EXHIBIT 10.13
CAREER EDUCATION CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
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THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT is made as of July 31,
1995 by and among Career Education Corporation, a Delaware corporation (the
"Corporation"), Xxxxxx Equity Capital Corporation, a Delaware corporation
("Xxxxxx"), Xxxx X. Xxxxxx ("Xxxxxx") and Xxxxxx X. Xxxxxxx ("Xxxxxxx"), The
Provident Bank, an Ohio banking corporation ("Provident"), Electra Investment
Trust P.L.C., a corporation organized under the laws of England and Wales, and
its successors and assigns ("EIT"), and Electra Associates, Inc., a Delaware
corporation, and its successors and assigns ("EAI," and together with EIT,
"Electra"). Xxxxxx, EIT, EAI, Xxxxxx and Xxxxxxx are hereafter collectively
referred to as the "Stockholders."
BACKGROUND
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The Corporation was incorporated in the State of Delaware on January
5, 1994 for the purpose of acquiring the operations of post secondary vocational
and trade schools through wholly-owned operating subsidiaries of the
Corporation. The Corporation's current capitalization is as follows:
(1) The Corporation has 5,250 shares of its Class A Voting Common
Stock, $.01 par value (the "Class A Stock"), issued and
outstanding, of which 750 shares are owned by Xxxxxx and 4,500
shares are owned by Xxxxxxx.
(2) The Corporation has 5,100 shares of its Class B voting Common
Stock, $.01 par value (the "Class B Stock"), issued and
outstanding, all of which is owned by Xxxxxx. The Class B Stock
is convertible into shares of Class A Stock at any time at the
discretion of the holder.
(3) The Corporation has 69,900 shares of its Class C Non-voting
Common Stock, $.01 par value (the "Class C Stock"), issued and
outstanding, all of which is owned by Xxxxxx. The Class C Stock
is convertible into shares of Class B Stock at any time at the
discretion of the holder.
(4) The Corporation has authorized 100,000 shares of its Class D Non-
voting Common Stock, $.01 par value (the "Class D Stock") of
which none are issued and outstanding.
(5) The Corporation has authorized 100,000 shares of its Class E Non-
voting Common Stock, $.01 par value, (the "Class E Stock") of
which none are issued and outstanding.
(6) The Corporation has 7,850 shares of its Preferred Stock, Series
A, $.01 par value (the "Series A Preferred"), issued and
outstanding, of which 7,500 shares are owned by Xxxxxx, 300
shares are owned by Xxxxxxx, and 50 shares are owned by Xxxxxx.
(7) The Corporation has no shares of its Preferred Stock, Series B,
$.01 par value (the "Series B Preferred"), issued and
outstanding.
(8) The Corporation has 500 shares of its Preferred Stock, Series C,
$.01 par value (the "Series C Preferred"), issued and
outstanding, of which 425 are owned by EIT and 75 are owned by
EAI. In addition, EIT has a Warrant, subject to adjustment in
accordance with the terms thereof, exercisable into 21,492 shares
and EAI has a Warrant, subject to adjustment in accordance with
the terms thereof, (each Warrant, together with any Penalty
Warrants issued to each of EIT and EAI, the "Warrants"),
exercisable into 3,793 shares, of the Corporation's Class D Stock
(such Shares of Class D Stock are hereinafter referred to as the
"Warrant Shares"). For purposes of calculating the number of
Warrant Shares issuable upon exercise of the Warrant at any time
of determination as required pursuant to any provision in this
Agreement, the number of Warrant Shares so issuable shall be
adjusted to reflect the Earned Amount (as defined in the Warrant)
as if fixed and finally determined as of such date.
(9) The Corporation has issued a warrant (the "Provident Warrant") to
Provident, which, subject to adjustment in accordance with the
terms thereof, is exercisable into ____ shares of the
Corporation's Class D Stock (the "Provident Shares").
The parties hereto constitute the record and beneficial owners of all of the
outstanding capital stock of the Corporation as of the date hereof.
The Stockholders desire to provide for the continuity of management of
the Corporation and the orderly perpetuation and disposition of the ownership of
the shares of Class A Stock, Class B Stock, Class C Stock, the Class D Stock and
the Class E Stock and the Series A Preferred, Series B Preferred and Series C
Preferred (collectively, the "Shares") as more fully set forth herein. The
Class A Stock, the Class B Stock, the Class C Stock, the Class D Stock and the
Class E Stock are collectively referred to herein as the "Common Shares" and the
Series A Preferred, Series B Preferred and Series C Preferred are collectively
referred to herein as the "Preferred Shares." The Warrants and the Provident
Warrants, along with any other options, rights or warrants to acquire Common
Shares held by any Stockholder from time to time, are collectively referred to
herein as the "Rights".
Accordingly, the parties hereto agree as follows:
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ARTICLE I
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1.1. Voting Agreements. Until the termination of this Agreement or, if
earlier, ten (10) years from the date hereof: each Stockholder (including any
person or entity purchasing or succeeding, by conversion or otherwise, to any
shares of Class A Stock or Class B Stock or other capital stock with the right
to vote under conditions hereinafter specified) agrees to vote the applicable
Shares held by such Stockholder and shall undertake or cause to be undertaken
any and all actions necessary in whatever capacity whether as a Stockholder or
through membership or representation on the Board of Directors of the
Corporation (the "Board"), so as to carry out the provisions of this Agreement
applicable to the voting of such Shares.
(a) Directors. Except as hereinafter provided, there shall be six (6)
Directors ("Directors") elected to the Corporation's Board as follows: (i)
Xxxxxx shall be nominated and elected to be a Director so long as he is the
President of the Corporation and owns not less than ten percent (10%) of
the Class A Stock; (ii) Xxxxxxx shall be nominated and elected to be a
Director so long as he remains a paid consultant to the Corporation or owns
not less than forty percent (40%) of the Class A Stock; (iii) two persons
designated by Xxxxxx (the "Xxxxxx Directors") shall be nominated and
elected to be Directors so long as Xxxxxx and its affiliates continue to
own Shares (such Directors shall initially be Xxx Xxxxx and Xxxx X.
Xxxxxx); (iv) the fifth Director shall be designated by the other Directors
and shall not be affiliated with any of the Stockholders and (v) once the
shares of Series C Preferred are no longer outstanding, for so long as
Electra and its affiliates or designees own at least five percent (5%) of
the issued and outstanding Common Shares, one person designated by Electra
or its designee (the "Electra Director") shall be nominated and elected to
be the sixth director and shall be appointed to serve on the Corporation's
and each Subsidiary's compensation and audit committees. For purposes of
the Corporation's Second Restated Certificate of Incorporation, as amended,
a copy of which is attached hereto as Exhibit A (the "Certificate"), Xxxxxx
and Xxxxxxx shall be the Class I Directors, the Xxxxxx Directors shall be
the Class II Directors, the fifth Director shall be the Class III Director
and the sixth Director shall be the Class IV Director. In the event Xxxxxx
or Xxxxxxx ceases to be a Director as the result of removal, resignation,
death, disability or otherwise, the resulting vacancy shall be filled in
accordance with the Corporation's by-laws without reference to this
Agreement. The affirmative vote of Directors holding not less than five (5)
votes shall be required to approve or disapprove any matter to be voted
upon by the Board.
Immediately upon the delivery of any Conversion Notice (as
defined in the Certificate), each of the Class II Directors shall be
entitled to two and one-half (2.5) votes on all matters to be voted upon by
the Board. In the event that all shares of Class B Stock and Class C Stock
are converted into shares of Class A Stock, the agreements contained in
this Section 1.1 shall expire with respect to the Class I and Class III
Directors only and all Class I and Class III Directors shall immediately
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resign as Directors of the Corporation. All other provisions of this
Section 1.1 shall continue in full force and effect in accordance with the
terms of this Agreement.
(b) Subsidiary Directors. The President of the Corporation shall be
nominated and elected to be the sole Director of each of its currently-owned and
hereafter acquired wholly-owned operating subsidiaries (including, without
limitation, Xx Xxxxxxx Graphic Design School, Ltd., a Delaware corporation, ABS
Acquisition, Ltd., a Delaware corporation, BI Acquisition, Ltd., a Delaware
corporation, and CEC Management, Inc., an Illinois corporation), unless and
until his successor is appointed or elected in accordance with the by-laws of
such subsidiaries; provided, that the Board of Directors shall have the right to
redesignate the number and composition of the board of directors of any of its
wholly-owned operating subsidiaries at any time with the prior written approval
of Xxxxxx and Electra. Following the exercise by the holders of the Series C
Preferred of their rights pursuant to Section 6(c) of the Certificate of
Designations attached to and incorporated by reference in the Certificate the
provisions of this Section 1.1(b) shall cease to be effective.
(c) Bylaws. The By-laws of the Corporation in effect as of the date
hereof shall remain in effect following the execution of this Agreement.
(d) Compensation Committee. The Directors have appointed a
Compensation Committee to determine and review the compensation of the executive
officers and employees of the Corporation and to determine and review the
granting of stock options, if any, to the executive officers and employees of
the Corporation. Such committee shall have three (3) members none of whom shall
be, to the extent possible, officers or employees of the Corporation. The
Committee consist of the one (1) Xxxxxx Director and one (1) Electra Director
and the fifth Director specified in Section 1.1(a)(iv) above.
(e) Other Matters Subject to Stockholder Vote.
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So long as any Warrant remains outstanding and the Voting Amount
(as defined below) is greater than zero, each Stockholder (including any person
or entity purchasing or succeeding, by conversion or otherwise, to any shares of
Class A Stock or Class B Stock or other capital stock with the right to vote on
such matter (the "Voting Stock")), agrees to vote all Shares held by such
Stockholder on all matters submitted to the Stockholders for vote (other than
those covered by subparagraph (a) above) in support of any determination made by
the Requisite Equity Holders pursuant to the provisions of this subparagraph
(e).
(i) For purposes hereof, the term "Equity Holders" shall mean the
holders of Voting Stock and the holders of the Warrants to the extent of the
Voting Amount (as defined below) and teh term "Requisite Equity Holders" shall
mean Equity Holders holding the Requisite
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Amount (as defined below) and the term "Requisite Equity Holders" shall
mean Equity Holders holding the Requisite Amount (as defined below) of
Voting Stock deemed outstanding (assuming for purposes of this Section
1.1(e) only that the Warrants have been exercised for and/or converted into
Voting Stock to the extent of the Voting Amount). "Requisite Amount" shall
mean the number of shares of Voting Stock required to approve any
particular corporate action pursuant to the Certificate, the By-laws or
applicable law. "Voting Amount" shall mean a number of shares of Voting
Stock, after giving effect to the deemed issuance and conversion of Warrant
Shares described above, representing a percentage of the Voting Stock equal
to the lesser of (x) 24.9% of the Voting Stock or (y) the percentage of
outstanding Common Shares represented by the Warrant Shares assuming
exercise of all the Warrants; provided, that clause (x) above shall not be
applicable to any matter where pursuant to the Certificate, the By-laws or
applicable law all Common Shares will constitute Voting Stock as defined
herein; and; provided, further, that in all cases the Voting Amount shall
be reduced on a share for share basis by all shares of Voting Stock
received upon exercise of the Warrant and/or, to the extent applicable, the
conversion of Warrant Shares into Class A Stock in accordance with the
Certificate.
