, the "Credit Agreement") pursuant to which (a) the Company's
11.02% Senior Secured Notes due October 17, 2004 in the principal amount of
$22,500,000 are now outstanding and are held by Prudential, (b) Prudential
agreed to lead to the Company from time to time sums evidenced by the Company's
Senior Secured Revolving Note in the principal face amount of $5,000,000 and (c)
the Company issued to Prudential a Stock Subscription Warrant to subscribe for
5,376.34 shares of the Company's Class A Common Stock (the "Common Stock") and a
Contingent Stock Warrant to purchase under certain circumstances additional
shares of the Common Stock.
WHEREAS, in connection with that certain amendment to the Credit Agreement
dated as of October 31, 1997 (the "Amendment"), the Company issued to Prudential
a Stock Subscription Warrant (the "1997 Warrant") to subscribe for 3,683.29
shares of the Common Stock. The 1997 Warrant is exercisable at any time after
October 17, 1999.
WHEREAS, the Company has advised Prudential that the Company's consolidated
Cash Flow From Operations for the fiscal year ended June 30, 1998 was
($3,372,712) and, consequently, (i) an Event of Default occurred under paragraph
7A(iv) of the Credit Agreement, and (ii) a Specified Event of Default occurred
under Section 5 of the 1997 Warrant since Consolidated Cash Flow From Operations
for the fiscal year ended June 30, 1998 was less than the minimum required under
paragraph 6A(6) of the Credit Agreement (the "Cash Flow Default"). Prudential
has waived the Cash Flow Default for the purposes of paragraph 7A(iv) of the
Credit Agreement, but Prudential has not waived such default for purposes of
Section 5 of the 1997 Warrant with the consequence that the 1997 Warrant, and
the rights of the holder thereof, cannot terminate pursuant to the provisions of
such Section 5.
WHEREAS, the Company and each of the Stockholders are parties to that
certain Amended and Restated Registration Agreement dated as of October 17, 1996
(and together with that certain First Amendment to the Amended and Restated
Registration Agreement dated as of November 24, 1997, the "Registration
Agreement").
WHEREAS, Section 2 of the Registration Agreement provides that each of the
Stockholders are entitled to certain "piggyback" registration rights as
described therein whenever the Company proposes to register any of its
securities under the Securities Act of 1933, as amended (the "Securities Act").
WHEREAS, the Company is currently contemplating completing prior to October
17, 1999 an underwritten public offering (the "Offering") of its Common Stock
and has given notice to the Stockholders of its intention to commence the
Offering.
WHEREAS, in contemplation of the Offering, the parties desire to waive
certain provisions of the Registration Agreement and to set forth their
respective rights to participate in the Offering as set forth herein.
WHEREAS, in connection with the Offering, and upon the satisfaction of
certain conditions precedent as set forth herein, Prudential is willing to agree
to terminate the 1997 Warrant.
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the adequacy and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows.
AGREEMENT
1. Registration Rights in the Offering.
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(a) Each of the Stockholders acknowledges that (i) the Company has
notified them of its intention to undertake the Offering, (ii) the managing
underwriter of the Offering has notified the Company, and the Company has
thereafter notified the Stockholders, that the managing underwriter deems it
inadvisable for the orderly marketing of the Offering to include any shares of
Common Stock held by the Stockholders as "primary" shares therein, and (iii) the
managing underwriter has proposed to include up to an aggregate of 405,000
shares of Company Common Stock held by the Stockholders in the Offering (or such
other number of shares as is equal to 15 percent of the number of shares of
Common Stock sold by the Company in the Offering, in either case defined as the
"Green Shoe Shares"), solely to cover overallotments, by having the underwriters
receive options to purchase shares of Common Stock held by certain of the
Stockholders (the "Green Shoe").
