SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___________)*
Concorde Career Colleges, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
- --------------------------------------------------------------------------------
Common Stock, $.10 Par Value Per Share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
20651H 10 2
- --------------------------------------------------------------------------------
(CUSIP Number)
Walter H. Stowell, Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street, Boston, MA 02110
(617) 248-7000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 25, 1997
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
|_|.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
- --------------------
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Edward L. Cahill
SSN: ###-##-####
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |_|
(b) |X|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
AF
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) or 2(e)
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------- -------- -------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH -------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------- ----------------------------------------------------------------------
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David L. Warnock
SSN: ###-##-####
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |_|
(b) |X|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
AF
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------- -------- -------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH
-------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------- ----------------------------------------------------------------------
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cahill, Warnock Strategic Partners, L.P.
IRSN: 52-1970604
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |_|
(b) |X|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
AF
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) or 2(e)
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- --------- ----------------------------------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH
-------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
PN
- --------- ----------------------------------------------------------------------
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cahill, Warnock Strategic Partners Fund, L.P.
IRSN: 52-1970619
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
WC, BK
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) or 2(e)
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- --------------------------- -------- -------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH
-------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
PN
- --------- ----------------------------------------------------------------------
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cahill, Warnock & Company, LLC
IRSN: 52-1931617
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |_|
(b) |X|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
AF
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) or 2(e)
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland Limited Liability Company
- --------------------------- -------- -------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH
-------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
OO
- --------- ----------------------------------------------------------------------
SCHEDULE 13D
- -----------------------------------------
CUSIP NO. 20651H 10 2
- -----------------------------------------
- --------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Strategic Associates, L.P.
IRSN: 52-1991689
- --------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) |X|
(b) |_|
- --------- ----------------------------------------------------------------------
3 SEC USE ONLY
- --------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
WC
- --------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEMS 2(d) or 2(e)
- --------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware Limited Partnership
- --------------------------- -------- -------------------------------------------
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES -------- -------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,602,940
-------- -------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
PERSON
WITH
-------- -------------------------------------------
10 SHARED DISPOSITIVE POWER
1,602,940
- --------- ----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,602,940
- --------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X|
SHARES (See Instructions)
- --------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
- --------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
PN
- --------- ----------------------------------------------------------------------
ITEM 1. SECURITY AND ISSUER:
This statement relates to the Common Stock, $.10 par value per share
(the "Shares"), of Concorde Career Colleges, Inc., a Delaware corporation (the
"Issuer"). The address of the Issuer's principal executive offices is 1100 Main
Street, Suite 416, Kansas City, MO 64105.
ITEM 2. IDENTITY AND BACKGROUND:
This statement is being filed by (i) Cahill, Warnock Strategic Partners
Fund, L.P. ("Strategic Partners Fund"), (ii) Cahill Warnock Strategic Partners,
L.P. ("Strategic Partners"), the sole general partner of Strategic Partners
Fund, (iii) Strategic Associates, L.P. ("Strategic Associates"), (iv) Cahill,
Warnock & Company, LLC ("Cahill, Warnock & Co."), the sole general partner of
Strategic Associates, (v) Edward L. Cahill ("Cahill"), a general partner of
Strategic Partners and a member of Cahill, Warnock & Co., and (vi) David L.
Warnock ("Warnock"), a general partner of Strategic Partners and a member of
Cahill, Warnock & Co. Strategic Partners Fund, Strategic Partners, Strategic
Associates, Cahill, Warnock & Co., Cahill and Warnock are sometimes referred to
collectively herein as the "Reporting Persons."
The address of the principal business and principal office of Strategic
Partners Fund, Strategic Partners, Strategic Associates and Cahill, Warnock &
Co. is 1 South Street, Suite 2150, Baltimore, MD 21202. The business address of
Cahill and Warnock is 1 South Street, Suite 2150, Baltimore, MD 21202.
The state of organization for Strategic Partners Fund, Strategic
Partners and Strategic Associates is Delaware. The state of organization for
Cahill, Warnock & Co. is Maryland. Both Cahill and Warnock are citizens of the
United States of America.
The principal business of Strategic Partners Fund and Strategic
Associates is to make private equity investments in micro-cap public companies
seeking capital for expansion or undergoing a restructuring of ownership. The
principal business of Strategic Partners is to act as the sole general partner
of Strategic Partners Fund. The principal business of Cahill, Warnock & Co. is
to act as the sole general partner of Strategic Associates and Camden Partners,
L.P. ("Camden Partners") and to manage the activities of Strategic Partners
Fund, Strategic Associates and Camden Partners. The principal occupations of
Cahill and Warnock are their activities on behalf of Strategic Partners Fund,
Strategic Partners, Strategic Associates, Cahill, Warnock & Co. and Camden
Partners.
The principal business of Camden Partners is to make passive
investments in public companies. The principal office of Camden Partners is 1
South Street, Suite 2150, Baltimore, MD 21202.
During the five years prior to the date hereof, none of the Reporting
Persons has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or has been a party to a civil proceeding
ending in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding a violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION:
On February 25, 1997 Strategic Partners Fund acquired 39,752 shares of
Class B Voting Convertible Preferred Stock of the Issuer for a total purchase
price of $1,081,255. The preferred stock acquired by Strategic Partners Fund is
currently convertible into 795,040 shares of the Issuer's Common Stock. The
working capital of Strategic Partners Fund was the source of funds for this
purchase. No part of the purchase price was or will be represented by funds or
other consideration borrowed or otherwise obtained for the purpose of acquiring,
holding, trading or voting the preferred stock.
On February 25, 1997, Strategic Partners Fund acquired 473,750 shares
of the Issuer's Common Stock for a total purchase price of $473,750. The funds
used to purchase the Common Stock were borrowed from Wilmington Trust Company
pursuant to a certain Promissory Note and Loan Agreement dated February 5, 1997,
by
and among Strategic Partners Fund and Wilmington Trust Company (attached hereto
as Exhibit 3). The Promissory Note and Loan Agreement provides Strategic
Partners Fund with a revolving line of credit of up to $8,000,000.
On February 25, 1997 Strategic Associates acquired 2,895 shares of
Class B Voting Convertible Preferred Stock of the Issuer for a total purchase
price of $78,744. The preferred stock acquired by Strategic Associates is
currently convertible into 57,900 shares of the Issuer's Common Stock. The
working capital of Strategic Associates was the source of funds for this
purchase. No part of the purchase price was or will be represented by funds or
other consideration borrowed or otherwise obtained for the purpose of acquiring,
holding, trading or voting the preferred stock.
On February 25, 1997 Strategic Associates acquired 26,250 shares of the
Issuer's Common Stock for a total purchase price of $26,250. The working capital
of Strategic Associates was the source of funds for this purchase. No part of
the purchase price was or will be represented by funds or other consideration
borrowed or otherwise obtained for the purpose of acquiring, holding, trading or
voting the common stock.
ITEM 4. PURPOSE OF TRANSACTION:
Strategic Partners Fund and Strategic Associates acquired the Issuer's
securities for investment purposes. Depending on market conditions, their
continuing evaluation of the business and prospects of the Issuer and other
factors, Strategic Partners Fund and Strategic Associates may dispose of or
acquire additional securities of the Issuer. Except as stated below, none of the
Reporting Persons has any present plans which relate to or would result in:
(a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of
its subsidiaries;
(c) A sale or transfer of a material amount of assets of the
Issuer or of any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies
on the board;
(e) Any material change in the present capitalization or dividend
policy of the Issuer;
(f) Any other material change in the Issuer's business or
corporate structure;
(g) Changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted
from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of
a registered national securities association;
(i) A class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4)
of the Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Exception. Pursuant to the terms of a certain Convertible Preferred
Stock Purchase Agreement dated as of February 25, 1997, by and among the Issuer,
Strategic Partners Fund and Strategic Associates, (the "Stock Purchase
Agreement")(attached hereto as Exhibit 6), Strategic Partners Fund shall
purchase an additional 12,500 shares of Class B Voting Convertible Preferred
Stock of the Issuer on March 21, 1997.
Exception. On February 25, 1997, pursuant to a certain Subordinated
Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic
Partners Fund (attached hereto as Exhibit 8), Strategic Partners Fund purchased
from the Issuer a 5% Subordinated Debenture due February 25, 2003 in the
principal amount of $3,316,250 (attached hereto as Exhibit 12). As partial
consideration for the purchase, Strategic Partners Fund was granted warrants to
purchase 2,438,419 shares of the Issuer's Common Stock at an exercise price of
$1.36 per share (attached hereto as Exhibit 10). The warrants do not become
exercisable until August 25, 1998 and, subject to certain exceptions, expire on
February 25, 2003.
Exception. On February 25, 1997, pursuant to a certain Subordinated
Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic
Associates (attached hereto as Exhibit 9), Strategic Associates purchased from
the Issuer a 5% Subordinated Debenture due February 25, 2003 in the principal
amount of $183,750 (attached hereto as Exhibit 13). As partial consideration for
the purchase, Strategic Associates was granted warrants to purchase 135,110
shares of the Issuer's Common Stock at an exercise price of $1.36 per share
(attached hereto as Exhibit 11). The warrants do not become exercisable until
August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003.
Exception. Pursuant to the terms of a certain Stockholders' Agreement,
dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund,
Strategic Associates, Jack L. Brozman, The Estate of Robert F. Brozman and the
Robert F. Brozman Trust Under Agreement Dated December 28, 1989 (the
"Stockholders' Agreement") (attached hereto as Exhibit 5), the parties thereto
agreed to fix the size of the Board of Directors of the Issuer at six (6), and
each shareholder who is a party to the agreement agreed to vote all of its
shares of stock of the Issuer to elect certain persons to the Board of Directors
of the Issuer. As a consequence of this agreement, at present, Strategic
Partners Fund and Strategic Associates collectively shall have the authority to
elect two members of the Board of Directors.
ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER:
(a) Strategic Partners Fund is the record owner of 39,752 shares of
Class B Voting Convertible Preferred Stock of the Issuer (the "Fund Preferred
Stock"). The Fund Preferred Stock is currently convertible into 795,040 shares
of the Issuer's Common Stock (the "Fund Conversion Shares"). Strategic Partners
Fund has a right to acquire an additional 12,500 shares of Class B Voting
Convertible Preferred Stock (the "Second Closing Preferred Stock") within 60
days of the date hereof. The Second Closing Preferred Stock is convertible into
250,000 shares of the Issuer's Common Stock (the "Second Closing Conversion
Shares"). In addition, Strategic Partners Fund is the record owner of 473,750
shares of Common Stock of the Issuer (the "Fund Common Stock").
Strategic Associates is the record owner of 2,895 shares of Class B
Voting Convertible Preferred Stock of the Issuer (the "Associates Preferred
Stock"). The Associates Preferred Stock is currently convertible into 57,900
shares of the Issuer's Common Stock (the "Associates Conversion Shares"). In
addition, Strategic Associates is the record owner of 26,250 shares of Common
Stock of the Issuer (the "Associates Common Stock").
The Fund Conversion Shares, the Second Closing Conversion Shares, the
Fund Common Stock, the Associates Conversion Shares and the Associates Common
Stock are sometimes referred to herein collectively as the "Concorde Shares".
Because of their relationship as affiliated entities, both Strategic
Partners Fund and Strategic Associates may be deemed to own beneficially the
Concorde Shares. As general partners of Strategic Partners Fund and Strategic
Associates, respectively, Strategic Partners and Cahill, Warnock & Co. may be
deemed to own beneficially the Concorde Shares. As the individual general
partners of Strategic Partners and as the members of Cahill, Warnock & Co., both
Cahill and Warnock may be deemed to own beneficially the Concorde Shares.
By virtue of the Stockholders' Agreement (attached hereto as Exhibit 5)
each of the Reporting Persons may be deemed to share voting power with respect
to each share of the Issuer's stock subject to the agreement. Consequently, the
Reporting Persons may be deemed to beneficially own, in addition to the Concorde
Shares, an additional 3,337,048 shares of the Issuer's Common Stock (the
"Agreement Shares").
Strategic Partners Fund disclaims beneficial ownership of the
Associates Conversion Shares, the Associates Common Stock and the Agreement
Shares. Strategic Associates disclaims beneficial ownership of the Fund
Conversion Shares, the Second Closing Conversion Shares, the Fund Common Stock
and Agreement Shares. Strategic Partners, Cahill, Warnock & Co., Cahill and
Warnock each disclaim beneficial ownership of the Concorde Shares and the
Agreement Shares.
Each of the Reporting Persons may be deemed to own beneficially 19.9%
of the Issuer's Common Stock, which percentage is calculated based upon (i)
6,961,776 shares of Common Stock reported outstanding by the Issuer in its
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996,
and (ii) the number of shares of Common Stock (1,102,940) issuable upon
conversion of the Fund Preferred Stock, the Second Closing Preferred Stock and
Associates Preferred Stock. The calculation of beneficial ownership percentage
does not reflect potential deemed beneficial ownership of the Agreement Shares.
In Amendment No. 1 to the Limited Partnership Agreement of Strategic
Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic
Partners and the limited partners of Strategic Partners Fund agreed that any
securities of a particular issuer that are acquired by both Strategic Partners
Fund and Strategic Associates shall be sold or otherwise disposed of at
substantially the same time, on substantially the same terms and in amounts
proportionate to the size of each of their investments. As a consequence,
Strategic Associates and Strategic Partners Fund may be deemed to be members of
a group pursuant to Rule 13d-5(b)(1) of the Securities Exchange Act of 1934.
Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim
membership in the aforementioned group.
(b) Number of Shares as to which each such person has
(i) Sole power to vote or direct the vote:
0 shares for each Reporting Person;
(ii) Shared power to vote or direct the vote:
1,602,940* shares for each Reporting Person;
(iii) Sole power to dispose or to direct the disposition:
0 shares for each Reporting Person;
(iv) Shared power to dispose or to direct the disposition:
1,602,940* shares for each Reporting Person.
* Does not reflect potential deemed beneficial ownership of the
Agreement Shares.
(c) Except as set forth above, none of the Reporting Persons has
effected any transaction in the Shares during the last 60 days.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or any proceeds from the sale of, the
Shares beneficially owned by any of the Reporting Persons.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER:
In Amendment No. 1 to the Limited Partnership Agreement of Strategic
Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic
Partners and the limited partners of Strategic Partners Fund agreed that any
securities of a particular issuer that are acquired by both Strategic Partners
Fund and Strategic Associates shall be sold or otherwise disposed of at
substantially the same time, on substantially the same terms and in amounts
proportionate to the size of each of their investments.
Pursuant to the terms of a certain Registration Rights Agreement dated
as of February 25, 1997, by and among the Issuer, Strategic Partners Fund and
Strategic Associates (attached hereto as Exhibit 7), subject to certain
exceptions and limitations, Strategic Partners Fund and Strategic Associates are
granted certain demand and "piggyback" registration rights.
Pursuant to the terms of the Stock Purchase Agreement, by and among the
Issuer, Strategic Partners Fund and Strategic Associates (attached hereto as
Exhibit 6), on February 25, 1997 Strategic Partners Fund acquired 39,752 shares
of Class B Voting Convertible Preferred Stock and Strategic Associates acquired
2,895 shares of Class B Voting Convertible Preferred Stock. In addition,
pursuant to this agreement, Strategic Partners Fund shall purchase an additional
12,500 shares of Class B Voting Convertible Preferred Stock of the Issuer on
March 21, 1997.
Pursuant to the terms of the Stockholders' Agreement, dated as of
February 25, 1997 by and among the Issuer, Strategic Partners Fund, Strategic
Associates, Jack L. Brozman, The Estate of Robert F. Brozman and the Robert F.
Brozman Trust Under Agreement Dated December 28, 1989 (the parties to the
agreement, with the exception of the Issuer, may be referred to herein
collectively as the "Securityholders")(attached hereto as Exhibit 5), the
parties thereto agreed to fix the size of the Board of Directors of the Issuer
at six (6), and the Securityholders agreed to vote all of their shares of stock
of the Issuer to elect certain persons to the Board of Directors of the Issuer.
As a consequence of the agreement, at present, Strategic Partners Fund and
Strategic Associates shall collectively have the authority to elect two members
of the Board of Directors. The Stockholders' Agreement also contains provisions
restricting transfer of any shares of stock owned the Securityholders, and,
under certain circumstances, grants each Securityholder a right of first refusal
in the event one of the other Securityholders wants to transfer all or a portion
of its shares. In addition, subject to certain restrictions and limitations,
this agreement grants the Securityholders certain demand and "piggyback"
registration rights. Pursuant to this agreement, Strategic Partners Fund and
Strategic Associates are granted certain preemptive rights which allow them to
participate in certain equity offerings of the Issuer to the extent necessary to
maintain their respective proportional interest in the Issuer.
Pursuant to a certain Subordinated Debenture and Warrant Purchase
Agreement by and between the Issuer and Strategic Partners Fund (attached hereto
as Exhibit 8), Strategic Partners Fund purchased from the Issuer a 5%
Subordinated Debenture due February 25, 2003 in the principal amount of
$3,316,250 (attached hereto as Exhibit 12). As partial consideration for the
purchase, Strategic Partners Fund was granted warrants to purchase 2,438,419
shares of the Issuer's Common Stock at an exercise price of $1.36 per share
(attached hereto as Exhibit 10). The warrants do not become exercisable until
August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003.
Pursuant to the terms of a certain Common Stock Purchase Warrant dated
February 25, 1997 (attached hereto as Exhibit 10) granted by the Issuer,
Strategic Partners Fund is granted warrants to purchase 2,438,419 shares of the
Issuer's Common Stock at an exercise price of $1.36 per share. The exercise
price is subject to adjustment upon the occurrence of certain dilution events.
The warrants do not become exercisable until August 25, 1998 and, subject to
certain exceptions, expire on February 25, 2003. Upon the occurrence of a
certain firm commitment underwritten public offering of Common Stock by the
Issuer, this warrant may become mandatorily exercisable. The sole party to this
agreement is the Issuer.
Pursuant to the terms of a certain 5% Subordinated Debenture due
February 25, 2003 (attached hereto as Exhibit 12) the Issuer agrees to pay
Strategic Partners Fund the principal amount of $3,316,250 and to pay interest
on any unpaid principal at the annual rate of five percent. Upon the occurrence
of a certain underwritten public offering of Common Stock by the Issuer,
Strategic Partners Fund may, in its discretion, require the Issuer to apply the
proceeds from that offering to prepay the unpaid principal amount and
outstanding interest on this Debenture. The sole party to this agreement is the
Issuer.
Pursuant to a certain Subordinated Debenture and Warrant Purchase
Agreement by and between the Issuer and Strategic Associates (attached hereto as
Exhibit 9), Strategic Associates purchased from the Issuer a 5% Subordinated
Debenture due February 25, 2003 in the principal amount of $183,750 (attached
hereto as Exhibit 13). As partial consideration for the purchase, Strategic
Associates was granted warrants to purchase 135,110 shares of
the Issuer's Common Stock at an exercise price of $1.36 per share (attached
hereto as Exhibit 11). The warrants do not become exercisable until August 25,
1998 and, subject to certain exceptions, expire on February 25, 2003.
Pursuant to the terms of a certain Common Stock Purchase Warrant dated
February 25, 1997 (attached hereto as Exhibit 11) granted by the Issuer,
Strategic Associates is granted warrants to purchase 135,110 shares of the
Issuer's Common Stock at an exercise price of $1.36 per share. The exercise
price is subject to adjustment upon the occurrence of certain dilution events.
The warrants do not become exercisable until August 25, 1998 and, subject to
certain exceptions, expire on February 25, 2003. Upon the occurrence of a
certain firm commitment underwritten public offering of Common Stock by the
Issuer, this warrant may become mandatorily exercisable. The sole party to this
agreement is the Issuer.
Pursuant to the terms of a certain 5% Subordinated Debenture due
February 25, 2003 (attached hereto as Exhibit 13) the Issuer agrees to pay
Strategic Associates the principal amount of $183,750 and to pay interest on any
unpaid principal at the annual rate of five percent. Upon the occurrence of a
certain underwritten public offering of Common Stock by the Issuer, Strategic
Associates may, in its discretion, require the Issuer to apply the proceeds from
that offering to prepay the unpaid principal amount and outstanding interest on
this Debenture. The sole party to this agreement is the Issuer.
Pursuant to the terms of a certain Stock Purchase Agreement dated as of
February 25, 1997 by and among Strategic Partners Fund, Strategic Associates and
The Estate of Robert F. Brozman (attached hereto as Exhibit 14), the Estate of
Robert F. Brozman sold 473,750 shares of the Issuer's Common Stock to Strategic
Partners Fund and 26,250 shares of the Issuer's Common Stock to Strategic
Associates. The Common Stock was sold for $1.00 per share.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS:
Exhibit 1 - Agreement regarding filing of joint Schedule 13D.
Exhibit 2 - Amendment No. 1 to the Limited Partnership Agreement of
Strategic Partners Fund.
Exhibit 3 - Promissory Note and Loan Agreement dated February 5,
1997 by and among Strategic Partners Fund and Wilmington
Trust Company.
Exhibit 4 - Pledge and Security Agreement dated February 5, 1997 by
and among Strategic Partners Fund and Wilmington Trust
Company, in its capacity as "financial intermediary" and
"secured party" (as those terms are defined therein).
Exhibit 5 - Stockholders' Agreement dated as of February 25, 1997
by and among the Issuer, Strategic Partners Fund, Strategic
Associates, Jack L. Brozman, The Estate of Robert F.
Brozman and the Robert F. Brozman Trust Under Agreement
dated December 28, 1989.
Exhibit 6 - Convertible Preferred Stock Purchase Agreement dated as
of February 25, 1997 by and among the Issuer, Strategic
Partners Fund and Strategic Associates.
Exhibit 7 - Registration Rights Agreement dated as of February 25,
1997 by and among the Issuer, Strategic Partners Fund and
Strategic Associates.
Exhibit 8 - Subordinated Debenture and Warrant Purchase Agreement
dated as of February 25, 1997 by and between the Issuer and
Strategic Partners Fund.
Exhibit 9 - Subordinated Debenture and Warrant Purchase Agreement
dated as of February 25, 1997 by and between the Issuer and
Strategic Associates.
Exhibit 10 - Common Stock Purchase Warrant dated February 25, 1997
granting Strategic Partners Fund the right to purchase up
to 2,438,419 shares of the Issuer's Common Stock at a
purchase price of $1.36 per share.
Exhibit 11 - Common Stock Purchase Warrant dated February 25, 1997
granting Strategic Associates the right to purchase up to
135,110 shares of the Issuer's Common Stock at a purchase
price of $1.36 per share.
Exhibit 12 - 5% Subordinated Debenture due February 25, 2003 in the
principal amount of $3,316,250.
Exhibit 13 - 5% Subordinated Debenture due February 25, 2003 in the
principal amount of $183,750.
Exhibit 14 - Stock Purchase Agreement dated February 25, 1997 by and
among Strategic Partners Fund, Strategic Associates and
The Estate of Robert F. Brozman.
SCHEDULE 13D
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief,
we certify that the information set forth in this statement is true, complete
and correct.
Dated: March 4, 1997 /s/ Edward L. Cahill
-----------------------------------------
Edward L. Cahill
/s/ David L. Warnock
-----------------------------------------
David L. Warnock
CAHILL, WARNOCK STRATEGIC
PARTNERS FUND, L.P.
By: Cahill, Warnock Strategic Partners,
L.P., its Sole General Partner
By: /s/ Edward L. Cahill
-------------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
-------------------------------------
David L. Warnock, General Partner
CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.
By: /s/ Edward L. Cahill
-----------------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
-----------------------------------------
David L. Warnock, General Partner
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Co., LLC, its
sole General Partner
By: /s/ Edward L. Cahill
------------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
------------------------------------
David L. Warnock, Member
CAHILL, WARNOCK & CO., LLC
By: /s/ Edward L. Cahill
-----------------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
-----------------------------------------
David L. Warnock, Member
Exhibit 1
AGREEMENT
Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, the
undersigned hereby agree that only one statement containing the information
required by Schedule 13D need be filed with respect to the ownership by each of
the undersigned of shares of stock of Concorde Career Colleges, Inc.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
Executed this 4th day of March, 1997.
/s/ Edward L. Cahill
----------------------------------
Edward L. Cahill
/s/ David L. Warnock
----------------------------------
David L. Warnock
CAHILL, WARNOCK STRATEGIC
PARTNERS FUND, L.P.
By: Cahill, Warnock Strategic Partners,
L.P., its Sole General Partner
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, General Partner
CAHILL, WARNOCK STRATEGIC
PARTNERS, L.P.
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, General Partner
STRATEGIC ASSOCIATES, L.P.
By: Cahill, Warnock & Co., LLC, its
sole General Partner
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, Member
CAHILL, WARNOCK & CO., LLC
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, Member
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, Member
Exhibit 2
AMENDMENT NO. 1 TO
LIMITED PARTNERSHIP AGREEMENT
OF
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
AMENDMENT NO. 1 dated as of the 26th day of July, 1996, by and among
Cahill, Warnock Strategic Partners, L.P., a Delaware limited partnership, as
general partner (the "General Partner") of Cahill, Warnock Strategic Partners
Fund, L.P., a Delaware limited partnership (the "Partnership"), and the Limited
Partners of the Partnership listed on Schedule A to the Limited Partnership
Agreement of the Partnership, dated as of April 11, 1996 (the "Partnership
Agreement"), at least 66 2/3% in interest of whom have executed a counterpart
signature page to this Amendment No. 1:
WHEREAS, immediately prior to the admission on the date hereof of
additional Limited Partners to the Partnership pursuant to Section 8(c) of the
Partnership Agreement, the parties hereto desire to amend the Partnership
Agreement and approve Amendment No. 1 to the Management Agreement, the form of
which Management Agreement is attached to the Partnership Agreement as Schedule
B.
NOW, THEREFORE, the parties hereto, in consideration of the premises and
the agreements herein contained and intending to be legally bound hereby, agree
as follows:
1. Section 4(k)(2) of the Partnership Agreement is amended by deleting the
second sentence thereof in its entirety and substituting the following:
"Notwithstanding Section 4(e)(1) to the contrary, the Principals
may organize, after the date of this Agreement, other investment
funds and client investment vehicles for the benefit of
employees, associates and advisors of the General Partner and the
Principals and for investors who may be strategically important
to the Partnership, specifically for the purpose of co-investing
with the Partnership; provided that the aggregate amount of
capital committed to such other investment funds and client
investment vehicles does not exceed $7 million; and provided,
further, that any such investment funds or client investment
vehicles which are managed by the General Partner or the
Principals shall sell
or otherwise dispose of each such co-investment at substantially
the same time and on substantially the same terms as the
Partnership in amounts proportionate to the relative size of the
investments made by such investment funds and client investment
vehicles and the Partnership."
2. Section 7(a) of the Partnership Agreement is amended by deleting the
first sentence thereof in its entirety and substituting the following:
"The Partnership shall have a Valuation Committee which shall
consist of at least three (3) but not more than five (5) members,
none of whom shall be an officer, director, member or employee of
the General Partner, the Management Company or any affiliate
thereof, and none of whom shall be related to any Principal."
3. Section 8(a) of the Partnership Agreement is amended by adding the
following text at the end thereof:
"Each notice for an Additional Capital Contribution from the
General Partner shall include a general description of the
purposes and uses for which the Additional Capital Contribution
is being called including, for example, the payment of
Partnership expenses (including the Management Fee) and the
purchase of Portfolio Company Securities; provided that the
General Partner shall not be required to identify the purposes
and uses of 100% of any Additional Capital Contribution or be
required to identify the name of any particular Portfolio Company
or proposed Portfolio Company. After the fourth anniversary of
the last admittance of any additional Limited Partners pursuant
to Section 8(c) hereof, the General Partner shall not make any
further calls for Additional Capital Contributions for the
purpose of investing in the Securities of any entity that was not
a Portfolio Company (including as a Portfolio Company for such
purpose, any predecessor of such entity) on such anniversary
date, except with the approval of the Valuation Committee. After
the fifth anniversary of the last admittance of any additional
Limited Partners pursuant to Section 8(c) hereof, the General
Partner shall not make any further calls for Additional Capital
Contributions for the purpose of investing in the Securities of
any entity that was a Portfolio Company (including as a Portfolio
Company for such purpose, any predecessor of such entity) on such
anniversary date, except with the approval of the Valuation
Committee."
4. Section 11(b) of the Partnership Agreement is amended by adding the
following subsection (8) at the end thereof:
"(8) An amount equal to 50% of all distributions made to the
General Partner, other than (A) Tax Distributions plus (B)
distributions the General Partner would have received if it had
made its Capital Contributions as a Limited Partner and did not
hold an interest as a General Partner (excluding any Tax
Distributions on account thereof which are included in (A)),
shall be used by the General Partner immediately upon
distribution thereof to prepay any promissory notes contributed
by the General Partner to the Partnership."
5. Section 16 of the Partnership Agreement is amended by adding the
following text at the end thereof:
"No Principal will voluntarily assign, pledge, mortgage,
hypothecate, sell or otherwise dispose of or encumber (a
"Disposition") all or any part of his interest in the allocations
made to the General Partner of "20% of such additional Net
Realized Gain" pursuant to Section 10(b)(1)(A)(iv) (the "20%
carried interest"), except for (a) Dispositions to members of his
immediate family or trusts for the benefit of such general
partner or members of his immediate family (and, in the case of
any Dispositions to such family members or such trusts, the
transferee shall thereafter be subject, as to further transfers,
to the same restrictions on transfer as were applicable to the
transferor), (b) Dispositions to other persons who are associated
with or employed by the General Partner, the Principals or the
Management Company, and (c) Dispositions to another Principal;
provided, that, the Dispositions of all Principals pursuant to
clauses (a) and (b) shall not exceed in the aggregate 45% of
their aggregate interests in the 20% carried interest."
6. Section 19(c) of the Partnership Agreement is amended by adding the
following text at the end thereof:
"The General Partner shall transmit to each Partner within sixty
(60) days after the close of each fiscal year, a report
describing any fees and other remuneration which, pursuant to
Section 4(b) of the Management Agreement, reduced the Management
Fee payable in such fiscal year. Such description will be
organized by the type of such fees and other remuneration (e.g.,
director's fees and consulting fees) and the dollar amount
attributable to each such category."
7. Pursuant to Section 7 of the Management Agreement, the Limited Partners
hereby consent to Amendment No. 1 to the Management Agreement dated the
date hereof, which amends Section 4(b) of the Management Agreement by
adding the following text at the end thereof:
"If in any year such reductions exceed the Management Fee
otherwise payable, the excess amount of such reductions shall be
carried forward on a year-by-year basis."
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the day and year first above written.
GENERAL PARTNER
CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.
By: /s/ Edward L. Cahill
----------------------------------
Edward L. Cahill, General Partner
By: /s/ David L. Warnock
----------------------------------
David L. Warnock, General Partner
AMENDMENT NO. 1 TO
LIMITED PARTNERSHIP AGREEMENT
OF
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
LIMITED PARTNER SIGNATURE PAGE
The undersigned Limited Partner hereby executes Amendment No. 1 to Limited
Partnership Agreement of Cahill, Warnock Strategic Partners Fund, L.P. and
hereby authorizes this signature page to be attached to a counterpart of such
document executed by the General Partner of Cahill, Warnock Strategic Partners
Fund, L.P.
Please type or print exact
name of Limited Partner *
--------------------------------
Please sign here By
--------------------------------
Please type or print exact
name of signer
--------------------------------
Please type or print
title of signer Title
--------------------------------
* Signature pages of the limited partners will be provided upon request.
Exhibit 3
PROMISSORY NOTE AND LOAN AGREEMENT
Borrower: Cahill, Warnock Strategic Partners Fund, L.P.
1 South Street, Suite 2150
Baltimore, MD 21202
Lender: Wilmington Trust Company
1100 N. Market Street
Wilmington, DE 19890
I. LOAN TERMS
1.1. PROMISE TO PAY. Cahill, Warnock Strategic Partners Fund, L.P.
("Borrower") promises to pay to Wilmington Trust Company ("Lender") the
principal amount of Eight Million and 00/100 Dollars ($8,000,000) or so much
thereof as may be extended and outstanding, together with interest on the unpaid
outstanding principal balance thereof (the "Loan").
1.2. REVOLVING LINE OF CREDIT. This Promissory Note and Loan Agreement
("Note") evidences a revolving line of credit for the maximum amount of Eight
Million and 00/100 Dollars ($8,000,000) provided that the maximum aggregate
amount of credit the Lender shall extend hereunder, upon request from the
Borrower, is the lesser of 75% of the then anticipated capital contribution call
to Borrower's Limited Partners ("Capital Call") or $8,000,000; provided further
that each extension of credit hereunder ("Advance") shall have a maturity date
of less than 90 days so that the principal amount of any Advance will be repaid
within 90 days of the date of such Advance. The unpaid principal balance owing
on this Note at any time may be evidenced by Lender's internal records which
will be provided to Borrower from time to time upon Borrower's request. Lender
will have no obligation to Advance funds under this Note if Borrower has failed
to comply with the covenants of Section III of this Note or if the Borrower is
in default under the terms of Section IV of this Note or any agreement that
Borrower has with Lender, including any agreement made in connection with the
signing of this Note.
1.3. PAYMENT. Borrower will pay all outstanding principal plus all accrued
and unpaid interest under each Advance when due and payable. Interest shall be
calculated from the date of each Advance until repayment of each Advance.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will make all payments to
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payment will be applied first to accrued unpaid interest, then to principal, and
any remaining amount to any unpaid collection costs and late charges.
1.4. VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an index which is the WILMINGTON
TRUST COMPANY'S NATIONAL COMMERCIAL RATE (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans and is set by Lender
in its sole discretion. If the Index becomes unavailable during the term of this
loan, Lender will utilize a prime lending rate as published in the Wall Street
Journal. Lender will tell Borrower the current Index rate upon Borrower's
request. Borrower understands that Lender may make loans based on other rates as
well. The interest rate change will not occur more often than each day. The
Index currently is 8.25% per annum. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate equal to the Index,
resulting in an initial rate
of 8.25% per annum. NOTICE: Under no circumstances will the interest rate on
this Note be more than the maximum rate allowed by applicable law.
1.5. PREPAYMENT. Borrower may prepay from time to time in whole or in part
without penalty or premium all or a portion of the amount owed earlier than it
is due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of accrued unpaid
interest on the principal which remains outstanding. Rather, they will reduce
the principal balance due.
1.6 SECURITY. This Note and the Borrower's obligations hereunder are
secured by a pledge of all assets held in a sub account to Account Number 36054,
known as Account Number 36054-1 by Wilmington Trust Company as Agent for
Borrower Under Agreement dated February 29, 1996, as more specifically described
in and pledged pursuant to the Pledge and Security Agreement ("the Security
Agreement") entered into between the Bank and the Borrower as of this date.
1.7. LATE CHARGE. If a payment is not made within 15 days of the date such
payment becomes due, Borrower will be charged 5.000% of the unpaid portion of
the regularly scheduled payment or $5.00, whichever is greater.
1.8. NOTICE AND MANNER OF ADVANCES. Borrower shall give Lender at least 1
business days' oral notice to be followed by telecopy or written fax notice of
any request for Advances under this Note. Such notice shall constitute an
affirmative representation that Borrower is not in default of this Agreement and
that Borrower is in compliance with all of the covenants in Section III hereof.
Such Advances hereunder will be made in immediately available funds by crediting
the amount thereof to the Borrower's account with Wilmington Trust Company or by
other means acceptable to Lender. Advances shall only be made pending the
receipt of Additional Capital Contributions under the Borrower's Limited
Partnership Agreement.
Advances under this Note may be requested in writing by Borrower or by an
Authorized Person (as defined below). All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office set forth in Section 5.1. The following party or parties are authorized
to request Advances under the line of credit until Lender receives from Borrower
written notice of revocation of their authority and/or the designation of the
appointment of other authorized persons: Edward L. Cahill and David L. Warnock
(individually, an "Authorized Person"). Borrower agrees to be liable for all
sums either: (a) Advanced in accordance with the instructions of an Authorized
Person; or (b) credited to any of Borrower's accounts with Lender upon the
instructions of an Authorized Person.
1.9. ANNUAL FEE. Borrower will pay an annual fee equal to 1/4% of the
unused Note balance calculated and charged quarterly and in arrears directly to
the Borrower's Custody Account 36054-0.
1.10. TERMINATION DATE. The Revolving Line of Credit and this Note will
terminate at the earlier of December 31, 1998 or 90 days after the eighth
Capital Call subsequent to the date of this Note; provided, however, the Lender
retains the right to terminate this loan if any of the Limited Partners withdraw
their subscription.