(ii) In the event that a vote of Stockholders is required, by law,
the Corporation's Certificate, the Corporation's bylaws, agreement or
otherwise, in connection with any matter and unless waived in writing by
the Requisite Equity Holders following notice to all Equity Holders, the
Corporation shall send the Equity Holders a written ballot describing the
matter(s) to be voted on not less than ten (10) nor more than sixty (60)
days prior to the date on which such vote is scheduled to be taken, whether
at a meeting or by written consent (the "Scheduled Date"). Each Equity
Holder shall register its vote(s) on said ballot and return said ballot to
the Corporation's Secretary at the Corporation's principal address not less
than five (5) days prior to the Scheduled Date. The Corporation's Secretary
shall then count the votes set forth on the ballots and send the holders of
Voting Stock written notice of the vote of the Requisite Equity Holders
with respect to each matter subject to vote by the holders of Voting Stock
not less than one (1) day prior to the Scheduled Date. The holders of
Voting Stock shall each then vote on the Scheduled Date as designated by
the Requisite Equity Holders.
1.2. Issuance of Additional Shares to Xxxxxx. The Stockholders hereby
acknowledge that Xxxxxx and certain of its successors or permitted assigns may
purchase additional Common Shares and Preferred Shares from time to time to fund
additional acquisitions or working capital needs of the Corporation. The
Stockholders agree that Xxxxxx shall be permitted to purchase and the
Corporation shall offer for sale to Xxxxxx investment units consisting of (a)
additional shares of Series A Preferred at a price equal to $1,000.00 per share
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and (b) additional Common Shares (which shall be Class B Stock and/or Class C
Stock as specified by Xxxxxx) equal to the Dilution Number (as defined below) at
a price equal to $.10 per Share (the original issuance price of the Common
Shares as of the date hereof) or such other price as may be determined by the
Board and subject to approval by Xxxxxx. The "Dilution Number" is the additional
number of Common Shares to be issued to Xxxxxx equal to the number of additional
Preferred Shares to be purchased by Xxxxxx multiplied by the ratio of the number
of outstanding Common Shares prior to such purchase to the number of outstanding
Preferred Shares prior to such purchase. Xxxxxx shall only purchase additional
Shares in the investment units described herein. Notwithstanding anything herein
to the contrary, neither Xxxxxx nor its affiliates shall be deemed by their
execution of this Agreement or any other documents related hereto or the
consummation of the transactions contemplated hereby to have committed or
otherwise obligated themselves to make any equity or debt investments in, or
provide any other financial accommodations to, the Corporation or its
subsidiaries beyond those made on the date hereof. Xxxxxxx and Xxxxxx shall have
no right to participate in any offering of additional Shares by the Corporation;
provided, that on or after such time as Xxxxxx has purchased a number of
Preferred Shares (the "Xxxxxx Investment") having an aggregate Liquidation
Value, at the time of their issuance, of $5,000,000.00, Xxxxxx and Xxxxxxx shall
be entitled to limited preemptive rights as set forth herein. The Corporation
shall give Xxxxxx and Xxxxxxx at least five (5) days prior written notice of any
Xxxxxx Investment, which notice shall describe the terms of such Xxxxxx
Investment. At such time as the Xxxxxx Investment exceeds $5,000,000.00, Xxxxxxx
and Xxxxxx shall have the right to purchase for a period of thirty (30) days
(the "Exercise Period") after they receive written notice of an additional
Xxxxxx Investment, to purchase upon the same terms and conditions, including
purchase price per Common Share, as offered to Xxxxxx, a number of Class A
Shares necessary to permit each of Xxxxxx and Xxxxxxx to maintain the same
percentage ownership interest in the Common Shares subsequent to the Xxxxxx
Investment as they each maintained prior to such Xxxxxx Investment. All of the
foregoing limited preemptive rights granted to Xxxxxxx and Xxxxxx shall
terminate with respect to all Shares purchased by Xxxxxx on or after such time
as the Xxxxxx Investment equals $8,000,000.00 for the first time. Xxxxxxx and
Xxxxxx may exercise their rights hereunder by delivery of written notice to the
Corporation and Xxxxxx at any time prior to the expiration of the Exercise
Period, and they shall purchase all Common Shares to be purchased hereunder by
the later of ten (10) business days after delivery of such notice or the date
upon which Xxxxxx, or any of its Permitted Transferees (as defined below),
purchase Shares pursuant to the Xxxxxx Investment. Notwithstanding anything
herein to the contrary, Xxxxxx or such Permitted Transferees shall be permitted
to purchase all Shares to be included in the Xxxxxx Investment (less the Common
Shares which may be purchased by Xxxxxx and Xxxxxxx hereunder) at any time prior
to or during the Exercise Period. To the extent Xxxxxxx or Xxxxxx elect not to
exercise each of their respective rights hereunder or waive such rights, Xxxxxx
or such Permitted Transferee shall purchase the Common Shares which could have
been purchased by Xxxxxx and Xxxxxxx hereunder by the later of (i) three (3)
business days after the waiver or failure of Xxxxxx or Xxxxxxx to exercise his
rights hereunder or (ii) concurrent with the purchase of the remaining Shares
included in the Xxxxxx Investment. All Shares issued to Xxxxxx and Xxxxxxx shall
be shares of Class A Stock unless the common equity securities to be
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issued pursuant to the Xxxxxx Investment do not participate equally in dividends
and distributions with the shares of Class A Stock, in which case Xxxxxx and
Xxxxxxx shall receive shares of stock of the same class or series as offered to
all participants in the Xxxxxx Investment.
1.3. Additional Equity Issuances.
(a) In case at any time or from time to time the Corporation shall
issue or sell the following (collectively hereinafter referred to as the
"Additional Capital Stock"): any shares of its capital stock or issue or
sell options, rights or warrants to subscribe for or purchase shares of its
capital stock (or securities convertible into shares of its capital stock)
("Options"), including but not limited to issuances pursuant to Section 1.2
above, other than (i) shares of Class D Stock to be issued to the holders
of the Warrants upon exercise thereof or pursuant to an adjustment provided
for under Section 5 of the Warrant Certificate and Section 5 of the Penalty
Warrant Certificate issued to each of EIT and EAI, (ii) up to 12,492 Common
Shares (subject to antidilution adjustments in the case of
recapitalizations, recombinations or stock splits) issued upon the exercise
of any stock options granted pursuant to present or future employee benefit
plans or the Corporation, (iii) any Common Shares issued to the holders of
the Provident Warrant upon exercise thereof, and (iv) any Common Shares
issuable upon exercise of any Options which have previously been treated as
Additional Capital Stock for purposes hereof, Electra, Xxxxxx and
Provident, respectively, shall have the right to purchase, on the same
terms and conditions and at the same time, such shares of Additional
Capital Stock equal to the percentage of Common Shares then owned by
Electra, Xxxxxx or Provident, as applicable; treating, for such purposes,
all Warrants and Provident Warrants as if they had been exercised.
(b) The Corporation shall at least 30 days prior to the consummation
of any issuance or sale for the price per share described in subparagraph
(a) above, deliver notice of such sale or issuance to Electra, Xxxxxx and
Provident, which notice shall state the terms and conditions of the
proposed sale or issuance and that such holders shall have the right to
purchase shares of the Additional Capital Stock as provided in subparagraph
(a) above. Electra, Xxxxxx and Provident shall have the option to exercise
their respective preemptive rights no later than 15 days prior to the
proposed date of the consummation of such issuance or sale, which exercise
shall be consummated contemporaneously with such issuance or sale. If any
or all of Electra, Provident and/or Xxxxxx exercises its preemptive rights
in accordance with this subparagraph (b) and, with respect to Electra,
subparagraph (c) below, the Corporation shall then be entitled to sell or
issue to third parties the balance of the securities initially offered. The
Corporation shall then be entitled for a period of 90 days thereafter to
sell or issue to third parties any or all of the securities initially
offered which were not purchased by Xxxxxx, Electra or Provident pursuant
to this Section 1.3 on the terms and conditions and at the price originally
offered.
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(c) For the purposes of this Section 1.3, EIT and EAI shall have the
right to exercise this preemptive right on a pari passu basis or on such
other basis as they shall mutually determine. If EIT or EAI does not
exercise its preemptive rights hereunder (the "Non-Participating Holder"),
the Non-Participating Holder shall offer such shares of Additional Capital
Stock to which it would otherwise be entitled to acquire hereunder (the
"Remaining Shares") to whichever of EIT and EAI has exercised such rights
(the "Exercising Holder"), and the Exercising Holder shall then be
permitted, in accordance with the terms of this Section 1.3, to purchase
the Remaining Shares in addition to the shares of Additional Capital Stock
it would otherwise be entitled to acquire hereunder.
1.4. Stock Option Plan. Within thirty (30) days from the date hereof,
the Stockholders shall vote their Shares or Voting Stock to approve a stock
option plan (the "Plan" to be offered to the executive management of the
Corporation and shall reserve not less than 12,215 shares of Class E Non-voting
Stock for issuance upon the exercise of such options, (subject to antidilution
adjustments in the case of recapitalizations, recombinations or stock splits).
All such stock options to be issued pursuant to the Plan shall be issued
pursuant to stock option agreements in a form acceptable to the Board; provided,
that each such agreement shall require that as a condition to the exercise of
any stock options by any person (an "Option Holder"), such Option Holder must
execute and deliver a Restricted Stock Agreement, in a form approved by the
Corporation, Xxxxxx and Electra, evidencing their agreement to be bound by the
terms of this Agreement and providing for certain repurchase rights on behalf of
the Corporation upon termination of such person's employment with the
Corporation under the circumstances specified therein (the "Restricted Stock
Agreement").
ARTICLE II
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2.1. Applicable Definitions. For purposes of this Article II of this
Agreement, the following definitions shall be applicable:
(a) "Cash Inflows" shall equal the sum of all payments of dividends
on the shares of Series C Preferred made to Electra as a holder of the
shares of Series C Preferred, all payments in respect of the redemption of
the shares of Series C Preferred made to Electra as a holder of the shares
of Series C Preferred, and all cash proceeds received by Electra from any
disposition of Covered Securities prior to or at any proposed date of sale
pursuant to an offer under subsection 2.4(c) (net of all selling expenses,
brokerage commissions and other expenses incurred in such sale), but shall
not include the value of any Penalty Warrants issued by the Company to
Electra.
(b) "Cash Outflows" shall mean $5,000,000 (representing the amount
invested by Electra under the Securities Purchase Agreement).
(c) "Cause" with respect to Xxxxxx, shall have the meaning set forth
in the Xxxxxx Employment Agreement, and with respect to Xxxxxxx shall have
the meaning set forth in the Xxxxxxx Consulting Agreement, respectively.
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(d) "Covered Securities" shall consist of the shares of Series C
Preferred and the Warrants originally issued to Electra under the
Securities Purchase Agreement, any Warrant Shares, and any shares received
in a stock split or similar transaction with respect to the Warrant Shares.
(e) "Disability" shall have the meaning set forth in the Xxxxxx
Employment Agreement.
(f) "Xxxxxxx Consulting Agreement" means the Consulting and Non-
Competition Agreement dated January 31, 1994 between the Corporation and
Xxxxxx X. Xxxxxxx, as amended on July 31, 1995.
(g) "Fair Market Value" shall mean the fair market value of any
Common Shares as agreed upon by the Corporation and Xxxxxxx or Xxxxxx, as
applicable or their respective estates within ten (10) days of the
Corporation's receipt of notice of a Xxxxxxx Termination Event or a Xxxxxx
Termination Event pursuant to Section 2.2 hereof; provided, that if such
parties fail to agree upon the fair market value of such Shares within such
ten (10) day period, the Fair Market Value shall be determined as follows:
(i) The Corporation and Xxxxxxx or Xxxxxx, as applicable, or
their respective estates, shall each select an independent and
reputable investment banking firm or business appraiser (an
"Appraiser") within five (5) days after the end of such ten (10) day
period. If either party fails to specify an Appraiser, the
determination of the Appraiser properly selected by the other party
shall be binding on the parties hereto.
