EXHIBIT 10.51
THIS WARRANT AND THE SECURITIES SUBJECT HERETO HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE WARRANT AND/OR
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN
EXEMPTION THEREFROM.
No. W-1977-1 Warrant to Subscribe
November 25, 1997 for 3,683.29 Shares
STOCK SUBSCRIPTION WARRANT
To Subscribe for and Purchase Class A Common Stock
of Corinthian Colleges, Inc.
THIS CERTIFIES that The Prudential Insurance Company of America
("Prudential"), or registered assigns, is entitled to subscribe for and purchase
from Corinthian Colleges, Inc., a Delaware corporation (the "Company"), at the
price of $0.01 per share at any time after the date hereof to and including the
Expiration Date (as hereinafter defined), 3,683.29 duly authorized, validly
issued, fully paid and non-assessable shares of the Company's Class A Common
Stock (as hereinafter defined in paragraph 9), as adjusted from time to time
pursuant to the terms hereof. This Warrant is issued for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged.
This Warrant was issued in connection with the amendment dated October 31,
1997 (the "Amendment"), to the Note Purchase and Revolving Credit Agreement,
dated as of October 17, 1996, between the Company and Prudential (as amended,
the "Note Agreement"). Under the Note Agreement there is outstanding, after
giving effect to the Amendment, $22,500,000 principal amount of the Company's
11.02% Senior Secured Term Notes due October 17, 2004 (the "Term Notes"). The
"Expiration Date" shall be the earlier of (a) October 17, 2004, or (b) the date
which is six months after the date upon which the entire outstanding principal
amount of, accrued interest on, and any Yield-Maintenance Amount (as defined in
the Note Agreement) or any other amount due with respect to the Term Notes has
been indefeasibly paid in cash.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. The rights
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represented by this Warrant may be exercised by the holder hereof from time to
time after October 17, 1999, in whole or in part (but not as to a fractional
share of Common Stock), by the surrender of this Warrant (properly endorsed if
required) at the principal office of the Company at 0 Xxxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxx Xxx, Xxxxxxxxxx 00000 Attention: Chief Financial Officer (or such
other office or agency of the Company as it may designate by notice in writing
to the holder hereof at the address
of such holder appearing on the books of the Company at any time within the
period above named) and upon payment to the Company by certified check, bank
draft or wire transfer of the Warrant Purchase Price (as hereinafter defined in
paragraph 3A(1)) for the shares being purchased upon such exercise. The Company
agrees that the shares so purchased shall be and are deemed to be issued to the
holder hereof as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such shares as aforesaid. Subject to the provisions of paragraph 2 below,
certificates for the shares of Common Stock so purchased shall be delivered to
the holder hereof within a reasonable time, not exceeding ten business days,
after the rights represented by this Warrant shall have been so exercised
(unless such exercise shall be in connection with an underwritten public
offering of shares of Common Stock, in which event concurrently with such
exercise), and, unless this Warrant has expired, a new Warrant representing the
number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
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and agrees that all shares of Common Stock which may be issued directly or
indirectly upon the exercise of the rights represented by this Warrant will,
upon issuance, be fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants and agrees that it will from
time to time take all such action as may be requisite to assure that the par
value (if any) per share of the Common Stock is at all times equal to or less
than the then effective Warrant Purchase Price per share of the Common Stock
issuable pursuant to this Warrant. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of its Common Stock to provide
for the exercise of the rights represented by this Warrant. The Company will
take all such action as may be necessary to assure that such shares of Common
Stock may be so issued without violation of any applicable law or regulation, or
of any requirements of any domestic securities exchange upon which any class of
Common Stock of the Company may be listed. The Company will not take any action
which would result in any adjustment of the Warrant Purchase Price if the total
number of shares of Common Stock issuable after such action upon exercise of
this Warrant, together with all shares of Common Stock then outstanding and all
shares of Common Stock then issuable upon exercise of all Options (as
hereinafter defined) (other than this Warrant) and upon conversion of all
Convertible Securities (as hereinafter defined) then outstanding, would exceed
the total number of shares of Common Stock then authorized by the Company's
Certificate of Incorporation.
3. Warrant Purchase Price. The above provisions are, however, subject to
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the following:
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3A. Warrant Purchase Price; Adjustment of Number of Shares.
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3A(1). Warrant Purchase Price. The initial Warrant Purchase Price of $0.0l
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per share shall be subject to adjustment from time to tie as hereinafter
provided (such price or price as last adjusted, as the case may be, being herein
called the "Warrant Purchase Price").
3A(2). Adjustment of Number of Shares When Adjustment of Warrant Purchase
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Price. Upon each adjustment of the Warrant Purchase Price, the holder of this
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Warrant shall thereafter be entitled to purchase, at the Warrant Purchase Price
resulting from such adjustment, the number of shares obtained by multiplying the
Warrant Purchase Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Purchase Price
resulting from such adjustment. Notwithstanding anything to the contrary
contained herein, in no event shall the adjustment of the number of shares set
forth above allow the holder of this Warrant to purchase a number of shares of
Common Stock which represents more than 2.20% of the aggregate number of Fully
Diluted Shares.
