EXHIBIT 10.9
SUPPLEMENTAL OPTION AGREEMENT
THIS SUPPLEMENTAL OPTION AGREEMENT (this "AGREEMENT"), dated as of
July 31, 1995, is between Career Education Corporation, a Delaware corporation
("CEC"), and Xxxx X. Xxxxxx ("XXXXXX").
RECITALS
X. Xxxxxx and CEC are parties to that certain Xxxxxx Option
Agreement, dated as of January 31, 1994 (the "ORIGINAL AGREEMENT") pursuant to
which Xxxxxx was granted options to purchase certain shares of CEC's common
stock, $.01 par value based upon the returns achieved by Xxxxxx Equity Capital
Corporation ("HECC"), on its behalf and as successor to Xxxxxx Financial, Inc.
X. Xxxxxx and CEC have decided to restructure a portion of Xxxxxx'x
rights to receive the options in connection with the extension of Xxxxxx'x
Employment Agreement as reflected in this Agreement and the Amended and Restated
Option Agreement of even date herewith between Xxxxxx and CEC.
AGREEMENTS
In consideration of the recitals and the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
I.1 In addition to the terms defined elsewhere in this Agreement, as
used in this Agreement:
(a) "CAUSE" has the meaning set forth in the Xxxxxx Employment
Agreement.
(b) "CEC COMMON" means the common stock of CEC, $.01 par value,
regardless of class.
(c) "COMMISSION" means the Securities and Exchange Commission.
(d) "XXXXXXX OPTION" means the option granted to Xxxxxx X. Xxxxxxx
("Xxxxxxx") pursuant to the Amended and Restated Xxxxxxx Option Agreement,
of even date
herewith, between CEC and Xxxxxxx.
(e) "EXERCISE PRICE" means $.01 per share (adjusted proportionately
in the event the CEC Common is combined into a lesser number or divided
into a greater number but in no event less than the par value of such CEC
Common).
(f) "EXISTING STOCKHOLDERS" means Xxxxxx, Xxxxxxx and HECC and each
of their respective successors and permitted assigns.
(g) "GOOD REASON" has the meaning set forth in the Xxxxxx Employment
Agreement.
(h) "XXXXXX EMPLOYMENT AGREEMENT" means the Employment and Non-
Competition Agreement, dated as of January 31, 1994, between Xxxxxx and
CEC, as amended as of July 31, 1994.
(i) "XXXXXX OPTION" means the option granted to Xxxxxx pursuant to
the Amended and Restated Xxxxxx Option Agreement, of even date herewith,
between CEC and Xxxxxx.
(j) "OPTION" has the meaning set forth in Section 2.1 hereof.
-----------
(k) "OPTION AMOUNT" means 2,199 shares of CEC Common, constituting
the number of shares of CEC Common equal to 2.0% of the number of shares of
CEC Common on a fully diluted basis outstanding as of the date hereof
(excluding any shares of CEC Common to be issued pursuant to the Xxxxxx
Option or the Xxxxxxx Option) after giving effect to the issuance, and
assuming the exercise, of warrants to Electra Investment Trust PLC and
Electra Associates, Inc. (collectively, "ELECTRA") or their respective
successors or assigns pursuant to the Securities Purchase Agreement of even
date herewith among CEC and Electra and the issuance of warrants to
Provident National Bank pursuant to the Warrant Agreement of even date
herewith between Provident National Bank and CEC; provided, that the Option
Amount shall be adjusted proportionately in the event the CEC Common is
combined into a lesser number, divided into a greater number or converted
into or exchanged for other shares of capital stock as the result of any
recapitalization, recombination or stock split.
(l) "OPTION TERMINATION DATE" means the earliest of (i) January 31,
2004, (ii) the date Xxxxxx ceases to be employed by CEC resulting from
Xxxxxx'x voluntary
decision to terminate his employment (other than for Good Reason) or a
termination of Xxxxxx'x employment with CEC for Cause, (iii) the date of
any material violation by Xxxxxx of any provision of Section 5 of the
---------
Xxxxxx Employment Agreement following the termination of his employment
with CEC and (iv) twenty-four (24) months after the date Xxxxxx and his
Permitted Transferees cease to be stockholders of CEC.
(m) "PERMITTED TRANSFEREE" has the meaning set forth in Section 2.6
-----------
of the Stockholders' Agreement.
(n) "PERSON" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, an estate, a joint venture, an
unincorporated organization or other entity or a governmental entity or any
department, agency or political subdivision thereof.