(ii) The two (2) Appraisers shall have thirty (30) days to
complete their respective appraisals and submit a written
determination of Fair Market Value to the Corporation. If the lower of
the two appraisals is at least ninety percent (90%) of the higher
appraisal, then the Fair Market Value shall be the average of such
appraisals.
(iii) If the lower of the two appraisals is less than ninety
percent (90%) of the higher appraisal, then the two Appraisers shall,
within five (5) days after the submission of the last appraisal to the
Corporation, jointly specify a third Appraiser. Within fifteen (15)
days after its selection, the third Appraiser shall complete an
appraisal and submit a written determination of Fair Market Value to
the Corporation. The median of such three appraisals shall be the Fair
Market Value
The determination of the Appraisers as set forth above shall be final and
binding on all parties thereto. The Corporation shall pay the fees and
expenses of the Appraisers. In making any determination of Fair Market
Value, (i) it shall be assumed that all outstanding stock options, warrants
or similar rights to acquire capital stock issued by
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the Corporation which are then exercisable or which will become exercisable
within twelve (12) months from the date of such determination have been
fully exercised, (ii) any discount which might otherwise be taken for the
fact that the Common Shares represent a minority position on the
Corporation shall be excluded, and (iii) the value of the Common Shares
shall be appropriately discounted to reflect the lack of a public market
for such Common Shares by a percentage reasonably determined.
(h) "Family Member(s)" shall mean the husband, wife, child (whether
natural or adopted), grandchild, parent or brother or sister of an
individual, or a trust (or custodial arrangement), all of the primary
beneficiaries of which are such related individuals, or a corporation, all
of the primary stockholders of which are such individual and such related
individuals; provided, that with respect to all intervivos transfers to
Family Members, the Stockholder shall retain the sole right to vote such
Shares.
(i) "Good Reason" shall have the meaning set forth in the Xxxxxx
Employment Agreement.
(j) "IRR" shall mean an internal rate of return (compounded annually)
which, when used to calculate the net present value as of July ___, 1995 of
all Cash Inflows and Cash Outflows, causes such net amount to equal zero.
For purposes of the net present value computation, each Cash Inflow and
each Cash Outflow specified above shall be deemed to have been received or
made on the first day of the month nearest to the actual date of such
payment.
(k) "Xxxxxx Employment Agreement" means the Employment and Non-
Competition Agreement dated January 31, 1994 between the Corporation and
Xxxx X. Xxxxxx, as amended on July 31, 1995.
(l) "Liquidation Value" shall have the meaning set forth in the
Certificate.
(m) "Permitted Transferee" shall have the meaning set forth in
Section 2.6 of this Agreement.
(n) The expression, "sell, transfer or dispose," (and other forms of
such words) as used herein, shall include a sale, transfer or any other act
whereby a Stockholder's rights or ownership are disposed of or in any way
impaired or affected, except as otherwise stated herein, provided, that it
is understood and agreed that no pledge, hypothecation or other encumbrance
of the Shares is permitted hereunder.
2.2. Redemption Upon Termination, Disability or Death of Xxxxxx or
Xxxxxxx.
(a) Termination of Xxxxxx. Upon the death or Disability of Xxxxxx or
the termination of his employment with the Corporation (a "Xxxxxx
Termination Event"),
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the Corporation shall have the option for a period of ninety (90) days
after the occurrence of such event to purchase any or all Shares held by
Xxxxxx or his estate (including any Shares held by any Family Members on
the date of such repurchase) at a purchase price per Share equal to the
Fair Market Value of such Common Shares and the Liquidation Value of such
Preferred Shares; provided, that if his employment is terminated pursuant
to Section 3.3 or 3.4 of the Xxxxxx Employment Agreement, as the result of
the Corporation's refusal to renew the Xxxxxx Employment Agreement, or as
the result of Xxxxxx'x refusal to renew the Xxxxxx Employment Agreement for
Good Reason, the Xxxxxx Termination Event shall not be deemed to occur
until the expiration of the Non-Competition Period, as defined in the
Xxxxxx Employment Agreement. Notwithstanding anything in the foregoing to
the contrary, if such Xxxxxx Termination Event results from a termination
of Xxxxxx'x employment for Cause or if a material violation of any
provision of Section 5 of the Xxxxxx Employment Agreement occurs after the
termination of Xxxxxx'x employment with the Corporation (a "Xxxxxx Covenant
Breach"), the purchase price per Share for each Common Share owned by
Xxxxxx, his estate or his Family Members shall be equal to the lowest of
the Fair Market Value of such Common Shares and the original purchase price
for such Common Shares as purchased by Xxxxxx; and the purchase price per
Share for each Preferred Share owned by Xxxxxx, his estate or his Family
Members shall be equal to the lesser of the Liquidation Value of such
Preferred Shares and the Fair Market Value of such Preferred Shares. In the
event the Corporation fails to purchase all of the Shares held by Xxxxxx
hereunder in accordance with the previous sentences, Xxxxxx and Electra and
each of their respective successors, assigns and Permitted Transferees
shall have the option for an additional period of thirty (30) days to
purchase on a pro rata basis (treating, for such purposes, all Warrants as
if they had been exercised) any and all remaining Shares not purchased by
the Corporation on the same terms and conditions applicable to the
Corporation. Any purchases by Electra shall be allocated among EIT and EAI
on a pro rata basis or on such other basis as they may mutually determine.
To the extent that Xxxxxx or Electra does not purchase such number of
Shares to which it would otherwise be entitled (the "Non-Participating
Holder"), the Non-Participating Holder shall offer such shares to which it
would otherwise be entitled to acquire hereunder (the "Remaining Shares")
to the other (the "Exercising Holder"), and the Exercising Holder shall
then be permitted to purchase the Remaining Shares in addition to the
Shares it would otherwise be entitled to acquire hereunder. The closing of
all purchases made hereunder shall be on or prior to the later of one
hundred eighty (180) days after Xxxxxx receives written notification of the
applicable Xxxxxx Termination Event or Xxxxxx Covenant Breach and sixty
(60) days after the completion of any determination of Fair Market Value
with respect to any Common Shares (the "Sale Date"). The purchase price for
all Shares purchased shall be, at the sole discretion of the purchaser,
either (i) made in immediately available funds or (ii) evidenced by a five
(5) year promissory note of the purchaser, secured by a pledge of the
Shares so purchased, bearing interest at the rate of two hundred (200)
basis points above the then applicable five (5)-year treasury note rate,
per annum payable semiannually and with principal
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payments to be made in three equal annual installments beginning on the
third anniversary of the issuance of the note (the "Deferred Payment
Note").
(b) Termination of Xxxxxxx. Upon the death of Xxxxxxx or Xxxxxxx'x
voluntary resignation as, or refusal to continue to serve as, a consultant
and Director of the Corporation (a "Xxxxxxx Termination Event"), the
Corporation shall have the option for a period of ninety (90) days after
the occurrence of such Xxxxxxx Termination Event to purchase any or all
Shares held by Xxxxxxx or his estate (including any Shares held by any
Family Members on the date of such repurchase) at a purchase price per
Share equal to the Fair Market Value of such Common Shares and the
Liquidation Value of such Preferred Shares. Upon the termination of the
Xxxxxxx Consulting Agreement for Cause or a material violation by Xxxxxxx
of any provision of Section 5 of the Xxxxxxx Consulting Agreement (a
"Xxxxxxx Covenant Breach"), the purchase price per Share for each Common
Share owned by Xxxxxxx, his estate or his Family Members shall be equal to
the lesser of the Fair Market Value of such Common Shares and the original
purchase price for such Common Shares as purchased by Xxxxxxx; and the
purchase price per share for each Preferred Share owned by Xxxxxxx, his
estate or his Family Members, shall be equal to the lesser of the
Liquidation Value of such Preferred Shares and the Fair Market Value of
such Preferred Shares. In the event the Corporation fails to purchase all
of the Shares held by Xxxxxxx hereunder in accordance with the previous
sentence, Xxxxxx and Electra and each of their respective successors,
assigns and Permitted Transferees shall have the option for an additional
period of thirty (30) days to purchase on a pro rata basis (treating, for
such purposes, all Warrants as if they had been exercised, adjusted to
reflect the Earned Amount as if fixed and finally determined as of such
date), any and all remaining Shares not purchased by the Corporation or the
same terms and conditions applicable to the Corporation. Any purchases by
Electra shall be allocated among EIT and EAI on a pro rata basis or on such
other basis as they may mutually determine. To the extent that Xxxxxx or
Electra does not purchase such number of Shares to which it would otherwise
be entitled, such Non-Participating Holder shall offer the Remaining Shares
to the Exercising Holder, and the Exercising Holder shall then be permitted
to purchase the Remaining Shares in addition to the Shares it would
otherwise be entitled to acquire hereunder. The closing of all purchases
made hereunder shall be no later than the Sale Date (as defined in Section
2.2(a)) and the purchase price for all Shares purchased shall be, at the
sole discretion of the purchase, either (i) made in immediately available
funds or (ii) evidenced by the Deferred Payment Note (as defined in Section
2.2(a)).
(c) Application to Earn-Up Shares. For purposes of this Section 2.2
and not by way of limitation, all Common Shares acquired by Xxxxxx or
Xxxxxxx as described in Section 2.6(b) hereof shall be included within the
Shares held by Xxxxxx and Xxxxxxx, as applicable.
2.3. Restrictions on Sale of Shares by Xxxxxxx; Rights of First
Refusal. Xxxxxxx, or any of his successors or permitted assigns, shall be
permitted to sell, transfer or
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dispose of Shares to any person in a transaction (not otherwise permitted by
Section 2.6 below) solely in compliance with this Section 2.3. If Xxxxxxx, or
any of his successors or permitted assigns, shall desire at any time to sell,
transfer or otherwise dispose of all or any part of the Shares held by him, then
the Corporation and each of Xxxxxx, Electra and their respective successors,
permitted assigns and any Permitted Transferees of Xxxxxx and Electra
(collectively, the "Eligible Stockholders") shall have the first right to
purchase on a pro rata basis (treating, for such purposes, all Warrants as if
they had been exercised), such Shares for the price and in the manner
hereinbelow provided. Any purchases by Electra shall be allocated among EIT and
EAI on a pro rata basis or on such other basis as they may mutually determine.
In the event that Xxxxxxx, or any of his successors or permitted assigns,
("Offeror"), shall receive and intend to accept a bona fide written offer from a
non-affiliated third party with a good business reputation for financial
integrity, who is not directly or indirectly engaged in activities which are
competitive with the Corporation's and its subsidiaries' operations and who is
reasonably acceptable to the Board as a new Stockholder (a "Purchaser") for the
sale, transfer or other disposition of all or any portion of his Shares (the
"Offered Shares"), he shall not sell, transfer or dispose of said Shares without
first giving the Corporation and each of the Eligible Stockholders a written
notice ("Offer") of the offer to purchase or acquire such Offered Shares, which
notice shall fully disclose all material terms of the proposed transaction,
including, but not limited to, the name of the proposed Purchaser, the purchase
price and terms of sale and any information as to the ability of the Purchaser
to perform such offer that the Offeror then possesses (collectively, the
"Offered Terms"). No proposed offer will be deemed to be an Offer for purposes
hereof, and accordingly, no sale of the Offered Shares may be made to a
Purchaser, if such offer or sale would give rise to a default or breach, or
accelerate any payments due, under any contract, lease, loan or other agreement
to which the Corporation is a party, irrespective of the exercise of the options
described in this Section 2.3.