3A(3). Special Adjustments of Number of Shares. If on or after the date of
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the original issuance of this Warrant and on or prior to the date of the
consummation by the Company of an Initial Public Offering the Company shall
issue any Options (as defined in Section 3D(l) hereof), whether or not such
Options are immediately exercisable, then the aggregate number of shares of
Common Stock which the holder of this Warrant shall be entitled to purchase upon
the exercise of this Warrant shall be adjusted on the date of such issuance to
equal the number which is the same percentage of the number of the Fully
Diluted Shares immediately after such issuance and adjustment (calculated after
giving effect to the adjustment provisions in any other outstanding Options) as
the percentage which the aggregate number of shares of Common Stock which the
holder of this Warrant is entitled to purchase immediately before such issuance
is of the Fully Diluted Shares immediately before such issuance. If an
adjustment is made pursuant to this paragraph 3A(3) as the result of the
issuance of any Option, then no adjustment to the Warrant Purchase Price or the
number of shares issuable upon the exercise of this Warrant shall be made under
any other provision of this Warrant as a result of (a) the issuance of such
Option, (b) any increase to the number of shares of Common Stock issuable under
any other outstanding Options under the adjustment provisions thereof as a
result of the issuance of such Option, (c) the issuance of shares of Common
Stock upon the exercise of such Option, or (d) the issuance of such additional
shares of Common Stock upon the exercise of such other outstanding Options. For
the purposes of this Warrant: (a) "Initial Public Offering" shall mean the first
offer and sale to the public by the Company or any holder of shares of Common
Stock, pursuant to a registration statement that has been declared effective by
the Securities and Exchange Commission; provided, however, that the gross
proceeds of the shares issued and sold by the Company are at least $20,000,000,
and (b) "Fully Diluted Shares" shall mean on any date all shares of Common Stock
outstanding on such date, plus all shares of Common Stock which would be
outstanding on such date if all Options and Convertible Securities (including
this Warrant) outstanding On such date, and all Options and Convertible
Securities issuable upon the full exercise of all then outstanding Options and
Convertible Securities,
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in either case whether or not then exercisable under the terms thereof, were
fully exercised on such date.
3A(4). Special Adjustment for Management Shares. Any Class B Common Stock
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of the Company purchased by the members of Senior Management pursuant to the
Executive Stock Agreements between the Company and the members of Senior
Management (the "Executive Stock Agreements") which will vest upon a Trigger
Event as defined in the Executive Stock Agreements (the "Earnback Shares") and
any Common Stock issuable upon exercise of the Contingent Warrants (the
"Contingent Warrant Shares") shall not be deemed to be issued and outstanding on
the date of issuance of this Warrant and shall be deemed to be issued at the
time of vesting of the Earnback Shares as a result of such Trigger Event.
Notwithstanding anything to the contrary contained herein, but subject to the
second sentence of Section 3A(2) above, if the Earnback Shares vest and/or the
Contingent Warrant Shares are issuable, the aggregate number of shares of Common
Stock which the holder of this Warrant shall be entitled to purchase upon the
exercise of this Warrant shall be adjusted on the date of such deemed issuance
to equal the number which is the same percentage of the number of Fully Diluted
Shares immediately after such deemed issuance and adjustment as the percentage
which the aggregate number of shares of Common Stock which the holder of this
Warrant is entitled to purchase immediately before such deemed issuance is of
the number of Fully Diluted Shares immediately before such deemed issuance. For
purposes of this Warrant: (a) "Senior Management" shall have the meaning given
such term in the Note Agreement; and (b) "Contingent Warrants" shall mean the
Contingent Stock Purchase Warrants, dated October 17, 1996, issued to
Prudential, Primus Capital Fund III Limited Partnership, Banc One Capital
Partners II, Ltd. and BOCA II Limited Liability Company.
3B. Adjustment of Warrant Purchase Price Upon Purchase of Common Stock by
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Company. If the Company directly or indirectly through a subsidiary or
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otherwise, purchases, redeems or otherwise acquires any of its Common Stock
(other than a purchase or other acquisition of shares of Common Stock from a
former employee of the Company or a subsidiary in connection with the
termination of the employment of such employee with the Company or any
Subsidiary) at a price per share greater than the Market Price then in effect,
then the Warrant Purchase Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Purchase Price existing at that time by a fraction (i) the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such purchase, redemption or acquisition minus the number of shares of
Common Stock which the aggregate consideration for the total number of such
shares of Common Stock so purchased, redeemed or acquired would purchase at the
Market Price; and (ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such purchase, redemption or
acquisition. For the purposes of this paragraph, the date as of which the Market
Price shall be computed shall be the earlier of (x) the date on which the
Company shall enter into a firm contract for the purchase, redemption or
acquisition of such Common Stock, or (y) the date of actual purchase, redemption
or acquisition of such Common Stock. For the purposes of this paragraph, a
purchase, redemption or acquisition of any Options or Convertible Securities
shall be deemed to be a purchase of the underlying Common Stock, and the
computation herein required shall be made on
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the basis of the full exercise, conversion or exchange of any such Option or
Convertible Security on the date as of which such computation is required hereby
to be made, even if such Option or right to convert or exchange any such
Convertible Securities is not exercisable on such date.
3C. Adjustment of Warrant Purchase Price upon Issuance of Common Stock.
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Except as provided in paragraph 3G and except that no adjustment will be made
pursuant to this paragraph 3C when an adjustment is made pursuant to paragraph
3F or paragraph 3A(3), if and whenever after the date hereof the Company shall
issue or sell any shares of its Common Stock for a consideration per share less
than the 95% of the Market Price (as determined pursuant to Section 3D(8)
hereof) at the time of such issue or sale, then, forthwith upon such issue or
sale, the Warrant Purchase Price shall be reduced to the lower of the prices
(calculated to the nearest one-thousandth cent) determined as follows:
(1) by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the Market Price at the time of such sale, and (b) the
aggregate consideration, if any, received by the Company upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale; and
(2) by multiplying the Warrant Purchase Price in effect immediately
prior to the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the
Market Price of such Common Stock immediately prior to such issue or sale
plus (ii) the consideration received by the Company upon such issue or
sale, and the denominator of which shall be the product of (iii) the total
number of shares of Common Stock outstanding immediately after such issue
or sale, multiplied by (iv) the Market Price of such Common Stock
immediately prior to such issue or sale.
