1
EXHIBIT 10.23
Letter Agreement
EXECUTION D
July 23, 1991
Trust for Defined Benefit Plan of
ICI American Holdings Inc.
State Employees' Retirement Fund
of the State of Delaware
c/o Pecks Management Partners Ltd.,
their Investment Adviser
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx,
Managing Director
Educational Medical, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx,
President
Re: Rights of Preferred Stockholders of
Educational Medical, Inc.
Dear Xx. Xxxxxx and Xx. Xxxxxx:
In connection with the Securities Purchase Agreement, dated as of July
23, 1991, among Educational Medical, Inc., a Delaware corporation (the
"Company"), Trust for Defined Benefit Plan of ICI American Holdings Inc. and
State Employees' Retirement Fund of the State of Delaware (the "Securities
Purchase Agreement"), attached to this agreement as Exhibit A, the undersigned
preferred stockholders of the Company (the "Preferred Stockholders"), being all
of the holders of preferred stock of the Company, have agreed to waive or
relinquish, as applicable, certain rights they have pursuant to the Company's
Amended and Restated Certificate of Incorporation (the "Certificate") and the
Stock Purchase Agreement, dated as of March 31, 1988, between the Company and
the Preferred Stockholders (the "1988 Agreement"), in consideration for, among
other things, your purchase of 13% Senior Subordinated Notes due July 23, 1996
(the "Notes") and Warrants to Purchase Common Stock (the "Warrants") pursuant
to the Securities Purchase Agreement. Capitalized terms not otherwise defined
in this letter agreement shall have the respective meanings set forth in the
Certificate.
2
Trust for Defined Benefit Plan of LETTER AGREEMENT
ICI American Holdings Inc.
State Employees' Retirement Fund EXECUTION D
of the State of Delaware
Educational Medical, Inc.
Page 2
July 23, 1991
1. The Preferred Stockholders hereby agree to the exchange into
common stock, par value $.01 per share, of the Company (the "Common Stock"), as
of the date hereof, of all Accrued Dividends due to the Preferred Stockholders
pursuant to Article Fourth, Section A.1 of the Certificate through July _____,
1991. The exchange rate of the Accrued Dividends shall be one share for each
$5.00 of Accrued Dividend. The number of shares of Common Stock to be issued
by the Company to each Preferred Stockholder upon exchange of the Accrued
Dividends (the "Dividend Shares") is set forth on Exhibit B attached to this
agreement. The Dividend Shares are being issued simultaneously with the
execution of this Agreement, and upon issuance shall be duly issued, fully
paid, nonassessable and shall not be subject to any preemptive rights.
2. Pursuant to Article Fourth, Sections A.3(h) and A.4(h) of the
Certificate as set forth in the Fifth Amendment to the Certificate, the
Preferred Stockholders hereby agree that the provisions of Article Fourth,
Sections A.3 and A.4 of the Certificate regarding mandatory and special
redemption shall be subject to the restrictions set forth in the Securities
Purchase Agreement so long as, and to the extent that, such restrictions in the
Securities Purchase Agreement as in effect on this date remain effective.
Consequently, no redemption payments to which Preferred Stockholders would
otherwise be due pursuant to Article Fourth, Sections A.3 or A.4 of the
Certificate shall be made in violation of such restrictions. This Agreement
constitutes an agreement which makes specific reference to Article Fourth of
the Certificate as referred to in Article Fourth, Sections A.3(h) and A.4(h) of
the Certificate.
3. Each undersigned holder of a warrant to purchase Common Stock,
dated March 31, 1988, hereby waives the provisions regarding adjustment of
number of shares and warrant price, set forth in Section 3 of such warrant,
arising solely out of the issuance of the Warrants, the shares of Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") the Dividend
Shares, the Warrant for 16,000 shares issued to Equitable Securities
Corporation dated July ____, 1991 (the "Equitable Warrant") and the shares
issuable upon its exercise (the "Equitable Shares"), and the Heidric Warrant
(as defined in Schedule 11C to the Securities Purchase Agreement) and the
shares issuable upon its exercise (the "Heidric Shares").
4. Each undersigned holder of a warrant to purchase Common Stock,
dated November 14, 1989, hereby waives provisions regarding adjustment of
number of shares and warrant price, set forth in Section 3 of such warrant,
arising solely out of the issuance of the Warrants, the Warrant Shares and the
Dividend Shares, or the Equitable Warrant, the Equitable
3
Trust for Defined Benefit Plan of LETTER AGREEMENT
ICI American Holdings Inc.
State Employees' Retirement Fund EXECUTION D
of the State of Delaware
Educational Medical, Inc.