(a) Purchase by the Corporation. For a period (the "Corporation
Option Period") of thirty (30) days after the delivery of the Offer, the
Corporation shall have the sole and exclusive right to purchase all or any
portion of the Offered Shares specified in the Offer upon the Offered
Terms. The Corporation may elect by written notice to the Stockholders to
waive its right of first refusal. Immediately upon the expiration of the
Corporation Option Period, or upon the waiver of such right, the
Corporation shall give to each of the Eligible Stockholders written notice
stating the Offered Terms for the Offered Shares specified in the Offer and
the number and amount of Offered Shares, if any, for which the Corporation
has not exercised its option under this subsection (a). To the extent
practicable, the Corporation shall not purchase fewer Shares than the
number of Shares, that when aggregated with all other concurrent sales by
the Offeror, is necessary to prevent such purchase by the Corporation from
being deemed to be a dividend pursuant to Section 302 of the Internal
Revenue Code of 1986, as amended.
(b) Purchase by Eligible Stockholders.
---------------------------------
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(i) If within the Corporation Option Period the Corporation does
not exercise the option provided in subsection (a) above for all of
the Offered Shares or waives such option as to any portion of the
Offered Shares, then for a period (the "Initial Option Period") of
fifteen (15) days commencing upon expiration of the Corporation Option
Period, each Eligible Stockholder shall have the option to purchase on
the Offered Terms its pro rata share (treating, for such purposes, all
Warrants as if they had been exercised) of the Offered Shares that the
Corporation did not elect to purchase.
(ii) In the event that any Eligible Stockholder fails to exercise
in full its option to purchase its pro rata share of the Offered
Shares within the Initial Option Period, the Corporation shall give to
each Eligible Stockholder who has exercised such rights in full
written notice of such failure within five (5) days after expiration
of the Initial Option Period stating the number and amount of Offered
Shares (the "Remaining Shares") which have not been accepted for
purchase under subsection (b)(i) above. Each such Eligible Stockholder
shall have an additional period of three (3) business days (the "Final
Option Period") from the date of giving of such notice in which to
exercise its option to purchase all or a specified portion of the
Remaining Shares at the Offered Terms. In the event that Eligible
Stockholders give notices under this subsection (b)(ii) for the
purchase of an aggregate quantity of Shares in excess of the Remaining
Shares available for purchase, then the Remaining Shares shall be
allocated pro rata among the Eligible Stockholders giving such notice
on the basis of their relative percentage ownership of Shares,
provided, that if any Eligible Stockholder has requested to purchase
less than its pro rata share of the Remaining Shares, then any
Remaining Shares which remain unallocated as a result of such
proration shall be allocated among the Eligible Stockholders desiring
to purchase more than their pro rata share in proportion to the number
of Shares specified in their respective notices until, to the extent
possible, the options on all of the Remaining Shares are exercised.
(c) Sale to Purchaser. After the expiration of the Corporation
Option Period, the Initial Option Period and the Final Option Period, if
the Corporation and Eligible Stockholders have not exercised their
respective options to purchase all of the Offered Shares, then within a
period ending sixty (60) days after the expiration of the Final Option
Period, the Offeror may sell or otherwise dispose of all of the Offered
Shares, but only in strict accordance with the Offered Terms.
(d) Exercise of Option. Any option granted under this Section 2.3
may be exercised by notice in writing to the Offeror and to the Corporation
stating that such
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option is exercised, and also stating the specific number of Shares to
which the exercise is applicable.
(e) Delivery of Shares. In the event that the options under this
Section 2.3 are exercised as to all of the Offered Shares, delivery of the
certificate or certificates evidencing the Offered Shares involved,
properly endorsed, shall be made by the Offeror against payment therefor
within thirty (30) days after the expiration of the Final Option Period, or
after the last date on which any of such options to purchase such Offered
Shares have been exercised, at the principal office of the Corporation,
unless a different time or place is agreed upon by the parties to such
transaction, and the purchase price with respect to such option shall be
paid in accordance with the Offered Terms.
(f) Transfer of Option. Notwithstanding anything hereinabove to the
contrary, the Eligible Stockholders may, at any time, elect to transfer all
or a portion of their option rights to any Permitted Transferee in
accordance with Section 2.6.
(g) Reinstatement. Any Shares purchased pursuant to this Section 2.3
shall remain subject to this Agreement. If all the Offered Shares are not
sold either pursuant to the Offer or the options granted hereunder within
sixty (60) days after the Final Option Period, the provisions of this
Section 2.3 shall remain in full force as to subsequent offers and sales
for the Offered Shares. During such sixty (60)-day period, the Offeror
shall be permitted to transfer the Offered Shares only pursuant to the
Offered Terms or the options granted hereunder. Any such Purchaser of said
Shares shall hold same subject to the terms and provisions of this
Agreement, including, without limitation, the foregoing rights of first
refusal. At the closing of any sale of the Offered Shares to the Purchaser,
the Purchaser shall execute such document as the Corporation and Xxxxxx
shall reasonably request agreeing to be bound by the terms of this
Agreement.
2.4. Co-Sale.
-------
(a) (i) In the event that Xxxxxx shall have received and intends
to accept an offer from a Purchaser to purchase more than fifty
percent (50%) of the Common Shares owned by Xxxxxx and its successors
and permitted assigns at the time of such offer, Xxxxxx shall provide
to all Stockholders a notice containing the information described in
Section 2.3 (the "Xxxxxx Notice"), and, any other Stockholder or
Provident holding Common Shares or Rights (a "Holder") may elect to
participate in the contemplated transfer to the Purchaser by
delivering written notice to Xxxxxx within thirty (30) days after
receipt by said Holder (the "Co-Sale Election Period"). If any such
Holder elects to participate in the contemplated transfer (a
"Participating Holder"), Xxxxxx and each Participating Holder shall be
entitled to participate in the contemplated
-15-
transfer pro rata based on the relative ownership of Common Shares
(treating, for such purposes, all Warrants as if they had been
exercised) among Heller and all Participating Holders. The purchase by
the Purchaser of the Common Shares of Participating Holders and Xxxxxx
shall be upon the terms set forth in the Xxxxxx Notice. If Electra
and/or Provident elects to participate in any sale pursuant to this
Section 2.4, Electra shall, to the extent required by the Purchaser
thereof, exercise the Warrants or Provident Warrants, as applicable,
for sufficient number of Warrant Shares or Provident Shares, as
applicable to participate in such sale.
(ii) In the event that Xxxxxx shall have received and intends to
accept an offer from a Purchaser to purchase any of the Common Shares
up to fifty (50%) percent of such Common Shares (for a purchase
greater than fifty (50%) percent, clause (i) above shall apply), owned
by Xxxxxx and its successors and permitted assigns at the time of the
offer, Xxxxxx shall provide to Electra and Provident the Xxxxxx Notice
and Electra or Provident may elect to participate in the contemplated
transfer to the Purchaser by delivering written notice to Xxxxxx
within the Co-Sale Election Period. If either Electra or Provident
elects to participate in the contemplated transfer (hereinafter, for
purposes of subsection 2.6(b) below, Electra and/or Provident, as
applicable, shall be considered a "Participating Holder"), Electra
and/or Provident, as applicable, shall be entitled to participate in
the contemplated transfer pro rata (treating, for such purposes, all
Warrants and Provident Warrants, as applicable, as if they had been
exercised) with Xxxxxx. The purchase by the Purchaser of the Warrant
Shares of Electra, the Provident Shares of Provident and the Common
Shares of Xxxxxx shall be upon the terms set forth in the Xxxxxx
Notice. If Electra and/or Provident elects to participate in any sale
pursuant to this Section 2.4, Electra and/or Provident shall, to the
extent required by the Purchaser thereof, exercise the Warrants or
Provident Warrants, as applicable, for sufficient number of Warrant
Shares or Provident Shares, as applicable, to participate in such
sale.
(b) Xxxxxx shall use its best efforts to obtain the agreement of the
Purchaser to the inclusion of the Common Shares owned by the Participating
Holders in lieu of a portion of Xxxxxx'x Common Shares in the proposed
sale; provided, that if the Purchaser declines to allow the participation
of the Participating Holders in such sale, Xxxxxx may proceed with such
transfer of Common Shares; provided, that Xxxxxx offers to purchase Shares
from such Participating Holders on the same terms and in the same
proportions as would have been applicable if such Shares were sold to the
Purchaser.
(c) Notwithstanding the terms of Section 2.3 or subsection 2.4(a), if
the terms of any bona fide offer are such that an offer by any non-
affiliated third party (i) is
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made to all holders of outstanding Common Shares and Rights for all of
their Common Shares and Rights and makes provision for the purchase or
redemption of all Preferred Shares outstanding and Xxxxxx elects to sell
all of the Common Shares owned by it; (ii) provides for the purchase of all
or substantially all of the assets of the Corporation; or (iii)
contemplates the merger of the Corporation with and into any other
corporation in which the Holders would receive cash and/or securities of
such other corporation; provided, however, that with respect to any actions
contemplated by clauses (i), (ii) or (iii), such actions would result in
Electra realizing on a cumulative basis an IRR of at least twenty percent
(20%) to the date of the proposed closing date of such offer (in addition
to the consideration to be received by Electra in such transaction with
respect to securities of the Corporation it may own other than the Shares
of Series C Preferred Stock and the Warrants issued under the Securities
Purchase Agreement), then if the holders of a majority of the outstanding
Common Shares (voting as a single class) desire to accept such offer, all
of the Holders shall be deemed by virtue of their being parties to this
Agreement to have (x) accepted such offer and they shall sell the Common
Shares (and, to the extent applicable, Preferred Shares or Rights) held by
them to the Purchaser making such offer on the terms contained in such
offer and (y) agreed to vote all Shares held by them, regardless of class
or series, to approve such transactions and to take all other actions
necessary to permit the consummation of such transactions.
2.5. Involuntary Transfers by Bankrupt Stockholders. In the event
that the Shares of any Stockholder shall be attached or taken in execution, or
in the event a Stockholder shall be adjudicated a bankrupt or makes an
assignment for the benefit of creditors or its Shares are taken by reason of
garnishment or other charging order (hereinafter for convenience called a
"Bankrupt Stockholder"), then the successors in interest to the Bankrupt
Stockholder shall succeed to all of the rights of the Bankrupt Stockholder
hereunder and shall be bound by all of the obligations of and restrictions upon
a Stockholder under this Agreement, including, without limitation, the rights of
first refusal of the Corporation and the Eligible Stockholders under Section
2.3, provided, however, if any such execution, assignment or involuntary
adjudication of bankruptcy or charging order is not vacated, reversed or
otherwise revoked within thirty (30) days after such action is taken, then the
Corporation and the other Stockholders shall have the successive options to
purchase all of the Shares of the Bankrupt Stockholder in the same manner and
within the same time period (measured from thirty (30) days and after written
notice of any such involuntary transfer is received by the Corporation and the
other Stockholders) as provided above in Section 2.3, except (a) the purchase
price for the Common Shares of the Bankrupt Stockholder shall be equal to the
Fair Market Value of such Common Shares and the purchase price for the Preferred
Shares owned by the Bankrupt Stockholder shall be equal to the Liquidation Value
of such Preferred Shares, and (b) the purchase price shall be payable, subject
to Section 2.8, by a Deferred Payment Note; provided that such note shall bear
interest at the applicable federal rate as determined by the Internal Revenue
Service pursuant to the Internal Revenue Code of 1986, as amended, for notes of
similar duration at the date of purchase.