Adjustments of the Warrant Purchase Price shall be made in fractions of a cent
per share to the nearest one-thousandth ($.00001) per share.
3D. Factors Affecting Adjustments. For all purposes of this paragraph 3,
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the following provisions shall also be applicable:
3D(l). Issuance of Rights or Options. In case at any time after the date
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hereof the Company shall in any manner grant (whether directly or by assumption
in a merger or otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securities convertible
into or exchangeable for Common Stock (such rights or options being herein
called "Options" and such convertible or exchangeable stock or securities being
herein called "Convertible Securities") whether or not such Options or the right
to convert or exchange any such Convertible Securities are immediately
exercisable (where no adjustment as a result of such issuance is made pursuant
to paragraph 3A(3)), and the price per share for which Common Stock is issuable
5
upon the exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than 95% of
the Market Price of such Common Stock in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall (as of the date of granting of such Options) be
deemed to be outstanding (and included as Common Stock outstanding for purposes
of paragraphs 3B and 3C) and to have been issued for such price per share.
Except as otherwise provided in paragraph 3D(3) below, no adjustment or further
adjustment (as the case may be) of the Warrant Purchase Price shall be made upon
tile actual issue of Common Stock or of Convertible Securities upon exercise of
Options or upon the actual issue of Common Stock upon conversion or exchange of
Convertible Securities (whether or not the granting or issuance of such Options
or Convertible Securities resulted in an adjustment of the Warrant Purchase
Price).
3D(2). Issuance of Convertible Securities. In case the Company shall in any
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manner issue (whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than 95% of the Market Price of such
Common Stock on the date of such issue or sale of such Convertible Securities,
then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be deemed to be outstanding (and
included as Common Stock for purposes of paragraphs 3B and 3C) and to have been
issued for such price per share, provided that (a) except as otherwise provided
in paragraph 3D(3) below, no adjustment or further adjustment (as the case may
be) of the Warrant Purchase Price shall be made upon the actual issue of Common
Stock upon conversion or exchange of Convertible Securities whether or not the
granting or issuance of such Convertible Securities resulted in an adjustment in
the Warrant Purchase Price, and (b) if any issue or sale of Convertible
Securities is made upon exercise of any Options, no further adjustment of the
Warrant Purchase Price shall be made by reason of such issue or sale (whether or
not the granting or issuance of such Options or Convertible Securities resulted
in an adjustment of the Warrant Purchase Price).
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3D(3). Change in Option Price or Conversion Rate. Upon the happening of
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any of the following events, namely, if the purchase price provided for in any
Option referred to in paragraph 3D(1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in paragraph 3D(l) or 3D(2), or the rate at which any Convertible Securities
referred to in paragraph 3D(l) or 3D(2) are convertible into or exchangeable for
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Warrant Purchase Price in
effect at the time of such event shall forthwith be readjusted to the Warrant
Purchase Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; and on the expiration of any such
Option or the termination of any such right to convert or exchange such
Convertible Securities, the Warrant Purchase Price then in effect hereunder
shall forthwith be increased to the Warrant Purchase Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the purchase price
provided for in any such Option referred to in paragraph 3D(l) or the rate at
which any Convertible Securities referred to in paragraph 3D(l) or 3D(2) are
convertible into or exchangeable for Common Stock, shall be reduced at any time
under or by reason of provisions with respect thereto designed to protect
against dilution other than as a result of a stock dividend or stock split which
results in an adjustment of the Warrant Purchase Price, then in case of the
delivery of Common Stock upon the exercise of any such Option or upon conversion
or exchange of any such Convertible Security, the Warrant Purchase Price then
in effect hereunder shall forthwith be adjusted to such amount as would have
obtained had such Option or Convertible Security never been issued as to such
Common Stock and had adjustments been made upon the issuance of the shares of
Common Stock delivered as aforesaid, but only if as a result of such adjustment
the Warrant Purchase Price then in effect hereunder is thereby reduced.
3D(4). Stock Dividends. In case the Company shall declare a dividend or
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make any other distribution upon any stock of the Company payable in Common
Stock, Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration.
3D(5). Consideration for Stock. In case any shares of Common Stock, Options
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or Convertible Securities shall be issued or sold for cash, or offered by the
Company for subscription, the consideration received therefor shall be deemed to
be the amount received by the Company therefor plus any additional consideration
payable to the Company upon the exercise, conversion or exchange of such Common
Stock, Options or Convertible Securities, excluding any amounts paid or
receivable for accrued interest or accrued dividends and after deducting
therefrom any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Company in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
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received by the Company shall be deemed to be the fair value of such
consideration as determined by the Board of Directors of the Company, after
deducting any expenses incurred or any underwriting commissions or concessions
paid or allowed by the Company in connection therewith. The amount of
consideration deemed to be received by the Company pursuant to the foregoing
provisions of this paragraph 3D(5) upon any issuance and/or sale, pursuant to an
established compensation plan of the Company, to directors, officers or
employees of the Company in connection with their employment, of shares of
Common Stock, Options or Convertible Securities, shall be increased by the
amount of any tax benefit realized by the Company as a result of such issuance
and/or sale, the amount of such tax benefit being the amount by which the
Federal and/or State income or other tax liability of the Company shall be
reduced by reason of any deduction or credit in respect of such issuance and/or
sale. In case any shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value as determined by the Board of Directors of the Company of such
portion of the assets and business of the non-surviving corporation as such
Board shall determine to be attributable to such Common Stock, Options or
Convertible Securities as the case may be. In case any Options shall be issued
in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration. In the event of any
consolidation or merger of the Company in which the Company is not the surviving
corporation or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation, the
Company shall be deemed to have issued a number of shares of its Common Stock
for stock or securities of the other corporation computed on the basis of the
actual exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such transaction of
such stock or securities of the other corporation, and if any such calculation
results in adjustment of the Warrant Purchase Price, the determination of the
number of shares of Common Stock receivable upon exercise of the Warrants
immediately prior to such merger, consolidation or sale, for purposes of this
paragraph 3D, shall be made after giving effect to such adjustment of the
Warrant Purchase Price. In all cases where the amount of consideration received
by the Company upon the issuance or sale of any Common Stock, Options, or
Convertible Securities is to be determined by the Board of Directors of the
Company, the Board shall notify the holder of this Warrant of its determination
of the consideration prior to payment or accepting receipt thereof. If, within
ten days after receipt of said notice, the holder of this Warrant shall notify
the Board of any objection to such determination of consideration, a
determination of the fair market value of the consideration will then be made by
arbitration in accordance with the Rules of the American Arbitration
Association, by an arbitrator in the City of San Francisco, California.