Page 3
July 23, 1991
Shares, the Heidric Warrant or the Heidric Shares.
5. The Preferred Stockholders hereby (a) waive all preemptive
rights with respect to the issuance of the Warrant, the Warrant Shares and the
Dividend Shares, and the Equitable Warrant, the Equitable Shares, the Heidric
Warrant and the Heidric Shares, pursuant to (x) Section 9.2 of the 1988
Agreement and (y) Section 9 of each Letter Agreement, dated November 14, 1989,
executed in connection with the financing of the acquisition of Xxxxxxx College
of Business; (b) consent pursuant to Section 9.3 (ii) of the 1988 Agreement, to
the Fifth Amendment to the Certificate; and
(c) consent to the issuance of the Notes, the Warrants,
the Warrant Shares and the Dividend Shares, Equitable Warrant and the Equitable
Shares, pursuant to Sections 9.3(viii) and (ix) of the 1988 Agreement and
Article Fourth, Sections A.5(c)(iii), (iv) and (v) of the Certificate.
6. Such undersigned Preferred Stockholder receiving Dividend
Shares hereby represents and warrants to the Company, severally, and not
jointly and severally, as follows:
(a) Such Preferred Stockholder is acquiring the Dividend
Shares for its own account, for investment and not with a view to the
distribution thereof, nor with any present intention of distributing the same;
(b) Such Preferred Stockholder understands that the
Dividend Shares have not been, nor will they be, registered under the
Securities Act, by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act and that they must be held
indefinitely unless a subsequent disposition of them is registered under the
Securities Act or is exempt from registration;
(c) Such Preferred Stockholder understands that the
exemption from registration afforded by Rule 144 (the provisions of which are
known to it) promulgated under the Securities Act depends on the satisfaction
of various conditions and that, if applicable, Rule 144 may only afford the
basis for sales under certain circumstances and in limited amounts; and
(d) Such Preferred Stockholder is an "accredited
investor" (as such term is defined in Rule 501 (a) of Regulation D promulgated
under the Securities Act).
4
Trust for Defined Benefit Plan of LETTER AGREEMENT
ICI American Holdings Inc.
State Employees' Retirement Fund EXECUTION D
of the State of Delaware
Educational Medical, Inc.
Page 4
July 23, 1991
7. Each Preferred Stockholder agrees that the certificates
representing the preferred stock held by such Stockholder will forthwith be
surrendered to the Company and stamped with a legend making reference to this
Letter Agreement and indicating that the shares represented by such certificate
are subject to the terms of this Agreement.
8. This agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute
one and the same instrument.
If the foregoing correctly sets forth your understanding, please so indicate by
signing and returning the enclosed counterpart of this letter agreement.
Very truly yours,
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
BY: BY:
-------------------------- ----------------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II, L.P.
BY: BY:
-------------------------- ----------------------------------
XXXXXXXX, TYRRELL, XXXXXX
& XXXXX
BY:
--------------------------
5
Trust for Defined Benefit Plan of LETTER AGREEMENT
ICI American Holdings Inc.
State Employees' Retirement Fund EXECUTION D
of the State of Delaware
Educational Medical, Inc.
Page 5
July 23, 1991
The undersigned xxxxxx agrees
to and accepts the foregoing
agreement.
TRUST FOR DEFINED BENEFIT PLAN OF
ICI AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
its Investment Adviser
By:
---------------------------------------
Xxxxxx X. Xxxxxx
Managing Director
STATE EMPLOYEES' RETIREMENT
FUND OF THE STATE OF DELAWARE
By: Pecks Management Partners Ltd.
its Investment Adviser
By:
---------------------------------------
Xxxxxx X. Xxxxxx
Managing Director
EDUCATIONAL MEDICAL, INC.
By:
---------------------------------------
Xxxx X. Xxxxxx, President
6
Letter Agreement
EXHIBIT "A"
SECURITIES PURCHASE AGREEMENT
7
Letter Agreement
COINVESTORS AGREEMENT
In order to induce State Employees' Retirement Fund of the State of
Delaware and Trust for Defined Benefit Plan of ICI American Holdings Inc.
(collectively, the "Investors") to enter into a Securities Purchase Agreement
(the 'Purchase Agreement') dated ________ 1993 with Educational Medical,
Inc. (the "Company"), the undersigned (collectively, the "Shareholders") and
the Company hereby agree with the Investors, and in order to induce the
Shareholders to consent to certain matters relating to the investment by the
Investors, the Investors and the Company hereby agree with the Shareholders,
all as follows;
1. Capitalized terms used herein and not otherwise defined shall have
the meaning ascribed thereto in the Purchase Agreement. The term
'beneficially own" (or variations thereof) shall have the meaning ascribed
thereto in Rule 13d-3 under the Exchange Act.