1.11. GENERAL PARTNERS OF CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.
a) If an individual general partner of the general partner of the Borrower
no longer serve as general partner of the general partner of the Borrower, then
such person shall remain liable to the Lender for any Advances outstanding at
the time such person ceases to serves as a general partner, to the full extent
such person would be liable to the Lender under Delaware law if such person
continued to serve as a general partner of the general partner of the Borrower.
b) In the event that either Edward L. Cahill or David L. Warnock no longer
serves as a general partner of the general partner of the Borrower, the Lender
has the right to refuse to make any Advances under the Note. If the Lender
exercises this right, the Borrower may terminate the Note without penalty.
c) Notwithstanding anything to the contrary contained herein, the failure
of either Edward L. Cahill or David L. Warnock to continue to serve as a general
partner of the general partner of the Borrower, shall in no way be considered a
default or trigger any acceleration or penalties under the Note.
II. BORROWER'S REPRESENTATIONS AND WARRANTIES
2.1. ORGANIZATION AND STANDING. The Borrower is a Limited Partnership duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and is duly qualified to do business in each jurisdiction in which the
conduct of its business requires such qualification and would be materially and
adversely affected in the absence thereof. The Borrower is in compliance with
all applicable law and regulations governing the conduct of its business and
governing consummation of the transactions contemplated herein, except for any
such failures to so comply that will or do not, singly or in the aggregate, have
a material adverse effect on the business, assets, financial conditions,
operations, or prospects of Borrower.
2.2. POWER AND AUTHORITY. The execution, delivery, and performance hereof
by Borrower are within its powers, have been duly authorized by all necessary
action, and are not in contravention of law or the terms of its Limited
Partnership Agreement or any amendment thereto, or any indenture, agreement, or
undertaking to which Borrower is a party or by which it is bound.
2.3. VALID AND BINDING OBLIGATION. This Agreement constitutes the legal,
valid, and binding obligations of Borrower, enforceable in accordance with their
respective terms, subject to applicable bankruptcy and insolvency laws and laws
affecting creditors' rights and the enforcement thereof generally.
2.4. NO LEGAL BAR. The execution, delivery, and performance of this
Agreement, and the borrowing contemplated by this Agreement do not and will not
violate any Requirement of Law or any contractual obligation of Borrower and
will not result in, or require, the creation or imposition of any lien on any of
its properties or revenues pursuant to any Requirement of Law or any contractual
obligation, which violation or lien would have a material adverse effect on the
business, assets, financial condition, operations, or prospects of Borrower. For
the purposes of this Section, "Requirement of Law" means the Limited Partnership
Agreement or other organizational or governing documents of a given entity and
any law, treaty, rule or regulation, or determination of any arbitrator or court
or other governmental authority, in each case applicable to or binding upon such
entity or any of its property or to which such entity or any of its property is
subject.
2.5. LITIGATION. There is not now pending against the Borrower, nor to the
knowledge of the general partner of Borrower, nor is there threatened by written
communication, any litigation, investigation, or proceeding the outcome of which
would, in any case or in the aggregate, materially and adversely affect the
assets or financial condition of Borrower, taken as a whole, or seriously affect
their continued material operations.
2.6. CONSENT OR FILING. No consent, approval, or authorization of, any
court, any governmental body or authority, or any other person or entity is
required in connection with the valid execution, delivery, or performance of
this Agreement or any document required by this Agreement or in connection with
any of the transactions contemplated thereby.
2.7. DISCLOSURE. No representation or warranty made by Borrower in this
Agreement, in any of the other Loan Documents, or in any other document
furnished in connection herewith or therewith contains any misrepresentation of
a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading with respect to any material facts.
There is no fact known to the Borrower (and not known to
Lender) that materially and adversely affects, or that in the future could
reasonably be expected to materially and adversely affect, the business, assets,
financial condition, operations, or prospects of Borrower.
III. BORROWER'S COVENANTS
3.1. INDEBTEDNESS. The Borrower, without prior written consent of Lender,
will not create, incur, assume, or suffer to exist liability for, contingently
or otherwise (including, without limitation, any guaranty of the indebtedness of
another person), any indebtedness for borrowed money, except:
(a) current indebtedness of Borrower to Wilmington Trust Company;
(b) unsecured current liabilities incurred with trade creditors in the
ordinary course of business other than those which are for money borrowed or are
evidenced by bonds, debentures, notes or other similar instruments;
3.2. EXISTENCE AND QUALIFICATION. Borrower shall do, or cause to be done,
all things necessary to preserve, renew, and keep in full force and effect its
Limited Partnership Agreement between and among Cahill Warnock Strategic
Partners, L.P. and the limited partners listed on Schedule A of the Limited
Partnership Agreement in compliance with all material laws applicable to it,
operate its business in a proper manner and substantially as presently operated
or proposed to be operated; and at all times shall maintain, preserve, and
protect its franchises and trade names and preserve its property used or useful
in the conduct of its business, and keep the same in good repair, working order,
and condition, and from time to time make, or cause to be made, all needful and
proper repairs, renewals, replacements, betterments, and improvements thereto,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
3.3. FINANCIAL STATEMENTS. Borrower shall keep its books of account in
accordance with GAAP and shall furnish to Lender within 120 days after the close
of its fiscal year a statement of assets and liabilities as of the close of such
year, a statement of operations and a statement of changes in net assets for
such year. Such statements shall be consolidated statements of the Borrower and
shall be audited and certified by Borrower's independent public accountants.
3.4. TAXES AND CLAIMS. Borrower shall promptly pay and discharge; (a) all
taxes, assessments, and governmental charges upon or against Borrower, or their
assets, including payroll taxes, prior to the date on which penalties attach
thereto, unless and to the extent that such taxes are being diligently contested
in good faith and by appropriate proceedings and appropriate reserves therefor
have been established; and (b) all lawful claims, whether for labor, materials,
supplies, services, or anything else that reasonably might or could, if unpaid,
become a lien or charge upon the properties or assets of Borrower unless and to
the extent only that the same are transferred to bond, being diligently
contested in good faith and by appropriate proceedings, and appropriate reserves
therefor have been established.
3.5. BOOKS AND RECORDS. Borrower shall: (a) maintain at all times true and
complete books, records, and accounts in which true and correct entries shall be
made of its transactions in accordance with GAAP; and (b) by means of
appropriate quarterly entries reflected in its accounts and in all financial
statements furnished pursuant to Section 3.3 of this Agreement, establish proper
liabilities and reserves for all taxes and proper reserves, for depreciation,
renewal and replacement, obsolescence, and amortization of its properties and
bad debts, all in accordance with GAAP.
3.6. INSPECTION BY LENDER; AUDITS. Borrower shall allow any authorized
representative of Lender to visit and inspect, any of the properties of
Borrower, or to examine the books of account and other Partnership financial
records and Partnership financial files of Borrower, to make copies thereof and
to discuss the finances and financial accounts of Borrower with its officers and
employees, all at such reasonable times and as often as Lender
may reasonably request; provided that Borrower need not disclose to Lender any
information which may result in a violation of the Securities Act of 1933 or the
Securities and Exchange Act of 1934.
3.7. PAY INDEBTEDNESS TO LENDER AND PERFORM OTHER COVENANTS. Borrower shall
make full and timely payments of the principal of and interest on this Note and
all other indebtedness of Borrower to Lender hereunder, whether now existing or
hereafter arising, and duly comply with all the terms and covenants contained in
each of the instruments and documents given to Lender pursuant to this Agreement
at the times and places and in the manner set forth herein.
3.8. LITIGATION. Borrower will promptly notify Lender upon the commencement
of any action, suit, claim, counterclaim, or proceeding against or investigation
of Borrower where the damage claim is in excess of $50,000 or where the
litigation may materially and adversely affect the Borrower's business (except
when the alleged liability is fully covered by insurance, excluding application
of any standard deductible). If any such action, suit, claim, counterclaim,
proceeding (where the alleged liability is not so covered by insurance) involves
an amount in excess of $100,000 or where the litigation could reasonably be
expected to materially and adversely affect Borrower's business, Borrower shall
also provide Lender, upon request, with an opinion of counsel concerning the
litigation or investigation and the probable outcome thereof. Any suit filed by
a Limited Partner that materially impacts such Limited Partner's ability to meet
its Capital Contributions under the Limited Partnership Agreement and any suit
filed by a Limited Partner against the Borrower regardless of the amount shall
immediately be reported to the Lender.
3.9. REGULATORY ENFORCEMENT ACTIONS. Borrower shall promptly notify Lender
of the institution of: any investigation, any indictment, the filing of any
complaint, the issuance of any cease and desist order or injunction, or the
imposition of any fine or non-monetary sanction, by any civil or criminal,
federal or civil, regulatory enforcement agency, district attorney's office,
attorney general's office or U.S. Attorney's office which involves Borrower and
could reasonably be expected to have a material adverse effect on Borrower. Such
notification shall include a description of the event that led to such action by
such enforcement agency.
3.10. DEFAULTS OR ASSESSMENTS. Borrower shall promptly notify Lender in
writing of: (a) any material assessment by any taxing authority for unpaid taxes
as soon as Borrower has knowledge thereof and shall supply Lender with copies of
all notices from the Internal Revenue Service or any other taxing authority with
respect to any such matter; and (b) any default by Borrower in the performance
of (or any material modification of, or waivers granted in connection with) any
of the terms or conditions contained in any agreement, mortgage, indenture, or
instrument to which Borrower is a party or which is binding upon Borrower,
including, but not limited to, any default in, material modification of, or
waiver granted in connection with, the Borrower's compliance with any agreement
with the Limited Partners of the Cahill Warnock Strategic Partners Fund, L.P.
and of any default by Borrower in the payment of any of its indebtedness which
default may, singly or in the aggregate, have a material adverse effect on the
business, assets, financial condition, operations, or prospects of Borrower
taken as a whole.
3.11. CHANGE OF NAME, PRINCIPAL PLACE OF BUSINESS, ETC. Borrower shall
notify Lender immediately of any change in the name of Borrower, the principal
place of business of Borrower, the office where the books and records of
Borrower are kept, or any change in the registered agent of Borrower for the
purpose of service process.
3.12. MERGERS, ETC. Without Lender's consent, Borrower shall not wind up,
liquidate or dissolve itself, reorganize, merge or consolidate with or into, or
convey, sell, assign, transfer, lease, or otherwise dispose of all or
substantially all of its assets to any person.
3.13. LIMITED PARTNERSHIP AGREEMENT. The Borrower shall not change, amend
or alter the Limited Partnership Agreement of the Cahill, Warnock Strategic
Partners Fund L.P. dated April 11, 1996 in a manner which could effect
Borrower's ability to fulfill its obligations under this Agreement without prior
written consent of the Lender.
IV. DEFAULT, RIGHT TO FUTURE ADVANCES AND REMEDIES UPON DEFAULT
4.1. DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment within five (5) business days after the
same becomes due to Lender hereunder ; (b) Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained in
this Note or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender, and such failure continues for fifteen (15)
business days after written notice to Borrower that Lender considers such
failure to be a default; (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement,
in favor of any person, (including the Limited Partners) that may materially and
adversely affect Borrower's ability to repay this Note or perform Borrower's
obligations under this Note and such default continues for fifteen (15) business
days after written notice to Borrower that Lender considers such default to be a
default hereunder; (d) Borrower becomes insolvent, a receiver is appointed for
any part of Borrower's property, Borrower makes a general assignment for the
benefit of creditors or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws; (e) Borrower, or any
of its affiliates, becomes subject to any civil or criminal order or decree by
any regulatory agency and that action has a material adverse effect on Borrower,
and Borrower fails to have such action effectively stayed, discharged, vacated
or set aside within thirty (30) days of the institution of such action; (f) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is determined to be false or misleading in any material
respect at the time made or furnished; or (g) A material adverse change occurs
in Borrower's financial condition, or Lender in good faith reasonably believes
the prospect of payment or performance of the indebtedness is materially
impaired, provided that Lender notifies Borrower in writing of such default and
Borrower fails to cure such default within ten (10) business days of such
notice.
4.2. BORROWER'S RIGHT TO ADVANCES. Borrower shall not be entitled to any
further Advances under the Revolving Line of Credit evidenced by this Note if
any of the following happens: (a) Borrower fails to make any payment after the
same becomes due to Lender hereunder ; (b) Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained in
this Note or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender; (c) Borrower defaults under any loan, extension
of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any person, (including the Limited Partners) that may
materially and adversely affect Borrower's ability to repay this Note or perform
Borrower's obligations under this Note and such default continues for fifteen
(15) business days after written notice to Borrower that Lender considers such
default to be a default hereunder; (d) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes a general
assignment for the benefit of creditors or any proceeding is commenced either by
Borrower or against Borrower under any bankruptcy or insolvency laws; (e)
Borrower, or any of its affiliates, becomes subject to any civil or criminal
enforcement order or decree by any regulatory agency and that action has a
material adverse effect on Borrower; (f) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is determined to be
false or misleading in any material respect at the time made or furnished; or
(g) A material adverse change occurs in Borrower's financial condition, or
Lender in good faith reasonably believes the prospect of payment or performance
of the indebtedness is materially impaired. If the conditions described herein
are addressed by the Borrower in such a way that default under Section 4.1 is
avoided or cured, Borrower shall thereafter be entitled to Advances under this
Note until the reoccurrence of a condition described herein.
4.3. LENDER'S RIGHTS. Upon default, as set forth in Section 4.1, Lender may
declare the entire unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will pay that amount
provided that the Borrower will not incur a late charge under Section 1.7 unless
payment is not made within 15 days of the date such payment was to originally
become due. Upon default, including failure to pay upon final maturity, Lender,
at its option, may also, if permitted under applicable law, increase the
variable interest rate on this Note to 3.000 percent points over the Index. The
interest rate will not exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if Borrower does
not
pay. Borrower also will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's reasonable attorney's fees and Lender's
legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post- judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law.
V. MISCELLANEOUS
5.1. NOTICES. Any notice, consent, request, or other communication to a
party required or permitted hereunder shall be deemed to have been duly given or
made (a) on the date delivered in person, (b) on the date indicated on the
return receipt if mailed postage prepaid, by certified or registered mail, with
return receipt requested, (c) on the date transmitted by facsimile, if sent by
1:30 P.M. Eastern Time, for purposes of Advances, and 2:30 P.M. Eastern Time for
all other purposes, and confirmation of receipt thereof is reflected or
obtained, or (d) if sent by Federal Express or other nationally recognized
overnight courier or overnight express U.S. Mail, with service charges prepaid,
then on the next business day after delivery to the courier of mail (in time for
and specifying next day delivery). Such notices shall be sent to a party at its
address or facsimile number as follows, unless otherwise designated in writing:
If to Borrower: Cahill, Warnock Strategic Partners Fund, L.P.
1 South Street, Suite 2150
Baltimore, MD 21202
Attn: David L. Warnock
Edward L. Cahill
Telephone No. (410) 895-3800
If to Lender: Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attn: Gloria Zook Diodato
Telephone No. (302) 651-8850
5.2. RIGHTS AND REMEDIES NOT WAIVED. Lender may delay or forego enforcing
any of its rights or remedies under this Note without losing them.
5.3. GOVERNING LAW. This Note has been delivered to Lender and accepted by
Lender in the State of Delaware. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware.
5.4. JURISDICTION. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of New Castle County, the
State of Delaware.
5.5. JURY TRIAL WAIVER. Lender and Borrower hereby waive the right to any
jury trial in any action, proceeding, or counterclaim brought by either Lender
or Borrower against the other.
5.6. WAIVER OF PRESENTMENT. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor.
5.7. AMENDMENTS. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone other than the Borrower. All
such parties also agree that Lender may modify this loan without the consent of
or notice to anyone other than the party with whom the modification is made.
5.8. INTEGRATION. The Note contains the entire agreement between the
parties relating to the subject matter hereof and supersedes all oral statements
and prior writings with respect thereto.
IN WITNESS WHEREOF, the parties have caused this Note and Loan Agreement to
be executed by their respective duly authorized officers.
LENDER BORROWER
Wilmington Trust Company Cahill, Warnock Strategic Partners Fund, L.P.
By: Cahill, Warnock Strategic Partners, L.P.
By: /s/ Douglas Cornforth By: /s/ Edward L. Cahill
---------------------- ---------------------------
Douglas Cornforth, Edward L. Cahill,
Vice President General Partner
By: /s/ Gloria Z. Diadato By: /s/ David L. Warnock
---------------------- ---------------------------
Gloria Zook Diodato, David L. Warnock,
Sr Banking Officer General Partner
Date: February 5, 1997 Date: February 5, 1997
Exhibit 4
PLEDGE AND SECURITY AGREEMENT
(BANK AS LENDER/PARTNERSHIP PLEDGOR)
This Pledge and Security Agreement (this "Agreement") is made as of the 5th
day of February, 1997, by and among Cahill, Warnock Strategic Partners Fund,
L.P., a Delaware limited partnership, as pledgor ("Pledgor"), Wilmington Trust
Company, a Delaware banking corporation, as lender ("Secured Party"), and
Wilmington Trust Company, a Delaware banking corporation, as financial
intermediary ("Financial Intermediary").
WITNESSETH:
WHEREAS, Pledgor has executed and delivered to Secured Party its Promissory
Note and Loan Agreement in the principal amount of $8,000,000 (the "Note") to
evidence a loan in the form of a revolving line of credit (the "Loan") made to
Pledgor by Secured Party; and
WHEREAS, Pledgor maintains a Pledged Account (as hereinafter defined) with
Financial Intermediary that contains Securities (as hereinafter defined), which
Account and Securities Pledgor desires to pledge to Secured Party and in which
Pledgor desires to grant to Secured Party a first priority perfected security
interest to secure Pledgor's obligations in connection with the Loan; and
WHEREAS, to induce Secured Party to make the Loan, Pledgor has agreed to
execute and deliver to Secured Party this Agreement.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, Pledgor, Secured Party and
Financial Intermediary hereby agree as follows:
SECTION 1. PLEDGE OF SECURITY. To secure the payment and performance of the
Obligations (as defined in Section 2 hereof), Pledgor hereby pledges, grants and
assigns to Secured Party a lien in and first priority perfected security
interest against all of Pledgor's right, title and interest in and to (i) a
custody/investment agency account in the name of Pledgor with Financial
Intermediary and further identified by Financial Intermediary as Account Number
36054-1 (the "Pledged Account"), (ii) any and all now owned or hereafter
acquired cash, securities, instruments or other property of any kind whatsoever
which are included now or at any time hereafter in the Pledged Account (jointly
and severally, the "Securities") including, without limitation, the Securities
now held in the Pledged Account and listed on Exhibit A attached hereto and
incorporated herein, (iii) all interest, dividends and income of any kind now or
hereafter derived from any property in the Pledged Account, and (iv) any and all
proceeds (as defined in Section 9-306 of the Uniform Commercial Code as in
effect in the State of Delaware (the "UCC")) of all the foregoing (items
(i)-(iv) being hereinafter referred to as the "Collateral").
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement is made for the benefit
of Secured Party to secure (i) the payment of the principal of and interest on
the Note from time to time (including, without limitation, interest accruing
after the date of any filing by Pledgor of any petition in bankruptcy or the
commencement of any bankruptcy, insolvency or similar proceeding with respect to
Pledgor), (ii) the payment of any indebtedness or obligations of Pledgor
relating to any guaranty in connection with the Loan or this Agreement, (iii)
the payment of all other indebtedness and obligations relating to the Loan
(including, without limitation, the payment of any taxes, assessments or fees
referred to in the Note, this Agreement or any other documents relating to the
Loan), including any extensions, replacements, modifications, substitutions,
amendments and renewals thereof made in accordance with the terms thereof (the
obligations referred to in clauses (i), (ii) and (iii) hereof being referred to
jointly and severally herein as the "Obligations").
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Pledgor
hereby represents, warrants and covenants as follows:
(a) Pledgor is organized under the laws of the State of Delaware;
Pledgor has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement; the general partner of Pledgor is Cahill,
Warnock Strategic Partners, L.P., a Delaware limited partnership, the general
partners of which are Edward L. Cahill and David L. Warnock; and Pledgor shall
not change the General Partner of Pledgor without prior written notice to
Secured Party.
(b) Pledgor is the sole legal and beneficial owner of the Collateral,
including, without limitation, the Securities.
(c) Pledgor has not sold, assigned, pledged, created a lien or security
interest in, or otherwise transferred any interest in, the Collateral to any
other person or entity, and without Secured Party's prior written consent,
Pledgor will not sell, assign, transfer, convey grant a lien or security
interest in or otherwise dispose of all, or any portion of, the Collateral,
including, without limitation, the Securities, except in accordance with the
provisions of Section 4 hereof.
(d) Unless otherwise agreed to in writing by Secured Party, the
Securities shall comply with the criteria specified in Exhibit A at all times
that any amounts are due and unpaid to Secured Party under the Note. In
addition, Pledgor shall direct all limited partners of Pledgor to deliver
capital contributions to the Pledged Account. Pursuant to Pledgor's Limited
Partnership Agreement, capital contributions are expected to be funded in cash
within 30 days of each capital call. No Collateral (including, without
limitation, cash) will be removed from the Pledged Account until any then
outstanding principal balance and any accrued and unpaid interest on the Note is
paid in full.
(e) Pledgor shall furnish or cause to be furnished to Secured Party,
from time to time, such additional information and copies of such documents
relating to this Agreement, the Collateral, and Pledgor's financial condition as
Secured Party may reasonably request.
(f) Pledgor shall, upon the request of Secured Party or Financial
Intermediary, furnish to Secured Party or Financial Intermediary, such further
information, execute and deliver to Secured Party or Financial Intermediary such
other documents evidencing that all right, title and interest of Pledgor in the
Collateral have been pledged and assigned to Secured Party, and do such other
acts and things, all as Secured Party or Financial Intermediary may at any time
reasonably request relating to the perfection or protection of Secured Party's
interests created by this Agreement or for the purpose of carrying out the
intent of this Agreement.
(g) All compensation, charges, fees, taxes, costs, and expenses
relating to the Pledged Account, Collateral or this Agreement shall be paid by
Pledgor, and Secured Party shall have no responsibility for such amounts nor
shall any such amounts be deductible from the Collateral, except as otherwise
provided or permitted in Section 6(m) hereof.
(h) Pledgor agrees to pay promptly when due all taxes, assessments or
governmental charges with respect to the Collateral.
(i) Pledgor shall cause, as a precautionary measure, a financing
statement to be duly filed with the office of the Secretary of State of the
State of Delaware (Uniform Commercial Code Division) and such other filing
offices as reasonably requested by Secured Party with respect to the Collateral,
and shall provide satisfactory evidence of such filing(s) to Secured Party. The
financing statement shall cover all of Pledgor's interest in the Collateral.
(j) Financial Intermediary and Secured Party shall have no liability to
Pledgor for, and Pledgor hereby absolutely, unconditionally and irrevocably
waive any and all charges, damages, taxes or claims of any kind or nature
whatsoever with respect to the selection of Collateral for liquidation or the
order of liquidation of the Collateral.
SECTION 4. INSTRUCTIONS TO FINANCIAL INTERMEDIARY.
(a) Pledgor hereby authorizes and instructs Financial Intermediary from
the date of this Agreement not to permit Pledgor or any other party to receive
any payments, proceeds or other distributions (whether of money or property)
from the Collateral without the express written permission of Secured Party;
provided, however, that such permission shall not be required so long as no
amounts are then due and unpaid to Secured Party under the Note. Notwithstanding
the foregoing, prior to the written notice to Financial Intermediary from
Secured Party of an Event of Default (as hereinafter defined), except as
provided herein, Pledgor may retain all rights and privileges of ownership of
the Securities (i.e., voting) and Secured Party authorizes Financial
Intermediary to distribute the interest and dividends earned on the Securities
to Pledgor, provided that upon notification from Secured Party to Financial
Intermediary that an Event of Default has occurred, Financial Intermediary shall
cease distributing interest or dividends earned on the Securities to Pledgor
and, if instructed by Secured Party, Financial Intermediary shall distribute
such interest and dividends to Secured Party.
(b) Secured Party hereby authorizes Financial Intermediary to follow
instructions provided by or on behalf of Pledgor with respect to the
reinvestment, sale or other disposition of the Collateral; provided that Pledgor
hereby agrees that all Collateral in the Pledged Account, including, without
limitation, all proceeds of any sale or disposition thereof in the Pledged
Account, shall be invested in securities satisfying the criteria identified on
Exhibit A attached hereto and made part hereof (as modified from time to time
with the written agreement of the Secured Party) at all times that any amounts
are due and unpaid to Secured Party under the Note. Pledgor agrees to notify any
investment manager of the investment restrictions for the Pledged Account and
Collateral, and Pledgor agrees to remain liable for the failure of any
investment manager to comply with the investment guidelines.
(c) Pledgor instructs Financial Intermediary to provide written
confirmation on the date hereof that all of Pledgor's right, title and interest
in the Collateral, including the Pledged Account and the Securities, have been
pledged and assigned to Secured Party.
(d) Pledgor agrees that, if an Event of Default occurs, Secured Party
is authorized and empowered to direct Financial Intermediary to liquidate the
Collateral then held in the Pledged Account and remit the proceeds to Secured
Party to be applied in the priority set forth in Section 9 below. Pledgor agrees
that Financial Intermediary shall have no duty to make any inquiry upon being
notified in writing by Secured Party that an Event of Default has occurred and
Financial Intermediary shall have no liability for thereafter acting upon
Secured Party's instructions. Neither Financial Intermediary nor Secured Party
shall have any liability to Pledgor for, and Pledgor hereby absolutely,
unconditionally and irrevocably waives, any and all charges, damages, taxes or
claims of any kind or nature whatsoever with respect the selection of Securities
for liquidation or the order of liquidation of Securities constituting the
Collateral.
SECTION 5. DELIVERY OF COLLATERAL TO FINANCIAL INTERMEDIARY. The
Collateral shall be held in the possession of Financial Intermediary on behalf
of, and as agent and bailee for, Secured Party in the Pledged Account. Financial
Intermediary hereby agrees and certifies that all of the Collateral is, by book
entry or otherwise, identified by Financial Intermediary as belonging to (i.e.,
subject to a security interest in favor of) Secured Party. In furtherance of the
foregoing, Financial Intermediary, by its execution and delivery of this
Agreement, shall be deemed to have confirmed and to have sent confirmation to
Secured Party of the transfer of the security interest in the Collateral to
Secured Party and by book entry or otherwise identified all such Collateral as
belonging to Secured Party.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF FINANCIAL
INTERMEDIARY. Financial Intermediary represents, warrants and covenants to and
with Pledgor and Secured Party that:
(a) It is a "Financial Intermediary" within the meaning of 6 Del. C.,
Section 8-313.
(b) It has notification of Secured Party's security interest in the
Collateral, but no notice or knowledge of any adverse claim or liens against any
of the Collateral (including, without limitation, purchase money liens, federal
tax liens or liens arising under the Employee Retirement Income Security Act of
1974, as amended).
(c) It has full power and authority to execute, deliver and perform its
obligations under this Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
it, and is enforceable against it.
(e) It shall send copies of all correspondence, statements and
information relating to the Collateral, including the Pledged Account, to
Secured Party at the same time it sends any such correspondence, statements and
information to Pledgor.
(f) Except as otherwise provided in Section 4 hereof, it shall not
purchase, sell or otherwise dispose of any of the Collateral, without the prior
written consent of Secured Party.
(g) Except as otherwise provided in Section 4 hereof, it shall not make
any distribution or payment of any kind arising out of the Pledged Account to
Pledgor or any other person or entity, without the prior written consent of
Secured Party. Financial Intermediary agrees that, upon receipt of written
notice by Secured Party that an Event of Default has occurred, Financial
Intermediary shall at the direction of Secured Party proceed to sell or
otherwise liquidate the Collateral and remit the proceeds to Secured Party and
send all distributions of interest and dividend income earned on the Collateral
to Secured Party.
(h) Its books and records shall reflect that Pledgor has transferred
its interest in the Collateral to Secured Party.
(i) It shall make appropriate entries on its books and records to
evidence, and hereby acknowledges, that all Collateral being held by Financial
Intermediary is being held as agent of and bailee for the benefit of Secured
Party.
(j) That all Collateral in the Pledged Account, will be held (i) by
Financial Intermediary in a Financial Intermediary designated account, or (ii)
by Financial Intermediary with The Depository Trust Company ("DTC") in New York,
New York, the Federal Reserve Bank of Philadelphia, in another registered
clearing corporation, or (iii) in an account in the name of Financial
Intermediary maintained with an agent bank in New York (collectively or
individually, a "Clearing Corporation").
(k) With respect to all Securities carried in the account of Financial
Intermediary with a Clearing Corporation, Financial Intermediary has received
from such Clearing Corporation confirmation of such Clearing Corporation holding
all such Securities for the account of Financial Intermediary.
(l) The certifications as set forth above are based on the current
operating procedures of Financial Intermediary in accordance with the laws and
regulations currently in effect.
(m) It hereby absolutely, unconditionally, and irrevocably subordinates
any and all claims, liens, pledges, security interests, encumbrances, demands,
set-offs or charges of any kind or nature whatsoever with respect to the
Collateral to the interest of Secured Party.
SECTION 7. EVENTS OF DEFAULT. Notwithstanding anything contained in
this Agreement to the contrary, an event of default shall occur under this
Agreement (an "Event of Default") upon the occurrence of a default, after the
expiration of any applicable grace period, under the Note, or the breach by
Pledgor of any representation, warranty or covenant contained in this Agreement
as determined by Secured Party, or the failure by Pledgor to perform any
obligation under this Agreement as determined by Secured Party, and such breach
or failure continues for fifteen (15) business days after written notice to
Pledgor that Secured Party considers such breach or failure to be a default.
SECTION 8. REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, Secured Party shall have all of the rights and remedies under this
Agreement, including the remedy set forth in Section 4 hereof to liquidate the
Collateral held in the Pledged Account and cause Financial Intermediary to remit
the proceeds so generated to Secured Party and, to the extent that such proceeds
remitted to Secured Party do not equal the Obligations, Pledgor hereby waives
and relinquishes, to the maximum extent permitted by law, any and all rights to
claim that Secured Party may not proceed against them for any deficiency. Upon
the occurrence of any Event of Default, in addition to all rights of Secured
Party under this Agreement, Secured Party shall have all rights and remedies of
a secured party under the UCC and under any applicable law, as the same may from
time to time be in effect. Among other things, Secured Party may sell the
Collateral under any applicable Uniform Commercial Code and apply the proceeds
in the manner set forth in Section 9.
SECTION 9. APPLICATION OF PROCEEDS OF SALE OF COLLATERAL. The proceeds
of any disposition of all, or any part of, the Collateral shall be applied by
Secured Party as follows:
FIRST: To the payment of all costs and expenses incurred by Secured
Party in order to obtain such proceeds or monies, including but not limited to
all court costs and the reasonable fees and disbursements of counsel for Secured
Party, and to the repayment of all advances made by Secured Party hereunder for
the account of Pledgor;
SECOND: To the payment in full or reduction of interest that is due
Secured Party in connection with the Obligations;
THIRD: To the payment in full or reduction of any remaining
undischarged principal obligations due Secured Party in connection with the
Obligations;
FOURTH: To the payment in full or reduction of any remaining
undischarged obligations due Secured Party in connection with the Obligations;
and
FIFTH: Any excess of such proceeds not needed to pay Secured Party the
amounts described in paragraphs First, Second, Third and Fourth above shall be
paid over to Pledgor or as any court of competent jurisdiction shall order.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
constitutes and appoints Secured Party the Attorney-in-Fact of Pledgor for the
purpose of carrying out the provisions of this Agreement and to take any action
and executing any instrument which Secured Party may deem necessary or advisable
to accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, Secured
Party shall have the right, after the occurrence and during the continuance of
an Event of Default, with full power of substitution either in the Secured
Party's name or in the name of Pledgor, to settle, compromise, prosecute or
defend any action, claim or proceeding with respect to the
Collateral and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating Secured Party to
make any inquiry as to the nature of sufficiency of any payment received by it,
to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof of the monies due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by Secured Party with respect to the Collateral or any part thereof shall
give rise to any defense, counterclaim or offset in favor of Pledgor or to any
claim or action against Secured Party.
SECTION 11. TERMINATION. This Agreement and the liens and security
interest created hereunder shall terminate when Secured Party gives Pledgor and
Financial Intermediary written notice that all of the Obligations relating to
the Loan have been indefeasibly paid in full and when Secured Party has no
further obligation to extend credit under the Note, at which time Secured Party
shall execute and deliver to Pledgor all documents which Pledgor shall
reasonably request to evidence termination of such security interest provided,
however, that all indemnities of Pledgor contained in this Agreement shall
survive termination of this Agreement.
SECTION 12. INDEMNITY AND EXPENSES. Pledgor agrees to indemnify Secured
Party and Financial Intermediary from and against any and all claims, losses and
liabilities growing out of or resulting from the failure of Pledgor to comply
with the terms and conditions of this Agreement (including, without limitation,
enforcement of, this Agreement, the Note and any other documents relating to the
Loan and all claims and demands of all persons at any time claiming the
Collateral or any interest therein), except claims, losses or liabilities
resulting from Secured Party's or Financial Intermediary's gross negligence or
willful misconduct. Pledgor agrees to pay on demand all out-of-pocket expenses
(including the reasonable fees and expenses of Secured Party's and Financial
Intermediary's counsel, experts and agents) in any way relating to the
enforcement or protection of the rights of Secured Party or Financial
Intermediary hereunder.
SECTION 13. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices given pursuant to any provision of this
Agreement shall be in writing and hand delivered, with a receipt being obtained
therefor, or sent by United States registered or certified mail, return receipt
requested, postage prepaid, or by Federal Express or other overnight courier
service, or via telecopier, at the following addresses or such other addresses
as to which the parties hereto may be notified in writing from time to time:
Pledgor:
Cahill, Warnock Strategic Partners Fund, L.P.
Attention: David L. Warnock
1 South Street, Suite 2150
Baltimore, Maryland 21202
Secured Party:
Wilmington Trust Company
Attention: Gloria Diodato, Commercial Loan
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Financial Intermediary:
Wilmington Trust Company
Attention: Corporate Custody
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
All such notices shall be deemed to have been given when received (if hand
delivered or telecopied) or two (2) days after deposit in the mails (if mailed)
or the next business day (if sent by Federal Express or other overnight courier
service); provided that any notice to Financial Intermediary shall be effective
only upon receipt.
(b) AMENDMENTS. All amendments and modifications of this Agreement must
be in writing and signed by the party against whom the same is sought to be
enforced.
(c) SEVERABILITY. If any term or provision of this Agreement or the
application thereof shall, to any extent, be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision, shall
be valid and may be enforced to the fullest extent permitted by law.
(d) NO DUTY TO PRESERVE COLLATERAL. Except as required by applicable
law, Secured Party shall not be obligated to take any steps necessary to
preserve any rights in the Collateral or in any security therefore against any
other party, which obligation Pledgor hereby assumes.
(e) ASSIGNMENT. This Agreement, including the covenants and agreements
contained herein, shall be binding upon and shall inure to the benefit of the
successors and assigns of the parties hereto.
(f) NO WAIVER; CUMULATIVE RIGHTS. To the extent permitted by applicable
law, no failure on the part of Secured Party to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Secured Party of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right, remedy and power hereby granted to
Secured Party or allowed it by law or other agreement shall be cumulative and
not exclusive, and may be exercised by Secured Party from time to time.
(g) EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but such counterpart
shall together constitute but one and the same instrument.
(h) CONFLICTS OF INTEREST ACKNOWLEDGMENT. Pledgor acknowledges that
Secured Party and Financial Intermediary are the same corporate entity and
waives any conflict of interest which may exist as a result. Pledgor agrees that
Wilmington Trust Company, in its capacity as Financial Intermediary, is not
charged with any special knowledge arising from its role as Secured Party nor is
Wilmington Trust Company, in either capacity, under a duty to inquire of, or
inform, its various departments and divisions supporting its various roles in
this transaction regarding any aspect of the transaction set forth in this
Agreement. In addition, Pledgor acknowledges that Wilmington Trust Company may
be designated from time to time by Pledgor to act as investment manager on
behalf of Pledgor, and if so designated, Pledgor hereby waives any and all
claims of conflict of interest for Wilmington Trust Company to serve in such
capacity.
SECTION 14. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware; provided, however, that with respect to Collateral, if
any, located in the State of New York, the laws of the State of New York shall
govern the perfection and priority of security interests in such Collateral. To
induce Secured Party to enter into this Agreement and to induce Secured Party to
make the Loan, Pledgor hereby irrevocably agrees that, to the extent permitted
by applicable law, subject to Secured Party's sole and absolute election, all
actions or proceedings that arise out of or in connection with this Agreement
shall be litigated in courts within the State of Delaware. Pledgor hereby
consents to personal jurisdiction in any state or federal court located within
the State of Delaware. To the extent permitted
under applicable law, Pledgor hereby waives any right it may have to transfer or
change the venue of any litigation between Pledgor and Secured Party in
accordance with this paragraph.
EACH OF PLEDGOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH
IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY WAY RELATED TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
The provisions of this Section 14 are a material inducement for Secured
Party's entering into the Loan and the transactions contemplated herein. Pledgor
hereby acknowledges that it has reviewed the provisions of this Section 14 with
its independent counsel.