3D(6). Record Date. In case the Company shall take a record of the holders
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of its Common Stock for the purpose of entitling them (i) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities, or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon
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the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
3D(7). Treasury Shares. The number of shares of Common Stock outstanding at
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any given time shall not include shares owned or held by or for the account of
the Company, and the subsequent issuance of any such shares shall be considered
an issue or sale of Common Stock for the purposes of paragraph 3D.
3D(8). Definition of Market Price. "Market Price" for any particular class
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of Common Stock shall mean the average of the closing prices of the Common Stock
sales on all domestic exchanges on which such class of Common Stock may at the
time be listed, or, if there shall have been no sales on any such exchange on
any such day, the average of the bid prices at the end of such day, or, if such
class of Common Stock is not listed, the average of the high and low bid prices
on such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 20 consecutive business days prior to the
date as of which "Market Price" is being determined; provided that if such class
of Common Stock is listed on any domestic exchange the term "business days" as
used in this sentence shall mean business days on which such exchange is open
for trading. If at any time such Common Stock is not listed on any domestic
exchange or quoted in the domestic over-the-counter market, the "Market Price"
shall be deemed to be an amount mutually agreed upon in writing between the
Company and the holder of this Warrant within 15 days immediately following the
date on which the Market Price is to be determined and shall be the Market Price
for purposes of such date. If no agreement as to Market Price is determined as
stated herein, (i) the holder of this Warrant and the Company shall mutually
agree upon the selection of an independent appraiser who shall then determine
Market Price (and whose determination shall be binding upon the parties), but if
no agreement on the selection of the appraiser is obtained within 20 days after
the expiration of said 15 day period, (ii) the holder of this Warrant and the
Company shall each select an independent appraiser who shall, independently of
the other appraiser, determine the fair market value of the Common Stock of the
Company. If the value determined by the appraiser whose determination is the
higher of the two appraisals does not exceed by more than twenty percent (20%)
the average of the values determined by each appraiser, then the Market Price
shall be the average of the values determined by the two appraisers and said
average shall be binding on the parties. If the value determined by the
appraiser whose determination is the higher of the two appraisals does exceed by
more than twenty percent (20%) the average of the values determined by each
appraiser, then the two appraisers shall select a third independent appraiser
who shall, independently of the other appraisals, determine the fair market
value of the Common Stock of the Company. The value determined by the appraiser
whose determination is the most discrepant from the average of the three
appraisals shall be discarded, and the Market Price shall equal the average of
the remaining two appraisals; except that in the event that the highest and
lowest appraisals are equally discrepant from the average of the three
appraisals, the Market Price shall be such average and said average shall be
binding on the parties. The Company shall bear the expenses of all appraisals
except the holder of this Warrant shall pay the expenses of the appraiser
selected by the holder of this Warrant under clause (ii).
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3D(9). Determination of Market Price under Certain Circumstances. Anything
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herein to the contrary notwithstanding, in case the Company shall issue any
shares of Common Stock, Options or Convertible Securities in connection with the
acquisition by the Company of the stock or assets of any other corporation or
the merger of any other corporation into the Company under circumstances where
on the date of the issuance of such shares of Common Stock, Options or
Convertible Securities the consideration received for such Common Stock or
deemed to have been received for the Common Stock issuable upon exercise of such
Options or into which such Convertible Securities are convertible is less than
95% of the Market Price of such Common Stock, but on the date when the number of
shares of Common Stock, Options or Convertible Securities (or in the case of
Convertible Securities other than stock, the aggregate principal amount of
Convertible Securities) was determined (as set forth in a binding agreement
between the Company and the other party to the transaction) the consideration
received for such Common Stock or deemed to have been received for the Common
Stock issuable upon exercise of such Options or into which such Convertible
Securities are convertible was not less than 95% of the Market Price of such
Common Stock, such shares of Common Stock shall not be deemed to have been
issued for less than 95% of the Market Price of such Common Stock.