(o) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(w) "VESTED PERCENTAGE" means the percentage identified below as
determined by the number of years from the date hereof Xxxxxx is a director
of CEC or is employed as an executive officer of CEC (pursuant to the
Xxxxxx Employment Agreement or otherwise), plus any additional period
during which Xxxxxx continues to receive his Base Salary pursuant to
Section 5.1 of the Xxxxxx Employment Agreement, as determined below:
Years of Employment Vested Percentage
------------------- -----------------
January 31, 1995 20%
January 31, 1996 40%
January 31, 1997 60%
January 31, 1998 80%
January 31, 1999 100%
Notwithstanding the foregoing, if Xxxxxx ceases to be an executive officer
of CEC as the direct result of (i) a the consummation of a transaction
described in Section 2.4(c) of the Stockholders' Agreement prior to January
--------------
31, 1999 or (ii) any person other than Xxxxxxx, Xxxxxx or Xxxxxx acquiring
a majority of the CEC Common and exercising the power to elect a majority
of CEC's Board of Directors, the Vested Percentage shall be 100%.
-3-
ARTICLE II
THE OPTION PROVISIONS
---------------------
2.1 GRANT OF THE OPTION. Subject to the terms and conditions set
-------------------
forth herein, CEC hereby grants to Xxxxxx an option (the "OPTION") to
purchase CEC Common from CEC at a price, per share, equal to the Exercise
Price. The Option shall be exercisable with respect to the Vested
Percentage of the Option Amount from time to time.
2.2 PROCEDURES FOR EXERCISE. Xxxxxx or a Permitted Transferee may
-----------------------
exercise the Vested Percentage of the Option Amount (in whole or in part)
at any time prior to the Option Termination Date by delivering written
notice to CEC setting forth the portion of the Option (not to exceed the
Vested Percentage of the Option Amount) to be exercised, together with cash
(or a bank check payable to the order of CEC or its designee) in an amount
equal to the aggregate Exercise Price for the shares of CEC Common with
respect to which Xxxxxx or a Permitted Transferee is exercising such
Option. The shares subject to the Option shall be shares of such class or
classes of the CEC Common as CEC shall determine. As promptly as
practicable after receiving such written notice and payment, CEC shall
deliver to Xxxxxx or a Permitted Transferee, as the case may be,
certificates for the shares of CEC Common with respect to which Xxxxxx or a
Permitted Transferee has exercised the Option. For all purposes, Xxxxxx or
a Permitted Transferee, as the case may be, will be deemed to have
exercised the Option and to have purchased and become the holder of the
applicable CEC Common as of the date CEC receives written notice and
payment from Xxxxxx or a Permitted Transferee, as the case may be, as
provided in this Section 2.2.
-----------
2.3 PAYMENTS IN LIEU OF EXERCISE OF OPTION. If at the time the
--------------------------------------
Option or any portion thereof is exercised neither Xxxxxx nor his Permitted
Transferees are stockholders of CEC, CEC shall have the right, but not the
obligation, to pay Xxxxxx or his Permitted Transferees the cash or cash
equivalent consideration attributable to the CEC Common that Xxxxxx would
have otherwise been entitled to purchase pursuant to Section 2.2 above. To
-----------
the extent that Xxxxxx or his Permitted Transferees are to receive cash or
cash equivalent consideration pursuant to this Section 2.3 in lieu of the
-----------
issuance of shares of CEC Common, CEC shall transfer to Xxxxxx an aggregate
amount of cash or cash equivalent consideration equal to the value of the
CEC Common that Xxxxxx would have been entitled to purchase pursuant to
such exercised Options less the Exercise Price with respect to such CEC
Common. The per share value of the CEC Common referred to in the preceding
sentence shall be equal to the Fair Market Value of such shares, as
determined in accordance with the Stockholders' Agreement.
-4-
2.4 TERMINATION OF THE OPTIONS. Notwithstanding anything else to
--------------------------
the contrary in this Agreement, the Options will expire and terminate
immediately upon the Option Termination Date and thereafter will be void
and of no force and effect.
2.5 NON-TRANSFERABLE. Xxxxxx or any Permitted Transferee feree will
----------------
not transfer, sell, convey, exchange or otherwise dispose of (herein referred to
as "DISPOSITION" or "TO DISPOSE OF") the Options and the rights and privileges
of Xxxxxx or such Permitted Transferee under this Agreement, except (i) in the
event of Xxxxxx'x death or incompetency, to a Permitted Transferee who consents
in writing to be bound by the terms of this Agreement to the same extent as
Xxxxxx or (ii) by exercise pursuant to the terms of this Agreement.
2.6 NO RIGHTS AS A STOCKHOLDER. The Options do not confer upon
--------------------------
Xxxxxx or a Permitted Transferee any right to vote or consent or to receive
notice as a stockholder of CEC that do not otherwise exist in respect of
any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise of the Options as hereinbefore provided.