IN WITNESS WHEREOF, Pledgor, Secured Party and Financial Intermediary
intending to be legally bound hereby, have duly executed this Agreement under
seal and caused it to be dated the day and year first above written.
[Seal] CAHILL, WARNOCK STRATEGIC
PARTNERS FUND, L.P., as Pledgor,
by its sole General Partner,
Cahill, Warnock Strategic Partners, L.P.,
by its General Partners
Witness: /s/ Gary Merwitz /s/ Edward L. Cahill
------------------ ---------------------------------
Edward L. Cahill, General Partner
Witness: /s/ Gary Merwitz /s/ David L. Warnock
------------------ ---------------------------------
David L. Warnock, General Partner
[SEAL] WILMINGTON TRUST COMPANY,
as Secured Party
Attest: /s/ Gloria Z. Diodato By: /s/ Douglas J. Cornforth
--------------------- --------------------------
Title: Senior Banking Officer Title: Vice President
[SEAL] WILMINGTON TRUST COMPANY,
as Financial Intermediary
Attest: /s/ Gloria Z. Diodato By: /s/ David B. Young
--------------------- --------------------------
Title: Senior Banking Officer Title: Senior Financial Services Officer
EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT AMONG
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., AS PLEDGOR,
WILMINGTON TRUST COMPANY, AS SECURED PARTY,
AND WILMINGTON TRUST COMPANY, AS FINANCIAL INTERMEDIARY
LIST OF INITIAL SECURITIES
Initially, no assets will be held in the Pledged Account.
CRITERIA FOR SECURITIES
(TYPE, RATING, ETC.)
The Pledged Account (account number 36054--1) will be the repository for the
limited partners' cash contributions from the date of receipt, which is expected
to be no more than 30 days after the capital call is made, until these funds are
used to purchase securities for the Fund or to pay expenses. Cash in the Pledged
Account may be invested in U.S. Treasury Bills, U.S. Treasury Notes and/or U.S.
Treasury Bonds or shares of money market mutual funds invested primarily in U.S.
Treasury securities, including any such mutual fund managed by Financial
Intermediary or any affiliate thereof.
EXHIBIT "A" TO FINANCING STATEMENT NAMING
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., AS DEBTOR,
AND WILMINGTON TRUST COMPANY, AS SECURED PARTY
All of Debtor's right, title and interest in and against an agency/custody
account in the name of Debtor with Wilmington Trust Company, as bailee and
financial intermediary ("WTC"), and further identified by WTC as WTC Account
Number 36054-1 (the "Pledged Account"); any and all now owned or hereafter
acquired securities which are included now or at any time hereafter in the
Pledged Account, as defined in the Pledge and Security Agreement dated as of
February 5, 1997 (the "Pledge and Security Agreement"), by and among the Debtor,
Wilmington Trust Company, as Secured Party, and WTC; any and all instruments,
cash, general intangibles or other property of any kind whatsoever now or
hereafter held in the Pledged Account, including, without limitation, all
interest, dividends and income of any kind now or hereafter derived from any
property in the Pledged Account; and any and all proceeds (as defined in Section
9-306 of the Uniform Commercial Code as in effect in the State of Delaware) of
all the foregoing (all of the foregoing being hereinafter referred to as the
"Collateral"). Interested parties may contact Wilmington Trust Company during
normal business hours to view specific records describing the Collateral,
including a copy of the Pledge and Security Agreement.
Exhibit 5
STOCKHOLDERS' AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND AMONG
CONCORDE CAREER COLLEGES, INC.
AND
THE STOCKHOLDERS IDENTIFIED HEREIN
TABLE OF CONTENTS
ARTICLE 1.DEFINITIONS ........................................ 1
1.1. Defined Terms ...................................... 1
ARTICLE 2. BOARD; COMMITTEE .................................. 4
2.1. Number and Election of Directors. .................. 4
2.2. Removal of Directors ............................... 4
2.3. Vacancies .......................................... 4
2.4. Proxies ............................................ 5
2.5. Compensation. ...................................... 5
2.6. Information ........................................ 5
2.7. Insurance. ......................................... 5
ARTICLE 3. CERTAIN CORPORATE ACTION ......................... 5
3.1. Approval of Preferred Stock Directors. ............. 5
3.2. Approval of Preferred Stock Holders. ............... 5
ARTICLE 4. TRANSFER OF SHARES ............................... 6
4.1. Restrictions on Transfer. .......................... 6
4.2. Certain Permitted Transfers ........................ 6
4.3. Rights of First Refusal ............................ 7
4.4. Restrictions in Connection with Registrations ...... 9
ARTICLE 5. REGISTRATION RIGHTS .............................. 9
5.1. Sale or Transfer of Shares ......................... 9
5.2. Public Offering Shares. ............................ 9
ARTICLE 6. PREEMPTIVE RIGHTS ................................ 18
6.1. Preemptive Rights. ................................ 19
ARTICLE 7. TERMINATION ...................................... 20
ARTICLE 8. REPRESENTATIONS .................................. 20
8.1. Representation of Company. ........................ 20
8.2. Representation of Cahill, Warnock Purchasers. ..... 20
8.3. Representation of the Brozman Estate. ............. 21
8.4. Representation of the Brozman Trust. .............. 21
ARTICLE 9. MISCELLANEOUS .................................... 21
9.1. Certificate Legend. ............................... 21
9.2. Negotiable Form. .................................. 22
9.3. Enforcement ....................................... 22
9.4. Specific Performance .............................. 22
9.5. Transferees. ...................................... 22
9.6. Notices ........................................... 22
9.7. Binding Effect; Assignment. ....................... 24
9.8. Governing Law. .................................... 24
9.9. Severability ...................................... 24
9.10.Entire Agreement. ................................. 24
9.11.Counterparts. ..................................... 24
9.12.Amendment; Waiver. ................................ 24
9.13.Captions .......................................... 24
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of February 25, 1997 (this
"Agreement") by and among CONCORDE CAREER COLLEGES, INC., a Delaware corporation
(the "Company"); the parties identified on the signature pages under the heading
"Cahill, Warnock Parties" (the "Cahill, Warnock Parties"); and the parties
identified on the signature pages under the heading "Other Holders"
(collectively, the "Other Holders"). The Cahill, Warnock Parties and the Other
Holders are referred to herein collectively as the "Securityholders."
WHEREAS, the Company has entered into a Convertible Preferred Stock
Purchase Agreement, of even date herewith (the "Stock Purchase Agreement"), with
the Cahill, Warnock Parties, pursuant to which the Cahill, Warnock Parties have
acquired shares of the Company's Convertible Preferred Stock on the terms and
conditions set forth therein;
WHEREAS, the Company proposes to issue and sell, and the Cahill Warnock
Parties wish to purchase, Debentures and Warrants pursuant to Debenture and
Warrant Purchase Agreements, between the Company and the Cahill, Warnock
Parties, of even date herewith;
WHEREAS, the Estate of Robert F. Brozman proposes to sell, and the
Cahill, Warnock Parties wish to purchase, 500,000 shares of common stock of the
Company, pursuant to a Stock Purchase Agreement, of even date herewith, between
the Company and the Cahill, Warnock Parties;
WHEREAS, on the date hereof, each Securityholder owns the shares of
capital stock of the Company or options exercisable for shares of capital stock
of the Company set forth opposite its name on Exhibit A hereto;
WHEREAS, the Securityholders desire to enter in this Agreement with the
Company;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. The following terms are defined as follows:
"Affiliate" means, with respect to any Person, (i) any Person in which
such Person holds direct or indirect beneficial ownership (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 5% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 5%
of the outstanding equity securities or equity interests in a Person and (ii)
any brother, sister, parent, child or spouse of such Person or any Person
described in clause (i).
"Board" shall mean the Board of Directors of the Company.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's common stock, par value $.10
per share.
"Common Stock Equivalent" shall mean, with respect to any
Securityholder, the number of shares of Common Stock owned by such
Securityholder and the number of shares of Common Stock into which any shares of
Convertible Preferred Stock owned by such Securityholder shall be convertible
and the number of shares of Common Stock into which any options owned by any
Securityholder shall be exercisable as of the date of determination thereof.
"Conversion Stock" shall mean Common Stock into which shares of
Convertible Preferred Stock shall have been converted.
"Convertible Preferred Stock" shall mean the Company's Convertible
Preferred Stock, par value $.10 per share, having such rights, preferences and
privileges as may be in effect from time to time.
"Encumbrances" shall mean any and all liens, claims, charges, security
interests, options or other legal or equitable encumbrances.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Preferred Stock Directors" shall mean the directors nominated by the
Preferred Stock Holders pursuant to Section 2.1(a).
"Preferred Stock Holders" shall mean all holders of the Convertible
Preferred Stock issued and outstanding at any time.
"Prime Rate" shall mean the prime rate publicly announced by The Chase
Manhattan Bank, N.A. from time to time.
"Pro Rata Share" shall mean the percentage of Transfer Shares (as
defined in Section 4.3) being offered by a Transferring Securityholder (as
defined in Section 4.3) that each other Securityholder shall be entitled to
purchase, if any. Such percentage shall be determined by dividing the number of
Shares of such other Securityholder by the aggregate number of all Shares of
Securityholders entitled to participate in the purchase of such Transfer Shares
(as defined in Section 4.3).
"Qualified Offering" shall mean the consummation of a firm-commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company in which (i) the net proceeds of the public
offering price equals or exceeds $20 million and (ii) the public offering price
per share of Common Stock equals or exceeds $4.00.
"Registered Securities" shall mean securities that have been registered
under the Securities Act.
"Sale of the Company" shall mean (i) consummation of a merger or
consolidation of the Company with or into another person that is not a parent or
subsidiary of the Company as a result of which those persons who were
stockholders of the Company immediately prior to such transaction own, in the
aggregate, less than a majority of the outstanding voting capital stock of the
surviving or resulting corporation, (ii) the consummation of the sale or other
disposition of a majority of the outstanding shares of voting capital stock of
the Company to a person that is not a parent or subsidiary of the Company or
(iii) the consummation of the sale or other disposition of all or substantially
all of the Company's assets to a person that is not a parent or subsidiary of
the Company.
"Securities Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Senior Management" shall mean the Company's Chairman, Chief Executive
Officer and Chief Financial Officer, and any other manager of the Company who
receives from the Company an annual base compensation equal to or in excess of
$100,000.
"Shares" shall mean any shares of capital stock of the Company,
including, without limitation, Common Stock and Convertible Preferred Stock, now
or hereafter issued.
"Subsidiary" shall mean any corporation of which a majority of the
outstanding voting securities or other voting equity interests are owned,
directly or indirectly, by the Company.
ARTICLE 2.
BOARD; COMMITTEE
2.1. Number and Election of Directors.
(a) Number of Directors. Subject to the next succeeding sentence, the
Board shall consist of six directors, (i) four directors nominated by the Board
of Directors (excluding the Preferred Stock Directors) or by the holders of a
majority of the shares of Common Stock in accordance with the Company's Bylaws
(excluding the Preferred Stock) (which nominees shall initially be the incumbent
directors and the new Chief Executive Officer) (collectively, the "Company
Directors"), and (ii) two directors (the "Preferred Stock Directors") nominated
by the Preferred Stock Holders. All such action shall have been taken as may be
necessary to elect such a Board of Directors of the Company effective upon the
Closing of this Agreement and the Stock Purchase Agreement. The Preferred Stock
Holders shall have the right to nominate the Preferred Stock Directors so long
as the Preferred Stock Holders maintain ownership in the aggregate of at least
50% of the Conversion Stock and Common Stock Equivalents acquired by them
pursuant to this Agreement.
(b) Election of Nominees. On the date hereof, and at each annual
meeting of stockholders of the Company or any special meeting called for the
purpose of electing directors of the Company (or by consent of stockholders in
lieu of any such meeting) or at such other time or times as the Securityholders
may agree, the Securityholders shall vote all of their respective Shares
entitled to vote in favor of the election of all of the persons nominated in
accordance with Section 2.1(a) and no other person.
(c) Term. The Preferred Stock Directors and the Company Directors shall
each hold office as a director of the Company until their successors are duly
elected and qualified.
2.2. Removal of Directors. No Securityholder shall vote any Shares in
favor of the removal of a director nominated by one or more of the other
Securityholders hereunder unless the right of any such Securityholder to so
designate such director shall no longer exist; provided, however, that upon the
request of Preferred Stock Holders holding a majority of the Common Stock
Equivalents to remove a director previously nominated by such persons, the
Securityholders shall vote all of their Shares in favor of (i) the removal of
such director and (ii) the election of any replacement director as may be
designated by such Securityholder(s).
2.3. Vacancies. If any vacancy occurs in the Board because of death,
disability, resignation, retirement or removal of a director in accordance with
this Agreement, the Securityholder that nominated the person creating such
vacancy shall nominate a successor, and all Securityholders shall vote their
Shares in favor of the election of such successor to the Board. Any vacancy that
occurs shall be filled as promptly as possible upon the request of the group
having the right to nominate a person to fill such vacancy.
2.4. Proxies. Neither the Company nor any Securityholder shall give any
proxy or power of attorney to any person or entity that permits the holder
thereof to vote in his discretion on any matter that may be submitted to the
Company's stockholders for their consideration and approval, unless such proxy
or power of attorney is made subject to and is exercised in conformity with the
provisions of this Agreement.
2.5. Compensation. Each Preferred Stock Director and Company Director
(collectively the "Directors") shall be reimbursed by the Company for all direct
out-of-pocket expenses reasonably incurred in connection with their services as
directors and each Director shall receive from the Company an annual director's
fee.
2.6. Information. The Company agrees to deliver to each of the
Directors the information specified in Section 9.1 of the Stock Purchase
Agreement.
2.7. Insurance. The Company agrees to obtain and maintain insurance, in
an amount acceptable to the Purchasers, to indemnify each Director against any
liability incurred by him or her arising as a result of his or her acting as a
director of the Company.
ARTICLE 3.
CERTAIN CORPORATE ACTION
3.1. Approval of Preferred Stock Directors. The Company agrees that it
shall not, without the prior approval of a majority of the Company Directors and
a majority of the Preferred Stock Directors:
(a) redeem or otherwise purchase any outstanding Shares;
(b) enter into any material transaction with any Affiliate (other than
a transaction between the Company and any of its Subsidiaries);
(c) change the number of Directors on the Board;
(d) amend, modify or waive any provision of this Agreement.
3.2. Approval of Preferred Stock Holders. The Company agrees it shall
not, without the approval of Preferred Stock Holders holding a majority of the
Preferred Stock:
(a) issue any class or series of equity security senior to or on a
parity with the Convertible Preferred Stock as to payment of dividends or senior
to or on a parity with the Convertible Preferred Stock as to payments on a
dissolution, liquidation or winding-up of the Company;
(b) enter into any agreement or arrangement of any kind that would
restrict the Company's ability to perform its obligations under this Agreement
or the Stock Purchase Agreement;
(c) amend the Certificate of Designation, the certificate of
incorporation or the by-laws of the Company in any manner that would impair,
reduce or affect the rights of the Convertible Preferred Stock;
(d) merge or consolidate with any other entity or sell all or
substantially all of its assets; or
(e) liquidate or dissolve.
ARTICLE 4.
TRANSFER OF SHARES
4.1. Restrictions on Transfer.
(a) So long as this Agreement is in effect, no Securityholder shall
sell, assign, transfer, give, encumber, pledge, hypothecate or in any other way
dispose of any Shares or options exercisable for Shares (any of which being a
"Transfer") except as provided in this Agreement.
(b) Each Securityholder agrees that it will not Transfer any of its
Shares or options exercisable for Shares except as permitted under the
Securities Act or applicable state securities laws or any rule or regulation
promulgated thereunder. No Transfer in violation of this Agreement shall be made
or recorded on the books of the Company and any such Transfer shall be void and
of no force or effect. Subject to the terms of this Agreement, the
Securityholders shall be entitled to exercise all rights of ownership of their
Shares and any such options, and the transferability of any such options shall,
in addition to the terms hereof, be subject to the terms and conditions
contained therein.
4.2. Certain Permitted Transfers. The Company and the Securityholders
acknowledge and agree that any of the following Transfers shall be deemed to be
in compliance with this Agreement:
(a) a Transfer in accordance with the provisions of Section 4.3 hereof
or through a sale in a registered offering in accordance with Article 5 hereof;
(b) a Transfer from the Cahill, Warnock Parties to any of their
partners, limited partners or employees;
(c) subject to Section 9.5 hereof, a Transfer upon the death of a
Securityholder to his executors, administrators and testamentary trustees; and
(d) subject to Section 9.5 hereof, a Transfer of Shares made for
nominal consideration or as a gift in compliance with applicable federal and
state securities laws to the Securityholder's spouse, parents or issue or to a
trust, the beneficiaries of which, or to a corporation or partnership the
stockholders or partners of which, include only the Securityholder and such
Securityholder's spouse or issue (any such transferee, together with any
transferee pursuant to Section 4.2(c), being a "Permitted Transferee");
(e) a Transfer from the Estate to the Trust; and
(f) a Transfer from the Trust to the beneficiaries thereof provided
such beneficiaries are bound by a voting trust agreement or similar arrangement
reasonably satisfactory to the Cahill Warnock Parties.
4.3. Rights of First Refusal.
(a) Each Securityholder agrees that, subject to the restrictions on
Transfers contained in Sections 4.4, 4.5 and 4.6, if any Securityholder (for
purposes of this Section 4.3, a "Transferring Securityholder") wishes to
Transfer any or all of the Shares then owned by such Transferring
Securityholder, other than as provided in Section 4.2 or 4.5 hereof, then such
Transferring Securityholder shall first give a written notice (the "Transfer
Notice") to the Company and each Securityholder specifying the number of Shares
such Transferring Securityholder wishes to Transfer (the "Transfer Shares"),
containing an irrevocable offer (open to acceptance for a period of 30 days
after the date such Transfer Notice is received) to sell the Transfer Shares to
each Securityholder other than the Transferring Securityholder (collectively the
"Transfer Offerees") at the price per share stated in the Transfer Notice, which
price shall be equal to the price per Share offered to such Securityholder by a
bona fide third-party offeror (the "Transfer Price"), and stating whether such
offer is conditioned upon purchase of all the Transfer Shares by the Transfer
Offerees.
(b) Each Securityholder shall have the right to purchase all or a
portion of the Transfer Shares in proportion to their respective Pro Rata Share.
A Transfer Offeree who wishes to purchase Transfer Shares shall provide the
Company and the other Transfer Offerees with written notice specifying the
number of Transfer Shares (up to such Transfer Offeree's Pro Rata Share) as to
which such Transfer Offeree desires to accept the offer within 10 business days
of the giving of such notice by the Transfer Offerees, and may, at the Transfer
Offeree's option, indicate the maximum number of Transfer Shares such Transfer
Offeree would purchase in excess of such Transfer Offeree's Pro Rata Share (the
"Excess Amount"). If one or more Transfer Offerees declines to participate in
such purchase or elects to purchase less than such Transfer Offeree's Pro Rata
Share, then the Remaining Transfer Shares shall automatically be deemed to be
accepted by Transfer Offerees who specified an Excess Amount in their respective
notice of acceptance, allocated among such Transfer Offerees (with rounding to
avoid fractional shares) in proportion to their respective Pro Rata Share but in
no event shall an amount greater than a Transfer Offeree's Excess Amount be
allocated to such Transfer Offeree. Any excess Transfer Shares shall be
allocated among the remaining Transfer Offerees whose specified Excess Amount
has not been satisfied (with rounding to avoid fractional shares) in proportion
to their respective Pro Rata Shares, and such procedure shall be employed until
the entire Excess Amount of each Transfer Offeree has been satisfied or all
Transfer Shares have been allocated. The Company and the Preferred Stock Holders
shall have the right but not the obligation to purchase any Transfer Shares
remaining thereafter.
(c) If the offer is accepted by any Transfer Offerees and, if the offer
is conditioned on the purchase of all Transferee Shares, all Transfer Shares
have been accepted for purchase, the Company, on behalf of all purchasing
Transfer Offerees, shall provide the Transferring Securityholder with written
notice of such acceptance specifying the number of the Transfer Shares as to
which each Transfer Offeree is accepting the offer (a "Notice of Acceptance")
within 30 days after the Transfer Notice is received.
(d) The closing of the purchase by the Transfer Offerees of the
Transfer Shares pursuant to this Section 4.3 shall take place at the principal
offices of the Company on the fifteenth business day after the Notice of
Acceptance is given. At such closing, each of the Transfer Offerees who has
elected to purchase Transfer Shares shall deliver a certified check or checks in
the appropriate amount
to the Transferring Securityholder against delivery of duly endorsed
certificates representing the Transfer Shares to be purchased. The Transfer
Shares shall be delivered free and clear of all Encumbrances other than those
imposed by this Agreement.
(e) If any Transfer Shares allocated to a Transfer Offeree are not
purchased by such Transfer Offeree (the "Transfer Default Shares"), such
Transfer Default Shares may be purchased by the Company promptly following any
such default. Nothing contained herein shall prejudice any Person's right to
maintain any cause of action or pursue any other remedies available to it as a
result of such default.
(f) If, at the end of the thirtieth (30th) day after the Transfer
Notice is received, the Company has not delivered an effective Notice of
Acceptance of the offer contained in such Transfer Notice, or if it has
delivered a Notice of Acceptance covering less than all of the Transfer Shares,
then the Transferring Securityholder shall have 90 days in which to Transfer any
or all of the Transfer Shares not accepted for purchase by the Transfer
Offerees, at a price not lower than the Transfer Price and on terms no more
favorable to the transferee than those contained in the Transfer Notice, to any
third party; provided, however, that no Transfer may be made to any third party
unless and until such third party delivers to the Company an executed consent to
be bound by the provision of this Agreement in form and substance reasonably
satisfactory to the Company. Promptly after any Transfer pursuant to this
Section 4.3, the Transferring Securityholder shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such Transfer and of the terms thereof as the Company may
request. If, at the end of such 90-day period, the Transferring Securityholder
has not completed the Transfer of all of the Transfer Shares, the Transferring
Securityholder shall no longer be permitted to Transfer such Shares pursuant to
this Section 4.3(f) without again complying with this Section 4.3 in its
entirety. If the Transferring Securityholder determines at any time within such
90-day period that the Transfer of all or any part of such Transfer Shares at a
price not lower than the Transfer Price and on terms no more favorable to the
transferee than those contained in the Transfer Notice is impractical, such
Securityholder may terminate all attempts to Transfer such Transfer Shares and
recommence the procedures of this Section 4.3 in their entirety without waiting
for the expiration of such 90-day period by delivering written notice of such
decision to the Company.
4.4. Restrictions in Connection with Registrations. Each Securityholder
agrees not to effect any public sale or distribution of Shares, including any
sale pursuant to Rule 144, during the seven (7) days prior to the effective date
of a registration statement effected pursuant to the terms hereof and during
such period of time beginning on such effective date as may be required by the
underwriters of such offering and agreed to by the Company, but in no event
exceeding nine (9) months (in each case except as part of such registration).
Each Securityholder hereby acknowledges that such Securityholder shall have no
right to include its Shares in any registration of Shares, except as expressly
provided in Article 6.
ARTICLE 5.
REGISTRATION RIGHTS
5.1. Sale or Transfer of Shares.
(a) In addition to the other transfer restrictions set forth in this
Agreement, the shares of Common Stock and any shares of Common Stock issued or
issuable upon conversion of the Convertible Preferred Stock shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for a transfer by a Purchaser that is a partnership to
a partner of such partnership.
5.2. Public Offering Shares.
(a) Demand Registration. At any time and from time to time but
excluding the period beginning December 1 and ending March 1 in any year, if the
Company receives written notice from Preferred Stock Holders holding a majority
of the Convertible Preferred Stock, which notice demands the registration of all
or at least 500,000 shares of the Conversion Stock issued or issuable upon
conversion of Convertible Preferred Stock, and specifies the intended methods of
disposition thereof, then the Company shall promptly (and in any event within 10
days after its receipt of such demand) provide notice thereof to the other
Securityholders in accordance with this Section 5.2 (which other Securityholders
shall have the right to include any shares of Common Stock and any shares of
Common Stock issued or issuable upon conversion of Convertible Preferred Stock
or exercise of options to purchase Common Stock held by them in such
registration) and cause to be prepared a registration statement, file the
registration statement within 60 days after the date of such request (45 days in
the case of a Form S-3) (using Form S-3 or other "short form," if available and
advised by counsel), to the end that such Conversion Stock issued or issuable
upon conversion of Convertible Preferred Stock, may be sold thereunder as soon
as it becomes effective, and the Company will use its reasonable best efforts to
ensure that a distribution of the Conversion Stock pursuant to the registration
statement may continue for up to nine months from the date of the effective date
of the registration statement. Each such registration shall hereinafter be
called a "Demand Registration." The Preferred Stock Holders shall be entitled to
request one Demand Registration. A Demand Registration shall not count as such
until a registration statement becomes effective; provided, that if, after it
has become effective, the offering pursuant to the registration statement is
interfered with by any stop order, injunction or other order or requirement of
the Commission or any other governmental authority, such registration be deemed
not to have been effected unless such stop order, injunction or other order
shall subsequently have been vacated or otherwise removed. The Preferred Stock
Holders shall select the underwriters of any offering pursuant to a registration
statement filed pursuant to this Section 5.2(a), subject to the approval of the
Company, which approval shall not be unreasonably withheld. Any selected
underwriter shall be a well-recognized firm in good standing.
(b) "Piggyback" Registration Rights. Subject to applicable stock
exchange rules and securities regulations, at least 30 days prior to any public
offering of any of its Common Stock for the account of the Company or any other
person (other than a registration statement on Form S-4 or S- 8 (or any
successor forms under the Securities Act) or other registrations relating solely
to employee benefit plans or any transaction governed by Rule 145 of the
Securities Act), other than pursuant to the exercise of any Demand Registration
pursuant to Section 5.2(a), the Company shall give written notice of such
proposed filing and of the proposed date thereof to each Securityholder and if,
on or before the twentieth (20th) day following the date on which such notice is
given, the Company shall receive a written request from any such holder
requesting that the Company include among the securities covered by such
registration statement any Shares of Common Stock, Shares of Common Stock issued
or issuable upon conversion of Convertible Preferred Stock or the exercise of
options to purchase Common Stock owned by such Securityholder for offering for
sale in a manner and on terms set forth in such request, the Company shall
include such Shares in such registration statement, if filed, so as to permit
such Shares to be sold or disposed of in the manner and on the terms of the
offering thereof set forth in such request. Each such registration shall
hereinafter be called a "Piggyback Registration." The Company shall select the
underwriters of any offering pursuant to a registration statement filed pursuant
to this Section 5.2(b), subject to the approval of the Purchasers, which
approval shall not be unreasonably withheld.
(c) Terms and Conditions of Registration or Qualification. In
connection with any registration statement filed pursuant to Sections 5.2(a) or
5.2(b) hereof, the following provisions shall apply.
(i) The obligations of the Company to use its reasonable best
efforts to cause the registration of Shares under the Securities Act
are subject to the limitation, condition and qualification that the
Company shall be entitled to postpone for a
reasonable period of time (but not exceeding 90 days in any one year
period) the filing of any registration statement otherwise required to
be filed by it if the Company in good faith determines that such
registration and offering would (A) interfere with any financing,
acquisition, corporate reorganization or other material transaction or
event involving the Company or any of its subsidiaries or (B) require
premature disclosure thereof or of conditions, circumstances or events
affecting the Company or the Company's industry which are not yet
fully developed or ripe for disclosure, in which event the Company
shall promptly give the Securityholders requesting registration
thereof written notice of such determination and an approximation of
the anticipated delay. If the Company shall so postpone the filing of
a registration statement, the Securityholders requesting registration
shall have the right to withdraw the request for registration by
giving written notice to the Company within 15 days after receipt of
the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for
registration to which Holders are entitled under this Agreement.
(ii) If the managing underwriter advises that the inclusion in
such registration or qualification of some or all of the Shares sought
to be registered exceeds the number (the "Saleable Number") that can
be sold in an orderly fashion or without adversely affecting the
offering, then the number of Shares offered shall be limited to the
Saleable Number and shall be allocated as follows:
(A) If such registration is being effected
pursuant to a Piggyback Registration, (1) first, all the
Shares the Company (or in the exercise of demand
registration rights by other stockholders of the Company,
the selling stockholder(s) exercising such rights) proposes
to register and (2) second, the difference between the
Saleable Number and the number to be included pursuant to
clause (1) above, allocated to the Preferred Stock Holders
pro rata on the basis of the relative number of Shares
offered for sale by each Preferred Stock Holder; and
(B) if such registration is being effected
pursuant to a Demand Registration other than in connection
with the first public offering of Common Stock of the
Company after the date of this Agreement, (1) first, the
entire Saleable Number allocated first to the Preferred
Stock Holders pro rata on the basis of the relative number
of Shares offered for sale by each such Securityholder, and
then among all other selling Securityholders pro rata on the
basis of the relative number of Shares offered for sale by
each such Securityholder and (2) second, the difference (if
positive) between the Saleable Number and the number to be
included pursuant to clause (1) above, allocated to the
Company; and
(C) if such registration is being effected
pursuant to a Demand Registration and would be the first
public offering of Common Stock after the date of this
Agreement and the Company wishes to sell, for its own
account, shares of Common Stock in such offering, then the
Saleable Number shall be allocated evenly to the Purchasers,
on one hand, and the Company, on the other hand, to the
extent of the number of Shares offered by the Purchasers.
(iii) The selling Securityholders will promptly provide the
Company with such information as the Company shall reasonably request
in order to prepare such registration statement and, upon the
Company's request, each selling Securityholder shall
provide such information in writing and signed by such holder and
stated to be specifically for inclusion in the registration statement.
In the event that the distribution of the Shares covered by the
registration statement shall be effected by means of an underwriting,
the right of any selling Securityholder to include its Shares in such
registration shall be conditioned on such holder's execution and
delivery of a customary underwriting agreement with respect thereto;
provided, however, that except with respect to information concerning
such holder and such holder's intended manner of distribution of the
Shares, no selling Securityholder shall be required (as a selling
Securityholder exercising registration rights) to make any
representations or warranties in such agreement as a condition to the
inclusion of its Shares in such registration.
(iv) The Company shall bear all expenses in connection with the
preparation of any registration statement filed pursuant to Section
5.2(a), including the fees and disbursements of one counsel for the
selling Securityholders.
(v) The Company shall bear all expenses in connection with the
preparation of any registration statement filed pursuant to Section
5.2(b), excluding (A) the fees and disbursements of counsel for the
selling Securityholders, and (B) the underwriting fees, discounts or
commissions with respect to Shares of the selling Securityholders,
which shall be borne by the selling Securityholders.
(vi) Following the effective date of such registration statement,
the Company shall, upon the request of the selling Securityholders,
forthwith supply such number of prospectuses (including preliminary
prospectuses and amendments and supplements thereto) meeting the
requirements of the Securities Act or such other securities laws where
the registration statement or prospectus has been filed and such other
documents as are referred to in the registration statement as shall be
requested by the selling Securityholders to permit such holders to
make a public distribution of their Shares, provided that the selling
Securityholders furnish the Company with such appropriate information
relating to such holders' intentions in connection therewith as the
Company shall reasonably request in writing.
(vii) The Company shall prepare and file such amendments and
supplements to such registration statement as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act or such other securities laws where
the registration statement has been filed with respect to the offer
and sale or other disposition of the shares covered by such
registration statement during the period required for distribution of
the Shares, which period shall not be in excess of six (6) months from
the effective date of such registration statement.
(viii) The Company shall use its reasonable best efforts to
register or qualify the Shares of the selling Securityholders covered
by any such registration statement under such securities or Blue Sky
laws in such jurisdictions as the Securityholders may reasonably
request; provided, however, that the Company shall not be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not
so qualified in order to comply with such request.
(ix) In connection with any registration pursuant to Article 5,
the Company will as expeditiously as possible:
(A) cause the Shares covered by such
registration statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary by virtue of
the business and operations of the Company to enable the
selling Securityholders to consummate the disposition of
such Shares;
(B) notify each selling Securityholder at any
time of the happening of any event as a result of which the
prospectus included in such registration statement contains
an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company
will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an 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;
(C) cause all Shares covered by the
registration statement to be listed on each securities
exchange on which similar securities issued by the Company
are then listed and, unless the same already exists, provide
a transfer agent, registrar and CUSIP number for all such
Shares not later than the effective date of the registration
statement;
(D) enter into such customary agreements
(including an underwriting agreement in customary form) and
take all such other actions as the holders of a majority of
the voting power of the Shares being sold or the
underwriters retained by such holders, if any, reasonably
request in order to expedite or facilitate the disposition
of such Shares;
(E) make available for inspection by any
selling Securityholder, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents
and properties of the Company as shall be necessary to
enable them to exercise their due diligence responsibility,
and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such
Inspector in connection with such registration statement,
provided that such Inspectors shall have first executed and
delivered to the Company a confidentiality agreement in
customary form protecting the confidentiality of such
information;
(F) obtain "cold comfort" letters and updates
thereof from the Company's independent public accountants
and an opinion from the Company's counsel in customary form
and covering such matters of the type customarily covered by
"cold comfort" letters and opinion of counsel, respectively,
as the holders of a majority of the voting power of the
Shares of the selling Securityholders shall reasonably
request; and
(G) otherwise comply with all applicable
rules and regulations of the Commission, and make available
to its Securityholders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months,
beginning within three months after the effective date of
the registration statement, which
earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.
(x) Each selling Securityholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 5.2(c)(ix)(B), such holder will forthwith
discontinue disposition of its Shares pursuant to the registration
statement covering such Shares until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by such
Section 5.2(c)(ix)(B) and, if so directed by the Company, such holder
will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such holder's possession, of
the prospectus covering such Shares current at the time of receipt of
such notice.
(xi) Each selling Securityholder agrees not to effect any public
sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Shares of Common Stock, and not to effect
any such public sale or distribution of any other equity security of
the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company in each case, other
than as part of an offering made pursuant to a registration statement
filed and affected by this Agreement during the 15 days prior to, and
during the 90-day period (or such longer period as each selling
Securityholder agrees with the underwriter of such offering) beginning
on the effective date of such registration statement (except as part
of such registration) provided that each selling Securityholder has
received written notice of such registration at least 15 days prior to
such effective date.
(d) Exceptions to Registration Obligations. The Company shall not be
required to effect any registration of Shares pursuant to Section 5.2(a) or
Section 5.2(b) hereof if either:
(i) it shall deliver to the selling Securityholders requesting
such registration an opinion of counsel in form reasonably
satisfactory to such selling Securityholder to the effect that all
such Shares held by such selling Securityholder may be sold in the
public market without registration under the Securities Act (e.g.,
pursuant to Rule 144) and any applicable state securities laws; or
(ii) it shall offer to purchase all the Shares sought by the
selling Securityholder to be registered, at a purchase price per Share
equal to the average, over the ten (10) trading days immediately after
the selling Securityholder's request for Demand Registration or
Piggyback Registration, of the average on each such trading day of the
bid and ask price (or high and low sales price, if applicable) for a
share of Common Stock of the Company on the exchange or quotation
system upon which the Common Stock is traded or quoted.
(e) Transfer Restrictions. The transfer restrictions contained in
Article 4 of this Agreement shall not apply to any offering of Shares pursuant
to this Section 5.2.
(f) Indemnification.
(i) In the event of the registration or qualification of any
Shares of the Securityholders under the Securities Act or any other
applicable securities laws pursuant to the provisions of this Section
5.2, the Company agrees to indemnify and hold harmless each
Securityholder thereby offering such Shares for sale (a "Seller"),
underwriter, broker or dealer, if any, of such Shares, and each other
person, if any, who controls any such Seller, underwriter, broker or
dealer within the meaning of the Securities Act or any other
applicable securities laws, from and against any and all losses,
claims, damages or
liabilities (or actions in respect thereof), joint or several, to
which such Seller, underwriter, broker or dealer or controlling person
may become subject under the Securities Act or any other applicable
securities laws 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 under which such
Shares were registered or qualified under the Securities Act or any
other applicable securities laws, any preliminary prospectus or final
prospectus relating to such Shares, or any amendment or supplement
thereto, 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, or
any violation by the Company of any rule or regulation under the
Securities Act or any other applicable securities laws applicable to
the Company or relating to any action or inaction required by the
Company in connection with any such registration or qualification and
will reimburse each such Seller, underwriter, broker or dealer and
each such controlling person for any legal or other expenses
reasonably incurred by such Seller, underwriter, broker or dealer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; 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 omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment
or supplement thereto or violation in reliance upon and in conformity
with written information furnished to the Company by such Seller,
underwriter, broker, dealer or controlling person specifically and
expressly for use in the preparation thereof; and provided, further,
that the Company shall not be liable to any person who participates as
an underwriter in the offering or sale of Shares or any other person,
if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of such person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Shares to such person if such statement or
omission was corrected in such final prospectus so long as such final
prospectus, and any amendments or supplements thereto, have been
furnished to such underwriter.