3E. Liquidating Dividends. The Company will not declare a dividend upon the
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Common Stock payable otherwise than out of consolidated earnings or consolidated
earned surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries, and otherwise than in Common Stock, unless
the Company shall pay over to the holder of this Warrant, on the dividend
payment date, the cash, stock or other securities and other property which the
holder of this Warrant would have received if such holder had exercised this
Warrant in full to purchase Common Stock and had been the record holder of such
Common Stock on the date on which a record is taken for the purpose of such
dividend, or, if a record is not taken, the date as of which the holders of
Common Stock of record entitled to such dividend are to be determined. For the
purposes of the foregoing a dividend other than in cash shall be considered
payable out of earnings or surplus (other than revaluation or paid-in surplus)
only to the extent that such earnings or surplus are charged an amount equal to
the fair value of such dividend as determined in good faith by the Board of
Directors of the Company.
3F. Subdivision or Combination of Stock. In case the Company shall at any
-----------------------------------
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Warrant Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Warrant Purchase Price in effect immediately prior
to such combination shall be proportionately increased. For purposes hereof,
such subdivision or combination shall be deemed to have occurred on the earlier
of the date of such event or the record date for determining holders whose
shares of Common Stock are subject to such subdivision or combination.
3G. Certain Issues Expected. Anything herein to the contrary
-----------------------
notwithstanding, the Company shall not be required to make any adjustment of the
Warrant Purchase Price in the case
10
of (i) the issuance of Common Stock upon the exercise of the Equity Sponsor
Warrants (as defined in the Note Agreement), so long as the terms of such Equity
Sponsor Warrants, as in effect on the date hereof, are not amended or modified,
(ii) the grant of Options after the date of the consummation by the Company of
an Initial Public Offering to employees, officers, or directors of the Company
or any Subsidiary pursuant to any option plan approved by the Board of Directors
of the Company to purchase up to an aggregate of 14,375 shares of Common Stock
and the issuance of Common Stock upon the exercise of such Options, (iii) the
issuance of 25,000 shares of Class A Series 2 Preferred Stock to Banc One
Capital Partners II, Limited Liability Company ("Banc One") pursuant to that
certain Purchase Agreement dated as of November 7, 1997 (the "Purchase
Agreement"), among the Company, Banc One and Primus Capital Fund III Limited
Partnership ("Primus"), and the issuance of Common Stock upon the conversion of
such Class A Series 2 Preferred Stock, so long as the terms of such Class A
Series 2 Preferred Stock, as in effect on the date hereof, are not amended or
modified, (iv) the issuance of 25,000 shares of Class A Series 3 Preferred Stock
to Primus pursuant to the Purchase Agreement, and the issuance of Common Stock
upon the conversion of such Class A Series 3 Preferred Stock, so long as the
terms of such Class A Series 3 Preferred Stock, as in effect on the date hereof,
are not amended or modified, and (v) the issuance of Common Stock upon the
exercise of the Warrants (as defined in the Note Agreement), so long as the
terms of such Warrants, as in effect on the date hereof, are not amended or
modified.
3H. Merger or Sale. If any capital reorganization or reclassification of
--------------
the capital stock of the Company or any consolidation or merger of the Company
with another Person (regardless of which entity is the surviving entity), or the
sale of all or substantially all of its assets to another Person corporation
shall be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets (including cash) with respect to or in
exchange for Common Stock, then, as a condition to such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder of this Warrant) shall be made
whereby the holder hereof shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets (including cash)
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of Common Stock equal to the number of shares of such stock
which immediately theretofore were purchasable and receivable upon the exercise
of the rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the Warrant Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be practicable, in relation to
any shares of stock, securities or assets (including cash) thereafter
deliverable upon the exercise hereof. In the event of a merger or consolidation
of the Company or any subsidiary with or into another Person as a result of
which a number of shares of common stock or other equity interests of the
surviving Person greater or less than the number of shares of Common Stock of
the Company outstanding immediately prior to such merger or consolidation are
issuable to holders of
11
Common Stock of the Company, then the Warrant Purchase Price in effect
immediately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock of the Company. The Company will not effect any
consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument (in form reasonably satisfactory to the holder of this
Warrant) executed and mailed or delivered to the registered holder hereof at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities or assets
(including cash) as, in accordance with the foregoing provisions, such holder
may be entitled to purchase. If a purchase, tender or exchange offer is made to
and accepted by the holders of more than 50% of the outstanding shares of Common
Stock of the Company, the Company shall not effect any consolidation, merger or
sale with the Person having made such offer or with any Affiliate of such
Person, unless prior to the consummation or such consolidation, merger or sale
the holder of this Warrant shall have been given a reasonable opportunity to
then elect to receive upon the exercise of this Warrant either the stock,
securities or assets then issuable with respect to the Common Stock of the
Company or the stock, securities or assets (including cash), or the equivalent,
issued to previous holders of the Common Stock in accordance with such offer as
if the shares of Common Stock issued upon the exercise of this Warrant had been
issued. The term "Person" as used in this Warrant shall mean and include an
individual, a partnership, a corporation, a trust, a joint venture, an
unincorporated organization and a government or any department or agency
thereof. For the purposes of this paragraph 3H, an "Affiliate" of any Person
shall mean any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with, such other Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise. For purposes of this Warrant, a
corporation is a "subsidiary" of another corporation (the "parent") if a
majority of the subsidiary's outstanding shares of capital stock ordinarily
entitled to vote for the election of directors (excluding stock which is
entitled to vote in the election of directors only upon the happening of some
contingency such as failure to pay dividends) is owned by the parent and/or one
or more of the parent's subsidiaries. A corporation is also the subsidiary of
another corporation if its parent is a subsidiary of such other corporation.