-17-
2.6. Permitted Transfers. A Holder may not sell, transfer or
dispose of any Shares or Rights except as expressly permitted by this Article
II; provided, that nothing herein shall prevent any Shares from being sold,
transferred or otherwise disposed of to the following persons or entities
("Permitted Transferees"):
(a) In the case of any individual Holder, to any Family Member
thereof whether pursuant to an intervivos gift or pursuant to the laws of
descent or to any corporation, partnership, trust or other entity which is
owned solely by such individual Holder and his Family Members; and
distribution or in the case of Xxxxxx and Electra, to any officer, director
or stockholder thereof, any "associate of a licensee," as defined in 13 CFR
107.3, or any entity controlled by, controlling or under common control
with Xxxxxx, Provident or Electra; provided, that said donee or transferee
executes and delivers to the Corporation for the benefit of the Corporation
and the other Stockholders, concurrently with the acceptance of such gift
or transfer, a written instrument, signifying his, her or its consent to be
bound by the terms of this Agreement and any amendments hereto and to the
assumption of all of the terms and provisions of this Agreement and any
amendments hereto and provided further, that, if required by the
Corporation, such transferor provides the Corporation with an opinion of
securities counsel acceptable to the Corporation that such transfer is
exempt from registration under the Securities Act of 1933, as amended, and
applicable state securities laws;
(b) By Xxxxxx, Electra or Provident to Xxxxxxx or Xxxxxx;
(c) In the case of the Shares or Rights held by Xxxxxx or Provident
to any person if such transfer is ordered or required by any governmental
body or agency with jurisdiction over Xxxxxx or Provident, as applicable,
or their respective corporate affiliates or determined by Xxxxxx or
Provident, as applicable, to be necessary in order to comply with any laws
or regulations applicable to it or its corporate affiliates;
(d) In the case of the Shares or Rights held by Electra, to Electra
Xxxxxxx Equity Partners or any Affiliate (as defined in the Securities
Purchase Agreement) of Electra;
(e) In the case of the Provident Warrant, to any assignee of all of
Provident's rights pursuant to the Credit Agreement, dated July 31, 1995,
between Provident and the Corporation to the extent permitted thereby; and
(f) In the case of Shares or Rights held by Xxxxxx, Electra or
Provident, to any person if such transfer does not result in a violation of
Section 2.4(a), in the case of Electra, Section 2.9(b) or, in the case of
Provident, Section 2.10(b).
2.7. Assumption by Successors. It is expressly agreed that any
Person which shall acquire, consistent with Article II, all or any part of the
Shares or Rights in an arm's length transaction and for value or by reason of
any permitted transfer or successorship (and including the transferee of a
Bankrupt Stockholder for the purposes hereof) shall succeed to all of the
-18-
rights (except as otherwise hereinabove provided) and shall be bound by all of
the obligations of and restrictions upon the transferring Holder under this
Agreement. Contemporaneously with any such transfer or succession, the
transferee or successor shall expressly assume in writing, all of the
obligations of a Holder under this Agreement and shall execute and deliver to
the Corporation for the benefit of the Corporation and the other Holders such
document as the Corporation and Xxxxxx shall reasonably request agreeing to be
bound by the terms of this Agreement.
2.8. Limitation on Purchases by the Corporation. Notwithstanding any
other provision of this Agreement, the Corporation shall not have the right or
the obligation to purchase any Shares except out of funds legally available
therefor. If, at the time the Corporation desires to purchase Shares pursuant to
this Agreement, its surplus is legally insufficient for that purpose, then,
subject to compliance with applicable contractual obligations or restrictions,
if any, the Corporation may borrow the funds necessary to complete the purchase
and/or the entire available surplus of the Corporation may be applied to the
purchase and the Corporation and the Stockholders agree promptly to take all
such action as may be permitted by law and applicable contractual obligations or
restrictions, if any, to arrange for such borrowing and/or to reduce the capital
of the Corporation or to revalue its assets so as to increase its surplus to the
extent necessary to permit the Corporation to purchase all of the Shares it
desires to purchase.
2.9. Right of First Offer-Electra.
----------------------------
(a) If Electra desires to sell or otherwise transfer (except to
Permitted Transferees under Section 2.6(a), (b) and (d) hereof) (the
"Proposed Disposition") any of its shares of Series C Preferred, its Rights
or any of its Warrant Shares or any other shares of the Corporation's
capital stock which Electra may acquire from time to time (the "Disposition
Securities"), whether or not to a then-identified third party (the "Electra
Purchaser"), Electra shall notify Xxxxxx and the Corporation of such desire
(the "Disposition Notice"). Electra agrees that for a period of thirty (30)
days from delivery of the Disposition Notice (the "Discussion Period") to
Xxxxxx that it will engage in good faith negotiations with Xxxxxx
concerning the terms of such Proposed Disposition. If Electra and Xxxxxx
are unable to reach a mutually satisfactory arrangement with respect to the
Disposition Securities, Electra shall then be free for a period of six (6)
months thereafter to so proceed with the Proposed Disposition regardless of
the terms thereof and without the need to re-offer the Disposition
Securities to Xxxxxx. If Electra does not conclude such a sale within such
six (6) month period, then Electra shall be required to comply with this
Section 2.9. Notwithstanding the foregoing, if Electra receives an
unsolicited bona fide written offer during the Discussion Period to
purchase part or all of its Securities, it shall not be required to comply
with this Section 2.9 except for subparagraph (b) below and shall be
permitted to effect the Proposed Disposition unless prohibited pursuant to
said subparagraph (b).
-19-
(b) Electra shall not complete the Proposed Disposition (unless the
Proposed Disposition is to a Permittee Transferee under Section 2.6(a), (b)
and (d) hereof in which case this subparagraph (b) shall not apply) if the
Corporation, by a good faith determination of the Board of Directors of the
Corporation, notifies Electra in writing, within ten (10) days of the later
of receipt of the Disposition Notice and receipt of written notice
disclosing the identity of the Electra Purchaser that the Electra Purchaser
is or is an Affiliate (as defined in the Securities Purchase Agreement) of
a competitor of the Corporation or that, based upon a legal opinion of
counsel to the Corporation with respect to federal and/or state educational
regulatory affairs delivered to the Company and Electra, the consummation
of the Proposed Disposition to the particular Electra Purchaser will have a
materially adverse impact on the ability of the Corporation or any of its
Subsidiaries to remain eligible for Title IV funding or the maintenance of
accreditation by Corporation or any of its Subsidiaries with any
Accrediting Body (as defined on the Securities Purchase Agreement);
provided, that notwithstanding the foregoing, Electra shall not complete a
proposed disposition of the Series C Preferred without the consent of the
Corporation, which consent shall not be unreasonably withheld.
(c) The provisions of this Section 2.9 shall not apply from and after
the occurrence of a Preferred Stock Failure Event, or, once the shares of
Series C Preferred Stock are no longer outstanding, any material breach of
any term or provision contained in the Securities Purchase Agreement which
survives pursuant to the terms thereof.
2.10. Right of First Offer-Provident.
------------------------------
(a) If Provident desires to sell or otherwise transfer (except to
Permitted Transferees under Section 2.6(a), (b) and (c) hereof) (the
"Proposed Disposition") any of its Provident Shares, its Rights or any
other shares of the Corporation's capital stock which Provident may acquire
from time to time (the "Disposition Securities"), whether or not to a then-
identified third party (the "Provident Purchaser"), Provident shall notify
Xxxxxx, Electra and the Corporation of such desire (the "Disposition
Notice"). Provident agrees that for a period of thirty (30) days from
delivery of the Disposition Notice (the "Discussion Period") to Xxxxxx that
it will engage in good faith negotiations with Xxxxxx and Electra
concerning the terms of such Proposed Disposition. If Provident, Xxxxxx
and/or Electra are unable to reach a mutually satisfactory arrangement with
respect to the Disposition Securities, Provident shall then be free for a
period of six (6) months thereafter to so proceed with the Proposed
Disposition regardless of the terms thereof and without the need to re-
offer the Disposition Securities to Xxxxxx. If Provident does not conclude
such a sale within such six (6) month period, then Provident shall be
required to comply with this Section 2.10. Notwithstanding the foregoing,
if Provident receives an unsolicited bona fide written offer during the
Discussion Period to purchase part or all of its Securities, it shall not
be required to comply with this Section 2.10 except for subparagraph (b)
below and shall be permitted to effect the Proposed Disposition unless
prohibited pursuant to said subparagraph (b).
-20-
Xxxxxx and Electra agree that in the event either enters into an agreement
to purchase the Disposition Securities, such party shall notify the other
of such agreement and offer to such other party the opportunity to
participate in such purchase. If both Xxxxxx and Electra desire to
participate in a purchase of the Disposition Securities they shall do so on
a pro rata basis based upon their respective ownership of the Common Shares
on a fully diluted basis.
(b) Provident shall not complete the Proposed Disposition (unless the
Proposed Disposition is to a Permittee Transferee under Section 2.6(a) and
(b) hereof in which case this subparagraph (b) shall not apply) if the
Corporation, by a good faith determination of the Board of Directors of the
Corporation, notifies Provident in writing, within ten (10) days of the
later of receipt of the Disposition Notice and receipt of written notice
disclosing the identity of the Provident Purchaser that the Provident
Purchaser is or is an Affiliate (as defined in the Securities Purchase
Agreement) of a competitor of the Corporation or that, based upon a legal
opinion of counsel to the Corporation with respect to federal and/or state
educational regulatory affairs delivered to the Company and Provident, the
consummation of the Proposed Disposition to the particular Provident
Purchaser will have a materially adverse impact on the ability of the
Corporation or any of its Subsidiaries to remain eligible for Title IV
funding or the maintenance of accreditation by Corporation or any of its
Subsidiaries with any Accrediting Body (as defined on the Securities
Purchase Agreement).
2.11. Potential PTP Action. In the event of the commencement of any
Potential PTP Action (as defined in the Xxxxxxx Consulting Agreement), the
Corporation shall have the right, exercisable by written notice given to
Xxxxxxx, to require that Xxxxxxx'x rights to take any of the following action
shall be temporarily suspended, (a) the right to attend any meetings of the
Board or otherwise participate or act as a Director, (b) the right to vote his
Shares or otherwise participate in any meetings of the Stockholders, (c) the
right to make any sale, transfer or disposition of his Shares or Rights or
purchase any additional Shares or Rights, whether pursuant to options or
otherwise, and (d) any other right to participate in any manner in the
management, operations or finances of the Corporation.
ARTICLE III
-----------
3.1. Certain Affiliated Transactions. Subject to approval by the
Board of Directors and the provisions of the Securities Purchase Agreement, each
of the Stockholders hereby acknowledges that Xxxxxx and certain of its
affiliates (collectively, the "Xxxxxx Entities") are authorized and may from
time to time charge the Corporation and its subsidiaries certain fees and
require the reimbursement of certain expenses relating to (a) the consummation
of the acquisition of certain subsidiaries and operations of the Corporation and
(b) ongoing consulting, advisory or related services provided by the Xxxxxx
Entities.