(ii) In the event of the registration or qualification of any
Shares of the Securityholders under the Securities Act or any other
applicable securities laws for sale pursuant to the provisions of this
Section 5.2, each selling Securityholder, each underwriter, broker and
dealer, if any, of such Shares, and each other person, if any, who
controls any such selling Securityholder, underwriter, broker or
dealer within the meaning of the Securities Act, agrees severally, and
not jointly to indemnify and hold harmless the Company, each person
who controls the Company within the meaning of the Securities Act, and
each officer and director of the Company from and against any and all
losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which the Company, such controlling
person or any such officer or director may become subject under the
Securities Act or any other applicable securities laws 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
of any material fact contained in any registration statement under
which such Shares were registered or qualified under the Securities
Act or any other applicable securities laws, any preliminary
prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon an
untrue statement or the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading or any violation by the Company of any rule or
regulation under
the Securities Act or any other applicable securities laws applicable
to the Company or relating to any action or inaction required by the
Company in connection with any such registration or qualification and
will reimburse each such Seller, underwriter, broker or dealer and
each such controlling person for any legal or other expenses
reasonably incurred by such Seller, underwriter, broker or dealer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action, which untrue statement
or omission or violation was made therein in reliance upon and in
conformity with written information furnished to the Company by such
selling Securityholder, underwriter, broker, dealer or controlling
person specifically for use in connection with the preparation
thereof, and will reimburse the Company, such controlling person and
each such officer or director for any legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that no selling Securityholder will be liable under this
Section 5.2(f)(ii) for any amount in excess of the net proceeds paid
to such selling Securityholder of Shares sold by it unless such
liability arises from such written information furnished to the
Company with knowledge of its misleading nature or an intent to
defraud.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 5.2(f) (an "indemnified party") of
notice of the commencement of any action or claim relating to any
registration statement filed under Section 5.2(a) or 5.2(b) or as to
which indemnity may be sought hereunder, such indemnified party will,
if a claim for indemnification hereunder in respect thereof is to be
made against any other party hereto (an "indemnifying party"), give
written notice to such indemnifying party of the commencement of such
action or claim, but the omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability that it may
have to any indemnified party otherwise than pursuant to the
provisions of this Section 5.2(f) and shall also not relieve the
indemnifying party of its obligations under this Section 5.2(f) except
to the extent that the indemnifying party is actually prejudiced
thereby. In case any such action is brought against an indemnified
party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled (at its own expense)
to participate in and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the
defense, with counsel reasonably satisfactory to such indemnified
party, of such action and/or to settle such action 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 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than the reasonable cost of investigation;
provided, however, that no indemnifying party shall enter into any
settlement agreement without the prior written consent of the
indemnified party unless such indemnified party is fully released and
discharged from any such liability. Notwithstanding the foregoing, the
indemnified party shall have the right to employ its own counsel in
any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (A) the employment of
such counsel shall have been authorized in writing by the indemnifying
party in connection with the defense of such suit, action, claim or
proceeding, (B) the indemnifying party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to take charge of
the defense of such action, suit, claim or proceeding, or (C) such
indemnified party shall have reasonably concluded, based upon the
advice of counsel, that there may be defenses available to it that are
different from or additional to those available to the indemnifying
party which, if the indemnifying party and the indemnified party were
to be represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of
the defenses available to such indemnified party. If any of the events
specified in clauses (A), (B) or (C) of the preceding sentence shall
have occurred or shall
otherwise be applicable, then the fees and expenses of one counsel or
firm of counsel selected by a majority in interest of the indemnified
parties (and reasonably acceptable to the indemnifying party) shall be
borne by the indemnifying party. If, in any such case, the indemnified
party employs separate counsel, the indemnifying party shall not have
the right to direct the defense of such action, suit, claim or
proceeding on behalf of the indemnified party and the indemnified
party shall assume such defense and/or settle such action; provided,
however, that an indemnifying party shall not be liable for the
settlement of any action, suit, claim or proceeding effected without
its prior written consent, which consent shall not be unreasonably
withheld.
ARTICLE 6.
PREEMPTIVE RIGHTS
6.1. Preemptive Rights. If, after the date hereof and prior to the
conversion of the Convertible Preferred Stock by Preferred Stock Holders holding
a majority of the Convertible Preferred Stock, the Company shall propose to
issue or sell New Securities (as hereinafter defined) or enter into any
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance or sale of any New Securities, each Preferred Stock
Holder shall have the right to purchase that number of New Securities at the
same price and on the same terms proposed to be issued or sold by the Company so
that such holder would after the issuance or sale of all of such New Securities,
hold the same proportional interest of the then outstanding Shares (assuming
that any securities or other rights convertible or exchangeable into or
exercisable for Shares have been converted, exchanged or exercised) as was held
by it prior to such issuance and sale (the "Proportionate Percentage"). "New
Securities" shall mean any securities or other rights convertible or
exchangeable into or exercisable for Shares; provided, however, that "New
Securities" does not include: (i) Common Stock issued or issuable on conversion
of the Convertible Preferred Stock or upon the exercise of options outstanding
on the date hereof; (ii) Shares issued pursuant to any rights or agreements
including, without limitation, any security convertible or exchangeable, with or
without consideration, into or for any stock, options and warrants, provided
that the rights established by this Section 6.1 apply with respect to the
initial sale or grant by the Company of such rights or agreements; (iii)
securities issued by the Company as part of any public offering pursuant to an
effective registration statement under the Securities Act; (iv) Shares issued in
connection with any stock split, stock dividend, recapitalization, spin-off, or
split-off of the Company; (v) Shares issued to management, directors or
employees of, or consultants to, the Company pursuant to plans outstanding as of
the date hereof, and options to purchase Shares issued in accordance with such
plans or pursuant to other plans approved by the Board and options to purchase
Shares issued in accordance with such plans; (vi) securities issued in
connection with any merger or acquisition by the Company; and (vii) securities
issued in any single transaction in which (A) the purchase price for such
securities is less than $1,000,000 and (B) such purchase price per share of
Common Stock or per Common Stock Equivalent is not less than the then applicable
Conversion Price per share of the Convertible Preferred Stock.
The Company shall give the Preferred Stock Holders written notice of
its intention to issue and sell New Securities, describing the type of New
Securities, the price and the general terms and conditions upon which the
Company proposes to issue the same. The Preferred Stock Holders shall have 15
days from the giving of such notice to agree to purchase all (or any part) of
its Proportionate Percentage of New Securities for the price and upon the terms
and conditions specified in the notice by giving written notice of the Company
and stating therein the quantity of New Securities to be purchased.
If the Preferred Stock Holders fail to timely exercise in full such
right, the Company shall have 120 days thereafter to sell the New Securities in
respect of which the Preferred Stock Holders' rights were not exercised, at a
price and upon general terms and conditions no more favorable to the purchasers
thereof than specified in the Company's notice to the Preferred Stock Holders
pursuant to this Section 7.1. If the Company has not sold the New Securities
within such 120 days, the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Preferred Stock Holders in the manner provided above.
ARTICLE 7.
TERMINATION
This Agreement shall terminate automatically upon the consummation of
(a) a Qualified Offering, or (b) a Sale of the Company. Notwithstanding the
foregoing, the provisions of Article 5 of this Agreement shall survive and
continue in effect subsequent to the consummation of a Qualified Offering until
the third anniversary of the date of consummation of a Qualified Offering.
ARTICLE 8.
REPRESENTATIONS
8.1. Representation of Company. The execution, delivery, and
performance by the Company of this Agreement and all other agreements in
connection with this Agreement required to be executed by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary corporate action. This Agreement and
all other agreements have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms. The execution of and performance of the
transactions contemplated by this Agreement and all other agreements and
compliance with their provisions by the Company will not violate any provision
of law and will not conflict with or result in any breach of any of the terms,
conditions, or provisions of, or constitute a default under, or require a
consent or waiver under, its Certificate of Incorporation or by-laws or any
indenture, lease, agreement or other instrument to which the company is a party
or by which it or any of its properties is bound, or any decree, judgment,
order, statute, rule or regulation applicable to the Company.
8.2. Representation of Cahill, Warnock Purchasers. The execution,
delivery, and performance by the Cahill, Warnock Parties of this Agreement and
all other agreements required to be executed by the Cahill, Warnock Parties and
the consummation by the Cahill, Warnock Parties of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary action. This
Agreement and all other agreements have been duly executed and delivered by the
Cahill, Warnock Parties and constitute valid and binding obligations of the
Cahill, Warnock Parties enforceable in accordance with their respective terms.
The execution of and performance of the transactions contemplated by this
Agreement and all other agreements and compliance with their provisions by the
Cahill, Warnock Parties will not violate any provision of law and will not
conflict with or result in any breach of any of the terms, conditions, or
provisions of, or constitute a default under, or require a consent or waiver
under any agreements applicable to the Cahill, Warnock Parties.
8.3. Representation of the Brozman Estate. The execution, delivery,
and performance by the Executor of the Brozman Estate of this Agreement and all
other agreements required to be executed by the Executor of the Brozman Estate
and the consummation by the Executor of the Brozman Estate of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action by the Brozman Estate. This Agreement and all other agreements have been
duly executed and delivered by the Executor of the Brozman Estate and constitute
valid and binding obligations of the Brozman Estate enforceable in accordance
with their respective terms. The execution of and performance of the
transactions contemplated by this Agreement and all other agreements and
compliance with their provisions by the Brozman Estate will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions, or provisions of, or constitute a default under, or
require a consent or waiver under any applicable agreements applicable to the
Brozman Estate.
8.4. Representation of the Brozman Trust. The execution, delivery, and
performance by the Trustee of the Robert F. Brozman Trust Under Agreement dated
December 28, 1989 (the "Brozman Trust") of this Agreement and all other
agreements required to be executed by the Trustee of the Brozman Trust and the
consummation by the Trustee of the Brozman Trust of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action by the Brozman Trust. This Agreement and all other agreements have been
duly executed and delivered by the Trustee of the Brozman Trust and constitute
valid and binding obligations of the Brozman Trust enforceable in accordance
with their respective terms. The execution of and performance of the
transactions contemplated by this Agreement and all other agreements and
compliance with their provisions by the Brozman Trust will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions, or provisions of, or constitute a default under, or
require a consent or waiver under any applicable agreements applicable to the
Brozman Trust.
ARTICLE 9.
MISCELLANEOUS
9.1. Certificate Legend. Upon execution of this Agreement, the stock
certificates representing Shares held by the Stockholders shall contain
substantially the following legend, in addition to any other legends deemed
reasonably appropriate or necessary by the Company:
"This certificate is transferable only upon compliance with and
subject to the provisions of a Stockholders' Agreement among the
Company and certain Securityholders, a copy of which Agreement is on
file in the office of the Secretary of the Company at its principal
place of business. The Company will furnish a copy of such Agreement
to the record holder of this Certificate, without charge, upon written
request to the Company at its principal place of business or
registered office."
9.2. Negotiable Form. Whenever any Shares are to be delivered or sold
pursuant to this Agreement, the person selling such Shares shall deliver such
certificates or other instruments duly endorsed or accompanied by appropriate
stock powers or assignments separate from the certificate or instrument.
9.3. Enforcement. No Shares shall be Transferred on the books of the
Company and no Transfer thereof shall be effective unless and until the terms
and provisions of this Agreement are complied with, and in cases of violation of
this agreement by the attempted Transfer of the Shares without compliance with
the terms and provisions thereof, such Transfer shall be invalid and of no
effect, and the Company and/or any of the Securityholders who are not attempting
to Transfer the Shares shall have the right to compel the Securityholder who is
attempting to Transfer the Shares, and/or the purported transferee, to Transfer
and deliver the same in accordance with the applicable provisions of this
Agreement.
9.4. Specific Performance. The parties hereto recognize that it is to
the benefit of the Company and the Securityholders that this Agreement be
carried out; and for those and other reasons, the parties hereto would be
irreparably damaged if this Agreement is not specifically enforced in the event
of a breach hereof. If any controversy concerning the rights or obligations to
purchase or sell any Shares arises, or if this Agreement is breached, the
parties hereto hereby agree that remedies at law might be inadequate and that,
therefore, such rights and obligations, and this Agreement, shall be enforceable
by specific performance. The remedy of specific performance shall not be an
exclusive remedy, but shall be cumulative of all other rights and remedies of
the parties hereto at law, in equity or under this Agreement.
9.5. Transferees. The Company and the Securityholders shall cause any
transferee of any Shares or options exercisable for shares held by any
Securityholder to execute a consent, in form and substance reasonably acceptable
to the Company, to be bound by the terms and conditions of this Agreement and
upon execution thereof such future Securityholder shall be entitled to the
rights of an owner of the Shares held by such transferee hereunder, provided
that the foregoing shall not apply to Shares that have been sold pursuant to an
effective registration statement under the Securities Act or Rule 144
thereunder.
9.6. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing and delivered in
person, transmitted by telecopier or sent by registered or certified mail
(return receipt requested) or recognized overnight delivery service, postage
pre-paid, addressed as follows, or to such other address as any such party may
notify to the other parties in writing:
(a) if to the Company:
Concorde Career Colleges, Inc.
1100 Main Street
Suite 416
Kansas City, MO 64105
Attn: Jack L. Brozman
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Attn: Thomas W. Van Dyke
(b) if to the Cahill, Warnock Parties:
c/o Cahill, Warnock & Company, LLC
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esquire
Facsimile No.: (410) 986-2828
(c) if to any of the Other Holders, to the respective Other Holder as
set forth below:
Jack L. Brozman
8607 Cedar
Prairie Village, KS 66207
The Brozman Estate
c/o Jack L. Brozman
1100 Main Street
Suite 416
Kansas City, MO 64105
The Brozman Trust
c/o Jack L. Brozman
1100 Main Street
Kansas City, MO 64105
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, 3 business days
after dispatch.
9.7. Binding Effect; Assignment. This Agreement, including the rights
and conditions contained herein in connection with disposition of Shares, shall
be binding upon the parties hereto, together with their respective executors,
administrators, successors, personal representatives, heirs and assigns
permitted under this Agreement.
9.8. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware.
9.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.10. Entire Agreement. This Agreement together with the Certificate
of Designation embodies the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to the subject matter hereof.
9.11. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
9.12. Amendment; Waiver. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Company and the
Securityholders.
9.13. Captions. The captions of this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
[Balance of Page Left Blank Intentionally -- Signature Page Follows]
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
----------------------------------------
Name: Jack L. Brozman
Title: President and Chief
Executive Officer
CAHILL, WARNOCK PARTIES:
CAHILL, WARNOCK STRATEGIC PARTNERS FUND,
L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS,
L.P.,
its General Partner
By: /s/ David L. Warnock
----------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
General Partner
By: /s/ David L. Warnock
----------------------------------------
Name: David L. Warnock
Title: Managing Member
OTHER HOLDERS:
JACK L. BROZMAN, in his individual
capacity
By: /s/ Jack L. Brozman
---------------------------------------
THE ESTATE OF ROBERT F. BROZMAN
By: /s/ Jack L. Brozman
---------------------------------------
Jack L. Brozman, Executor
ROBERT F. BROZMAN TRUST UNDER AGREEMENT
DATED DECEMBER 28, 1989
By: /s/ Jack L. Brozman
----------------------------------------
Jack L. Brozman, Trustee
Exhibit 6
CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND AMONG
CONCORDE CAREER COLLEGES, INC.,
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
TABLE OF CONTENTS
SECTION 1 1
Definitions 1
1.1. Defined Terms. 1
SECTION 2 4
Authorization and Sale of Convertible Preferred Stock 4
2.1. Authorization of Convertible Preferred
Stock. 4
2.2. Sale and Purchase of Convertible Preferred
Stock. 4
SECTION 3 5
Closing Dates; Delivery 5
3.1. Closing Dates 5
3.2. Delivery. 5
SECTION 4 5
Representations and Warranties of the Company 5
4.1. Organization, Good Standing and
Qualification. 5
4.2. Capitalization. 5
4.3. Subsidiaries 6
4.4. Partnerships 7
4.5. Authorization 7
4.6. Governmental Consents. 7
4.7. Litigation 7
4.8. Certain Events; Insurance 8
4.9. Patents and Trademarks. 8
4.10. Compliance with Other Instruments and
Legal Requirements. 8
4.11. Material Agreements; Action. 9
4.12. Disclosure 9
4.13. Brokers' Fees 9
4.14. Registration Rights. 9
4.15. Corporate Documents 10
4.16. Real Property 10
4.17. Tangible Personal Property 11
4.18. Environmental Matters 11
4.19. Financial Statements. 12
4.20. Changes 13
4.21. Employee Benefit Plans 13
4.22. Taxes 17
4.23. Insurance. 17
4.24. Minute Books 17
4.25. Labor and Employment Matters. 18
4.26. Use of Proceeds 18
4.27. Accreditation and State Licensure/
Approval. 18
4.28. No Undisclosed Liabilities 19
4.29. Licenses and Permits 19
4.30. U.S. Department of Education Certification
and Eligibility 20
SECTION 5 22
Representations, Warranties and Covenants of the
Purchasers 22
5.1. Accredited Investor; Experience; Risk 22
5.2. Investment 22
5.3. Legends; Opinion Requirement 22
5.4. Authorization 23
5.5. Governmental Consents 23
5.6. Brokers' Fees 23
SECTION 6 24
Covenants 24
6.1. Access to Information 24
6.2. Publicity 24
6.3. Register of Securities 24
6.4. Removal of Legend 25
SECTION 7 25
Conditions to Closing of Purchasers 25
7.1. Representations and Warranties Correct 25
7.2. Covenants 25
7.3. Opinion of Company's Counsel 25
7.4. No Material Adverse Change 25
7.5. Certificate of Designation. 25
7.6. Stockholders' Agreement 26
7.7. State Securities Laws 26
7.8. CenCor Obligations 26
7.9. Issuance of Shares 26
7.10. Certificates 26
7.11. Debenture and Warrant Purchase Agreements. 26
7.12. Debentures and Warrants 26
7.13. Registration Rights Agreement. 26
SECTION 8 27
Conditions to Closing of the Company 27
8.1. Representations 27
8.2. Covenants 27
8.3. Stockholders' Agreement 27
8.4. Opinion of Purchasers' Counsel 27
8.5. No Material Adverse Change 27
8.6. State Securities Laws. 27
8.7. Purchase Price. 27
8.8. Certificate 27
8.9. Debenture and Warrant Purchase Agreements. 27
8.10. Registration Rights Agreement 28
SECTION 9 28
Covenants of the Company 28
9.1. Information. 28
9.2. Additional Agreements 30
SECTION 10 31
Miscellaneous 31
10.1. Amendment; Waiver. 31
10.2. Notices 31
10.3. Survival of Representations, Warranties
and Covenants 32
10.4. Severability. 32
10.5. Successors and Assigns 32
10.6. Entire Agreement 32
10.7. Choice of Law 32
10.8. Counterparts 33
10.9. Costs and Expenses 33
10.10.Indemnification 33
10.11.Limits on Liability 34
10.12.No Third-Party Beneficiaries. 34
CONCORDE CAREER COLLEGES, INC.
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of February 25,
1997 (this "Agreement"), by and among CONCORDE CAREER COLLEGES, INC., a Delaware
corporation (the "Company"), CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a
limited partnership organized under the laws of the State of Delaware, and
STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of
the State of Delaware. Cahill, Warnock Strategic Partners Fund, L.P. and
Strategic Associates, L.P. together may be referred to herein as the
"Purchasers."
WHEREAS, the Company has issued and outstanding the shares of capital stock
described in Section 4.2 hereof and the Company has reserved for issuance
additional shares of capital stock upon the exercise of the outstanding
convertible securities identified in Section 4.2;
WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to
purchase, shares of the Company's Convertible Preferred Stock, par value $0.10
per share (the "Convertible Preferred Stock") on the terms and conditions set
forth herein;
WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to
purchase, Debentures and Warrants pursuant to Debenture and Warrant Purchase
Agreements, between the Company and Purchasers, of even date herewith;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
1.1. Defined Terms. The following terms are defined
as follows:
"Affiliate" means, with respect to any Person, (i) any Person in which such
Person holds direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person and (ii) any
brother, sister, parent, child or spouse of such Person or any Person described
in clause (i).
"Benefit Arrangement" means any benefit arrangement, obligation, custom, or
practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors, other than any obligation,
arrangement, custom or practice that is an Employee Benefit Plan, including,
without limitation, employment agreements, severance agreements, executive
compensation arrangements, incentive programs or arrangements, sick leave,
vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, any plans subject to
Section 125 of the Code, and any plans providing benefits or payments in the
event of a change of control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors, or agents.
"CenCor" means CenCor, Inc., a Delaware corporation.
"Code" means the Internal Revenue Code of 1986 (or any successor thereto),
as amended from time to time.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored or
maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former directors, employees,
or agents of the Company or the Subsidiaries.
"Company Plan" means, as of the Closing Date, any Employee Benefit Plan for
which the Company or any Subsidiary is the "plan sponsor" (as defined in Section
3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the Company or any
Subsidiary or to which the Company or any Subsidiary is obligated to make
payments, in each case with respect to any present or former employees of the
Company or the Subsidiaries.
"Company's Knowledge" or derivations thereof shall mean the actual
knowledge of the executive officers of the Company.
"Employee Benefit Plan" has the meaning given in Section 3(3) of ERISA.
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance or rule of common law as now or hereafter in effect in any
way relating to the protection of the environment including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App.
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et
seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42
U.S.C. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. 651 et seq.) and the
regulations promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation or rule issued thereunder.
"ERISA Affiliate" means any person that together with the Company, would be
or was at any time treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA and any general partnership of which the Company is or has
been a general partner.
"Hazardous Material" means any substance, material or waste that is
regulated by the United States, the foreign jurisdictions in which the Company
or its Subsidiaries conducts business, or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance that is defined as a "hazardous waste,"
"hazardous substance," "hazardous material," "restricted hazardous waste,"
"industrial waste," "solid waste," "contaminant," "pollutant," "toxic waste" or
"toxic substance" under any provision of Environmental Law.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
"Multiemployer Plan" means any Employee Benefit Plan described in Section
3(37) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means any approvals, authorizations, consents, licenses, permits
or certificates.
"Permitted Exceptions" means (i) all defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance that have been made available to the Company; (ii) statutory Liens for
current taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve is established therefor; (iii)
mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not material to the
business, operations and financial condition of the property so encumbered or
the Company or its Subsidiaries; (iv) zoning, entitlement and other land use and
environmental regulations by any governmental body, provided that such
regulations have not been violated; and (v) such other imperfections in title,
charges, easements, restrictions and encumbrances that do not materially detract
from the value of or materially interfere with the present use of any Company
Property (as hereinafter defined) subject thereto or affected thereby.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Qualified Plan" means any Employee Benefit Plan that meets, purports to
meet, or is intended to meet the requirements of Section 401(a) of the Code.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or in
any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post- remedial monitoring and care.
"Subsidiaries" means each corporation in which the Company owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
"Welfare Plan" means any Employee Benefit Plan described in Section 3(1) of
ERISA.
SECTION 2
Authorization and Sale of Convertible Preferred Stock
2.1. Authorization of Convertible Preferred Stock. At the First Closing (as
defined in Section 3.1), the Company will have authorized the issuance and sale
of 55,147 shares of Convertible Preferred Stock, having the rights, preferences,
privileges and restrictions set forth in the Certificate of Designation attached
to this Agreement as Exhibit A hereto (the "Certificate of Designation").
2.2. Sale and Purchase of Convertible Preferred Stock. In reliance on the
representations and warranties of the Company contained herein and subject to
the terms and conditions hereof, the Purchasers agree to purchase from the
Company, severally and in the amounts set forth on Exhibit B hereto, and the
Company agrees to sell to the Purchasers 55,147 shares of Convertible Preferred
Stock for the purchase price of $27.20 per share.
SECTION 3
Closing Dates; Delivery
3.1. Closing Dates. The initial closing of the purchase and sale of certain
of the Convertible Preferred Stock in the amounts as set forth on Schedule 3.1
(the "First Closing") shall be held at the offices of Bryan Cave LLP, One Kansas
City Place, Suite 3500, Kansas City, Missouri on February 25, 1997, or on such
other date or at such other place as the Purchasers and the Company shall
mutually agree (the date of the Closing being referred to herein as the "First
Closing Date"). The second closing of the purchase and sale of certain of the
Convertible Preferred Stock in the amounts as set forth on Schedule 3.1 (the
"Second Closing") shall be held at the offices of Bryan Cave LLP, One Kansas
City Place, Suite 3500, Kansas City, Missouri on March 21, 1997, or on such
other date or at such other place as the Purchasers and the Company shall
mutually agree (the date of the Closing being referred to herein as the "Second
Closing Date").
3.2. Delivery. At the First Closing and the Second Closing, the Company
shall deliver to each Purchaser a certificate or certificates evidencing the
shares of Convertible Preferred Stock being purchased by it registered in such
Purchaser's name against delivery to the Company of payment in an amount equal
to the full purchase price of the shares of Convertible Preferred Stock being
purchased by such Purchaser by certified check or wire transfer to an account
designated by the Company in the amounts set forth on Schedule 3.2.
SECTION 4
Representations and Warranties of the Company
The Company hereby represents and warrants to, and agrees with, each
Purchaser as follows:
4.1. Organization, Good Standing and Qualification. Each of the Company and
its Subsidiaries (i) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) has all
requisite power and authority to carry on its business, (iii) is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure so to qualify could reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the business, financial
condition, or operations of the Company and its Subsidiaries (a "Material
Adverse Effect").
4.2. Capitalization.
(a) The authorized capital stock of the Company is 20,000,000 shares,
consisting of 19,400,000 shares of common stock, par value $.10 per share
("Common Stock") of which 6,966,576 shares are issued and outstanding, and
600,000 shares of preferred stock, par value $.10 per share ("Preferred Stock"),
of which 233,817 shares are Class A Redeemable Preferred Stock issued and
outstanding and owned by CenCor to be redeemed at the First Closing. Schedule
4.2 lists the options and warrants of the Company issued and outstanding prior
to the First Closing. At the First Closing, the Company will have reserved for
issuance 1,102,940 shares of Common Stock upon conversion of the authorized
shares of Convertible Preferred Stock and at least 600,000 shares of Common
Stock in connection with a new option to be issued to the Company's new chief
executive officer. Schedule 4.2 sets forth a true and correct list of the
stockholders of record maintained by the Company's transfer agent with respect
to the issued and outstanding shares of capital stock of the Company as of
December 31, 1996. Except as listed on Schedule 4.2, there are no outstanding
securities of the Company convertible into or evidencing the right to purchase
or subscribe for any shares of capital stock of the Company, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other
agreements of any character obligating the Company to issue any shares of its
capital stock or any securities convertible into or evidencing the right to
purchase or subscribe for any shares of such stock, and there are no agreements
or understandings with respect to the voting, sale, transfer or registration of
any shares of capital stock of the Company, other than the Stockholders'
Agreement in the form of Exhibit C hereto (the "Stockholders' Agreement"), the
Registration Rights Agreement dated of even date herewith among the parties
hereto, the First Amendment to the Settlement Agreement, dated as of December
31, 1996, among the parties thereto. No outstanding options, warrants or other
securities exercisable for or convertible into shares of capital stock of the
Company require anti-dilution adjustments by reason of the consummation of the
transactions contemplated hereby.
(b) The issued and outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable. The shares of
Convertible Preferred Stock to be issued pursuant to this Agreement, upon
delivery to the Purchasers of certificates therefor against payment in
accordance with the terms of this Agreement, and the shares of Common Stock
issuable upon conversion of such Convertible Preferred Stock of the Company when
\issued upon conversion of such Convertible Preferred Stock in accordance with
the Certificate of Designation, (i) will be validly issued, fully paid and
nonassessable, (ii) will be free and clear of all Liens, other than any created
by the holder thereof and the restrictions imposed by the Stockholders'
Agreement and (iii) assuming that the representations of the Purchasers in
Section 5 hereof are true and correct, will be issued in compliance with all
applicable federal and state securities laws.
4.3. Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of
all Subsidiaries of the Company, showing (as to each such Subsidiary) the date
of its incorporation, the jurisdiction of its incorporation, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding, the names of all stockholders of such Subsidiaries
and the number and percentage of the outstanding shares of each such class
owned, directly or indirectly, by all such stockholders, including the Company.
The outstanding shares of capital stock of each Subsidiary are validly issued,
fully paid and nonassessable and all such shares represented as being owned by
the Company are owned by it, except as listed on Schedule 4.3, free and clear of
all Liens. There are no outstanding securities of any Subsidiary convertible
into or evidencing the right to purchase or subscribe for any shares of capital
stock of any Subsidiary, there are no outstanding or authorized options,
warrants, calls, subscriptions, rights, commitments or any other agreements of
any character obligating any Subsidiary to issue any shares of its capital stock
or any securities convertible into or evidencing the right to purchase or
subscribe for any shares of such stock, and there are no agreements or
understandings with respect to the voting, sale, transfer or registration of any
shares of capital stock of any Subsidiary.
4.4. Partnerships. The Company is not a party to, and does not hold, any
equity interests in any partnership or limited partnership of any kind.
4.5. Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered in connection herewith (the
"Transaction Documents") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of the Agreement and the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate, including stockholder action on the part of the Company.
Each Transaction Document has been duly and validly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that rights to indemnification and contribution under this
Agreement and the Stockholders' Agreement may be limited by federal or state
securities laws or public policy relating thereto.
4.6. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the valid execution and delivery by the Company of
the Transaction Documents to which it is a party, or the consummation by the
Company of the transactions contemplated by the Transaction Documents to which
it is a party, except for such filings as have been made prior to the First
Closing.
4.7. Litigation. All pending claims, suits, or proceedings against the
Company, its Subsidiaries, and its schools are set forth on Schedule 4.7. None
of the pending claims, suits, or proceedings listed on Schedule 4.7 seeks to
enjoin the consummation of this Agreement or the Stockholders Agreement, nor
does management believe that any pending claims, suits or proceedings materially
adversely affect the operation or financial condition of, or result in the
payment of material damages by, the Company, its Subsidiaries or any of the
schools, taken as a whole. The Company, its Subsidiaries, and the schools
represent that each of the claims, suits, and proceedings or litigation
contained on Schedule 4.7 is without merit and intend to vigorously defend the
Company, the affected Subsidiary or the affected school in all matters
pertaining to such claims, suits or proceedings. Except as set forth on Schedule
4.7, there are no pending or threatened claims, suits or proceedings against the
Company, its Subsidiary or its schools. To the Company's Knowledge, there is no
investigation by any governmental agency pending or threatened against the
Company, its Subsidiaries, or its schools which might result in any such suit,
action or other proceeding, except as disclosed on Schedule 4.7.
4.8. Certain Events; Insurance. Except for matters covered by Section 4.7
hereof, there has been no event or accident at any premises owned or operated by
the Company or any of its Subsidiaries involving personal injury or that
otherwise could reasonably be expected to result in monetary liability to the
Company or any of its Subsidiaries that has not been adequately covered by
insurance sufficient in amount to pay any and all foreseeable liabilities
arising therefrom or in connection therewith, subject to a reasonable
deductible.
4.9. Patents and Trademarks. The Company and its Subsidiaries have
sufficient title and ownership of (or rights under license agreements to use)
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes ("Intellectual Property") necessary for their
businesses. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company or any of its Subsidiaries bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes of any other Person. A list of all patents,
patent applications, registered trademarks, trademark applications, registered
copyrights and copyright applications owned by the Company or any of its
Subsidiaries is set forth on Schedule 4.9. Within the past five years, the
Company has not received any communications alleging that the Company or any of
its Subsidiaries has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets, proprietary rights and processes of any other Person, nor is the
Company aware of any such violations.
4.10. Compliance with Other Instruments and Legal Requirements.
(a) None of the Company or any of its Subsidiaries is in violation or
default of any provisions of its certificate of incorporation, by-laws, or
comparable organizational documents. Except as listed on Schedule 4.10, none of
the Company or any of its Subsidiaries is in violation or default in any
material respect under any provision, instrument, judgment, order, writ, decree,
contract or agreement to which it is a party or by which it is bound or of any
provision of any federal, state or local statute, rule or regulation applicable
to the Company or any of its Subsidiaries (including, without limitation, any
law, rule or regulation relating to protection of the environment and the
maintenance of safe and sanitary premises). Except under the agreements with
CenCor, the execution, delivery and performance of each Transaction Document and
the consummation of the transactions contemplated hereby and thereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree, contract or agreement, or require any consent, waiver or approval
thereunder, or constitute an event that results in the creation of any Lien upon
any assets of the Company or any of its Subsidiaries.
(b) Except as set forth on Schedule 4.10, the Company and its
Subsidiaries have all material Permits of all governmental entities required to
conduct their respective businesses as proposed to be conducted.
4.11. Material Agreements; Action. Except as set forth on Schedule 4.11,
there are no material contracts, agreements, commitments, understandings or
proposed transactions, whether written or oral, to which the Company or any of
its Subsidiaries is a party or by which it is bound that involve or relate to:
(i) any of their respective officers, directors stockholders or partners or any
Affiliate thereof; (ii) the sale of any of the assets of the Company or any of
its Subsidiaries other than in the ordinary course of business; (iii) covenants
of the Company or any of its Subsidiaries not to compete in any line of business
or with any Person in any geographical area or covenants of any other Person not
to compete with the Company or any of its Subsidiaries in any line of business
or in any geographical area; (iv) the acquisition by the Company or any of its
Subsidiaries of any operating business or the capital stock of any other Person;
(v) the borrowing of money; (vi) the expenditure of more than $100,000 in the
aggregate or the performance by any party more than one year from the date
hereof or (vii) the license of any Intellectual Property, other material
proprietary right to or from the Company or any of its Subsidiaries. There have
been made available to the Purchasers and their representatives true and
complete copies of all such agreements. All such agreements are in full force
and effect and are the legal, valid and binding obligation of the Company or its
Subsidiaries, enforceable against them in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). None of the Company
or any of its Subsidiaries is in default under any such agreements nor is any
other party to any such agreements in default thereunder in any respect.
4.12. Disclosure. To the Company's knowledge, after making due inquiry,
neither this Agreement nor any Schedule hereto nor any certificates or
instruments delivered by the Company or its representatives to the Purchasers in
connection with this Agreement or the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
required to be contained therein not misleading.
4.13. Brokers' Fees. No broker, finder, investment banker or other Person
is entitled to any brokerage fee, finder's fee or other commission in connection
with the transactions contemplated by this Agreement.
4.14. Registration Rights. Except as provided in the Stockholders'
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback registration rights, to any Person.
4.15. Corporate Documents. The Certificate of Incorporation and the By-laws
of the Company, as amended, are in the form set forth in Exhibits D and E
hereto, respectively.
4.16. Real Property.
(a) Neither the Company nor its Subsidiaries owns any real property or
fee simple interests in real property. Schedule 4.16 sets forth a complete list
of all real property and interests in real property leased by the Company and
its Subsidiaries (individually, a "Real Property Lease" and the real properties
specified in such leases, together with the Owned Properties, being referred to
herein individually as a "Company Property" and collectively as the "Company
Properties") as lessee or lessor. The Company Property constitutes all interests
in real property currently used or currently held for use in
connection with the business of the Company and its Subsidiaries and which are
necessary for the continued operation of the business of the Company and its
Subsidiaries as the business is currently conducted. The Company and its
Subsidiaries have a valid and enforceable leasehold interest under each of the
Real Property Leases, and none of the Company or any of its Subsidiaries has
received any written notice of any default or event which, with notice or lapse
of time, or both, would constitute a default by the Company or any of its
Subsidiaries under any of the Real Property Leases. All of the Company Property,
buildings, fixtures and improvements thereon owned or leased by the Company and
its Subsidiaries are in good operating condition and repair (subject to normal
wear and tear) except for deficiencies which do not have a Material Adverse
Effect. The Company has delivered or otherwise made available to the Purchasers
true, correct and complete copies of the Real Property Leases, together with all
amendments, modifications or supplements, if any, thereto.
(b) The Company and its Subsidiaries have all material certificates of
occupancy and Permits of any governmental body necessary or useful for the
current use and operation of each Company Property, and the Company and its
Subsidiaries have fully complied with all material conditions of the Permits
applicable to them. No default or violation, or event which, with the lapse of
time or giving of notice or both would become a default or violation, has
occurred in the due observance of any such Permit.
(c) There does not exist any actual, threatened or contemplated
condemnation or eminent domain proceedings that affect any Company Property or
any part thereof, and none of the Company or any of its Subsidiaries has
received any notice, oral or written, of the intention of any governmental body
or other Person to take or use all or any part thereof.
(d) None of the Company or any of its Subsidiaries has received any
written notice from any insurance company that has issued a policy with respect
to any Company Property requiring performance of any structural or other repairs
or alterations to such Company Property.
(e) Except as set forth on Schedule 4.16, none of the Company or any of
its Subsidiaries owns or holds, and is not obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell, assign or dispose of any real estate or any portion thereof or interest
therein.