3I. Accountants' Report as to Adjustments. In each case of any adjustment
-------------------------------------
in the shares of Common Stock issuable upon the exercise of this Warrant, the
Company at its expense will promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause independent public
accountants of recognized national standing selected by the Company (which may
be the regular auditors of the Company) to verify such computation and prepare a
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any shares of Common
Stock issued or sold or deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (c) the Warrant
Purchase Price in effect
12
immediately prior to such issue or sale and as adjusted and readjusted (if
required by paragraph 3) on account thereof. The Company will forthwith mail a
copy of each such report to the holder of this Warrant and will, upon the
written request at any time of any holder of this Warrant, furnish to each such
holder a like report setting forth the Warrant Purchase Price at the time in
effect and showing in reasonable detail how it was calculated. The Company will
also keep copies of all such reports at its principal office and will cause the
same to be available for inspection at such office during normal business hours
by the holder or holders of this Warrant or any prospective purchaser of this
Warrant designated by the holder or holders thereof.
3J. Other Notices. In case at any time:
-------------
(1) the Company shall declare any cash dividend
upon its Common Stock payable at a rate in excess of the
rate of the last cash dividend theretofore paid;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend
or other distribution (other than regular cash dividends)
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional
shares of stock of any class or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all
or substantially all of its assets to, another corporation;
or
(5) there shall be a voluntary or involuntary
dissolution, liquidation of winding up of the Company;
then, in each such case, the Company shall give, by first class mail, postage
prepaid, addressed to the holder of this Warrant at the address of such holder
as shown on the books of the Company, (a) at least 35 days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (b) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 35 days' prior written
notice of the earliest date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (b) shall also specify the date (if then known, and
if not then known, then the holder of this Warrant shall be advised thereof
when known) on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
13
3K. Certain Events. If any event occurs as to which, in the opinion of the
--------------
Board of Directors of the Company, the other provisions of this paragraph 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then the Board of Directors of the Company shall
make an adjustment in the application of such provisions, in accordance with
such essential intent arid principles, so as to protect such purchase rights as
aforesaid, but in no event shall any such adjustment have the effect of
increasing the Warrant Purchase Price or decreasing the number of underlying
shares of Common Stock as otherwise determined pursuant to this paragraph 3,
except in the event of a combination of shares of the type contemplated in
paragraph 3F and then in no event to an amount larger than the Warrant Purchase
Price as adjusted pursuant to paragraph 3F.
4. Financial and Other Information. The Company covenants that it will
-------------------------------
deliver to each holder (as defined in Section 12 hereof) by first-class mail,
postage prepaid, addressed to the address of such Holder as shown on the books
of the Company:
(i) as soon as practicable and in any event within 20 days after the
end of each calendar month in each fiscal year, unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of
the Company and its Subsidiaries (as defined in the Note Agreement) for
such calendar month and for the period from the beginning of the current
fiscal year to the end of such calendar month, and a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such calendar
month, all in reasonable detail and satisfactory in form to the Holders;
(ii) as soon as practicable and in any event within 45 days after the
end of each fiscal quarter (other than the fourth fiscal quarter) in each
fiscal year, unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
such fiscal quarter and for the period from the beginning of the current
fiscal year to the end of such fiscal quarter, and a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such fiscal
quarter, setting forth in each case in comparative form figures for the
corresponding periods in the preceding fiscal year, all in reasonable
detail and satisfactory in form to the Holders and certified by an
authorized financial officer of the Company, provided, however, that
delivery within such time period of the Company's Quarterly Report on Form
l0-Q containing such financial statements and financial information
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirement of this clause (ii) as to delivery of consolidated financial
statements;
(iii) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidated and consolidating statements of
income and cash flows and a consolidated and consolidating statement of
stockholders' equity of the Company and its Subsidiaries for such year, and
a consolidated balance sheet of the
14
Company and its Subsidiaries as at the end of such year, setting forth in each
case in comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in form to the Holders
and, as to consolidated statements, reported on by independent public
accountants of recognized national standing selected by the Company or other
independent public accountants reasonably acceptable to the Holders whose report
shall be without limitation as to the scope of the audit and satisfactory in
substance to the Holders, and as to consolidating statements certified by an
authorized financial officer of the Company; provided, however, that delivery
within such time period of the Company's Annual Report on Form 1O-K containing
such financial statements and financial information prepared in compliance with
the requirements therefor and filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this clause (iii) as to delivery
of consolidated financial statements;
(iv) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its public
stockholders and copies of all registration statements (without exhibits) and
all reports (including reports on Form 8-K) which it files with the Securities
and Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(v) promptly upon receipt thereof, a copy of each management letter
and other report submitted to the management or board of directors of the
Company or any Subsidiary by independent accountants in connection with any
annual, interim or special audit made by them of the books of the Company or any
Subsidiary;
(vi) promptly after the preparation thereof, school-by-school
information with the content and in the form prepared by management for internal
review and use (which information can be in the form contained in the Private
Placement Memorandum (as defined in the Note Agreement)), provided that the
Company need not provide the information under this clause (vi) more frequently
than once each fiscal quarter;
(vii) promptly after the Company's receipt thereof, copies of any
notice from the United States Department of Education or any other Federal,
state or local governmental body, agency or department alleging non-compliance
by the Company or any of its Subsidiaries with any material statute, law decree,
court or administrative order or regulation, including maximum cohort default
rates, the "85/15 Rule", denial of a requested change of control in connection
with acquisition of schools or threatened loss of school accreditation; and
(viii) promptly after the Company or any Subsidiary becomes aware
thereof, notice of the occurrence of any other event which is material to the
Company or any
15
of its Subsidiaries, including the initiation of any material disputes,
administrative proceeding, investigation or litigation or any material
developments in any such disputes or litigation, conditions that could
result in a material adverse change in the business, condition (financial
or otherwise), operations or prospects of the Company or any of its
Subsidiaries, and generally accepted accounting principles or Company
accounting practices (which notice shall describe such event and the
effect, if any, of such event or change on the Company's results of
operations, financial condition or compliance with this Agreement in
reasonable detail).