-21-
ARTICLE IV
----------
4.1. Term of this Agreement. This Agreement shall be effective as of
the date hereof and shall continue in effect until:
(a) a written agreement to terminate is executed by the Corporation
and Stockholders owning in excess of sixty percent (60%) of each class of
the outstanding Common Shares (voting separately as a class);
(b) the substantial permanent cessation of the Corporation's
business;
(c) the dissolution of the Corporation or the entering of an order
against the Corporation for reorganization or liquidation under the United
States Bankruptcy Code, or the assignment of substantially all of its
assets for the benefit of creditors; or
(d) the consummation of an IPO as defined in the Certificate;
provided, however, that Electra shall continue to have the right to designate a
Director of the Corporation and such Director shall continue to have the right
to serve on the Corporation's and each Subsidiary's compensation and audit
committees for so long as Electra owns at least five (5%) percent of the issued
and outstanding Common Shares, or, if earlier, ten (10) years from the date
hereof.
In addition, each holder of Class B Stock, Class C Stock, Class D
Stock and Class E Stock hereby agrees that upon the occurrence of any event
described in subparagraph (d) above, such holder shall convert all shares of
Class B Stock, Class C Stock, Class D Stock and Class E Stock into shares of
Class A Stock in accordance with the terms of the Certificate.
ARTICLE V
---------
5.1. Legend on Share Certificates. All certificates representing the
Shares shall also have imprinted thereon a legend (in addition to or
incorporating any securities law legend) substantially to the following effect:
"The sale, transfer or other disposition or pledge or other encumbrance of
Shares represented by this Certificate is subject to an Amended and
Restated Stockholders' Agreement dated as of July 31, 1995, among Career
Education Corporation, a Delaware corporation (the "Corporation"), and
certain of the Stockholders of the Corporation, including certain options
to purchase or sell the Shares represented by this Certificate. A copy of
said Agreement is on file in the office of the Secretary of the Corporation
and may be reviewed by application thereto. Each holder hereof shall be
bound by all provisions of said Agreement."
-22-
5.2. Amendments. This Agreement may be amended or altered in any of
its provisions by the agreement of the Corporation and Stockholders owning in
excess of sixty percent (60%) of each class of the outstanding Common Shares
(voting separately as a class), and any such amendment or alteration shall
become effective upon its being reduced to writing and executed by said parties;
provided, that such amendment does not adversely affect any Holder not
consenting thereto.
5.3. Notices. Notices, directions, consents and all other
communications required or permitted hereunder shall be in writing and shall be
deemed received and become effective upon personal delivery or by telecopy or
the day after deposit with a reputable overnight courier to the several parties
at the addresses specified below (or to any address which is changed after
similar notice in writing).
Xxxxxx: Xxxx X. Xxxxxx
00 Xxxxxxxx Xxxxx
Xxxxx Xxxxxxxxxx, Xxxxxxxx 00000
Xxxxxxx: Xxxxxx X. Xxxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
In each case with a copy to: Xxxxx, Xxxxx & Xxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Xxxxxx: Xxxxxx Equity Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
with copies to: Xxxxxx Equity Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Goldberg, Kohn, Bell, Black,
Xxxxxxxxxx & Moritz, Ltd.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Black, Esq.
-23-
Corporation: Career Education Corporation
0000 X. Xxxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: President
EIT and EAI: Electra Investment Trust P.L.C.
00 Xxxxxxxx
Xxxxxx, Xxxxxxx XX0X 0XX
Attention: Xx. Xxxxxx Xxxx
with copies to: Electra, Inc.
00 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxxx
Senior Vice President
Provident: The Provident Bank
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
with copies to: Xxxxxxx, Xxxxxxxx & Xxxxxxx
1800 Provident Tower
One East Fourth Street
Attention: J. Xxxxx Xxxxxxxxx, Esq.
5.4. General.
(a) Governing Law. This Agreement shall be subject to and governed
by the laws of the State of Delaware.
(b) Superseding Agreement. This Agreement shall supersede, revoke
and nullify all and any agreements bearing prior date by or between the
Corporation and the Stockholders, or any of them, relating to or
restricting the Stockholders on disposition, whether voluntary or
involuntary, of all or any of the Shares. All such agreements, and all
promises, rights, duties and obligations established pursuant thereto are
hereby rendered void.
(c) Counterparts. This Agreement may be executed in several
counterparts (including by way of separate signature pages, which may be
attached hereto) by one or more of the parties, each of which shall be
deemed an original but all of said counterparts (and signature pages) shall
be deemed to constitute or be part of one and the same instrument.
-24-
(d) Severability. Should any particular provisions of this Agreement
be adjudicated to be invalid or unenforceable such provision shall be
deemed deleted and the remainder of the Agreement, nevertheless, remain
unaffected and fully enforceable; further, to the extent any provision
herewith is deemed unenforceable by virtue of its scope but may be made
enforceable by limitation thereof, the parties hereto agree the same shall,
nevertheless, be enforceable to the fullest extent possible under the laws
and public policies applied in the jurisdiction in which enforcement or
interpretation is sought.
(e) Ratification. This Agreement and all of the terms and provisions
hereof shall be affirmed and approved by the Board.
(f) Further Assurances. Upon request of the Corporation or any party
hereto, all parties hereto agree to promptly execute and deliver all such
other instruments and take all such other actions or any party hereto may
reasonably request from time to time in order to effectuate and carry out
the purposes, privileges, restrictions, rights and duties of the parties
and other provisions of this Agreement.
(g) Headings. The headings or other subdivision in this Agreement
are intended solely for convenience of reference and shall be given no
effect in the construction or interpretation of this Agreement.
(h) Specific Performance. Each party's obligations under this
Agreement are unique. The acquisition of Shares by a party entitled to
purchase Shares under this Agreement is a unique prospect for the
purchasing party. If any party should default in any of his or her
obligations under this Agreement, the parties each acknowledge that it
would be impracticable to measure the resulting damages and that it may not
be possible to adequately compensate the injured party by monetary damages.
Accordingly, without prejudice to his right to seek and recover monetary
damages, each non-defaulting party shall be entitled to xxx in equity for
specific performance of this Agreement, and each party hereby expressly
waives the defense that a remedy in damages would be adequate. Each party
further acknowledges that any consideration to be paid for Shares by the
Corporation under this Agreement is fair and adequate.
(i) Consent to Jurisdiction and Service of Process. THE CORPORATION
AND EACH OF THE STOCKHOLDERS HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF XXXX, STATE OF ILLINOIS
AND IRREVOCABLY AGREES THAT 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
-25-
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. XXXXXX AND XXXXXXX HEREBY DESIGNATE AND APPOINT CT CORPORATION
SYSTEM AND SUCH OTHER PERSONS AS MAY HEREINAFTER BE SELECTED BY THE
CORPORATION WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS AGENT TO
RECEIVE ON SUCH PARTY'S BEHALF SERVICE OF ALL PROCESS IN ANY 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 THE
CORPORATION TO BRING PROCEEDINGS AGAINST XXXXXX OR XXXXXXX IN ANY OTHER
COURT HAVING JURISDICTION THEREOVER.
(j) Waiver of Jury Trial. THE CORPORATION AND EACH OF THE
STOCKHOLDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION
AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE CORPORATION AND EACH OF
THE STOCKHOLDERS ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE OTHER PARTIES. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS. THE CORPORATION AND EACH OF THE STOCKHOLDERS ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS. THE CORPORATION AND EACH OF THE STOCKHOLDERS FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY
-26-
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO
ANY OTHER DOCUMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the date first above written.
CAREER EDUCATION CORPORATION, a
Delaware corporation
By /s/ XXXX X. XXXXXX
-------------------------------
Xxxx X. Xxxxxx
Its President
XXXXXX EQUITY CAPITAL CORPORATION,
a Delaware corporation
By /s/ XXXX XXXXXX
------------------------------------
Its Vice President
/s/ XXXX X. XXXXXX
------------------------------------
Xxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXXX
------------------------------------
Xxxxxx X. Xxxxxxx
ELECTRA INVESTMENT TRUST P.L.C., a
corporation organized under the laws
of England and Wales
By /s/ XXXX X. XXXXXXX
-------------------------------
-27-
Its Director
---------------------------------
ELECTRA ASSOCIATES, INC., a Delaware
corporation
By /s/ X.X. XXXXX
---------------------------------
Its Director
---------------------------------
-28-
Signature page continued.
The undersigned hereby executes this Agreement solely for purposes of
evidencing its agreement to be bound by or subject to Sections 1.3, 2.4, 2.6,
2.7, 2.8, 2.10 and 4.1, and Article V of this Agreement and shall not be deemed
to be a party to this Agreement for any other purposes.
PROVIDENT BANK, an Ohio banking corporation
By /s/ XXXXX XXXX
---------------------------------------
Its Vice President
---------------------------------------
-29-
FIRST AMENDMENT TO CAREER EDUCATION CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
THIS FIRST AMENDMENT TO CAREER EDUCATION CORPORATION AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT (this "First Amendment") is made as of February
28, 1997 by and among Career Education Corporation, a Delaware corporation (the
"Corporation"), Xxxxxx Equity Capital Corporation, a Delaware corporation
("Xxxxxx"), Xxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxxx X.
Xxxx and Xxxxxxxxx X. Xxxx (the "Laubs"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), The
Provident Bank, an Ohio banking corporation ("Provident"), Electra Investment
Trust P.L.C., a corporation organized under the laws of England and Wales, and
its successors and assigns ("EIT"), and Electra Associates, Inc., a Delaware
corporation, and its successors and assigns ("EAI," and together with EIT,
"Electra"). Xxxxxx, EIT, EAI, Larson, Dowdell, the Laubs and Xxxxxxx are
hereafter collectively referred to as the "Stockholders." Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Stockholders' Agreement (defined below).
WITNESSETH:
WHEREAS, the Corporation, the Stockholders and Provident are parties
to that certain Career Education Corporation Amended and restated Stockholders'
Agreement dated as of July 31, 1995 (the "Stockholders' Agreement");
WHEREAS, the Stockholders are the holders of all of the issued and
outstanding capital stock and options to acquire capital stock of the
Corporation (other than certain warrants held by Provident and certain options
issued to employees of the Corporation pursuant to its 1995 Stock Option Plan
dated August 23, 1995 (as amended, the "Management Option Plan");
WHEREAS, pursuant to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith among the Corporation and
the Stockholders other than EAI (such Stockholders sometimes being referred to
herein as the "Purchasers"), the Purchasers have agreed to provide additional
equity financing to the Corporation in the amount of up to Seven Million Five
Hundred Thousand Dollars ($7,500,000) in exchange for up to 7,500 shares of the
Corporation's Series D Redeemable Preferred Stock, with a stated value of One
Thousand Dollars ($1,000) per share, together with certain warrants to purchase
the Corporation's Class E Non-Voting Common Stock, on the terms and subject to
the conditions set forth in the Securities Purchase Agreement; and
WHEREAS, in connection with the transactions contemplated by the
Securities Purchase Agreement, the parties hereto now wish to make certain
amendments to the Stockholders' Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
bound, hereby agree as follows:
1. Definition of Shares and Preferred Shares. All references in the
Stockholders' Agreement to "Shares" and/or "Preferred Shares" shall be deemed to
include (in addition to the Corporation's Class A Stock, Class B Stock, Class C
Stock, Class D Stock, Class E Stock, Series A Preferred, Series B Preferred, and
Series C Preferred), the Corporation's Series D Preferred Stock, $.01 par value
(the "Series D Preferred"), of which 2,000 shares have been issued as of the
date hereof and of which up to an additional 5,500 shares may be issued in the
future pursuant to the Securities Purchase Agreement.