2. So long as the Investors collectively hold or beneficially own (a)
$750,000 aggregate principal amount of Notes (the "Minimum Principal Amount")
or (b) if the Minimum Principal Amount is not outstanding, 150,000 shares
of Common Stock issued or issuable upon exercise of the Warrants (the
"Warrant Common Stock"), such Investors shall be entitled to select one
representative (the "Representative") on the Company's Board of Directors, and
the Shareholders agree to vote all voting securities of the Company held or
beneficially owned by them in favor of such representative. Such
Representative shall be designated by Investors beneficially owning or holding
a majority of (a) the outstanding aggregate principal amount of the Notes, or
(b) the Warrant Common Stock, if the Minimum Principal Amount is not
outstanding ("Majority Holders"), by written notice given to the Company's
Secretary, which notice shall be effective until revoked or modified in
writing by the Majority Holders or the provisions of this section are no
longer effective because of the repayment or disposition of the relevant
Securities. In connection with this Section, the shareholders shall be
entitled to rely on any notice given by Pecks Management Partners Ltd., on
account of any Investor.
3. (a) Until the earlier to occur of (x) consummation of an Initial
Public Offering of
8
equity securities of the Company (and expiration of any lock-up periods imposed
by underwriters in connection therewith) or (y) a Private Parallel Exit
Opportunity (as defined below), the Shareholders shall not sell, contract to
sell or, otherwise dispose of, directly or indirectly, any shares of
Common Stock, or options, rights or warrants to purchase any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock except (i) by gift, devise or transfer to a custodian, liquidating
trustee or other entity empowered to liquidate, dissolve or wind up any
of the Shareholders ('a Liquidator"), provided the donee or beneficiary
thereof or (except as provided in clause (iv) below) Liquidator agrees to be
bound by this Coinvestors Agreement, (ii) pursuant to repurchase agreements
with employees of the Company which give the Company the right, but not the
obligation, to repurchase Common Stock upon termination of the employee's
employment with the Company, (iii) if one Shareholder purchases shares held
or beneficially owned by another Shareholder, provided that such shares in the
hands of such purchasing Shareholder shall continue to be subject to this
Section 3(a) or (iv) in the event of dissolution, liquidation and wind-up of
Investech, L.P. ("Investech"), the general partner or Liquidator of Investech
may, in its discretion, (x) distribute the equity securities held by Investech
to Investech's general and limited partners free and clear of the terms and
provisions hereof or (y) sell all equity securities held by Investech to
a third-party buyer who shall be reasonably acceptable to the Company's Board
of Directors and the Representative individually, provided, that any such
buyer shall continue to be bound by this Coinvestors Agreement.
(b) "Private Parallel Exit Opportunity" means a sale or disposition
of Common Stock held or beneficially owned by a Shareholder or Shareholders in
which the Investors are offered the opportunity to sell or dispose of a Pro
Rata Amount (as defined below) of Common Stock held or beneficially owned by
the Investors.
(c) "Pro Rata Amount" shall be determined for each Investor with
respect to a proposed sale or disposition of Common Stock held or beneficially
owned by a Shareholder, by multiplying (i) the aggregate amount of Common
Stock held or beneficially owned and being sold or
9
disposed of by such Shareholder by (ii) a fraction of which (x) the numerator
is the aggregate amount of Common Stock held or beneficially owned by such
Investor and (y) the denominator is the aggregate amount of Common Stock held
or beneficially owned by all Investors and the Shareholder or Shareholders
contemplating making such sale or disposition. In making such computation,
each amount shall be determined as of the time immediately before such sale or
disposition.
4. Shareholders' Put and Distribution of Put Amounts.
(a) (i) The Company agrees that, if and when an Investor exercises
its right to payment under subparagraph 6B(iii) of the Purchase Agreement,
each Shareholder (including, for purposes of this Section 4, the constituent
partners of Investech, L.P. or any Liquidator of a Shareholder or any donee of
beneficiary under Section 3(a)(i) hereof) shall have, subject to compliance
with paragraph (ii) below, the right to require the Company to purchase from
such Shareholder all of the following securities, if held or beneficially
owned by such Shareholder at the time of such exercise, at the following
respective prices: (x) shares of Cumulative Convertible Preferred Stock at
$6.66 per share; and (y) shares of Common Stock into which shares of
Cumulative Convertible Preferred Stock have been converted, at the conversion
price paid when such shares of Cumulative Convertible Preferred Stock were
converted. Any such purchase amounts are hereinafter refeffed to as
"Shareholders Put Amounts." The aggregate Shareholders Put Amounts payable
hereunder to all Shareholders shall not exceed $6,793,200. If, prior to the
payment or distribution of any Shareholders Put Amounts under Section 4(b)
below, any Shareholder sells or otherwise disposes of (A) any shares of
Cumulative Convertible Preferred Stock at a price greater than $6.66 per share
or (B) any shares of Common Stock into which Cumulative Convertible Prefeffed
Stock has been converted at a price greater than the conversion price paid
when such Cumulative Convertible Prefeffed Stock was converted, then the
aggregate arnounts in excess of such $6.66 price or conversion price shall be
credited to such Shareholder's Shareholders Put Amount and shall be deemed
paid and distributed to such Shareholder for purposes of this Section 4.
