EXHIBIT 10.18
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SECURITIES PURCHASE AGREEMENT
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Series D Redeemable Preferred Stock of Career Education Corporation
($7,500,000.00)
and
Warrants to Purchase Class E Common Stock of Career Education Corporation
(Exercisable for 8,924 Aggregate Shares,
$.01 per share Exercise Price)
Dated as of February 28, 1997
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
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1. AUTHORIZATION OF FINANCING.............................................. 2
2. PURCHASE AND SALE OF SECURITIES; CLOSING................................ 2
2.1. PURCHASE AND SALE................................................ 2
2.2. CLOSING.......................................................... 2
3. CONDITIONS TO EACH CLOSING.............................................. 3
3.1. CLOSING OF THE COMPUTERTECH ACQUISITION.......................... 3
3.2. OPINION OF COUNSEL............................................... 3
3.3. REPRESENTATIONS AND WARRANTIES................................... 3
3.4. PURCHASE PERMITTED BY APPLICABLE LAWS............................ 4
3.5. NO ADVERSE LEGISLATION, ACTION OR DECISION....................... 4
3.6. APPROVALS AND CONSENTS........................................... 4
3.7. PROCEEDINGS...................................................... 5
3.8. SERIES D PREFERRED STOCK AND WARRANT CERTIFICATES................ 5
3.9. STOCKHOLDERS AGREEMENT........................................... 5
3.10. CERTIFICATE OF DESIGNATION...................................... 5
3.11. COMPLIANCE CERTIFICATE.......................................... 5
3.12. ADDITIONAL INFORMATION.......................................... 5
3.13. NO CHANGE RESULTING IN MATERIAL ADVERSE EFFECT.................. 6
4. SUBSEQUENT INVESTMENTS.................................................. 6
4.1. CONDITIONS TO SUBSEQUENT INVESTMENTS............................. 6
4.2. LIMITATION OF OBLIGATION OF PURCHASERS TO MAKE ANY
SUBSEQUENT INVESTMENT.......................................... 7
4.3. FURTHER LIMITATION OF OBLIGATION OF INDIVIDUAL
INVESTORS TO MAKE ANY SUBSEQUENT INVESTMENT.................... 7
5. AFFIRMATIVE COVENANTS................................................... 7
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS........................... 8
5.2. USE OF PROCEEDS.................................................. 8
5.3. RESERVATION OF SHARES............................................ 8
6. NEGATIVE COVENANTS...................................................... 8
6.1. WITHHOLDING TAXES................................................ 8
7. OTHER REMEDIES.......................................................... 9
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8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY................ 9
8.1. ORGANIZATION; AUTHORITY.......................................... 9
8.2. AUTHORIZATION.................................................... 10
8.3. CAPITAL STOCK AND RELATED MATTERS................................ 10
8.4. LITIGATION....................................................... 12
8.5. COMPLIANCE....................................................... 12
8.6. OFFERING......................................................... 13
8.7. CONFLICTING AGREEMENTS........................................... 13
8.8. GOVERNMENTAL PERMITS, CONSENTS, ETC.............................. 13
8.9. FEES AND COMMISSIONS............................................. 14
8.10. RESERVATION OF SHARES........................................... 14
9. REPRESENTATIONS OF THE PURCHASERS....................................... 14
9.1. PURCHASE OF SECURITIES........................................... 14
9.2. INCORPORATION AND AUTHORIZATION OF INSTITUTIONAL INVESTORS....... 14
9.3. NO CONFLICTS..................................................... 14
9.4. NO BROKERS' FEES................................................. 15
10. DEFINITIONS............................................................ 15
11. MISCELLANEOUS.......................................................... 19
11.1. PAYMENTS........................................................ 19
11.2. EXPENSES; INDEMNITY............................................. 19
11.3. CONSENT TO AMENDMENTS; SUBORDINATION............................ 20
11.4. PERSONS DEEMED OWNERS........................................... 21
11.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.... 21
11.6. SUCCESSORS AND ASSIGNS.......................................... 22
11.7. NOTICES......................................................... 22
11.8. DESCRIPTIVE HEADINGS, ETC....................................... 22
11.9. GOVERNING LAW; CHOICE OF FORUM.................................. 23
11.10. WAIVER OF JURY TRIAL........................................... 24
11.11. ISSUANCE OF SECURITIES TO XXXXXXX.............................. 24
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES:
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Schedule 1 Investments
Schedule 8.2 Authorization
Schedule 8.3 Capitalization
Schedule 8.4 Litigation
Schedule 8.7 Conflicting Agreements
Schedule 8.8 Governmental Permits
EXHIBITS:
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Exhibit A Form of Certificate of Designations for Series D Preferred Stock
Exhibit B Form of Warrant Certificate
Exhibit C Form of Opinion of the Company's Counsel
Exhibit D Form of First Amendment to Stockholders Agreement
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of February 28, 1997, is
made by and among CAREER EDUCATION CORPORATION, a Delaware corporation (the
"COMPANY"), XXXXXX EQUITY CAPITAL CORPORATION, an Illinois corporation
("XXXXXX"), ELECTRA INVESTMENT TRUST P.L.C. ("EIT"), Xxxxxx X. Xxxxxxx
("XXXXXXX"), Xxxx X. Xxxxxx ("XXXXXX"), Xxxxxxx X. Xxxx and Xxxxxxxxx X. Xxxx
(collectively, the "LAUBS"), and Xxxxxxx X. Xxxxxxx ("XXXXXXX" and together with
Xxxxxxx, Xxxxxx and the Laubs, the "INDIVIDUAL INVESTORS"). Xxxxxx and EIT are
sometimes collectively referred to herein as the "INSTITUTIONAL INVESTORS." The
Institutional Investors and the Individual Investors are sometimes collectively
referred to herein as the "PURCHASERS."
W I T N E S S E T H:
WHEREAS, Purchasers are the holders of all of the issued and
outstanding capital stock of the Company, and all issued and outstanding
warrants and other options and rights to purchase capital stock of the Company
(other than certain options issued to employees of the Company pursuant to its
1995 Stock Option Plan dated August 23, 1995 (as amended, the "MANAGEMENT OPTION
PLAN") and certain Warrants issued to The Provident Bank.
WHEREAS, the Company has requested additional equity financing in the
amount of up to Seven Million Five Hundred Thousand Dollars ($7,500,000) from
Purchasers, and desires to sell the Series D Preferred Stock and the Warrants
(as each is hereinafter defined, and collectively, the "SECURITIES") to the
Purchasers, for the purpose of providing funds for, among other things, the
acquisition of capital stock of The School of Computer Technology, Inc., a
Pennsylvania corporation (the "COMPUTERTECH ACQUISITION") and for other future
private, post-secondary vocational school acquisitions by the Company (each, a
"FUTURE ACQUISITION"); and
WHEREAS, the Purchasers desire, upon the terms and conditions
hereinafter provided, to purchase from the Company the Series D Preferred Stock
and Warrants;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
bound, hereby agree as follows:
Certain terms used in this Agreement are defined in Section 10 hereof.
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Unless otherwise indicated, references to statutes are to statutes of the United
States. Accounting terms used herein shall be construed in accordance with
GAAP. In addition, unless the contrary intention appears, terms and expressions
having a defined or generally
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accepted meaning under the securities laws of the United States shall have the
same meaning in this Agreement.
