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Exhibit 4.11
EDUCATION MANAGEMENT CORPORATION
COMMON STOCK SUBSCRIPTION AND REPURCHASE AGREEMENT
As of July 17, 1995
To: ("Purchaser")
Dear Purchaser:
Education Management Corporation, a Pennsylvania corporation ("EMC"), hereby
agrees with you as follows:
1. Certain Definitions. For the purposes of this
Agreement, the following terms have the following meanings, respectively:
"1986 Recapitalization" means the transaction consummated in
1986 pursuant to which Holdings acquired all of the shares of EMC.
"1986 Recapitalization Premium" means the excess of (a) the
total cash and other consideration paid by Holdings for all of the shares of
EMC common stock, plus the total expenses incurred by Holdings in connection
with the 1986 Recapitalization, over (b) the net book value of the assets
acquired, as determined by procedures in conformity with GAAP for the
application of "purchase accounting" to the 1986 Recapitalization.
"1989 Recapitalization" means the transaction consummated in
1989 pursuant to which the capital stock of Holdings was reclassified, Holdings
merged with EMC Recapitalization, Inc. and the concurrent restructuring of
Holdings' capital stock and certain
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other transactions were accomplished, all as described in Holdings' Proxy and
Information Statement dated September 20, 1989 as amended.
"1989 Recapitalization Premium" means the excess of (a) the
total cash and other consideration paid by the ESOP, Holdings and all other
investors, plus the total expenses incurred by Holdings in connection with the
1989 Recapitalization, over (b) the net book value of the assets acquired, as
determined by procedures in conformity with GAAP for the application of
"purchase accounting" to the 1989 Recapitalization.
"Adjusted Consolidated EBIT" means the Consolidated EBIT
calculated as of the end of EMC's most recent fiscal year, adjusted by adding
thereto any amounts deducted from EMC's revenues in determining such
Consolidated EBIT in respect of (a) amortization of the 1986 Recapitalization
Premium and the 1989 Recapitalization Premium, (b) contributions by EMC to the
ESOP and/or payment by EMC of dividends on Shares held by the ESOP and (c)
stock options granted to any EMC employee under any EMC employee stock option
or similar plan or to any member of the Compensation Committee.
"Adjusted Purchase Price" of any Share owned by you means (a)
$1.2899433 per Share with respect to all Shares owned by you immediately
following the closing of the 1989 Recapitalization and (b) with respect to all
Shares acquired by you thereafter, the original per share purchase price paid
by you for such Share, as appropriately adjusted to reflect any stock
dividends, stock splits, reverse stock splits, recapitalizations or similar
events occurring subsequent to the date of purchase of such Share.
"Affiliate" with respect to any Person means a director or
officer of such Person, any corporation, association, firm or other entity of
which such Person (or an officer
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or director of such Person) is a member, director or officer, the spouse of
such Person (or of any officer or director of such Person), either parent of
such Person (or of any officer or director of such Person) or of such Person's
spouse (or of the spouse of any officer or director of such Person), any
descendent of any such parent, any relative of such Person (or of any officer
or director of such Person) who has the same home as such Person (or of any
officer or director of such Person), and any other Person, directly or
indirectly controlling, controlled by, or under common control with, such
Person. For the purpose of this definition, "control" (including, with
correlative meanings, the term "controlling," "controlled by," and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" means this Common Stock Subscription and
Repurchase Agreement, as amended from time to time.
"Alternative Buyers" is defined in Section 12(b) hereof.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks are authorized to be closed in New York City or
Pittsburgh, Pennsylvania.
"Cause," when used in connection with the termination of your
employment with EMC or any subsidiary thereof, means (a) your willful failure
substantially to perform and discharge your duties and responsibilities as an
employee of EMC or any subsidiary thereof, other than by reason of your
Incapacity or (b) the engaging by you in serious misconduct which is injurious
to EMC or any subsidiary thereof.
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"Class A Shares" means EMC Class A Common Stock, par value
$0.0001 per share.
"Class B Shares" means EMC Class B Common Stock, par value
$0.0001 per share.
"Closing" is defined in Section 5 hereof.
"Closing Date" is defined in Section 5 hereof.
"Commission" means the U.S. Securities and Exchange Commission
and any successor federal agency having similar powers.
"Compensation Committee" means the Compensation Committee of
the Board of Directors of EMC.
"Compounded Adjusted Purchase Price" means, with respect to
any Share, the Adjusted Purchase Price of such Share as of the Date of
Termination, plus interest thereon from the date of acquisition of such Share
by you to the Date of Termination compounded annually on each July 1st at an
interest rate per annum equal to the Prime Rate in effect on each July 1st (or
the next succeeding Business Day if such day is not a Business Day).
"Consolidated" means the consolidation of the accounts of EMC
and its subsidiaries in accordance with GAAP.
"Consolidated EBIT" means EMC's Consolidated earnings before
interest and taxes determined with reference to EMC's audited income statement
for the pertinent fiscal year.
"Consolidated Net Debt" means, for any period, on a
Consolidated basis, the difference between (a) EMC's Indebtedness for Borrowed
Money and (b) all cash and cash
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equivalents held by EMC and its subsidiaries, including any amounts held in
cash collateral or escrow accounts by another Person on behalf of EMC or any of
its subsidiaries.
"Convertible Preferred Shares" means shares of EMC's class of
convertible preferred stock issued to the ESOP.
"Counterpart Signature Page" means the counterpart signature
page to Stockholders Agreement by which you become a party to and bound by the
Stockholders Agreement.
"Date of Termination," when used in connection with the
termination of your employment with EMC or any subsidiary thereof, means if
your employment is terminated (a) by death, the date of your death, (b) by EMC
or any subsidiary thereof, the date specified in a written notice of
termination to you or, if no date is specified therein, the date on which such
notice is given to you, (c) by you, the date specified in a written notice of
termination to EMC or any subsidiary thereof, or if no date is specified
therein, the date on which such notice is given to EMC or such subsidiary, (d)
by retirement at or after the Normal Retirement Age, the date you cease your
employment with EMC or any subsidiary thereof, and (e) as a result of your
Incapacity, on the date you become entitled to receive benefits under any
long-term disability plan maintained by EMC or its subsidiaries.
"EMC" is defined in the introduction to this Agreement.
"EMC Capital Stock" means the Class A Shares, the Class B
Shares, the Convertible Preferred Shares and any other shares of capital stock
of EMC hereafter authorized.
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"EMC Common Stock" means the Class A Shares, the Class B
Shares and any other shares of capital stock of EMC classified as common stock
hereafter authorized.
"Escrow Agent" is defined in Section 5 hereof.
"ESOP" means the Education Management Corporation Employee
Stock Ownership Plan.
"Estate" is defined in Section 8(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer of EMC" means the Chairman, the President,
any Executive Vice President, any Senior Vice President, or any Vice President
in charge of a principal business unit, division or function (such as sales,
administration or finance) of EMC, any other officer who performs a
policy-making function, or any other person who performs similar policy-making
functions for EMC. Executive officers of subsidiaries of EMC may be deemed
Executive Officers of EMC if they perform such policy-making functions for EMC.
"Fair Market Value" of any Share means (a) so long as EMC has
an ESOP and is required to obtain appraisals of its capital stock for the
purposes of such ESOP, the most recent value of the Shares as determined by the
most recent such appraisal, or (b) if there is no such appraisal of the Shares,
a price equal to the quotient obtained by dividing (i) the difference between
(A) seven times Adjusted Consolidated EBIT and (B) the Consolidated Net Debt
determined as of the end of EMC's most recent fiscal year by (ii) the number of
Shares (on a fully diluted basis) as of the date of determination.
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"GAAP" means generally accepted accounting principles,
consistently applied, including without limitation the official interpretations
therein as defined by the Financial Accounting Standards Board, its
predecessors and successors.
"Holdings" means EMC Holdings, Inc., a Delaware corporation to
which EMC is successor by merger.
"Incapacity" means your gaining entitlement to receive
benefits under any long-term disability plan maintained by EMC or its
subsidiaries.
"Indebtedness for Borrowed Money" as applied to any Person
means the liabilities of such Person for money borrowed or credit received
(other than trade accounts payable incurred in the ordinary course of
business), direct or contingent, whether evidenced by a bond, note, debenture,
capitalized lease obligation, deferred purchase price arrangement, title
retention device, reimbursement agreement, guarantee, book entry or otherwise.
"Junior Subordinated Note" is defined in Section 12(e) hereof.
"Management Holders" means the Management Stockholders (as
defined in the Stockholders Agreement) and each of their successors and
Permitted Transferees.
"Non-Recourse Note" is defined in Section 4 hereof.
"Normal Retirement Age" means the attainment of age 65 while
you are in the employ of EMC or any subsidiary thereof.
"Other Agreements" is defined in Section 4 hereof.
"Permitted Transferee" is defined in Section 8(a) hereof.
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"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization or a government or any
department or agency thereof
"Pledge Agreement" is defined in Section 4 hereof.
"Prime Rate" means the rate of interest announced publicly by
PNC Bank, National Association in Pittsburgh from time to time as its prime
rate, corporate base rate, or other designation announced in replacement of the
prime rate.
"Public Distribution" means a Public Offering of EMC Common
Stock at the conclusion of which (a) EMC is required to register shares of EMC
Common Stock under Section 12(b) or (g) of the Exchange Act and (b) 25% of the
outstanding EMC Common Stock shall have been sold to the public pursuant to one
or more effective registration statements under the Securities Act.
"Public Offering" means a public offering of securities of EMC
pursuant to an effective registration statement under the Securities Act.
"Purchaser" is defined on the first page of this Agreement.
"Purchaser Designation" means the Purchaser Designation
attached as Exhibit A hereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Transferees" is defined in Section 12(a) hereof.
"Senior Credit Agreement" means the Amended and Restated
Credit Agreement dated as of March 16, 1995 among EMC, PNC Bank, National
Association, and the other banks named therein, as amended from time to time.