4.17. Tangible Personal Property.
(a) Schedule 4.17 sets forth all leases of personal property ("Personal
Property Leases") involving annual payments in excess of $50,000 relating to
personal property used in the business of the Company and its Subsidiaries or to
which the Company or any of its Subsidiaries is a party or by which the
properties or assets of the Company or any of its Subsidiaries is bound. The
Company has delivered or otherwise made available to the Purchasers true,
correct and complete copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.
(b) Each of the Company and its Subsidiaries has a valid leasehold
interest under each of the Personal Property Leases under which it is a lessee,
and there is no material default under any Personal Property Lease by the
Company or any of its Subsidiaries, by any other party thereto, and no event has
occurred which, with the lapse of time or the giving of notice or both would
constitute a material default thereunder.
(c) Except as set forth on Schedule 4.17, each of the Company and its
Subsidiaries has good and marketable title to all of the items of tangible
personal property reflected in the balance sheets referred to in Section 4.19
(except as sold or disposed of subsequent to the date thereof in the ordinary
course of business consistent with past practice), free and clear of any and all
Liens other than the Permitted Exceptions. All such items of tangible personal
property that, individually or in the aggregate, are material to the operation
of the business of the Company and its Subsidiaries are in good condition and
in a state of good maintenance and repair (ordinary wear and tear excepted) and
are suitable for the purposes used.
(d) All of the items of tangible personal property used by the Company
and its Subsidiaries under the Personal Property Leases are in good condition
and repair (ordinary wear and tear excepted) and are suitable for the purposes
used except for deficiencies which do not have a Material Adverse Effect.
4.18. Environmental Matters.
(a) to the Company's Knowledge, the operations of each of the Company
and its Subsidiaries are in compliance with all applicable Environmental Laws
and all Permits issued pursuant to Environmental Laws or otherwise;
(b) to the Company's Knowledge, each of the Company and its
Subsidiaries has obtained all Permits required under all applicable
Environmental Laws necessary to operate its business;
(c) none of the Company or any of its Subsidiaries is the subject of
any outstanding written order, agreement or arrangement with any governmental
authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;
(d) none of the Company or any of its Subsidiaries has received any
written communication alleging either or both that the Company or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(e) to the Company's Knowledge, none of the Company or any of its
Subsidiaries has any current contingent liability in connection with any Release
of any Hazardous Materials into the indoor or outdoor environment (whether
on-site or off-site);
(f) to the Company's Knowledge, there are no investigations of the
business, operations, or currently or previously owned, operated or leased
property of the Company or any of its Subsidiaries pending or threatened that
could lead to the imposition of any liability pursuant to Environmental Law;
(g) to the Company's Knowledge, there is not located at any of the
properties owned, leased or operated by the Company or any of its Subsidiaries
any (i) underground storage tanks, (ii) asbestos-containing material or (iii)
equipment containing polychlorinated biphenyls; and
(h) the Company has provided to the Purchasers all environmentally
related audits, studies, reports, analyses and results of investigations, if
any, that have been performed by or for the Company in the last five (5) years
with respect to the currently or previously owned, leased or operated properties
of the Company or any of its Subsidiaries.
4.19. Financial Statements. The Company has delivered to each Purchaser its
audited consolidated balance sheets as at December 31, 1994 and December 31,
1995, and the related statements of income, changes in stockholders' equity and
cash flows for the fiscal periods then ended and its unaudited financial
statements as at the end of and for the twelve-month period ended December 31,
1996 (collectively the "Financial Statements"). The Financial Statements have
been prepared from the books and records of the Company and fairly reflect in
all material respects the consolidated financial position and results of
operations, shareholders' equity and cash flows of the Company and its
Subsidiaries as at the dates and for the periods reflected thereon in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as noted therein and except for the
failure of the unaudited financial statements to include the footnotes required
by generally accepted accounting principles, and subject, in the case of the
unaudited financial statements, to normal year-end audit adjustments that will
not in the aggregate be material. The Company maintains a standard system of
accounting established and administered in accordance with generally accepted
accounting principles. The books and records of the Company accurately reflect
in all material respects the transactions to which the Company or any of its
Subsidiaries is a party or by which any of their properties are subject or
bound, and such books and records have been properly maintained.
4.20. Changes. Except as set forth on Schedule 4.20, since December 31,
1996, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries from that reflected
in the Financial Statements, except changes in the ordinary course of business
that have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company or any of its
Subsidiaries;
(c) any waiver by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it outside of the ordinary course of
business or that otherwise could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;
(d) any satisfaction or discharge of any Lien or payment of any
obligation by the Company or any of its Subsidiaries that could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(e) any change or amendment to a contract or arrangement by which the
Company or any of its Subsidiaries or any of their respective assets or
properties is bound or subject that could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect;
(f) other than in the ordinary course of business, any material
increase in any compensation arrangement or agreement with any employee of the
Company or any of its Subsidiaries receiving compensation in excess of $50,000
annually;
(g) any events or circumstances that otherwise could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
or
(h) none of the Company or any of its Subsidiaries has since December
31, 1996 (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock or
equity interests, (ii) incurred any indebtedness for money borrowed in excess of
$20,000, (iii) made any loans or advances to any Person, other than ordinary
advances for travel expenses not exceeding $20,000, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights for consideration in excess of
$20,000 in any one transaction or series of related transactions.
4.21. Employee Benefit Plans
(a) Schedule 4.21(a) contains a complete and accurate list of all
Company Plans and Company Benefit Arrangements. Schedule 4.21(a) specifically
identifies all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements:
(i) true, correct, and complete copies of all the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable, have been delivered to Purchasers: (A) all documents
constituting the Company Plans and Company Benefit Arrangements, including but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the most recent Forms 5500 or
5500C/R and any financial statements attached thereto and those for the prior
three years; (C) the last Internal Revenue Service determination letter, the
last IRS determination letter that covered the qualification of the entire plan
(if different), and the materials submitted by the Company to obtain those
letters; (D) the most recent summary plan description; (E) the most recent
written descriptions of all non-written agreements relating to any such plan or
arrangement; (F) all reports submitted within the four years preceding the date
of this Agreement by third-party administrators, actuaries, investment managers,
consultants, or other independent contractors; (G) all notices that were given
within the three years preceding the date of this Agreement by the IRS,
Department of Labor, or any other governmental agency or entity with respect to
any plan or arrangement; and (H) employee manuals or handbooks containing
personnel or employee relations policies;
(ii) the Concorde Career Colleges, Inc. Profit Sharing and 401(k)
Retirement Savings Plan (the Company 401(k) Plan) is the only Qualified Plan.
The Company has never, and since their formation or acquisition by the Company
or the Company's former parent corporation, CenCor (the "Subsidiary Start
Date"), the Subsidiaries have never maintained or contributed to another
Qualified Plan which has not heretofore been terminated. To the Company's
Knowledge, there have been no claims against the Company or any Subsidiary since
such Subsidiary's Start Date under or alleging any such other Qualified Plan.
The Company 401(k) Plan substantially qualifies under Section 401(a) of the
Code, and any trusts maintained pursuant thereto are exempt from federal income
taxation under Section 501 of the Code, and, to the Company's Knowledge, nothing
has occurred with respect to the design or operation of any Qualified Plans that
would likely cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Code;
(iii) the Company has never, and since their respective
Subsidiary Start Dates, any Subsidiary has never, sponsored or maintained, had
any obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code
or Title IV of ERISA (including any Multiemployer Plan), and, to the Company's
Knowledge, nothing has occurred with respect to the design or operation of any
Employee Benefit Plan that would likely cause the loss of such qualification or
exemption or the imposition of any liability, lien, penalty, or tax under ERISA
or the Code;
(iv) to the Company's Knowledge, each Company Plan and each
Company Benefit Arrangement has been substantially maintained in accordance with
its constituent documents and with all applicable provisions of the Code, ERISA
and other laws, including federal and state securities laws;
(v) there are no pending claims or lawsuits by, against, or
relating to any Employee Benefit Plans or Benefit Arrangements that are not
Company Plans or Company Benefit Arrangements that would, if successful, result
in liability of the Company or any Stockholder, and no claims or lawsuits have
been asserted, instituted or, to the knowledge of the Company, threatened by,
against, or relating to any Company Plan or Company Benefit Arrangement, against
the assets of any trust or other funding arrangement under any such Company
Plan, by or against the Company or the Subsidiaries with respect to any Company
Plan or Company Benefit Arrangement, or by or against the plan administrator or
any fiduciary of any Company Plan or Company Benefit Arrangement, and the
Company does not have Knowledge of any fact that would likely form the basis for
a meritorious claim or lawsuit. The Company Plans and Company Benefit
Arrangements are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental agency or entity, and no matters are pending
with respect to the Company 401(k) Plan
under the IRS's Voluntary Compliance Resolution program, its Closing Agreement
Program, or other similar programs;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) to the Company's Knowledge, with respect to each Company
Plan, there has occurred no non- exempt "prohibited transaction" (within the
meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of
ERISA or breach of any fiduciary duty described in Section 404 of ERISA that
would, if successful, result in any liability for the Company or any
Stockholder, officer, director, or employee of the Company;
(viii) to the Company's Knowledge, all reporting, disclosure, and
notice requirements of ERISA and the Code have been substantially satisfied with
respect to each Company Plan and each Company Benefit Arrangement;
(ix) all amendments and actions required to bring the Company
Benefit Plans into conformity with the applicable provisions of ERISA, the Code,
and other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on Schedule 4.21(b);
(x) to the Company's Knowledge, payment has been made of all
amounts that the Company and each Subsidiary is required to pay as contributions
to the Company Benefit Plans as of the last day of the most recent fiscal year
of each of the plans ended before the date of this Agreement; all benefits
accrued under any unfunded Company Plan or Company Benefit Arrangement will have
been paid, accrued, or otherwise adequately reserved in accordance with GAAP as
of the Balance Sheet Date; and all monies withheld from employee paychecks with
respect to Company Plans have been transferred to the appropriate plan within 30
days of such withholding;
(xi) except as disclosed on Schedule 4.21(b)(xi), the Company and
the Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust,
reserve, premium stabilization, or similar account, nor do they provide benefits
through a voluntary employee beneficiary association as defined in Section
501(c)(9);
(xii) to the Company's Knowledge, no statement, either written or
oral, has been made by the Company or the Subsidiaries to any person with regard
to any Company Plan or Company Benefit Arrangement that was not in accordance
with the Company Plan or Company Benefit Arrangement and that would likely have
an adverse economic consequence to the Company or the Subsidiaries;
(xiii) to the Company's Knowledge, the Company and the
Subsidiaries have no liability (whether actual, contingent, with respect to any
of its assets or otherwise) with respect to any Employee Benefit Plan or Benefit
Arrangement that is not a Company Benefit Arrangement or with respect to any
Employee Benefit Plan sponsored or maintained (or which has been or should have
been sponsored or maintained) by any ERISA Affiliate;
(xiv) to the Company's Knowledge, all group health plans of the
Company and its ERISA Affiliates have been operated in material compliance with
the requirements of Sections 4980B (and its predecessor) and 5000 of the Code;
(xv) to the Company's Knowledge, no employee or former employee
of the Company or beneficiary of any such employee or former employee is, by
reason of such employee's or
former employee's employment, entitled to receive any benefits, including,
without limitation, death or medical benefits (whether or not insured) beyond
retirement or other termination of employment as described in Statement of
Financial Accounting Standards No. 106, other than (i) death or retirement
benefits under a Qualified Plan, (ii) deferred compensation benefits accrued as
liabilities on the Closing Statement or (iii) continuation coverage mandated
under Section 4980B of the Code or other applicable law.
(c) Schedule 4.21(c) hereto sets forth an accurate list, as of the date
hereof, of all officers, directors, and key employees of the Company and lists
all employment agreements with such officers, directors, and key employees and
the rate of compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such person as of (a)
December 31, 1996 and (b) the date hereof.
4.22. Taxes. Except as set forth on Schedule 4.22, all federal, state,
local and foreign tax returns, reports and statements required to be filed by
the Company or any of its Subsidiaries have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns, reports and
statements are required to be filed and, to the Company's Knowledge, all such
returns, reports and statements were true, complete and correct in all material
respects. All taxes, charges and other impositions due and payable by the
Company or any of its Subsidiaries have been paid except where contested in good
faith and by appropriate proceedings if adequate reserves therefor have been
established on the books and records of the Company or such Subsidiary in
accordance with generally accepted accounting principles consistently applied,
and where such non-payment would not have a Material Adverse Effect. The
provision for taxes of each of the Company and its Subsidiaries as shown in the
Financial Statements is sufficient for all taxes, charges and other impositions
of any nature due or accrued as of the date hereof, whether or not assessed or
disputed. To the Company's Knowledge, proper and accurate amounts have been
withheld by each of the Company and its Subsidiaries from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. The Company has not received notice of any
audit or of any proposed deficiencies from any governmental authority, and no
controversy with respect to taxes of any type is pending or threatened. Except
for routine filing extensions granted as a matter of right under applicable law,
none of the Company or any of its Subsidiaries has executed or filed with the
Internal Revenue Service or any other governmental authority any agreement or
other document extending, or having the effect of extending, the period for
assessment or collection of any taxes, charges or other impositions. None of the
Company or any of its Subsidiaries has agreed or has been requested to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. Further, none of the Company or any of its Subsidiaries has
any obligation under any written tax-sharing agreement. None of the Company or
any of its Subsidiaries has elected, pursuant to the Code, to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code.
4.23. Insurance. Schedule 4.23 sets forth a complete and accurate list of
all policies of insurance of any kind or nature covering the Company and its
Subsidiaries and any of their respective employees, properties or assets,
including, without limitation, policies of life, disability, fire, theft,
workers compensation, employee fidelity and other casualty and liability
insurance. All such policies are in full force and effect and are of a nature
and provide such coverage as is customarily carried by companies of the size and
character of the Company and its Subsidiaries. None of the Company or any of its
Subsidiaries is in default of any policies of insurance. None of the Company or
any of its Subsidiaries has been refused insurance or had any policy of
insurance terminated (other than at its request).
4.24. Minute Books. The minute books of the Company and each of its
Subsidiaries contain a complete summary of all material actions by their
respective directors and stockholders since the date of their respective
incorporation (or acquisition, in the case of Subsidiaries) and reflect all
transactions referred to in such minutes accurately in all material respects.
4.25. Labor and Employment Matters. With respect to employees of and
service providers to the Company and the Subsidiaries: (a) the Company and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice; (b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company or any Subsidiary
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other comparable authority; (c) there is not now, nor
within the past three years has there been, any labor strike, slowdown or
stoppage actually pending or, to the Company's or any Subsidiary's knowledge,
threatened against or directly affecting the Company or any Subsidiary; (d) to
the Company's Knowledge, no labor representation organization effort exists nor
has there been any such activity within the past three years; (e) no grievance
or arbitration proceeding arising out of or under collective bargaining
agreements is pending and, to the Company's Knowledge, no claims therefor exist
or have been threatened; (f) the employees of the Company and the Subsidiaries
are not and have never been represented by any labor union, and no collective
bargaining agreement is binding and in force against the Company or any
Subsidiary or currently being negotiated by the Company or any Subsidiary; and
(g) to the Company's Knowledge, all persons classified by the Company or its
Subsidiaries as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and the Company and its Subsidiaries
have fully and accurately reported their compensation on IRS Forms 1099 when
required to do so. To the Company's knowledge, none of the employees of the
Company or any of its Subsidiaries is obligated under any contract or other
agreement (including licenses, covenants or commitments of any nature), or
subject to any judgment, decree or order of any court or administrative agency,
that materially interferes with the use of the employee's best efforts to
promote the interests of the Company and its Subsidiaries or conflicts with the
business as proposed to be conducted by the Company or its Subsidiaries.
4.26. Use of Proceeds. The Company shall use the net proceeds from the
issuance and sale of the Convertible Preferred Stock to redeem, retire, and
repay its obligations to CenCor in their entirety on terms substantially in the
form of the Fourth Amendment to the Restructuring, Security and Guaranty
Agreement, dated December 30, 1996.
4.27. Accreditation and State Licensure/Approval.
(a) Schedule 4.27(a) contains a complete and accurate statement of the
accreditation granted to each of the Company and its Subsidiaries, the date that
accreditation was last granted, and the current term of accreditation. Except as
set forth on Schedule 4.27(a), none of the schools or educational and training
programs of the Company and its Subsidiaries are on probation or warning, having
been directed to show cause why accreditation should not be revoked, or are
subject to an action by an accrediting agency to withdraw or deny accreditation.
To the Company's knowledge, there are no facts, circumstances, or omissions
concerning their schools that would likely lead to such actions by an
accrediting agency.
(b) The Company, its Subsidiaries, and its schools have substantially
complied with all stipulations, conditions and other requirements imposed by the
schools' accrediting agencies at the time of, or since, the last grant of
accreditation, including but not limited to the timely filing of all required
reports and responses. Such reports and responses demonstrate improvement in the
compliance of the schools with accrediting standards.
(c) The Company, its Subsidiaries, and its schools have secured all
requisite approvals from its institutional accrediting agencies for the
educational and training programs currently offered. Without limiting the effect
of this representation and warranty, the school located in Miami, Florida has
secured the approval of the Accrediting Commission of Career Schools and
Colleges of
Technology ("ACCSCT") to offer its Dental Assistant and Patient Care Assistant
programs, and the school located in Tampa, Florida has secured the approval of
ACCSCT to offer its Dental Radiographers program.
(d) To the Company's Knowledge, the Company, its Subsidiaries, and its
schools have secured all requisite licenses to operate in the states in which
they are located and all requisite approvals from such states for the
educational and training programs currently offered. Without limiting the effect
of this representation and warranty, the school located in Denver, Colorado has
secured state approval of its Practical Nursing program; the school in San
Diego, California has secured state approval for its Dental Assisting program;
and the school located in Anaheim, California has secured state approval for its
Vocational Nurse, Dental Assistant and other programs.
(e) The Company, its Subsidiaries, and its schools have secured all
requisite approvals from the schools' accrediting agencies and the states in
which the schools are located to consummate the transaction provided for in this
Agreement and in the Stockholders' Agreement or, in the event that approval has
not been secured, have reasonably determined that no such approval is required.
4.28. No Undisclosed Liabilities. Except as, and to the extent, reserved
for in the Financial Statements and the notes thereto or as set forth on
Schedule 4.28 attached hereto and made a part hereof or in any filings with the
Securities and Exchange Commission (the "SEC"), to the Company's Knowledge, the
Company does not on the date hereof have any material liabilities or
obligations, whether accrued, absolute or contingent, determined or
undetermined, or whether due or to become due, nor, to the Company's Knowledge,
does any basis exist for such liabilities or obligations other than those
incurred in the ordinary course of business since December 31, 1996.
4.29. Licenses and Permits. Schedule 4.29 attached hereto and made a part
hereof is a complete list of all governmental licenses and permits and other
governmental authorizations and approvals required for the conduct of the
Business as presently conducted (collectively, the "Permits").
4.30 U.S. Department of Education Certification and Eligibility
(a) Schedule 4.30(a) contains a complete and accurate statement of the
U.S. Department of Education certification and eligibility status for each of
the schools owned by the Company and its Subsidiaries, including the date that
certification was last granted and the current terms of certification. Each of
the schools listed on Schedule 4.30(a) is certified by the U.S. Department of
Education to participate in all programs authorized by the Higher Education Act
of 1965, as amended (the "Higher Education Act"). None of the schools are
subject to limitation, suspension or termination proceedings, or subject to any
other action or proceeding by the U.S. Department of Education that would likely
result in the loss of certification or eligibility or a material liability or
fine. To the Company's Knowledge, there are no facts, circumstances, or
omissions concerning their schools that would likely lead to such an action by
the U.S. Department of Education.
(b) The Company and its Subsidiaries have accurately and completely
disclosed to the U.S. Department of Education the ownership interests in all of
the schools and have secured all requisite approvals for such ownership; based
upon the Letter of Steven Z. Finley of the Office of General Counsel at the
Department of Education dated February 14, 1997 to Mark L. Pelesh, the
consummation of the transactions provided for in this Agreement and in the
Stockholders' Agreement do not require the approval of the Department of
Education.
(c) Each of the schools listed on Schedule 4.30(a) is in material
compliance with all rules, regulations and requirements established by the U.S.
Department of Education pertaining to each school's eligibility and
participation in Title IV of the Higher Education Act and other federal student
financial aid funding programs set forth at 34 C.F.R. 600 et seq. The Company
does not have Knowledge of facts, circumstances, or omissions concerning the
schools that would likely result in a
finding of material non-compliance with regard to such rules, regulations and
requirements. Without limiting the foregoing, the Company, its Subsidiaries and
its schools also represent that:
(1) Each of the schools satisfies the standards of financial
responsibility and administrative capability, as established by the U.S.
Department of Education and as set forth at 34 C.F.R. 668.15-668.16, including
all requirements pertaining to satisfactory academic progress. Further, each
program offered by the schools is an eligible program in accordance with the
requirements of 34 C.F.R. 668.8.
(2) Except as set forth on Schedule 4.30(c)(2), each of the
schools provides refunds substantially in accordance with applicable state and
federal refund policies and as required pursuant to 34 C.F.R. 668.22. To the
extent that the U.S. Department of Education previously determined that any of
the schools failed to comply with applicable state or federal refund
requirements. Except as set forth on Schedule 4.30(c)(2), the Company and its
Subsidiaries have taken or are taking appropriate corrective action to ensure
that all refunds are made in accordance with such requirements, the schools have
satisfied all U.S. Department of Education findings regarding non-compliance
with applicable refund requirements by posting letters of credit in accordance
with 34 C.F.R. 668.15(b)(5), and none of the schools is subject to any further
action or to the imposition of a liability by the U.S. Department of Education
as a result of the school's non- compliance with applicable refund requirements.
(3) Each of the schools receives no greater than eighty-five
percent (85%) of its revenues from Title IV or other federal student financial
aid funds and satisfies the requirements regarding tuition revenue established
by the Department of Education as set forth at 34 C.F.R. 600.5. Schedule
4.30(c)(3) contains a correct statement of each school's percentage of revenue
from such federal funding sources.
(4) The cohort default rates published by the U.S. Department of
Education for fiscal years 1990 through 1994 for the schools of the Company and
its Subsidiaries are listed on Schedule 4.30(c)(4). All rates except for those
published for fiscal year 1991 are considered official by the U.S. Department of
Education. Based on the cohort default rates supplied by the Department for
fiscal year 1994, San Diego, Anaheim, and, assuming the use of the
prepublication rates, the San Bernardino schools have cohort default rates
attributed to them of 25% or over for three consecutive years and could be
declared ineligible to participate in Federal Family Education Loan ("FFEL")
programs. If the 1991 cohort default rates are certified as official, the
Jacksonville, Portland, Tampa and Miami schools also could be found to have
cohort default rates attributed to them of over 25% for three consecutive years
and could be declared ineligible to participate in the FFEL programs.
Notwithstanding the foregoing and with the understanding that the Company does
not have the servicing records for 1994, the Company believes that the cohort
default rate information supplied and published by the Department of Education
with respect to the schools referred to above is erroneous and when corrected
will demonstrate that each of the schools' cohort default rates are within
acceptable thresholds but it has no assurance that such correction will be made.
In addition, the Company, the affected Subsidiaries and the affected schools
have filed, or intend to timely file, all requisite administrative and judicial
actions, challenges, and appeals regarding the veracity of cohort default rates
published by the U.S. Department of Education in those instances in which the
published cohort default rates for a school exceeds or equals 25%.
(5) Each of the schools has established a default reduction plan
and submitted such plans to the U.S. Department of Education in accordance with
34 C.F.R. 674.6 for Fiscal Years 1995 and 1996.
(6) Each of the schools disburses federal Pell Grant payments
substantially in accordance with procedures that comply with 34 C.F.R. 690.63.
(d) The U.S. Department of Education program reviews and compliance
audits conducted at each of the schools since 1991 have not materially adversely
affected the Company, its
Subsidiaries or its schools nor has any program review or compliance audit
resulted in the imposition of any material liability, financial or otherwise,
affecting the Company, its Subsidiaries or its schools, except as disclosed on
Schedule 4.30(d) or Forms 10- K and Forms 10-Q previously filed by the Company
with the SEC. The Company, its Subsidiaries, and its schools have substantially
complied with all the findings and conditions arising from the program reviews
and compliance audits. To the extent that any program review or audit remains
pending or unresolved. Except as disclosed on Schedule 4.30(d), there are no
issues or findings of non-compliance which, to the Company's Knowledge would
likely result in the loss of certification or eligibility or a material
liability or fine.
SECTION 5
Representations, Warranties and Covenants of the Purchasers
Each of the Purchasers (severally and not jointly), hereby represents and
warrants to and agrees with the Company, as follows:
5.1. Accredited Investor; Experience; Risk. Such Purchaser is an accredited
investor within the definition of Regulation D of the Securities Act of 1933
(the "Securities Act"). Such Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the purchase of the Convertible Preferred Stock pursuant to this
Agreement and recognizes that it must bear the economic risk of its investment
in the Convertible Preferred Stock for an indefinite period of time.
5.2. Investment. Such Purchaser is acquiring the Convertible Preferred
Stock for investment purposes only, for its own account and not as a nominee or
agent for any other Person, and not with a view to, or for resale in connection
with, any distribution thereof in violation of applicable law. Such Purchaser
understands that the Convertible Preferred Stock has not been registered under
the Securities Act or applicable state securities laws and that, accordingly,
neither the Convertible Preferred Stock nor the shares of Common Stock issuable
upon conversion thereof will be transferable except upon satisfaction of the
registration and prospectus delivery requirements of such laws or pursuant to an
available exemption therefrom. Such Purchaser is not acquiring the Convertible
Preferred Stock for purposes of acquiring or changing "control" (as defined in
Rule 405 of the Securities Exchange Act of 1934) of the Company.
5.3. Legends; Opinion Requirement. Such Purchaser hereby agrees with the
Company as follows:
(a) The certificates evidencing the Convertible Preferred Stock and the
shares of Common Stock issuable upon conversion thereof, and each certificate
issued in transfer thereof, will bear the following legend and any applicable
legend required by the Stockholders' Agreement:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS
MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY
SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER."
(b) If such Purchaser desires to sell or otherwise dispose of all or
any part of the Convertible Preferred Stock or shares of Common Stock issuable
upon conversion thereof owned by it under an exemption from registration under
the Securities Act, and if requested by the Company, such Purchaser shall
deliver to the Company an opinion of counsel, which may be counsel for the
Company, that such exemption is available.
5.4. Authorization. Such Purchaser represents that it has all requisite
power and authority to enter into and perform its obligations under the
Transaction Documents to which it is a party. Assuming the due authorization,
execution and delivery of the Transaction Documents by each other party thereto,
each Transaction Document to which such Purchaser is a party constitutes a valid
and binding obligation of such Purchaser, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution under this Agreement and the Stockholders'
Agreement may be limited by federal or state securities laws or public policy
relating thereto.
5.5. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of such Purchaser is
required in connection with the valid execution and delivery by such Purchaser
of the Transaction Documents to which it is a party, or the consummation by such
Purchaser of the transactions contemplated by the Transaction Documents to which
it is a party, except for such filings as have been made prior to the First
Closing.
5.6. Brokers' Fees. No broker, finder, investment banker or other Person is
entitled to any brokerage fee, finder's fee or other commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by the Purchasers.
SECTION 6
Covenants
6.1. Access to Information. The Company agrees that, after the First
Closing Date, the Purchasers shall be entitled, through their respective
officers, employees and representatives (including, without limitation, their
respective legal advisors and accountants), to make such investigation of the
properties, businesses and operations of the Company and its Subsidiaries and
such examination of the books, records and financial condition of the Company
and its Subsidiaries as the Purchasers reasonably request and to make extracts
and copies of such books and records. Any such investigation and examination
shall be conducted during regular business hours and under reasonable
circumstances, and the Company shall cooperate, and shall cause its Subsidiaries
to cooperate, fully therein. No investigation by the Purchasers prior to or
after the date of this Agreement shall diminish or obviate any of the
representations, warranties, covenants or agreements of the Company contained in
this Agreement or in any certificates, instruments or other documents delivered
by the Company or its representatives to the Purchasers in connection with this
Agreement or the transactions contemplated hereby. In order that the Purchasers
may have full opportunity to make such physical, business, accounting and legal
review, examination or investigation as any of them may reasonably request of
the affairs of the Company and its Subsidiaries, the Company shall cause the
officers, employees, consultants, agents, accountants, attorneys and other
representatives of the Company and its Subsidiaries to cooperate fully with such
representatives in connection with such review and examination.
6.2. Publicity. Neither the Company nor the Purchasers shall issue any
press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the
prior written approval of the other parties hereto, which approval will not be
unreasonably withheld or delayed, unless disclosure is otherwise required by
applicable law, provided that, to the extent required by applicable law, the
party intending to make such release shall use its best efforts consistent with
such applicable law to consult with the other parties hereto with respect to the
text thereof.
6.3. Register of Securities. The Company or its duly appointed agent shall
maintain a separate register for the shares of the Company's Convertible
Preferred Stock and Common Stock, in which it shall register the issue and sale
of all such shares. All transfers of such securities shall be recorded on the
register maintained by the Company or its agent, and the Company shall be
entitled to regard the registered holder of such securities as the actual holder
of the securities so registered until the Company or its agent is required to
record a transfer of such securities on its register. Subject to Section 5.3 the
Company or its agent shall be required to record any such transfer when it
receives such security to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.
6.4. Removal of Legend. Subject to any contrary rule, regulation or advice
of the SEC or its staff, any legend endorsed on a certificate pursuant to
Section 5.3 and any stop transfer instructions and record notations with respect
thereto shall be removed and the Company shall issue a certificate without such
legend to the holder thereof at such time as (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, or (iii) such securities are otherwise sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(l) thereof so that all transfer restrictions
with respect to such securities are removed upon the consummation of such sale
and the seller of such securities provides the Company an opinion of counsel
(which may be counsel for the Company), which shall be in form and content
reasonably satisfactory to the Company, to the effect that such securities in
the hands of the purchaser thereof are freely transferable without restriction
or registration under the Securities Act in any public or private transaction.
SECTION 7
Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Convertible Preferred Stock at
each of the Closings is, at the option of such Purchaser, subject to the
fulfillment on or prior to each of the Closing Dates of the following
conditions:
7.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct on each of the Closing Dates with the
same force and effect as if they had been made on and as of such date.
7.2. Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to each of the Closing
Dates shall have been performed or complied with in all material respects.
7.3. Opinion of Company's Counsel. The Purchasers shall have received from
Bryan Cave, L.L.P., counsel to the Company, an opinion addressed to the
Purchasers, dated the First Closing Date, in substantially the form of Exhibit F
hereto.
7.4. No Material Adverse Change. Since December 31, 1996, there shall not
have occurred any events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
7.5. Certificate of Designation. The Certificate of Designation shall have
been duly adopted and executed by the Company and filed with the Delaware
Secretary of State.
7.6. Stockholders' Agreement. The Stockholders' Agreement shall have been
executed and delivered by all the parties thereto. All such action shall have
been taken as may be necessary to elect a Board of Directors of the Company,
effective upon the First Closing, in accordance with the Stockholders'
Agreement.
7.7. State Securities Laws. All registrations, qualifications and Permits
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
7.8. CenCor Obligations. The Company shall have executed appropriate legal
documentation and releases, on terms reasonably satisfactory to the Purchasers,
redeeming, retiring and repaying all of the Company's obligations to CenCor on
terms substantially in the form of the Fourth Amendment to the Restructuring,
Security and Guaranty Agreement, dated December 30, 1996.
7.9. Issuance of Shares. At the First Closing, the Company shall be
prepared to issue 42,647 shares of Convertible Preferred Stock pursuant to this
Agreement. At the Second Closing, the Company shall be prepared to issue 12,500
shares of Convertible Preferred Stock pursuant to this Agreement.
7.10. Certificates. Each of the Purchasers shall have received a
certificate of the President or a Vice President of the Company to the effect
set forth in Sections 7.1, 7.2, 7.4, 7.6 and 7.8. 7.11. Debenture and Warrant
Purchase Agreements. The Debenture and Warrant Purchase Agreements shall have
been executed and delivered by all the parties thereto.
7.12. Debentures and Warrants. The Company shall be prepared to issue the
Debentures and Warrants pursuant to the Debenture Purchase Agreements, of even
date herewith, between the Company and Purchasers.
7.13. Registration Rights Agreement. The Registration Rights Agreement, of
even date herewith, between the Company and Purchasers, shall have been executed
and delivered by all the parties thereto.
SECTION 8
Conditions to Closing of the Company
The Company's obligation to issue and sell the Convertible Stock at each of
the Closing is, at the option of the Company, subject to the fulfillment of the
following conditions:
8.1. Representations. The representations and warranties made by each
Purchaser in Section 5 hereof shall be true and correct when made, and shall be
true and correct on each of the Closing Dates with the same force and effect as
if they had been made on and as of such date.
8.2. Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to each of the Closing
Dates shall have been performed or complied with in all respects.
8.3. Stockholders' Agreement. The Stockholders' Agreement shall have been
executed and delivered by all other parties thereto. All such action shall have
been taken as may be necessary to elect a Board of Directors of the Company,
effective upon the First Closing, in accordance with the Stockholders'
Agreement.
8.4. Opinion of Purchasers' Counsel. The Company shall have received from
Wilmer, Cutler & Pickering, counsel to the Purchasers, an opinion addressed to
the Company, dated the First Closing Date, in substantially the form of Exhibit
H hereto.
8.5. No Material Adverse Change. Since December 31, 1996, there shall not
have occurred any events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
8.6. State Securities Laws. All registrations, qualifications and Permits
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
8.7. Purchase Price. At the First Closing, the Purchasers shall have
tendered the purchase price for the Convertible Preferred Stock of One Million
One Hundred Sixty Thousand Dollars ($1,160,000). At the Second Closing, the
Purchasers shall have tendered the purchase price for the Convertible Preferred
Stock of Three Hundred Forty Thousand Dollars ($340,000).
8.8. Certificate. The Company shall have received a certificate from the
Purchasers to the effect set forth in Sections 8.1 and 8.2.
8.9. Debenture and Warrant Purchase Agreements. The Debenture and Warrant
Purchase Agreements, of even date herewith, between the Company and Purchasers,
shall have been executed and delivered by all the parties thereto.
8.10. Registration Rights Agreement. The Registration Rights Agreement, of
even date herewith, between the Company and Purchasers, shall have been executed
and delivered by all the parties thereto.
SECTION 9
Covenants of the Company
9.1. Information. The Company covenants and agrees that so long as the
Purchasers own of the shares of Convertible Preferred Stock or shares of Common
Stock into which any such shares of Convertible Preferred Stock shall have been
converted, the Company shall deliver to such Purchaser the information specified
in this Section 9.1 unless any such Purchaser at any time specifically requests
that such information not be delivered to it.
(a) Monthly Financial Statements. As soon as available, but in any
event not later than forty-five (45) days after the end of each monthly fiscal
period (other than the last monthly fiscal period of the fourth fiscal quarter
of the Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form (i) the figures as of the
end of and for the comparable periods of the preceding fiscal year and (ii) the
figures reflected in the operating budget for such period as specified in the
financial plan of the Company delivered pursuant to Section 9.1(e) hereof. All
such financial statements shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods reflected therein except as stated therein and shall be accompanied by a
certificate of the Company's president or chief financial officer to such
effect.
(b) Material Litigation. Within ten (10) days after the Company learns
of the commencement or written threat of commencement of any litigation or
proceeding against the Company or any of its Subsidiaries or any of their
respective assets that would likely be expected to have a Material Adverse
Effect, written notice of the nature and extent of such litigation or
proceeding.
(c) Material Agreements. Within five (5) days after the receipt by the
Company of written notice of the occurrence of a default by the Company or any
of its Subsidiaries under any material contract, agreement or document to which
it is a party or by which it is bound, written notice of the nature and extent
of such default.
(d) Other Reports and Statements. Promptly (but in any event within ten
(10) days) after any distribution to its stockholders generally, to its
directors or to the financial community of an annual report, definitive proxy
statement, registration statement or other similar report or communication, a
copy of each such annual report, proxy statement, registration statement or
other similar report or communication and promptly (but in any event within ten
(10) days) after any filing by the Company with the SEC or with any national
securities exchange, of any publicly available annual or periodic or special
report or proxy statement or registration statement, a copy of such report or
statement and copies of all press releases and other statements made available
generally by the Company to the public concerning material developments in the
Company's business.
(e) Budgets. As soon as available, but in any event not later than
thirty (30) days prior to the beginning of each fiscal year of the Company, the
financial plan of the Company for such fiscal year, including, without
limitation, a cash flow projection and operating budget, calculated monthly, as
contained in its operating plan approved by the Company's Board of Directors as
well as any updates or revisions to such plan as soon as available.
(f) Accountants' Management Letters, Etc. Promptly after receipt by the
Company, copies of all accountants' management letters and all management and
board responses to such letters, and copies of all certificates as to
compliance, defaults, material adverse changes, material litigation or similar
matters relating to the Company and its Subsidiaries, which shall be prepared by
the Company or its officers and delivered to the third parties.