1. AUTHORIZATION OF FINANCING.
--------------------------
The Company has authorized the issuance, sale and delivery of (a)
7,500 shares of its Series D Redeemable Preferred Stock, par value $.01 per
share, with a stated value of $1,000 per share (the "SERIES D PREFERRED STOCK"),
which series has the rights, restrictions, privileges and preferences as set
forth in the Certificate of Designations for the Series D Preferred Stock of the
Company, substantially in the form of Exhibit A attached hereto (the
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"CERTIFICATE OF DESIGNATIONS"), and (b) the detachable warrants to be issued in
connection with each issuance of Series D Preferred Stock in accordance with
Schedule 1 attached hereto (collectively, the "WARRANTS" and each individually,
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a "WARRANT") to purchase a maximum aggregate of 8,924 shares of Class E Common
Stock of the Company, at an exercise price of $.01 per share, evidenced by one
or more warrant certificates (the "WARRANT CERTIFICATES") to be substantially in
the form of Exhibit B attached hereto.
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2. PURCHASE AND SALE OF SECURITIES; CLOSING.
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2.1. PURCHASE AND SALE.
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The Company hereby agrees to issue and sell to each Purchaser and each
Purchaser, severally and not jointly, agrees, subject to the terms and
conditions herein set forth and in reliance upon the representations, warranties
and agreements of the Company herein contained, to purchase at the Closings from
the Company for the purchase price set forth opposite such Purchaser's name in
Schedule 1 attached hereto, (a) the aggregate number of shares of Series D
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Preferred Stock set forth opposite such Purchaser's name under the heading Total
Investment in Schedule 1 attached hereto, and registered in such Purchaser's
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name (or, in the case of Xxxxxx and EIT, the name of such Institutional
Investor's nominee, as such Institutional Investor shall request) and (b) the
aggregate number of Warrants set forth opposite such Purchaser's name under the
heading Total Investment in Schedule 1 attached hereto, in the form of one or
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more Warrant Certificates, registered in such Purchaser's name (or, in the case
of Xxxxxx and EIT, the name of such Institutional Investor's nominee, as such
Institutional Investor shall request).
2.2. CLOSING.
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The purchase and delivery of the Securities shall take place at the
offices of Goldberg, Kohn, Bell, Black, Xxxxxxxxxx & Xxxxxx, Ltd., 00 X. Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 at one or more closings (each, a
"CLOSING"). Subject to the satisfaction or waiver of the conditions described
in Section 3 below, the Closing of the purchase and sale of the Securities set
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forth opposite each Purchaser's name under the heading Initial Investment in
Schedule 1 attached hereto, which Closing shall pertain to an aggregate
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investment of $2,000,000 (the "INITIAL INVESTMENT"), shall be held
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simultaneously with the execution and delivery of this Agreement, or at such
other place or on such other date as the Institutional Investors and the Company
may agree upon, but in no event later than February 28, 1997 (the "INITIAL
CLOSING DATE"). Subject to the satisfaction or waiver of the conditions
described in Section 3 and Section 4 below, each Closing of the purchase and
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sale of the Securities, or any portion thereof, set forth opposite each
Purchaser's name under the heading Subsequent Investment(s) in Schedule 1
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attached hereto, which Closings shall pertain to an aggregate investment of up
to $5,500,000 (each, a "SUBSEQUENT INVESTMENT"), shall be held simultaneously
with the closing of a Future Acquisition which the Company intends to finance
with the proceeds of such Subsequent Investment. At each Closing, the Company
will deliver one or more certificates evidencing the appropriate number of
shares of Series D Preferred Stock and one or more certificates evidencing the
appropriate number of Warrants to each Purchaser, against payment by such
Purchaser of the purchase price therefor by transfer of immediately available
funds to such bank or other financial institution as the Company may direct in
writing, for credit to the Company's account The date of each Closing hereunder
is sometimes referred to as a "CLOSING DATE".
3. CONDITIONS TO EACH CLOSING.
--------------------------
Each Purchaser's obligation to purchase and pay for the Securities to
be sold in connection with the Initial Investment and each Subsequent Investment
is subject to the satisfaction prior to or at each Closing of each of the
following conditions:
3.1. CLOSING OF THE COMPUTERTECH ACQUISITION.
---------------------------------------
With respect to the Initial Closing only, the ComputerTech Acquisition
shall close simultaneously with the Initial Investment, in accordance with the
terms and subject to the conditions approved by the Board of Directors of the
Company, without any material deviation therefrom.
3.2 OPINION OF COUNSEL.
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The Institutional Investors shall have received from Goldberg, Kohn,
Bell, Black, Xxxxxxxxxx & Xxxxxx, Ltd., special counsel to the Company, an
opinion substantially in the form set forth in Exhibit C, addressed to the
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Institutional Investors, dated the Closing Date and otherwise reasonably
satisfactory in form and substance to such parties.
3.3. REPRESENTATIONS AND WARRANTIES.
------------------------------
The representations and warranties of the Company contained in this
Agreement and those otherwise made in any writing by the Company, furnished in
connection with or pursuant to this Agreement and the ComputerTech Acquisition
or Future Acquisition to be financed hereby, as applicable (the "TRANSACTION
DOCUMENTS") or in connection with the transactions contemplated hereby or
thereby, shall be true and correct when made and at the time of such Closing
(unless expressly made as of a
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particular date) as though made at such time, and the Company shall have
performed or complied with the covenants, conditions and agreements contained in
this Agreement and the applicable Transaction Documents required to be performed
and complied with by the Company at or prior to such Closing, other than
covenants, conditions and agreements contained in such Transaction Documents
which have been waived by the parties thereto and disclosed to the Institutional
Investors on or prior to such Closing.
3.4. PURCHASE PERMITTED BY APPLICABLE LAWS.
-------------------------------------
The purchase of and payment for the Securities to be purchased at such
Closing shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act) and shall not
subject the Purchasers to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation or order.
Each Purchaser shall have received such certificates or other evidence as they
may reasonably request to establish compliance with the conditions set forth in
this Section 3.4.
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3.5. NO ADVERSE LEGISLATION, ACTION OR DECISION.
------------------------------------------
After the date hereof and prior to the applicable Closing Date, no
legislation, order, rule, ruling or regulation shall have been enacted or made
by or on behalf of any governmental body, department or agency, nor shall have
any legislation been introduced and favorably reported for passage to either
House of Congress by any committee of either such House to which such
legislation has been referred for consideration or any state legislature in any
jurisdiction in which the Company operates or by any committee of such
legislature to which such legislation has been referred for consideration, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in any Institutional Investor's judgment, would
have a Material Adverse Effect. There shall be no action, suit, investigation,
or proceeding pending, or to the Company's knowledge, threatened, against or
affecting the Company or any of its Subsidiaries, the Company's or any such
Subsidiary's properties or rights, or any of the Company's or any such
Subsidiary's Affiliates, officers or directors, before any court, arbitrator or
administrative or governmental body which (a) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement or the applicable Transaction Documents or (b) questions the validity
or legality of any such transactions or seeks to recover damages or to obtain
other relief in connection with any such transactions, and, to the Company's
knowledge, there shall be no valid basis for any such action, proceeding or
investigation.
