Exhibit 12
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
CONCORDE CAREER COLLEGES, INC.
5% Subordinated Debenture due 2003
$3,316,250 February 25, 1997
FOR VALUE RECEIVED, CONCORDE CAREER COLLEGES, INC., a Delaware corporation
(the "Company"), hereby promises to pay to XXXXXX, XXXXXXX STRATEGIC PARTNERS
FUND, L.P., or permitted assigns ("Strategic Partners" or the "Holder"), the
principal amount of Three Million Three Hundred Sixteen Thousand Two Hundred
Fifty Dollars ($3,316,250) on February 25, 2003, and to pay interest on the
unpaid principal amount hereof, from the date hereof until paid in full, at the
annual rate of five percent (5%). Interest shall be computed on the basis of a
360 day year and the actual number of days elapsed. Accrued and unpaid interest
shall be due and payable quarterly in arrears on February 28, May 31, August 31,
and November 30 of each year from the date hereof until the entire principal
amount is paid. All amounts due and owing hereunder shall be payable in lawful
money of the United States of America, in immediately available funds, at the
principal office of the Holder or at such other place as the Holder may
designate from time to time in writing to the Company. Any payment on this
Debenture coming due on a Saturday, a Sunday or a day which is a legal holiday
in the place at which a payment is to be made hereunder shall be made on the
next succeeding day which is a business day in such place, and any such
extension of the time of payment shall be included in the computation of
interest hereunder. This Debenture is issued pursuant and subject to and is
entitled to the benefits of a certain Debenture and Warrant Purchase Agreement
dated as of February 25, 1997 between the Company and Strategic Partners (the
"Debenture Purchase Agreement").
Subject to the terms of the Debenture Purchase Agreement (including, but
not limited to, the subordination provisions thereof), upon the occurrence or
existence of an Event of Default (as defined in the Debenture Purchase
Agreement) the Holder may, by notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable to the Holder hereunder or under the Debenture
Purchase Agreement to be forthwith due and payable, whereupon this Debenture,
all such accrued interest and all such amounts shall become and be forthwith due
and payable, and in addition thereto, and not in substitution therefor, the
Holder shall be entitled to exercise any one or more of the rights and remedies
provided by applicable law. Failure to exercise any right or remedy under this
Debenture or available under applicable law shall not constitute a waiver of
such option or such other remedies or of the right to exercise any of the same
in the event of any subsequent Event of Default. The Company and all makers,
sureties, guarantors, endorsers and other persons assuming obligations pursuant
to this Debenture hereby waive presentment, protest, demand, notice of dishonor
and all other notices and all defenses and pleas on the grounds of any extension
or extension of the time of payments or the due dates hereof, in whole or in
part, before or after maturity, with or without notice. No renewal or extension
of this Debenture, no release of any obligor and no delay in enforcement of this
Debenture or in exercising any right
or power hereunder shall affect the liability of any obligor hereunder. The
pleading of any statute of limitations as a defense to any demand against any
obligor is expressly waived.
1. Warrant. As part of the consideration for the loan evidenced by this
Debenture, the Company has authorized and issued a non-detachable Warrant,
attached to this Debenture as Exhibit 1 (the "Warrant"), to Holder. If the
Holder exercises the Warrant at any time after August 25, 1998 and on or before
February 25, 2003 (the "Exercise Period"), the Warrant would entitle Holder to
purchase an aggregate of 2,438,419 shares of the Company's Common Stock, at an
exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments
as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the
event that Xxxxxx fails to exercise this Warrant after the Company has provided
Holder (i) twenty (20) days prior written notice of its intention to pay in full
and redeem the Debenture on a particular date (the "Repayment Date"), and (ii)
thirty (30) days after the Redemption Date within which to exercise this
Warrant, then this Warrant shall terminate and thereafter be null and void.