(g) Stockholders' Lists. As prepared in connection with the Company's
proxy solicitation for its annual meeting of shareholders each year and as soon
as practicable after preparation thereof:
(i) a list of stockholders as of the record date for such
meeting, as prepared by the Company's transfer agent,
showing the names and addresses of stockholders of record
and number of shares of Common Stock held; and
(ii) one or more tables of lists identifying:
(A) any grants of options or stock appreciation or similar
rights in the last fiscal year as required by Item 402(c) of
Regulation S-K;
(B) any exercise of options or stock appreciation or similar
rights in the last fiscal year as required by Item 402(d) of
Regulation S-K; and
(C) any repricing of options or stock appreciation or
similar rights in the last fiscal year as required by Item 402(k)
of Regulation S-K.
In addition, a list as of December 31 of the previous fiscal year of any grants,
exercises, conversions or repricing of warrants or convertible securities of the
Company (not described in subparagraph (ii) above) in the last fiscal year, and
the name of each holder thereof together with the amount of such security held
and the issuance and exercise price thereof.
(h) Other Information and Access. From time to time, and promptly, such
additional information regarding results of operations, financial condition or
business of the Company and its Subsidiaries, including, without limitation,
cash flow analyses, projections and minutes of any meetings of the Board of
Directors, as the Purchasers may reasonably request, and access, at reasonable
times and on reasonable prior notice, to the books, records and properties of
the Company and its Subsidiaries, provided that Purchaser and its
representatives execute and deliver to the Company an appropriate
confidentiality agreement relating thereto.
9.2. Additional Agreements.
(a) Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
timely file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder, to
the extent required from time to time to enable each Purchaser to sell shares of
Convertible Preferred Stock and the shares of Common Stock into which the
Convertible Preferred Stock may be converted without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Purchaser, the Company will deliver a written statement as to whether it has
complied with such requirements.
(b) Rule 144A Information. The Company will, as promptly as practicable
after, but in any event within thirty (30) days after, a written request from
any Purchaser provide the information required in Rule 144A(d)(4) under the
Securities Act to such Purchaser and any Person designated by any Purchaser to
the Company as a prospective buyer in a transaction pursuant to Rule 144A.
(c) Transaction with Affiliates. Except for employee or director
compensation, stock bonus, stock option or similar plans or arrangements
approved by the Board of Directors, neither the Company nor any Subsidiary of
the Company shall, directly or indirectly, enter into any transaction or
agreement with any holder of five percent (5%) or more of any class of capital
stock of the Company or with any Affiliate of the Company or of any such
stockholder or extend or modify any existing agreement with any such stockholder
or Affiliate, unless the transaction or agreement is reviewed and approved by a
majority of the disinterested directors of the Board of Directors of the
Company.
(d) Publicity. Except as may be required by law, the Company shall not
use the name of, or make reference to, any Purchaser or any of its Affiliates in
any press release or in any public manner without such Purchaser's prior written
consent.
SECTION 10
Miscellaneous
10.1. Amendment; Waiver. Neither this Agreement nor any provision hereof
may be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) the Purchasers holding a majority in
interest of the Convertible Preferred Stock issued and sold pursuant to this
Agreement and the shares of Common Stock issuable upon conversion thereof.
10.2. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
(a) if to the Company:
Concorde Career Colleges, Inc.
1100 Main Street
Suite 416
Kansas City, MO 64105
Attn: Jack L. Brozman
Facsimile No.: (816) 474-7610
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Attn: Thomas W. Van Dyke
Facsimile No.: (913) 338-7777
(b) if to the Purchasers:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David L. Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esq.
Facsimile No.: (410) 986-2828.
A notice or communication will be effective (i) if delivered in Person or
by overnight courier, on the business day it is delivered, (ii) if transmitted
by telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
10.3. Survival of Representations, Warranties and Covenants. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of any Purchaser, and the sale
and purchase of the Convertible Preferred Stock and payment therefor for a
period of two (2) years; provided, however, that the representations and
warranties made in Section 4.22 (Taxes) shall survive the applicable statutory
period of limitations with respect to any liabilities covered thereby.
10.4. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is
held to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
10.5. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, including, without limitation,
each transferee of all or any portion of the Convertible Preferred Stock. No
party hereto may assign its rights or delegate its obligations under this
Agreement without the prior written consent of the other parties hereto.
10.6. Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written, among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.
10.7. Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
10.8. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
10.9. Costs and Expenses. The Company shall pay (i) all reasonable
out-of-pocket expenses (including legal fees) incurred by Purchasers in
connection with the negotiation of the Transaction Documents, up to a maximum of
$25,000, plus (ii) the reasonable legal fees and expenses incurred by Wilmer,
Cutler & Pickering for the period on or after February 10, 1997 in connection
with the preparation, execution and delivery of the Transaction Documents.
10.10. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchasers
and their Affiliates, and their respective partners, co-investors, officers,
directors, employees, agents, consultants, attorneys and advisers (each, an
"Indemnified Party"), from and against any and all actual losses, claims,
damages, liabilities, costs and expenses (including, without limitation,
environmental liabilities, costs and expenses and all reasonable fees, expenses
and disbursements of counsel), joint or several (hereinafter collectively
referred to as a "Loss"), which may be incurred by or asserted or awarded
against any Indemnified Party in connection with or in any manner arising out of
or relating to any investigation, litigation or proceeding or the preparation of
any defense with respect thereto, arising out of or in connection with or
relating to this Agreement, the other Transaction Documents or the transactions
contemplated hereby or thereby or any use made or proposal to be made with the
proceeds of the Purchasers' purchase of the Convertible Preferred Stock pursuant
to this Agreement, whether or not such investigation, litigation or proceeding
is brought by the Company, any of its Subsidiaries, shareholders or creditors,
whether or not any of the transactions contemplated by this Agreement or the
other Transaction Documents are consummated, except to the extent such Loss is
found in a final judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(b) An Indemnified Party shall give written notice to the Company of
any claim with respect to which it seeks indemnification within ten (10) days
after the discovery by such parties of any matters giving arise to a claim for
indemnification pursuant to Section 10.10(a); provided that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations under this Section 10.10, except to the extent that
the Company is actually prejudiced by such
failure to give notice. In case any such action or claim is brought against any
Indemnified Party, the Company shall be entitled to participate in and, unless
in the reasonable good faith judgment of the Indemnified Party a conflict of
interest between such Indemnified Party and the Company may exist in respect of
such action or claim, to assume the defense thereof, with counsel satisfactory
to the Indemnified Party and after notice from the Company to the Indemnified
Party of its election so to assume the defense thereof, the Company shall not be
liable to such Indemnified Party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. In any event, unless and until the Company
elects in writing to assume and does so assume the defense of any such action or
claim the Indemnified Party's costs and expenses arising out of the defense,
settlement or compromise of any such action or claim shall be Losses subject to
indemnification hereunder. If the Company elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The Company
shall not be liable for any settlement of any action or claim effected without
its written consent. Anything in this Section 10.10 to the contrary
notwithstanding, the Company shall not, without the Indemnified Party's prior
written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof that imposes any future obligation on the
Indemnified Party or that does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party, a release
from all liability in respect of such claim.
(c) Purchaser hereby agrees to indemnify and hold harmless the Company
and its respective directors, officers, affiliates, attorneys or advisers (the
"Company Group") from and against any Loss sustained, incurred, paid or required
to be paid by any of the Company Group which arises out of the inaccuracy or
breach by Purchaser of any representation or warranty contained in this
Agreement.
10.11. Limits on Liability.
The Company agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Company or
any of its Subsidiaries, shareholders or creditors, for or in connection with
the transactions contemplated by this Agreement or the other Transaction
Documents, except to the extent such liability is found in a final judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct or the misrepresentations of the
Indemnified Party, but in no event shall an Indemnified Party be liable for
punitive, exemplary or consequential damages. The maximum aggregate liability
under and with respect to this Agreement, the transactions contemplated hereby,
or any claims associated herewith shall be One Million Five Hundred Thousand
Dollars ($1,500,000) plus reasonable attorneys' fees. The foregoing limitation
on indemnification shall not apply with respect to any claim for intentional
fraud.
10.12. No Third-Party Beneficiaries.
Nothing in this Agreement will confer any third party beneficiary or other
rights upon any person (specifically including any employees of the Company and
its Subsidiaries) or entity that is not a party to this Agreement.
[Balance of Page Left Blank Intentionally -- Signature Page Follows]
CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed effective as of the date first above written.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
-----------------------------------------
Name: Jack L. Brozman
Title: President and Chief
Executive Officer
CAHILL, WARNOCK PURCHASERS:
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
-----------------------------------------
its General Partner
By: /s/ David L. Warnock
-----------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its
-----------------------------------------
General Partner
By: /s/ David L. Warnock
-----------------------------------------
Name: David L. Warnock
Title: Managing Member
Exhibit B
NAME TOTAL NUMBER OF SHARES TOTAL COST
- ---- ---------------------- ----------
Cahill, Warnock Strategic 52,252 $1,421,255
Partners Fund, L.P.
Strategic Associates, L.P 2,895 $ 78,744
Schedule 3.2
NUMBER OF SHARES PURCHASE PRICE
FIRST CLOSING
Cahill, Warnock Strategic 39,752 $1,081,255
Partners Fund, L.P.
Strategic Associates, L.P. 2,895 $78,744
SECOND CLOSING
Cahill, Warnock Strategic 12,500 $340,000
Partners Fund, L.P.
Exhibit 7
REGISTRATION RIGHTS AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND AMONG
CONCORDE CAREER COLLEGES, INC.,
CAHILL WARNOCK STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
TABLE OF CONTENTS
SECTION 1 Registration Rights .................................... 1
1.1 Demand Registration Rights. ....................... 1
1.2 "Piggyback" Registration Rights. .................. 2
1.3 Terms and Conditions of Registration or
Qualification. .................................... 2
1.4 Exceptions to Registration Obligations. ........... 6
1.5 Indemnity. ........................................ 6
SECTION 2 Miscellaneous .......................................... 9
2.1 Additional Actions and Documents. ................. 9
2.2 No Assignment. .................................... 9
2.3 Entire Agreement; Amendment. ...................... 9
2.4 Limitation on Benefits. ........................... 9
2.5 Binding Effect. ................................... 9
2.6 Governing Law. .................................... 10
2.7 Notices. .......................................... 10
2.8 Headings. ......................................... 11
2.9 Execution in Counterparts. ........................ 11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of February
25, 1997, by and among CONCORDE CAREER COLLEGES, INC., a Delaware corporation
(the "Company"), CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited
partnership organized under the laws of the State of Delaware, and STRATEGIC
ASSOCIATES, L.P., a limited partnership organized under the laws of the State of
Delaware (collectively, the "Purchasers").
WHEREAS, the Company and the Purchasers have entered into Debenture and
Warrant Purchase Agreements, dated as of February 25, 1997 (the "Debenture
Purchase Agreements");
WHEREAS, pursuant to the Debenture Purchase Agreements, the Company and the
Purchasers desire to enter into this Agreement to provide Purchasers with
certain stock registration rights and to address related matters;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
SECTION 1
Registration Rights
1.1 Demand Registration Rights. At any time after the date hereof but
excluding the period beginning December 1 and ending March 1 in any year,
Purchasers may request, in writing, registration for sale under the Securities
Act of 1933, as amended (the "Act"), of all or at least 500,000 shares of the
Common Stock, par value $0.10 per share, of the Company (the "Shares") then held
by Purchasers or issuable to Purchasers upon exercise of the Warrants of even
date herewith, issued by the Company to Purchasers pursuant to the Debenture
Purchase Agreements. The Company shall thereafter, as expeditiously as
practicable, use its reasonable best efforts (i) to prepare and file with the
Securities and Exchange Commission (the "SEC") under the Act, a registration
statement on the appropriate form (using Form S-3 or other "short form," if
available and advised by counsel) covering all of the Shares specified in the
demand request, within 60 days after the date of such request (45 days in the
case of a Form S-3) and (ii) to cause such registration statement to be declared
effective. The Purchasers shall select the underwriter of any offering pursuant
to a registration statement filed pursuant to this Section 1.1, subject to the
approval of the Company, which approval shall not be unreasonably withheld. Any
selected underwriter shall be a well-recognized firm in good standing. The
Company shall not be required to comply with more than one (1) request by
Purchasers for demand registration ("Demand Registration") pursuant to this
Section 1.1. A demand registration shall not count as such until a registration
statement becomes effective; provided, that if, after it has become effective,
the offering pursuant to the registration statement is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental authority, such registration be deemed not to have been effected
unless such stop order, injunction or other order shall subsequently have been
vacated or otherwise removed.
1.2 "Piggyback" Registration Rights. Subject to applicable stock exchange
rules and securities regulations, at least 30 days prior to any public offering
of any of its Common Stock for the account of the Company or any other person
(other than a registration statement on Form S-4 or S- 8 (or any successor forms
under the Securities Act) or other registrations relating solely to employee
benefit plans or any transaction governed by Rule 145 of the Securities Act),
other than pursuant to the exercise of any Demand Registration pursuant to
Section 1.1, the Company shall give written notice of such proposed filing and
of the proposed date thereof to Purchasers and if, on or before the twentieth
(20th) day following the date on which such notice is given, the Company shall
receive a written request from Purchasers requesting that the Company include
among the securities covered by such registration statement any Shares of Common
Stock or Shares of Common Stock issued or issuable upon exercise of the Warrant
for offering for sale in a manner and on terms set forth in such request, the
Company shall include such Shares in such registration statement, if filed, so
as to permit such Shares to be sold or disposed of in the manner and on the
terms of the offering thereof set forth in such request. Each such registration
shall hereinafter be called a "Piggyback Registration." The Company shall select
the underwriters of any offering pursuant to a registration statement filed
pursuant to this Section 1.2, subject to the approval of the Purchasers, which
approval shall not be unreasonably withheld.
1.3 Terms and Conditions of Registration or Qualification. In connection
with any registration statement filed pursuant to Sections 1.1 or 1.2 hereof,
the following provisions shall apply.
(a) The obligations of the Company to use its reasonable best efforts
to cause the registration of Shares under the Securities Act are subject to the
limitation, condition and qualification that the Company shall be entitled to
postpone for a reasonable period of time (but not exceeding 90 days in any one
year period) the filing of any registration statement otherwise required to be
filed by it if the Company in good faith determines that such registration and
offering would (i) interfere with any financing, acquisition, corporate
reorganization or other material transaction or event involving the Company or
any of its subsidiaries or (ii) require premature disclosure thereof or of
conditions, circumstances or events affecting the Company or the Company's
industry which are not yet fully developed or ripe for disclosure, in which
event the Company shall promptly give the securityholders requesting
registration thereof written notice of such determination and an approximation
of the anticipated delay. If the Company shall so postpone the filing of a
registration statement, the Purchasers shall have the right to withdraw the
request for registration by giving written notice to the Company within 15 days
after receipt of the notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which Purchasers are entitled under this Agreement.
(b) If the managing underwriter advises that the inclusion in such
registration or qualification of some or all of the Shares sought to be
registered exceeds the number (the "Saleable Number") that can be sold in an
orderly fashion or without adversely affecting the offering, then the number of
Shares offered shall be limited to the Saleable Number and shall be allocated as
follows:
(i) If such registration is being effected pursuant to a
Piggyback Registration under Section 1.2, (1) first, all the Shares the Company
(or in the exercise of demand registration rights, the selling stockholder(s)
exercising such rights) proposes to register and (2) second, the difference
between the Saleable Number and the number to be included pursuant to clause (1)
above, allocated first to the Purchasers pro rata on the basis of the relative
number of Shares offered for sale by each Purchaser; and
(ii) if such registration is being effected pursuant to a Demand
Registration other than in connection with the first public offering after the
date of this Agreement of Common Stock of the Company, (1) first, the entire
Saleable Number allocated first to the Purchasers on the basis of the relative
number of Shares offered for sale by Purchasers, and then among all other
selling securityholders pro rata on the basis of the relative number of Shares
offered for sale by each such securityholder and (2) second, the difference (if
positive) between the Saleable Number and the number to be included pursuant to
clause (1) above, allocated to the Company;
(iii) if such registration is being effected pursuant to a Demand
Registration pursuant to Section 1.1 and would be the first public offering of
Common Stock after the date of this Agreement and the Company wishes to sell,
for its own account, shares of Common Stock in such offering, then the Saleable
Number shall be allocated to the Purchasers, on one hand, and the Company, on
the other hand, equally, to the extent of the number of Shares offered by the
Purchasers.
(c) Purchasers will promptly provide the Company with such information
as the Company shall reasonably request in order to prepare such registration
statement and, upon the Company's request, each Purchaser shall provide such
information in writing and signed by such Purchaser and stated to be
specifically for inclusion in the registration statement. In the event that the
distribution of the Shares covered by the registration statement shall be
effected by means of an underwriting, the right of any Purchaser to include its
Shares in such registration shall be conditioned on such Purchaser's execution
and delivery of a customary underwriting agreement with respect thereto;
provided, however, that except with respect to information concerning such
holder and such Purchaser's intended manner of distribution of the Shares, no
Purchaser shall be required as a Purchaser exercising registration rights to
make any representations or warranties in such agreement as a condition to the
inclusion of its Shares in such registration.
(d) The Company shall bear all expenses in connection with the
preparation of any registration statement filed pursuant to Section 1.1,
including the fees and disbursements of one counsel for Purchasers.
(e) The Company shall bear all expenses in connection with the
preparation of any registration statement filed pursuant to Section 1.2,
excluding (A) the fees and disbursements of counsel for Purchasers, and (B) the
underwriting fees, discounts or commissions with respect to Shares of
Purchasers, which shall be borne by Purchasers.
(f) Following the effective date of such registration statement, the
Company shall, upon the request of Purchasers, forthwith supply such number of
prospectuses (including preliminary prospectuses and amendments and supplements
thereto) meeting the requirements of the Securities Act or such other securities
laws where the registration statement or prospectus has been filed and such
other documents as are referred to in the registration statement as shall be
requested by Purchasers to permit such Purchasers to make a public distribution
of their Shares, provided that Purchasers furnish the Company with such
appropriate information relating to such Purchasers' intentions in connection
therewith as the Company shall reasonably request in writing.
(g) The Company shall prepare and file such amendments and supplements
to such registration statement as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act or
such other securities laws where the registration statement has been filed with
respect to the offer and sale or other disposition of the shares covered by such
registration statement during the period required for distribution of the
Shares, which period shall not be in excess of six (6) months from the effective
date of such registration statement.
(h) The Company shall use its reasonable best efforts to register or
qualify the Shares of Purchasers covered by any such registration statement
under such securities or Blue Sky laws in such jurisdictions as Purchasers may
reasonably request; provided, however, that the Company shall not be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction where it is not so qualified in order
to comply with such request.
(i) In connection with any registration pursuant to Sections 1.1 and
1.2, the Company will as expeditiously as possible:
(A) cause the Shares covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable Purchasers to consummate the disposition of such Shares;
(B) notify each Purchaser at any time of the happening of any event as
a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the Purchasers of such Shares,
such prospectus will not contain an 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;
(C) cause all Shares covered by the registration statement to be listed
on each securities exchange on which similar securities issued by the Company
are then listed and, unless the same already exists, provide a transfer agent,
registrar and CUSIP number for all such Shares not later than the effective date
of the registration statement;
(D) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as Purchasers or
the underwriters retained by such holders, if any, reasonably request in order
to expedite or facilitate the disposition of such Shares;
(E) make available for inspection by any Purchaser, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by any such seller or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement, provided that such Inspectors shall have first executed and delivered
to the Company a confidentiality agreement in customary form protecting the
confidentiality of such information;
(F) obtain "cold comfort" letters and updates thereof from the
Company's independent public accountants and an opinion from the Company's
counsel in customary form and covering such matters of the type customarily
covered by "cold comfort" letters and opinion of counsel, respectively, as
Purchasers may reasonably request; and
(G) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its securityholders, as soon as reasonably
practicable, an earnings statement covering a period of 12 months, beginning
within three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
(j) Each Purchaser agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
1.3(i)(B), such holder will forthwith discontinue disposition of its Shares
pursuant to the registration statement covering such Shares until such
Purchaser's receipt of the copies of the supplemented or amended prospectus
contemplated by such Section 1.3(i)(B) and, if so directed by the Company, such
Purchaser will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Purchaser's possession, of the
prospectus covering such Shares current at the time of receipt of such notice.
(k) Each Purchaser agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Shares of Common Stock, and not to effect any such public sale or
distribution of any other equity security of the Company or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company in each case, other than as part of an offering made pursuant to a
registration statement filed and affected by this Agreement during the 15
days prior to, and during the 90-day period (or such longer period as each
Purchaser agrees with the underwriter of such offering) beginning on the
effective date of such registration statement (except as part of such
registration) provided that each Purchaser has received written notice of such
registration at least 15 days prior to such effective date.
1.4 Exceptions to Registration Obligations. The Company shall not be
required to effect any registration of Shares pursuant to Section 1.1 or Section
1.2 hereof if either:
(a) it shall deliver to the Purchaser requesting such registration an
opinion of counsel in form reasonably satisfactory to such Purchaser to the
effect that all such Shares held by such Purchaser may be sold in the public
market without registration under the Securities Act (e.g., pursuant to Rule
144) and any applicable state securities laws; or
(b) it shall offer to purchase all the Shares sought by the Purchaser
to be registered, at a purchase price per Share equal to the average, over the
ten (10) trading days immediately after the Purchaser's request for Demand
Registration or Piggyback Registration, of the average on each such trading day
of the bid and ask price (or high and low sales price, if applicable) for a
share of Common Stock of the Company on the exchange or quotation system upon
which the Common Stock is traded or quoted.
1.5 Indemnity.
(a) In the event of the registration or qualification of any Shares of
the securityholders under the Securities Act or any other applicable securities
laws pursuant to the provisions of Sections 1.1 and 1.2, the Company agrees to
indemnify and hold harmless each Purchaser thereby offering such Shares for sale
(a "Seller"), underwriter, broker or dealer, if any, of such Shares, and each
other person, if any, who controls any such Seller, underwriter, broker or
dealer within the meaning of the Securities Act or any other applicable
securities laws, from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which such
Seller, underwriter, broker or dealer or controlling person may become subject
under the Securities Act or any other applicable securities laws 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 under
which such Shares were registered or qualified under the Securities Act or any
other applicable securities laws, any preliminary prospectus or final prospectus
relating to such Shares, or any amendment or supplement thereto, 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, or any violation by the Company of any rule or regulation under
the Securities Act or any other applicable securities laws applicable to the
Company or relating to any action or inaction required by the Company in
connection with any such registration or qualification and will reimburse each
such Seller, underwriter, broker or dealer and each such controlling person for
any legal or other expenses reasonably incurred by such Seller, underwriter,
broker or dealer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; 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 omission made in such registration statement, such preliminary
prospectus, such final prospectus or such amendment or supplement thereto or
violation in reliance upon and in conformity with written information furnished
to the Company by such Seller, underwriter, broker, dealer or controlling person
specifically and expressly for use in the preparation thereof; and provided,
further, that the Company shall not be liable to any person who participates as
an underwriter in the offering or sale of Shares or any other person, if any,
who controls such underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of such person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Shares to such person if such statement or omission
was corrected in such final
prospectus so long as such final prospectus, and any amendments or supplements
thereto, have been furnished to such underwriter.
(b) In the event of the registration or qualification of any Shares of
Seller under the Securities Act or any other applicable securities laws for sale
pursuant to the provisions of Sections 1.1 and 1.2, each Seller, each
underwriter, broker and dealer, if any, of such Shares, and each other person,
if any, who controls any such Seller, underwriter, broker or dealer within the
meaning of the Securities Act, agrees severally, and not jointly to indemnify
and hold harmless the Company, each person who controls the Company within the
meaning of the Securities Act, and each officer and director of the Company from
and against any and all losses, claims, damages or liabilities (or actions in
respect thereof), joint or several, to which the Company, such controlling
person or any such officer or director may become subject under the Securities
Act or any other applicable securities laws 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 of any material fact contained in any
registration statement under which such Shares were registered or qualified
under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon an untrue
statement or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or any
violation by the Company of any rule or regulation under the Securities Act or
any other applicable securities laws applicable to the Company or relating to
any action or inaction required by the Company in connection with any such
registration or qualification, which untrue statement or omission or violation
was made therein in reliance upon and in conformity with written information
furnished to the Company by such selling securityholder, underwriter, broker,
dealer or controlling person specifically for use in connection with the
preparation thereof, and will reimburse the Company, such controlling person and
each such officer or director for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that no Seller will be
liable under this Section 1.4(b) for any amount in excess of the net proceeds
paid to such selling securityholder of Shares sold by it unless such liability
arises from such written information furnished to the Company with knowledge of
its misleading nature or an intent to defraud.
(c) Promptly after receipt by a person entitled to indemnification
under this Section 1.4 (an "indemnified party") of notice of the commencement of
any action or claim relating to any registration statement filed under Section
1.1 or 1.2 or as to which indemnity may be sought hereunder, such indemnified
party will, if a claim for indemnification hereunder in respect thereof is to be
made against any other party hereto (an "indemnifying party"), give written
notice to such indemnifying party of the commencement of such action or claim,
but the omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability that it may have to any indemnified party
otherwise than pursuant to the provisions of this Section 1.4 and shall also not
relieve the indemnifying party of its obligations under this Section 1.4 except
to the extent that the indemnifying party is actually prejudiced thereby. In
case any such action is brought against an indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled (at its own expense) to participate in and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense, with counsel reasonably satisfactory to such indemnified party, of
such action and/or to settle such action 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 for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than the reasonable cost of
investigation; provided, however, that no indemnifying party shall enter into
any settlement agreement without the prior written consent of the indemnified
party unless such indemnified party is fully released and discharged from any
such liability. Notwithstanding the foregoing, the indemnified party shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (A) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such suit, action, claim or
proceeding, (B) the indemnifying party shall not have employed counsel
(reasonably satisfactory to the indemnified party) to
take charge of the defense of such action, suit, claim or proceeding, or (C)
such indemnified party shall have reasonably concluded, based upon the advice of
counsel, that there may be defenses available to it that are different from or
additional to those available to the indemnifying party which, if the
indemnifying party and the indemnified party were to be represented by the same
counsel, could result in a conflict of interest for such counsel or materially
prejudice the prosecution of the defenses available to such indemnified party.
If any of the events specified in clauses (A), (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the fees and
expenses of one counsel or firm of counsel selected by a majority in interest of
the indemnified parties (and reasonably acceptable to the indemnifying party)
shall be borne by the indemnifying party. If, in any such case, the indemnified
party employs separate counsel, the indemnifying party shall not have the right
to direct the defense of such action, suit, claim or proceeding on behalf of the
indemnified party and the indemnified party shall assume such defense and/or
settle such action; provided, however, that an indemnifying party shall not be
liable for the settlement of any action, suit, claim or proceeding effected
without its prior written consent, which consent shall not be unreasonably
withheld.
SECTION 2
Miscellaneous
2.1 Additional Actions and Documents. Each of the parties hereto hereby
agrees to use its good faith best efforts to bring about the consummation of
this Agreement, and to take or cause to be taken such further actions, to
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments, and to obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
2.2 No Assignment. The right of Purchasers herein are personal and may not
be assigned or transferred to any third party without the Company's prior
express written consent.
2.3 Entire Agreement; Amendment. This Agreement, including the other
writings referred to herein or delivered pursuant hereto, constitutes the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification, or discharge is sought.
2.4 Limitation on Benefits. It is the explicit intention of the parties
hereto that no person or entity other than the parties hereto (and their
respective successors and assigns) is or shall be entitled to bring any action
to enforce any provision of this Agreement against any of the parties hereto,
and the covenants, undertakings and agreements set forth in this Agreement shall
be solely for the benefit of, and shall be enforceable only by, the parties
hereto or their respective successors and assigns.
2.5 Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
2.6 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of Delaware (excluding the choice
of law rules thereof).
2.7 Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) If to the Company:
Concorde Career Colleges, Inc.
1100 Main Street
Suite 416
Kansas City, MO 64105
Attn: Jack L. Brozman
Facsimile No.: (816) 474-7610
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Attn: Thomas W. Van Dyke
Facsimile No.: (913) 338-7777
(b) if to the Purchasers:
c/o Cahill, Warnock & Company, LLC
One South Street, Suite 2150
Baltimore, Maryland 21202
Attn: David Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esquire
Facsimile No.: (410) 986-2828
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or facsimile transmission confirmation being deemed conclusive (but
not exclusive) evidence of such delivery) or at such time as delivery is refused
by the addressee upon presentation.
2.8 Headings. Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
2.9 Execution in Counterparts. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of each party appear on each counterpart; but it
shall be sufficient that the signature of each party appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of all of the parties hereto.
[Remainder of Page Left Blank Intentionally -- Signature Page Follows]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first above written.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
Name: Jack L. Brozman
Title: President and Chief Executive Officer
CAHILL, WARNOCK STRATEGIC PARTNERS
FUND, L.P.
By: CAHILL, WARNOCK STRATEGIC PARTNERS,
L.P., its General Partner
By: /s/ David L. Warnock
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, L.L.C., its
General Partner
By: /s/ David L. Warnock
Name: David L. Warnock
Title: Managing Member
Exhibit 8
SUBORDINATED DEBENTURE AND
WARRANT PURCHASE AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND BETWEEN
CONCORDE CAREER COLLEGES, INC.
AND
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
TABLE OF CONTENTS
SECTION 1 Authorization, Purchase and Sale of Debenture;
Issuance of Warrant ........................................... 1
1.1 Authorization of the Debenture. ..................... 1
1.2 Authorization of the Warrant. ...................... 1
1.3 Purchase and Sale of Debenture. ..................... 1
1.4 Issuance of Warrants. .............................. 2
SECTION 2 Certain Terms of the Debenture and Warrant ............... 2
2.1 Certain Terms of the Debenture. ..................... 2
2.2 Certain Terms of the Warrants. ...................... 3
2.3 Replacement of Debenture or Warrant. ................ 3
2.4 Registration, etc. .................................. 3
SECTION 3 Conditions to Purchaser's Obligation ..................... 4
3.1 Preferred Stock Transfer. ........................... 4
3.2 Registration Rights Agreement ....................... 4
3.3 Certificate that Representations True at
Closing. ................................................. 4
3.4 Covenants of the Company. ........................... 4
3.5 No Injunction. ...................................... 4
3.6 Approvals ........................................... 5
3.7 Opinion of Seller's Counsel. ........................ 5
SECTION 4 Conditions to Company's Obligations ...................... 5
4.1. Preferred Stock Transfer ............................ 5
4.2 Certificate That Representations True at
Closing .................................................. 5
4.3 Covenants of Purchaser. ............................. 5
4.4 No Injunction ....................................... 5
4.5 Opinion of Purchaser's Counsel ...................... 6
SECTION 5 Representations and Warranties of the Company ............ 6
5.1 Authority; Validity ................................. 6
5.2 No Conflicts ........................................ 6
5.3 Consents and Approvals .............................. 6
5.4 Representations and Warranties Regarding the
Company. ................................................. 6
5.5 Accuracy of Information. ............................ 7
SECTION 6 Representations and Warranties of Purchaser .............. 7
6.1 Authority. .......................................... 7
6.2 No Conflicts ........................................ 7
6.3 Investment Representations .......................... 7
SECTION 7 Events of Default ....................................... 8
7.1 Events of Default. .................................. 8
7.2 Annulment of Defaults. .............................. 9
SECTION 8 Covenants of the Company ................................. 10
8.1 General Covenants of the Company. ................... 10
SECTION 9 Subordination of Debentures .............................. 14
9.1 Subordinate to Senior Indebtedness .................. 14
9.2 Payment Over of Proceeds Upon Dissolution,
Liquidation, Etc. of the Company. ................... 14
9.3 Subrogation to Rights of Holders of Senior
Indebtedness. ............................................ 14
9.4 No Payment on Debentures When Senior
Indebtedness
in Default. ......................................... 14
9.5 Definition of Senior Indebtedness. .................. 14
SECTION 10 Miscellaneous ....................................... 15
10.1 Indemnification. .................................... 15
10.2 No Waiver; Cumulative Remedies. ..................... 15
10.3 Amendments, Waiver and Consents. .................... 15
10.4 Notices. ............................................ 16
10.5 Costs and Expenses. ................................. 17
10.6 Binding Effect; Assignment .......................... 17
10.7 Survival of Representations and Warranties. ......... 17
10.8 Prior Agreements. ................................... 17
10.9 Governing Law. ...................................... 17
10.10 Headings. .......................................... 17
10.11 Counterparts. ...................................... 18
10.12 Further Assurances ................................. 18
SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT
THIS SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT (the "Debenture
Agreement") is made as of February 25, 1997, by and between CONCORDE CAREER
COLLEGES, INC., a Delaware corporation (the "Company") and CAHILL, WARNOCK
STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of
the State of Delaware (the "Purchaser").
WHEREAS, the Company has agreed to issue 52,252 shares of the Company's
Class B Voting Convertible Preferred Stock, par value $0.10 per share, to the
Purchaser pursuant to the Convertible Preferred Stock Purchase Agreement, of
even date herewith, between the Company and Purchaser (the "Preferred
Agreement");
WHEREAS, the Company wishes to sell to Purchaser, and Purchaser wishes to
purchase from the Company, the Company's Debenture and non-detachable Warrant;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
SECTION 1
Authorization, Purchase and Sale
of Debenture; Issuance of Warrant
1.1 Authorization of the Debenture. The Company has authorized the issuance
and sale to Purchaser of the Company's Debenture in the original principal
amount of Three Million Three Hundred Sixteen Thousand Two Hundred Fifty Dollars
($3,316,250). Such Debenture shall be substantially in the form set forth as
Exhibit 1.1 (the "Debenture"). The Debenture shall be repayable at the times and
under the terms and conditions specified therein.
1.2 Authorization of the Warrant. The Company has authorized the issuance
of a Warrant as part of the consideration for the loan evidenced by the
Debenture. The Warrant entitles Purchaser to purchase an aggregate of 2,438,419
shares of the Company's Common Stock, at an exercise price of $1.36 per share,
subject to any adjustment as set forth in Section 3.3 of the Warrant. The
Warrant shall be substantially in the form set forth as Exhibit 1.2 (the
"Warrant"). The Company has reserved a sufficient number of shares of Common
Stock for issuance upon exercise of the Warrant. (The shares of Common Stock
issuable upon exercise of the Warrant are referred to as the "Warrant Shares.")
1.3 Purchase and Sale of Debenture.
(a) The Closing. The Company agrees to issue and sell to Purchaser, and
subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, Purchaser agrees to purchase, the Debenture for
the purchase price (the "Purchase Price") of Three Million Three Hundred Sixteen
Thousand Two Hundred Fifty Dollars ($3,316,250). Such purchase and sale shall
take place at a closing (the "Closing") to be held by exchange of documents on
February 25, 1997, or on such other date as may be mutually agreed, at the
offices of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City,
Missouri (the date of such Closing is the "Closing Date"). At the Closing, the
Company will issue to Purchaser the Debenture. At the Closing, Purchaser will
deliver to the Company, by wire transfer of immediately available funds to an
account designated by the Company by written notice to Purchaser, the Purchase
Price.
(b) Use of Proceeds. The Company agrees to use the full proceeds, to
the extent required, from the sale of the Debenture to settle, redeem, and
release its financial obligations to CenCor, Inc. ("CenCor"), pursuant to the
Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated
December 30, 1996, by and among CenCor, the Company and certain of the Company's
affiliates (the "CenCor Obligations").
1.4 Issuance of Warrants. At the Closing, the Company agrees to issue to
Purchaser, as part of the consideration for the loan evidenced by the Debenture,
the Warrant substantially in the form as set forth in Exhibit 1.2.
SECTION 2
Certain Terms of the Debenture and Warrant
2.1 Certain Terms of the Debenture. All principal, interest and amounts
outstanding under the Debenture shall be due and payable in full on February 25,
2003. The Debenture shall bear interest at an annual rate of five percent (5%).
Accrued and unpaid interest shall be due and payable quarterly in arrears on
February 28, May 31, August 31, and November 30 of each year until maturity. The
Debenture may be prepaid or redeemed, in whole or in part, by the Company prior
to maturity, without penalty, with twenty (20) days prior written notice thereof
to the Purchaser. In the event that the Company consummates an underwritten
registered public offering covering the offer and sale of Common Stock for the
account of the Company in which net proceeds to the Company of the public
offering equals or exceeds $15 million (a "Public Offering"), then the Company
must apply, at the request of Purchaser, the proceeds of such Public Offering
(to the extent available after payment of all Senior Indebtedness (as defined in
Section 9.5)) to prepay the unpaid principal amount and outstanding interest on
the Debenture. Payments of principal and interest on the Debenture shall be made
directly by wire transfer to an account designated by Purchaser by written
notice to the Company or by check duly mailed or delivered to Purchaser at its
address set forth in Section 8.4 of the Agreement. The Debenture (and any rights
of the Purchaser hereunder or related thereto) is non- transferable except to a
person or entity controlled by, or under common control with, Purchaser. No
sinking fund or similar provision shall be required to fund payment of principal
or interest under the Debenture. Payment of principal and interest on the
Debenture is unsecured.