3.6. APPROVALS AND CONSENTS.
----------------------
The Company shall have duly received all material authorizations,
waivers, consents, approvals, licenses, franchises, permits and certificates
(collectively, "CONSENTS") by or of all federal, state and local governmental
authorities and all material Consents by or
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of all other Persons necessary or advisable for the issuance of the applicable
Securities, and all thereof shall be in full force and effect at the time of
Closing.
3.7. PROCEEDINGS.
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All proceedings taken or to be taken in connection with the
transactions contemplated hereby and in the applicable Transaction Documents,
and all documents incident thereto, shall be reasonably satisfactory in form and
substance to each Institutional Investor, and each Institutional Investor shall
have received all such counterpart originals or certified or other copies of
such documents as it may request.
3.8. SERIES D PREFERRED STOCK AND WARRANT CERTIFICATES.
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The Company shall have delivered to each Purchaser one or more Series
D Preferred Stock certificates and one or more Warrant certificates representing
the aggregate number of shares of Series D Preferred Stock and Warrants being
purchased from the Company by such Purchaser at such Closing.
3.9. STOCKHOLDERS AGREEMENT.
----------------------
The First Amendment to the Amended and Restated Stockholders'
Agreement of the Company, in the form of Exhibit D hereto, shall have been
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executed and delivered by and to all parties thereto.
3.10. CERTIFICATE OF DESIGNATION.
--------------------------
The Certificate of Designations shall have been executed and duly
filed with the Delaware Secretary of State, and shall remain in full force and
effect, and since the date of such filing the Company will not have adopted or
filed any other document designating terms, relative rights or preferences of
its Preferred Stock, or otherwise amending or modifying the Certificate of
Designation, without the prior written consent of the Institutional Investors.
3.11. COMPLIANCE CERTIFICATE.
----------------------
Each Purchaser shall have received an Officers' Certificate, dated as
of such Closing Date, certifying that the conditions specified in this Section 3
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required to be fulfilled on such Closing Date (other than actions required to be
taken by such Purchaser) have been fulfilled.
3.12. ADDITIONAL INFORMATION.
----------------------
The Company shall have executed and/or delivered such other
information and documentation as each Purchaser and its counsel may reasonably
request. Each Purchaser shall have received such other documents and opinions,
in form and substance
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satisfactory to its counsel, relating to matters incident to the ComputerTech
Acquisition or relevant Future Acquisition, as applicable, and the transactions
contemplated by the applicable Transaction Documents.
3.13. NO CHANGE RESULTING IN MATERIAL ADVERSE EFFECT.
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Since November 30, 1996, there shall have been no change in the
business or operations of the Company, nor any other event, which has had, or is
likely to have, in any Institutional Investor's reasonable judgment, a Material
Adverse Effect.
Any condition specified in this Section 3 (or in Section 4 below) may
--------- ---------
be waived with respect to any Purchaser upon express written consent executed by
such Purchaser.
4. SUBSEQUENT INVESTMENTS.
----------------------
4.1. CONDITIONS TO SUBSEQUENT INVESTMENTS.
------------------------------------
Following the Initial Closing, upon written request of the Company,
each Purchaser shall be obligated to make one or more Subsequent Investments,
for the purchase of Series D Preferred Stock and Warrants up to a maximum
aggregate purchase in the amount set forth opposite such Purchaser's name under
the heading Subsequent Investment(s) in Schedule 1 attached hereto, subject to
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the satisfaction prior to or at the Closing of such Subsequent Investment of
each of the following conditions:
(a) No Event of Default. No default or event of default shall
-------------------
exist or be continuing under the Senior Loan Agreement, other than any
default or event of default caused by the Purchasers' failure to
purchase all or any of the Series D Preferred Stock or Warrants or
which would be cured by the purchase of the Series D Preferred Stock
and Warrants being requested by the Company.
(b) Representations and Warranties. The representations and
------------------------------
warranties contained in Section 8 (other than those made as of a particular
---------
date) shall be true and correct in all material respects as of the date of
such Closing.
(c) Conditions. The conditions contained in Section 3 shall
---------- ---------
continue to be fulfilled in all material respects.
(d) Approval of Company Board of Directors; Use of Proceeds. The
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proceeds of such Subsequent Investment shall be used to fund a Future
Acquisition previously approved by the Board of Directors of the
Company, which approval shall include the affirmative vote of the
Xxxxxx Director (as defined in the Stockholders Agreement), Xxxxxxx X.
Xxxxx (or any successor to his seat on the Board of Directors).
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(e) Prior Notice. The Company shall have given to each
------------
Purchaser written notice of the Company's request for a Subsequent
Investment not less than thirty (30) days prior to the date of the
Closing for such Subsequent Investment, which notice shall indicate
the number of shares of Series D Preferred Stock and the number of
Warrants which such Purchaser is requested to purchase, the price
therefor, and the anticipated date of such Closing.
4.2. LIMITATION OF OBLIGATION OF PURCHASERS TO MAKE ANY SUBSEQUENT
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INVESTMENT.
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Notwithstanding any provision of this Agreement to the contrary, in no
event shall Purchasers, or any one of them, be obligated to make a Subsequent
Investment, the proceeds of which will be used by the Company to pay in excess
of thirty-five percent (35%) of the aggregate consideration for the Future
Acquisition to be funded with the proceeds of such Subsequent Investment.
Furthermore, in no event shall any Purchaser be obligated to make any Subsequent
Investment after July 31, 1998.
4.3. FURTHER LIMITATION OF OBLIGATION OF INDIVIDUAL INVESTORS TO
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MAKE ANY SUBSEQUENT INVESTMENT.
------------------------------
Notwithstanding any provision of this Agreement to the contrary, no
Individual Investor shall be obligated to make any Subsequent Investment
pursuant to this Agreement; provided, that within fifteen (15) days after any
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Individual Investor desiring not to make a Subsequent Investment receives notice
of the Company's request for such Subsequent Investment in accordance with
subsection 4.1(e) above, such Individual Investor provides written notice to the
-----------------
Company of his election not to participate in such Subsequent Investment. No
notice given pursuant to the immediately preceding sentence shall be deemed an
election by the Individual Investor giving such notice not to participate in any
later Subsequent Investment. In the event that one or more Individual Investors
elect not to participate in any Subsequent Investment pursuant to this Section
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4.3, the parties hereto agree that the Securities that would have been purchased
---
by such Individual Investor or Investors shall be purchased at the closing of
such Subsequent Investment by the Institutional Investors, pro rata.
5. AFFIRMATIVE COVENANTS.
---------------------
The Company hereby covenants from and after the date of this
Agreement, so long as any Securities remain outstanding, as follows:
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS.
--------------------------------------
The Company covenants that it will deliver, or cause to be delivered,
to each Purchaser, the financial statements and other reports described in
Section 5.1 of the Electra Securities Agreement, in the form and in accordance
with the deadlines for delivery of such financial statements and other reports
set forth in the Electra Securities Agreement.
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5.2. USE OF PROCEEDS.