5. Termination Prior to Expiration Date. Anything herein to the contrary
------------------------------------
notwithstanding, this Warrant, and the rights of the Holder hereof, will
terminate prior to the Expiration Date (i) if, on or before October 17, 1998,
each of the following shall have occurred: (a) the Company has consummated a
Qualified Equity Offering, (b) a portion of the proceeds from such Qualified
Equity Offering are used to prepay, pursuant to paragraph 4B(1) of the Note
Agreement, the entire required principal prepayments of the Term Notes due on
October 17, 1998 and on October 17, 1999 under paragraph 4A of the Note
Agreement, and all accrued and unpaid interest thereon, (c) a portion of the
proceeds from such Qualified Equity Offering are used to prepay, pursuant to
paragraph 2B(2) of the Note Agreement, the entire outstanding principal amount
of Revolving Notes, and all accrued and unpaid interest thereon, (d) on the date
the Company receives the proceeds from such Qualified Equity Offering, after
giving effect to the prepayments described in clauses (b) and (c) above and any
Restricted Payments which the Company is required to or elects to make
concurrent with or prior to the consummation of, or as a result of, such
Qualified Equity Offering, (1) the Company shall have at least $5,000,000 in
unrestricted cash and (2) no Specified Event of Default under the Note Agreement
shall have occurred and be continuing or (ii) if, on October 17, 1999, each of
the following shall have occurred: (x) the Company shall have prepaid when due
each required principal prepayment of the Term Notes due on or before October
17, 1999 under paragraph 4A of the Note Agreement, and all accrued and unpaid
interest thereon, (y) the Company shall have prepaid when due, pursuant to
paragraph 2B(1) of the Note Agreement, the amount by which the outstanding
principal amount of Revolving Loans exceeded the Revolving Commitment on or
before October 17, 1999 (including any such prepayment which may be due as a
result of the reduction of the Revolving Commitment on October 17, 1999) and all
accrued and unpaid interest thereon and (z) after giving effect to the
prepayments described in clauses (x) and (y) above and any Restricted Payments
due on or before October 17, 1999, no Event of Default under the Note Agreement
shall have occurred and be continuing; provided, however, that if the conditions
-------- -------
of clauses (i) or (ii) above are not satisfied, this Warrant, and the rights of
the Holder hereof, will continue until the Expiration Date. The effective time
of any termination pursuant to clause (i) above will be the date the Company
receives proceeds from a Qualified Equity Offering, and the effective time of
termination pursuant to clause (ii) above will be October 17, 1999. For purposes
of this Warrant: (a) "Qualified Equity Offering", "Revolving Notes", "Revolving
Loans", "Event of Default" and "Restricted Payments" shall have the meanings
given in the Note Agreement and (b) "Specified Event of Default" shall mean (1)
an Event of Default under Section 7A(i), 7A(ii), 7A(iv), 7A(vi) through 7A(xii),
inclusive, 7A(xiv), 7A(xv) or 7A(xvi) of the Note Agreement, or (2) an Event of
Default under Section 7A(v) of the Note Agreement resulting from
16
the failure to perform or observe any agreement, term or condition under Section
5F, 5H, 5K, or 5M of the Note Agreement.
6. Registration. If either this Warrant or any shares of Common Stock
------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any Federal or
State law, or listing on any domestic securities exchange, before such shares
may be issued upon exercise, the Company will, at its expense, as expeditiously
as possible, use its best efforts to cause such Warrant and such shares to be
duly registered or approved or listed on the relevant domestic securities
exchange, as the case may be.
7. Issue Tax. The issuance of certificates for shares of Common Stock upon
---------
the exercise of Warrants shall be made without charge to the holders of such
Warrants for any issuance tax in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Warrant exercised.
8. Closing of Books. The Company will at no time close its transfer books
----------------
against the transfer of any Warrant or of any shares of Common Stock issued or
issuable upon the exercise of any Warrant in any manner which interferes with
the timely exercise of this Warrant.
9. Definition of Common Stock. As used in this Warrant the term "Common
--------------------------
Stock" shall mean and include the Company's authorized Class A Common Stock of
the par value of $0.01 per share and the Company's authorized Class B Common
Stock of the par value of $ 0.01 per share as constituted under the provisions
of the Company's Second Restated Certificate of incorporation, and shall also
include any capital stock of any class of the Company thereafter authorized
which shall not be limited to either a fixed sum or a percentage of its par or
stated value in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided that, except as
provided in paragraph 3H, the shares purchasable pursuant to this Warrant shall
include only shares designated as Class A Common Stock of the Company under the
provisions of said Certificate of Incorporation, or, in case of any
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in paragraph 3H.
10. No Participation Preferred Stock. Other than the Class A Series 2
--------------------------------
Preferred Stock and the Class A Series 3 Preferred Stock issued pursuant to the
Purchase Agreement, subject to the rights granted to the holder of this Warrant
pursuant to paragraph 3H, so long as this Warrant remains outstanding, the
Company will not issue any capital stock of any class preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary liquidation,
dissolution or winding up unless the rights of the holders thereof with respect
to such dividends or distributions shall be limited to either a fixed sum or a
percentage of par or stated value of such stock in respect of participation in
dividends and in the distribution of such assets.