2.2 Certain Terms of the Warrants. The Warrant shall initially be
exercisable into 2,438,419 shares of Common Stock. The Warrant shall initially
be exercisable at any time between August 25, 1998 and February 25, 2003,
subject to earlier termination upon redemption of the Debenture (the "Exercise
Period"). The Warrant entitles Holder to purchase an aggregate of 2,438,419
shares of the Company's Common Stock, at an exercise price ("Exercise Price") of
$1.36 per share, subject to any adjustments as set forth in Section 3.3 of the
Warrant. During the Exercise Period, in the event that Holder fails to exercise
this Warrant after the Company has provided Holder (i) twenty (20) days prior
written notice of its intention to pay in full and redeem the Debenture on a
particular date (the "Repayment Date"), and (ii) thirty (30) days after the
Redemption Date within which to exercise this Warrant, then this Warrant shall
terminate and thereafter be null and void. Notwithstanding the preceding
sentence, in the event that the Company repays and redeems the Debenture in full
on or before August 25, 1998, this Warrant shall remain in full force and effect
until September 25, 1998, when it shall then expire. The Warrant may be
exercised in whole or in part by payment in cash, bank cashier's check,
certified check, or, at the option of Purchaser, by reduction in the principal
amount of the Debenture (or forgiveness of any accrued and unpaid interest
thereon), in an amount equal to the exercise price with respect to the Warrant
being exercised. The Warrant shall have an initial exercise price of $1.36 per
share of Common Stock.
2.3 Replacement of Debenture or Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Debenture or Warrant and, if requested in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond or other agreement or
security reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of such Debenture or Warrant, the
Company will issue a new Debenture or Warrant, of like tenor and amount, in lieu
of such lost, stolen, destroyed or mutilated Debenture or Warrant; provided,
however, if any Debenture or Warrant of which Purchaser, its nominee, or any of
its partners, officers or principals is the registered holder is lost, stolen or
destroyed, the affidavit of such principal or general partner or any principal
or corporate officer of such holder setting forth the circumstances with respect
to such loss, theft or destruction, together with an agreement to indemnify the
Company with respect thereto shall be accepted as satisfactory evidence thereof,
and no bond or other security shall be required as a condition to the execution
and delivery by the Company of a new Debenture or Warrant in replacement of such
lost, stolen or destroyed Debenture or Warrant.
2.4 Registration, etc. The Company shall maintain at its principal office a
register with respect to the Debenture and Warrant and shall record therein the
name(s) and address(es) of the respective registered holder(s) thereof, to which
notices are to be sent and the address(es) to which payments (in the case of the
Debenture) are to be made as designated by the registered holder if other than
the address of such holder, and the particulars of all permitted transfers,
exchanges and replacements of the Debenture and Warrant. Provided that such
transfer is permitted herein, the Company shall record on such register any and
all transfers of the Debenture and Warrant by or for the registered holder or
such holder's executors or administrators or their duly appointed attorney, in
form reasonably satisfactory to the Company, in order to maintain an accurate
record of the holder(s) thereof. Each Debenture and Warrant issued hereunder,
whether originally or upon transfer, exchange or replacement, shall be
registered on the date of execution thereof by the Company. The registered
holder of a Debenture and Warrant issued hereunder shall be that individual,
corporation, partnership, joint venture, trust or unincorporated organization or
other entity (a "Person") in whose name the Debenture and Warrant has been so
registered by the Company. A registered holder shall be deemed the owner of a
Debenture or Warrant for all purposes of this Agreement and, subject to the
provisions hereof, shall be entitled to all of the benefits thereof and rights
thereunder free from all equities or rights of set off or counterclaim between
the Company and the transferor of such registered holder or any previous
registered holder of such Debenture or Warrant.
SECTION 3
Conditions to Purchaser's Obligation
The obligation of Purchaser to purchase and pay for the Debenture at the
Closing is subject to the following conditions, which may be waived by Purchaser
at its sole discretion:
3.1 Preferred Stock Transfer. The Preferred Agreement between the Company
and Purchaser shall have been fully executed and the closing of the transactions
provided for therein, including but not limited to the execution of the
Stockholders' Agreement, of even date herewith, by and among the Company, the
Purchaser and other stockholders (the "Stockholders' Agreement"), shall have
closed and be complete prior to or simultaneously with the issuance of the
Debenture and payment therefor.
3.2 Registration Rights Agreement. The Company and Purchaser shall have
entered into the Registration Rights Agreement substantially in the form set
forth as Exhibit 3.2 hereto.
3.3 Certificate that Representations True at Closing. Purchaser shall have
received the executed certificate of an executive officer of the Company to the
effect that each of the Company's representations and warranties herein and in
any document or instrument delivered to Purchaser hereunder shall be true and
correct on the Closing Date with the same force and effect as though such
representations and warranties had been made again on and as of such time.
3.4 Covenants of the Company. The Company shall have duly performed all of
the covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, including but not limited to the closing deliveries required of
it.
3.5 No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of the business of the Company, if such action,
proceeding, investigation, regulation or legislation, in the reasonable judgment
of Purchaser, would make it inadvisable to consummate such transactions.
3.6 Approvals. The execution and the delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been approved by
all regulatory authorities whose approvals are required by law and by all third
parties whose approvals are required by an agreement binding upon the Company.
It is acknowledged by all parties that the approval of the Department of
Education is not required to close this transaction.
3.7 Opinion of Seller's Counsel. Purchaser shall have received from Bryan
Cave, LLP, counsel to the Company, an opinion addressed to Purchaser, dated the
Closing Date, in substantially the form of Exhibit A hereto.
SECTION 4
Conditions to Company's Obligations
The obligation of the Company to issue and sell the Debenture at the
Closing is subject to the following conditions, which may be waived by the
Company at its sole discretion:
4.1. Preferred Stock Transfer. The Preferred Agreement between the Company
and Purchaser shall have been fully executed and the closing of the transactions
provided for therein, including but not limited to the execution of the
Stockholders' Agreement, of even date herewith, by and among the Company, the
Purchaser and other stockholders (the "Stockholders' Agreement"), shall have
closed and be complete prior to or simultaneously with the issuance of the
Debenture and payment therefor.
4.2 Certificate That Representations True at Closing. The Company shall
have received the executed certificate of the Purchaser to the effect that each
of the Purchaser's representations and warranties herein and in any document or
instrument delivered to the Company hereunder shall be true and correct on the
Closing Date with the same force and effect as though such representations and
warranties had been made again on and as of such time.
4.3 Covenants of Purchaser. Purchaser shall have duly performed all of the
covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, including but not limited to the closing deliveries required of
it.
4.4 No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of the business of Purchaser, if such action,
proceeding, investigation, regulation or legislation, in the reasonable judgment
of Company, would make it inadvisable to consummate such transactions.
4.5 Opinion of Purchaser's Counsel. Purchaser shall have received from
Wilmer, Cutler & Pickering, counsel to Purchaser, an opinion addressed to the
Company, dated the Closing Date, in substantially the form of Exhibit B hereto.
SECTION 5
Representations and Warranties of the Company
The Company hereby represents and warrants to Purchaser as follows:
5.1 Authority; Validity. The Company has the full legal right, power and
authority to enter into this Agreement and to issue the Debenture and Warrant in
accordance with the terms of this Agreement. This Agreement has been duly and
validly executed by the Company and this Agreement, the Debenture and Warrant
constitute legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution under this Agreement may be limited by federal
or state securities laws or public policy thereto.
5.2 No Conflicts. Subject to the repayment and satisfaction of the CenCor
obligations, the execution, delivery and performance of this Agreement, the
Debenture and Warrant and the consummation of the transactions by the Company
contemplated hereby and thereby will not conflict with, violate or result in a
breach or constitute a default under any mortgage, indenture, loan agreement or
other agreement or instrument binding upon the Company, or any order, decree,
statute, ordinance, regulation or other law applicable to the Company.
5.3 Consents and Approvals. Subject to the repayment and satisfaction of
the CenCor obligations, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or any
third party is required in connection with the execution, delivery and
performance of this Agreement, the Debenture and Warrant by the Company and the
consummation of the transactions by the Company hereunder.
5.4 Representations and Warranties Regarding the Company. In order to
induce the Purchasers to enter into this Agreement, the Company hereby
represents and warrants that each of the representations and warranties
regarding the Company set forth in Section 4 of the Preferred Agreement is true,
complete and accurate in all material respects.
5.5 Accuracy of Information. To the knowledge of the executive officers of
the Company, none of this Agreement, the Debenture, the Warrant nor any
certificate, instrument or other agreement (including, but not limited to, the
Preferred Agreement and Stockholders' Agreement) furnished or to be furnished by
or on behalf of the Company, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
SECTION 6
Representations and Warranties of Purchaser
6.1 Authority. Purchaser is duly organized and validly existing and has the
full legal right, power and authority to enter into this Agreement. This
Agreement has been duly and validly authorized,
executed and delivered by the Purchaser and constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms.
6.2 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions by Purchaser contemplated hereby will
not conflict with, violate or result in a breach or constitute a default under,
any mortgage, indenture, loan agreement or other agreement or instrument, or any
order, decree, statute, ordinance, regulation or other law applicable to the
Purchaser.
6.3 Investment Representations. Purchaser hereby represents and warrants to
the Company as follows:
(a) It is acquiring the Debenture and the Warrant for its own account
for investment, and not with a view to the distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act");
(b) It is an "Accredited Investor" as defined under the Securities Act;
(c) It is aware and it acknowledges that neither the Debenture nor the
Warrant is registered under the Securities Act or any state securities laws, and
that the Debenture and the Warrant are each subject to certain restrictions on
the subsequent transfer and/or sale thereof; and
(d) It is not acquiring the Debenture or the Warrant for purposes of
acquiring or changing "control" (as defined under Rule 405 of the Securities
Exchange Act of 1934, as amended) of the Company.
SECTION 7
Events of Default
7.1 Events of Default. For so long as any indebtedness under the Debenture
shall be outstanding, the following events shall constitute an event of default
hereunder ("Events of Default"):
(a) The Company shall fail to pay any installment of principal of or
interest on the Debenture when due and any such failure shall not be cured by
full performance thereof within ten (10) days after written notice thereof shall
have been given to the Company by any registered holder of the Debenture; or
(b) The Company shall default in the performance of any covenant
contained in Section 7 of this Agreement, any covenant set forth in the
Preferred Agreement, or any covenant in the Stockholders' Agreement, and any
such failure shall not be cured by full performance thereof within ten (10) days
after written notice thereof shall have been given to the Company by any
registered holder of the Debenture; or
(c) Any representation or warranty made by the Company or any
Subsidiary in this Agreement or by the Company or any Subsidiary (or any
officers of the Company or any Subsidiary) in any certificate, instrument or
written statement contemplated by or made or delivered pursuant to or in
connection with this Agreement, the Preferred Agreement, or the Stockholders'
Agreement, shall prove to have been incorrect when made in any material respect;
or
(d) The Company or any Subsidiary shall fail to perform or observe any
other term, covenant or agreement contained in the Preferred Agreement, the
Stockholders' Agreement, the Debenture, or Warrant on its part to be performed
or observed and any such failure shall not be cured or by full performance
thereof within ten (10) days after written notice thereof shall have been given
to the Company by any registered holder of the Debenture; or
(e) The Company or any Subsidiary shall (i) admit in writing its
inability to pay its debts generally as they become due; (ii) commence a
voluntary case under Title 11 of the United States Code as from time to time in
effect, or authorize, by appropriate proceedings of its Board of Directors or
other governing body, the commencement of such a voluntary case; (iii) file an
answer or other pleading omitting or failing to deny the material allegations of
a petition filed against it commencing an involuntary case under such Title 11,
or seek, consent to or acquiesce in the relief therein provided, or fail to
controvert timely the material allegations of any such petition; (iv) suffer the
entry of an order for relief in any involuntary case commenced under said Title
11; (v) seek relief as a debtor under any applicable law, other than said Title
11, of any jurisdiction relating to the liquidation or reorganization of debtors
or to the modification or alteration of the rights of creditors, or consent to
or acquiesce in such relief; (vi) suffer the entry of an order by a court of
competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering
or approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (C) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property (not
otherwise covered by subsection (f) below); or (vii) make an assignment for the
benefit of, or enter into a composition with, its creditors, or appoint or
consent to the appointment of a receiver or other custodian or all or a
substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against the property of the Company or any
Subsidiary in an aggregate amount which exceeds $2,500,000 and such judgment,
writ, or similar process shall not be released, vacated or fully bonded or
stayed pending appeal within sixty (60) days after its issue or levy; or
(g) The Company fails to prepay the unpaid principal amount of the
Debenture and outstanding interest thereon in the event of a Public Offering to
the extent available after payment of all Senior Indebtedness.
Upon the occurrence of any Event of Default, and in any such event, Purchaser or
any other holder of any Debenture may, by notice to the Company, declare the
entire unpaid principal amount of such Debenture, all interest accrued and
unpaid thereon and all other amounts payable to such holder under such Debenture
or this Agreement to be forthwith due and payable, whereupon such Debenture, all
such accrued interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under Section
6.1(e) in which case all such accounts shall automatically become due and
payable without such declaration), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company with respect to itself and its Subsidiaries. Upon the occurrence of any
Event of Default, the Warrant shall immediately become exercisable, at the
option of the Holder, for that number of shares of Common Stock issuable upon
exercise of the Warrant.
7.2 Annulment of Defaults. Section 7.1 is subject to the condition that, if
at any time after the principal of any Debenture shall have become due and
payable, and before any judgment or decree for the payment of the moneys so due
shall have been entered, all arrears of interest upon such Debenture and all
other sums payable to the holder of such Debenture under or such Debenture and
under this Agreement (except the principal amount which by such declaration
shall have become payable) shall have been duly paid, and every other default
and Event of Default shall have been made good or cured, then and in every such
case the holder of such Debenture, by written instrument delivered to the
Company, may rescind and annul such declaration and its consequences; but no
such rescission or annulment shall extend to or affect any other or subsequent
default or Event of Default or impair any right of the holders of any other
Debenture consequent thereon.
SECTION 8
Covenants of the Company
8.1 General Covenants of the Company. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that, as long as any of
the Debenture is outstanding, it will perform and observe the following
covenants and provisions and will cause each Subsidiary to perform and observe
such of the following covenants and provisions as are applicable to such
Subsidiary:
(a) Punctual Payment. The Company shall pay the principal of and
interest on the Debenture at the times and place and in the manner provided in
the Debenture and herein.
(b) Payment of Taxes. The Company shall pay and discharge, and cause
each Subsidiary to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed on it or upon its income or profits or
business, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might likely
(in the Company's opinion) become a lien or charge upon any properties of the
Company or any Subsidiary, provided that neither the Company nor the Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested and/or negotiated in good faith and by appropriate
proceedings if the Company or Subsidiary concerned shall have set aside on its
books adequate (in the Company's opinion) reserves with respect thereto. The
Company shall pay, when due, or in conformity with customary trade terms, all
material lease obligations, all material trade debt, and all other material
indebtedness incident to the operations of the Company, except such as are being
contested in good faith and by appropriate proceedings if the Company shall have
set aside on its books adequate reserves with respect thereto.
(c) Maintenance of Insurance. The Company shall maintain, and cause
each Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Company or such Subsidiary operates.
(d) Preservation of Corporate Existence. The Company shall preserve and
maintain, and cause each Subsidiary to preserve and maintain, its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each Subsidiary to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business and
operations or the ownership of its properties; the Company shall preserve and
maintain, and cause each Subsidiary to preserve and maintain, all licenses and
other rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or used by and
necessary to the conduct of its business; provided, however, that the Company
shall not be required to preserve any such Subsidiary, license or right if the
Board of Directors shall determine that the preservation is no longer desirable
in the conduct of the Company's business and that the loss thereof is not, and
will not be, adverse in any material respect to the holder of the Debenture.
(e) Compliance with Laws. The Company shall use its best efforts to
comply, and cause each Subsidiary to comply, with all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with which
could materially adversely affect its business or condition, financial or
otherwise.
(f) Access to Information. In the Event of a Default (as defined in
Section 7.1 above), the Company shall permit Purchaser or any representatives
thereof, at any reasonable time and from time to time, to receive, to examine
and make copies of and extract from the records and books of account of
(including, but not limited to unaudited balance sheets of the Company as at the
end of each month and unaudited statements of income and of cash flows of the
Company for each month and for the current fiscal year to the end of each month,
setting forth in comparative form the Company's budget for the corresponding
periods for the current fiscal year, all in reasonable detail and duly certified
by the chief
financial officer of the Company as having been prepared in accordance with
generally accepted accounting principles consistently applied), and visit and
inspect the properties of, the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of
their officers or directors and independent accountants. Purchaser agrees and
acknowledges that, upon access to and receipt of such information, it shall keep
such information confidential and that such information may constitute
proprietary information and/or trade secrets of the Company.
(g) Keeping of Records and Books of Account. The Company shall keep,
and cause each Subsidiary to keep, adequate records and books of account, in
which complete entries shall be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such Subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
(h) Maintenance of Properties, etc. The Company shall maintain and
preserve, and cause each Subsidiary to maintain and preserve, all of its
properties, necessary or useful in the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted, except as
otherwise determined by the Board of Directors.
(i) Compliance with ERISA. The Company shall use its best efforts to
comply, and cause each Subsidiary to comply, with the provisions of ERISA and
the Code, and the rules and regulations thereunder, which are applicable to any
Plan. Neither the Company nor any Subsidiary shall permit any event or condition
it knows to exist which would likely permit any such plan to be terminated under
circumstances which would cause the lien provided for in Section 4068 of ERISA
to attach to the assets of the Company or any Subsidiary.
(j) Dealings with Affiliates. Except for employee or director
compensation, stock bonus, stock option or similar plans or arrangements
approved by the Board of Directors, the Company will not enter or permit any
Subsidiary to enter into any transaction with any holder of five percent (5%) or
more of any class of capital stock of the Company, or any member of their
families or any corporation or other entity in which any one or more of such
stockholders or members of their immediate families directly or indirectly holds
five percent (5%) or more of any class of capital stock except in the ordinary
course of business and on terms not less favorable to the Company or the
Subsidiary than it would obtain in a transaction between unrelated parties.
(k) SEC Reports. The Company shall file all reports and other
information and documents which it is required to file with the Securities and
Exchange Commission ("SEC") pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"). The Company will
cause any quarterly and annual reports, proxy statements and any other documents
which it mails to its stockholders to be mailed to the registered holder of the
Debenture.
If the Company is not subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company will prepare, for the first three
quarters of each fiscal year, quarterly financial statements substantially
equivalent to the financial statements required to be included in a report on
Form 10-Q under the Exchange Act. The Company will also prepare, on an annual
basis, complete audited consolidated financial statements, including, but not
limited to, a balance sheet, a statement of income and retained earnings, a
statement of changes in financial position and all appropriate notes. All such
financial statements will be prepared in accordance with generally accepted
accounting principles consistently applied, except for changes with which the
Company's independent accountants concur, and except that quarterly statements
may be subject to year-end adjustments. The Company will cause a copy of such
financial statements to be mailed to the registered holder of the Debenture as
soon as available within sixty (60) days after the close of each of the first
three quarters of each fiscal year and within one hundred twenty (120) days
after the close of each fiscal year.
The holder of the Debenture and prospective purchasers designated by such
holder will have the right to obtain from the Company upon request by such
holder or prospective purchasers, during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the information required by
paragraph d (4)(i) of Rule 144A under the Securities Act.
(l) Debt. The Company shall not and shall not permit any Subsidiary to
create, incur, assume or suffer to exist any secured debt in excess of $5
million outstanding principal amount, excluding purchase money indebtedness for
office equipment or fixtures.
(m) Proceeds from Public Offering. The Company will apply, at the
request of Purchaser, the proceeds of a Public Offering to prepay the unpaid
principal amount and outstanding interest on the Debenture, to the extent that
proceeds are available after payment in full of any Senior Indebtedness (as
defined in Section 9.5).
SECTION 9
Subordination of Debentures
9.1 Subordinate to Senior Indebtedness. The Company agrees, and Purchaser
by its acceptance hereof likewise agrees, that the payment of the principal of
and interest on this Debenture is hereby expressly made subordinate and junior
in right of payment to the prior payment in full of all principal of and
interest on all Senior Indebtedness (as defined below) whether now outstanding
or hereafter incurred, created or assumed.
9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the
Company. In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection herewith, relative to the Company or to its creditors, as such, or to
its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be
entitled to receive payment in full of all principal and any interest on all
Senior Indebtedness before the Holder of this Debenture is entitled to receive
any payment on account of principal or interest upon this Debenture and to that
end (but subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of this
Section upon the Senior Indebtedness and the holders thereof with respect to
this Debenture and the Holder thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of the Senior Indebtedness shall be
entitled to receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash or property or securities
which may be payable or deliverable in any such proceedings in respect of this
Debenture.
9.3 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the
payment in full of all principal and interest on all Senior Indebtedness, the
Holder of this Debenture shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to the Senior Indebtedness.
9.4 No Payment on Debentures When Senior Indebtedness in Default. In the
event and during the continuation of any default in the payment of principal or
interest on any Senior Indebtedness beyond any applicable grace, notice or cure
period, or if any Event of Default (as defined in Section 7.1) with respect to
Senior Indebtedness shall have occurred and be continuing permitting the holders
of such Senior Indebtedness to accelerate the maturity thereof, unless and until
such default or Event of Default shall have been cured or waived or shall have
ceased to exist, then no payment of principal or interest shall be made by the
Company on this Debenture.
9.5 Definition of Senior Indebtedness. The term "Senior Indebtedness," as
used in this Agreement, shall mean the principal and interest on the following,
whether outstanding at the date of execution of this Agreement or thereafter
incurred, created, assumed, modified, renewed or extended: (w) indebtedness of
the Company for money borrowed (including the loan with Security Bank); (x) the
financial obligations of the Company to CenCor existing as of the date hereof
(which will be repaid in full and released at Closing); (y) obligations of the
Company as lessee under any lease of property which is reflected on the
Company's balance sheet as a capitalized lease in accordance with generally
accepted accounting principles ("GAAP"); and (z) guarantees by the Company of
indebtedness for money borrowed by a Subsidiary or of any obligations of a
Subsidiary under any lease of property which is reflected on the Subsidiary's
balance sheet as a capitalized lease in accordance with GAAP.
SECTION 10
Miscellaneous
10.1 Indemnification. The Company hereby agrees to indemnify, exonerate and
hold Purchaser and each of its partners, and their stockholders, officers,
directors, employees and agents free and harmless from and against any and all
actions, causes of action, suits, litigation, losses, liabilities and damages,
investigations or proceedings instituted by any governmental agency or any other
Person, and expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements, incurred by the indemnitee or any
of them as a result of, or arising out of, or relating to (a) any transaction
financed or to be financed in whole or in part directly or indirectly with
proceeds from the sale by the Company of any securities hereunder, or (b) the
execution, delivery, performance or enforcement of this Agreement or any
instrument contemplated hereby by any of the indemnitees, except in each such
case to the extent any such indemnified liabilities arise on account of such
indemnitee's gross negligence, willful misconduct or bad faith. Purchaser hereby
agrees to indemnify, exonerate and hold the Company and its stockholders,
officers, directors, employees and agents free and harmless from and against any
and all actions, causes of action, suits, litigation, losses, liabilities and
damages, investigations or proceedings instituted by any governmental agency or
any other Person, and expenses in connection therewith, including without
limitation reasonable attorneys' fees and disbursements, incurred by the
indemnitee or any of them as a result of, or arising out of, or relating to the
execution, delivery, performance or enforcement of this Agreement or any
instrument contemplated hereby by any of the indemnitees, except in each such
case to the extent any such indemnified liabilities arise on account of such
indemnitee's gross negligence, willful misconduct or bad faith.
10.2 No Waiver; Cumulative Remedies. No failure or delay on the part of any
party in exercising any right, power or remedy hereunder or thereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder or thereunder. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10.3 Amendments, Waiver and Consents. No amendment, modification or
addition to this Agreement, and no waiver of or consent to noncompliance with
any covenant or other provision of this Agreement, or the Debenture shall be
effective unless in writing and duly executed by the party against whom
enforcement of such amendment, modification, addition, waiver or consent is
sought. Any waiver or consent may be given subject to satisfaction of conditions
stated therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. In addition, no
amendment, modification or addition to this Agreement or the Debenture that is
material or affects the economic or subordination provisions hereof (but
excluding any postponement, delay or exercises of the Exercise Period of the
Warrants) shall be effective without the prior written consent of Security Bank
of Kansas City (for so long as such bank is a lender to the Company).
10.4 Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) if to the Company:
Concorde Career Colleges, Inc.
1100 Main Street
Suite 416
Kansas City, MO 64105
Facsimile No.: (816) 474-7610
Attn: Jack L. Brozman
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Facsimile No.: (913) 338-7777
Attn: Thomas W. Van Dyke
(b) if to Purchaser:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, MD 21202
Attn: David L. Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esq.
Facsimile No.: (410) 986-2828.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the affidavit of
messenger being deemed conclusive (but not exclusive) evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.
10.5 Costs and Expenses. The Company agrees to pay all Purchaser's
reasonable legal fees and expenses (incurred by Wilmer, Cutler & Pickering for
the period on or after February 10, 1997) in connection with the preparation,
execution and delivery of this Agreement, the Debenture, the Warrant and other
instruments and documents to be delivered hereunder.
10.6 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Purchaser. The parties hereto agree that the Warrant is attached to
the Debenture and the Warrant may not be assigned separately from the Debenture.
10.7 Survival of Representations and Warranties. All representations and
warranties made in this Agreement, the Debenture or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof until the payment in full of the
outstanding principal and accrued interest of the Debenture, except for those
representations and warranties of the Company made in the Preferred Agreement
and incorporated herein, which shall survive as provided in the Preferred
Agreement.
10.8 Prior Agreements. This Agreement, the Debenture, the Warrant, and the
instruments in documents referred to herein constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
10.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (excluding the choice of laws
provisions thereof).
10.10 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
10.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
10.12 Further Assurances. From and after the date of this Agreement, upon
the request of Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Debenture, the Debenture Shares and the other
agreements and instruments contemplated hereby.
[Balance of Page Left Blank Intentionally -- Signature
Page Follows]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first above written.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
-------------------------------------------
Name: Jack L. Brozman
Title: President and Chief Executive Officer
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P.,
-------------------------------------------
its General Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: a General Partner
Exhibit 9
SUBORDINATED DEBENTURE AND
WARRANT PURCHASE AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND BETWEEN
CONCORDE CAREER COLLEGES, INC.
AND
STRATEGIC ASSOCIATES, L.P.
SECTION 1
Authorization, Purchase and Sale 1
1.1 Authorization of the Debenture. 1
1.2 Authorization of the Warrant. 1
1.3 Purchase and Sale of Debenture 1
1.4 Issuance of Warrants. 2
SECTION 2
Certain Terms of the Debenture and Warrant 2
2.1 Certain Terms of the Debenture. 2
2.2 Certain Terms of the Warrants. 3
2.3 Replacement of Debenture or Warrant 3
2.4 Registration, etc. 3
SECTION 3
Conditions to Purchaser's Obligation 4
3.1 Preferred Stock Transfer. 4
3.2 Registration Rights Agreement. 4
3.3 Certificate that Representations True at
Closing. 4
3.4 Covenants of the Company. 4
3.5 No Injunction. 4
3.6 Approvals. 5
3.7 Opinion of Seller's Counsel. 5
SECTION 4
Conditions to Company's Obligations 5
4.1. Preferred Stock Transfer. 5
4.2 Certificate That Representations True at
Closing. 5
4.3 Covenants of Purchaser. 5
4.4 No Injunction. 5
4.5 Opinion of Purchaser's Counsel. 6
SECTION 5
Representations and Warranties of the Company 6
5.1 Authority; Validity. 6
5.2 No Conflicts. 6
5.3 Consents and Approvals. 6
5.4 Representations and Warranties Regarding the
Company. 6
5.5 Accuracy of Information. 7
SECTION 6
Representations and Warranties of Purchaser 7
6.1 Authority 7
6.2 No Conflicts. 7
6.3 Investment Representations. 7
SECTION 7
Events of Default 8
7.1 Events of Default. 8
7.2 Annulment of Defaults. 9
SECTION 8
Covenants of the Company 10
8.1 General Covenants of the Company. 10
SECTION 9
Subordination of Debentures 14
9.1 Subordinate to Senior Indebtedness. 14
9.2 Payment Over of Proceeds Upon Dissolution,
Liquidation,
Etc. of the Company. 14
9.3 Subrogation to Rights of Holders of Senior
Indebtedness. 14
9.4 No Payment on Debentures When Senior
Indebtedness in Default 14
9.5 Definition of Senior Indebtedness. 14
SECTION 10
Miscellaneous 15
10.1 Indemnification. 15
10.2 No Waiver; Cumulative Remedies. 15
10.3 Amendments, Waiver and Consents 15
10.4 Notices. 16
10.5 Costs and Expenses. 17
10.6 Binding Effect; Assignment. 17
10.7 Survival of Representations and Warranties 17
10.8 Prior Agreements 17
10.9 Governing Law. 17
10.10 Headings 17
10.11 Counterparts 18
10.12 Further Assurances 18
SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT
THIS SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT (the "Debenture
Agreement") is made as of February 25, 1997, by and between CONCORDE CAREER
COLLEGES, INC., a Delaware corporation (the "Company") and STRATEGIC ASSOCIATES,
L.P., a limited partnership organized under the laws of the State of Delaware
(the "Purchaser").
WHEREAS, the Company has agreed to issue 52,252 shares of the Company's
Class B Voting Convertible Preferred Stock, par value $0.10 per share, to the
Purchaser pursuant to the Convertible Preferred Stock Purchase Agreement, of
even date herewith, between the Company and Purchaser (the "Preferred
Agreement");
WHEREAS, the Company wishes to sell to Purchaser, and Purchaser wishes to
purchase from the Company, the Company's Debenture and non-detachable Warrant;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereby agree as follows:
SECTION 1
Authorization, Purchase and Sale
of Debenture; Issuance of Warrant
1.1 Authorization of the Debenture. The Company has authorized the issuance
and sale to Purchaser of the Company's Debenture in the original principal
amount of One Hundred Eighty Three Thousand Seven Hundred Fifty Dollars
($183,750). Such Debenture shall be substantially in the form set forth as
Exhibit 1.1 (the "Debenture"). The Debenture shall be repayable at the times and
under the terms and conditions specified therein.
1.2 Authorization of the Warrant. The Company has authorized the issuance
of a Warrant as part of the consideration for the loan evidenced by the
Debenture. The Warrant entitles Purchaser to purchase an aggregate of 135,110
shares of the Company's Common Stock, at an exercise price of $1.36 per share,
subject to any adjustment as set forth in Section 3.3 of the Warrant. The
Warrant shall be substantially in the form set forth as Exhibit 1.2 (the
"Warrant"). The Company has reserved a sufficient number of shares of Common
Stock for issuance upon exercise of the Warrant. (The shares of Common Stock
issuable upon exercise of the Warrant are referred to as the "Warrant Shares.")
1.3 Purchase and Sale of Debenture.
(a) The Closing. The Company agrees to issue and sell to Purchaser,
and subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, Purchaser agrees to purchase, the Debenture for
the purchase price (the "Purchase Price") of One Hundred Eighty Three Thousand
Seven Hundred Fifty Dollars ($183,750). Such purchase and sale shall take place
at a closing (the "Closing") to be held by exchange of documents on February 25,
1997, or on such other date as may be mutually agreed, at the offices of Bryan
Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri (the date of
such Closing is the "Closing Date"). At the Closing, the Company will issue to
Purchaser the Debenture. At the Closing, Purchaser will deliver to the Company,
by wire transfer of immediately available funds to an account designated by the
Company by written notice to Purchaser, the Purchase Price.
(b) Use of Proceeds. The Company agrees to use the full proceeds, to
the extent required, from the sale of the Debenture to settle, redeem, and
release its financial obligations to CenCor, Inc. ("CenCor"), pursuant to the
Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated
December 30, 1996, by and among CenCor, the Company and certain of the Company's
affiliates (the "CenCor Obligations").
1.4 Issuance of Warrants. At the Closing, the Company agrees to issue to
Purchaser, as part of the consideration for the loan evidenced by the Debenture,
the Warrant substantially in the form as set forth in Exhibit 1.2.
SECTION 2
Certain Terms of the Debenture and Warrant
2.1 Certain Terms of the Debenture. All principal, interest and amounts
outstanding under the Debenture shall be due and payable in full on February 25,
2003. The Debenture shall bear interest at an annual rate of five percent (5%).
Accrued and unpaid interest shall be due and payable quarterly in arrears on
February 28, May 31, August 31, and November 30 of each year until maturity. The
Debenture may be prepaid or redeemed, in whole or in part, by the Company prior
to maturity, without penalty, with twenty (20) days prior written notice thereof
to the Purchaser. In the event that the Company consummates an underwritten
registered public offering covering the offer and sale of Common Stock for the
account of the Company in which net proceeds to the Company of the public
offering equals or exceeds $15 million (a "Public Offering"), then the Company
must apply, at the request of Purchaser, the proceeds of such Public Offering
(to the extent available after payment of all Senior Indebtedness (as defined in
Section 9.5)) to prepay the unpaid principal amount and outstanding interest on
the Debenture. Payments of principal and interest on the Debenture shall be made
directly by wire transfer to an account designated by Purchaser by written
notice to the Company or by check duly mailed or delivered to Purchaser at its
address set forth in Section 8.4 of the Agreement. The Debenture (and any rights
of the Purchaser hereunder or related thereto) is non-transferable except to a
person or entity controlled by, or under common control with, Purchaser. No
sinking fund or similar provision shall be required to fund payment of principal
or interest under the Debenture. Payment of principal and interest on the
Debenture is unsecured.
2.2 Certain Terms of the Warrants. The Warrant shall initially be
exercisable into 135,110 shares of Common Stock. The Warrant shall initially be
exercisable at any time between August 25, 1998 and February 25, 2003, subject
to earlier termination upon redemption of the Debenture (the "Exercise Period").
The Warrant entitles Holder to purchase an aggregate of 135,110 shares of the
Company's Common Stock, at an exercise price ("Exercise Price") of $1.36 per
share, subject to any adjustments as set forth in Section 3.3 of the Warrant.
During the Exercise Period, in the event that Holder fails to exercise this
Warrant after the Company has provided Holder (i) twenty (20) days prior written
notice of its intention to pay in full and redeem the Debenture on a particular
date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date
within which to exercise this Warrant, then this Warrant shall terminate and
thereafter be null and void. Notwithstanding the preceding sentence, in the
event that the Company repays and redeems the Debenture in full on or before
August 25, 1998, this Warrant shall remain in full force and effect until
September 25, 1998, when it shall then expire. The Warrant may be exercised in
whole or in part by payment in cash, bank cashier's check, certified check, or,
at the option of Purchaser, by reduction in the principal amount of the
Debenture (or forgiveness of any accrued and unpaid interest thereon), in an
amount equal to the exercise price with respect to the Warrant being exercised.
The Warrant shall have an initial exercise price of $1.36 per share of Common
Stock.
2.3 Replacement of Debenture or Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Debenture or Warrant and, if requested in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond or other agreement or security
reasonably satisfactory to the Company, or, in the case of any such mutilation,
upon surrender and cancellation of such Debenture or Warrant, the Company will
issue a new Debenture or Warrant, of like tenor and amount, in lieu of such
lost, stolen, destroyed or mutilated Debenture or Warrant; provided, however, if
any Debenture or Warrant of which Purchaser, its nominee, or any of its
partners, officers or principals is the registered holder is lost, stolen or
destroyed, the affidavit of such principal or general partner or any principal
or corporate officer of such holder setting forth the circumstances with respect
to such loss, theft or destruction, together with an agreement to indemnify the
Company with respect thereto shall be accepted as satisfactory evidence thereof,
and no bond or other security shall be required as a condition to the execution
and delivery by the Company of a new Debenture or Warrant in replacement of such
lost, stolen or destroyed Debenture or Warrant.
