<PAGE>
As filed with the Securities and Exchange Commission on March 29, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
the Securities Act of 1933
---------------
CAREER EDUCATION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3932190
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 West Higgins Road, Suite 790, Hoffman Estates, Illinois, 60195, (847) 781-
3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
John M. Larson
Chairman, President and Chief Executive Officer
2800 West Higgins Road, Suite 790, Hoffman Estates, Illinois, 60195, (847) 781-
3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Lawrence D. Levin, Esq. Dennis V. Osimitz, Esq.
Katten Muchin Zavis Sidley & Austin
525 West Monroe Street, Suite 1600 Bank One Plaza
Chicago, Illinois 60661-3693 10 South Dearborn
(312) 902-5200 Chicago, Illinois 60603
(312) 853-7000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering offering registration
registered registered(1) price(2) price(2) fee
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par 2,415,000 $35.00 per
value.................. shares share $84,525,000 $22,315
</TABLE>
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(1) Includes 315,000 shares to be offered upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of Regulation C under the Securities Act of 1933, as
amended.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 29, 2000
2,100,000 Shares
[LOGO OF CAREER EDUCATION CORPORATION]
Common Stock
--------
We are selling 1,500,000 shares of common stock and the selling stockholders
listed under "Selling Stockholders" are selling 600,000 shares of common stock.
We will not receive any of the proceeds from the shares of common stock sold by
the selling stockholders.
The Underwriters have an option to purchase a maximum of 315,000 additional
shares to cover over-allotments of shares.
Our common stock is traded on The Nasdaq National Market under the symbol
"CECO." On March 27, 2000, the last reported sale price of our common stock was
$35.50.
Investing in the common stock involves certain risks. See "Risk Factors" on
page 7.
<TABLE>
<CAPTION>
Underwriting Proceeds to Proceeds to
Price to Discounts and Career Education Selling
Public Commissions Corporation Stockholders
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Per Share........... $ $ $ $
Total............... $ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Chase H&Q
Salomon Smith Barney
The date of this prospectus is , 2000
<PAGE>
[Inside Front Cover]
[LOGO] CAREER EDUCATION CORPORATION
[Four photographs, each representing one of the Company's four principal
curricula listed on the right side of the page]
TURNING
DREAMS
INTO
FUTURES
VISUAL COMMUNICATION
AND DESIGN TECHNOLOGIES
INFORMATION TECHNOLOGY
BUSINESS STUDIES
CULINARY ARTS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where you can find more Information. 1
Prospectus Summary.................. 2
Risk Factors........................ 7
Use of Proceeds..................... 13
Dividend Policy..................... 13
Price Range of Common Stock......... 14
Capitalization...................... 15
Business............................ 16
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management............................................................ 28
Selling Stockholders.................................................. 32
Description of Capital Stock.......................................... 33
Shares Eligible for Future Sale....................................... 35
Underwriting.......................................................... 36
Notice to Canadian Residents.......................................... 38
Legal Matters......................................................... 39
Experts............................................................... 39
</TABLE>
----------------
Notes to Readers of this Prospectus
You should keep in mind the following points as you read this prospectus:
. The term "school" means a campus or group of campuses known by a single
brand name, such as The Katharine Gibbs Schools or the Al Collins Graphic
Design School. The term "campus" means a single location of any school,
such as the New York campus of The Katharine Gibbs Schools or the Al
Collins Graphic Design School in Tempe, Arizona. The term "institution"
means a main campus and its additional locations, as such are defined
under regulations of the U.S. Department of Education.
. This offering is for 2,100,000 shares; however, the underwriters have a
30-day option to purchase up to 315,000 additional shares to cover over-
allotments. Some of the disclosures in this prospectus would be different
if the underwriters exercise the option. Unless we tell you otherwise,
the information in this prospectus assumes that the underwriters will not
exercise the option.
----------------
Special Note Regarding Forward-Looking Statements
This prospectus contains "forward-looking" statements that have been made
pursuant to the Private Securities Litigation Reform Act of 1995 which reflect
our expectations regarding our future growth, results of operations,
performance and business prospects and opportunities. Wherever possible, words
such as "anticipate," "believe," "plan," "expect" and similar expressions have
been used to identify these forward-looking statements. These statements
reflect our current beliefs and are based on information currently available to
us. Accordingly, these statements are subject to risks and uncertainties,
including those listed under "Risk Factors," which could cause our actual
growth, results, performance and business prospects and opportunities to differ
from those expressed in, or implied by, these statements. Except as otherwise
required by federal securities law, we are not obligated to update or revise
these forward-looking statements to reflect new events or circumstances.
----------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
i
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC.
This prospectus does not contain all of the information contained in the
registration statement and all of the exhibits and schedules thereto. For
further information about us, please see the complete registration statement.
Summaries of agreements or other documents in this prospectus are not
necessarily complete. Please refer to the exhibits to the registration
statement for complete copies of such documents.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. The
Exchange Act file number for our SEC filings is 0-23245. You may read and copy
any document we file at the following SEC public reference rooms:
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Room 1024 New York, NY 10048 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may also inspect and copy our SEC filings, the complete registration
statement and other information at the offices of The Nasdaq Stock Market
located at 1735 K Street, N.W., Washington, D.C. 20006-1500.
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
This prospectus is part of a registration statement we filed with the SEC.
The SEC allows us to "incorporate by reference" certain documents we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information in the documents incorporated by
reference is considered to be part of this prospectus, and information in
documents that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act until this offering is terminated:
1. The Annual Report on Form 10-K for our year ended December 31, 1999;
and
2. The description of our common stock contained in our Registration
Statement on Form 8-A which we filed on October 21, 1997.
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus, including any beneficial
owner of our common stock. To request a copy of any or all of these documents,
you should write or telephone us at the following address and telephone number:
Career Education Corporation
Attn: Patrick K. Pesch
Chief Financial Officer
2800 West Higgins Road, Suite 790
Hoffman Estates, Illinois, 60195
Telephone: (847) 781-3600
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It may
not contain all of the information that is important to you. To understand this
offering fully, you should read the entire prospectus carefully, including the
risk factors and the financial statements.
Career Education Corporation
We are a provider of private, for-profit postsecondary education in North
America, with approximately 23,400 students enrolled as of February 1, 2000. We
operate 27 campuses located in 15 states and two Canadian provinces. Our
schools enjoy long operating histories and offer a variety of bachelor's
degree, associate's degree and non-degree programs in career-oriented
disciplines within our core curricula of:
. visual communication and design technologies
. information technology
. business studies
. culinary arts
We have experienced significant growth both internally and through
acquisitions with our net revenue increasing from $19.4 million in 1995 to
$216.8 million in 1999. In addition, our net income increased from $0.1 million
in 1995 to $10.9 million in 1999.
We were founded in January 1994 by John M. Larson, our Chairman, President
and Chief Executive Officer, who has over 25 years of experience in the career-
oriented education industry. We were formed to capitalize on opportunities in
the large and highly fragmented postsecondary school industry. Since our
inception, we have completed 17 acquisitions. We have acquired schools that we
believe possess strong curricula, leading reputations and broad marketability
but that have been undermanaged from a marketing and financial standpoint. We
seek to apply our expertise in operations, marketing and curricula development,
as well as our financial strength, to improve the performance of these schools.
Our Acquisition History
<TABLE>
<CAPTION>
Number of Year Date
School Campuses Founded Acquired
- ------ --------- ------- --------
<S> <C> <C> <C>
Al Collins Graphic Design School..................... 1 1978 1/94
Brooks College....................................... 1 1970 6/94
Allentown Business School............................ 1 1869 7/95
Brown Institute...................................... 1 1946 7/95
Western Culinary Institute........................... 1 1983 10/96
School of Computer Technology........................ 2 1967 2/97
The Katharine Gibbs Schools.......................... 7 1911 5/97
International Academy of Merchandising & Design...... 2 1977 6/97
International Academy of Design...................... 2 1983 6/97
California School of Culinary Arts................... 1 1994 3/98
Scottsdale Culinary Institute........................ 1 1986 7/98
Harrington Institute of Interior Design.............. 1 1931 1/99
McIntosh College..................................... 1 1896 3/99
Briarcliffe College.................................. 2 1966 4/99
Brooks Institute of Photography...................... 1 1945 6/99
Washington Business School........................... 1 1950 12/99
The Cooking and Hospitality Institute of Chicago..... 1 1983 2/00
</TABLE>
2
<PAGE>
Our Business and Operating Strategy
Our business and operating strategy has enabled us to achieve significant
improvements in the performance of our schools. We believe this strategy will
allow us to continue to capitalize on the favorable trends which are driving
demand for career-oriented education. These trends include greater
technological skills required for entry-level jobs, increasing numbers of high
school graduates and a greater recognition of the value of higher education.
The key elements of our strategy are:
. Focusing on Core Curricula. Our schools offer educational programs
principally in four career-related fields of study identified by us as
areas with highly interested and motivated students, strong entry-level
employment opportunities and ongoing career and salary advancement
potential.
. Adapting and Expanding Educational Programs. Each of our schools strives
to meet the changing needs of its students and the employment markets by
regularly refining and adapting its existing educational programs,
selectively duplicating successful programs offered elsewhere in our
school system and introducing entirely new programs of study.
. Investing for Future Growth. We make substantial investments in our
infrastructure to prepare for continued growth. We devote particular
attention to attracting and retaining both corporate and campus-level
management, and we focus on employee development to facilitate internal
promotions. Our investments in facilities and classroom technologies help
us attract and retain students and prepare them for the increasing
technical demands of the workplace.
. Emphasizing School Management Autonomy and Accountability. We provide
significant operating autonomy and appropriate performance-based
incentives to our campus-level managers. We believe these policies create
an important sense of personal responsibility for achieving campus
performance objectives and provide a significant advantage in recruiting
and retaining highly-motivated, entrepreneurial individuals.
. Direct Response Marketing. We seek to increase school enrollment and
profitability through intensive local, regional and national direct
response marketing programs specifically crafted for each school to
maximize its market penetration. We also use the Internet to attract
potential students and believe this medium will be an increasingly
important marketing tool.
. Improving Student Retention. We focus substantial attention on student
retention, as modest improvements in student retention can result in
meaningful increases in school revenue and profitability. We strive to
improve retention by treating students as valued customers.
. Emphasizing Employment of Graduates. We devote significant resources to
graduate placement efforts because we believe that maintaining high
employment rates for graduates of our schools enhances the overall
reputation of the schools and their ability to attract new students.
Approximately 91.8% of our students that graduated during the academic
year ended June 30, 1999, obtained employment related to their program of
study within six months of graduation.
Our Growth Strategy
We believe we can continue to achieve superior long-term growth in revenue
and profitability through:
. Expanding Existing Operations. We intend to achieve continued growth at
our existing campuses by executing our business and operating strategy.
. Acquiring Additional Schools. We continually evaluate opportunities to
acquire schools in the U.S. and Canada that have leading reputations,
broad marketability and demonstrated compliance with regulatory
requirements and accreditation standards. We may also acquire operations
outside North America where we believe significant opportunities exist.
We seek to acquire schools which we believe will benefit from the
implementation of our business and operating strategy.
3
<PAGE>
. Establishing New Campuses. We expect to open new campuses, most likely as
additional locations of existing institutions, to capitalize on new
markets or geographic regions that exhibit strong enrollment potential or
the opportunity to establish a successful school operation in one of our
core curricula areas.
. Entering New Service Areas. We plan to develop new services which we
believe offer strong long-term growth potential. In 1999, we introduced
our first distance learning program, which offers educational products
and services through the Internet and other distribution channels. We
also plan to expand our contract training operations, which provide
customized training on a contract basis for business and government
organizations.
. Recruiting International Students. We recently launched marketing efforts
in selected countries to increase international student enrollment at our
schools.
Our Address
We were incorporated in Delaware on January 5, 1994. Our principal executive
offices are located at 2800 West Higgins Road, Suite 790, Hoffman Estates,
Illinois 60195 and our telephone number is (847) 781-3600. Our web site is
located at http://www.careered.com. Web sites for our schools can be accessed
through hyperlinks at our web site. Information contained in our web site or in
our schools' web sites is not a part of this prospectus.
The Offering
<TABLE>
<S> <C>
Common stock offered............... 1,500,000 shares by us
600,000 shares by the selling
stockholders
Common stock outstanding after the
offering.......................... 9,520,182 shares
Use of proceeds.................... We will use the net proceeds to us from the
sale of the shares offered by us in this
offering for repayment of debt and general
corporate purposes. We will not receive any
proceeds from the sale of shares by the
selling stockholders.
Nasdaq National Market symbol...... CECO
</TABLE>
Common stock outstanding after the offering excludes 1,143,475 shares of common
stock issuable upon the exercise of stock options outstanding at March 15,
2000, other than those options being exercised by selling stockholders in
connection with the offering, at a weighted average exercise price of $23.98
per share and 503,585 shares reserved for issuance under our stock plans.
Recent Development
On December 6, 1999, we entered into an agreement whereby we will acquire
California Culinary Academy, Inc. As of December 31, 1999, the Academy had a
student population of approximately 650 at its core campus in San Francisco.
The acquisition is subject to a number of conditions, but is expected to close
on April 3, 2000. We anticipate that the purchase price will be approximately
$20 million. We will also assume approximately $3 million of debt of the
Academy.
4
<PAGE>
Summary Consolidated Financial And Other Data
You should read the consolidated financial and other operating data below in
conjunction with the consolidated financial statements and notes thereto which
are incorporated by reference into this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1998 1999
-------- -------- --------
(Dollars in thousands,
except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue:
Tuition and registration fees, net.............. $ 74,842 $132,926 $199,057
Other, net...................................... 7,756 11,306 17,747
-------- -------- --------
Total net revenue............................. 82,598 144,232 216,804
Depreciation and amortization (1)................ 8,121 12,163 14,557
Compensation expense related to the initial
public offering................................. -- 1,961 --
Income from operations........................... 2,315 9,101 20,351
Net income (loss) (2)............................ $ (880) $ 4,296 $ 10,943
======== ======== ========
Net income (loss) attributable to common
stockholders (3)................................ $ (9,307) $ 1,869 $ 10,943
======== ======== ========
Net income (loss) per diluted share attributable
to common stockholders (3)...................... $ (12.12) $ 0.27 $ 1.38
======== ======== ========
Other Data:
EBITDA (4)....................................... $ 10,436 $ 21,264 $ 34,908
EBITDA margin (4)................................ 12.6% 14.7% 16.1%
Cash flow provided by (used in):
Operating activities............................ $ (194) $ 22,227 $ 34,191
Investing activities............................ (45,214) (12,356) (55,859)
Financing activities............................ 56,659 (4,897) 42,711
Capital expenditures, net........................ 3,822 6,383 12,169
Student population (5)........................... 13,000 15,900 22,500
Number of campuses (6)........................... 18 20 26
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------------
Pro Forma
Actual As Adjusted(7)
-------- --------------
(Dollars in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash.................................................... $ 44,745 $
Working capital......................................... 25,787
Total assets............................................ 210,524
Total debt.............................................. 49,939
Total stockholders' investment.......................... 113,681
</TABLE>
- --------
(1) Includes depreciation of property and equipment, amortization of goodwill
and covenants not-to-compete and excludes the amortization of debt discount
and deferred financing costs.
(2) For the year ended December 31, 1997, net loss includes an extraordinary
loss of $418, which is net of a $233 tax benefit, resulting from the early
extinguishment of debt. For the year ended December 31, 1998, net income
includes a charge of $205, net of taxes of $149, related to the cumulative
effect of a change in accounting principle, in connection with the adoption
of Statement of Position 98-5 "Reporting on the Costs of Start-up
Activities."
(3) Includes reductions to net income (loss) for dividends paid or added to the
redemption value of preferred stock and the accretion to redemption value
of preferred stock and warrants during 1997 and 1998.
(4) EBITDA equals earnings before interest expense, taxes, depreciation and
amortization, including amortization of debt discount and deferred
financing costs. EBITDA margin equals EBITDA as a
5
<PAGE>
percentage of net revenue. We have included information concerning EBITDA
and EBITDA margin because we believe they allow for a more complete analysis
of our results of operations. EBITDA and EBITDA margin should not be
considered as alternatives to, nor is there any implication that they are
more meaningful than, any measure of performance or liquidity as promulgated
under generally accepted accounting principles.
(5) Represents the approximate total number of students attending our schools
as of October 31.
(6) Represents the total number of campuses operated by us as of the end of the
period.
(7) Represents our pro forma capitalization as of December 31, 1999 giving
effect to our acquisition of The Cooking and Hospitality Institute of
Chicago and our acquisition of the California Culinary Academy, which we
expect to occur on April 3, 2000, and as adjusted for our sale of 1,500,000
shares of common stock in this offering and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds."
6
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, and all of the other information included in this
prospectus, before you decide whether to purchase shares of our common stock.
Any of the following risks could materially adversely affect our business,
results of operations or financial condition and could result in a complete
loss of your investment.
Failure to Comply with Extensive Regulations Could Have a Material Adverse
Effect on our Business
Failure of our U.S. schools to comply with extensive regulations could result
in financial penalties.
We derive a majority of our revenue from U.S. federal student financial aid
programs. To participate in such programs, a U.S. institution must obtain and
maintain authorization by the appropriate state agencies, accreditation by an
accrediting agency recognized by the Department of Education, and certification
by the Department of Education. As a result, our U.S. schools are subject to
extensive regulation by these agencies. These regulations cover virtually all
phases of our operations, including our educational programs, facilities,
instructional and administrative staff, administrative procedures, financial
operations and financial strength. They also affect our ability to acquire or
open additional schools or change our corporate structure. These regulatory
agencies periodically revise their requirements and modify their
interpretations of existing requirements.
If one of our schools were to violate any of these regulatory requirements,
we could suffer a financial penalty. The regulatory agencies could also place
limitations on or terminate our schools' operations, including our receipt of
federal student financial aid funds, which could have a material adverse effect
on our business, results of operations or financial condition. We believe that
we substantially comply with the requirements of these regulatory agencies, but
we cannot predict with certainty how all of these requirements will be applied,
or whether we will be able to comply with all of the requirements in the
future. Some of the most significant regulatory requirements and risks that
apply to our U.S. schools are described in the following paragraphs. Please see
Item 1 "Business--Financial Aid and Regulation" incorporated by reference
herein from our Annual Report on Form 10-K for more detailed information on the
regulations and other requirements that apply to us.
The U.S. Congress may change the law or reduce funding for federal student
financial aid programs, which could harm our business.
The U.S. Congress regularly reviews and revises the laws governing the
federal student financial aid programs and annually determines the funding
level for each of these programs. Any action by Congress that significantly
reduces funding for the federal student financial aid programs or the ability
of our schools or students to participate in these programs could have a
material adverse effect on our business, results of operations or financial
condition. Legislative action may also increase our administrative costs and
burden and require us to modify our practices in order for our schools to
comply fully with applicable requirements, which could have a material adverse
effect on our business, results of operations or financial condition.
If we do not meet financial responsibility standards, our schools may lose
eligibility to participate in federal student financial aid programs.
To participate in the federal student financial aid programs, an institution
must either satisfy numeric standards of financial responsibility, or post a
letter of credit in favor of the Department of Education and possibly accept
other conditions on its participation in the federal student financial aid
programs. Currently, none of our schools is required to post a letter of credit
in favor of the Department of Education or accept other conditions on its
participation in the federal student financial aid programs due to failure to
satisfy the numeric standards of financial responsibility. However, four of our
institutions have outstanding letters of credit in favor of the Department of
Education due to late student refunds. We cannot assure you that we or our
institutions will satisfy the numeric standards in the future.
7
<PAGE>
Our schools may lose eligibility to participate in federal student financial
aid programs if their student loan default rates are too high.