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"Shares" means, collectively, all shares of any class of EMC
Capital Stock, including any shares of EMC Capital Stock which may have been
issued or distributed in respect of any of the foregoing by way of stock
dividend or stock split or other distribution, recapitalization or
reclassification.
"Stockholders Agreement" means the Stockholders Agreement
dated as of October 26, 1989 among EMC, Xxxxxxx Xxxxx Interfunding, Inc., the
ESOP and the Persons listed on the Schedule of Stockholders attached thereto,
as amended from time to time.
"Subordinated Credit Agreement" means the Note and Warrant
Purchase Agreement dated as of October 25, 1989 among EMC, The Northwestern
Mutual Life Insurance Company and National Union Fire Insurance Company of
Pittsburgh, PA, as amended from time to time.
"Subscription Shares" is defined in Section 4 hereof.
"Third Party" has the meaning specified in the Stockholders
Agreement.
"Third Party Offer" is defined in Section 9 hereof.
2. Representations and Warranties of EMC. EMC
represents and warrants that:
(a) EMC is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. EMC
has all requisite corporate power and authority to enter into and perform all
of its obligations under this Agreement.
(b) Neither EMC, nor any Person acting on its behalf, has
offered the Subscription Shares or any part thereof or any similar securities
to, or solicited any offers to
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buy any thereof from, or otherwise approached or negotiated with respect
thereto with, any Person or Persons other than you. Neither EMC, nor any
Person acting on its behalf, has taken or will take any action which would
subject the offering which has been made or the issuance on the Closing Date of
any EMC Capital Stock under this Agreement, or any of the Other Agreements, to
the registration provisions of Section 5 of the Securities Act.
3. Purchase for Investment; Other Representations and
Warranties by You. You represent and warrant that:
(a) There has been made available to you a reasonable
time prior to your execution hereof an opportunity to ask questions and receive
answers concerning the terms and conditions of your investment in the
Subscription Shares and to obtain any additional information which EMC
possesses or can acquire without unreasonable effort or expense. You have
received all additional information which you have reasonably requested.
(b) You have been advised that the Subscription Shares
have not been registered under the Securities Act or any state securities or
"blue sky" laws, and, therefore, cannot be resold unless they are registered
under the Securities Act or under any applicable state securities or "blue sky"
laws or unless an exemption from registration thereunder is available. You are
purchasing the Subscription Shares for your own account for investment, and not
with a view to, or for resale in connection with, the distribution thereof, and
you have no present intention of distributing or reselling any thereof. In
making the foregoing representation, you are aware that you must bear the
economic risk of such investment for an indefinite period of time since, in the
view of the Commission, the statutory basis for exemption from registration
under the Securities Act would not be present if such
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representation meant merely that your present intention is to hold these
securities only for the long-term capital gains period of the Internal Revenue
Code of 1986, as amended, for a deferred sale, or for any fixed period in the
future.
(c) You, either individually or together with your
purchaser representative, have such knowledge and experience in financial and
business matters that you are capable of evaluating the merits and risks of
your investment in the Subscription Shares.
(d) You are aware of and familiar with the prohibitions,
restrictions and limitations imposed on EMC by the Senior Credit Agreement and
the Subordinated Credit Agreement, including without limitation those
prohibitions, restrictions and limitations which may prohibit, restrict or
limit EMC's ability to repurchase any Shares, whether pursuant to this
Agreement or otherwise, or to waive, change, modify or discharge this
Agreement.
(e) You are aware of and familiar with the restrictions
imposed on the transfer by you of any Shares, including without limitation the
restrictions contained in this Agreement and in the Stockholders Agreement, and
the rights of EMC and others under this Agreement and under the Stockholders
Agreement in connection with transfers of Shares by you.
(f) You are aware of and familiar with the provisions of
the Stockholders Agreement and exhibits thereto relating to the management of
EMC.
(g) You acknowledge that EMC is entering into this
Agreement in reliance upon your representations and warranties in this
Agreement, including without limitation those set forth in this Section 3.
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(h) The Non-Recourse Note to be issued by you will, when
issued and delivered in accordance with the terms hereof, be duly and validly
issued and be your valid and binding obligation, enforceable against you in
accordance with its terms, except that the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws relating to or
affecting creditors' rights generally and by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(i) You have full right, power and authority to execute
and deliver this Agreement and the Pledge Agreement and to perform your
obligations hereunder and thereunder and this Agreement and the Pledge
Agreement have been duly executed and delivered by you and are valid, binding
and enforceable against you in accordance with their terms, except that the
enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws relating to or affecting creditors' rights generally and by
general equitable principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
4. Purchase of Subscription Shares. Subject to the
terms and conditions herein set forth, EMC will issue and sell to you, and you
will subscribe for and purchase from EMC for investment, at a purchase price of
$3.60 per share, the number of Class B Shares (the "Subscription Shares") set
forth in the Purchaser Designation payable in one or more of the following
items, as set forth in the Purchaser Designation: (i) cash and (ii) a
non-recourse secured promissory note (the "Non-Recourse Note") substantially in
the form of Exhibit B hereto. As collateral security for your obligation to
pay the principal of and
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interest on your Non-Recourse Note, you hereby agree that the Subscription
Shares will be pledged to EMC pursuant to the terms of the Stock Pledge
Agreement made by you in favor of EMC (the "Pledge Agreement") substantially in
the form of Exhibit C hereto. Contemporaneously with entering into this
Agreement, EMC may be entering into separate Common Stock Subscription and
Repurchase Agreements (the "Other Agreements") substantially similar to this
Agreement with certain other purchasers. The sales of Class B Shares to you
and to each of such other purchasers are to be separate sales, and this
Agreement and the Other Agreements are to be separate agreements.