17
11. No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
12. Appraisal Rights. In the case of any capital reorganization or
----------------
reclassification of the capital stock of the Company or any consolidation or
merger of the Company with another Person (regardless of which entity is the
surviving entity), or the sale of all or substantially all of its assets to any
Person (a "Transaction"), the Company shall, not less than 20 days prior to the
meeting of stockholders to be held for the purpose of voting on such proposed
Transaction (or, if no such meeting of stockholder is to be held, not less than
20 days prior to the consummation of such Transaction) provide notice to the
holder of this Warrant and to the holder of any shares of Common Stock issued
upon the exercise of this Warrant (a "Holder") of such proposed Transaction and
all material terms thereof and stating that appraisal rights are available under
this Section 12. Each Holder shall have the right to demand an appraisal of this
Warrant or such shares of Common Stock, as the case may be, by delivering a
demand therefor to the Company prior to the taking of the vote at such meeting
of stockholders or consummation of such Transaction, as the case may be. Each
Holder who has made such demand shall be entitled to be paid cash by the Company
or the entity surviving such Transaction, as applicable, for this Warrant or
such shares of Common Stock, as the case may be, be, within 15 days after the
consummation of such Transaction, in an amount equal to the fair market value of
this Warrant or such shares of Common Stock, as the case may be, as determined
by an independent investment banker (with an established national reputation as
a valuer of equity securities) selected by the Company with the approval of such
Holders, such fair market value to be determined with regard to all material
relevant factors but without regard to any effects arising from the
accomplishment of such Transaction. Any Holder accepting such payment shall not
receive rights under Section 3H hereof with respect to such Transaction or any
consideration payable to the stockholders of the Company with respect to such
shares of Common Stock, as the case may be, but any Holder may withdraw such
demand prior to the time such Holder accepts the payment under this Section 12
and accept such Holder's rights under Section 3H hereof or such consideration,
as the case may be.
13. Warrants Transferable. This Warrant and all rights hereunder are
---------------------
transferable, in whole or in part, without charge to the holder hereof, at the
office or agency of the Company referred to in paragraph 1 by the holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed, provided that such holder or its transferee pays any
applicable stamp or transfer taxes. Each taker and holder of this Warrant, by
taking or holding the same, consents and agrees that this Warrant, when endorsed
in blank, shall be deemed negotiable and that the holder hereof, when this
Warrant shall have been so endorsed, may be treated by the Company and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company, any notice to the
contrary notwithstanding; but until such transfer on such books, the Company may
treat the registered holder hereof as the owner for all
18
purposes. Prudential represents that it is not acquiring this Warrant with a
view to or for sale in connection with any distribution thereof within the
meaning of the Act, provided that the disposition of Prudential's property shall
at all times be and remain within its control.
14. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant (but for which a surety shall not be required if the holder of this
Warrant is Prudential or any other institutional investor), upon delivery of
unsecured indemnity agreement from such holder reasonably satisfactory to the
Company in form and amount or, in the case of any such mutilation, upon
surrender of this Warrant for cancellation at the principal office of the
Company, the Company will execute and deliver, in lieu thereof, a new Warrant of
like tenor dated the date hereof.
15. Acknowledgment by Company. The Company will, at the time of or at any
-------------------------
time after each exercise of this Warrant, upon the request of the holder hereof
or of any shares of Common Stock issued upon such exercise, acknowledge in
writing its continuing obligation to afford to such holder all rights to which
such holder shall continue to be entitled, after such exercise in accordance
with the terms of this Warrant, provided, that if any such holder shall fail to
make any such request, the failure shall not affect the continuing obligation of
the Company to afford such rights to such holder.
16. Rights and Obligations Survive Exercise of Warrant. The rights and
--------------------------------------------------
obligations of the Company, of the holder of this Warrant, and of the holder of
shares of Common Stock issued upon exercise of this Warrant, contained in
paragraphs 4, 6 and 12 hereof shall survive the exercise of this Warrant.
17. Warrants Exchangeable for Different Denominations. This Warrant is
-------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in paragraph 1, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender. All warrants issued on transfers or exchanges shall be dated the
date hereof and shall be identical with this Warrant except as to the number of
shares of Common Stock issuable pursuant hereto.
18. Remedies. The Company stipulates that the remedies at law of the holder
--------
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
19. Miscellaneous. This Warrant and any term hereof may be changed, waived,
-------------
discharged or terminated only by an instrument ill writing signed by the party
against which
19
enforcement of such change, waiver, discharge or termination is sought. The
agreements of the Company contained in this Warrant are binding upon the
Company, its successors and permitted assigns and shall inure to the benefit of
and be enforceable by any holder or holders at the time of any Common Stock
issued upon the exercise of this Warrant whether so expressed or not.
20. Descriptive Headings and Governing Law. The descriptive headings of the
--------------------------------------
several paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of California, without giving effect to principles of conflicts of
laws.
20
IN WITNESS WHEREOF, CORINTHIAN COLLEGES, INC. has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated as of November 24, 1997.
CORINTHIAN COLLEGES, INC.
By: /s/ Xxxxx X. XxXxxx
----------------------------------
(CORPORATE SEAL)
Attest:
/s/ Xxxx St. Pierre
----------------------------------
SUBSCRIPTION AGREEMENT
________________, 19__
To:
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase _____________ shares of the
Common Stock covered by such Warrant, and makes payment herewith in full
therefor at the price per share provided by such Warrant.
Signature
----------------------------
Address
------------------------------
------------------------------
-----------------------------
ASSIGNMENT
FOR VALUE RECEIVED, _________________________________________________
_____________________________________ hereby sells, assigns and transfers all of
the rights of the undersigned under the within Warrant, with respect to the
number of shares of the Common Stock covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
---------------- ------- -------------
Dated: _________________, 19__.
Signature
----------------------------
Witness
----------------------------