ARTICLE III
MISCELLANEOUS
-------------
3.1 NOTICES. All notices, demands or other COMMUNICATIONS D to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid), sent by facsimile or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to the Company and to Xxxxxx at
the addresses indicated below:
If to CEC:
Career Education Corporation
0000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
With copies to:
Xxxxxx Equity Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
-5-
Xxxxxx International Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
and
Goldberg, Kohn, Bell, Black,
Xxxxxxxxxx & Moritz, Ltd.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxxx:
Xxxx X. Xxxxxx
00 Xxxxxxxx Xxxxx
Xxxxx Xxxxxxxxxx, Xxxxxxxx 00000
With copies to:
Xxxxx, Xxxxx & Xxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
3.2 ENTIRE AGREEMENT. Except as otherwise expressly set forth
----------------
herein, this Agreement and the other agreements executed in connection here
embody the complete agreement and understanding among the parties and supersede
and preempt any prior understand understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way, including, without limitation, the Original Agreement.
3.3 SUCCESSORS AND ASSIGNS. All covenants and agree agreements
----------------------
contained in this Agreement by or on behalf of either party hereto shall bind
and inure to the benefit of the other party hereto and their heirs, legal
representatives, successors and assigns whether so expressed or not.
3.4 GOVERNING LAW. This Agreement shall be construed and enforced
-------------
in accordance with, and all questions concerning the
-6-
construction, validity, interpretation and performance of this Agreement shall
be governed by the laws of the State of Illinois without giving effect to the
provisions thereof regarding conflict of laws.
3.5 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH PARTY
----------------------------------------------
HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF XXXX, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT SUBJECT
TO CEC'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER RELATED DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH
PARTY HERETO ACCEPTS FOR ITSELF AND HIMSELF, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. XXXXXX DESIGNATES AND
APPOINTS CT CORPORATION SYSTEM AND SUCH OTHER PERSONS AS MAY HEREINAFTER BE
SELECTED BY CEC WHO IRREVOCABLY AGREE IN WRITING TO SO SERVE AS AGENT TO RECEIVE
ON SUCH PARTY'S BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH PARTY TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL
BE MAILED BY REGISTERED MAIL TO EACH PARTY AS PROVIDED HEREIN, EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL
NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY
REFUSES TO ACCEPT SERVICE, SUCH PARTY HEREBY AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
CEC TO BRING PROCEEDINGS AGAINST XXXXXX IN ANY OTHER COURT HAVING JURISDICTION
OVER XXXXXX.
3.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ITS
--------------------
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED. EACH PARTY HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE OTHER PARTY. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS OR HIS JURY TRIAL RIGHTS
-7-
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
3.7 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement .
3.8 COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
3.9 AMENDMENTS AND WAIVERS. No modification, amendment or waiver
----------------------
of any provisions of this Agreement shall be effective unless approved in
writing by each of the parties hereto. The failure of any party at any time to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and will not affect the right of such party to
enforce each and every provision hereof in accordance with its terms.
3.10 SEVERABILITY. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
3.11 XXXXXX'X INVESTMENT REPRESENTATIONS. Xxxxxx hereby represents
-----------------------------------
on the date hereof, and any person that acquires all or any portion of the
Options in accordance with the provisions of this Agreement represents with
respect to such person as of the date of such acquisition, that such person is
acquiring the Options for such person's own account with the present intention
of holding the Options and any shares of common stock of CEC acquired pursuant
to the Options for purposes of investment, and that such person has no intention
of selling either the Options or any shares of common stock of CEC acquired
pursuant to the Options in a public distribution d in violation of the federal
securities laws or any applicable state securities laws. Xxxxxx hereby
represents on the date hereof, and any person that acquires all or any portion
of the Options in accordance with the provisions of this Agreement represents
with respect to such person as of the date of exercise, that such person (a) has
such
-8-
knowledge and experience in financial and business matters that such person is
capable of evaluating the merits and risks of such person's investment in the
Options and any shares of common stock of CEC acquired pursuant to the Options;
(b) is able to bear the complete loss of his investment in the Options and any
shares of common stock of CEC acquired pursuant to the Options; (c) has had the
opportunity to ask questions of, and receive answers from, CEC concerning the
terms and conditions of the Options and the common stock of CEC and to obtain
additional information about CEC; (d) is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated by the Commission under the
Securities Act; and (e) understands that no assurances can be given that CEC's
business plan, as currently proposed or subsequently modified, will be
effectuated and that none of HECC, HFI or their respective affiliates has any
commitment or obligation to provide additional equity or debt financing, or
other financial accommodations, to CEC or its subsidiaries to effectuate such
business plan or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CAREER EDUCATION CORPORATION
By /s/ XXXX X. XXXXXX
---------------------------
Its President
---------------------------
XXXX X. XXXXXX
/s/ XXXX X. XXXXXX
------------------------------------
-9-