5. Subscription. In connection with your subscription
to the Subscription Shares, you have delivered the following: (i) two executed
copies of this Agreement; (ii) two executed copies of the Counterpart Signature
Page (unless you are currently a party to the Stockholders Agreement); (iii) a
duly executed Non-Recourse Note in the principal amount set forth in the
Purchaser Designation; (iv) two executed copies of the Pledge Agreement; (v)
stock transfer powers duly endorsed in blank covering the Subscription Shares;
and (vi) your check, payable to the order of "Education Management
Corporation," in the amount set forth in the Purchaser Designation. The
documents described above are to be sent by Express Mail or other means of
overnight delivery to Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx (the "Escrow Agent"), at
the following address: 42nd Floor, 000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx
00000, Attn: Xxxx X. Xxxxxxx, Esq. Such documents will not become effective
and binding unless your subscription is accepted by EMC, and a closing occurs
on or prior to July 31, 1995 (the "Closing"). If your subscription is accepted
and a Closing occurs, the documents described above will be delivered by the
Escrow Agent to
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EMC, and will become effective and binding on you on the date of such Closing
(the "Closing Date"). If your subscription is rejected or if a Closing does
not occur, the documents described above will be returned promptly to you,
without interest or deduction, and those documents shall not become effective,
and this Agreement will be void and of no further effect.
6. Conditions to Issuance and Sale of Subscription
Shares. EMC's obligation to issue and sell the Subscription Shares to you
shall be subject to the fulfillment to EMC's satisfaction at or prior to the
Closing of the following conditions:
(a) Your representations and warranties contained in this
Agreement shall be true and correct when made and at and as of the Closing
Date.
(b) You shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by you prior to the Closing.
7. No Implied Right to Employment. Neither this
Agreement nor any provision hereof nor any action taken or omitted to be taken
hereunder shall be deemed to create or confer upon you any right to be retained
in the employ of EMC or any subsidiary or other Affiliate thereof.
8. Transfer Restrictions.
(a) You hereby agree that any and all Shares held by you
will be subject to the terms and conditions of this Agreement and the
Stockholders Agreement and that you will not violate the transfer restrictions
contained in the Stockholders Agreement. In addition, you may at any time and
without EMC's consent transfer any Shares owned by you (i) to
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your estate, spouse, parents or issue, or to a trust the beneficiaries of which
include only yourself and your spouse, parents or issue or (ii) upon your
death, to your executors, administrators, testamentary trustees, legatees or
beneficiaries (your "Estate"); provided, that each such transferee (a
"Permitted Transferee") shall agree in writing, in form and substance
reasonably satisfactory to EMC, to become bound, and becomes bound, by the
terms of this Agreement, the Stockholders Agreement and the Pledge Agreement.
Each Permitted Transferee may further transfer any Shares acquired by such
Permitted Transferee to any of your other Permitted Transferees (including
transfers back to you); provided, that no transfer shall be made to a Permitted
Transferee (or to you) hereunder (whether by you or another Permitted
Transferee) unless and until such Permitted Transferee (or you, in the event of
transfers back to you) shall agree in writing, in form and substance reasonably
satisfactory to EMC, to become bound, and becomes bound, by the terms of this
Agreement, the Stockholders Agreement and the Pledge Agreement. Subsequent to
any Public Distribution, any Shares owned by you (or any of your Permitted
Transferees) may be transferred without the consent of EMC under this Section
8(a), subject, however, to all rights of EMC hereunder, under the Stockholders
Agreement, the Pledge Agreement, the Non-Recourse Note and to compliance with
Sections 8(c) and 8(d) hereof. No transfer pursuant to this Agreement shall
release you from your liability with respect to the payment and performance of
your obligations contained in the Non-Recourse Note. Unless made in
compliance with this Agreement and the Stockholders Agreement, no transfer of
Shares shall be made or recorded, and any such transfer shall be void and of
no effect.
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(b) You may at any time transfer your Shares to EMC or,
if such right is assigned by EMC to the ESOP, to the ESOP.
(c) You agree that prior to any Public Distribution the
certificate or certificates representing any Shares held by you shall bear the
following legend:
The securities represented by this certificate were
issued in a private placement, without registration under the
Securities Act of 1933 and any applicable state securities and
"blue sky" laws, and in reliance upon the holder's
representation that such securities were being acquired for
investment and not for resale. No transfer of such securities
may be made on the books of the issuer unless accompanied by
an opinion of counsel, satisfactory to the issuer, that such
transfer may properly be made without registration under the
Securities Act of 1933 or that such securities have been so
registered under a registration statement which is in effect
at the date of such transfer.