Notwithstanding the preceding sentence, in the event that the Company repays and
redeems the Debenture in full on or before August 25, 1998, this Warrant shall
remain in full force and effect until September 25, 1998, when it shall then
expire.
2. Prepayment.
(a) Voluntary Payment. The Company may prepay or redeem all or part of the
Debenture prior to maturity hereof, without penalty, with twenty (20) days'
prior written notice thereof to Holder.
(b) Mandatory Prepayment. In the event that the Company consummates a
registered underwritten public offering covering the offer and sale of Common
Stock for the account of the Company in which net proceeds to the Company of the
public offering equals or exceeds $15 million (a "Public Offering"), then the
Company must apply, at the request of Holder, the proceeds of such Public
Offering (to the extent available after payment of all Senior Indebtedness (as
defined in Section 12(e) below) to prepay the unpaid principal amount and
outstanding interest of this Debenture.
3. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Debenture, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment due to such event. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on exercise of the Warrant attached
hereto above the Exercise Price then in effect, (b) will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of the
Warrant attached hereto from time to time and (c) will not consolidate with or
merge into any other person or permit any such person to consolidate with or
merge into the Company, unless such other person (or, in the case of a merger or
consolidation in which the Company is the surviving entity, the person issuing
the securities involved in such merger or consolidation) shall expressly assume
in writing and will be bound by all the terms of this Debenture and the Warrant
attached hereto.
4. Chief Financial Officer's Certificate as Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock issuable on the
exercise of the Warrant attached hereto, the Chief Financial Officer of the
Company will promptly compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such adjustment
or readjustment, the Exercise Price resulting therefrom, and the increase or
decrease, if any, of the number of shares purchasable at such price upon
exercise of the Warrant showing in detail the facts and computation upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such certificate to each registered holder of this Debenture, and will,
on the written request at any time of the holder of this Debenture, furnish to
such holder a like certificate setting forth the Exercise Price of the Debenture
at the time in effect and showing how it was calculated.
5. Notices of Record Date, etc. In the event the Company (a) takes a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or (b)
consolidates or merges into, or transfers all or substantially all of its assets
to, another corporation, or (c) dissolves or liquidates (the events described in
the foregoing clauses (b) and (c) being hereinafter referred to as a
"Fundamental Change"), then and in each such event the Company will mail or
cause to be mailed to the registered holder of this Debenture a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
Fundamental Change is to be effected, and the time, if any to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property, if any, deliverable on
any Fundamental Change and (iii) the amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant is to be offered or made. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), or a favorable vote of
stockholders, if either is required. Such notice shall be mailed at least 20
days prior to the date specified in such notice on which any such action is to
be taken or 20 days prior to the record date therefor, whichever is earlier.
6. Reservation of Warrant Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the Warrant
attached hereto, all shares of Common Stock from time to time issuable upon such
exercise.
7. Transfer. Subject to applicable federal and state securities laws, the
transfer of this Debenture and all rights hereunder, in whole or in part, is
registrable at the office or agency of the Company by the holder hereof in
person or by his duly authorized attorney, upon surrender of this Debenture
properly endorsed, provided that this Debenture (and any rights of the Holder
hereunder) is non-transferable except to a person or entity controlled by, or
under common control with, the Holder. Each taker and holder of this Debenture,
by taking or holding the same, consents and agrees that this Debenture, when
endorsed in blank, shall be deemed negotiable, and that the holder hereof, when
this Debenture shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Debenture as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Debenture, or to the registration of transfer hereof on the
books of the Company; and until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder for all purposes, and the Company shall not be affected by notice to the
contrary.
8. Register. The Company shall maintain, at the principal office of the
Company (or such other office as it may designate by notice to the holder
hereof), a register for the Debenture, in which the Company shall record the
name and address of the person in whose name a Debenture has been issued, as
well as the name and address of each transferee and each prior owner of such
Debenture.
9. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such loss, theft or destruction of this Debenture, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Debenture, the Company at its expense will execute and
deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a
Debenture held by Holder its nominee or any of its partners, principals,
officers or directors is lost, stolen or destroyed, the affidavit of a general
partner or any principal or corporate officer of Holder setting forth the
circumstances with respect to such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the company of a new
Debenture in replacement of such lost, stolen or destroyed Debenture.
10. Remedies. The Company stipulates that the remedies at law of the holder
of this Debenture in the event of any default or threatened default by the
Company in the performance of or compliance with any of the
terms of this Debenture are not and will not be adequate, and that such terms
may be specifically enforced pursuant to a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
11. No Sinking Fund; Payment Unsecured. No sinking fund or similar
provision shall be required to fund payment of principal or interest under this
Debenture. Payment of principal and interest on this Debenture is unsecured.
12. Subordination.
(a) Subordination to Senior Indebtedness. The payment of the principal
of and interest on this Debenture is hereby expressly made subordinate and
junior in right of payment to the prior payment in full of all principal of and
interest on all Senior Indebtedness (as defined below) whether now outstanding
or hereafter incurred, created or assumed.
(b) Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of
the Company. In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its creditors, as such, or
to its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether nor not involving
insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be
entitled to receive payment in full of all principal and interest on all Senior
Indebtedness before the Holder of this Debenture is entitled to receive any
payment on account of principal or interest upon this Debenture and to that end
(but subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of this
Section upon the Senior Indebtedness and the holders thereof with respect to
this Debenture and the Holder thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of the Senior Indebtedness shall be
entitled to receive for application in payment hereof any payment or
distribution of any kind or character, whether in cash or property or securities
which may be payable or deliverable in any such proceedings in respect of this
Debenture.
(c) Subrogation to Rights of Holders of Senior Indebtedness. Subject
to the payment in full of all principal and interest on all Senior Indebtedness,
the Holder of this Debenture shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to the Senior Indebtedness.
(d) No Payment on Debentures When Senior Indebtedness in Default. In
the event and during the continuation of any default in the payment of principal
or interest on any Senior Indebtedness beyond any applicable grace, notice or
cure period, or if any Event of Default (as defined in the Debenture Purchase
Agreement) with respect to Senior Indebtedness shall have occurred and be
continuing permitting the holders of such Senior Indebtedness to accelerate the
maturity thereof, unless and until such default or Event of Default shall have
been cured or waived or shall have ceased to exist, then no payment of principal
or interest shall be made by the Company on this Debenture.
(e) Definition of Senior Indebtedness. The term "Senior Indebtedness,"
as used in this Debenture, shall mean the principal and interest on the
following, whether outstanding at the date of execution of the Debenture
Purchase Agreement or thereafter incurred, created, assumed, modified, renewed
or extended: (w) indebtedness of the Company for money borrowed (including the
loan with Security Bank, as defined in the Debenture Purchase Agreement); (x)
the financial obligations of the Company to CenCor existing as of the date
hereof (which will be repaid in full and released at Closing as defined in the
Debenture Purchase Agreement); (y) obligations of the Company as lessee under
any lease of property which is reflected on the Company's balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed
by a Subsidiary or of any obligations of a Subsidiary under any lease or
property which is reflected on the Subsidiary's balance sheet as a capitalized
lease in accordance with GAAP.
13. Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent pursuant to this Debenture
shall be given, served and sent in accordance with the provisions of the
Debenture Purchase Agreement.
14. Miscellaneous. This Debenture and the Warrant attached hereto and any
term hereof or therein may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. Any amendment, modification
or addition to this Warrant is subject to the provisions governing same in the
Debenture Purchase Agreement. This Debenture and the Warrant attached hereto
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware (excluding the choice of law rules thereof). The headings
in this Debenture and the Warrant attached hereto are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be duly
executed on its behalf as of the date first hereinabove set forth.
CONCORDE CAREER COLLEGES, INC.
By:/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
President and Chief Executive Officer