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The Company shall use all of the proceeds received from the sale of
the Securities pursuant to this Agreement to fund (a) in the case of the Initial
Investment, the ComputerTech Acquisition and related costs and expenses, (b) in
the case of any Subsequent Investment, the Future Acquisition for which such
Subsequent Investment is requested by the Company and any related costs and
expenses.
5.3. RESERVATION OF SHARES.
---------------------
The Company shall at all times keep reserved, and available for
issuance, the number of shares of Common Stock for issuance upon exercise of all
of the Warrants (as such number may be adjusted from time to time pursuant to
the terms of the Warrants).
6. NEGATIVE COVENANTS.
------------------
The Company hereby covenants from and after the date of this
Agreement, so long as any Securities remain outstanding, as follows:
6.1. WITHHOLDING TAXES.
-----------------
(a) The Company covenants that it will not withhold United
States withholding taxes from payments to be made to holders of the
Securities if such holders (i) are corporations organized under the
laws of a jurisdiction outside the United States or are otherwise
persons not resident in the United States for United States federal
income tax purposes, and (ii) provide the Company, upon the Company's
reasonable request, with one or more of Internal Revenue Service Form
W-8, Form 4224 or other applicable forms, certificates or documents
certifying as to entitlement to an exemption from any such withholding
requirements.
(b) The Company covenants that it will not withhold United
States withholding taxes from payments to be made to holders of the
Securities in excess of an applicable treaty rate if such holders (i)
are corporations organized under the laws of jurisdictions outside the
United States or are otherwise persons not resident in the United
States for United States federal income tax purposes, and (ii) provide
the Company, upon the Company's reasonable request, with one or more
of certifications of their residence address, Internal Revenue Service
Form 1001 or other applicable forms, certificates or documents
certifying as to entitlement to a reduced rate of withholding under
any such withholding requirements.
(c) Neither subsection 6.1(a) nor subsection 6.1(b) hereof shall
----------------- -----------------
require the Company to apply an exemption or reduced rate of
withholding during any period when it shall have received notice or
has knowledge (i) that the residence information previously provided
on any applicable form,
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certificate or document is incorrect and no corrected form,
certificate or document as applicable has been provided to the
Company, or (ii) of any other information which would render such
exemption or reduced rate inapplicable.
7. OTHER REMEDIES.
--------------
No remedy conferred in this Agreement upon the holder of any Preferred
Shares is intended to be exclusive of any other remedy available to such holder,
and each and every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law or in
equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
--------------------------------------------------------
The Company hereby represents, covenants and warrants for the benefit
of each holder from time to time of the Securities and the Purchasers, as of the
applicable Closing and after giving effect to the transactions contemplated by
this Agreement to be consummated simultaneously with such Closing, as follows:
8.1. ORGANIZATION; AUTHORITY.
-----------------------
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as presently conducted and as proposed to be conducted. Each of the
Company and its Subsidiaries is duly qualified and in good standing as a foreign
corporation duly authorized to do business in each jurisdiction where it owns or
leases property or in which the conduct of its business requires it so to
qualify or be licensed, except in those jurisdictions in which the failure to
qualify will not individually or in the aggregate have a Material Adverse
Effect. Other than the Subsidiaries, the Company does not own of record or
beneficially any Capital Stock or equity interest or investment in any
corporation, association, partnership, joint venture or other entity. The
Company and each of its Subsidiaries have furnished Purchasers with true,
correct and complete copies of its Certificate of Incorporation (including,
without limitation, the Certificate of Designations) and By-Laws, each as
amended to date.
8.2. AUTHORIZATION.
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All corporate action on the part of the Company and its directors and
stockholders necessary for the authorization, execution, delivery and
performance by (a) the Company of this Agreement, the Series D Preferred Stock
certificates, the Warrants and the other transactions to be consummated in
connection with the applicable Closing, and (b) the consummation of the
transactions contemplated herein and therein shall have been taken or will be
taken prior to such Closing. Each of the Transaction Documents to which the
Company is a party is the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms. The execution, delivery
and
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performance by the Company of each Transaction Document to which it is a party
and compliance therewith and the issuance and sale of the shares of Series D
Preferred Stock and the Warrants will not result in any violation of and will
not (i) conflict with, or result in a breach of, any of the terms of, or
constitute a default under, (a) any provision of state or Federal law to which
the Company is subject, (b) the Company's Certificate of Incorporation
(including, without limitation, the Certificate of Designations) or By-Laws, or
(c) any mortgage, indenture, agreement, instrument, judgment, decree, order,
rule or regulation, or other restriction to which the Company is a party or by
which it is bound, or (ii) result in the creation of any Lien (except as
contemplated by the Senior Loan Documents) upon any of the properties or assets
of the Company pursuant to any such term, or (iii) except as set forth on
Schedule 8.2, result in the suspension, revocation, impairment, forfeiture or
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non-renewal of any permit, license, authorization or approval applicable to the
Company's operations or any of its assets or properties. No stockholder has any
preemptive rights or rights of first refusal by reason of the issuance of the
Warrants or the shares of Series D Preferred Stock which have not previously
been waived. The issued and outstanding shares of Series D Preferred Stock have
been duly and validly issued and are fully paid and non-assessable. The shares
of Common Stock issuable upon exercise of the Warrants, have, in each case, been
duly and validly reserved, and are not subject to any preemptive rights or
rights of first refusal which have not previously been waived, and, upon
issuance, will be validly issued, fully paid and non-assessable.