The securities represented by this certificate are
also subject to the restrictions on transfer contained in the
Common Stock Subscription and Repurchase Agreement, dated as
of July 17, 1995, and in the Stockholders Agreement, dated as
of October 26, 1989, copies of each of which may be obtained
from the issuer or from the holder of this certificate, as
well as the rights of the issuer and certain of its
stockholders under such Stockholders Agreement. No transfer
of such securities will be made on the books of the issuer
unless accompanied by evidence of compliance with the terms of
each of such Agreements.
(d) Except for the transfer effected pursuant to a Public
Offering of EMC Common Stock in accordance with the provisions of the
Stockholders Agreement and anything to the contrary herein contained
notwithstanding, no transfer of any Shares held by you to a Person other than
EMC or its designee pursuant to Section 10 hereof shall be effected unless such
transfer may properly be made without registration because of the availability
of an exemption from registration under the Securities Act and the rules and
regulations in effect thereunder and under any applicable state securities or
"blue sky" laws,
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and EMC shall have been furnished with an opinion of counsel, satisfactory in
form and substance to EMC, to that effect.
9. Right of Inclusion: Right of First Refusal. Prior
to the earlier of (a) the tenth anniversary of the Closing Date or (b) a Public
Distribution, notwithstanding any written consent of EMC required pursuant to
Section 8(a) hereof, if you (or any of your Permitted Transferees) shall have
received a bona fide offer in writing from a Third Party (the "Third Party
Offer") to purchase any Shares owned by you (or any of your Permitted
Transferees), which offer you (or any of your Permitted Transferees) desire (or
desires) to accept, and you (or any of your Permitted Transferees) are
otherwise permitted to sell such shares, then (unless such transfer shall be in
a Public Offering in accordance with Section 6 of the Stockholders Agreement)
your (or any of your Permitted Transferees') right to accept the Third Party
Offer and to sell the shares covered thereby shall be subject to the rights of
inclusion and rights of first refusal contained in Section 7 of the
Stockholders Agreement; provided, that you (or any of your Permitted
Transferees) may not transfer any Shares owned by you (or any of your Permitted
Transferees) to a Third Party pursuant to Section 7 of the Stockholders
Agreement other than for cash or promissory notes or both cash and promissory
notes. You agree that you will not transfer, or seek EMC's consent to permit
you to transfer, any Shares owned by you to a Person whom you know, or after
reasonable inquiry should know, has been convicted of a felony which, due to
its nature or notoriety, reflects or would reflect adversely upon EMC or any
subsidiary thereof or which has resulted in the incarceration of such Person
for 30 days or more (unless such conviction is reversed in any final appeal
thereof). Notwithstanding anything herein contained to the contrary, you (or
any
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of your Permitted Transferees) may not transfer any Shares owned by you (or any
of your Permitted Transferees) to a Third Party unless and until you shall have
repaid in full the principal of and the accrued and unpaid interest on the
Non-Recourse Note.
10. Rights with Respect to Shares Following Termination
of Your Employment.
(a) Termination Upon Death, Incapacity or Retirement.
(i) EMC's Call. Upon your death, Incapacity or
the termination of your employment as a result of your
retirement having attained Normal Retirement Age, prior to a
Public Distribution, then, in any such event, EMC shall have
the right, upon delivery of notice to you, for a period of 90
calendar days after the Date of Termination, to repurchase any
or all Shares owned by you. If EMC so notifies you in
accordance with Section 11 hereof of its determination to
exercise such right, you shall have the obligation to sell the
relevant number of Shares on the terms and conditions set
forth in Section 12 hereof to EMC at a price equal to the
product of (A) the Fair Market Value of each such Share as of
the Date of Termination and (B) the number of Shares so
purchased.
(ii) Your Put. In the event of the failure of EMC
to exercise its right to repurchase all Shares owned by you
pursuant to Section 10(a)(i) hereof within the period therein
specified, then, in such event, you shall have the right, upon
delivery of notice to EMC, for a period of 90 calendar days
(180 calendar days in the case of your death) commencing on
the 91st calendar day
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after the Date of Termination, to require EMC to repurchase in
accordance with Section 11 hereof all (but not fewer than all)
Shares then owned by you. If you deliver such notice, you
shall have the obligation to sell to EMC, and EMC shall have
the obligation to purchase, all of such Shares on the terms
and conditions set forth in Section 12 hereof at the price set
forth in Section 10(a)(i) hereof.
(b) Termination Upon Resignation of Employment: EMC's
Call. Upon termination by you prior to a Public Distribution of your
employment with EMC or any subsidiary thereof for any reason other than (i)
your death, (ii) Incapacity or (iii) retirement having attained Normal
Retirement Age, then, in such event, EMC shall have the right, upon delivery of
notice to you, for a period of 90 calendar days after the Date of Termination,
to repurchase any and all Shares owned by you. If EMC notifies you in
accordance with Section 11 hereof of its determination to exercise such right,
you shall have the obligation to sell the relevant number of Shares on the
terms and conditions set forth in Section 12 hereof to EMC at a price equal to
the product of (i) the lessor of (A) the Fair Market Value of each such Share
on the Date of Termination and (B) the Compounded Adjusted Purchase Price of
each such Share and (ii) the number of Shares so purchased.