2. Additional Warrants. Pursuant to the Securities Purchase
Agreement, the Corporation has agreed to issue warrants (the "Additional
Warrants") to purchase up to 8,924 shares of the Corporation's Class E Stock, of
which 2,380 Additional Warrants have been issued as of the date hereof and of
which up to an additional 6,544 Additional Warrants may be issued in the future.
With respect to such Additional Warrants, the Stockholders hereby agree as
follows:
(a) All references in the Stockholders' Agreement, as amended by this
First Amendment, to the term "Additional Warrants" shall refer to the Additional
Warrants (as defined herein). All references in the Stockholders' Agreement, as
amended by this First Amendment, to the term "Additional Warrant Shares" shall
mean the shares of Class E Stock to be issued upon exercise of the Additional
Warrants.
(b) All references in the Stockholders' Agreement to "Rights" shall be
deemed to include the Additional Warrants.
(c) Section 1.3(a) of the Stockholders' Agreement is hereby amended
and restated in its entirety as follows:
(a) In case at any time or from time to time the Corporation shall
issue or sell the following (collectively hereinafter referred to as the
"Additional Capital Stock"): any shares of its capital stock or issue or
sell options, rights or warrants to subscribe for or purchase shares of its
capital stock (or securities convertible into shares of its capital stock)
("Options"), including but not limited to issuances pursuant to Section 1.2
above, other than (i) shares of Class D Stock to be issued to the holders
of the Warrants upon exercise thereof or pursuant to an adjustment provided
for under Section 5 of the Warrant Certificate and Section 5 of the Penalty
Warrant Certificate issued to each of EIT and EAI, (ii) up to 13,400 Common
Shares (subject to
-2-
antidilution adjustments in the case of recapitalizations, recombinations
or stock splits) issued upon the exercise of any stock options granted
pursuant to present or future employee benefit plans or the Corporation,
(iii) any Common Shares issued to the holders of the Provident Warrant upon
exercise thereof, (iv) shares of Class E Stock to be issued to the holders
of the Additional Warrants upon exercise thereof or pursuant to an
adjustment provided for under Section 5 of each of the Warrant Certificates
evidencing such Additional Warrants, and (v) any Common Shares issuable
upon exercise of any Options which have previously been treated as
Additional Capital Stock for purposes hereof, Electra, Xxxxxx and
Provident, respectively, shall have the right to purchase, on the same
terms and conditions and at the same time, such shares of Additional
Capital Stock equal to the percentage of Common Shares then owned by
Electra, Xxxxxx or Provident, as applicable; treating, for such purposes,
all Warrants, Provident Warrants and Additional Warrants as if they had
been exercised.
(d) Section 2.4(a) of the Stockholders' Agreement is hereby amended
and restated in its entirety as follows:
(a) (i) In the event that Xxxxxx shall have received and intends to
accept an offer from a Purchaser to purchase more than fifty percent (50%)
of the Common Shares owned by Xxxxxx and its successors and permitted
assigns at the time of such offer, Xxxxxx shall provide to all Stockholders
and Provident a notice containing the information described in Section 2.3
(the "Xxxxxx Notice"), and, any other Stockholder or Provident holding
Common Shares or Rights (a "Holder") may elect to participate in the
contemplated transfer to the Purchaser by delivering written notice to
Xxxxxx within thirty (30) days after receipt by said Holder (the "Co-Sale
Election Period"). If any such Holder elects to participate in the
contemplated transfer (a "Participating Holder"), Xxxxxx and each
Participating Holder shall be entitled to participate in the contemplated
transfer pro rata based on the relative ownership of Common Shares
(treating, for such purposes, all Warrants, the Provident Warrant and all
Additional Warrants, as if they had been exercised) among Xxxxxx and all
Participating Holders. The purchase by the Purchaser of the Common Shares
of the Participating Holders and Xxxxxx shall be upon the terms set forth
in the Xxxxxx Notice. If Electra and/or Provident elects to participate in
any sale pursuant to this Section 2.4(a)(i), Electra and/or Provident
shall, to the extent required by the Purchaser thereof, exercise the
Warrants or Provident Warrants, as applicable, for sufficient number of
Warrant Shares or Provident Shares, as applicable to participate in such
sale. If any Holder elects to participate in any sale pursuant to this
Section 2.4(a)(i), such Holder shall, to the extent required by the
Purchaser thereof, exercise its Additional Warrants for a sufficient number
of Additional Warrant Shares to participate in such sale.
-3-
(ii) In the event that Xxxxxx shall have received and intends to
accept an offer from a Purchaser to purchase any of the Common Shares up to
fifty (50%) percent of such Common Shares (for a purchase greater than
fifty (50%) percent, clause (i) above shall apply), owned by Xxxxxx and its
successors and permitted assigns at the time of the offer, Xxxxxx shall
provide to Electra and Provident the Xxxxxx Notice, and Electra or
Provident may elect to participate in the contemplated transfer to the
Purchaser by delivering written notice to Xxxxxx within the Co-Sale
Election Period. If either Electra or Provident elects to participate in
the contemplated transfer (hereinafter, for purposes of subsection 2.4(b)
below, Electra and/or Provident, as applicable, shall be considered a
"Participating Holder"), Electra and/or Provident, as applicable, shall be
entitled to participate in the contemplated transfer pro rata (treating,
for such purposes, all Warrants, Provident Warrants and all Additional
Warrants, as applicable, as if they had been exercised) with Xxxxxx. The
purchase by the Purchaser of the Warrant Shares and Additional Warrant
Shares of Electra, the Provident Shares and Additional Warrant Shares of
Provident and the Common Shares and Additional Warrant Shares of Xxxxxx
shall be upon the terms set forth in the Xxxxxx Notice. Furthermore, if
Electra and/or Provident elects to participate in any sale pursuant to this
Section 2.4(a)(ii), Electra and/or Provident shall, to the extent required
by the Purchaser thereof, exercise the Warrants, Provident Warrants and/or
Additional Warrants, as applicable, for sufficient number of Warrant
Shares, Provident Shares and/or Additional Warrant Shares, as applicable,
to participate in such sale.
3. Waivers.
(a) Issuances of Additional Shares to Xxxxxx. Notwithstanding the
provisions of Section 1.2 of the Stockholders' Agreement, the Stockholders and
Provident hereby agree that Xxxxxx shall be permitted to purchase and the
Corporation shall offer for sale to Xxxxxx investment units consisting of Series
D Preferred and Additional Warrants in accordance with the Securities Purchase
Agreement. Furthermore, Larson, Dowdell, the Laubs and Xxxxxxx hereby (i) waive
all presently existing and future rights granted to them pursuant to Section 1.2
of the Stockholders Agreement with respect to any Xxxxxx Investment between
$5,000,000 and $8,000,000, (ii) acknowledge and agree that as a result of the
consummation of the Initial Investment (as defined in Securities Purchase
Agreement), the Xxxxxx Investment is now in excess of $8,000,000, and (iii)
therefore, all rights of Larson, Dowdell, the Laubs and Xxxxxxx to purchase
additional Shares (beyond those previously purchased, if any) pursuant to
Section 1.2 of the Stockholders' Agreement are now expired and terminated.
(b) Additional Equity Issuances. Each of Xxxxxx, Electra and
Provident hereby acknowledges and agrees that the Additional Capital Stock
purchased or to be purchased pursuant to the Securities Purchase Agreement by
each of such parties is in
-4-
proportion to the percentage of Common Shares now owned by each of Xxxxxx,
Electra and Provident, respectively, and hereby waives its preemptive rights
under Section 1.3 of the Stockholders' Agreement with respect to all
transactions contemplated by the Securities Purchase Agreement.
(c) Electra Securities Purchase Agreement and Warrants. Except as
otherwise specifically provided in the Securities Purchase Agreement or the
Securities (as defined in the Securities Purchase Agreement) issued pursuant
thereto, each of EIT and EAI hereby waives all of its rights to purchase or
otherwise receive Additional Capital Stock as a result of the transactions
contemplated by the Securities Purchase Agreement, including without limitation
all rights granted pursuant to (i) that certain Securities Purchase Agreement
dated July 31, 1995 between Electra and the Corporation, (ii) the Warrants; and
(iii) Series C Preferred Stock Rights granted pursuant to Exhibit A to the
Restated Certificate of Incorporation of Career Education Corporation, as
amended.
(d) Provident Warrant. Provident hereby waives all of its rights to
purchase or otherwise receive Additional Capital Stock as a result of the
transactions contemplated by the Securities Purchase Agreement, other than those
rights provided in the Provident Warrant. Furthermore, Provident and the
Corporation hereby agree that, notwithstanding any provision of the Provident
Warrant to the contrary, for each Share of Class D Stock to which Provident is
or may become entitled to pursuant to the Provident Warrant as a result of the
transactions contemplated by the Securities Purchase Agreement, the Corporation
shall issue to Provident, and Provident shall accept, in exchange therefor, one
Share of Class E Stock. In addition, Provident and the Corporation hereby agree
that, assuming the issuance of all 8,924 Additional Warrants contemplated by the
Securities Purchase Agreement, the Additional Capital Stock which Provident will
be entitled to receive upon exercise of the Provident Warrant as a result of the
issuance of such Additional Warrants is four hundred ninety (490) Shares of
Class E Stock, which number of Shares will be reduced pro rata in the event any
lesser number of Additional Warrants had been issued at the time of exercise of
the Provident Warrant.
4. Issuance of Securities to the Xxxxxxx XXX. The Company and
Xxxxxxx hereby agree and acknowledge that certain Shares and Rights of which
Xxxxxxx is the beneficial owner have been and/or may be issued to First Chicago,
Custodian, Xxxxxxx X. Xxxxxxx XXX (the "Xxxxxxx XXX"). Xxxxxxx hereby represents
and warrants that he is the sole beneficiary of the Xxxxxxx XXX with power of
direction, and agrees that, in the event of the issuance of any Shares and/or
Rights to the Xxxxxxx XXX, he will cause the Xxxxxxx XXX to be bound by the
terms of the Stockholders Agreement, as amended hereby, the Securities Purchase
Agreement and all other agreements governing the rights of the Corporation's
stockholders to which Xxxxxxx is a party. Furthermore, Xxxxxxx hereby agrees to
execute and deliver, or to cause the Xxxxxxx XXX to execute and deliver, such
other documents as the Company may reasonably require in connection with any
issuance of such Shares and/or Rights to the Xxxxxxx XXX and Xxxxxxx'x
beneficial ownership thereof.
-5-
5. Ratification of Prior Issuance of Shares to Xxxxxxx XXX. Each of
the Stockholders (other than Xxxxxxx) and Provident hereby ratifies, confirms
and approves the prior issuance to the Xxxxxxx XXX of 824 Shares of Class E
Stock and 70 Shares of Series A Preferred, and hereby acknowledges its, his or
her consent to such issuance and its, his or her waiver of all rights to
purchase or otherwise receive Additional Capital Stock as a result of such
issuance, including without limitation all rights granted pursuant to the
agreements and other documents described in Section 3 of this First Amendment.
6. References to the Stockholders' Agreement. All references to
"this Agreement" or similar language in the Stockholders' Agreement shall be
deemed to refer to the Stockholders' Agreement as amended by this First
Amendment.
7. Stockholders' Agreement. Except as modified by this First
Amendment, the Stockholders' Agreement shall remain in full force and effect,
and is hereby ratified and confirmed.
[SIGNATURE PAGE FOLLOWS]
-6-
IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the date first above written.