An institution may lose its eligibility to participate in some or all of
the federal student financial aid programs, if defaults by its students on
their federal student loans exceed specified rates. If any of our
institutions, depending on its size, loses eligibility to participate in
federal student financial aid programs because of high student loan default
rates, it could have a material adverse effect on our business, results of
operations or financial condition.
Our schools may lose eligibility to participate in federal student financial
aid programs if the percentage of their revenue derived from those programs
is too high.
A proprietary institution loses its eligibility to participate in the
federal student financial aid programs if it derives more than 90% of its
revenue from these programs in any fiscal year. If any of our institutions,
depending on its size, loses eligibility to participate in federal student
financial aid programs, it could have a material adverse effect on our
business, results of operations or financial condition.
If regulators do not approve our acquisitions, our ability to participate in
federal student financial aid programs would be limited.
When we acquire an institution, the Department of Education and most
applicable state agencies and accrediting agencies consider that a change of
ownership or control of the institution has occurred. A change of ownership or
control of an institution under the standards of the Department of Education
may result in the temporary suspension of the institution's participation in
the federal student financial aid programs until the Department of Education
issues a temporary certification document. If we were unable to reestablish
the state authorization, accreditation or Department of Education
certification of an institution we acquired, depending on the size of that
acquisition, that failure could have a material adverse effect on our
business, results of operations or financial condition.
If regulators do not approve transactions involving a change of control of us
or our schools, we may lose our ability to participate in federal student
financial aid programs.
If we or any of our institutions experience a change of control under the
standards of applicable state agencies or accrediting agencies or the
Department of Education, we or the affected institutions must seek the
approval of the relevant agencies. The failure of any of our institutions to
reestablish its state authorization, accreditation or Department of Education
certification would result in a suspension or loss of federal student
financial aid funding, which could have a material adverse effect on our
business, results of operations or financial condition.
We have been advised by the Department of Education that this offering will
not be a change of control under its standards. We believe that this offering
will not be considered a change of control by any state agency or applicable
accrediting agency, based on our review of their standards and our familiarity
with their procedures.
The Department of Education, applicable state education agencies or
applicable accrediting agencies may consider other transactions or events to
constitute a change of control. Some of these transactions or events, such as
a significant acquisition or disposition of our common stock, may be beyond
our control.
If our schools do not maintain their state authorizations and accreditations,
they may not operate or participate in federal student financial aid
programs.
An institution that grants degrees, diplomas or certificates must be
authorized by the relevant agencies of the state in which it is located and,
in some cases, other states. Requirements for authorization vary substantially
among the states. State authorization and accreditation by an accrediting
agency recognized by the Department of Education are also required for an
institution to participate in the federal student financial aid programs. Loss
of state authorization or accreditation by any of our campuses, depending on
the size of the campus, could have a material adverse effect on our business,
results of operations or financial condition.
8
<PAGE>
Failure to comply with extensive Canadian regulations could affect the ability
of our Canadian schools to participate in Canadian financial aid programs.
Approximately 67% of students enrolled at our Canadian schools receive
assistance from Canadian governmental financial aid programs. Depending on
their province of residence, Canadian students may receive loans under the
Canada Student Loan Program, the Ontario Student Loans Plan and the Quebec
Loans and Bursaries Program.
Our Canadian schools must meet the eligibility standards to administer these
programs and must comply with extensive statutes, regulations and other
requirements. Our International Academy of Design school in Toronto will be
required to share the cost of student loan defaults if defaults by its students
on their Ontario Student Assistance Plan loans exceed specified rates. Our
Toronto school currently does not have a default rate that exceeds the
applicable threshold. If our Canadian schools cannot meet these and other
eligibility standards or fail to comply with applicable requirements, it could
have a material adverse effect on our business, results of operations or
financial condition.
The Canadian, Ontario and Quebec governments continuously review the
legislative, regulatory and other requirements relating to student financial
assistance programs due to political and budgetary pressures. Although we do
not anticipate a significant reduction in the funding for these programs, any
change that significantly reduces funding or the ability of our schools to
participate in these programs could have a material adverse effect on our
business, results of operations or financial condition.
Risks Specific to our Business Could Have a Material Adverse Effect on Us
Failure to effectively manage our growth could harm our business.
We have grown rapidly since our incorporation in January 1994. Our rapid
growth could place a strain on our management, operations, employees or
resources. We cannot assure you that we will be able to maintain or accelerate
our current growth rate, effectively manage our expanding operations or achieve
planned growth on a timely or profitable basis. If we are unable to manage our
growth effectively, our business, results of operations or financial condition
could be materially adversely affected.
If we cannot effectively pursue and integrate acquired schools, it could harm
our business.
We expect to continue to rely on acquisitions as a key component of our
growth. From time to time, we engage in, and we are currently engaged in,
evaluations of, and discussions with, possible acquisition candidates,
including the one discussed under "Prospectus Summary--Recent Development." We
cannot assure you that we will continue to be able to identify suitable
acquisition opportunities or to acquire any such schools on favorable terms.
Furthermore, we cannot assure you that any acquired schools can be successfully
integrated into our operations or be operated profitably. Acquisitions involve
a number of special risks and challenges, including the diversion of
management's attention, assimilation of the operations and personnel of
acquired schools, adverse short-term effects on reported operating results,
possible loss of key employees and difficulty of presenting a unified corporate
image. Continued growth through acquisition may also subject us to
unanticipated business or regulatory uncertainties or liabilities. We cannot
assure you that any potential acquisition will enhance our business and will
not ultimately have a material adverse effect on us.
When we acquire an existing school, we typically allocate a significant
portion of the purchase price to fixed assets, curriculum, goodwill and
intangibles, such as covenants not-to-compete. For our acquisitions to date, we
have amortized goodwill over a period of 40 years and intangible assets over
periods of three to five years. In addition, our acquisition of a school in the
U.S. would be a change of ownership of that school, which may result in the
temporary suspension of that school's participation in the federal student
financial aid programs until it obtains the Department of Education's approval.
If we fail to manage our acquisition program effectively, it could have a
material adverse effect on our business, results of operations or financial
condition.
9
<PAGE>
Opening new schools and adding new services could be difficult for us.
To date, we have added new schools only through acquisitions. However, in
the future we expect to open and operate new schools, most likely as additional
locations of existing schools, but possibly also as separate, freestanding
institutions. Establishing new schools poses unique challenges and would
require us to make investments in management, capital expenditures, marketing
expenses and other resources different, and in some cases greater, than those
required with respect to the operation of acquired schools. To open a new
school, we would be required to obtain appropriate state or provincial and
accrediting agency approvals. In addition, to be eligible for federal student
financial aid programs, such a school would have to be certified by the
Department of Education. We have never established a new school, and we cannot
assure you that we will be able to do so successfully or profitably.
While we expect that our career-oriented school business will continue to
provide the substantial majority of our revenue in the near term, we plan to
expand our contract training business, currently offered to a limited extent by
a few of our schools, and may also decide to provide other education-related
services. We cannot be certain which, if any, new service areas we will decide
to enter or whether we will succeed in markets beyond our current career-
oriented school business.
Our failure to effectively manage the operations of newly established
schools or service areas, or any diversion of management's attention from our
core career-oriented school operating activities, could have a material adverse
effect on our business, results of operations or financial condition.
Failure to keep pace with changing market needs and technology could harm our
business.
Prospective employers of our graduates increasingly demand that their entry-
level employees possess appropriate technological skills. Educational programs
at our schools, particularly programs in visual communications and information
technology, must keep pace with these evolving requirements. If we cannot
respond to changes in industry requirements, it could have a material adverse
effect on our business, results of operations or financial condition.
Competitors with greater resources could harm our business.
The postsecondary education market is highly competitive. Our schools
compete with traditional public and private two-year and four-year colleges and
universities and other proprietary schools, including those that offer distance
learning programs. Some public and private colleges and universities, as well
as other private career-oriented schools, may offer programs similar to those
of our schools. Although tuition at private nonprofit institutions is, on
average, higher than tuition at our schools, some public institutions are able
to charge lower tuition than our schools, due in part to government subsidies,
government and foundation grants, tax-deductible contributions and other
financial sources not available to proprietary schools. Some of our competitors
in both the public and private sectors have substantially greater financial and
other resources than us.
Expansion outside of the U.S. and Canada could adversely affect our business.
Although we currently operate only in the U.S. and Canada, we intend to
explore opportunities outside those markets. There may be difficulties and
complexities associated with our expansion into international markets, and we
cannot assure you that our strategies will succeed beyond the U.S. and Canada.
International operations present inherent risks, including currency
fluctuations, varying political and economic conditions, unanticipated changes
in regulation, trade barriers, staffing and management problems and adverse tax
consequences. Also, in expanding internationally, we would be required to
comply with different, and potentially more onerous, regulatory requirements.
We cannot assure you that such factors will not have a material adverse effect
on our business, results of operations or financial condition in the future.
10
<PAGE>
Failure to obtain additional capital in the future could reduce our ability
to grow.
We believe that funds from operations, cash, investments and borrowings
under our $90 million credit facility pursuant to our credit agreement will be
adequate to fund our current operating plans for the foreseeable future.
However, we may need additional debt or equity financing in order to carry out
our strategy of growth through acquisitions. We may also need additional debt
or equity financing in the future to carry out our growth strategy. The amount
and timing of such additional financing will vary principally depending on the
timing and size of acquisitions and the sellers' willingness to provide
financing themselves. To the extent that we require additional financing in
the future and are unable to obtain such additional financing, we may not be
able to fully implement our growth strategy.
Our credit agreement limits our ability to take various actions.
Our credit agreement limits our ability to take various actions, including
paying dividends, disposing of assets and incurring additional indebtedness.
Accordingly, we may be restricted from taking actions which management
believes would be desirable and in the best interests of us and our
stockholders. The credit agreement also requires us to maintain specified
financial ratios and satisfy specified financial tests. We were in compliance
with all ratios and financial tests as of December 31, 1999, and believe that
we remain in compliance. However, a breach of any covenants contained in the
credit agreement could result in an event of default under that agreement and
allow the lenders to accelerate the indebtedness, which could have a material
adverse effect on our business, results of operations or financial condition.
The loss of our key personnel, including John M. Larson and Patrick K. Pesch,
could harm our business.
Our success to date has depended, and will continue to depend, largely on
the skills and efforts of John M. Larson, our Chairman of the Board, President
and Chief Executive Officer, Patrick K. Pesch, our Senior Vice President and
Chief Financial Officer, and our other key personnel. Our success also
depends, in large part, upon our ability to attract and retain highly
qualified faculty, school presidents and administrators and corporate
management. Due to the nature of our business, we may have difficulty locating
and hiring qualified personnel, and retaining such personnel once hired. None
of our employees is subject to an employment or noncompetition agreement other
than Mr. Larson. We do not maintain life insurance on any of our employees.
The loss of the services of any of our key personnel, or our failure to
attract and retain other qualified and experienced personnel on acceptable
terms, could have a material adverse effect on our business, results of
operations or financial condition.
Failure to be Year 2000 compliant could harm our business.
Most companies face potentially serious problems because many information
technology hardware and software systems and non-IT systems containing
embedded technology may not properly recognize calendar dates beginning in the
Year 2000. Although January 1, 2000 has occurred and we did not experience any
disruptions in our business, our IT systems could be impaired or cease to
operate due to the Year 2000 problem. Additionally, we rely on services
provided by third parties, including the Department of Education, state
education agencies, accrediting agencies, guaranty agencies and student loan
lenders. Any Year 2000 problems experienced by us or any of these third
parties could harm our business. We do not believe that the cost to remedy any
future Year 2000 problems will have a material adverse effect on our business,
results of operations or financial condition. We cannot assure you, however,
that our systems or those of third parties with whom we interact will be free
of Year 2000 problems.
Anti-takeover provisions in our charter documents and Delaware law could make
an acquisition of us difficult.
Our Certificate of Incorporation, our by-laws and Delaware law contain
provisions that may delay, defer or inhibit a future acquisition of us not
approved by our board of directors. These provisions are intended to
11
<PAGE>
encourage any person interested in acquiring us to negotiate with and obtain
the approval of our board of directors in connection with the transaction. Our
Certificate of Incorporation also permits our board of directors to issue
shares of preferred stock with such voting, conversion and other rights as it
determines, without any further vote or action by our stockholders. By using
preferred stock, we could (1) discourage a proxy contest, (2) make the
acquisition of a substantial block of our common stock more difficult or (3)
limit the price investors may be willing to pay in the future for shares of our
common stock. In addition, our by-laws provide that (1) special meetings of our
stockholders may be called only by our board of directors and (2) only two of
our six Directors may be elected at such special meetings. These provisions
also could discourage bids for your shares of common stock at a premium and
could have a material adverse effect on the market price of your shares. Please
see "Description of Capital Stock" for more detailed information on these
provisions.
Risks Specific to this Offering Could Have a Material Adverse Effect on Us
The number of shares eligible for public sale after this offering could cause
our stock price to decline.
The sale of a substantial number of shares of our common stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for our common stock. As of March 15, 2000, we had approximately
7,951,182 shares of common stock outstanding. Substantially all of these shares
are eligible for immediate sale in the public market without restriction unless
such shares are held by persons who are deemed to be our "affiliates" because
they, directly or indirectly through one or more intermediaries, control, or
are controlled by, or are under common control, with us. Based on shares
outstanding as of March 15, 2000, upon completion of the offering, 1,165,940
shares will be held by our affiliates, which shares of common stock are subject
to lock-up agreements between the holders of our shares and the representatives
of the underwriters, pursuant to which the holders have agreed that they will
not, directly or indirectly, sell or otherwise dispose of any shares of common
stock, or securities or other rights convertible into or exchangeable or
exercisable for any shares of common stock, for 90 days after the date of the
offering without the prior written consent of Credit Suisse First Boston
Corporation. Upon expiration of this period, the shares subject to the lock-up
agreements will be eligible for sale under Rule 144, subject to volume and
other limitations, other than the holding period requirement, of such rule. An
additional 1,143,475 shares of common stock are issuable at various dates upon
exercise of options granted to certain of our employees, officers, directors
and consultants pursuant to stock option agreements. After the offering, our
affiliates holding 1,060,507 shares of our common stock have registration
rights. We cannot predict the effect, if any, that future sales of shares, or
the availability of shares for future sales, will have on the market price of
the common stock prevailing from time to time or on our ability to raise
capital through an offering of our equity securities.
12
<PAGE>
USE OF PROCEEDS
We expect to receive approximately $ million of net proceeds from the
sale of the 1,500,000 shares of common stock we are offering based on the
estimated price to the public of $ per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us. If the underwriters exercise in full the over-allotment
option granted to them by us, our net proceeds from the sale of the shares of
common stock offered by us in this offering, after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, are estimated to be approximately $ million.
We intend to use approximately $28.5 million of the net proceeds to repay
outstanding revolving credit borrowings under our credit agreement incurred in
connection with our acquisition of The Cooking and Hospitality Institute of
Chicago and expected to be incurred in connection with our acquisition of the
California Culinary Academy and the remaining $ million for general
corporate purposes. Interest on our credit borrowings is payable quarterly and
is determined by a formula based on LIBOR plus a specified number of basis
points which is determined based on our leverage ratio. Our current interest
rate is 7 3/4% per annum. Our credit agreement matures on October 26, 2003. We
also may use a portion of the net proceeds for the acquisition of businesses
complementary to ours.
We will not receive any proceeds from the sale of shares by the selling
stockholders.
DIVIDEND POLICY
We have never paid a cash dividend on our common stock. We do not anticipate
paying any cash dividends on our common stock in the foreseeable future and we
plan to retain our earnings to finance future growth. The declaration and
payment of dividends on our common stock are subject to the discretion of our
board of directors. Our board's decision to pay future dividends will depend on
general business conditions, the effect on our financial condition and other
factors our board may consider to be relevant. Our ability to pay dividends on
our common stock is limited if we are not in compliance with the terms of our
credit agreement or we fail to meet a specified leverage ratio.
13
<PAGE>
PRICE RANGE OF COMMON STOCK
The following table sets forth the range of high and low sales prices per
share for our common stock as reported on The Nasdaq National Market, where the
stock trades under the symbol "CECO," for the periods indicated. The initial
public offering price of our common stock on January 28, 1998 was $16.00 per
share.
<TABLE>
<CAPTION>
Price Range
of
Common Stock
-------------
High Low
------ ------
<S> <C> <C>
1998:
First Quarter (from January 29, 1998).......................... $22.13 $17.63
Second Quarter................................................. 27.50 21.50
Third Quarter.................................................. 26.75 17.38
Fourth Quarter................................................. 30.00 14.13
1999:
First Quarter.................................................. $37.00 $27.50
Second Quarter................................................. 39.00 29.88
Third Quarter.................................................. 34.00 23.00
Fourth Quarter................................................. 38.50 21.94
2000:
First Quarter (through March 27, 2000)......................... $39.75 $31.13
</TABLE>
On March 27, 2000, the last sale price of the common stock as reported on
The Nasdaq National Market was $35.50 per share. As of March 27, 2000, there
were 23 holders of record of our common stock.
14
<PAGE>
CAPITALIZATION
The following table sets forth (1) our actual capitalization as of December
31, 1999 and (2) our pro forma capitalization as of December 31, 1999 giving
effect to our acquisition of the California Culinary Academy, which we expect
to occur on April 3, 2000, and our February 2000 acquisition of The Cooking and
Hospitality Institute of Chicago, and as adjusted to reflect the application of
the proceeds from our sale of 1,500,000 shares of common stock in this
offering, net of estimated underwriting discounts and commissions and estimated
offering expenses. We will not receive any of the proceeds of the sale of
common stock by the selling stockholders. The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
the related notes thereto which are incorporated by reference into this
prospectus.
<TABLE>
<CAPTION>
December 31, 1999
---------------------
Pro Forma
Actual As Adjusted
-------- -----------
<S> <C> <C>
Cash..................................................... $ 44,745 $
======== ========
Total debt............................................... $ 49,939 $
Stockholders' investment:
Common stock, $.01 par value, 50,000,000 shares
authorized; 7,876,767 actual shares issued and
outstanding; 9,376,767 shares issued and outstanding
as adjusted (1)....................................... 79
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding.......... -- --
Additional paid-in capital............................. 113,125
Accumulated other comprehensive income................. (372)
Retained earnings...................................... 849
-------- --------
Total stockholders' investment....................... 113,681
-------- --------
Total capitalization................................. $163,620 $
======== ========
</TABLE>
This table does not include (1) 1,231,297 shares of common stock issuable upon
the exercise of options outstanding at December 31, 1999 at a weighted average
exercise price of $22.73 per share and (2) 498,905 shares of common stock then
reserved for issuance under our stock plans.
15
<PAGE>
BUSINESS
The discussion below contains certain forward-looking statements, as such
term is defined in Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our management.
Our actual growth, results, performance and business prospects and
opportunities in 2000 and beyond could differ materially from those expressed
in, or implied by, any such forward-looking statements. See "Risk Factors."
Overview
We are a provider of private, for-profit postsecondary education in North
America, with approximately 23,400 students enrolled as of February 1, 2000. We
operate 27 campuses located in 15 states and two Canadian provinces. Our
schools enjoy long operating histories and offer a variety of bachelor's
degree, associate's degree and non-degree programs in career-oriented
disciplines. We have experienced significant growth both internally and through
acquisitions with our net revenue increasing from $19.4 million in 1995 to
$216.8 million in 1999. In addition, our net income increased from $0.1 million
in 1995 to $10.9 million in 1999.
We were founded in January 1994 by John M. Larson, our Chairman, President
and Chief Executive Officer, who has over 25 years of experience in the career-
oriented education industry. We were formed to capitalize on opportunities in
the large and highly fragmented postsecondary school industry. Since our
inception, we have completed 17 acquisitions. We have acquired schools that we
believe possess strong curricula, leading reputations and broad marketability
but that have been undermanaged from a marketing and financial standpoint. We
seek to apply our expertise in operations, marketing and curricula development,
as well as our financial strength, to improve the performance of these schools.
Our schools offer educational programs principally in the following four
career-related fields of study, identified by us as areas with highly
interested and motivated students, strong entry-level employment opportunities
and ongoing career and salary advancement potential:
. Visual Communication and Design Technologies: These programs include
desktop publishing, graphic design, fashion design, interior design,
graphic imaging, webpage design and animation.
. Information Technology: These programs include PC/LAN, PC/Net, computer
technical support, computer network operation, computer information
management and computer programming.
. Business Studies: These programs include business administration and
business operations.
. Culinary Arts: These programs include culinary arts, restaurant
management and pastry arts.
16
<PAGE>
The schools we have acquired are summarized in the following table:
<TABLE>
<CAPTION>
Year Date Principal Degree
School Founded Acquired Curricula(1) Granting
------ ------- -------- ------------ --------
<S> <C> <C> <C> <C>
Al Collins Graphic Design School 1978 1/94 IT, VC Yes
Tempe, AZ
Brooks College 1970 6/94 VC Yes
Long Beach, CA
Allentown Business School 1869 7/95 B, IT, VC Yes
Allentown, PA
Brown Institute 1946 7/95 CA, IT, VC Yes
Mendota Heights, MN
Western Culinary Institute 1983 10/96 CA No
Portland, OR
School of Computer Technology 1967 2/97 CA, IT Yes
Fairmont, WV
Pittsburgh, PA
The Katharine Gibbs Schools 1911 5/97 B, IT, VC Yes
Boston, MA
Melville, NY
Montclair, NJ(2)
New York, NY
Norwalk, CT(2)
Piscataway, NJ(3)
Providence, RI(3)
International Academy of
Merchandising & Design 1977 6/97 VC Yes
Chicago, IL
Tampa, FL(4)
International Academy of Design 1983 6/97 VC No
Montreal, PQ
Toronto, ON
California School of Culinary Arts 1994 3/98 CA No
South Pasadena, CA
Scottsdale Culinary Institute 1986 7/98 CA Yes
Scottsdale, AZ
Harrington Institute of Interior
Design 1931 1/99 VC Yes
Chicago, IL
McIntosh College 1896 3/99 B, CA, IT Yes
Dover, NH
Briarcliffe College 1966 4/99 B, IT, VC Yes
Bethpage, NY
Patchogue, NY
Brooks Institute of Photography 1945 6/99 VC Yes
Santa Barbara, CA
Washington Business School 1950 12/99 B No
Vienna, VA
The Cooking and Hospitality
Institute of Chicago 1983 2/00 CA Yes
Chicago, IL
</TABLE>
- --------
(1) The programs offered by our schools include business studies (B), culinary
arts (CA), information technology (IT), and visual communication and design
technologies (VC).
(2) The Gibbs campuses in Norwalk, Connecticut and Montclair, New Jersey are
now using the name Gibbs College.
(3) Does not offer degree programs.
(4) This campus is now using the name International Academy of Design.
17
<PAGE>
Industry Background
Based on estimates for 1996 by the Department of Education's National Center
for Education Statistics, postsecondary education is a $225 billion industry,
with over 14 million students obtaining some form of postsecondary education.
Of this total, approximately 3.2 million students are enrolled in approximately
4,600 private, degree-granting schools. Federal funds available to support
postsecondary education exceed $40 billion each year and have grown steadily
over the last two decades. Additionally, the federal government guaranteed over
$32 billion in student loans in 1997 and is expected to guarantee loans at
comparable levels in the future. State, local and private funds for career-
oriented training are also available.
Several national economic, demographic and social trends are converging to
contribute to the growing demand for career-oriented education:
Changes in Workplace Demands. The workplace is becoming increasingly
knowledge-intensive. Rapid advances in technology have increased demands on
employers and their employees, requiring many new workers to have some form of
training or education beyond the high school level. The increasing
technological skills required for entry level jobs are spurring demand for
specialized training which, in many cases, is not provided by traditional two
and four year colleges. The U.S. Department of Labor projects that between 1996
and 2006 jobs requiring (1) a bachelor's degree are expected to increase
approximately 24%, (2) an associate's degree are expected to increase
approximately 31% and (3) postsecondary vocational training are expected to
increase approximately 14%. As of December 31, 1999, approximately 65% of our
U.S. students were enrolled in bachelor's or associate's degree programs and
the remaining 35% of our U.S. students were enrolled in vocational
diploma/certificate programs. As of December 31, 1999, approximately 9% of our
students were enrolled in our Canadian schools. Furthermore, career-oriented
schools generally have the ability to react quickly to the changing needs of
the nation's business and industrial communities. Additionally, to meet the new
workplace demands, many major companies are now using career-oriented
institutions to provide customized training for their employees on a
contractual basis. Small to medium-sized companies are also using proprietary
career-oriented schools to fill their needs for training to maintain or
increase the skill levels of their employees.
Increasing Numbers of High School Graduates. Currently, U.S. high school
graduates represent over 2.6 million new prospective postsecondary students
each year, the largest pool of potential enrollees. Over the 18 years prior to
1993, the number of high school graduates had been declining. However, this
trend has changed favorably as children of the "baby boom" generation are
entering their high school years. These members of the "echo boom," as it is
commonly known, are expected to boost enrollment in postsecondary educational
programs to as high as 15.8 million students by 2006, an increase of over 10%
from approximately 14.3 million in the fall of 1996.
Growing Demand for Postsecondary Education. High school graduates and adults
are seeking postsecondary education in increasing numbers. According to the
U.S. Department of Commerce, approximately 65% of all 1996 high school
graduates continued their education that same year, compared with 53% a decade
earlier. In addition, enrollment in postsecondary programs is expected to
increase substantially as individuals seek to enhance their skills or re-train
for new job requirements. In part because of the recent trend toward corporate
downsizing, the National Center for Education Statistics estimates that over
the next several years initial enrollments in postsecondary education
institutions by working adults will increase more rapidly than initial
enrollments by recent high school graduates. The number of adults enrolled in
postsecondary education programs in the U.S. is estimated by the National
Center for Education Statistics to reach 6.2 million in 2000, or 41% of the
total number of people enrolled.
18
<PAGE>
Recognition of the Value of Postsecondary Education. We believe that
prospective students are increasingly recognizing the income premium and other
improvements in career prospects associated with a postsecondary education. On
average, (1) a female with an associate's degree earns 33% more than a female
high school graduate, and a male with an associate's degree earns 19% more than
a male high school graduate, while (2) a female with a bachelor's degree earns
57% more than a female high school graduate, and a male with a bachelor's
degree earns 53% more than a male high school graduate. Independent research
studies have demonstrated that prospective students consider these benefits in
making their education decisions.
Reduction in Public Education Funding. The reduction of federal, state or
provincial and local funding of public educational institutions in recent years
has forced educational institutions to cut back spending on general operations.
As a result, some schools have become underfunded and overcrowded. This trend
may provide an opportunity for proprietary institutions to serve, at more
competitive prices, the postsecondary education needs of individuals who would
have otherwise attended public schools.
Decreasing Size of Military Forces. Due to defense budget cuts and the
corresponding reduction in the U.S. armed forces, the U.S. military, a
traditional provider of technical and career-oriented training, is able to
provide fewer educational opportunities. According to the U.S. Department of
Defense, the aggregate number of military personnel has declined by 36% since
1987, with the aggregate number of individuals on active duty in the military
services declining from 2.2 million in 1987 to 1.4 million in 1998. This has
left an educational void to be filled by other sources, including proprietary
career-oriented schools.
We believe that private, for-profit, career-oriented schools are uniquely
positioned to take advantage of these national trends. We also believe that
similar factors are creating a favorable climate for career-oriented
postsecondary education in Canada and other international markets.
Business and Operating Strategy
Our business and operating strategy has enabled us to achieve significant
improvements in the performance of our schools. We believe this strategy will
enable us to continue to capitalize on the favorable economic, demographic and
social trends which are driving demand for career-oriented education, thereby
strengthening our position as a premier, professionally managed system of
career-oriented postsecondary educational institutions. The key elements of our
business and operating strategy are as follows:
Focusing on Core Curricula. Our schools offer educational programs
principally in four career-related fields of study:
. visual communication and design technologies, offered at 18 campuses
. information technology, including Internet and intranet technology,
offered at 15 campuses
. business studies, offered at 12 campuses
. culinary arts, offered at seven campuses
We perceive a growing demand by employers for individuals possessing skills
in these particular fields. We also believe there are many entry-level
positions and ongoing career and salary advancement potential for individuals
who have received advanced training in these areas. We recognize that these
employment opportunities have attracted highly interested and motivated
students. These students include both recent high school graduates and adults
seeking formal training in these fields as well as degrees, diplomas and
certificates evidencing their knowledge and skills. Our experience and
expertise in these attractive areas of study enable us to differentiate
ourselves from many of our competitors and to effectively tailor our
acquisition and marketing plans.
19
<PAGE>
Adapting and Expanding Educational Programs. We strive to meet the changing
needs of our students and the employment market. We continually refine and
adapt our courses to ensure that both students and employers are satisfied with
the quality and breadth of our educational programs. Through various means,
including student and employer surveys and curriculum advisory boards comprised
of business and community members, our schools regularly evaluate their program
offerings and consider revisions to existing classes and programs, as well as
the introduction of new courses and programs of study within our core
curricula. We selectively duplicate programs that have been successful
elsewhere in our school system. In 1999, we successfully duplicated nine
programs and plan to continue this curricula migration in the future. For
example, we introduced visual communication programs at three of our Gibbs
schools and at the School of Computer Technology in Pittsburgh. Brown Institute
became the first U.S. campus to offer the Le Cordon Bleu culinary program. Al
Collins Graphic Design School started a new program in both traditional and
computer animation. The International Academy of Design in Toronto launched a
program in digital television production.
Investing for Future Growth. We make substantial investments in our people,
facilities, management information systems and classroom technologies to
prepare for continued growth. We devote particular attention to attracting and
retaining both corporate and school-level management, and focus on employee
development in order to facilitate internal promotions. We make substantial
investments in facilities and classroom technologies to attract, retain and
prepare students for the increasing technical demands of the workplace.
Additionally, we have made significant investments in our management
information systems to standardize applications and processes across our
schools in order to maintain effective and expedient communication between our
schools and corporate management, as well as to ensure the smooth integration
of newly acquired schools.
Emphasizing School Management Autonomy and Accountability. We provide
significant autonomy and appropriate performance-based incentives to our
campus-level managers, which we believe offers important benefits for the
organization. We believe these policies foster an important sense of personal
responsibility for achieving campus performance objectives. We also believe our
willingness to grant local autonomy provides us and our schools with a
significant advantage in recruiting and retaining highly-motivated individuals
with an entrepreneurial spirit. Management of each of our campuses is
principally directed by a campus president and local managers, who are
accountable for the campus' operations and profitability. Corporate strategy,
finance and accounting consolidation functions are, however, centralized at our
executive offices in Hoffman Estates, Illinois. When we acquire a new school,
we evaluate the capabilities of existing campus management personnel, and
typically retain a significant portion, which contributes to our ability to
rapidly integrate acquired schools into our system. We also determine the
acquired school's needs for additional or stronger managers in key areas and,
where necessary, take appropriate action by hiring new managers or assigning
experienced staff to the school's campuses.
Direct Response Marketing. We seek to increase school enrollment and
profitability through intensive local, regional and national direct response
marketing programs designed to maximize each school's market penetration. We
also use the Internet to attract potential students and believe that this
medium will be an increasingly important marketing tool. Because many of our
schools have been significantly under-marketed prior to their acquisition, we
believe that major benefits can result from carefully crafted, targeted
marketing programs that leverage schools' curriculum strength and brand name
recognition. After every school acquisition, we design a marketing program
tailored to the particular school to highlight its strengths and to improve
student lead generation and student enrollment rates. Our management uses a
diversified media, direct response approach, including direct mail, Internet-
based advertising, infomercials, other television-based advertising, newspaper
advertising and other print media, to attract potential students. We place
particular emphasis on high school recruitment because it produces a steady
supply of new students.
Improving Student Retention. We emphasize the retention of students, from
initial enrollment to completion of their courses of study because, as at other
postsecondary educational institutions, a substantial portion of our students
never finish their educational programs for personal, financial or academic
reasons.
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Substantial increases in revenue and profitability can be achieved through
modest improvements in student retention rates. Our costs to keep current
students in school are much less than the expense of the marketing efforts
associated with attracting new students; therefore, student retention efforts,
if successful, are extremely beneficial to operating results. We strive to
improve retention by treating students as valued customers. We consider student
retention the responsibility of the entire staff of each school, from
admissions to faculty and administration to career counseling services, and
provide resources and support for the retention efforts developed by our local
school administrators. School personnel typically employ an approach based upon
establishing personal relationships with students; for example, students may
receive a telephone call from a school counselor or faculty member if they miss
classes. In addition, our corporate staff regularly tracks retention rates at
each school and provides feedback and support to the efforts of local school
administrators. As of December 31, 1999, our retention rate was approximately
77%. This rate was determined in accordance with the standards of the
Accrediting Council for Independent Colleges and Schools, which determines
retention rates by dividing the total number of student dropouts by the sum of
(1) beginning student population, (2) new starts and (3) student re-enters.
Emphasizing Employment of Graduates. We believe that the high rates of
employment for graduates of our schools enhance the overall reputation of the
schools as well as their ability to attract new students. High placement rates
also lead to low student loan default rates, which are necessary to allow our
schools to continue to participate in the federal student financial aid
programs. We consider student placement to be a high priority and allocate a
significant amount of time and resources to placement services. Due at least in
part to this emphasis, 91.8% of our students that graduated during the academic
year ended June 30, 1999 who were available for employment found employment
relating to their fields of study within six months of graduation. We are
committed to maintaining or improving these graduate employment rates and newly
acquired schools will be expected to meet similar graduate employment success
standards.
Growth Strategy
We believe we can achieve superior long-term growth in revenue and
profitability by continuing to expand existing operations and acquire
additional schools in attractive markets. We believe we can achieve additional
growth in the future by establishing new campuses and also by entering new
service areas and recruiting internationally.
Expanding Existing Operations. We believe that our existing 27 campuses can
achieve significant internal growth in enrollment, revenue and profitability.
We are executing our business and operating strategy, including all of the
elements described above, to accomplish this growth. We believe that expansion
of operations at our existing schools, along with acquisitions of new schools,
will be the primary generators of our growth in the near term.
Acquiring Additional Schools. To date, we have grown by acquiring new
schools in the U.S. and Canada and then applying our expertise in marketing and
school management to increase enrollment, revenue and profitability at those
schools. We expect that this process will continue to be one of the most
important elements of our growth strategy. We may also acquire operations
outside North America where we believe significant opportunities exist. We have
an active acquisition program and from time to time engage in, and are
currently engaged in, evaluations of, and discussions with, possible
acquisition candidates, including evaluations and discussions relating to
acquisitions that may be material in size or scope.
We make selective acquisitions of for-profit, career-oriented schools which
have capable faculty and operations staff, as well as quality educational
programs, which stand to benefit from our educational focus, marketing and
operating strengths. We target schools which we believe have the potential to
generate superior financial performance. Generally, such schools demonstrate
the following characteristics:
. ""Schools of Choice"--Possessing leading reputations in career-oriented
disciplines within local, regional and national markets
. Success--Demonstrating the ability to attract, retain and place students,
while meeting applicable federal and state regulatory criteria and
accreditation standards
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. Marketable Curricula--Offering programs that provide students with
relevant training and the skills necessary to obtain attractive jobs and
advance in their selected fields
. Broad Marketability--Attracting students from each of the high school,
adult, foreign and contract training market segments
. Attractive Facilities and Geographic Locations--Providing geographically
desirable locations and modern facilities to attract and prepare students
for the demands of the increasingly competitive workplace
We believe that significant opportunities exist for growth through
acquisition. Some opportunities result from institutions having limited
resources to manage increasingly complex regulations or to fund the significant
cost of developing new educational programs necessary to meet changing demands
of the employment market. We believe that a substantial number of schools
exhibiting the characteristics described above exist in the U.S. and Canadian
markets and such schools can be successfully integrated into our marketing and
administrative structure. We believe that competition in Canada is not
currently as intense as in the U.S. Few of the largest U.S. operators of
postsecondary career-oriented schools currently have a significant Canadian
presence. We believe that, given our existing Canadian operations, we are well
positioned to take advantage of these opportunities.
We analyze acquisition targets for their long-term profit potential,
enrollment potential and long-term demographic trends, concentration of likely
employers within the region, level of competition, facility costs and
availability and quality of management and faculty. We carefully investigate
any potential acquisition target for its history of regulatory compliance, both
as an indication of future regulatory costs and compliance issues and as an
indication of the school's overall condition. Significant regulatory compliance
issues in the school's past will generally remove a school from our
consideration as an acquisition candidate.
After we complete an acquisition, we immediately begin to apply our business
strategy to boost enrollment and improve the acquired school's profitability.
We assist acquired schools in achieving their potential through a highly
focused and active management role, as well as through capital contributions.
We selectively commit resources to improve marketing, advertising,
administration and regulatory compliance at each acquired school. We may also
commit further resources to enhance management depth. We retain acquired
schools' brand names to take advantage of their established reputation in
local, regional and national markets as "schools of choice."
By acquiring new schools, we are also able to realize economies of scale in
terms of our management information systems, accounting and audit functions,
employee benefits and insurance procurement. We also benefit from the exchange
of ideas among school administrators regarding faculty development, student
retention programs, recruitment, curriculum, financial aid and student
placement programs.
Establishing New Campuses. Although, to date, we have added new campuses
only through acquisitions, we plan to develop, open and operate new campuses
ourselves. We will most likely establish these new campuses as additional
locations of existing institutions, but we may also establish campuses as
entirely separate, free-standing institutions. Opening new campuses would
enable us to capitalize on new markets or geographic locations that exhibit
strong enrollment potential and/or the potential to establish a successful
operation in one of our core curricula areas. We believe that this strategy
will allow us to continue to grow rapidly even if appropriate acquisition
opportunities are not readily available.
Entering New Service Areas. While we expect that our current career-oriented
school operations will continue to provide the substantial majority of our
revenue in the near term, we plan to further develop new education-related
services which we believe offer strong long-term growth potential. In 1999, we
introduced our first distance learning program, which offers educational
products and services through the Internet and other distribution channels. We
also plan to expand our contract training business, which provides customized
training on a contract basis for business and government organizations, and
which is currently a limited part of the operations of a few of our schools.
Although we have not yet actively targeted the growing market for contract
training services, we believe that contract training can become a much more
significant part of our business.
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Recruiting International Students. Although all of our current operations
are located in North America, we believe that trends similar to those impacting
the market for postsecondary career-oriented education in the U.S. and Canada
are occurring outside of North America. As a result, we believe that there may
be significant international opportunities in private, for-profit postsecondary
education. We recently launched marketing efforts in selected countries to
increase international student enrollment at our schools.
Student Recruitment
Our schools seek to attract students with both the desire and ability to
complete their academic programs. Therefore, to produce interest among
potential students, each of our schools engages in a wide variety of marketing
activities.
We believe that the reputation of our schools in local, regional and
national business communities and the recommendations of satisfied former
students are important factors contributing to success in recruiting new
students. Each school's admissions office is charged with marketing the
school's programs through a combination of admissions representatives, direct
mailings and radio, Internet, television and print media advertising, in
addition to providing the information needed by prospective students to assist
them in making their enrollment decisions.
As of December 31, 1999, our schools employed approximately 300 admissions
representatives, each of whom focuses his or her efforts on one or more of the
following areas: (1) out-of-area/correspondence recruiting, (2) high school
recruiting or (3) in-house/local recruiting. Correspondence representatives
work with students who live outside of the immediate school area to generate
interest through correspondence with potential enrollees who have learned of
the school through regional or national advertising. We believe that we are
able to significantly boost enrollment by targeting students outside of the
local population. High school recruiting representatives conduct informational
programs at local secondary schools and follow up with interested students
outside of school, either at their homes or on our school campus. The
interpersonal relationships formed with high school counselors and faculty may
have significant influence over a potential student's choice of school. In
1999, approximately 31% of our student population was under the age of 20. We
believe that the relationships of our schools' representatives with the
counseling departments of high schools are good and that the brand awareness
and placement rates of our schools assist representatives in gaining access to
counselors. In-house representatives are also available to speak with
prospective students who visit campuses and to respond to calls generated
through the school's advertising campaigns. Representatives interview and
advise students interested in specific careers to determine the likelihood of
their success in completing their educational programs. The admissions
representatives are full-time, salaried employees of the schools. Regulations
of the Department of Education prevent us from giving our U.S. employees
incentive compensation based, directly or indirectly, upon the number of
students recruited.
We also engage in significant direct mail campaigns. We purchase mailing
lists from a variety of sources, and we mail brochures regularly during the
course of the year, with frequency determined by the number of school starts in
a given year. We believe direct mailings offer a fast and cost-effective way to
reach a targeted population.
In addition, each school develops advertising for a variety of media,
including radio, television and the Internet, which is run locally, regionally
and sometimes nationally. While multi-media advertising is generally more
appropriate for local markets, some initiatives have been successfully utilized
on a national basis. We have found infomercials to be a particularly effective
tool nationally, because their length enables schools to convey a substantial
amount of information about their students, their faculty, their facilities
and, most importantly, their course offerings. We also believe that the
personal flavor of the presentation typical of infomercials is well-suited to
attracting potential applicants. As an additional marketing tool, all of our
schools have established web sites, which can be easily accessed for
information about these schools and their educational programs. Although we
retain independent advertising agencies, we design and produce a portion of our
direct marketing and multi-media advertising and communications in-house,
through Market Direct, Inc., a wholly-owned subsidiary. While substantially all
of Market Direct's operations involve designing and
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producing advertising for us, Market Direct also provides these services to
other businesses outside of the postsecondary education industry as
opportunities arise.
We closely monitor the effectiveness of our marketing efforts. We estimate
that, in 1999, admissions representatives were responsible for attracting
approximately 36% of student enrollments, direct mailings were responsible for
approximately 11%, television, radio and print media advertising were
responsible for approximately 41%, Internet advertising was responsible for
approximately 6%, and the remaining approximately 6% was attributable to
various other methods.
Student Admissions and Retention
The admissions and entrance standards of each school are designed to
identify those students who are best equipped to meet the requirements of their
chosen fields of study. The most important qualifications for students include
a strong desire to learn, passion for their area of interest, initiative and a
high likelihood of successfully completing their programs. These
characteristics are generally identified through personal interviews conducted
by admissions representatives. We believe that a success-oriented student body
results in higher retention and placement rates, increased satisfaction on the
part of students and their employers and lower student default rates on
government loans. To be qualified for admission to one of our schools, each
applicant must have a high school diploma or a General Education Development
certificate. Many of our schools also require that applicants obtain certain
minimum scores on academic assessment examinations.
We recognize that our ability to retain students until graduation is an
important indicator of our success and that modest improvements in retention
rates can result in meaningful increases in school revenue and profitability.
As with other postsecondary educational institutions, many of our students do
not complete their programs for a variety of personal, financial or academic
reasons. As a result, student retention is considered an entire school's
responsibility, from admissions to faculty and administration to career
counseling services. To minimize student withdrawals, faculty and staff members
at each of our campuses strive to establish personal relationships with
students. Each campus devotes staff resources to advising students regarding
academic and financial matters, part-time employment and other matters that may
affect their success. However, while there may be many contributors, each
campus has one administrative employee specifically responsible for monitoring
and coordinating the student retention efforts. In addition, our corporate
staff regularly tracks retention rates at each campus and provides feedback and
support to appropriate local campus administrators.
Curriculum Development and Faculty
We believe that curriculum is the single most important component of our
operations, because students choose, and employers recruit from, career-
oriented schools based on the type and quality of technical education offered.
The curriculum development efforts of our schools are a product of their
operating partnership with students and the business and industrial
communities.
The relationship of each of our schools with the business community plays a
significant role in the development and adaptation of school curriculum. Each
school has one or more program advisory boards composed of members of the local
and regional business community who are engaged in businesses directly related
to the educational offerings provided by the school. These boards provide
valuable input to the school's education department, which allows the school to
keep its programs current and provide graduates with the training and skills
that these employers seek.
We also endeavor to enhance and maintain the relevancy of our curricula by
soliciting ideas through student and employer surveys and by requiring students
in selected programs to complete an internship during their school experience.
We have developed a number of techniques designed both to gain valuable
industry insight for ongoing curriculum development and enhance the overall
student experience. These techniques include (1) classroom discussions with
industry executives, (2) part-time job placement within a student's industry of
choice and (3) classroom case studies that are based upon actual industry
issues.
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Our schools are in continuous contact with employers through their faculty,
many of whom are industry professionals. The schools hire a significant number
of part-time faculty holding positions in business and industry because
specialized knowledge is required to teach many of the schools' courses and to
provide students with current, industry-specific training. The schedules of
business and industry professionals often permit them to teach the many evening
courses offered by our schools. Unlike traditional four-year colleges,
instructors in our schools are not awarded tenure and are evaluated, in part,
based upon student evaluations. Our schools employ approximately 1,700 faculty
members, of which approximately 35% are full-time employees and approximately
65% have been hired on a part-time, adjunct basis.
School Administration
We provide significant operational autonomy and appropriate performance-
based compensation to local school administrators who have demonstrated the
ability to undertake such responsibility, based on our belief that success is
driven by performance at the local level through enrollment growth, student
retention rates and placement rates. In addition, each of our schools requires,
to a certain extent, different resources and operating tactics due to a variety
of factors, including curriculum, demographics, geographic location and size.
Management of each of our schools is principally in the hands of a school
president who has accountability for the school's operations and profitability.
Each of our schools has five primary operating departments: admissions,
financial aid, education, placement and accounting.
Corporate strategy, finance and accounting consolidation functions are
centralized at our corporate headquarters. Our corporate staff develops long-
term and short-term operating strategies for the schools and works closely with
local administrators to accomplish their goals and ensure adherence to our
strategy. We maintain stringent quality standards and controls at both the
corporate and individual school levels. Activities at the corporate level
include regular reporting processes which track the vital statistics of each
school's operations, including leads, enrollments, retention rates, placements,
and financial data. These reports provide real-time data which allow management
to monitor the performance of each campus. Each operating department at the
campus level is also required to compile quantitative reports at regular
intervals, including reports on admissions, financial aid, academic performance
and placement.
We use a number of quality and financial controls. Information is tracked
through an advanced, PC-based management information system, which currently
runs on a decentralized basis, but also allows centralized access to account
information.
Tuition and Fees
Currently, total tuition for completion of a diploma/certificate program
offered by our schools, assuming full-time attendance, ranges from $5,400 to
$28,000, for completion of an associate's degree program ranges from $12,450 to
$28,000, and for completion of a bachelor's degree program ranges from $45,000
to $51,300. In addition to these tuition amounts, students at our schools
typically must purchase textbooks and supplies as part of their educational
programs.
Our institutions bill students for their tuition and other institutional
charges based on the specific instructional format or formats of the school's
educational programs. Each institution's refund policies must meet the
requirements of the Department of Education and such institution's state and
accrediting agencies. Generally, under the Department of Education's
requirements, if a first-time student ceases attendance before the point in
time that is 60% of the period of enrollment for which the student has been
charged, the institution will refund institutional charges based on the amount
of time for which the student was charged but did not attend. After a student
has attended 60% or more of such period of enrollment, the institution will
retain 100% of the institutional charges for that period of enrollment. After
the student's first enrollment period, the institution refunds institutional
charges for subsequent periods of enrollment based on the number of weeks
remaining in the period of enrollment in which the student withdrew. In certain
circumstances, institutions must apply state refund requirements when
determining refunds for students.
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Graduate Employment
We believe that employment of graduates of our schools in occupations
related to their fields of studies is critical to the reputation of the schools
and their ability to continue to recruit students successfully. We believe that
our schools' most successful form of recruiting is through referrals from
satisfied graduates. A strong placement office is important to maintain and
elevate the school's reputation, as well as manage the rate at which former
students default on their loans.
We devote a significant amount of time and resources to student placement,
which we believe to be the ultimate indicator of our success. We believe that
our average placement rate is attractive to prospective students. Student
placement is a top priority of each of our schools beginning on the first day
of student enrollment. This approach heightens the students' awareness of the
placement department and keeps students focused on their goal--job placement
within their field of choice. Moreover, each of our schools includes career
development instruction in our curricula, which includes the preparation of
resumes, cover letters, networking and other essential job-search tools.
Placement office resources are regularly available to our graduates. With such
assistance, our graduates find employment with a wide variety of businesses
located not only in the schools' local markets but also regionally and
nationally.
Each campus' placement department also plays a role in marketing the campus'
curriculum to the business community to produce job leads for graduates. As of
December 31, 1999, approximately 75 employees worked in the placement
departments of our campuses. Placement counselors participate in professional
organizations, advisory boards, trade shows and community events to keep
apprised of industry trends and maintain relationships with key employers.
Partnerships with local and regional businesses are established through
internships and curriculum development programs and facilitate placement of
graduates in local and regional businesses. The placement department also
assists current students in finding part-time jobs while attending school.
These part-time placements often lead to permanent positions.
Based on survey information received from graduating students and employers,
we believe that of the 8,648 students graduating from our schools during the
academic year ending June 30, 1999, 91.8% of the 7,941 available graduates,
which excludes students who are continuing their education, are in active
military service or are disabled or deceased, as well as students from foreign
countries who are legally ineligible to work in the U.S., obtained employment
in fields related to their program of study within six months following their
graduation.
The reputation of Gibbs and Washington Business School allows them to charge
fees to employers upon placement of many of their students. Our other schools
do not currently receive such placement fees, nor, we believe, do any of our
principal proprietary competitors. We believe that, as an additional source of
revenue, we may be able to replicate these placement fee programs at some of
our other schools.
Technology
We are committed to providing our students access to the technology
necessary for developing skills required to succeed in the careers for which
they are training. Through regular consultation with business representatives,
we ensure that all our schools provide their students with industry-current
computer hardware, computer software and equipment meeting industry-specific
technical standards. In each program, students use the types of equipment that
they will eventually use in their careers of choice. For example, graphic
animation students use sophisticated computer multimedia animation and digital
video editing equipment and supplies, and visual communication and design
technologies students make significant use of technologies for computer-related
design and layout and digital pre-press applications.
Employees
As of December 31, 1999, we had a total of approximately 1,800 full-time and
1,300 part-time employees. We do not have any collective bargaining agreements
with our employees. We consider our relations with our employees to be good.
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Competition
The postsecondary education market is highly fragmented and competitive,
with no single institution having a significant market share. Our schools
compete with traditional public and private two-year and four-year colleges and
universities, other proprietary schools, including those that offer distance
learning programs, and alternatives to higher education such as immediate
employment and military service. Private and public colleges and universities
may offer courses of study similar to those of our schools. Some public
institutions are able to charge lower tuition than our schools due in part to
government subsidies, government and foundation grants, tax-deductible
contributions and other financial sources not available to proprietary schools.
However, tuition at private, non-profit institutions is, on average, higher
than the average tuition rates of our schools. Other proprietary career-
oriented schools also offer programs that compete with those of our schools. We
believe that our schools compete with other educational institutions
principally based upon quality of their educational programs, reputation in the
business community, costs of programs and graduates' ability to find
employment. Some of our competitors in both the public and private sectors may
have substantially greater financial and other resources than us.
Changes in the regulatory environment have stimulated consolidation in the
postsecondary education industry. Regulations adopted in recent years have
tightened standards for educational content, established strict standards for
student loan default rates, required intensified scrutiny by state education
agencies and accrediting agencies and created more stringent standards for the
evaluation of an institution's financial responsibility and administrative
capability. As a result, some career-oriented schools have been forced to close
because they lacked sufficient quality or financial resources or could not
manage the increased regulatory burden. At the same time, despite increasing
demand, potential new entrants face significant barriers to entry due to the
highly regulated nature of the industry and the considerable expense of start-
up operations.
Facilities
Our corporate headquarters are located in Hoffman Estates, Illinois, near
Chicago, and our 27 campuses are located in 15 states and two Canadian
provinces. Each campus contains teaching facilities, including modern
classrooms, laboratories and, in the case of the schools with culinary arts
programs, large, well-equipped kitchens. Admissions and administrative offices
are also located at each campus. Additionally, Brooks' campus includes a
dormitory and student cafeteria, and Western, Scottsdale Culinary, and The
Cooking Hospitality Institute of Chicago lease and operate restaurants in
conjunction with their culinary arts program.
We lease all of our facilities, except the primary Gibbs facility in
Montclair, New Jersey and the facility at Brooks Institute of Photography,
which we own. As of December 31, 1999, we owned approximately 28,500 square
feet and leased approximately 1.2 million square feet. The leases have
remaining terms ranging from less than one year to ten years.
We actively monitor facility capacity in light of our current utilization
and projected enrollment growth. We have plans to lease approximately 180,000
additional square feet in 2000 to accommodate our growth. We believe that our
schools can acquire any necessary additional capacity on reasonably acceptable
terms. We devote capital resources to facility improvements and expansions as
necessary.
Legal Proceedings
We and our institutions are subject to occasional lawsuits, investigations
and claims arising out of the ordinary conduct of our business. Although we
cannot predict the outcomes, we do not believe that any legal proceeding to
which we are a party will have a material adverse effect on our business,
results of operations or financial condition.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information with respect to our
executive officers and directors:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John M. Larson 48 Chairman of the Board, President, Chief Executive Officer,
Secretary and Director
Patrick K. Pesch 43 Senior Vice President, Chief Financial Officer, Treasurer and
Director
Nick Fluge 48 Senior Vice President--Operations
Jacob P. Gruver 45 Senior Vice President--Operations
Robert E. Dowdell 54 Director
Thomas B. Lally 56 Director
Wallace O. Laub 75 Director
Keith K. Ogata 45 Director
</TABLE>
John M. Larson has served as our Chairman of the Board since January 2000
and as President and Chief Executive Officer and one of our Directors since
January 1994. From July 1993 until our formation, Mr. Larson served as a
consultant to Heller Equity Capital Corporation ("Heller"), working with Heller
to establish Career Education Corporation. From January through May 1993, Mr.
Larson served as the Eastern Regional Operating Manager of Educational Medical,
Inc., which provides career-oriented postsecondary education. From 1989 until
1993, Mr. Larson served as the Senior Vice President of College Operations of
Phillips Colleges, Inc., overseeing a nationwide system of 58 schools, which
offered a wide range of academic programs. From March through September 1989,
he served as Senior Vice President of Operations for the Geneva Companies, a
mergers and acquisitions firm. From 1980 to 1989, Mr. Larson was Vice President
of Marketing at National Education Centers, Inc., a subsidiary of National
Education Corporation, where he managed the entire admissions program,
including marketing and advertising efforts, with a team of approximately 500
employees. Mr. Larson has also served in marketing positions with DeVry Inc.,
at its Chicago and Kansas City campuses. Mr. Larson received a Bachelor of
Science in Business Administration from the University of California at
Berkeley and has completed the Executive Management Program at Stanford
University.
Patrick K. Pesch has served as our Senior Vice President, Chief Financial
Officer and Treasurer since October 1999 and as one of our directors since
1995. From 1992 until joining us, Mr. Pesch served as a Senior Vice President
of Heller Financial, Inc. ("HFI"), and also as an officer of Heller, managing a
portfolio of loan and equity investments. Mr. Pesch joined HFI in 1985 as head
of the internal audit function and served in a number of positions, including
senior credit officer for Heller Corporate Finance. Previously, he was an audit
manager with Arthur Young & Company (currently Ernst & Young). Mr. Pesch
received a Bachelor of Science of Commerce degree from DePaul University and is
a certified public accountant.
Nick Fluge has served as our Senior Vice President--Operations since October
1999 and prior to that as one of our Managing Directors since July 1997. Mr.
Fluge has served as Director and President of Western Culinary Institute since
1989. From 1984 until 1988, Mr. Fluge was Director of Retail/Restaurants and a
member of the management team of Western. With over 20 years of experience in
the hospitality/foodservice industry and as a Certified Culinary Educator with
the American Culinary Federation, Mr. Fluge has chaired American Culinary
Federation Food Salons, judged wine competitions and written columns for
various periodicals, including The National Culinary Review. Mr. Fluge has been
a Team Leader for the Accrediting Commission of Career Schools and Colleges of
Technology (ACCSCT) since 1992. Mr. Fluge is a member of the Oregon Department
of Education--Career College Division. Mr. Fluge holds a Bachelor of Science
degree in Political Science from Portland State University.
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<PAGE>
Jacob P. Gruver has served as our Senior Vice President--Operations since
October 1999 and prior to that as one of our Managing Directors since May 1997.
From August 1994 to May 1997, Mr. Gruver served as our Director of Finance.
From 1989 until joining our management team, Mr. Gruver was Vice President and
Controller of Wyoming Technical Institute in Laramie, Wyoming, a moderately
sized career-oriented school. In such positions, he managed all financial
functions, including budgeting and implementation of management
information/financial systems. From 1978 to 1989, Mr. Gruver audited career-
oriented schools and other clients at a regional public accounting firm in
Laramie, Wyoming. Mr. Gruver received a Bachelor of Science in Accounting from
National College.
Robert E. Dowdell has been one of our Directors since our inception in
January 1994. From 1989 to present, Mr. Dowdell has served as Chief Executive
Officer and director of Marshall & Swift, L.P., a publishing company. Mr.
Dowdell is also the general partner of LaQuinta Springs, L.P., a real estate
investment company, and is a managing member of Hemet 99, LLC, a real estate
investment company.
Thomas B. Lally has been one of our Directors since January 1998. Mr. Lally
was designated to be a director by Heller. He has been the President of Heller
since 1996 and an Executive Vice President of HFI, the parent of Heller, since
1994, with direct responsibility for the asset quality oversight of HFI's
portfolio of loan and equity investments. Mr. Lally joined HFI in 1974.
Wallace O. Laub has been one of our Directors since October 1994. Mr. Laub
was a co-founder of National Education Corporation, Inc., where he served as
Executive Vice President and director from 1955 to 1993. From 1981 to 1990, Mr.
Laub served as a director of the Distance Education Training Council, a trade
association and accrediting agency for distance education companies. Mr. Laub
is now retired.
Keith K. Ogata has been one of our Directors since January 1998. Mr. Ogata
is currently president of, and a private investor in, 3-K Financial
Corporation, a private investment company, and a managing member of Hemet 99.
From 1996 to 1998, Mr. Ogata served as President of National Education Centers,
Inc., a subsidiary of National Education Corporation. From 1990 to June 1998,
he served as Vice President, Chief Financial Officer and Treasurer of National
Education Corporation, with responsibility for finance, accounting, treasury,
tax, mergers and acquisitions, human resources, investor and public relations
and information systems.
Certain Other Significant Employees of Career Education Corporation
The following table sets forth information with respect to some of our other
significant employees:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
J. Patrick Andrews Vice President--Advertising
Jon R. Coover Vice President--Marketing
Mari-Ann Deering Vice President--Human Resources
Patricia Kapper Vice President--Education/Placement
James R. McEllhiney Vice President--Regulatory Compliance
Carol A. Menck Vice President and Managing Director
Robert W. Nachtsheim Vice President and Controller
Steve B. Sotraidis Vice President and Managing Director
Todd H. Steele Vice President--Strategic Planning and Development
Mark J. Tobin Vice President--Student Finance and Regulatory Affairs
</TABLE>
29
<PAGE>
J. Patrick Andrews has served as our Vice President--Advertising since
November 1999 and prior to that as our Director of Advertising from October
1995 until November 1999. From 1994 until he joined our corporate management,
Mr. Andrews was Advertising Manager for two of our schools, Collins and Brooks.
For approximately 12 years prior to joining us, Mr. Andrews managed the
advertising and marketing functions for Spartan, a 2,800 student school in
Tulsa, Oklahoma. Mr. Andrews holds a Bachelor of Arts in Journalism from the
University of South Carolina and a Masters degree in Marketing from the
University of Texas.
Dr. Jon R. Coover has served as our Vice President--Marketing since November
1999 and prior to that as our National Director of Marketing since May 1997,
after serving for 14 months as Director of Education at our largest school,
Brown. Dr. Coover's background in private career education includes holding
positions as Vice President of Marketing for the Rasmussen Business Colleges,
Minneapolis, Minnesota; Vice President of Operations at Virginia College,
Birmingham, Alabama; President of Dominion College, Roanoke, Virginia;
President of Nettle Junior College, Sioux Falls, South Dakota; Co-Director of
New York Restaurant School in New York City; and Regional Director with DeVry
Institute of Technology. Dr. Coover holds a Bachelor of Science in Business
Administration and an M.B.A. from California Western University and a Ph.D. in
Business from California Coast University.
Mari-Ann Deering has served as our Vice President--Human Resources since
November 1999 and prior to that as our Director of Human Resources since July
1998. Ms. Deering joined our corporate management with 19 years of human
resources experience in the veterinary pharmaceutical industry. Ms. Deering
served as the Director of Human Resources--North America for Fort Dodge Animal
Health, Overland Park, Kansas, a division of American Home Products, from 1997
until 1998. She was Vice President of Human Resources and Administration of
Southwest Technologies, a medical device company, from 1996 until 1997. Her
prior experience also includes 16 years in human resource management with
Sanofi Animal Health from 1979 until 1995 where her final position was Vice
President of Human Resources. Ms. Deering holds a Bachelor of Science degree in
Business Administration from AVILA College, Kansas City, Missouri and an M.B.A.
from Rockhurst College, Kansas City, Missouri.
Dr. Patricia A. Kapper, Ed.D, has served as our Vice President--
Education/Placement since November 1999 and prior to that as our Director of
Education and Placement since August 1997. From 1990 until joining our
management team, Dr. Kapper was Dean of Academic Affairs (Chief Academic
Officer) of DeVry Institute of Technology, Addison, Illinois. From 1986 until
1990, Dr. Kapper held academic management positions with Milwaukee Area
Technical College, from 1984 to 1986 as Associate Dean of Business and Graphic
and Applied Arts and from 1986 to 1990 as Dean of Business and Graphic Arts.
Dr. Kapper holds a Bachelor of Arts in Business Education from the University
of Wisconsin--Eau Claire, a Masters of Science in Teaching from the University
of Wisconsin--Whitewater, and a doctorate in Adult Education from Northern
Illinois University.
James R. McEllhiney has served as our Vice President--Regulatory Compliance
since November 1999 and prior to that as our Director of Regulatory Compliance
since August 1997. Mr. McEllhiney served as our Director of Education from
August 1994 until August 1997. Prior to joining our corporate management in
August 1994, Mr. McEllhiney was the Vice President of Academic Affairs for
Phillips Colleges, Inc. In this position, Mr. McEllhiney managed regulatory
compliance, including processing change of ownership applications for over 60
acquisitions, and oversaw corporate educational administration for this group
of 92 schools. From 1975 to 1988, Mr. McEllhiney managed regulatory compliance
and served as Chief Academic Officer for MetriData Computing, a 40 unit career-
oriented school company. Prior to joining MetriData, Mr. McEllhiney was an
instructor and Academic Dean at Northwood Institute. Mr. McEllhiney holds a
Bachelor of Science in Education and a Masters of Science in Psychology from
Indiana State University.
Carol L. A. Menck has served as our Vice President and Managing Director
since November 1999 and prior to that as one of our Managing Directors since
January 1999. From 1997 to 1999, Ms. Menck served as the President of The
School of Computer Technology--Pittsburgh with oversight responsibility over
the campus in Fairmont. From 1993 until joining us, Ms. Menck was Director of
an ITT Technical Institute. From
30
<PAGE>
1991 until 1993, she served as Director of Phillips Junior College--Spokane,
Washington. From 1987 to 1991 she served as President of Bradford School--
Portland, Oregon. From 1976 until 1987, she held various positions at Trend
Colleges--Vancouver, Washington. Her final position at Trend was Operations
Manager. Ms. Menck received a Bachelor of Arts in Political Science from
Gonzaga University and a Juris Doctorate from Gonzaga Law School.
Robert W. Nachtsheim has served as our Vice President and Controller since
November 1999 and prior to that as our Controller since December 1995. Mr.
Nachtsheim joined our corporate management with 19 years of accounting and
financial analysis experience in multiple industries. From 1993 until 1995, Mr.
Nachtsheim served as Controller for Century 21 North Central, Inc., overseeing
the financial performance of 600 midwestern Century 21 franchises. His prior
experience includes six years as the Director of Financial Analysis and
Reporting for Newark Electronics, a nationwide electronics distributor, and 11
years with Amoco Corporation in various accounting positions. Mr. Nachtsheim
holds a Bachelor of Science in Accountancy from the University of Missouri and
an M.B.A. in Finance from DePaul University.
Steve B. Sotraidis has served as our Vice President and Managing Director
since November 1999 and prior to that as one of our Managing Directors since
July 1, 1997. Mr. Sotraidis joined our administrative management team in June
1994. Mr. Sotraidis joined Brooks College in 1970 and has managed Brooks'
overall operations since 1975. Mr. Sotraidis holds a Bachelor of Science in
Psychology and completed two years of graduate work in Industrial Psychology at
California State University at Long Beach.
Todd H. Steele has served as our Vice President--Strategic Planning and
Development since November 1999 and prior to that as our Director of Strategic
Planning and Development since March 1998. Mr. Steele served as a director from
our inception in January 1994 until March 1998. From December 1996 until
joining our management team, he served as a Vice President of Baker, Fentress &
Co., an investment company, making equity investments in private companies.
From May 1990 to November 1996, he served as a Vice President of HFI and
Heller, also making equity investments in private companies. Mr. Steele holds a
Bachelor of Arts in Economics from Northwestern University and an M.B.A. in
Finance from the University of Chicago.
Mark J. Tobin has served as our Vice President--Student Finance and
Regulatory Affairs since November 1999 and prior to that as our Director of
Student Finance since March 1996. Mr. Tobin joined DeVry, Inc., in 1984 and,
from 1989 until joining our corporate management, Mr. Tobin was Director of
Student Finance for DeVry, Inc. In that position, Mr. Tobin was responsible for
student finance policy development, technical and operations assistance and
performance monitoring for the DeVry Institutes of Technology and the Keller
Graduate School of Management. From 1984 to 1989, Mr. Tobin held corporate
financial aid management positions at DeVry, Inc. Prior to his tenure at DeVry,
Inc., Mr. Tobin was Director of Financial Aid at Carthage College from 1978
until 1984 and Marian College from 1973 until 1978. Mr. Tobin holds a Bachelor
of Arts in Psychology from Northeastern Illinois State College and a Masters of
Education degree in Student Personnel Work in Higher Education from Loyola
University of Chicago.
31
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership by the selling stockholders of our common stock as of March 15, 2000
and as adjusted to reflect the sale of 1,500,000 shares of common stock offered
by us and 600,000 shares of common stock offered by the selling stockholders.
Except as otherwise indicated below, the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.
<TABLE>
<CAPTION>
Shares of Common Shares of Common
Stock Shares of Stock
Beneficially Common Stock Beneficially
Owned Prior to Being Owned After the
the Offering(1) Offered Offering
-------------------- ------------ -----------------
Number Percent Number Number Percent
--------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Heller Equity Capital
Corporation............... 1,560,507(2) 19.6 500,000 1,060,507 11.1
John M. Larson............. 151,350(3) 1.9 50,500 100,850 1.0
Robert E. Dowdell.......... 101,483(4) 1.3 30,000 71,483 *
Nick Fluge................. 13,837(5) * 9,500 4,337 *
Jacob P. Gruver............ 15,942(6) * 10,000 5,942 *
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
The number of shares beneficially owned by a person and the percentage
ownership of that person include shares of common stock subject to options
held by that person that are currently exercisable or exercisable within 60
days of March 15, 2000.
(2) As reported on a Schedule 13D/A filed with the SEC on January 7, 2000
jointly by The Fuji Bank, Limited, Fuji America Holdings, Inc., HFI and
Heller. According to the Schedule 13D/A, Heller has sole voting and sole
dispositive power with respect to 1,560,507 shares of common stock. The
address of Heller is 500 West Monroe Street, Chicago, Illinois 60661.
(3) Includes 135,718 shares of common stock which may be acquired by Mr. Larson
upon the exercise of stock options which are currently exercisable or
exercisable within 60 days of March 15, 2000.
(4) Includes 2,834 shares of common stock held by Mr. Dowdell, as Custodian for
Brian M. Dowdell under the Uniform Transfers to Minors Act; 2,034 shares of
common stock held by Mr. Dowdell, as Custodian for Sharon T. Dowdell under
the Uniform Transfers to Minors Act; 18,000 shares of common stock held by
Mr. Dowdell and Grace C. Dowdell, as Trustees under a Trust Agreement dated
July 1, 1991; and 39,980 shares of common stock which may be acquired by
Mr. Dowdell upon the exercise of stock options which are currently
exercisable or exercisable within 60 days of March 15, 2000.
(5) Includes 12,514 shares of common stock which may be acquired by Mr. Fluge
upon the exercise of stock options which are currently exercisable or
exercisable within 60 days of March 15, 2000.
(6) Includes 15,585 shares of common stock which may be acquired by Mr. Gruver
upon the exercise of stock options which are currently exercisable or
exercisable within 60 days of March 15, 2000.
32
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
$.01 par value per share, and 1,000,000 shares of preferred stock, $.01 par
value per share.
The following summarizes the material provisions of our Certificate of
Incorporation and by-laws that are included as exhibits to the registration
statement of which this prospectus is a part. We believe this summary contains
a description of all of the material terms of our capital stock.
Common Stock
As of March 15, 2000, 7,951,182 shares of common stock were outstanding and
held by 23 holders of record. Subject to the rights of holders of preferred
stock, the holders of outstanding shares of common stock are entitled to share
ratably in dividends declared out of assets legally available therefor at such
time and in such amounts as the board of directors may from time to time
lawfully determine. Each holder of common stock is entitled to one vote for
each share held. Subject to the rights of holders of any outstanding preferred
stock, upon our liquidation, dissolution or winding up, any assets legally
available for distribution to stockholders as such are to be distributed
ratably among the holders of our common stock at that time outstanding. All
shares of common stock currently outstanding are, and all shares of common
stock offered by hereby when duly issued and paid for will be, fully paid and
nonassessable, not subject to redemption and assessment and without conversion,
preemptive or other rights to subscribe for or purchase any proportionate part
of any new or additional issues of any class or of securities convertible into
stock of any class.
Preferred Stock
Preferred stock may be issued by us in series from time to time with such
designations, relative rights, priorities, preferences, qualifications,
limitations and restrictions thereof, to the extent that such are not fixed in
our Certificate of Incorporation, as the board of directors determines. The
rights, preferences, limitations and restrictions of different series of
preferred stock may differ with respect to dividend rates, amounts payable on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions and other matters. The board of directors may authorize the
issuance of preferred stock which ranks senior to our common stock with respect
to the payment of dividends and the distribution of assets on liquidation. In
addition, the board of directors is authorized to fix the limitations and
restrictions, if any, upon the payment of dividends on common stock to be
effective while any shares of preferred stock are outstanding. The board of
directors, without stockholder approval, may issue preferred stock with voting
and conversion rights which could adversely affect the voting power of the
holders of common stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of us. We have no present
intention to issue shares of preferred stock.
Certain Corporate Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, this statute prohibits a publicly held Delaware
corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless either (1) prior to the date at which the stockholder
became an interested stockholder the board of directors approved either the
business combination or the transaction in which the person became an
interested stockholder, (2) the stockholder acquires more than 85% of the
outstanding voting stock of the corporation (excluding shares held by directors
who are officers or held in certain employee stock plans) upon consummation of
the transaction in which the stockholder becomes an interested stockholder or
(3) the business combination is approved by the board of directors and by two-
thirds of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder) at a meeting of the stockholders (and not
by written consent) held on or subsequent to the date of the business
combination. An "interested stockholder" is a person who, together with
affiliates and
33
<PAGE>
associates, owns or at any time within the prior three years did own, 15% or
more of the corporation's voting stock. Section 203 defines a "business
combination" to include, without limitation, mergers, consolidations, stock
sales and asset based transactions and other transactions resulting in a
financial benefit to the interested stockholder.
Our Certificate of Incorporation and by-laws contain a number of provisions
relating to corporate governance and to the rights of stockholders. Some of
these provisions may be deemed to have a potential "anti-takeover" effect in
that such provisions may delay, defer or prevent a change of control of us.
These provisions include (1) a requirement that stockholder action may be taken
only at stockholder meetings; (2) notice requirements in the by-laws relating
to nominations to the board of directors and to the raising of business matters
at stockholders meetings; and (3) the classification of the board of directors
into three classes, each serving for staggered three year terms.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Harris Trust and
Savings Bank.
34
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have an aggregate of approximately
9,520,182 shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options.
Substantially all of these shares will be freely tradable without restriction
or further registration under the Securities Act of 1933, unless held by
persons who are deemed to be our "affiliates" because they, directly or
indirectly through one or more intermediaries control, or are controlled by, or
are under common control, with us. Based on shares outstanding as of March 15,
2000, upon completion of the offering 1,165,940 shares will be held by our
affiliates.
All selling stockholders, directors and executive officers have agreed with
the underwriters that, for a period of 90 days from the date of this
prospectus, they will not offer to sell or otherwise sell, dispose of or grant
rights with respect to any shares of common stock, now owned or hereafter
acquired directly by such holders or with respect to which they have the power
of disposition, otherwise than with the prior written consent of Credit Suisse
First Boston Corporation. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701 of the Securities Act of 1933, shares subject to
lock-up agreements will not be salable until the agreements expire or unless
prior written consent is received from Credit Suisse First Boston Corporation.
Any early waiver of the lock-up agreements by the underwriters, which, if
granted, could permit sales of a substantial number of shares and could
adversely affect the trading price of our shares, may not be accompanied by an
advance public announcement by us.
In general, under Rule 144 a person, or persons whose shares are aggregated,
who has beneficially owned "restricted shares" for at least one year, including
persons who may be deemed our "affiliate," would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the number of shares of common stock then outstanding or the average
weekly trading volume of our common stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to manner of sale provisions and notice requirements and
to the availability of current public information about us. In addition, a
person who is not deemed to have been our affiliate at any time during the 90
days preceding a sale, and who has beneficially owned for at least two years
the shares proposed to be sold, would be entitled to sell such shares under
Rule 144(k) without regard to the requirements described above. We are unable
to estimate accurately the number of restricted shares that will be sold under
Rule 144 because this will depend on, among other factors, the market price for
our common stock and the personal circumstances of the seller.
Upon consummation of the offering, options to purchase 1,143,475 shares of
common stock will be issued and outstanding, of which options to purchase
275,881 shares of common stock will be exercisable.
Registration Rights
Under a registration rights agreement, Heller is entitled, subject to
various exceptions, to demand that we register shares of common stock held by
Heller on up to three occasions and to cause us to register such shares in any
registration by us for our own account or for the account of other security
holders. Additionally, at any time that we are eligible to use Form S-3 for
registration of securities, Heller will be entitled, subject to certain
exceptions, to cause us to register such shares held by Heller on a
registration statement on Form S-3. Upon consummation of the offering, Heller
will hold 1,060,507 shares which will be covered by the registration rights
agreement.
Under a Stock Transfer and Registration Rights Agreement, Le Cordon Bleu is
entitled, subject to various exceptions, to cause us to register the 101,202
shares issued to them in connection with their license arrangement with us in
any registration by us for our own account or for the account of other security
holders through October 29, 2000.
35
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we and the selling stockholders have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Chase Securities Inc. and Salomon Smith Barney Inc. are acting as
representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.........................
Chase Securities Inc...........................................
Salomon Smith Barney Inc.......................................
---------
Total...................................................... 2,100,000
=========
</TABLE>
The underwriting agreement provides that the underwriters be obligated to
purchase all the shares of common stock in this offering, other than those
shares covered by the over-allotment option described below. The underwriting
agreement also provides that, if an underwriter defaults, the purchase
commitments of non-defaulting underwriters may be increased or the offering of
common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 315,000 additional shares at the public offering price less
the underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions
paid by us............. $ $ $ $
Expenses payable by us.. $ $ $ $
Underwriting Discounts
and Commissions
paid by the selling
stockholders........... $ $ $ $
Expenses payable by the
selling stockholders... $ $ $ $
</TABLE>
We have agreed not to offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933 relating
to, any shares of our common stock or securities or other rights convertible
into or exchangeable or exercisable for any shares of our common stock, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation, for a period of 90 days after the date of this prospectus,
except that such restrictions will not apply to our ability to grant employee
or director stock options pursuant to the terms of a plan in effect on the date
of this prospectus or issuance of common stock pursuant to the exercise of such
options.
36
<PAGE>
Our executive officers and directors and the selling stockholders have
agreed that they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock,
whether any such aforementioned transaction is to be settled by delivery of our
common stock or such other securities, in cash or otherwise, or publicly
disclose the intention to make any such offer, sale, pledge or disposition, or
to enter into any such transaction, swap, hedge or other arrangement, without,
in each case, the prior written consent of Credit Suisse First Boston
Corporation for a period of 90 days after the date of this prospectus.
We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments which
the underwriters may be required to make in that respect.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
. In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of the common stock until the time, if any, at
which a stabilizing bid is made.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the underwriters that will make Internet distributions on the
same basis as other allocations.
Other than the prospectus in electronic format, the information contained on
any underwriter's web site and any information contained on any other web site
maintained by an underwriter is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved or
endorsed by us or any underwriter in its capacity as an underwriter and should
not be relied upon by investors.
37
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of our common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
stockholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are effected.
Accordingly, any resale of our common stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of our common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us, the selling stockholders and
the dealer from whom such purchase confirmation is received that (1) such
purchaser is entitled under applicable provincial securities laws to purchase
such common stock without the benefit of a prospectus qualified under such
securities laws, (2) where required by law, that such purchaser is purchasing
as principal and not as agent, and (3) such purchaser has reviewed the text
above under "Resale Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of our directors and officers as well as the experts named herein and
the selling stockholders may be located outside of Canada and, as a result, it
may not be possible for Canadian purchasers to effect service of process within
Canada upon us or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to the offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in our common
stock in their particular circumstances and with respect to the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.
38
<PAGE>
LEGAL MATTERS
The validity of our common stock offered hereby and other legal matters will
be passed upon for us by Katten Muchin Zavis, Chicago, Illinois. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Sidley & Austin, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Career Education Corporation and
its subsidiaries as of December 31, 1998 and 1999, and for each of the three
years in the period ended December 31, 1999, included in our Annual Report on
Form 10-K and incorporated by reference into this prospectus and registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and is included
herein in reliance upon the authority of said firm as experts in giving said
report.
39
<PAGE>
[Inside Back Cover]
[Map of North America with dots representing
the locations of each of the Company's
schools and lines from the dots to the schools' names,
which are also listed underneath the map]
<PAGE>
[Outside Back Cover]
[LOGO] Career Education Corporation
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of our common stock
pursuant to the Prospectus contained in this Registration Statement. The
Registrant will pay all of these expenses.
<TABLE>
<CAPTION>
Approximate
Amount
-----------
<S> <C>
Securities and Exchange Commission registration fee........... $22,315
NASD filing fee............................................... 8,953
Nasdaq National Market fee.................................... *
Accountants' fees and expenses................................ *
Blue Sky fees and expenses.................................... *
Legal fees and expenses....................................... *
Transfer Agent and Registrar fees and expenses................ *
Printing and engraving........................................ *
Miscellaneous expenses........................................ *
-------
Total..................................................... $ *
=======
</TABLE>
- --------
* To be provided by amendment
All expenses other than the Securities and Exchange Commission registration
fee and NASD filing fee are estimated.
Item 15. Indemnification of Directors and Officers
Article XII of the Registrant's Certificate of Incorporation provides that
the Registrant shall indemnify its directors to the full extent permitted by
the General Corporation Law of the State of Delaware and may indemnify its
officers and employees to such extent, except that the Registrant shall not be
obligated to indemnify any such person (i) with respect to proceedings, claims
or actions initiated or brought voluntarily by any such person and not by way
of defense, or (ii) for any amounts paid in settlement of an action indemnified
against by the Registrant without the prior written consent of the Registrant.
The Registrant has entered into indemnity agreements with each of its
directors. These agreements may require the Registrant, among other things, to
indemnify such directors against certain liabilities that may arise by reason
of their status or service as directors, to advance expenses to them as they
are incurred, provided that they undertake to repay the amount advanced if it
is ultimately determined by a court that they are not entitled to
indemnification, and to obtain directors' liability insurance if available on
reasonable terms.
In addition, Article XII of the Registrant's Certificate of Incorporation
provides that a director of the Registrant shall not be personally liable to
the Registrant or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Registrant or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for willful or negligent conduct in paying
dividends or repurchasing stock out of other than lawfully available funds or
(iv) for any transaction from which the director derives an improper personal
benefit.
Reference is made to Section 145 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
II-1
<PAGE>
The Registrant has purchased a directors' and officers' liability insurance
policy.
Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Registrant, its directors, certain
of its officers and persons who control us within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), against certain liabilities.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
2.1* Asset Purchase Agreement dated as of September 30, 1996, among
the Registrant, WCI Acquisition, Ltd., Phillips Educational Group
of Portland, Inc., and Phillips Colleges, Inc.
2.2* Stock Sale Agreement dated as of April 7, 1997, between K-III
Prime Corporation, Inc. and the Registrant.
2.3* Stock Purchase Agreement dated as of June 30, 1997, among IAMD
Acquisition I, Ltd. and Clem Stein, Jr., Marion Stein, Leonard
Rutstein, Barbara Ann Scott King, Thomas V. King, William W.
Wirtz and David Powell.
2.4* Share Purchase Agreement dated as of June 30, 1997, among the
Registrant and Clem Stein, Jr., Leonard Rutstein, Barbara Ann
Scott King and Lawrence N. Gross.
2.5**** Asset Purchase Agreement dated as of July 1, 1998 by and among
Scottsdale Institute, Inc., an Arizona corporation, The Frank G.
and Elizabeth S. Leite Revocable Trust dated April 14, 1992,
Frank G. Leite and Elizabeth S. Leite, and SCI Acquisition I,
Ltd., a Delaware Corporation.
3.1** Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Amended and Restated Bylaws of the Registrant.
4.1* Specimen stock certificate representing common stock.
4.2*** Amended and Restated Credit Agreement dated as of October 26,
1998 among the Registrant, as borrower, the Co-Borrowers named
therein, the lenders named therein, LaSalle National Bank, as
administrative agent and The Bank of Nova Scotia as foreign
currency agent (collectively, the "Parties").
4.3+ Amendment No. 1 and Consent to the Amended and Restated Credit
Agreement, dated as of February 24, 1999, by and between the
Parties.
4.4+ Amendment No. 2 to the Amended and Restated Credit Agreement,
dated as of March 31, 1999, by and between the Parties.
5++ Opinion of Katten Muchin Zavis as to the legality of the
securities being registered (including consent).
23.1 Consent of Arthur Andersen LLP with respect to financial
statements of the Registrant.
23.2++ Consent of Katten Muchin Zavis (contained in its opinion to be
filed as Exhibit 5 hereto).
24 Power of Attorney (included on signature page hereto).
27+++ Financial Data Schedule
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts+++
</TABLE>
- --------
* Incorporated by reference to the Exhibit of the same number to our
Registration Statement No. 333-37601 on Form S-1, effective as of January
28, 1998.
** Incorporated by reference to the Exhibit of the same number to our Annual
Report on Form 10-K for the year ended December 31, 1997.
***Incorporated by reference to the Exhibit of the same number to our
Registration Statement No. 333-70747 on Form S-1, effective as of March 17,
1999.
****Incorporated by reference to our Report on Form 8-K dated August 14, 1998.
+ Incorporated by reference to our Report on Form 10-Q for the quarter ended
March 31, 1999.
++ To be filed by amendment.
+++ Incorporated by reference to the Exhibit of the same number to our Annual
Report on Form 10-K for the year ended December 31, 1999.
II-2
<PAGE>
Item 17. Undertakings the Registrant hereby undertakes:
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefits plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act,
(i) the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective and (ii)
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois on the 27th day of
March, 2000.
Career Education Corporation
/s/ John M. Larson
By: _________________________________
John M. Larson
Chairman of the Board, President
and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John M. Larson and Patrick K. Pesch, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-3 (including
any registration statement filed pursuant to Rule 462(b) under the Securities
Act of 1933, and all amendments thereto) and to file the same, with all
exhibits thereto and any other documents in connection therewith, with the
Securities and Exchange Commission under the Securities Act of 1933, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as each might or
could do in person, hereby ratifying and confirming each act that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on March 27, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ John M. Larson Chairman of the Board, President, Chief
___________________________________________ Executive Officer (Principal Executive
John M. Larson Officer) and a Director
/s/ Patrick K. Pesch Senior Vice President, Chief Financial
___________________________________________ Officer, Treasurer and a Director
Patrick K. Pesch (Principal Financial and Accounting
Officer)
/s/ Robert E. Dowdell Director
___________________________________________
Robert E. Dowdell
/s/ Thomas B. Lally Director
___________________________________________
Thomas B. Lally
/s/ Wallace O. Laub Director
___________________________________________
Wallace O. Laub
/s/ Keith K. Ogata Director
___________________________________________
Keith K. Ogata
</TABLE>
II-4
<PAGE>
Exhibit 1
2,100,000 Shares
CAREER EDUCATION CORPORATION
Common Stock, $.01 par value
UNDERWRITING AGREEMENT
Credit Suisse First Boston Corporation
Chase Securities Inc.
Salomon Smith Barney Inc.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Ladies and Gentlemen:
1. Introductory. Career Education Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell 1,500,000 shares of its Common Stock,
$.01 par value (the "Securities"), and the stockholders listed in Schedule A
hereto (the "Selling Stockholders") propose severally to sell an aggregate of
600,000 outstanding shares of the Securities (such 2,100,000 shares of
Securities being hereinafter referred to as the "Firm Securities"). The Company
also proposes to sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than 315,000 additional shares of its Securities (such
315,000 additional shares being hereinafter referred to as the "Optional
Securities"). The Firm Securities and the Optional Securities are herein
collectively called the "Offered Securities." The Company and the Selling
Stockholders hereby agree with the several Underwriters named in Schedule B
hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-_____) relating to the Offered
Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission (the "Commission") and either (A) has
been declared effective under the Securities Act of 1933, as amended (the
"Act"), and is not proposed to be amended or (B) is proposed to be amended
by amendment or post-effective amendment. If such registration statement
(the "initial registration statement") has been declared effective,
<PAGE>
either (A) an additional registration statement (the "additional
registration statement") relating to the Offered Securities may have been
filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the
Act and, if so filed, has become effective upon filing pursuant to Rule
462(b), and the Offered Securities all have been duly registered under the
Act pursuant to the initial registration statement and, if applicable, the
additional registration statement, or (B) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule
462(b) and will become effective upon filing pursuant to Rule 462(b) and,
upon such filing, the Offered Securities will all have been duly registered
under the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to amend
the initial registration statement or if an additional registration
statement has been filed and the Company does not propose to amend it, and
if any post-effective amendment to either such registration statement has
been filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (A) if the
Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment thereto
(if any) filed prior to the execution and delivery of this Agreement, was
declared effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (B) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the Commission. If
an additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, Effective Time with respect
to such additional registration statement means the date and time as of
which such registration statement is filed and becomes effective pursuant
to Rule 462(b). "Effective Date" with respect to the initial registration
statement or the additional registration statement (if any) means the date
of the Effective Time thereof. The initial registration statement, as
amended at its Effective Time, including all material incorporated by
reference therein and all information contained in the additional
registration statement (if any) and deemed to be a part of the initial
registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form on
which it is filed and including all information (if any) deemed to be a
part of the initial registration statement as of its Effective Time
pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter
referred to as the "Initial Registration Statement." The additional
registration statement, as amended at its Effective Time, including the
contents of the initial registration statement incorporated by reference
therein and including all information (if any) deemed to be a part of the
additional registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement." The Initial Registration Statement and the Additional
-2-
<PAGE>
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration Statement."
The form of prospectus relating to the Offered Securities, as first filed
with the Commission pursuant to and in accordance with Rule 424(b) ("Rule
424(b)") under the Act or (if no such filing is required) as included in a
Registration Statement, including all material incorporated by reference in
such prospectus, is hereinafter referred to as the "Prospectus." No
document has been or will be prepared or distributed in reliance on Rule
434 under the Act.
(ii) (A) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (1) on the Effective
Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all material respects to the requirements of the Act
and the rules and regulations of the Commission (the "Rules and
Regulations") and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (2) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed or will conform, in all material respects
to the requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact and
did not omit, or will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
and (3) on the date of this Agreement, each of the Initial Registration
Statement and, if the Effective Time of the Additional Registration
Statement is prior to the execution and delivery of this Agreement, the
Additional Registration Statement conforms, and at the time of filing of
the Prospectus pursuant to Rule 424(b) or (if no such filing is required)
at the Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus will
conform, in all material respects to the requirements of the Act and the
Rules and Regulations, and none of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
(B) If the Effective Time of the Initial Registration Statement
is subsequent to the execution and delivery of this Agreement, on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all material
respects to the requirements of the Act and the Rules and Regulations,
neither of such documents will include any untrue statement of a material
fact or will omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and no
Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or the Prospectus based upon written information
furnished to the Company by any Selling Stockholder or by any Underwriter
through the Representatives specifically for use therein, it being
understood and agreed that the only such information furnished by any
Selling Stockholder is that described as such in Section 7(b) hereof and
the only such information furnished by any Underwriter is that described as
such in Section 7(c) hereof.
-3-
<PAGE>
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification, except for failures to be so
qualified and in good standing that, individually or in the aggregate, do
not have, and are reasonably likely not to have, a material adverse effect
on the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
(iv) Each of the subsidiaries of the Company listed in Schedule C
hereto (the "Material Subsidiaries") has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; and each Material
Subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified or in good standing
that, individually or in the aggregate, do not have, and are reasonably
likely not to have, a Material Adverse Effect; all of the issued and
outstanding capital stock of each Material Subsidiary of the Company has
been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each Material Subsidiary is owned
by the Company, directly or through subsidiaries, free from any mortgage,
pledge, lien, security interest, claim, encumbrance or other defect of any
kind, except any of the foregoing that has been or will be granted under
the Credit Agreement dated as of October 26, 1998, as amended (as described
in the Prospectus); and, there are no rights granted to or in favor of any
third party (whether acting in an individual, fiduciary or other capacity)
other than the Company to acquire such capital stock, any additional
capital stock or any other securities of any such Material Subsidiary.
(v) The Offered Securities to be sold by the Selling Stockholders and
all other outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and nonassessable and have
been issued in compliance with applicable federal and state securities
laws. The Offered Securities to be sold by the Company have been duly
authorized and will be, when issued and paid for in accordance with this
Agreement, validly issued, fully paid and nonassessable, and no further
approval or authorization of the stockholders or the Board of Directors of
the Company is or will be required for the issuance and sale of the Offered
Securities as contemplated by this Agreement on each Closing Date (as
defined below). The Offered Securities to be sold by the Selling
Stockholders conform and the Offered Securities to be sold by the Company
will conform to the descriptions thereof contained in the Prospectus under
the captions "Capitalization" and "Description of Capital Stock" and on
each Closing Date the stockholders of the Company will have no preemptive
or similar rights with respect to the Offered Securities or any other
securities of the Company.
(vi) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim
-4-
<PAGE>
against the Company or any Underwriter for a brokerage commission, finder's
fee or other like payment in connection with this Agreement.
(vii) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned
or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to a Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act.
(viii) The Securities have been approved for listing, subject to
notice of issuance, on The Nasdaq National Market.
(ix) Except as described in the Prospectus, no consent, approval,
authorization or order of, or filing with, any governmental agency or body
or any court is required to be obtained or made by the Company for the
consummation of the transactions contemplated by this Agreement, except
such as have been, or will be, obtained or made on or prior to the First
Closing Date (as defined below).
(x) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated herein have been duly authorized by all necessary corporate
action on the part of the Company and, to the extent required, its
stockholders and do not and will not conflict with or result in a breach or
violation of any of the terms and provisions of, and do not and will not
constitute a default (or an event which with the giving of notice or the
lapse of time or both would constitute a default) under, and do not and
will not result in the creation or imposition of any lien, charge or
encumbrance upon any assets, properties or operations of the Company or any
of its subsidiaries (including any individual institution within such
entity ("subsidiaries")) under, (A) the charter, by-laws or other
organizational documents of the Company or any such subsidiary, (B) except
as described in the Prospectus, any statute, rule, regulation, requirement,
order or decree of any governmental, regulatory or accrediting agency or
body or any court having jurisdiction over the Company or any such
subsidiary or any of their properties, assets or operations, including,
without limitation, The Higher Education Act of 1965, as amended, and the
regulations promulgated thereunder (the "HEA"), or (C) any indenture,
mortgage, loan or credit agreement, note, lease, permit, license or other
agreement or instrument to which the Company or any such subsidiary is a
party or by which the Company or any such subsidiary is bound or to which
any of the properties, assets or operations of the Company or any such
subsidiary is subject, except, in each case, for such conflicts, breaches,
violations, defaults, liens, charges or encumbrances that, individually or
in the aggregate, do not have, and are reasonably likely not to have, a
Material Adverse Effect or that, individually or in the aggregate, do not
have, and are reasonably likely not to have, a material adverse effect on
the ability of the Company to consummate the transactions contemplated by
this Agreement and perform its obligations hereunder. The sale of the
Offered Securities or consummation of the other transactions contemplated
by this Agreement will not
-5-
<PAGE>
constitute a change of ownership resulting in a "change of control" of the
Company as defined in the HEA.
(xi) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except to the extent that (A) enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
relating to creditors' rights generally and by general principles of
equity, whether applied by a court of law or equity, and (B) rights to
indemnity and contribution may be limited by federal or state securities
laws or policies underlying such laws.
(xii) Except as described in the Prospectus, the Company and its
Material Subsidiaries have good and marketable title to all real properties
and all other material properties and assets owned by them, in each case
free from any mortgage, pledge, lien, security interest, claim, encumbrance
or other defect of any kind, except any of the foregoing that do not have,
and are reasonably likely not to have, a Material Adverse Effect; and,
except as described in the Prospectus, the Company and its Material
Subsidiaries hold any leased real or material personal property under valid
and enforceable leases with no exceptions other than any exceptions that do
not have, and are reasonably likely not to have, a Material Adverse Effect.
(xiii) Except as described in the Prospectus, the Company and its
subsidiaries possess all accreditations, approvals, authorizations,
certificates, permits and licenses (collectively, "Licenses") issued by
appropriate governmental, regulatory or accrediting agencies or bodies,
including, without limitation, all authorizations required for
participation in federal aid programs under Title IV of the HEA ("Title IV
Programs"), as are necessary to own, lease or operate their properties and
to conduct the business now operated by them and all such Licenses are in
full force and effect, except for failures to possess any such Licenses or
failures of any such Licenses to be in full force and effect that,
individually or in the aggregate, do not have, and are reasonably likely
not to have, a Material Adverse Effect; the Company and its subsidiaries
are in compliance with their respective obligations under such Licenses,
subject to such qualifications as are described in the Prospectus; and,
except as described in the Prospectus, neither the Company nor any of its
subsidiaries has received written notice of any proceedings, investigations
or inquiries (or has knowledge of any facts that could form a reasonable
basis for any proceedings, investigations or inquiries) relating to the
revocation, modification, termination or suspension of any such License,
except for any such revocations, modifications, terminations or suspensions
that, individually or in the aggregate, do not have, and are reasonably
likely not to have, a Material Adverse Effect.
(xiv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that is
reasonably likely to have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively,
-6-
<PAGE>
"intellectual property rights") necessary to conduct the business now
operated by them, or currently employed by them, and have not received any
notice of infringement of or conflict with asserted rights of others with
respect to any intellectual property rights that, if determined adversely
to the Company or any of its subsidiaries, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect.
(xvi) Except as described in the Prospectus, neither the Company nor
any of its subsidiaries is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic
or foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively,
"environmental laws"), owns or operates any real property contaminated with
any substance that is subject to any environmental laws, is liable for any
off-site disposal or contamination pursuant to any environmental laws, or
is subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim, individually or in the
aggregate has, or is reasonably likely to have, a Material Adverse Effect;
and the Company is not aware of any pending investigation that is
reasonably likely to lead to such a claim.
(xvii) Except as described in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect or
would materially and adversely affect the ability of the Company to perform
its obligations under this Agreement or which are otherwise material in the
context of the sale of the Offered Securities; and no such actions, suits
or proceedings are, to the Company's knowledge, threatened.
(xviii) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of the
entities covered thereby as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States of America applied on a
consistent basis (except, with respect to unaudited interim financial
statements, as otherwise described in the Prospectus); any financial
statement schedules included in each Registration Statement present fairly
the information required to be stated therein; and the assumptions used in
preparing the pro forma financial information included in each Registration
Statement and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts.
(xix) Except as described in the Prospectus, since the date of the
latest financial statements of the Company included in the Prospectus there
has been no material adverse change, nor any development or event involving
a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the
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Company and its subsidiaries taken as a whole, and, except as described in
or contemplated by the Prospectus, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(xx) Except as described in the Prospectus, there are no outstanding
(A) securities or obligations of the Company convertible into or
exchangeable for any capital stock of the Company, (B) warrants, rights or
options to subscribe for or purchase from the Company any such capital
stock or any such convertible or exchangeable securities or obligations or
(C) obligations of the Company to issue any such capital stock, convertible
or exchangeable securities or obligations, or warrants, rights or
obligations.
(xxi) The Company and its Material Subsidiaries maintain a system of
internal accounting controls sufficient in all material respects for
purposes of the prevention or detection of errors or irregularities in
amounts that could be expected to be material to the Company's consolidated
financial statements and the recording of transactions so as to permit the
preparation of such consolidated financial statements in conformity with
generally accepted accounting principles.
(xxii) Neither the Company nor any of its Material Subsidiaries is in
violation of (A) its charter, by-laws or other organizational documents or
(B) except as described in the Prospectus, any statute, rule, regulation,
requirement, order, decree or judgment of any governmental, regulatory or
accrediting agency or body or any court having jurisdiction over the
Company or any such Material Subsidiary; and no event of default (or event
which with the giving of notice or the lapse of time, or both, would
constitute an event of defaults) exists under any indenture, mortgage, loan
or credit agreement, note, lease, permit, license or other agreement or
instrument to which the Company or any such subsidiary is a party or by
which the Company or any such Material Subsidiary is bound or to which any
of the properties, assets or operations of the Company or any such
subsidiary is subject, except, in each case, for violations or events of
default that, individually or in the aggregate, do not have, and are
reasonably likely not to have, a Material Adverse Effect.
(xxiii) The Company and its Material Subsidiaries carry or are
entitled to the benefits of insurance in such amounts and covering such
risks as the Company believes are generally maintained by companies of
established repute engaged in the same or a similar business, and all such
insurance is in full force and effect.
(xxiv) The Company has not taken and will not take, directly or
indirectly, any action designed to or that could cause or result in the
stabilization or manipulation of the price of the Offered Securities to
facilitate the sale or resale of the Offered Securities.
(xxv) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds
therefrom as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
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(b) Each Selling Stockholder severally represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder has, and on the Closing Date hereinafter
mentioned will have, good and clear title to the Offered Securities to be
delivered by such Selling Stockholder on such Offered Closing Date and full
right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver the Offered Securities to be delivered by such
Selling Stockholder on such Closing Date hereunder; and upon the delivery
of and payment for the Offered Securities on each Closing Date hereunder
the several Underwriters will acquire good and clear title to the Offered
Securities to be delivered by such Selling Stockholder on such Closing
Date.
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the Effective
Date of the Initial Registration Statement, the information in the Initial
Registration Statement under the caption "Selling Stockholders" which
specifically relates to such Selling Stockholder (the "Selling Stockholder
Information") did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, (B) on the Effective Date of
the Additional Registration Statement (if any), the Selling Stockholder
Information in each Registration Statement did not include, or will not
include, any untrue statement of a material fact and did not omit, or will
not omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (C) on the
date of this Agreement, the Selling Stockholder Information in each of the
Initial Registration Statement, and, if the Effective Time of the
Additional Registration Statement is prior to the execution and delivery of
this Agreement, the Additional Registration Statement, does not include, or
will not include, any untrue statement of a material fact or omit, or will
not omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If the Effective
Time of the Initial Registration Statement is subsequent to the execution
and delivery of this Agreement, then on the Effective Date of the Initial
Registration Statement, the Selling Stockholder Information in the Initial
Registration Statement and the Prospectus will not include any untrue
statement of a material fact and will not omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(iii) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder and constitutes the legal,
valid and binding obligation of such Selling Stockholder enforceable
against such Selling Stockholder in accordance with its terms, except to
the extent that (A) enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws
relating to creditors' rights generally and by general principles of
equity, whether applied by a court of law or equity, and (B) rights to
indemnity and contribution may be limited by federal and state securities
laws or policies underlying such laws.
(iv) Except as described in the Prospectus, no consent, approval,
authorization or order of, filing with, any governmental agency or body or
any court is required to be obtained or made for the consummation by such
Selling Stockholder of the transactions
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contemplated by this Agreement, except such as have been, or will be,
obtained or made on or prior to the First Closing Date.
(v) The execution, delivery and performance by such Selling
Stockholder of the Power of Attorney, the Custody Agreement and this
Agreement, the sale of the Offered Securities to be sold by such Selling
Stockholder and the consummation by such Selling Stockholder of any of the
other transactions herein and therein contemplated, do not and will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute or will constitute a default (or an event
which with the giving of notice or the lapse of time or both would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon the Offered Securities under (A) in the
case of a corporate Selling Stockholder, the charter, by-laws or other
organizational documents of such Selling Stockholder, (B) except as
described in the Prospectus, any statute, rule, regulation, requirement,
order or decree of any governmental or accrediting agency or body or any
court having jurisdiction over such Selling Stockholder or any of its
properties, assets or operations or (C) any indenture, mortgage, loan or
credit agreement, note, lease, permit, license or other agreement or
instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound or to which any of the properties, assets or
operations of such Selling Stockholder is subject, except, in each case,
for such conflicts, breaches, violations, defaults, liens, charges and
encumbrances that individually or in the aggregate, do not have, and are
reasonably likely not to have, a material adverse effect on the ability of
such Selling Stockholder to consummate the transactions contemplated by
this Agreement, the Power of Attorney and the Custody Agreement or perform
such Selling Stockholder's obligations hereunder and thereunder.
(vi) The Power of Attorney and related Custody Agreement with respect
to such Selling Stockholder has been duly authorized, executed and
delivered by such Selling Stockholder and constitute valid and legally
binding obligations of each such Selling Stockholder enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar law of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(vii) Except as described in the Prospectus, there are no contracts,
agreements or understandings between such Selling Stockholder and any third
party that would give rise to a valid claim against such Selling
Stockholder or any Underwriter for a brokerage commission, finder's fee or
other like payment in connection with the transactions contemplated by this
Agreement.
(viii) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that could cause or
result in the stabilization or manipulation of the price of the Offered
Securities to facilitate the sale or resale of the Offered Securities.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and each Selling Stockholder
agree, severally and not jointly, to sell to the
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Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company and each Selling Stockholder, at a purchase price of
$_______ per share, that number of Firm Securities (rounded up or down as
determined by Credit Suisse First Boston Corporation ("CSFBC") in its
discretion, in order to avoid fractions) obtained by multiplying 1,500,000 Firm
Securities (in the case of the Company) and the number of Firm Securities set
forth opposite the name of such Selling Stockholder in Schedule A hereto (in the
case of a Selling Stockholder) in each case by a fraction the numerator of which
is the number of Firm Securities set forth opposite the name of such Underwriter
in Schedule B hereto and the denominator of which is the total number of Firm
Securities.
Certificates in negotiable form for the Offered Securities to be sold by
the Selling Stockholders hereunder have been placed in custody, for delivery
pursuant to this Agreement, under Custody Agreements made with [Harris Trust and
Savings Bank,] as custodian ("Custodian"). Each Selling Stockholder agrees that
the shares represented by the certificates held in custody for such Selling
Stockholders under such Custody Agreements are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling Stockholders
for such custody are, to that extent, irrevocable, and that the obligations of
the Selling Stockholders hereunder shall not be terminated by operation of law,
whether by the death of any individual Selling Stockholder or the occurrence of
any other event, or, in the case of a trust, by the death of any trustee or
trustees or the termination of such trust. If any individual Selling Stockholder
or any such trustee or trustees should die, or if any other such event should
occur, or if any of such trusts should terminate, before the delivery of the
Offered Securities to be sold by such Selling Stockholder hereunder,
certificates for such Offered Securities shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such death or
other event or termination had not occurred, regardless of whether or not the
Custodian shall have received notice of such death or other event of
termination.
The Company and the Custodian will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters against payment of the
purchase price in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank designated by the Company and the Selling
Stockholders and reasonably acceptable to CSFBC drawn to the order of the
Company in the case of the Firm Securities sold by the Company and to each
Selling Stockholder in the case of the Firm Securities sold by such Selling
Stockholder at the office of Katten Muchin & Zavis, at ____ A.M., New York time,
on __________, 2000 or at such other time not later than seven full business
days thereafter as CSFBC, the Company and the Custodian determine (such time
being herein referred to as the "First Closing Date"). For purposes of Rule
15c6-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the First Closing Date (if later than the otherwise applicable settlement
date) shall be the settlement date for payment of funds and delivery of
securities for all the Offered Securities sold pursuant to this Agreement. The
certificates for the Firm Securities so to be delivered will be in definitive
form, in such denominations and registered in such names as CSFBC requests and
will be made available for checking and packaging at the office of CSFBC, Eleven
Madison Avenue, New York, New York 10010, at least 24 hours prior to the First
Closing Date.
In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per share to be paid for the Firm
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<PAGE>
Securities. The Company agrees to sell to the Underwriters the number of
Optional Securities specified in such notice and the Underwriters agree,
severally and not jointly, to purchase such Optional Securities. Such Optional
Securities shall be purchased for the account of each Underwriter in the same
proportion as the number of Firm Securities set forth opposite such
Underwriter's name bears to the total number of Firm Securities (subject to
adjustment by CSFBC to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments made in connection
with the sale of the Firm Securities. No Optional Securities shall be sold or
delivered unless the Firm Securities previously have been, or simultaneously
are, sold and delivered. The right to purchase the Optional Securities or any
portion thereof may be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at any time upon notice
by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date," which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of the Company. The certificates for the Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as CSFBC requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the office of CSFBC, Eleven Madison Avenue, New York,
New York 10010, at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Offered Securities for sale to the public as set forth in
the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders. The
Company agrees with the several Underwriters and the Selling Stockholders and,
with respect to clauses (j) and (k) below, each Selling Stockholder agrees with
the Company and the several Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the 15th business day after the Effective Date of the Initial
Registration Statement. The Company will advise CSFBC promptly of any such
filing pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to register
a portion of the Offered Securities under the Act but the Effective Time
thereof has not occurred as of such execution and delivery, the Company
will file the additional registration statement or, if filed, will file a
post-effective amendment thereto with the
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Commission pursuant to and in accordance with Rule 462(b) on or prior to
10:00 P.M., New York time, on the date of this Agreement or, if earlier, on
or prior to the time the Prospectus is printed and distributed to any
Underwriter, or will make such filing at such later date as shall have been
consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to amend or
supplement the initial or any additional registration statement as filed or
the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent, which
consent shall not be unreasonably withheld; and the Company will also
advise CSFBC promptly of the effectiveness of each Registration Statement
(if its Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of any
stop order proceedings in respect of a Registration Statement and will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will promptly
notify CSFBC of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement that will
correct such statement or omission or an amendment which will effect such
compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will make generally available to its
security holders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) that will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement (three of which will be signed and will include all
exhibits), each related preliminary prospectus and, so long as a prospectus
relating to the Offered Securities is required to be delivered under the
Act in connection with sales by any Underwriter or dealer, the Prospectus
and all amendments and supplements to such documents, in each case in such
quantities as CSFBC reasonably requests. The Prospectus shall be so
furnished on or prior to 3:00 P.M., New York time, on the business day
following the later
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of the execution and delivery of this Agreement or the Effective Time of
the Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution; provided, that the Company shall not be
required to file a general consent to service of process or qualify to do
business in any jurisdiction in which it is not so qualified.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Exchange Act or mailed to stockholders, and (ii)
from time to time, such other information concerning the Company as CSFBC
may reasonably request.
(h) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act relating
to, any additional shares of its Securities or securities convertible into
or exchangeable or exercisable for any shares of its Securities, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFBC, except
issuances of Securities pursuant to the conversion or exchange of
convertible or exchangeable securities or the exercise of warrants or
options, in each case outstanding on the date hereof, or grants of employee
or director stock options pursuant to the terms of a plan in effect on the
date hereof or issuances of Securities pursuant to the exercise of such
options.
(i) The Company and each Selling Stockholder agree with the several
Underwriters that the Company will pay all expenses incident to the
performance of the obligations of the Company and such Selling Stockholder,
as the case may be, under this Agreement, for any filing fees and other
expenses (including fees and disbursements of counsel to the Company) in
connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, for the filing fee incident to, the review by
the National Association of Securities Dealers, Inc. (the "NASD") of the
Offered Securities, for any travel expenses of the Company's officers and
employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the Offered
Securities and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters. Each Selling Stockholder will reimburse the
Underwriters (if and to the extent incurred by them) for any transfer taxes
on the sale by such Selling Stockholder of the Offered Securities to the
Underwriters.
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(j) Each Selling Stockholder agrees to deliver to CSFBC, attention:
Transactions Advisory Group, on or prior to the First Closing Date, if any,
a properly completed and executed United States Treasury Department Form W-
9 (or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(k) Each Selling Stockholder agrees, for a period of 90 days after the
date of the initial public offering of the Offered Securities, not to
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any additional shares of the Securities of the Company or
securities convertible into or exchangeable or exercisable for any shares
of Securities, enter into a transaction which would have the same effect,
or enter into any swap, hedge or other arrangement that transfers, in whole
or in part, any of the economic consequences of ownership of the
Securities, whether any such aforementioned transaction is to be settled by
delivery of the Securities or such other securities, in cash or otherwise,
or publicly disclose the intention to make any such offer, sale, pledge or
disposition, or enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of CSFBC.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement to
be filed shortly prior to such Effective Time), of Arthur Andersen LLP
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the applicable Rules and
Regulations thereunder and stating substantially to the effect that:
(i) in their opinion the financial statements and schedule of the
Company audited by them and included in the Registration Statements
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards
No. 71, Interim Financial Information, on the unaudited financial
statements included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii) above
and a reading of the latest available interim financial statements of
the Company, inquiries of
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officials of the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the related published Rules and Regulations or any material
modifications should be made to such unaudited financial
statements for them to be in conformity with generally accepted
accounting principles;
(B) at the date of the latest available balance sheet read
by such accountants, and at a subsequent specified date not more
than three business days prior to the date of this Agreement,
there was any decrease in stockholders' investment or change in
the capital stock or any increase in total current liabilities or
long term debt of the Company and its consolidated subsidiaries
or any decrease in consolidated total current assets or total
assets as compared with amounts shown on the latest balance sheet
included in the Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date
of the latest available income statement read by such accountants
and at a subsequent specified date not more than three business
days prior to the date of this Agreement, there were any
decreases, as compared with the corresponding period of the
previous year, in consolidated total net revenue or income from
operations of the Company or in the total or per share amounts of
consolidated total net income of the Company;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
(iv) they have read any unaudited pro forma information included
in the Prospectus, inquired of certain officials of the Company who
have responsibility for financial and accounting matters about the
basis for their determination of the pro forma adjustments and whether
such unaudited pro forma financial information complies as to form in
all material respects with the applicable requirements of Rule 11-02
of Regulation S-X under the Act; and proved the arithmetic accuracy of
the application of the pro forma adjustments to the historical amounts
in the unaudited pro forma financial information;
(v) on the basis of the procedures specified in clause (iv)
above, nothing came to their attention that caused them to believe
that the unaudited pro forma financial information referred to in
clause (iv) above does not comply as to form in all material respects
with the applicable accounting requirements of Rule 11-02 of
Regulation S-X under the Act and that the pro forma adjustments have
not been
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properly applied to the historical amounts in the compilation of that
information; and
(vi) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Registration Statements (in each case to the extent
that such dollar amounts, percentages and other financial information
are derived from the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and delivery
of this Agreement, "Registration Statements" shall mean the initial
registration statement as proposed to be amended by the amendment or post-
effective amendment to be filed shortly prior to its Effective Time, (ii)
if the Effective Time of the Initial Registration Statements is prior to
the execution and delivery of this Agreement but the Effective Time of the
Additional Registration Statement is subsequent to such execution and
delivery, "Registration Statements" shall mean the Initial Registration
Statement and the additional registration statement as proposed to be filed
or as proposed to be amended by the post-effective amendment to be filed
shortly prior to its Effective Time, and (iii) "Prospectus" shall mean the
prospectus included in the Registration Statements. All financial
statements and schedules indicated in material incorporated by reference
into the Prospectus shall be deemed included in the Registration Statements
for purposes of this subsection.
(b) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, the time the Prospectus
is printed and distributed to any Underwriter, or shall have occurred at
such later date as shall have been consented to by CSFBC. If the Effective
Time of the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with the
Commission in accordance with the Rules and Regulations and Section 5(a)
hereof. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall be threatened by the
Commission.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective
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change, in the condition (financial or other), business, properties or
results of operations of the Company or its subsidiaries, taken as a whole,
which, in the judgment of a majority in interest of the Underwriters
(including the Representatives), is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities; (ii) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company on
any exchange or in the over-the-counter market; (iii) any banking
moratorium declared by U.S. Federal or New York authorities; or (iv) any
outbreak or escalation of major hostilities in which the United States of
America is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters (including the
Representatives), the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for the
Offered Securities.
(d) The Representatives shall have received an opinion, dated such
Closing Date, of Katten Muchin & Zavis, counsel for the Company, to the
effect that:
(i) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct
its business as described in the Prospectus; and the Company is
qualified to do business as a foreign corporation in good standing in
each jurisdiction listed in Schedule D hereto;
(ii) The Offered Securities to be sold by the Selling
Stockholders on such Closing Date and all other outstanding shares of
capital stock of the Company have been duly authorized and are validly
issued, fully paid and nonassessable. The Offered Securities to be
sold by the Company have been duly authorized and will be, when issued
and paid for in accordance with this Agreement, validly issued, fully
paid and nonassessable. The Offered Securities conform in all material
respects to the descriptions thereof contained in the Prospectus under
the captions "Capitalization" and "Description of Capital Stock;"
(iii) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement, other than as required
under state securities laws or as have been obtained or made under the
Act (it being understood that such counsel need express no opinion as
to the matters described in Section 6(f)(ii), as to which Dow, Lohnes
& Albertson, PLLC, is providing an opinion to the Underwriters, or
Section 6(g)(ii), as to which Fraser Milner is providing an opinion to
the Underwriters);
(iv) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
herein contemplated have been duly authorized by all necessary
corporate action on the
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part of the Company and, to the extent required, its stockholders and
do not result in a breach or violation of any of the terms and
provisions of, and do not constitute a default (or an event which with
the giving of notice or the lapse of time or both would constitute a
default) under, and do not result in the creation or imposition of any
lien, charge or encumbrance upon any assets, properties or operations
of the Company or any of its Material Subsidiaries under, (A) the
charter, by-laws or other organizational documents of the Company or
any such Material Subsidiary, (B) to the knowledge of such counsel,
any statute, rule, regulation, requirement, order or decree of any
governmental or regulatory agency or body or any court having
jurisdiction over the Company or any such Material Subsidiary or any
of their properties, assets or operations or (C) to the knowledge of
such counsel, any indenture, mortgage, loan or credit agreement, note,
lease, permit, license or other agreement or instrument that is
material to the Company and the Material Subsidiaries, taken as a
whole, and to which the Company or such Material Subsidiary is a party
or by which the Company or any such Material Subsidiary is bound or to
which any of the properties, assets or operations of the Company or
any such Material Subsidiary is subject (it being understood that, in
the case of clause (B) above, such counsel need express no opinion as
to the matters described in Section 6(f)(iii), as to which Dow, Lohnes
& Albertson, PLLC, is providing an opinion to the Underwriters, or
Section 6(g)(iii), as to which Fraser Milner is providing an opinion
to the Underwriters);
(v) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable)
specified in such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in
such opinion on the date specified therein or was included in the
Initial Registration Statement or the Additional Registration
Statement (as the case may be), and, to the knowledge of such counsel,
no stop order suspending the effectiveness of a Registration Statement
or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act, and each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or
issue dates, complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations; the
descriptions in the Registration Statements and Prospectus of
statutes, legal and governmental proceedings and contracts and other
documents are accurate and fairly present the information required to
be shown (it being understood that such counsel need express no
opinion as to the matters described in Section 6(f)(i), as to which
Dow, Lohnes & Albertson, PLLC, is providing an opinion to the
Underwriters, or Section 6(g)(i), as to which Fraser Milner is
providing an opinion to the Underwriters); and
(vi) This Agreement has been duly executed and delivered by the
Company and is enforceable against the Company in accordance with its
terms, except to the extent that (A) enforceability may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws relating
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to creditors' rights generally and by general principles of equity,
whether applied by a court of law or equity, and (B) rights to
indemnity and contribution may be limited by federal and state
securities laws or policies underlying such laws.
In addition, such counsel shall state that (A) except as
described in the Prospectus, to the knowledge of such counsel, there
are no contracts or agreements between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act; (B) such counsel do not know of any legal or
governmental proceedings required to be described in a Registration
Statement or the Prospectus which are not described as required or of
any contracts or documents of a character required to be described in
a Registration Statement or the Prospectus or to be filed as exhibits
to a Registration Statement which are not described and filed as
required; (C) except as described in the Prospectus, to the knowledge
of such counsel, there are no pending or threatened actions, suits,
proceedings or investigations against or affecting the Company or any
of its subsidiaries or any of their respective properties, assets or
operations that, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, would be reasonably
likely to have, a Material Adverse Effect or would be reasonably
likely to materially and adversely affect the ability of the Company
to perform its obligations under this Agreement; and (D) they have no
reason to believe that any part of a Registration Statement or any
amendment thereto, as of its effective date or as of such Closing
Date, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or that the Prospectus or
any amendment or supplement thereto, as of its issue date or as of
such Closing Date, contained any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the
statements therein, the light of the circumstances under which they
were made, not misleading (it being understood that for purposes of
this subparagraph such counsel need express no opinion as to the
financial statements and schedules and other financial and accounting
data contained in the Registration Statements or the Prospectus or as
to any matters described in Section 6(f), as to which Dow, Lohnes &
Albertson, PLLC, is providing an opinion to the Underwriters, or
Section 6(g), as to which Fraser Milner is providing an opinion to the
Underwriters).
In rendering such opinion, such counsel may rely as to matters governed by
the laws of jurisdictions other than the laws of jurisdictions in which such
counsel is admitted to practice and the federal laws of the United States of
America and, to the extent deemed appropriate by such counsel, as to other
matters upon the opinions of counsel reasonably satisfactory to the
Representatives and counsel for the Underwriters.
(e) The Representatives shall have received opinions, dated such
Closing Date, of counsel for the Selling Stockholders satisfactory to the
Representatives, to the effect that:
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(i) Immediately prior to the delivery of the Offered Securities
being sold by such Selling Stockholder, such Selling Stockholder was
the sole registered owner of the Offered Securities and has legal
right and power, or, in the case of a corporate Selling Stockholder,
corporate power and authority, to enter into this Agreement and to
sell, assign, transfer and deliver the Offered Securities delivered by
such Selling Stockholder on such Closing Date; and, upon payment for
such Offered Securities, delivery to the Underwriters by such Selling
Stockholder of such Offered Securities and registration of such
Offered Securities in the names of the Underwriters or their nominees,
assuming the Underwriters have purchased such Offered Securities for
value, in good faith and without notice of any adverse claim as
defined in Section 8-105 of the Uniform Commercial Code, the
Underwriters will have acquired all the rights of such Selling
Stockholder in such Offered Securities free of any adverse claim, any
lien in favor of the Company and any restrictions on transfer imposed
by the Company;
(ii) This Agreement, the Power of Attorney and Custody Agreement
have been duly authorized, executed and delivered by or on behalf of
such Selling Stockholder and constitutes the legal, valid and binding
obligations of such Selling Stockholder enforceable against such
Selling Stockholder in accordance with their respective terms, except
to the extent that (A) enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar
laws relating to creditors' rights generally and by general principles
of equity, whether applied by a court of law or equity, and (B) rights
to indemnity and contribution may be limited by federal and state
securities laws or policies underlying such laws;
(iii) No consent, approval, authorization, order of or filing
with, any governmental agency or body or any court is required to be
obtained or made by such Selling Stockholder for the consummation by
such Selling Stockholder of the transactions contemplated by this
Agreement (it being understood that such counsel need express no
opinion as to the matters described in Section 6(f)(ii), as to which
Dow, Lohnes & Albertson, PLLC, is providing an opinion to the
Underwriters, or Section 6(g)(ii), as to which Fraser Milner is
providing an opinion to the Underwriters); and
(iv) The execution, delivery and performance by such Selling
Stockholder of the Power of Attorney, the Custody Agreement and this
Agreement and the consummation of the transactions contemplated herein
and therein by such Selling Stockholder do not result in a breach or
violation of any of the terms and provisions of, and do not constitute
a default (or an event which with the giving of notice or the lapse of
time or both would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon the
Offered Securities being sold by such Selling Stockholder under (A) in
the case of a corporate Selling Stockholder, the charter, by-laws or
other organizational documents of such Selling Stockholder, (B) to the
knowledge of such counsel, any statute, rule, regulation, requirement,
order or decree of any governmental or regulatory agency or body, or
any court having jurisdiction over such Selling
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<PAGE>
Stockholder or any of its properties, assets or operations or (C) to
the knowledge of such counsel, any indenture, mortgage, loan or credit
agreement, note, lease, permit, license or other agreement or
instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound or to which any of the properties,
assets or operations of such Selling Stockholder is subject, except,
in each case, for such breaches, violations, defaults, liens, charges
and encumbrances which could not, individually or in the aggregate,
have a material adverse effect on the ability of such Selling
Stockholder to consummate the transactions contemplated by this
Agreement, the Power of Attorney and the Custody Agreement or perform
such Selling Stockholder's obligations hereunder and thereunder (it
being understood that, in the case of clause (B) above, such counsel
need express no opinion as to the matters described in Section
6(f)(iii), as to which Dow, Lohnes & Albertson, PLLC, is providing an
opinion to the Underwriters, or Section 6(g)(iii), as to which Fraser
Milner is providing an opinion to the Underwriters).
(f) The Representatives shall have received from Dow, Lohnes &
Albertson, PLLC, special United States regulatory counsel to the Company,
such opinion or opinions, dated as of such Closing Date, to the effect
that:
(i) The statements contained in the Prospectus under the
captions "Risk Factors -- Failure to Comply with Extensive Regulations
Could Have a Material Adverse Effect on our Business" and the
statements incorporated by reference into the Prospectus from the
Company's Annual Report on Form 10-K for the year ended December 31,
1999 (the "Form 10-K") under the caption "Financial Aid and
Regulation" to the extent related to educational regulatory matters
other than Canadian educational regulatory matters, insofar as such
statements constitute a summary of legal matters, documents or
proceedings with respect to the operation of postsecondary educational
institutions and the offering of programs of postsecondary education
in the United States of America (collectively, "U.S. Regulatory
Matters"), are accurate in all material respects;
(ii) Except as disclosed in the Prospectus, no consent,
approval, authorization, order, registration or qualification of, or
filing with, the U.S. Department of Education under Title IV of the
HEA or any state education agency under any similar state statute
governing the authorization to operate postsecondary educational
institutions is required for the consummation of the transactions
contemplated by this Agreement in connection with the issuance and
sale of the Offered Securities;
(iii) To the knowledge of such counsel, except as disclosed in
the Prospectus, the execution, delivery and performance by the Company
of this Agreement and the consummation of the transactions
contemplated herein in connection with the issuance and sale of the
Offered Securities do not result in a breach or violation of (A) Title
IV of the HEA; (B) any rule, regulation or requirement of the U.S.
Department of Education promulgated under Title IV of
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the HEA; or (C) any similar state statute governing the authorization
to operate postsecondary educational institutions, except for any such
breaches or violations that, individually or in the aggregate, do not
have, and are reasonably likely not to have, a Material Adverse
Effect;
(iv) The consummation of the transactions contemplated by this
Agreement in connection with the issuance and sale of the Offered
Securities will not constitute a change of ownership resulting in a
"change of control" as defined in the HEA; and
(v) To the knowledge of such counsel, except as disclosed in the
Prospectus, the Company and its subsidiaries have all necessary
Licenses required for the Company and such subsidiaries to participate
in the Title IV Programs as described in the Registration Statements
and the Prospectus, except for any failures to possess any such
Licenses that, individually or in the aggregate, do not have, and are
not reasonably likely to have, a Material Adverse Effect.
Such counsel shall also describe the extent to which they have
participated in the preparation of those portions of the Registration
Statements and the Prospectus relating to U.S. Regulatory Matters and
state that nothing has come to their attention in the course of such
participation to cause them to believe that the information relating
to U.S. Regulatory Matters contained in any Registration Statement or
any amendment thereto (and specifically excluding the financial
statements and schedules and other financial and accounting data), as
of its effective date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that any such information contained in the
Prospectus or any amendment or supplement thereto, as of its issue
date or as of such Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(g) The Representatives shall have received an opinion, dated such
Closing Date, of Fraser Milner, special Canadian regulatory counsel for the
Company, to the effect that:
(i) The statements contained in the Prospectus under the caption
"Risk Factors -- Failure to comply with extensive Canadian regulations
could affect the ability of our Canadian schools to participate in
Canadian financial aid programs" and the statements incorporated by
reference into the Prospectus from the Form 10-K under the caption
"Financial Aid and Regulation - Canadian Regulation" (collectively,
the "Canadian Captions"), in each case, only to the extent related to
legislation, regulations and other legal requirements applicable
specifically to the regulation of private vocational schools and
student financial assistance programs thereat in the Province of
Ontario and the regulation of private educational institutions and
student financial assistance programs thereat in the Province of
Quebec (collectively, "Canadian Educational Regulatory Matters"),
insofar as such
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<PAGE>
statements constitute a summary of Canadian Educational Regulatory
Matters are, accurate in all material respects;
(ii) Except as described in the Prospectus, no prior consent,
approval, authorization, order, registration or qualification of, or
filing with, any governmental or regulatory agency or body under any
legislation or regulation related to Canadian Educational Regulatory
Matters ("Canadian Educational Legislation") is required for the
consummation of the transactions contemplated by this Agreement; and
(iii) The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated
herein do not result in a breach or violation of Canadian Educational
Legislation, except for any such breaches or violations that,
individually or in the aggregate, do not have, and are reasonably
likely not to have, a Material Adverse Effect.
Such counsel shall also state that they have no reason to believe
that any statements relating to Canadian Educational Regulatory
Matters contained in any Registration Statement or any amendment
thereto under the Canadian Captions, as of its effective date or as of
such Closing Date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that any
statements relating to Canadian Educational Regulatory Matters
contained in the Prospectus or any amendment or supplement thereto
under the Canadian Captions, as of its issue date or as of such
Closing Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters governed by
the laws of jurisdictions other than the laws of jurisdictions in which such
counsel is admitted to practice and the federal laws of the United States of
America upon the opinions of counsel reasonably satisfactory to the
Representatives and counsel for the Underwriters. Further, Fraser Milner may
qualify its opinion in such manner as counsel for the Underwriters may agree.
(h) The Company shall have delivered to the Representatives
agreements of the executive officers and directors of the Company and the
Selling Stockholders to the effect that, for a period of 90 days after the
date of the initial public offering of the Offered Securities, such persons
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any additional shares of the Securities of the
Company or securities convertible into or exchangeable or exercisable for
any shares of Securities, enter into a transaction which would have the
same effect, or enter into any swap, hedge or other arrangement that
transfers, in whole or in part, any of the economic consequences of
ownership of the Securities, whether any such aforementioned transaction is
to be settled by delivery of the Securities or such other securities, in
cash or otherwise, or publicly disclose the intention to make any such
offer, sale, pledge or disposition, or enter into any such
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transaction, swap, hedge or other arrangement, without, in each case, the
prior written consent of CSFBC.
(i) The Representatives shall have received from Sidley & Austin,
counsel for the Underwriters, such opinion or opinions, dated such Closing
Date, with respect to the incorporation of the Company, the validity of the
Offered Securities delivered on such Closing Date, the Registration
Statements, the Prospectus and other related matters as the Representatives
may require, and the Selling Stockholders and the Company shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(j) The Representatives shall have received a certificate of the
Company, dated such Closing Date, executed on behalf of the Company by the
President or any Vice President and a principal financial or accounting
officer of the Company after their reasonable investigation, to the effect
that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date; no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are, to the knowledge
of such officers, threatened by the Commission; the Additional Registration
Statement (if any) satisfying the requirements of subparagraphs (1) and (3)
of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any
Underwriter; and, subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse change,
nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or
results of operations of the Company and its subsidiaries taken as a whole,
except as set forth in or contemplated by the Prospectus or as described in
such certificate.
(k) The Representatives shall have received a certificate, dated such
Closing Date, of each Selling Stockholder, which, in the case of a
corporate Selling Stockholder, shall be executed on behalf of such Selling
Stockholder by a senior executive officer of such Selling Stockholder,
after reasonable investigation, to the effect that: the representations and
warranties of such Selling Stockholder in this Agreement are true and
correct and such Selling Stockholder has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date.
(l) The Representatives shall have received a letter, dated such
Closing Date, of Arthur Andersen LLP, which meets the requirements of
subsection (a) of this Section, except that the specified date referred to
in such subsection will be a date not more than three business days prior
to such Closing Date for the purposes of this subsection.
(m) The Representatives shall have received copies of the certificate
of incorporation or other equivalent document of each Material Subsidiary
listed in Schedule E hereto, certified as of a date within fifteen days
prior to the Closing Date by the secretary of state or other equivalent
governmental official of the jurisdiction of
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incorporation of such Material Subsidiary and certificates of appropriate
governmental officials as to the good standing of such Material Subsidiary
under the laws of the jurisdiction of its incorporation and as to the
qualification of each Material Subsidiary to do business as a foreign
corporation in good standing in each jurisdiction listed opposite its name
in Schedule E hereto.
(n) The Representatives shall have received such other opinions,
certificates, letters and other documents from or on behalf of the Company
or the Selling Stockholders as the Representatives shall reasonably
request.
The Selling Stockholders and the Company will furnish the Representatives
with such conformed copies of such opinions, certificates, letters and documents
as the Representatives reasonably request. CSFBC may in its sole discretion
waive on behalf of the Underwriters compliance with any conditions to the
obligations of the Underwriters hereunder, whether in respect of an Optional
Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Selling Stockholder or by
any Underwriter through the Representatives specifically for use therein, it
being understood and agreed that the only such information furnished by any
Underwriter consists of the information described as such in subsection (c)
below; and provided, further, however, that the foregoing indemnity with respect
to any untrue statement or alleged untrue statement or omission or alleged
omission in any preliminary prospectus or the Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities if a copy of the Prospectus or any
amendment or supplement thereto was not sent or given to such person at or prior
to the written confirmation of the sale of such Offered Securities to such
person if required by the Act and the Prospectus or any amendment or supplement
thereto would have cured the defect giving rise to such loss, claim, damage or
liability.
(b) Each Selling Stockholder will, severally and not jointly, indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
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alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement was made in reliance upon and in conformity with written
information furnished to the Company or its representatives by or on behalf of
such Selling Stockholder specifically for use therein, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Selling Stockholder
consists of the Selling Stockholder Information; provided, however, that the
liability of each Selling Stockholder pursuant to this subsection (b) is limited
to the proceeds received (less underwriting discounts and commissions) by such
Selling Stockholder, if any, from the sale of the Firm Securities; and provided,
further, however, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the person asserting any
such losses, claims, damages or liabilities purchased the Offered Securities if
a copy of the Prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Offered Securities to such person if
required by the Act and the Prospectus would have cured the defect giving rise
to such loss, claim, damage or liability.
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and each Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or such Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and each Selling Stockholder in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: the penultimate paragraph of
the cover page concerning the terms of the offering by the Underwriters, the
list under the caption "Underwriting" setting forth the names of the
Underwriters and the number of Firm Securities to be purchased by each
Underwriter, the concession and reallowance figures appearing in the fourth
paragraph under the caption "Underwriting," the information responsive to
Regulation M under the Act contained in the ninth paragraph under the caption
"Underwriting" and the information contained under the caption "Notice to
Canadian Residents."
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be
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made against an indemnifying party under subsection (a), (b) or (c) above,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under subsection (a), (b) or
(c) above. In case any such action is brought against any indemnified party and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party (who shall not, except with the consent of such indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the relevant indemnified party, effect any settlement of any pending
or threatened action in respect of which indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified party
unless such settlement includes an unconditional release of such indemnified
party from all liability on any claims that are the subject matter of such
action.
(e) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a), (b) or
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission
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or alleged omission, and no Selling Stockholder shall be required to contribute
any amount in excess of the amount by which the proceeds received (less
underwriting discounts and commissions) by such Selling Stockholder, if any,
from the sale of the Offered Securities exceeds the amount of any damages which
such Selling Stockholder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under this
Section shall be in addition to any liability which the Company and the Selling
Stockholders may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Offered Securities hereunder on either the First
Closing Date or any Optional Closing Date and the aggregate number of shares of
Offered Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total number of shares of Offered
Securities that the Underwriters are obligated to purchase on such Closing Date,
CSFBC may make arrangements satisfactory to the Company and the Selling
Stockholders for the purchase of such Offered Securities by other persons,
including any of the Underwriters, but if no such arrangements are made by such
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Offered
Securities that such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so default and the
aggregate number of shares of Offered Securities with respect to which such
default or defaults occur exceeds 10% of the total number of shares of Offered
Securities that the Underwriters are obligated to purchase on such Closing Date
and arrangements satisfactory to CSFBC, the Company and the Selling Stockholders
for the purchase of such Offered Securities by other persons are not made within
36 hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholders, except as provided in Section 9 (provided that if such default
occurs with respect to Optional Securities after the First Closing Date, this
Agreement will not terminate as to the Firm Securities or any Optional
Securities purchased prior to such termination). As used in this Agreement, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholders or their officers (if applicable), of the Company or its
officers and of the several Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation,
or statement as to the results thereof, made by or on behalf of any Underwriter,
any
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Selling Stockholder, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company, the Selling Stockholders and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect; provided, however, that
the obligations of the Company in Sections 5 and 7 shall not affect any rights
of the Company against any defaulting Underwriter. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (ii), (iii) or (iv) of
Section 6(c), the Company will reimburse the Underwriters for all out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed or delivered to the Representatives, c/o
Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y.
10010-3629, Attention: Investment Banking Department - Transactions Advisory
Group, or, if sent to the Company, will be mailed or delivered to it at 2800
West Higgins Road, Suite 790, Hoffman Estates, Illinois 60195, Attention: Chief
Financial Officer, or, if sent to the Selling Stockholders or any of them, will
be mailed or delivered to the addresses set forth in Schedule A hereto;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed or delivered, telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective personal representatives and
successors and the officers and directors and controlling persons referred to in
Section 7, and no other person will have any right or obligation hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. Messrs. Larson or Pesch will
act for the Selling Stockholders other than Heller Equity Capital Corporation
("Heller") in connection with such transactions, and any action under or in
respect of this Agreement taken by Messrs. Larson or Pesch will be binding upon
such Selling Stockholders. __________ will act for Heller in connection with
such transactions, and any action under or in respect of this Agreement taken by
_____________ will be binding upon Heller.
13. Counterparts. This 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 Agreement.
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14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflict of laws.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
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If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Stockholders, the Company and the several Underwriters in accordance with its
terms.
Very truly yours,
CAREER EDUCATION CORPORATION
By:________________________________
Patrick K. Pesch
Senior Vice President and
Chief Financial Officer
SELLING STOCKHOLDERS
By:_______________________________
John M. Larson or Patrick K. Pesch
As attorneys-in-fact acting on behalf of
the Selling Stockholders
HELLER EQUITY CAPITAL CORPORATION
By:_______________________________
Name:
Title:
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The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
SALOMON SMITH BARNEY INC.
Acting on behalf of themselves and as the Representatives of the
several Underwriters.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By:________________________
Name:
Title:
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Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 20, 2000
(except with respect to the matter discussed in the last paragraph of Note 5, as
to which the date is February 1, 2000) included in CAREER EDUCATION
CORPORATION's Form 10-K for the year ended December 31, 1999 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 27, 2000