(c) Termination for Cause; EMC's Call. Upon termination
prior to a Public Distribution of your employment with EMC or any subsidiary
thereof for Cause, EMC shall have the right, upon delivery of notice to you,
for a period of 90 calendar days after the Date of Termination, to repurchase
any or all Shares owned by you. If EMC so notifies you in accordance with
Section 11 hereof of its determination to exercise such right,
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you shall have the obligation to sell the relevant number of Shares on the
terms and conditions set forth in Section 12 hereof to EMC at a price equal to
the product of (i) the lesser of (A) the Fair Market Value of each such Share
as of the Date of Termination or (B) the Adjusted Purchase Price of each such
Share and (ii) the number of Shares so purchased.
(d) Termination for Other Reasons.
(i) EMC's Call. Upon termination, prior to a
Public Distribution, of your employment with EMC or any
subsidiary thereof for any reason other than as a result of
(A) your death, (B) Incapacity, (C) retirement having attained
Normal Retirement Age, (D) your resignation or (E) a
termination for Cause, then, in such event, EMC shall have the
right, upon delivery of notice to you, for a period of 90
calendar days after the Date of Termination, to repurchase any
or all Shares owned by you. If EMC so notifies you in
accordance with Section 11 hereof of its determination to
exercise such right, you shall have the obligation to sell the
relevant number of Shares on the terms and conditions set
forth in Section 12 hereof to EMC at a price equal to:
(x) in the case of Shares acquired by you within
the three-year period immediately preceding the Date of
Termination, the product of (i) the lesser of (A) the Fair
Market Value of each such Share as of the Date of Termination
or (B) the Compounded Adjusted Purchase Price of each such
Share and (ii) the number of such Shares so purchased; and
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21
(y) in the case of all other Shares
owned by you, the product of (i) the Fair Market
Value of each such Share as of the Date of
Termination and (ii) the number of such Shares so
purchased.
(ii) Your Put. In the event of the failure of EMC
to exercise its right to repurchase all Shares owned by you
pursuant to Section 10(d)(i) hereof within the period therein
specified, then, in such event, you shall have the right, upon
delivery of notice to EMC, for a period of 90 calendar days
commencing on the 91st calendar day after the Date of
Termination, to require EMC to repurchase in accordance with
Section 11 hereof all (but not fewer than all) Shares then
owned by you. If you deliver such notice, you shall have the
obligation to sell to EMC, and EMC shall have the obligation
to purchase, all of such Shares on the terms and conditions
set forth in Section 12 hereof at the price set forth in
Section 10(d)(i) hereof.
11. Election Procedures.
(a) The parties shall exercise their respective rights
under Section 10 hereof by sending a written notice by United States certified
or registered mail, return receipt requested, postage prepaid, addressed:
(i) if to you (or any of your Permitted
Transferees), to your attention at your address specified in
the Purchaser Designation (or to any of your Permitted
Transferees at the address furnished by such Permitted
Transferee by written notice to EMC); and
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(ii) if to EMC, to the attention of the President
of EMC at the address specified in Section 17 hereof with a
copy to Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx at their address
specified in Section 17 hereof, or to such other address as
either party has furnished to the other in writing, except
that notices of change of address shall be effective only upon
receipt. Other notices pursuant to this Agreement shall be
communicated in the manner provided in Section 17 hereof,
unless otherwise expressly provided herein.
(b) EMC'S notice of its determination to repurchase
Shares owned by you (or any of your Permitted Transferees) pursuant to Section
10 hereof shall be effective if deposited in the mail as specified in Section
11(a) hereof, or hand delivered to you (or any of your Permitted Transferees),
within the applicable time period specified in Section 10 hereof and shall
specify the applicable purchase price determined in accordance with Section 10
hereof and shall specify in reasonable detail the basis on which such price was
computed. Your notice of your determination to sell Shares to EMC pursuant to
Section 10 hereof (or your Estate's determination to sell Shares to EMC
pursuant to Section 10 hereof) shall be effective if received by the President
of EMC within the applicable time period specified in such Section 10 hereof;
and within 45 calendar days after the receipt by EMC of such notice, EMC shall
notify you (or your Estate) of the applicable purchase price determined in
accordance with Section 10 hereof and shall specify in reasonable detail the
basis on which such price was computed.
(c) Any notice specifying an affirmative determination by
EMC to repurchase Shares pursuant to Section 10 hereof, or specifying the
applicable purchase price
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in response to an affirmative determination by you (or your Estate) to sell
Shares to EMC pursuant to Section 10 hereof, shall specify the place, time and
date for the delivery of and payment for such Shares, which shall be in the
City of Pittsburgh, and during normal business hours on a Business Day which
shall not be less than 10 nor more than 30 calendar days after the receipt by
you (or your Permitted Transferees) of the notice.
12. Delivery and Payment Procedures.
(a) At the place, and at the time and date (the "delivery
date"), specified pursuant to Section 11 hereof for any sale of Shares pursuant
to Section 10 hereof, you (or such of your Permitted Transferees as is or as
are obligated or permitted to sell any Shares to EMC pursuant to Section 10
hereof (collectively, the "Selling Transferees")) shall deliver to EMC or its
designee certificates for such Shares duly endorsed, or accompanied by written
instruments of transfer, in form satisfactory to EMC or its designee, duly
executed by you (or the Selling Transferees), free and clear of all claims,
encumbrances, security interests, liens, equities, options and pledges of every
kind and interests arising in connection with so-called community property
laws or other laws relating to rights of spouses, against payment of the
purchase price therefor which will be payable as follows: (i) all or any part
of such purchase price shall be set off against the indebtedness outstanding
under the Non-Recourse Note at the delivery date, in accordance with the terms
of such Non-Recourse Note, and (ii) any excess of such purchase price over such
indebtedness shall be paid in cash by delivering to you (or to the Selling
Transferees) a certified or bank cashier's check or checks, payable to you or
upon your order (or to the Selling Transferees or upon the order of the Selling
Transferees) in an amount equal to such excess. All transfer and documentary
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stamp taxes, if any, payable in respect of the sale of such Shares to EMC shall
be borne by the party exercising its right to purchase or to sell Shares, as
the case may be, under Section 10 hereof.
(b) Notwithstanding the provisions of Section 12(a)
hereof, if on the delivery date EMC does not have sufficient funds legally
available under law or pursuant to its Certificate of Incorporation or By-laws
or any agreement or instrument to which it is a party or by which it is bound
(including without limitation the Senior Credit Agreement and the Subordinated
Credit Agreement, but excluding any agreement entered into in material part for
the purpose of avoiding EMC's obligations hereunder) (each a "governing
provision) to make the cash payment required by Section 12(a) hereof, then EMC
may issue a Junior Subordinated Note in lieu of the cash consideration required
by Section 12(a) hereof. If EMC does not have sufficient funds legally
available under each governing provision to make the cash payment required by
Section 12(a) hereof and if EMC is further precluded by any governing provision
from issuing a Junior Subordinated Note, EMC shall not purchase any Shares, and
EMC shall have no further obligation under Section 10 hereof with respect to
any Shares not purchased by EMC because it does not have sufficient funds
legally available therefor under each governing provision, and in such event
the Compensation Committee shall, within 180 days, recommend, to you (or your
Estate) one or more of the then current Management Holders or other persons who
at such time are Executive Officers of EMC (collectively, the "Alternative
Buyers") who are willing to purchase, and who shall be entitled to purchase,
from you (or your Estate) at the purchase price specified in Section 10 hereof
any or all of the Shares which EMC was unable to purchase from you (or
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25
your Estate) because of the foregoing restrictions. Any Shares not purchased
within 90 days from the date of the Compensation Committee's offer to the
Alternative Buyers pursuant to the preceding sentence shall be offered for sale
and sold by you (or your Estate) to the Management Holders in the manner set
forth in Section 12(c) hereof.
(c) Any offer to sell Shares to the Management Holders
pursuant to Section 12(b) hereof shall be made by giving to each such
stockholder written notice of your offer to sell those Shares to the Management
Holders at the purchase price which EMC would have been required to pay
therefor pursuant to Section 10 hereof. For a period of 90 calendar days after
the date of his receipt of such notice, each of the Management Holders shall
have the right to notify you (or your Estate) in accordance with Section 7.2 of
the Stockholders Agreement that he or she has determined to accept such offer,
and if one or more of the Management Holders so notifies you (or your Estate)
of his, her or their acceptance, he, she or each of them may purchase any of
the Shares so offered which he or she is entitled to purchase at the price
specified on your (or your Estate's) notice. The number of Shares which each
Management Holder would be entitled to purchase is the product of (i) the total
number of Shares so offered for sale times (ii) a fraction, the numerator of
which is the number of Shares held by such Management Holder and the
denominator of which is the total number of outstanding Shares held by all of
the Management Holders (other than by you or your Estate). Notwithstanding the
foregoing, your (or your Estate's) notice shall also be deemed to constitute an
offer to sell to each Management Holder the Shares subject to your (or your
Estate's) offer which any other Management Holder is entitled to purchase and
does not purchase. The additional number of
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shares which each Management Holder would be entitled to purchase pursuant to
the preceding sentence is the product of (i) the total number of Shares so
offered for sale times (ii) a fraction, the numerator of which is the number of
Shares held by such Management Holder and the denominator of which is the total
number of outstanding Shares held by all of the Management Holders who have
accepted the offer deemed to be made pursuant to the preceding sentence. In
order for a Management Holder to accept the offer to sell such additional
number of Shares, such Management Holder shall indicate his acceptance thereof
in his notice to you (or your Estate) referred to above, and if a Management
Holder so indicates his acceptance, he or she may purchase any of the
additional Shares which he or she would be entitled to purchase at the price
specified in your (or your Estate's) notice.