8.3. CAPITAL STOCK AND RELATED MATTERS.
---------------------------------
At the time of the Closing of the Initial Investment, (a) the
authorized capital stock of the Company will consist of (i) 500,000 shares of
Class A Voting Common Stock, par value $.01 per share, of which 5,250 shares
will be issued and outstanding, (ii) 100,000 shares of Class B Voting Common
Stock, par value $.0l per share, of which 5,100 shares will be issued and
outstanding, (iii) 100,000 shares of Class C Non-Voting Common Stock, par value
$.01 per share, of which 69,900 shares will be issued and outstanding, (iv)
100,000 shares of Class D Non-Voting Common Stock, par value $.01 per share, of
which no shares will be issued and outstanding and 27,484 shares will be
reserved for issuance upon the exercise of certain warrants held by Electra and
The Provident Bank, (v) 100,000 shares of Class E Non-Voting Common Stock, par
value $.01 per share, of which 1,648 shares will be issued and outstanding and
13,400 shares will be reserved for issuance upon exercise of certain management
stock options, 490 shares will be reserved for issuance upon exercise of certain
warrants held by The Provident Bank and 8,924 shares will be reserved for
issuance upon exercise of the Warrants, (vi) 50,000 shares of Series A Preferred
Stock, par value $.01 per share, of which 7,852 shares will be issued and
outstanding, (vii) 1,000 shares of Series B Preferred Stock, par value $.01 per
share, none of which shares will be issued and outstanding, (viii) 5,000 shares
of Series C Preferred Stock, par value $.01 per share, of which 4,954 shares of
Series C Preferred Stock will be issued to Electra and outstanding, and (ix)
10,000 shares of Series D Preferred Stock, par value $.01 per share, per share,
of which 2,000 shares will be issued and outstanding, (b) no shares of Common
Stock will be owned or held by or for the account of the Company; (c) all of the
issued and outstanding shares of the Company's Capital Stock will be validly
-10-
issued and outstanding, fully paid and non-assessable and will be owned of
record (other than shares attributable to Xxxxxxx, which shall be owned of
record by First Chicago, Custodian, Xxxxxxx X. Xxxxxxx XXX) and, to the best
knowledge of the Company, beneficially, free and clear of any Liens (except as
may be contemplated by the Senior Loan Documents) by the individuals and
entities and in the amounts set forth on Schedule 1 and Schedule 8.3 hereof; (d)
---------- ------------
except for the Class A Voting Common Stock, the Class B Voting Common Stock, the
Class C Non-Voting Common Stock, warrants for the Class D Non-Voting Common
Stock, the Class E Non-Voting Common Stock and certain warrants and options for
the Class E Non-Voting Common Stock, the Series A Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock, and the Warrants, and except as
set forth on Schedule 8.3 hereto, the Company has no, and at the time of the
------------
Closing of the Initial Investment will not have, outstanding stock or securities
convertible into or exchangeable for any shares of its Capital Stock, or any
outstanding rights (either preemptive or other) to subscribe for or to purchase,
or any outstanding options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any outstanding calls, commitments
or claims of any character relating to, any Capital Stock or any stock or
securities convertible into or exchangeable for any Capital Stock of the
Company, or any outstanding demand or piggyback registration rights to register
any Capital Stock or any stock or securities convertible into or exchangeable
for the Capital Stock of the Company (other than rights of certain Purchasers
which have been waived or are being waived simultaneously herewith); (e) except
with respect to the Series C Preferred Stock, the Series A Preferred Stock and
the Series D Preferred Stock, the Company will not be subject to any obligation
(contingent or other) to repurchase, otherwise acquire or retire any shares of
Capital Stock; and (f) the Company has no knowledge of any agreement (except as
set forth in this Agreement, the Electra Securities Agreement or the
Stockholders Agreement) restricting the transfer of any shares of the Company's
Capital Stock, except as set forth on Schedule 8.3. Schedule 8.3 sets forth the
------------ ------------
number of shares of Capital Stock, the holders thereof, and the percentage held
by each holder of the issued and outstanding Capital Stock of the Company and
each Subsidiary at the time of the Closing of the Initial Investment and after
giving effect to the Initial Investment.
8.4. LITIGATION.
----------
Except as disclosed on Schedule 8.4 hereto, there is no action, suit,
------------
investigation or proceeding pending, or, to the Company's knowledge threatened,
or any basis therefor or threat thereof, in, nor is there any existing judgment,
order or decree of, any court, governmental authority, arbitration board or
tribunal, foreign or domestic to which the Company or any of its Subsidiaries is
or may be named as a party or its property is or may be subject or which
challenges this Agreement or any of the transactions contemplated hereby, or to
the Company's knowledge, to which any officer, employee or stockholder of the
Company or any of its Subsidiaries is subject, and the Company has no knowledge
of any unasserted claim, the assertion of which is likely and which, if
asserted, will seek damages, an injunction or other legal, equitable, monetary
or nonmonetary relief which claim individually or collectively with other such
unasserted claims, if granted, or
-11-
actions, suits, investigations or proceedings would have a Material Adverse
Effect or which challenges this Agreement or any of the other Transaction
Documents or any of the transactions contemplated hereby or thereby. No
legislation, order, rule, ruling or regulation has been enacted or made by or on
behalf of any governmental body, department or agency, nor to the Company's
knowledge has there been any legislation introduced and favorably reported for
passage to either House of Congress by any committee of either such House to
which such legislation has been referred for consideration or any state
legislature in any jurisdiction in which the schools operated by the Company and
its Subsidiaries operate or by any committee of such legislature to which such
legislation has been referred for consideration, nor to the Company's knowledge
has any decision of any court of competent jurisdiction within the United States
been rendered which, in the Company's judgment, would have a Material Adverse
Effect.
8.5. COMPLIANCE.
----------
(a) Neither the Company nor any Subsidiary is in violation of
any statute, law, ordinance, governmental rule or regulation
(including environmental laws) or any judgment, order or decree
(federal, state, local or foreign) to which it is subject, except
where such violation would not have, and is not likely to result in, a
Material Adverse Effect, nor has it failed to obtain any, and it
possesses all, licenses, permits, franchises or other governmental
authorizations necessary for the ownership or operation of its
properties or the conduct of its business as presently conducted and
as proposed to be conducted, except where the failure to so obtain or
to so possess would not have, and is not likely to result in, a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in violation of
any term of its Certificate of Incorporation, as amended (including,
without limitation, the Certificate of Designations in the case of the
Company), or By-Laws, as amended.
(c) Neither the Company nor any Subsidiary is in violation of
any term of any Contract, judgment, decree, order, statute, rule or
regulation to which either the Company or any Subsidiary is subject or
which would permit any party to any Contract to terminate, amend or
modify such Contract, except for any violations which do not cause,
and are not likely to result in, a Material Adverse Effect. To the
Company's knowledge, neither the Company nor any Subsidiary has waived
any right or default by any party under any Contract. All Contracts
are in full force and effect, and the Company and its Subsidiaries
each have no knowledge that any party to any Contract, or any parties
to any Contract is or is seeking or presently intends to seek to (i)
terminate, amend or modify such Contract or (ii) upon the expiration
of such Contract, not renew such Contract on terms substantially
similar to those terms currently in such
-12-
Contract, except where the termination, amendment, modification or
failure to renew does not have, and is not likely to result in, a
Material Adverse Effect.
8.6. OFFERING.
--------
Based upon the representations and warranties of each Purchaser set
forth in Section 9 hereof, the offer, sale and issuance of the shares of Series
---------
D Preferred Stock, the Warrants, and the shares of Common Stock issuable upon
the exercise of the Warrants are all exempt from the registration requirements
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or other jurisdiction, and neither the Company
nor anyone acting on its behalf will take any action hereafter that would cause
the lose of such exemption.
8.7. CONFLICTING AGREEMENTS.
----------------------
Neither the Company nor any of its Subsidiaries is a party to any
Contract or subject to any restriction which would have, or would be likely to
have, a Material Adverse Effect. Except as set forth on Schedule 8.7 hereto,
------------
neither the Company nor any of its Subsidiaries is a party to or otherwise
subject to any Contract which limits the amounts of, or otherwise imposes
restrictions on, the issuance of the Warrants, the Series D Preferred Stock or
the Common Stock (upon the exercise of the Warrants).
8.8. GOVERNMENTAL PERMITS, CONSENTS, ETC.
-----------------------------------
Except as set forth on Schedule 8.8, no consent, approval,
------------
authorization, exemption or other action by, or notice to or filing with, any
court or administrative or governmental body which has not been obtained, taken
or made is required in connection with the execution and delivery of this
Agreement or the Transaction Documents, the consummation of the transactions
contemplated hereby or thereby or fulfillment of or compliance with the terms
and provisions hereof.
8.9. FEES AND COMMISSIONS.
--------------------
No broker 's or finder 's fee or commission will be payable by the
Company with respect to the issuance and sale of the Securities or the
transactions contemplated hereby.