(b) Each of the Stockholders acknowledges that it is familiar with its
respective priority rights to participate in an underwritten public offering as
set forth in Section 2 of the
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Registration Agreement and hereby agrees to waive such priority rights held by
it and to participate in the Offering only as follows: (i) subject to all non-
price terms of the underwriting agreement being in the form of the underwriting
agreement approved in writing by Prudential and filed with an Amendment to the
Company's Registration Statement on Form S-1 (Registration No. 333-59505) filed
with the Securities and Exchange Commission (the "Approved Underwriting
Agreement"), Prudential will participate in the Green Shoe portion of the
Offering by granting to the underwriters an option to purchase up to all of the
shares of Common Stock held by it, excluding any shares issued under the 1997
Warrant (the "Prudential Option"), at a sales price per share equal to the sales
price per share received by the Company for the sale by the Company of shares of
the Common Stock in the Offering, (ii) if the total number of shares offered by
Prudential in the Green Shoe is less than all of the Green Shoe Shares, then
each of the Executives will participate in the Green Shoe on an equal basis by
granting the underwriters an option to purchase up to 24,927 shares of the
Common Stock held by each such Executive (the "Executives' Option"), up to an
aggregate maximum (including both the Prudential Option and the Executives'
Option) of all of the Green Shoe Shares, and (iii) if the aggregate number of
shares offered by Prudential and the Executives in the Green Shoe is less than
all of the Green Shoe Shares, then each of the Investors will thereafter have
the right to participate in the Green Shoe on a pro rata basis (the "Investors'
Option"), up to an aggregate maximum (including the Prudential Option, the
Executives' Option and the Investors' Option) of all of the Green Shoe Shares.
Notwithstanding the foregoing, Prudential may elect not to grant the Prudential
Option to the underwriters if the offering price of the Common Stock in the
Offering is less than (x) $14.00 per share if the Offering is consummated on or
before March 31, 1999, or (y) a price acceptable to Prudential, if the Offering
is consummated after March 31, 1999. The Company agrees that it will not conduct
the Offering without offering the Stockholders the right to participate in the
Offering in the manner specified in this Section 1(b).
(c) The waiver in Section 1(b) hereof is applicable to the Offering
only and does not constitute a waiver by any Stockholder of any registration
rights with respect to any other offering or of any other rights under the
Registration Agreement. Except to the extent specifically waived in this Section
1, all other terms of the Registration Agreement shall remain in full force and
effect. The waiver in Section 1(b) hereof shall expire and cease to be in effect
at the close of business on October 17, 1999 if the Offering has not been
consummated prior to that time.
(d) The Stockholders and the Company hereby agree that if, immediately
following the Offering, Prudential owns no shares of Common Stock of the Company
and all of its rights under the 1996 Warrant, the Contingent Warrant and the
1997 Warrant have been exercised or terminated, all rights of the holders of
Prudential Registrable Securities under the Registration Agreement shall be
allocated to the Investors on a pro rata basis. The definition of "Prudential
Registrable Securities" in the Registration Agreement shall thereupon be amended
in its entirety to mirror the definition of "Investor Registrable Securities" in
the Registration Agreement.
2. Amendment to 0000 Xxxxxxx. Subject to and effective upon the
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satisfaction of the condition precedent in Section 3 prior to January 31, 1999,
Prudential and the Company agree that Section 5 of the 0000 Xxxxxxx be amended
in its entirety to read as follows:
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"5. Termination Prior to Expiration Date. Anything herein to the
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contrary notwithstanding, this Warrant, and the rights of the holders
hereof, will terminate prior to the Expiration Date if either:
(i) on or before October 17, 1999, each of the following shall
have occurred:
(a) The Company shall have consummated the Offering in
accordance with the terms described in Section 1 of the 1999
Amendment Agreement; provided, however, that the termination of
this Warrant is not contingent upon the underwriters of the
Offering exercising their overallotment option;
(b) as soon as reasonably practicable after the closing of
the sale by the Company of shares of its Common Stock to the
underwriters in connection with the Offering, the Company (1)
shall have used a portion of the proceeds from such sale to prepay
the entire outstanding principal amount of the Term Notes, plus
interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect thereto, pursuant to paragraph 4B(1)
of the Note Agreement and the entire outstanding principal amount
of the Revolving Note, plus interest thereon to the prepayment
date, pursuant to paragraph 2B(2) of the Note Agreement, and to
pay any other amounts owed by the Company under the Note Agreement
and (2) shall have agreed to terminate Prudential's commitment to
make any further Revolving Loans under the Note Agreement; and
(c) at no time after June 30, 1998 and prior to the date
upon which the Company shall have consummated the Offering shall
any Event of Default under paragraph 7A(i) of the Note Agreement
have occurred; or
(ii) the Company shall not have consummated the Offering on or
before October 17, 1999 and at no time after June 30, 1998 and on or
prior to October 17, 1999 shall(1) any Event of Default under
paragraph 7A(i) of the Note Agreement have occurred
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or (2) any other Event of Default have occurred and be continuing on
October 17, 1999.