(d) Any obligation of EMC to purchase Shares pursuant to
Section 10 hereof shall he subject to compliance with all applicable legal
requirements.
(e) Notwithstanding anything herein contained to the
contrary, in connection with the purchase of your Shares pursuant to Section
10(d)(ii) hereof at the price specified in clause (y) of Section 10(d)(i)
hereof, if the Fair Market Value of each such Share as of the Date of
Termination exceeds the Compounded Adjusted Purchase Price, then EMC may issue
a Junior Subordinated Note, in lieu of the cash consideration required by
Section 12(a) hereof, for the portion of the purchase price for such Shares
equal to the product of (i) the difference between (A) the Fair Market Value of
each such Share as of the Date of Termination and (B) the Compounded Adjusted
Purchase Price and (ii) the number of Shares so purchased. As used in this
Section 12, "Junior Subordinated Note" means the junior subordinated promissory
note issued by EMC for payment of a portion of the purchase
- 26 -
27
price for Shares pursuant to this Section 12(e), in the principal amount
specified above, bearing interest on the unpaid principal amount from the date
of issue of such note until such note is paid in full, payable quarterly on the
first Business Day of each calendar quarter, at a fluctuating interest rate per
annum (based on a year of 365 or 366 calendar days, as the case may be) equal
to 1% per annum above the Prime Rate in effect from time to time (each change,
if any, in such fluctuating interest rate to take effect simultaneously with
the corresponding change in the Prime Rate; provided, that such fluctuating
interest rate shall at no time exceed 12% per annum), and the principal amount
of which is payable on the date occurring three months following the latest of
payment in full of all notes or other evidences of indebtedness issued pursuant
to the existing Senior Credit Agreement or the existing Subordinated Credit
Agreement (but not refinancings or extensions thereof).
(f) EMC and each holder of a Junior Subordinated Note, by
acceptance of such Junior Subordinated Note, covenant and agree that each such
Junior Subordinated Note is and shall be subordinated in right of payment to
the prior payment in full of all notes or other evidences of indebtedness
issued pursuant to the existing Senior Credit Agreement and the existing
Subordinated Credit Agreement (but not refinancings or extensions thereof).
13. Survival; Assignment. All covenants, agreements,
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any investigation at any time made by
or on behalf of a party hereto, and the purchase of the Subscription Shares by
you under this Agreement. EMC's rights and obligations hereunder may be
assigned by EMC in whole or in part. You may not assign any of your rights
hereunder. Whenever in this Agreement any of the parties hereto is
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28
referred to, such reference shall be deemed to include the successors,
executors or administrators and permitted assigns of such party; and all
covenants, promises and agreements made in this Agreement by or on behalf of
EMC, or by or on your behalf, shall bind and inure to the benefit of and be
enforceable by the respective successors, executors or administrators and
permitted assigns of such parties hereto, whether so expressed or not.
14. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
15. Entire Agreement; Headings. This Agreement and the
agreements referred to herein embody the entire agreement and understanding
between you and EMC and supersede all prior agreements and understandings
relating to the subject matter hereof. The headings in and date of this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
16. Amendments. This Agreement cannot be changed orally,
and can be changed only by an instrument in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
17. Notices. All communications provided for herein
shall be in writing and:
(a) if addressed to you, shall be delivered or
mailed addressed to you at your address specified in the
Purchaser Designation; or
(b) if addressed to EMC, shall be delivered or
mailed addressed to it, at Suite 800, 000 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: President, with a
copy to Xxxxxx Xxxxxxx Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx,
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00
00xx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxx
X. Xxxxxxx, Esq., or to such other address as either party has furnished to the
other in writing.
18. Execution in Counterparts. This Agreement may be
executed in counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
If you are in agreement with the foregoing, please sign each
counterpart of this Agreement.
Very truly yours,
EDUCATION MANAGEMENT CORPORATION
By:
-------------------------------
Title:
----------------------------
The foregoing Agreement is hereby
agreed to as of the date first
above written, with the intent
to be legally bound thereby.
__________________________________
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COMMON STOCK SUBSCRIPTION AND
REPURCHASE AGREEMENT AND AMENDMENTS
DATE OF AGREEMENT NAME RECOURSE/NON-
RECOURSE
October 13, 1995 Xxxxxx X. Xxxxxxxx Recourse
July 31, 1995 R. Xxxxxxxx Xxxxxx Nonrecourse
Xxxxxx X. Xxxxxxxx
July 17, 1995 Xxxxxxx X. XxXxxxxxx
Xxxxxx X. XxXxxxxx Nonrecourse
February 13, 1992 R. Xxxxxxxx Xxxxxx Nonrecourse
Xxxxx X. Xxxxxx
Xxxx X. Xxxxxx
Xxxxxx X. XxXxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxx
Xxxxxxx X. XxxXxxx
September 13, 1991 Xxxxxx X. Xxxxxxx Nonrecourse
Xxxx X. Xxxxxx
Xxxxxx X. XxXxxxxx
Xxxxxx X. Xxx
Xxxxxxx X. XxxXxxx
June 1, 1990 Xxxxxx X. Xxxxxxx Nonrecourse