(ii) The Company agrees to give each Shareholder reasonably
prompt notice
10
of an exercise pursuant to subparagraph 6B(iii) of the Purchase Agreement.
Upon receipt of such notice, each Shareholder shall have 5 days to advise the
Company in writing of its desire to require a purchase under the following
paragraph (i).
(b) The parties hereto agree that any amounts due and payable
to the Investors pursuant to subparagraph 6B(iii) of the Purchase Agreement
('Investors Put Amounts") and any Shareholders Put Amounts shall be paid and
distributed by the Company in the following order and priority:
(i) 50% of the Investors Put Amounts shall be paid and
distributed by the Company to the Investors immediately;
(ii) immediately thereafter, all Shareholders Put Amounts
shall be paid and distributed by the Company to the Shareholders;
and
(iii) immediately thereafter, the remaining Investors Put
Amounts shall be paid and distributed by the Company to the Investors.
5. Successors and Assigns. This Agreement shall be binding on the
Investors successors and assigns, and the Investors agree not to sell,
transfer, or assign the Warrants unless the successor or assign specifically
agrees to be bound by the provisions of this Agreement.
11
6. IN WITNESS WHEREOF, the undersigned have executed and delivered, or
caused their authorized officer to execute and deliver, this Coinvestors
Agreement as of _______, 1993.
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
By: By:
---------------------- ---------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II
By: By:
---------------------- ---------------------------
XXXXXXXX, XXXXXX, XXXXXX
& XXXXX
By:
---------------------- ------------------------------
Xxxx X. Xxxxxx
EDUCATIONAL MEDICAL, INC.
By:
----------------------
Name:
Title:
Agreed and Accepted:
12
IN WITNESS WHEREOF, the undersigned have executed and delivered, or caused
their authorized officer to execute and deliver, this Coinvestors Agreement as
of _______, 1993.
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
By: By:
---------------------- ---------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II
By: By:
---------------------- ---------------------------
XXXXXXXX, XXXXXX, XXXXXX
& XXXXX
By:
---------------------- ------------------------------
Xxxx X. Xxxxxx
EDUCATIONAL MEDICAL, INC.
By:
----------------------
Name:
Title:
Agreed and Accepted:
13
IN WITNESS WHEREOF, the undersigned have executed and delivered, or caused
their authorized officer to execute and deliver, this Coinvestors Agreement as
of _______, 1993.
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
By: By:
---------------------- ---------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II
By: By:
---------------------- ---------------------------
XXXXXXXX, XXXXXX, XXXXXX
& XXXXX
By:
---------------------- ------------------------------
Xxxx X. Xxxxxx
EDUCATIONAL MEDICAL, INC.
By:
----------------------
Name:
Title:
Agreed and Accepted:
14
IN WITNESS WHEREOF, the undersigned have executed and delivered, or caused
their authorized officer to execute and deliver, this Coinvestors Agreement as
of _______, 1993.
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
By: By:
---------------------- ---------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II
By: By:
---------------------- ---------------------------
XXXXXXXX, XXXXXX, XXXXXX
& XXXXX
By:
---------------------- ------------------------------
Xxxx X. Xxxxxx
EDUCATIONAL MEDICAL, INC.
By:
----------------------
Name:
Title:
Agreed and Accepted:
15
IN WITNESS WHEREOF, the undersigned have executed and delivered, or caused
their authorized officer to execute and deliver, this Coinvestors Agreement as
of _______, 1993.
SPROUT CAPITAL V SPROUT TECHNOLOGY FUND, L.P.
By: By:
---------------------- ---------------------------
INVESTECH, L.P. DLJ VENTURE CAPITAL FUND II
By: By:
---------------------- ---------------------------
XXXXXXXX, XXXXXX, XXXXXX
& XXXXX
By:
---------------------- ------------------------------
Xxxx X. Xxxxxx
EDUCATIONAL MEDICAL, INC.
By:
----------------------
Name:
Title:
Agreed and Accepted:
