Exhibit 99.4
Xxxxxxx Education, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
November 14, 2002
New Mountain Partners, L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
DB Capital Investors, L.P.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to (1) the Preferred Stock Purchase Agreement,
dated as of November 28, 2000 (the "Preferred Stock Purchase Agreement"), by
and between Xxxxxxx Education, Inc., a Maryland corporation (the "Company"),
New Mountain Partners, L.P. ("New Mountain") and DB Capital Investors, L.P.
("DB Capital" and, together with New Mountain, the "Selling Stockholders"),
pursuant to which, among other things, the Company issued and sold to the
Selling Stockholders an aggregate of 5,769,231 shares of the Company's Series
A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred
Stock"); (2) the Shareholders' Agreement, dated as of March 16, 2001 (the
"Shareholders' Agreement"), by and between New Mountain and DB Capital; (3)
the Registration Rights Agreement, dated May 15, 2001 (the "Registration
Rights Agreement"), by and among New Mountain, DB Capital and the Company; and
(4) the Articles Supplementary of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on May 15, 2001 (the
"Articles Supplementary"), which, among other things, set forth the powers,
rights and other terms of the Series A Preferred Stock.
At the request of the Selling Stockholders, the Company has prepared
and filed with the Securities and Exchange Commission a registration statement
on Form S-3 (the "Registration Statement") in connection with the registration
of 2,300,000 shares of the Company's common stock, par value $.01 per share
("Common Stock"), for resale by the Selling Stockholders. In connection with
the offering contemplated by the Registration Statement (including the sale of
any shares of Common Stock pursuant to the Over-allotment Option (as defined
below), the "Offering"), the Company and the Selling Stockholders intend to
enter into an underwriting agreement (the "Underwriting Agreement") with one
or more underwriters led by Credit Suisse First Boston Corporation (the
"Underwriters"). A form of the Underwriting Agreement has been provided to the
parties to this letter agreement.
The Company and the Selling Stockholders agree as follows:
1. Number of Shares to be Sold. Notwithstanding anything to the
contrary contained in the Shareholders' Agreement or the Registration Rights
Agreement, New Mountain shall be permitted to sell in the Offering 1,700,000
shares of Common Stock issuable upon conversion of shares of Series A
Preferred Stock owned by New Mountain and DB Capital shall be permitted to
sell in the Offering 300,000 shares of Common Stock issuable upon conversion
of shares of Series A Preferred Stock owned by DB Capital. Any or all of the
300,000 shares of Common Stock to be sold in the Offering pursuant to the
over-allotment option (the "Over-allotment Option") to be granted to the
Underwriters pursuant to the Underwriting Agreement shall be sold by DB
Capital.
2. Board Representation.
(a) Following completion of the Offering, pursuant to Section 10 of
the Articles Supplementary, the number of members of the Board of Directors of
the Company that the Selling Stockholders shall be entitled to elect shall be
reduced from 50% to 40% of the total members of the Board of Directors.
(b) In connection therewith, New Mountain and DB Capital hereby
acknowledge that effective upon completion of the Offering, Xxxxxxx Xxxxx will
resign from the Board of Directors of the Company and any committees of the
Board of Directors of the Company. Notwithstanding Section 3.1 of the
Shareholders' Agreement, New Mountain and DB Capital hereby agree that,
following the completion of the Offering, New Mountain, acting alone, shall be
entitled to elect all of the members of the Board of Directors of the Company
entitled to be elected by the Selling Stockholders pursuant to the Articles
Supplementary.
3. Conversion of Series A Preferred Stock.
(a) The execution by the Selling Stockholders of the Underwriting
Agreement shall (except as provided in Section 3(e) below) constitute written
notice (as required by Section 7(b) of the Articles Supplementary) to the
Company that New Mountain and DB Capital shall have elected, pursuant to
Section 7(a) of the Articles Supplementary, to convert the Applicable Firm
Number (as defined below) of shares of Series A Preferred Stock held by such
Selling Stockholder into shares of Common Stock (the "Conversion").
Certificates evidencing the 1,700,000 shares of Common Stock issuable upon
such Conversion to New Mountain and the 300,000 shares of Common Stock
issuable upon such Conversion to DB Capital shall be issued in the name of,
and shall be delivered by the Company to, the respective Selling Stockholders
against delivery pursuant to Section 3(f) below of certificate(s) representing
the Applicable Firm Number of shares of Series A Preferred Stock, at least one
business day prior to the closing (the "First Closing") occurring on the First
Closing Date (as defined in the Underwriting Agreement), such delivery to be
made at the location of such First Closing. "Applicable Firm Number" means
that number of shares of Series A Preferred Stock which, if converted into
shares of Common Stock in accordance with Section 7 of the Articles
Supplementary (taking into account all accumulated and unpaid dividends
thereon in accordance with the Articles Supplementary through the First
Closing Date), would result in the issuance upon such Conversion of 1,700,000
shares of Common Stock in the case of New Mountain and 300,000 shares of
Common Stock in the case of DB Capital. Any cash in lieu of fractional shares
of Common Stock payable upon such Conversion in accordance with the Articles
Supplementary shall be paid to New Mountain or DB Capital, as applicable. The
Company acknowledges and agrees that certificates number A-23 and A-29 for
1,618,844 shares and 285,678 shares, respectively, of Series A Preferred Stock
registered in the name of New Mountain and DB Capital Partners, Inc.,
respectively, represent, in addition to the 1,618,844 shares and 285,678
shares of Series A Preferred Stock indicated on the face of such certificates,
81,156 shares and 14,322 shares, respectively, of Series A Preferred Stock
representing accrued dividends and, accordingly, the Applicable Firm Number of
shares of Series A Preferred Stock evidenced by such certificates as of the
date hereof and as of the First Closing Date equals 1,700,000 in the case of
New Mountain and 300,000 in the case of DB Capital.
(b) The delivery by the Underwriters to the Company and DB Capital of
each notice referred to in Section 3 of the Underwriting Agreement of the
exercise of the Over-allotment Option shall (except as provided in Section
3(e) below) constitute a written notice (as required by Section 7(b) of the
Articles Supplementary) to the Company that DB Capital shall have elected,
pursuant to Section 7(a) of the Articles Supplementary, to convert the
Applicable Option Number (as defined below) of shares of Series A Preferred
Stock held by DB Capital into the number of shares of Common Stock in respect
of which the Over-allotment Option is exercised (the "Option Conversion").
Certificate(s) evidencing such number of shares of Common Stock issuable upon
such Option Conversion to DB Capital shall be issued in the name of, and shall
be delivered by the Company to, DB Capital against delivery pursuant to
Section 3(f) below of certificate(s) representing the Applicable Option Number
of shares of Series A Preferred Stock, at least one business day prior to the
closing (the "Option Closing") occurring on the applicable Optional Closing
Date (as defined in the Underwriting Agreement), such delivery to be made at
the location of such Option Closing. "Applicable Option Number" means that
number of shares of Series A Preferred Stock which, if converted into shares
of Common Stock in accordance with Section 7 of the Articles Supplementary
(taking into account all accumulated and unpaid dividends thereon in
accordance with the Articles Supplementary through the applicable Optional
Closing Date), would result in the issuance upon such Option Conversion of the
number of shares of Common Stock in respect of which the Over-allotment Option
is exercised. Any cash in lieu of fractional shares of Common Stock payable
upon such Optional Conversion in accordance with the Articles Supplementary
shall be paid to DB Capital.
(c) For purposes of determining the number of shares of Common Stock
issuable upon the Conversion and the Option Conversion referred to in Sections
3(a) and 3(b) above and for no other purposes, the parties hereto acknowledge
and agree that no credit shall be given for dividends accumulating on or after
October 1, 2002 and before January 1, 2003 on the shares of Series A Preferred
Stock being converted, unless the First Closing Date occurs on January 1, 2003
(or thereafter), and that full credit shall be given for all dividends
accumulating through but excluding October 1, 2002 on the shares of Series A
Preferred Stock being converted.
(d) The Company hereby waives any requirement that the Company
receive any additional formal written Conversion Notice (as defined in Section
7(b) of the Articles Supplementary) from the Selling Stockholders with respect
to the shares of Series A Preferred Stock to be converted into shares of
Common Stock as contemplated by paragraphs (a) and (b) above.
(e) In accordance with the Articles Supplementary, the Conversion
Date (as defined in Section 7(b) of the Articles Supplementary) with respect
to the Applicable Firm Number of shares of Series A Preferred Stock and the
Applicable Option Number of shares of Series A Preferred Stock shall be the
date of the notice provided pursuant to paragraphs (a) and (b) above, as
applicable; provided, however, that the Conversion and the Option Conversion
shall occur if and only if the First Closing and the Option Closing,
respectively, occur; and provided, further, that if the First Closing does not
occur by December 31, 2002, no notice of conversion by the Selling
Stockholders shall be deemed to have been given to the Company and no
conversion of such shares of Series A Preferred Stock shall occur or be deemed
to have occurred by reason of this letter agreement, and in which case, the
Company shall return the certificates evidencing the shares of Series A
Preferred Stock referred to in Section 3(f) below to New Mountain and DB
Capital, as applicable, not later than the earlier of the date of termination
of the Underwriting Agreement or December 31, 2002.
(f) At least one business day prior to the First Closing, each of New
Mountain and DB Capital shall surrender to the Company at the location of the
First Closing certificate(s) evidencing at least their respective Applicable
Firm Number of shares of Series A Preferred Stock, duly endorsed and free and
clear of all liens and encumbrances (other than encumbrances that, pursuant to
Section 4 below, shall cease upon the sale of the shares of Common Stock in
the Offering), as provided in Section 7(b) of the Articles Supplementary. At
least one business day prior to each Option Closing, DB Capital shall
surrender to the Company at the location of the Option Closing certificate(s)
evidencing at least the Applicable Option Number of shares of Series A
Preferred Stock, duly endorsed and free and clear of all liens and
encumbrances (other than encumbrances that, pursuant to Section 4 below, shall
cease upon the sale of the shares of Common Stock in the Offering), as
provided in Section 7(b) of the Article Supplementary.
(g) If any of the certificates evidencing the shares of Series A
Preferred Stock surrendered in accordance with paragraph (f) above evidence a
number of shares of Series A Preferred Stock greater than the Applicable Firm
Number or the Applicable Option Number being converted, the Company shall
issue and deliver to the applicable Selling Stockholder at the First Closing
and/or the Option Closing a certificate or certificates evidencing the number
of shares of Series A Preferred Stock evidenced by such surrendered
certificates that shall not have been converted into shares of Common Stock.
4. Consent to Transfers. To the extent, if any, that the consent of
either Selling Stockholder to the conversion of shares of Series A Preferred
Stock as contemplated by Section 3 hereof and/or the sale in the Offering of
the shares of Common Stock issuable upon such conversion is required under the
Company's articles of incorporation or bylaws, Maryland law, the Preferred
Stock Purchase Agreement, the Shareholders' Agreement or otherwise, each of
the Selling Stockholders hereby grants its consent to such conversion and
subsequent sale.
5. Applicable Law; Amendments; Counterparts; Signatory Authority.
(a) The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this letter
agreement, without regard to the application of principles of conflicts of
law.
(b) This letter agreement may not be amended or modified except by a
writing executed by all of the parties hereto, except that the terms and
provisions of the last sentence of Section 2(b) hereof may be amended without
the consent of the Company after the 30th day following the First Closing
Date; consent of the Company to any amendment or modification prior to such
date shall not be unreasonably withheld.
(c) This letter agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same letter agreement.
(d) New Mountain hereby represents and warrants that Xxxxxx X.
Xxxxxxx, the sole Member of New Mountain GP, LLC, which is the general partner
of New Mountain Investments, L.P., which is the general partner of New
Mountain, is duly authorized to sign all stock powers and/or stock
certificates on behalf of New Mountain to effect the sale to the Underwriters
of the shares of Common Stock in connection with the Offering, and New
Mountain hereby agrees to indemnify and hold harmless the Company from and
against any loss arising out of any breach of this representation and
warranty. DB Capital hereby represents and warrants that Xxxxxxx Xxxxx, a
Managing Director of DB Capital Partners, Inc., which is the general partner
of DB Capital Partners, L.P., which is the general partner of DB Capital, is
duly authorized to sign all stock powers and/or stock certificates on behalf
of DB Capital to effect the sale to the Underwriters of the shares of Common
Stock in connection with the Offering, and DB Capital hereby agrees to
indemnify and hold harmless the Company from and against any loss arising out
of any breach of this representation and warranty.
6. Indemnification. The parties hereto acknowledge and agree that the
indemnification and contribution provisions contained in Section 6 of the
Registration Rights Agreement apply to the Offering.
7. Termination. This letter agreement shall terminate, shall be
deemed to be void ab initio and shall be of no further force or effect (a) on
the date of termination of the Underwriting Agreement or (b) if the First
Closing Date does not occur on or prior to December 31, 2002.
Very truly yours,
XXXXXXX EDUCATION, INC.
By: /s/ Xxxxxx X. XxXxxxxx
-----------------------------
Name: Xxxxxx X. XxXxxxxx
Title: Senior Vice President
and General Counsel
Confirmed and agreed as of the
date first written above:
NEW MOUNTAIN PARTNERS, L.P.
By: New Mountain Investments, L.P., its general partner
By: New Mountain GP, LLC, its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Member
DB CAPITAL INVESTORS, L.P.
By: DB Capital Partners, L.P., its general partner
By: DB Capital Partners, Inc., its general partner
By: /s/ Xxxxxxx Xxxxx
-----------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