8.10. RESERVATION OF SHARES.
---------------------
The Company has reserved for issuance the number of its authorized but
unissued shares of Common Stock necessary to permit the exercise in full of all
the outstanding Warrants.
-13-
9. REPRESENTATIONS OF THE PURCHASERS.
---------------------------------
Each Purchaser represents, severally and not jointly, and in making
its purchase hereunder it is specifically understood and agreed, that:
9.1. PURCHASE OF SECURITIES.
----------------------
Such Purchaser is purchasing the Securities set forth opposite his or
its name on Schedule 1 hereto for its own account, (a) for investment purposes
----------
and not with a view to or for sale in connection with any distribution thereof;
and (b) it, he or she is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act. Such Purchaser agrees that
it will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any of the Securities purchased by it
hereunder (or solicit any offers to buy, purchase, or otherwise acquire or take
a pledge of any of such Securities), except in compliance with the Securities
Act, the Exchange Act, any applicable state securities or blue sky laws and the
Stockholders Agreement.
9.2. INCORPORATION AND AUTHORIZATION OF INSTITUTIONAL INVESTORS.
----------------------------------------------------------
In the case of each Institutional Investor, such Institutional
Investor is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and such Institutional
Investor has the full legal right, power and authority to enter into this
Agreement and to perform its obligations hereunder without the need for the
consent of any other person; and this Agreement has been duly authorized,
executed and delivered and constitutes the legal, valid and binding obligation
of such Institutional Investor enforceable against such Institutional Investor
in accordance with the terms hereof.
9.3. NO CONFLICTS.
------------
The execution, delivery and performance by such Purchaser of this
Agreement and each Transaction Document to which it is a party and compliance
therewith and the purchase of the Securities will not result in any violation of
and will not conflict with, or result in a breach of, any of the terms of, or
constitute a default under, (a) any provision of state, Federal or foreign law
to which it is subject, (b) where applicable, its Certificate of Incorporation
or By-Laws, or (c) any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation, or other restriction to which it is a party
or by which it is bound.
9.4. NO BROKERS' FEES.
----------------
Such Purchaser has not agreed or committed to pay any broker's or
finder's fee or commission with respect to the purchase of the Securities or the
transactions contemplated hereby.
-14-
10. DEFINITIONS.
-----------
For the purpose of this Agreement, the following terms shall have the
meanings specified with respect thereto below:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person, but shall exclude, with
respect to the Company, Electra and any transferee that might be
deemed to be an Affiliate of the Company solely by reason of its
ownership of Securities purchased by EIT under this Agreement or any
other agreement or securities issued in exchange for any such
Securities, or by reason of its benefiting from any agreements or
covenants of the Company contained in this Agreement. A Person shall
be deemed to control another Person if such Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Securities Purchase Agreement, as this
Agreement may be amended from time to time, together with all Exhibits
and Schedules hereto.
"BY-LAWS" means for any Person all By-Laws, Codes of Regulation
or other equivalent charter documents in the jurisdiction of
incorporation of such Person.
"CAPITAL STOCK" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of,
rights to acquire, or interests in (however designated) corporate
stock, including, without limitation, any security which is
convertible into or exercisable for such corporate stock.
"CERTIFICATE OF DESIGNATIONS" has the meaning set forth in Section 1
---------
hereof.
"CERTIFICATE OF INCORPORATION" means for any Person all
Certificates of Incorporation, Articles of Incorporation or other
equivalent charter documents in the jurisdiction of incorporation of
such Person.
"CLOSING" has the meaning specified in Section 2.2 hereof.
-----------
"CLOSING DATE" has the meaning specified in Section 2.2 hereof.
-----------
"COMMON STOCK" means the Company's common stock, par value $.01
per share.
-15-
"COMPANY" means Career Education Corporation, a Delaware
corporation, and its successors and assigns.
"COMPUTERTECH ACQUISITION" has the meaning set forth in the
second recital to this Agreement.
"CONSENTS" has the meaning specified in Section 3.6 hereof.
-----------
"CONTRACT" means any written or oral contract, agreement,
commitment, note, bond, pledge, lease, sublease, deed, mortgage,
guaranty, indenture, license, option, consulting agreement, supply
contract, repair contract, distribution agreement, purchase order,
joint venture agreement, franchise, technology and know-how agreement,
employment agreement, instrument or any other contractual commitment
that is binding on any Person or its property, which provide for
payments from or to such Person of $50, 000 or more after the date
hereof.
"DAMAGES" has the meaning set forth in subsection 11.2(b) hereof.
------------------
"XXXXXXX" means Xxxxxx X. Xxxxxxx, an individual residing at 0000
Xxxxx Xxxx, Xxxxx Xxx, Xxxxxxxxxx 00000.
"EAI" means Electra Associates, Inc., a Delaware corporation, and
its successors and assigns.
"EIT" means Electra Investment Trust P.L.C., a corporation
organized under the laws of England and Wales, and its successors and
assigns.
"ELECTRA" means EIT and EAI.
"ELECTRA SECURITIES AGREEMENT" means that certain Securities
Purchase Agreement dated as of July 31, 1995 between the Company and
Electra.
"EXCHANGE ACT" means the Securities Act of 1934, as amended, from
time to time, and any successor statute or law thereto.
"FUTURE ACQUISITION" has the meaning set forth in the second
recital to this Agreement.
"GAAP" means generally accepted accounting principles in the
United States as in effect at the time any determination is made or
financial statement is required hereunder as promulgated by the
American Institute of Certified Public Accountants, the Accounting
Principles Board, the Financial Accounting Standards Board or any
other body existing from time to time which is authorized to establish
or interpret such principles, applied on a consistent basis throughout
any applicable period, subject to any change
-16-
required by a change in GAAP; provided, however, that if any change in
-------- -------
generally accepted accounting principles during the term of this
Agreement affects the calculation of any financial covenant or
determination of value contained herein, the parties hereto hereby
agree to amend this Agreement to the effect that each such financial
covenant or determination of value is not more or less restrictive
than such covenant as in effect on the date hereof.
"XXXXXX" means, collectively, Xxxxxx Equity Capital Corporation,
a Delaware corporation, and any entity controlling or under common
control with Xxxxxx Equity Capital Corporation, and their successors
and assigns.
"INDIVIDUAL INVESTORS" has the meaning set forth in the
introductory paragraph of this Agreement.
"INITIAL CLOSING DATE" has the meaning set forth in Section 2.2
-----------
hereof.
"INITIAL CLOSING" means the Closing of the Initial Investment.
"INITIAL INVESTMENT" has the meaning set forth in Section 2.2 hereof.
-----------
"INSTITUTIONAL INVESTORS" has the meaning set forth in the
introductory paragraph of this Agreement.
"XXXXXXX" means Xxxxxxx X. Xxxxxxx, an individual residing at
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx Xxxx, Xxxxxxxx 00000.
"XXXXXX" means Xxxx X. Xxxxxx, an individual residing at 00
Xxxxxxxx Xxxxx, Xxxxx Xxxxxxxxxx, Xxxxxxxx 00000.
"LAUBS" means Xxxxxxx X. Xxxx and Xxxxxxxxx X. Xxxx, a married
couple residing at 00-000 Xxxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx
00000.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditions sale or other title
retention agreement, any lease in the nature thereof and the filing of
or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
"MANAGEMENT OPTION PLAN" has the meaning set forth in the first
recital of this Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, condition (financial or other), assets, properties or
operations or prospects of the Company and its Subsidiaries, taken as
a whole.