If the conditions of clause (i) are satisfied, then this Warrant shall
terminate upon the consummation of the Offering by the Company. If the
conditions of clause (ii) are satisfied, then this Warrant shall terminate
on the close of business on October 17, 1999. For purposes of this Warrant
(x), "Revolving Note", "Revolving Loans", "Event of Default" and "Yield-
Maintenance Amount" shall have the meanings given in the Note Agreement,
(y) the "1999 Amendment Agreement" shall mean that certain Agreement
Regarding Registration Rights and Amendment to Warrant dated as of January
7, 1999, by and among the Company, Primus Capital Fund III Limited
Partnership, Banc One Capital Partners 11, LLC, BOCP II, Limited Liability
Company, Prudential, Xxxxx X. Xxxxx, Xxxx St. Pierre, Xxxxx X. XxXxxx,
Xxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxxx, and (z) the "Offering" shall have
the meaning given in the 1999 Amendment Agreement."
Upon the effectiveness of the amendment to the 1997 Warrant under this Section
2, each reference to the 0000 Xxxxxxx in any other document, instrument or
agreement shall mean and be a reference to the 1997 Warrant as modified by this
Section 2, Except as specifically set forth in this Section 2, the 1997 Warrant
shall remain in full force and effect and is hereby ratified and confirmed in
all respects.
3. Condition Precedent. The effectiveness of the amendment to of the 1997
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Warrant pursuant to Section 2 of this Agreement is subject to the receipt by
Prudential, prior to January 31, 1999, of evidence that an amendment to Section
6B(iv) of Article IV of the Second Restated Certificate of Incorporation of the
Company changing the date therein of "October 31, 1998" to "October 31, 1999"
shall have been duly adopted and shall have become effective.
4. Miscellaneous Provisions.
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(a) Governing Law. This Agreement shall be construed and enforced in
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accordance with the internal laws of the State of California without regard to
the conflict of laws principles of such state.
(b) Effectiveness; Counterparts. This Agreement shall become effective
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upon the execution hereof by the Company and all the Stockholders. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one and
the same instrument.
(c) Share Price and Number of Shares. The price per share of Common
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Stock and all numbers of shares of Common Stock expressed in Section 1 of this
Agreement are stated after giving effect to a proposed 44.094522 for 1 split of
the Company's Common Stock and shall be adjusted for any different split or
combination of shares of the Company's Common Stock.
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(d) Section Titles. The section titles contained in this Agreement are and
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shall be without substance, meaning or content of any kind whatsoever and are
not part of the agreement between the parties hereto.
(e) Expenses. The Company confirms its obligations under paragraph 11B of
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the Credit Agreement to pay all of the reasonable fees and expenses of special
counsel to Prudential in connection with this Agreement and the transactions
contemplated hereby.
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IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
Regarding Registration Rights and Amendment to Warrant to be duly executed as of
the date first above written.
"COMPANY"
CORINTHIAN COLLEGES, INC.
By: /s/ XXXXX XXXXX
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Xxxxx Xxxxx
President and Chief Executive Officer
"STOCKHOLDERS"
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners III
Its: General Partner
By: /s/ LOYAL X. XXXXXX
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Xxxxx Xxxxxx
President
BANC ONE CAPITAL PARTNERS II, LLC
By: BOCP Holdings Corporation, Manager
By: /s/ XXXXX X. XXXXXXX
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Name: /s/ XXXXX X. XXXXXXX
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Its: Authorized Signer
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BOCP II, LIMITED LIABILITY COMPANY
By: BOCP Holdings Corporation, Manager
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Its: Authorized Signer
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THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
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Its: Vice President
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/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
/s/ Xxxx St. Pierre
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Xxxx St. Pierre
/s/ Xxxxx X. XxXxxx
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Xxxxx X. XxXxxx
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