CAREER EDUCATION CORPORATION, a
Delaware corporation
By: /s/ XXXX X. XXXXXX
--------------------------------
Xxxx X. Xxxxxx
Its President
XXXXXX EQUITY CAPITAL CORPORATION, a
Delaware corporation
By: /s/ XXXXX XXXXX
--------------------------------
Its Vice President
/s/ XXXX X. XXXXXX
--------------------------------
Xxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXXX
--------------------------------
Xxxxxx X. Xxxxxxx
/s/ XXXXXXX X. XXXX
--------------------------------
Xxxxxxx X. Xxxx
/s/ XXXXXXXXX X. XXXX
--------------------------------
Xxxxxxxxx X. Xxxx
/s/ XXXXXXX XXXXXXX
--------------------------------
Xxxxxxx Xxxxxxx
ELECTRA INVESTMENT TRUST P.L.C., a
corporation organized under the laws
of England and Wales
By: /s/ XXXX X. XXXXXXX
-------------------------------
Its: Director
-------------------------------
ELECTRA ASSOCIATES, INC., a Delaware
corporation
By: X.X. XXXXX
------------------------------
Its: Director
------------------------------
The undersigned hereby executes this Agreement solely for purposes of
evidencing its agreement to be bound or subject to this First Amendment to the
extent applicable to Sections 1.3, 2.4, 2.6, 2.7, 2.8, 2.10 and 4.1, and Article
V of the Stockholders Agreement or its rights under the Provident Warrant, and
shall not be deemed to be a party to this First Amendment for other purposes.
PROVIDENT BANK, an Ohio banking corporation
By: /s/ XXXXX XXXX
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Its: Vice President
---------------------------------
SECOND AMENDMENT TO CAREER EDUCATION CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
THIS SECOND AMENDMENT TO CAREER EDUCATION CORPORATION AMENDED AND
RESTATED STOCKHOLDERS' AGREEMENT (this "Second Amendment") is made as of May 30,
1997 by and among Career Education Corporation, a Delaware corporation (the
"Corporation"), Xxxxxx Equity Capital Corporation, a Delaware corporation
("Xxxxxx"), Xxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxxxx X.
Xxxx and Xxxxxxxxx X. Xxxx (the "Laubs"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), The
Provident Bank, an Ohio banking corporation ("Provident"), Electra Investment
Trust P.L.C., a corporation organized under the laws of England and Wales, and
its successors and assigns ("EIT"), and Electra Associates, Inc., a Delaware
corporation, and its successors and assigns ("EAI," and together with EIT,
"Electra"). Xxxxxx, EIT, EAI, Larson, Dowdell, the Laubs and Xxxxxxx are
hereafter collectively referred to as the "Stockholders." Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Stockholders' Agreement (defined below).
WITNESSETH:
WHEREAS, the Corporation, the Stockholders and Provident are parties
to that certain Career Education Corporation Amended and Restated Stockholders'
Agreement dated as of July 31, 1995, as amended by that certain First Amendment
to Career Education Corporation Amended and Restated Stockholders' Agreement
dated as of February 28, 1997 (the "Stockholders' Agreement");
WHEREAS, the Stockholders are the holders of all of the issued and
outstanding capital stock and options to acquire capital stock of the
Corporation (other than certain warrants held by Provident and certain options
issued to employees of the Corporation pursuant to its 1995 Stock Option Plan
dated August 23, 1995 (as amended, the "Management Option Plan");
WHEREAS, pursuant to that certain Securities Purchase Agreement (the
"Securities Purchase Agreement") of even date herewith among the Corporation and
certain of the Stockholders (such Stockholders sometimes being referred to
herein as the "Purchasers"), the Purchasers have agreed to provide additional
equity financing to the Corporation in the amount of up to Fifteen Million
Dollars ($15,000,000) in exchange for up to 15,000 shares of the Corporation's
Series D Redeemable Preferred Stock, with a stated value of One Thousand Dollars
($1,000) per share, together with certain Warrants to purchase the Corporation's
Class E Non-Voting Common Stock, on the terms and subject to the conditions set
forth in the Securities Purchase Agreement; and
WHEREAS, in connection with the transactions contemplated by the
Securities Purchase Agreement, the parties hereto now wish to make certain
amendments to the Stockholders' Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
bound, hereby agree as follows:
1. Definition of Shares and Preferred Shares. All references in the
Stockholders' Agreement to "Shares" and/or "Preferred Shares" shall be deemed to
include (in addition to the Corporation's Class A Stock, Class B Stock, Class C
Stock, Class D Stock, Class E Stock, Series A Preferred, Series B Preferred, and
Series C Preferred), the Corporation's Series D Preferred Stock, $.01 par value
(the "Series D Preferred"), of which 7,500 shares have been issued as of the
date hereof and of which up to an additional 15,000 shares are being or may be
issued in the future pursuant to the Securities Purchase Agreement.
2. Additional Warrants. Pursuant to the Securities Purchase
Agreement, the Corporation has agreed to issue warrants (the "Additional
Warrants") to purchase up to 36,186 shares of the Corporation's Class E Stock,
which are being or may be issued in the future pursuant to the Securities
Purchase Agreement. With respect to such Additional Warrants, the Stockholders
hereby agree as follows:
(a) All references in the Stockholders' Agreement, as amended by this
Second Amendment, to the term "Additional Warrants" shall refer to the
Additional Warrants (as defined herein). All references in the Stockholders'
Agreement, as amended by this Second Amendment, to the term "Additional Warrant
Shares" shall mean the shares of Class E Stock to be issued upon exercise of the
Additional Warrants.
(b) All references in the Stockholders' Agreement to "Rights" shall be
deemed to include the Additional Warrants.
3. Waivers.
(a) Issuances of Additional Shares to Xxxxxx. Notwithstanding the
provisions of Section 1.2 of the Stockholders' Agreement, the Stockholders and
Provident hereby agree that Xxxxxx shall be permitted to purchase and the
Corporation shall offer for sale to Xxxxxx investment units consisting of Series
D Preferred and Additional Warrants in accordance with the Securities Purchase
Agreement.
(b) Additional Equity Issuances. Each of Xxxxxx, Electra and
Provident hereby acknowledges and agrees that the Additional Capital Stock
purchased or to be purchased pursuant to the Securities Purchase Agreement by
each of such parties is in proportion to the percentage of Common Shares now
owned by each of Xxxxxx, Electra and Provident, respectively, and hereby waives
its preemptive rights under Section 1.3 of the
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Stockholders' Agreement with respect to all transactions contemplated by the
Securities Purchase Agreement.
(c) Electra Securities Purchase Agreement and Warrants. Except as
otherwise specifically provided in the Securities Purchase Agreement or the
Securities (as defined in the Securities Purchase Agreement) issued pursuant
thereto, each of EIT and EAI hereby waives all of its rights to purchase or
otherwise receive Additional Capital Stock as a result of the transactions
contemplated by the Securities Purchase Agreement, including without limitation
all rights granted pursuant to (i) that certain Securities Purchase Agreement
dated July 31, 1995 between Electra and the Corporation, (ii) the Warrants; and
(iii) Series C Preferred Stock Rights granted pursuant to Exhibit A to the
Restated Certificate of Incorporation of Career Education Corporation, as
amended.
(d) Provident Warrant. Provident hereby waives all of its rights to
purchase or otherwise receive Additional Capital Stock as a result of the
transactions contemplated by the Securities Purchase Agreement, other than those
rights provided in the Provident Warrant. Furthermore, Provident and the
Corporation hereby agree that, notwithstanding any provision of the Provident
Warrant to the contrary, for each Share of Class D Stock to which Provident is
or may become entitled to pursuant to the Provident Warrant as a result of the
transactions contemplated by the Securities Purchase Agreement, the Corporation
shall issue to Provident, and Provident shall accept, in exchange therefor, one
Share of Class E Stock. In addition, Provident and the Corporation hereby agree
that, assuming the issuance of all 36,186 Additional Warrants contemplated by
the Securities Purchase Agreement, the Additional Capital Stock which Provident
will be entitled to receive upon exercise of the Provident Warrant as a result
of the issuance of such Additional Warrants is Eight Hundred Twenty-Five (825)
Shares of Class E Stock, which number of Shares will be reduced pro rata in the
event any lesser number of Additional Warrants had been issued at the time of
exercise of the Provident Warrant.
4. Issuance of Securities to the Xxxxxxx XXX. The Company and
Xxxxxxx hereby agree and acknowledge that certain Shares and Rights of which
Xxxxxxx is the beneficial owner have been and/or may be issued to First Chicago,
Custodian, Xxxxxxx X. Xxxxxxx XXX (the "Xxxxxxx XXX"). Xxxxxxx hereby represents
and warrants that he is the sole beneficiary of the Xxxxxxx XXX with power of
direction, and agrees that, in the event of the issuance of any Shares and/or
Rights to the Xxxxxxx XXX, he will cause the Xxxxxxx XXX to be bound by the
terms of the Stockholders Agreement, as amended hereby, the Securities Purchase
Agreement and all other agreements governing the rights of the Corporation's
stockholders to which Xxxxxxx is a party. Furthermore, Xxxxxxx hereby agrees to
execute and deliver, or to cause the Xxxxxxx XXX to execute and deliver, such
other documents as the Company may reasonably require in connection with any
issuance of such Shares and/or Rights to the Xxxxxxx XXX and Xxxxxxx'x
beneficial ownership thereof.
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5. References to the Stockholders' Agreement. All references to
"this Agreement" or similar language in the Stockholders' Agreement shall be
deemed to refer to the Stockholders' Agreement as amended by this Second
Amendment.
6. Stockholders' Agreement. Except as modified by this Second
Amendment, the Stockholders' Agreement shall remain in full force and effect,
and is hereby ratified and confirmed.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have set their hands and seals as
of the date first above written.
CAREER EDUCATION CORPORATION, a
Delaware corporation
By /s/ XXXX X. XXXXXX
-------------------------------
Xxxx X. Xxxxxx
Its President
XXXXXX EQUITY CAPITAL CORPORATION, a
Delaware corporation
By /s/ XXXXX XXXXX
-------------------------------
Its Vice President
/s/ XXXX X. XXXXXX
-------------------------------
Xxxx X. Xxxxxx
/s/ XXXXXX X. XXXXXXX
-------------------------------
Xxxxxx X. Xxxxxxx
/s/ XXXXXXX X. XXXX
-------------------------------
Xxxxxxx X. Xxxx
/s/ XXXXXXXXX X. XXXX
-------------------------------
Xxxxxxxxx X. Xxxx
/s/ XXXXXXX XXXXXXX
-------------------------------
Xxxxxxx Xxxxxxx
ELECTRA INVESTMENT TRUST P.L.C., a
corporation organized under the laws
of England and Wales
By A.M. VINTON
-------------------------------
Its Authorized Signatory
------------------------------
ELECTRA ASSOCIATES, INC., a Delaware
corporation
By X.X. XXXXX
-------------------------------
Its
------------------------------
The undersigned hereby executes this Agreement solely for purposes of
evidencing its agreement to be bound or subject to this Second Amendment to the
extent applicable to Sections 1.3, 2.4, 2.6, 2.7, 2.8, 2.10 and 4.1, and Article
V of the Stockholders Agreement or its rights under the Provident Warrant, and
shall not be deemed to be a party to this Second Amendment for other purposes.
PROVIDENT BANK, an Ohio banking corporation
[PROVIDENT DID NOT SIGN]
By_________________________________________
Its________________________________________