-17-
"OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company, as applicable, by its chief executive officer, president or one of
its vice presidents and by its chief financial officer, treasurer or
controller.
"PERSON" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof, and any other legal entity.
"PREFERRED SHARES" means the shares of Series D Preferred Stock of the
Company.
"PURCHASERS" has the meaning set forth in the introductory paragraph
of this Agreement.
"SECURITIES" means the Warrants and the Series D Preferred Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SENIOR LOAN AGREEMENT" means that certain Credit Agreement dated as
of July 31, 1995 by and among the Company and various of its Subsidiaries,
The Provident Bank, as Agent, and various lenders, as amended.
"SENIOR LOAN DOCUMENTS" means the Senior Loan Agreement and the
documents entered into in connection with or provided for in the Senior
Loan Agreement.
"SERIES D PREFERRED STOCK" means the Series D Redeemable Preferred
stock of the Company, par value $.01 per share with a stated value of
$1,000.00 per share.
"STOCKHOLDERS AGREEMENT" means that certain Amended and Restated
Stockholders Agreement dated as of July 31, 1995 among the Company and the
Purchasers, as amended by that certain First Amendment to Amended and
Restated Stockholders Agreement of even date herewith among the Company and
Purchasers.
"SUBSEQUENT INVESTMENT" has the meaning set forth in Section 2.2
-----------
hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation or
similar entity, a majority of the Capital Stock or other equity of which,
except directors' qualifying shares, shall, at the time as of which any
determination is being made, be owned by such Person either directly or
through Subsidiaries.
-18-
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 3.3
-----------
hereof.
"UNITED STATES" or "U.S." means the United States of America.
"WARRANT CERTIFICATE" shall have the meaning set forth in Section 1
---------
hereof.
"WARRANTS" shall have the meaning set forth in Section 1 hereof.
---------
11. MISCELLANEOUS.
-------------
11.1. PAYMENTS.
--------
The Company agrees that, so long as any Purchaser shall hold any
Securities, it will make payments in respect of such Securities, in compliance
with the terms of this Agreement, and the other Transaction Documents, by wire
transfer of immediately available funds for credit to such account or accounts
as such Purchaser may designate in writing.
11.2. EXPENSES; INDEMNITY.
-------------------
(a) The Company hereby agrees, whether or not the transactions
hereby contemplated shall be consummated, to pay, and save any holder harmless
against liability for the payment of, the costs and expenses incurred by such
holder, including, without limitation, the reasonable fees and disbursements of
counsel engaged by Xxxxxx, EIT and the Individual Investors, in connection with
(i) any subsequent proposed amendment to, modification of, or proposed consent
under (whether or not such proposed modification shall be effected or proposed
consent granted) and (ii) the costs and expenses, including attorney's fees,
incurred by Xxxxxx, EIT and the Individual Investors, in enforcing its rights
under, any of this Agreement, the Warrants or the Series D Preferred Stock or in
responding to any subpoena or other legal process issued in connection with this
Agreement or the transactions contemplated hereby or by reason of such
Purchaser's having acquired any Security, including without limitation, costs
and expenses incurred in any bankruptcy case involving the Company or any of its
Subsidiaries; provided, however, that the Company shall not be obligated to
-------- -------
pay any costs, fees or expenses incurred by any holder solely by reason of such
holder's gross negligence or willful misconduct. The obligations of the Company
under this Section 11.2 shall survive the transfer of any Securities or
------------
portion thereof or interest therein by any Purchaser or any subsequent holder of
the Securities and the redemption of the Preferred Shares.
(b) Notwithstanding any investigation performed by any Purchaser
prior to any Closing of the Initial Investment or any Subsequent Investment,
from and after the Closing of the Initial Investment, the Company shall
indemnify, save and hold harmless, release and discharge each holder of any
Securities and all of its
-19-
officers, directors, stockholders, agents, representatives, consultants,
employees, and Affiliates, and all of its heirs, successors and permitted
assigns from and against any and all damages, obligations, cases, claims,
deficiencies, penalties, interest, expenses, fines, assessments, charges and
costs (including attorneys' fees and court costs) and other liabilities of any
kind, including, without limitation, environmental liabilities (collectively,
"DAMAGES"), arising from, out of or in any manner connected with or based on (i)
notwithstanding any disclosure in this Agreement (including the exhibits and
schedules attached hereto) or otherwise, the breach of any covenant of the
Company or the failure by the Company to perform any of its obligations
contained herein or in any of the agreements, documents or instruments required
to be executed and delivered by the Company in connection with the transactions
contemplated hereby and in any other Transaction Documents, (ii) any inaccuracy
in or breach of any representation or warranty of the Company under this
Agreement or any agreement, document or instrument required to be executed and
delivered by the Company in connection with the transactions contemplated hereby
and in any other Transaction Documents, (iii) notwithstanding any disclosure in
this Agreement (including the exhibits and schedules attached hereto) or
otherwise, any and all acts, omissions, events, conditions or circumstances
involving or related to the assets, properties, businesses, operations or
activities of the Company, any of its Subsidiaries or any predecessor of any
thereof, whether occurring or existing on, prior to or after the Closing of the
Initial Investment, except if any such Damages arise solely as a result of such
Person's gross negligence or willful misconduct.
11.3. CONSENT TO AMENDMENTS; SUBORDINATION.
-------------------------------------
(a) This Agreement may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the holders of eighty percent
(80%) of the number of shares of Series D Preferred Stock at the time
outstanding, and each holder of any shares of Series D Preferred Stock at the
time or thereafter outstanding shall be bound by any consent authorized by this
Section 11.3. No course of dealing between the Company and the holder of any
------------
share of Series D Preferred Stock nor any delay in exercising any rights
hereunder or under any share of Series D Preferred Stock shall operate as a
waiver of any rights of any holder of such shares of Series D Preferred Stock.
(b) Once the Preferred Shares have been redeemed in full, this
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holders of eighty percent (80%) of the then outstanding
Warrants, and each holder of Warrants at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 11.3.
------------
-20-
11.4. PERSONS DEEMED OWNERS.
---------------------
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any shares of Series D Preferred Stock is
registered as the owner and holder of such shares of Series D Preferred Stock
for the purpose of receiving payment of the liquidation value of, and dividends
on, such shares and for all other purposes whatsoever.
11.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
------------------------------------------------------------
All representations and warranties contained herein and under any
other Transaction Documents or made in writing by or on behalf of the Company in
connection herewith or therewith or in connection with the transactions
contemplated hereby or thereby shall survive the execution and delivery of this
Agreement and the Securities, the transfer by any Purchaser of any Securities or
portion thereof or interest therein, or the repurchase or redemption of the
Securities and may be relied upon by any transferee regardless of any
investigation made at any time by or on behalf of such Purchaser; provided,
--------
however, that the representations and warranties set forth in any Transaction
-------
Document shall survive only for such period of time specifically set forth in
such Transaction Document to the extent that a shorter period is set forth
therein. Subject to the preceding sentence, this Agreement, the Securities and
the other Transaction Documents embody the entire agreement and understanding
among the Purchasers and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
11.6. SUCCESSORS AND ASSIGNS.
----------------------
All covenants and other agreements in this Agreement contained by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the of the parties hereto whether so expressed or not.
11.7. NOTICES.
-------
All written communications provided for hereunder shall be sent by
first class mail or nationwide overnight delivery service (with charges prepaid)
and (a) if to Xxxxxx, addressed to it at 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, Telecopier no.: 000-000-0000, Attention: Xxxxx X. Xxxxx, with
copies to Goldberg, Kohn, Bell, Black, Xxxxxxxxxx & Moritz, Ltd., 00 Xxxx Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, Telecopier No.: 000-000-0000,
Attention: Xxxxxx X. Black, (b) if to EIT, addressed to it at 00 Xxxxxxxx,
Xxxxxx, Xxxxxxx XX0X 0XX, Telecopier no.: 011-4471-242-1806, Attention: Xx.
Xxxxxx Xxxx, with a copy to Electra Xxxxxxx, Inc., 000 Xxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Telecopier No.: 000-000-0000, Attention: Xx. Xxxxx
X. Xxxxx, Senior Vice President, with copies to Pryor, Cashman, Xxxxxxx & Xxxxx,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Telecopier No.: 212-326-0806,
Attention: Xxxxx X. Xxxxx, Esq., or to such other address or addresses as EIT
shall have specified to
-21-
the parties hereto in writing, (c) if to any other holder of any shares of
Series D Preferred Stock or Warrants, including without limitation the
Individual Investors, addressed to such holder at such address as such other
holder shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then addressed to
such other holder in care of the last holder of such share of Series D Preferred
Stock or Warrants which shall have so specified an address to the Company, and
(d) if to the Company, addressed to it at Career Education Corporation, 0000
Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxxxx, Xxxxxxxx 00000, Telecopier No.:
000-000-0000, Attention: President, with a copy to: X'Xxxxxx and Xxxxxx, 00
Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, Telecopier No.: 312-
580-0923, Attention: Xxxxxx X. Xxxxxxx, Esq., and with a copy to Xxxxxx Equity
Capital Corp., 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Telecopier No.:
000-000-0000, Attention: Xxxxx X. Xxxxx, or to such other address or addresses
as the Company may have designated in writing to each holder of the Securities
at the time outstanding.
11.8. DESCRIPTIVE HEADINGS, ETC.
--------------------------
The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
References herein to a Section are, unless otherwise specified, to one of the
Sections of this Agreement and references to an "Exhibit" or "Schedule" are,
unless otherwise specified, to one of the Exhibits or Schedules to this
Agreement.
11.9. GOVERNING LAW; CHOICE OF FORUM.
------------------------------
THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT
AND SHALL BE DEEMED TO HAVE BEEN MADE IN CHICAGO, ILLINOIS. THIS AGREEMENT, AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS
(WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULES OR PRINCIPLES) AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE SERIES D PREFERRED STOCK SHALL
BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE
STATE OF DELAWARE (WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULES OR
PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING WITH RESPECT HERETO AND THERETO
SHALL ONLY BE BROUGHT IN THE COURTS OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY AND EACH PURCHASER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS AND IRREVOCABLY WAIVES ANY DEFENSE OR CLAIM TO SUCH JURISDICTION WHICH
EITHER OR BOTH MAY HAVE BASED, DIRECTLY OR INDIRECTLY, ON THE GROUNDS OF FORUM
NON CONVENIENS. IF ANY ACTION IS COMMENCED IN ANY OTHER JURISDICTION, THE
PARTIES
-22-
HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO THE NORTHERN DISTRICT OF
ILLINOIS. THE COMPANY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, AS
THE DESIGNEE, APPOINTEE AND AGENT, OF THE COMPANY TO RECEIVE, FOR AND ON BEHALF
OF THE COMPANY, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE RIGHTS AND
OBLIGATIONS HEREUNDER OR THEREUNDER OR UNDER THE SERIES D PREFERRED STOCK AND
SUCH SERVICE SHALL BE DEEMED COMPLETED UPON DELIVERY THEREOF TO SUCH AGENT. IT
IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY
FORWARDED BY MAIL TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.7, BUT
------------
THE FAILURE OF THE COMPANY TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY PURCHASER, OR ANY OTHER HOLDER OF ANY OF THE SECURITIES TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
11.10. WAIVER OF JURY TRIAL.
--------------------
THE COMPANY AND EACH PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED HEREUNDER. THE COMPANY AND EACH PURCHASER ALSO WAIVE ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THE COMPANY AND EACH PURCHASER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
COMPANY AND EACH PURCHASER FURTHER WARRANT AND
-23-
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.11. ISSUANCE OF SECURITIES TO XXXXXXX.
---------------------------------
The Company and Xxxxxxx hereby agree that upon Xxxxxxx'x prior written
request, any Securities to be issued to Xxxxxxx pursuant to this Agreement may
be issued to First Chicago, Custodian, Xxxxxxx X. Xxxxxxx XXX (the "XXXXXXX
XXX"); provided, that the issuance of such Securities to the Xxxxxxx XXX would
--------
not result in a breach of the representations and warranties of Xxxxxxx in
Section 9 hereof if such representations and warranties were made by the Xxxxxxx
---------
XXX. Xxxxxxx hereby represents and warrants that he is the sole beneficiary of
the Xxxxxxx XXX with power of direction, and agrees that, in the event of the
issuance of any Securities to the Xxxxxxx XXX, he will cause the Xxxxxxx XXX to
be bound by the terms of this Agreement, the Stockholders Agreement and all
other agreements governing the rights of the Company's stockholders to which
Xxxxxxx is a party. Furthermore, Xxxxxxx hereby agrees to execute and deliver,
or to cause the Xxxxxxx XXX to execute and deliver, such other documents as the
Company may reasonably require in connection with any issuance of Securities to
the Xxxxxxx XXX.
[Signature page follows.]
-24-
IN WITNESS WHEREOF, the Company and each Purchaser have caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
CAREER EDUCATION CORPORATION
/s/ XXXXXX X. XXXXXXX By /s/ XXXXXXX X. XXXXXXX
----------------------------------- -------------------------------
Xxxxxx X. Xxxxxxx Name Xxxxxxx X. Xxxxxxx
-----------------------------
/s/ XXXX X. XXXXXX Title Vice President & CFO
----------------------------------- ----------------------------
Xxxx X. Xxxxxx
XXXXXX EQUITY CAPITAL CORPORATION
/s/ XXXXXXX X. XXXX
----------------------------------- By /s/ XXXXX X. XXXXX
Xxxxxxx X. Xxxx -------------------------------
Name Xxxxx X. Xxxxx
-----------------------------
/s/ XXXXXXXXX X. XXXX Title Vice President
----------------------------------- ----------------------------
Xxxxxxxxx X. Xxxx
ELECTRA INVESTMENT TRUST P.L.C.
/s/ XXXXXXX X. XXXXXXX By /s/ XXXX X. XXXXXXX
----------------------------------- -------------------------------
Xxxxxxx X. Xxxxxxx Name Xxxx X. Xxxxxxx
-----------------------------
Title Director
----------------------------