2.4 Registration, etc. The Company shall maintain at its principal office a
register with respect to the Debenture and Warrant and shall record therein the
name(s) and address(es) of the respective registered holder(s) thereof, to which
notices are to be sent and the address(es) to which payments (in the case of the
Debenture) are to be made as designated by the registered holder if other than
the address of such holder, and the particulars of all permitted transfers,
exchanges and replacements of the Debenture and Warrant. Provided that such
transfer is permitted herein, the Company shall record on such register any and
all transfers of the Debenture and Warrant by or for the registered holder or
such holder's executors or administrators or their duly appointed attorney, in
form reasonably satisfactory to the Company, in order to maintain an accurate
record of the holder(s) thereof. Each Debenture and Warrant issued hereunder,
whether originally or upon transfer, exchange or replacement, shall be
registered on the date of execution thereof by the Company. The registered
holder of a Debenture and Warrant issued hereunder shall be that individual,
corporation, partnership, joint venture, trust or unincorporated organization or
other entity (a "Person") in whose name the Debenture and Warrant has been so
registered by the Company. A registered holder shall be deemed the owner of a
Debenture or Warrant for all purposes of this Agreement and, subject to the
provisions hereof, shall be entitled to all of the benefits thereof and rights
thereunder free from all equities or rights of set off or counterclaim between
the Company and the transferor of such registered holder or any previous
registered holder of such Debenture or Warrant.
SECTION 3
Conditions to Purchaser's Obligation
The obligation of Purchaser to purchase and pay for the Debenture at the
Closing is subject to the following conditions, which may be waived by Purchaser
at its sole discretion:
3.1 Preferred Stock Transfer. The Preferred Agreement between the Company
and Purchaser shall have been fully executed and the closing of the transactions
provided for therein, including but not limited to the execution of the
Stockholders' Agreement, of even date herewith, by and among the Company, the
Purchaser and other stockholders (the "Stockholders' Agreement"), shall have
closed and be complete prior to or simultaneously with the issuance of the
Debenture and payment therefor.
3.2 Registration Rights Agreement. The Company and Purchaser shall have
entered into the Registration Rights Agreement substantially in the form set
forth as Exhibit 3.2 hereto.
3.3 Certificate that Representations True at Closing. Purchaser shall have
received the executed certificate of an executive officer of the Company to the
effect that each of the Company's representations and warranties herein and in
any document or instrument delivered to Purchaser hereunder shall be true and
correct on the Closing Date with the same force and effect as though such
representations and warranties had been made again on and as of such time.
3.4 Covenants of the Company. The Company shall have duly performed all of
the covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, including but not limited to the closing deliveries required of
it.
3.5 No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of the business of the Company, if such action,
proceeding, investigation, regulation or legislation, in the reasonable judgment
of Purchaser, would make it inadvisable to consummate such transactions.
3.6 Approvals. The execution and the delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been approved by
all regulatory authorities whose approvals are
required by law and by all third parties whose approvals are required by an
agreement binding upon the Company. It is acknowledged by all parties that the
approval of the Department of Education is not required to close this
transaction.
3.7 Opinion of Seller's Counsel. Purchaser shall have received from Bryan
Cave, LLP, counsel to the Company, an opinion addressed to Purchaser, dated the
Closing Date, in substantially the form of Exhibit A hereto.
SECTION 4
Conditions to Company's Obligations
The obligation of the Company to issue and sell the Debenture at the
Closing is subject to the following conditions, which may be waived by the
Company at its sole discretion:
4.1. Preferred Stock Transfer. The Preferred Agreement between the Company
and Purchaser shall have been fully executed and the closing of the transactions
provided for therein, including but not limited to the execution of the
Stockholders' Agreement, of even date herewith, by and among the Company, the
Purchaser and other stockholders (the "Stockholders' Agreement"), shall have
closed and be complete prior to or simultaneously with the issuance of the
Debenture and payment therefor.
4.2 Certificate That Representations True at Closing. The Company shall
have received the executed certificate of the Purchaser to the effect that each
of the Purchaser's representations and warranties herein and in any document or
instrument delivered to the Company hereunder shall be true and correct on the
Closing Date with the same force and effect as though such representations and
warranties had been made again on and as of such time.
4.3 Covenants of Purchaser. Purchaser shall have duly performed all of the
covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, including but not limited to the closing deliveries required of
it.
4.4 No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of the business of Purchaser, if such action,
proceeding, investigation, regulation or legislation, in the reasonable judgment
of Company, would make it inadvisable to consummate such transactions.
4.5 Opinion of Purchaser's Counsel. Purchaser shall have received from
Wilmer, Cutler & Pickering, counsel to Purchaser, an opinion addressed to the
Company, dated the Closing Date, in substantially the form of Exhibit B hereto.
SECTION 5
Representations and Warranties of the Company
The Company hereby represents and warrants to Purchaser as follows:
5.1 Authority; Validity. The Company has the full legal right, power and
authority to enter into this Agreement and to issue the Debenture and Warrant in
accordance with the terms of this Agreement. This Agreement has been duly and
validly executed by the Company and this Agreement, the Debenture and Warrant
constitute legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that rights to indemnification and contribution under this
Agreement may be limited by federal or state securities laws or public policy
thereto.
5.2 No Conflicts. Subject to the repayment and satisfaction of the CenCor
obligations, the execution, delivery and performance of this Agreement, the
Debenture and Warrant and the consummation of the transactions by the Company
contemplated hereby and thereby will not conflict with, violate or result in a
breach or constitute a default under any mortgage, indenture, loan agreement or
other agreement or instrument binding upon the Company, or any order, decree,
statute, ordinance, regulation or other law applicable to the Company.
5.3 Consents and Approvals. Subject to the repayment and satisfaction of
the CenCor obligations, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or any
third party is required in connection with the execution, delivery and
performance of this Agreement, the Debenture and Warrant by the Company and the
consummation of the transactions by the Company hereunder.
5.4 Representations and Warranties Regarding the Company. In order to
induce the Purchasers to enter into this Agreement, the Company hereby
represents and warrants that each of the representations and warranties
regarding the Company set forth in Section 4 of the Preferred Agreement is true,
complete and accurate in all material respects.
5.5 Accuracy of Information. To the knowledge of the executive officers of
the Company, none of this Agreement, the Debenture, the Warrant nor any
certificate, instrument or other agreement (including, but not limited to, the
Preferred Agreement and Stockholders' Agreement) furnished or to be furnished by
or on behalf of the Company, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
SECTION 6
Representations and Warranties of Purchaser
6.1 Authority. Purchaser is duly organized and validly existing and has the
full legal right, power and authority to enter into this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by the
Purchaser and constitutes a valid and binding obligation of Purchaser,
enforceable in accordance with its terms.
6.2 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions by Purchaser contemplated hereby will
not conflict with, violate or result in a breach or constitute a default under,
any mortgage, indenture, loan agreement or other agreement or instrument, or any
order, decree, statute, ordinance, regulation or other law applicable to the
Purchaser.
6.3 Investment Representations. Purchaser hereby represents and warrants to
the Company as follows:
(a) It is acquiring the Debenture and the Warrant for its own account
for investment, and not with a view to the distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act");
(b) It is an "Accredited Investor" as defined under
the Securities Act;
(c) It is aware and it acknowledges that neither the Debenture nor the
Warrant is registered under the Securities Act or any state securities laws, and
that the Debenture and the Warrant are each subject to certain restrictions on
the subsequent transfer and/or sale thereof; and
(d) It is not acquiring the Debenture or the Warrant for purposes of
acquiring or changing "control" (as defined under Rule 405 of the Securities
Exchange Act of 1934, as amended) of the Company.
SECTION 7
Events of Default
7.1 Events of Default. For so long as any indebtedness under the Debenture
shall be outstanding, the following events shall constitute an event of default
hereunder ("Events of Default"):
(a) The Company shall fail to pay any installment of principal of or
interest on the Debenture when due and any such failure shall not be cured by
full performance thereof within ten (10) days after written notice thereof shall
have been given to the Company by any registered holder of the Debenture; or
(b) The Company shall default in the performance of any covenant
contained in Section 7 of this Agreement, any covenant set forth in the
Preferred Agreement, or any covenant in the Stockholders' Agreement, and any
such failure shall not be cured by full performance thereof within ten (10) days
after written notice thereof shall have been given to the Company by any
registered holder of the Debenture; or
(c) Any representation or warranty made by the Company or any
Subsidiary in this Agreement or by the Company or any Subsidiary (or any
officers of the Company or any Subsidiary) in any certificate, instrument or
written statement contemplated by or made or delivered pursuant to or in
connection with this Agreement, the Preferred Agreement, or the Stockholders'
Agreement, shall prove to have been incorrect when made in any material respect;
or
(d) The Company or any Subsidiary shall fail to perform or observe any
other term, covenant or agreement contained in the Preferred Agreement, the
Stockholders' Agreement, the Debenture, or Warrant on its part to be performed
or observed and any such failure shall not be cured or by full performance
thereof within ten (10) days after written notice thereof shall have been given
to the Company by any registered holder of the Debenture; or
(e) The Company or any Subsidiary shall (i) admit in writing its
inability to pay its debts generally as they become due; (ii) commence a
voluntary case under Title 11 of the United States Code as from time to time in
effect, or authorize, by appropriate proceedings of its Board of Directors or
other governing body, the commencement of such a voluntary case; (iii) file an
answer or other pleading omitting or failing to deny the material allegations of
a petition filed against it commencing an involuntary case under such Title 11,
or seek, consent to or acquiesce in the relief therein provided, or fail to
controvert timely the material allegations of any such petition; (iv) suffer the
entry of an order for relief in any involuntary case commenced under said Title
11; (v) seek relief as a debtor under any applicable law, other than said Title
11, of any jurisdiction relating to the liquidation or reorganization of debtors
or to the modification or alteration of the rights of creditors, or consent to
or acquiesce in such relief; (vi) suffer the entry of an order by a court of
competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering
or approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (C) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property (not
otherwise covered by subsection (f) below); or (vii) make an assignment for the
benefit of, or enter into a composition with, its creditors, or appoint or
consent to the appointment of a receiver or other custodian or all or a
substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against the property of the Company or any
Subsidiary in an aggregate amount which exceeds $2,500,000 and such judgment,
writ, or similar process shall not be released, vacated or fully bonded or
stayed pending appeal within sixty (60) days after its issue or levy; or
(g) The Company fails to prepay the unpaid principal amount of the
Debenture and outstanding interest thereon in the event of a Public Offering to
the extent available after payment of all Senior Indebtedness.
Upon the occurrence of any Event of Default, and in any such event, Purchaser or
any other holder of any Debenture may, by notice to the Company, declare the
entire unpaid principal amount of such Debenture, all interest accrued and
unpaid thereon and all other amounts payable to such holder under such Debenture
or this Agreement to be forthwith due and payable, whereupon such Debenture, all
such accrued interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under Section
6.1(e) in which case all such accounts shall automatically become due and
payable without such declaration), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company with respect to itself and its Subsidiaries. Upon the occurrence of any
Event of Default, the Warrant shall immediately become exercisable, at the
option of the Holder, for that number of shares of Common Stock issuable upon
exercise of the Warrant.
7.2 Annulment of Defaults. Section 7.1 is subject to the condition that, if
at any time after the principal of any Debenture shall have become due and
payable, and before any judgment or decree for the payment of the moneys so due
shall have been entered, all arrears of interest upon such Debenture and all
other sums payable to the holder of such Debenture under or such Debenture and
under this Agreement (except the principal amount which by such declaration
shall have become payable) shall have been duly paid, and every other default
and Event of Default shall have been made good or cured, then and in every such
case the holder of such Debenture, by written instrument delivered to the
Company, may rescind and annul such declaration and its consequences; but no
such rescission or annulment shall extend to or affect any other or subsequent
default or Event of Default or impair any right of the holders of any other
Debenture consequent thereon.
SECTION 8
Covenants of the Company
8.1 General Covenants of the Company. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that, as long as any of
the Debenture is outstanding, it will perform and observe the following
covenants and provisions and will cause each Subsidiary to perform and observe
such of the following covenants and provisions as are applicable to such
Subsidiary:
(a) Punctual Payment. The Company shall pay the principal of and interest
on the Debenture at the times and place and in the manner provided in the
Debenture and herein.
(b) Payment of Taxes. The Company shall pay and discharge, and cause each
Subsidiary to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed on it or upon its income or profits or
business, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might likely
(in the Company's opinion) become a lien or charge upon any properties of the
Company or any Subsidiary, provided that neither the Company nor the Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested and/or negotiated in good faith and by appropriate
proceedings if the Company or Subsidiary concerned shall have set aside on its
books adequate (in the Company's opinion) reserves with respect thereto. The
Company shall pay, when due, or in conformity with customary trade terms, all
material lease obligations, all material trade debt, and all other material
indebtedness incident to the operations of the Company, except such as are being
contested in good faith and by appropriate proceedings if the Company shall have
set aside on its books adequate reserves with respect thereto.
(c) Maintenance of Insurance. The Company shall maintain, and cause each
Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Company or such Subsidiary operates.
(d) Preservation of Corporate Existence. The Company shall preserve and
maintain, and cause each Subsidiary to preserve and maintain, its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each Subsidiary to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business and
operations or the ownership of its properties; the Company shall preserve and
maintain, and cause each Subsidiary to preserve and maintain, all licenses and
other rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or used by and
necessary to the conduct of its business; provided, however, that the Company
shall not be required to preserve any such Subsidiary, license or right if the
Board of Directors shall determine that the preservation is no longer desirable
in the conduct of the Company's business and that the loss thereof is not, and
will not be, adverse in any material respect to the holder of the Debenture.
(e) Compliance with Laws. The Company shall use its best efforts to comply,
and cause each Subsidiary to comply, with all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with which
could materially adversely affect its business or condition, financial or
otherwise.
(f) Access to Information. In the Event of a Default (as defined in Section
7.1 above), the Company shall permit Purchaser or any representatives thereof,
at any reasonable time and from time to time, to receive, to examine and make
copies of and extract from the records and books of account of (including, but
not limited to unaudited balance sheets of the Company as at the end of each
month and unaudited statements of income and of cash flows of the Company for
each month and for the current fiscal year to the end of each month, setting
forth in comparative form the Company's budget for the corresponding periods for
the current fiscal year, all in reasonable detail and duly certified by the
chief financial officer of the Company as having been prepared in accordance
with generally accepted accounting principles consistently applied), and visit
and inspect the properties of, the Company and any Subsidiary, and to discuss
the affairs, finances and accounts of the Company and any Subsidiary with any of
their officers or directors and independent accountants. Purchaser agrees and
acknowledges that, upon access to and receipt of such information, it shall keep
such information confidential and that such information may constitute
proprietary information and/or trade secrets of the Company.
(g) Keeping of Records and Books of Account. The Company shall keep, and
cause each Subsidiary to keep, adequate records and books of account, in which
complete entries shall be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Company and such Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
(h) Maintenance of Properties, etc. The Company shall maintain and
preserve, and cause each Subsidiary to maintain and preserve, all of its
properties, necessary or useful in the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted, except as
otherwise determined by the Board of Directors.
(i) Compliance with ERISA. The Company shall use its best efforts to
comply, and cause each Subsidiary to comply, with the provisions of ERISA and
the Code, and the rules and regulations thereunder, which are applicable to any
Plan. Neither the Company nor any Subsidiary shall permit any event or condition
it knows to exist which would likely permit any such plan to be terminated under
circumstances which would cause the lien provided for in Section 4068 of ERISA
to attach to the assets of the Company or any Subsidiary.
(j) Dealings with Affiliates. Except for employee or director compensation,
stock bonus, stock option or similar plans or arrangements approved by the Board
of Directors, the Company will not enter or permit any Subsidiary to enter into
any transaction with any holder of five percent (5%) or more of any class of
capital stock of the Company, or any member of their families or any corporation
or other entity in which any one or more of such stockholders or members of
their immediate families directly or indirectly holds five percent (5%) or more
of any class of capital stock except in the ordinary course of business and on
terms not less favorable to the Company or the Subsidiary than it would obtain
in a transaction between unrelated parties.
(k) SEC Reports. The Company shall file all reports and other information
and documents which it is required to file with the Securities and Exchange
Commission ("SEC") pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"). The Company will cause
any quarterly and annual reports, proxy statements and any other documents which
it mails to its stockholders to be mailed to the registered holder of the
Debenture.
If the Company is not subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company will prepare, for the first three
quarters of each fiscal year, quarterly financial statements substantially
equivalent to the financial statements required to be included in a report on
Form 10-Q under the Exchange Act. The Company will also prepare, on an annual
basis, complete audited consolidated financial statements, including, but not
limited to, a balance sheet, a statement of income and retained earnings, a
statement of changes in financial position and all appropriate notes. All such
financial statements will be prepared in accordance with generally accepted
accounting principles consistently applied, except for changes with which the
Company's independent accountants concur, and except that quarterly statements
may be subject to year-end adjustments. The Company will cause a copy of such
financial statements to be mailed to the registered holder of the Debenture as
soon as available within sixty (60) days after the close of each of the first
three quarters of each fiscal year and within one hundred twenty (120) days
after the close of each fiscal year.
The holder of the Debenture and prospective purchasers designated by such
holder will have the right to obtain from the Company upon request by such
holder or prospective purchasers, during any period in which the Company is not
subject to Section 13 or 15(d) of the Exchange Act, the information required by
paragraph d (4)(i) of Rule 144A under the Securities Act.
(l) Debt. The Company shall not and shall not permit any Subsidiary to
create, incur, assume or suffer to exist any secured debt in excess of $5
million outstanding principal amount, excluding purchase money indebtedness for
office equipment or fixtures.
(m) Proceeds from Public Offering. The Company will apply, at the request
of Purchaser, the proceeds of a Public Offering to prepay the unpaid principal
amount and outstanding interest on the Debenture, to the extent that proceeds
are available after payment in full of any Senior Indebtedness (as defined in
Section 9.5).
SECTION 9
Subordination of Debentures
9.1 Subordinate to Senior Indebtedness. The Company agrees, and Purchaser
by its acceptance hereof likewise agrees, that the payment of the principal of
and interest on this Debenture is hereby expressly made subordinate and junior
in right of payment to the prior payment in full of all principal of and
interest on all Senior Indebtedness (as defined below) whether now outstanding
or hereafter incurred, created or assumed.
9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the
Company. In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection herewith, relative to the Company or to its creditors, as such, or to
its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether or not involving
insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be
entitled to receive payment in full of all principal and any interest on all
Senior Indebtedness before the Holder of this Debenture is entitled to receive
any payment on account of principal or interest upon this Debenture and to that
end (but subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of this
Section upon the Senior Indebtedness and the holders thereof with respect to
this Debenture and the Holder thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of the Senior Indebtedness shall be
entitled to receive for application in payment thereof any payment or
distribution of any kind
or character, whether in cash or property or securities which may be payable or
deliverable in any such proceedings in respect of this Debenture.
9.3 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the
payment in full of all principal and interest on all Senior Indebtedness, the
Holder of this Debenture shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to the Senior Indebtedness.
9.4 No Payment on Debentures When Senior Indebtedness in Default. In the
event and during the continuation of any default in the payment of principal or
interest on any Senior Indebtedness beyond any applicable grace, notice or cure
period, or if any Event of Default (as defined in Section 7.1) with respect to
Senior Indebtedness shall have occurred and be continuing permitting the holders
of such Senior Indebtedness to accelerate the maturity thereof, unless and until
such default or Event of Default shall have been cured or waived or shall have
ceased to exist, then no payment of principal or interest shall be made by the
Company on this Debenture.
9.5 Definition of Senior Indebtedness. The term "Senior Indebtedness," as
used in this Agreement, shall mean the principal and interest on the following,
whether outstanding at the date of execution of this Agreement or thereafter
incurred, created, assumed, modified, renewed or extended: (w) indebtedness of
the Company for money borrowed (including the loan with Security Bank); (x) the
financial obligations of the Company to CenCor existing as of the date hereof
(which will be repaid in full and released at Closing); (y) obligations of the
Company as lessee under any lease of property which is reflected on the
Company's balance sheet as a capitalized lease in accordance with generally
accepted accounting principles ("GAAP"); and (z) guarantees by the Company of
indebtedness for money borrowed by a Subsidiary or of any obligations of a
Subsidiary under any lease of property which is reflected on the Subsidiary's
balance sheet as a capitalized lease in accordance with GAAP.
SECTION 10
Miscellaneous
10.1 Indemnification. The Company hereby agrees to indemnify, exonerate and
hold Purchaser and each of its partners, and their stockholders, officers,
directors, employees and agents free and harmless from and against any and all
actions, causes of action, suits, litigation, losses, liabilities and damages,
investigations or proceedings instituted by any governmental agency or any other
Person, and expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements, incurred by the indemnitee or any
of them as a result of, or arising out of, or relating to (a) any transaction
financed or to be financed in whole or in part directly or indirectly with
proceeds from the sale by the Company of any securities hereunder, or (b) the
execution, delivery, performance or enforcement of this Agreement or any
instrument contemplated hereby by any of the indemnitees, except in each such
case to the extent any such indemnified liabilities arise on account of such
indemnitee's gross negligence, willful misconduct or bad faith. Purchaser hereby
agrees to indemnify, exonerate and hold the Company and its stockholders,
officers, directors, employees and agents free and harmless from and against any
and all actions, causes of action, suits, litigation, losses, liabilities and
damages, investigations or proceedings instituted by any governmental agency or
any other Person, and expenses in connection therewith, including without
limitation reasonable attorneys' fees and disbursements, incurred by the
indemnitee or any of them as a result of, or arising out of, or relating to the
execution, delivery, performance or enforcement of this Agreement or any
instrument contemplated hereby by any of the indemnitees, except in each such
case to the extent any such indemnified liabilities arise on account of such
indemnitee's gross negligence, willful misconduct or bad faith.
10.2 No Waiver; Cumulative Remedies. No failure or delay on the part of any
party in exercising any right, power or remedy hereunder or thereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any
other right, power or remedy hereunder or thereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
10.3 Amendments, Waiver and Consents. No amendment, modification or
addition to this Agreement, and no waiver of or consent to noncompliance with
any covenant or other provision of this Agreement, or the Debenture shall be
effective unless in writing and duly executed by the party against whom
enforcement of such amendment, modification, addition, waiver or consent is
sought. Any waiver or consent may be given subject to satisfaction of conditions
stated therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. In addition, no
amendment, modification or addition to this Agreement or the Debenture that is
material or affects the economic or subordination provisions hereof (but
excluding any postponement, delay or extensions of the Exercise Period of the
Warrants) shall be effective without the prior written consent of Security Bank
of Kansas City (for so long as such bank is a lender to the Company).
10.4 Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) if to the Company:
Concorde Career Colleges, Inc.
1100 Main Street
Suite 416
Kansas City, MO 64105
Facsimile No.: (816) 474-7610
Attn: Jack L. Brozman
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Facsimile No.: (913) 338-7777
Attn: Thomas W. Van Dyke
(b) if to Purchaser:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, MD 21202
Attn: David L. Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esq.
Facsimile No.: (410) 986-2828.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which
shall be mailed, delivered or transmitted in the manner described above shall be
deemed sufficiently given, served, sent and received for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger being deemed conclusive (but not exclusive)
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
10.5 Costs and Expenses. The Company agrees to pay all Purchaser's
reasonable legal fees and expenses (incurred by Wilmer, Cutler & Pickering for
the period on or after February 10, 1997) in connection with the preparation,
execution and delivery of this Agreement, the Debenture, the Warrant and other
instruments and documents to be delivered hereunder.
10.6 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Purchaser. The parties hereto agree that the Warrant is attached to
the Debenture and the Warrant may not be assigned separately from the Debenture.
10.7 Survival of Representations and Warranties. All representations and
warranties made in this Agreement, the Debenture or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof until the payment in full of the
outstanding principal and accrued interest of the Debenture, except for those
representations and warranties of the Company made in the Preferred Agreement
and incorporated herein, which shall survive as provided in the Preferred
Agreement.
10.8 Prior Agreements. This Agreement, the Debenture, the Warrant, and the
instruments in documents referred to herein constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
10.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (excluding the choice of laws
provisions thereof).
10.10 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
10.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
10.12 Further Assurances. From and after the date of this Agreement, upon
the request of Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Debenture, the Debenture Shares and the other
agreements and instruments contemplated hereby.
[Balance of Page Left Blank Intentionally -- Signature Page
Follows]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first above written.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
-------------------------------------------
Name: Jack L. Brozman
Title: President and Chief Executive Officer
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC
its General Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: Managing Member
Exhibit 10
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONCORDE
CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
WARRANT TO ACQUIRE SHARES OF
COMMON STOCK OF
CONCORDE CAREER COLLEGES, INC.
February 25, 1997
THIS CERTIFIES THAT CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
("Holder"), for value received, or its registered assigns, is entitled to
purchase, on the terms and subject to the conditions hereinafter set forth, from
CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), at any
time after August 25, 1998 and on or before February 25, 2003, subject to
earlier termination (the "Exercise Period"), that number of shares (the "Warrant
Shares") of common stock, par value $.10 per share, of the Company (the "Common
Stock"), as set forth in Section 2.1 hereof.
SECTION 1
Exercise Price
The exercise price at which this Warrant may be exercised shall be
$1.36 per share of Common Stock (the "Exercise Price"), subject to any
adjustment pursuant to Section 3.3.
SECTION 2
Exercise of Warrant, Etc.
2.1 Number of Shares for Which Warrant is Exercisable. This Warrant shall
be exercisable for 2,438,419 shares of Common Stock, subject to any adjustment
pursuant to Section 3.3.
2.2 Procedure for Exercise of Warrant. The Warrant may be exercised in
whole or in part during the Exercise Period by surrendering this Warrant, with
the purchase form provided for herein duly executed by Holder or by Holder's
duly authorized attorney-in-fact, at the principal office of the Company or at
such other office or agency in the United States as the Company may designate by
notice in writing to the Holder accompanied by payment in full, in cash, bank
cashier's check or certified check payable to the order of the Company, of the
Exercise Price payable in respect of the Warrant Shares being exercised. In
addition to payments of the Exercise Price by cash or said checks, payment of
the Exercise Price with respect to the Warrants being exercised may be made, at
the option of the Holder, by the reduction in the principal amount of the
Debenture (the "Debenture") issued to the Holder pursuant to the Debenture
Purchase Agreement, dated as of February 25, 1997, by and between the Company
and the Holder (the "Debenture Purchase Agreement") (or forgiveness of any
accrued and unpaid interest thereon, whether or not payment of such interest has
been suspended pursuant to the provisions of such
Debenture), even during a period in which an Event of Default (as defined in the
Debenture Purchase Agreement) has occurred and is continuing under such
Debenture, in an amount equal to the Exercise Price with respect to the Warrant
being exercised; and in such a case, this Warrant shall be accompanied by said
Debenture (with the purchase form duly executed) which shall be substituted and
replaced by a new Debenture identical in form and content to the original
Debenture except that principal amount shall be appropriately reduced to reflect
the reduction in the principal amount applicable to the payment of the Exercise
Price with respect to the Warrant being exercised. If fewer than all of the
Warrant Shares are being exercised, the Company shall, upon exercise prior to
the end of the Expiration Period, execute and deliver to the Holder a new
certificate (dated the date hereof) evidencing the balance of the Warrant Shares
that remain exercisable.
2.3 Conversion.
(a) On or after August 25, 1998, in the event that the Company
consummates a firm-commitment underwritten public offering pursuant to an
effective registration statement under the Act covering the offer and sale of
Common Stock for the account of the Company in which (i) the net proceeds of the
public offering price equals or exceeds $20 million and (ii) the public offering
price per share of Common Stock equals or exceeds $4.00, then this Warrant shall
become mandatorily exercisable within six (6) months for that number of shares
of Common Stock issuable upon exercise of the Warrant.
(b) In the Event of Default (as defined in the Debenture Purchase
Agreement), then this Warrant shall immediately become exercisable, at the
option of the Holder, for that number of shares of Common Stock issuable upon
exercise of the Warrant.
2.4 Transfer Restriction Legend. Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Act, shall bear the following
legend (and any additional legend required by any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered,
sold or transferred only if registered pursuant to the provisions of such
laws, or if in the opinion of counsel satisfactory to the Company, an
exemption from such registration is available."
2.5 Acknowledgment of Continuing Obligation. The Company will, if
Holder exercises this Warrant in part, upon request of the Holder, acknowledge
in writing the Company's continuing obligation to the Holder in respect of any
rights to which the Holder shall continue to be entitled after such exercise in
accordance with this Warrant, provided, that the failure of the Holder to make
any such request shall not affect the continuing obligation of the Company to
the Holder in respect of such rights.
2.6 Exercise Period. The Company and Purchaser agree to negotiate in
good faith to modify or extend the Exercise Period in the event that either the
Company or Purchaser deems it appropriate to modify or extend such Exercise
Period.
2.7 Termination of Warrant. During the Exercise Period, in the event
that Holder fails to exercise this Warrant after the Company has provided Holder
(i) twenty (20) days prior written notice of its intention to pay in full and
redeem the Debenture on a particular date (the "Repayment Date"), and (ii)
thirty (30) days after the Redemption Date within which to exercise this
Warrant, then this Warrant shall terminate and thereafter be null and void.
Notwithstanding the preceding sentence, in the event that the Company repays and
redeems the Debenture in full on or before August 25, 1998, this Warrant shall
remain in full force and effect until September 25, 1998, when it shall expire.
SECTION 3
Ownership of this Warrant.
3.1 Deemed Holder. The Company may deem and treat the person in whose
name this Warrant is registered as the Holder and owner hereof (notwithstanding
any notations of ownership or writing hereon made by anyone other than the
Company) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Warrant for registration of transfer as
provided in this Section 3.
3.2 Exchange, Transfer and Replacement. This Warrant is non-detachable
from the Debenture and may not be transferred, assigned, sold, pledged or
otherwise hypothecated ("Transferred") except with the Debenture, and if so
Transferred, then only as permitted under the terms and conditions of the
Debenture and the Debenture Purchase Agreement; provided, however, that if the
Company repays and redeems the Debenture in full on or before August 25, 1998,
this Warrant shall remain in full force and effect until September 25, 1998.
This Warrant and all rights hereunder are transferable in whole or in part upon
the books of the Company by the Holder in person or by duly authorized attorney,
and a new Warrant shall be made and delivered by the Company, of the same tenor
as this Warrant but registered in the name of the transferee, upon surrender of
this Warrant duly endorsed at said office or agency of the Company. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, or indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant, provided,
however, that if the Holder of this Warrant is the original Holder, an affidavit
of lost Warrant shall be sufficient for all purposes of this Section 3.2. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
reasonable expenses, taxes (other than stock transfer taxes and income taxes)
and other charges payable by it in connection with the preparation, execution
and delivery of Warrant Shares pursuant to this Section 3.2.
3.3 Antidilution.
(a) If at any time while all or any portion of this Warrant remains
outstanding all or any portion of this Warrant shall be exercised subsequent to
(i) any sales of shares of Common Stock of the Company at a price per share less
than the Exercise Price per share then applicable to this Warrant, or (ii) any
issuance of any security convertible into shares of Common Stock of the Company
with a conversion price per share less than the Exercise Price per share then
applicable to this Warrant, or (iii) any issuance of any option, warrant or
other right to purchase shares of Common Stock of the Company at any Exercise
Price per share less than the Exercise Price per share then applicable to this
Warrant (except pursuant to an employee or director stock option plan or similar
compensation plan approved by the Board of Directors); then in any and every
such event the Exercise Price per share for this Warrant shall be reduced and
shall be equal to such lower sales, conversion or Exercise Price per share.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, reorganization or liquidation
of the Company occurring after the date hereof, as a result of which such shares
of any class shall be issued in respect of outstanding shares of Common Stock of
the Company (or shall be issuable in respect of securities convertible into
shares of Common Stock) or upon exercise of rights (other than this Warrant) to
purchase shares of Common Stock or shares of such Common Stock shall be changed
into the same or a different number of shares of the same or another class or
classes, the Holder exercising this Warrant shall receive the aggregate number
and class of shares which such Holder would have received if this Warrant had
been exercised immediately before such stock dividend, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
reorganization or liquidation.
SECTION 4
Special Agreements of the Company
The Company covenants and agrees that:
4.1 The Company will reserve and set apart and have at all times, free
from preemptive rights, a number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant or of any other rights or
privileges provided for therein sufficient to enable the Company at any time to
fulfill all its obligations thereunder.
4.2 This Warrant shall be binding upon any corporation or entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
SECTION 5
Notices
Any notice or other document required or permitted to be given or
delivered to the Holder or the Company shall be delivered, or sent by certified
or registered mail, to the Holder or the Company at the address as set forth in
Section 10.4 of the Debenture Purchase Agreement.
SECTION 6
Governing Law
This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware, without giving
effect to its conflicts of laws provisions.
SECTION 7
Assignment
Notwithstanding any provision of this Warrant which may be construed
to the contrary, this Warrant and any rights hereunder shall not be assignable
by the Holder except in accordance with the provisions governing assignments
hereof set forth in the Debenture Purchase Agreement, dated as of February 25,
1997, among the Company and Holder, and any attempt by Holder to assign this
Warrant or any rights hereunder other than in accordance therewith shall be void
and of no force and effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer under its corporate seal, attested by its duly
authorized officer, and to be dated as of February 25, 1997.
ATTEST: CONCORDE CAREER COLLEGES, IN
/s/ Lisa M. Henak By: /s/ Jack L. Brozman
- --------------------------- ------------------------
Lisa M. Henak, Secretary Jack L. Brozman, President and Chief Executive
Officer
Exhibit 11
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
WARRANT TO ACQUIRE SHARES OF
COMMON STOCK OF
CONCORDE CAREER COLLEGES, INC.
February 25, 1997
THIS CERTIFIES THAT STRATEGIC ASSOCIATES, L.P. ("Holder"), for
value received, or its registered assigns, is entitled to purchase, on the terms
and subject to the conditions hereinafter set forth, from CONCORDE CAREER
COLLEGES, INC., a Delaware corporation (the "Company"), at any time after August
25, 1998 and on or before February 25, 2003, subject to earlier termination (the
"Exercise Period"), that number of shares (the "Warrant Shares") of common
stock, par value $.10 per share, of the Company (the "Common Stock"), as set
forth in Section 2.1 hereof.
SECTION 1
Exercise Price
The exercise price at which this Warrant may be exercised
shall be $1.36 per share of Common Stock (the "Exercise Price"), subject to any
adjustment pursuant to Section 3.3.
SECTION 2
Exercise of Warrant, Etc.
2.1 Number of Shares for Which Warrant is Exercisable. This
Warrant shall be exercisable for 135,110 shares of Common Stock, subject to any
adjustment pursuant to Section 3.3.
2.2 Procedure for Exercise of Warrant. The Warrant may be
exercised in whole or in part during the Exercise Period by surrendering this
Warrant, with the purchase form provided for herein duly executed by Holder or
by Holder's duly authorized attorney-in-fact, at the principal office of the
Company or at such other office or agency in the United States as the Company
may designate by notice in writing to the Holder accompanied by payment in full,
in cash, bank cashier's check or certified check payable to the order of the
Company, of the Exercise Price payable in respect of the Warrant Shares being
exercised. In addition to payments of the Exercise Price by cash or said checks,
payment of the Exercise Price with respect to the Warrants being exercised may
be made, at the option of the Holder, by the reduction in the principal amount
of the Debenture (the "Debenture") issued to the Holder pursuant to the
Debenture Purchase Agreement, dated as of February 25, 1997, by and between the
Company and the Holder (the "Debenture Purchase Agreement") (or forgiveness of
any accrued and unpaid interest thereon, whether or not payment of such interest
has been suspended pursuant to the provisions of such Debenture), even during a
period in which an Event of Default (as defined in the Debenture Purchase
Agreement) has occurred and is continuing under such Debenture, in an amount
equal to the Exercise Price with respect to the Warrant being exercised; and in
such a case, this Warrant shall be accompanied by said Debenture (with the
purchase form duly executed) which shall be substituted and replaced by a new
Debenture identical in form and content to the original Debenture except that
principal amount shall be appropriately reduced to reflect the reduction in the
principal amount applicable to the payment of the Exercise Price with respect to
the Warrant being exercised. If fewer than all of the Warrant Shares are being
exercised, the Company shall, upon exercise prior to the end of the Expiration
Period, execute and deliver to the Holder a new certificate (dated the date
hereof) evidencing the balance of the Warrant Shares that remain exercisable.
2.3 Conversion.
(a) On or after August 25, 1998, in the event that the Company
consummates a firm-commitment underwritten public offering pursuant to an
effective registration statement under the Act covering the offer and sale of
Common Stock for the account of the Company in which (i) the net proceeds of the
public offering price equals or exceeds $20 million and (ii) the public offering
price per share of Common Stock equals or exceeds $4.00, then this Warrant shall
become mandatorily exercisable within six (6) months for that number of shares
of Common Stock issuable upon exercise of the Warrant.
(b) In the Event of Default (as defined in the Debenture
Purchase Agreement), then this Warrant shall immediately become exercisable, at
the option of the Holder, for that number of shares of Common Stock issuable
upon exercise of the Warrant.
2.4 Transfer Restriction Legend. Each certificate for Warrant
Shares initially issued upon exercise of this Warrant, unless at the time of
exercise such Warrant Shares are registered under the Act, shall bear the
following legend (and any additional legend required by any securities exchange
upon which such Warrant Shares may, at the time of such exercise, be listed) on
the face thereof:
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be
offered, sold or transferred only if registered pursuant to the
provisions of such laws, or if in the opinion of counsel satisfactory
to the Company, an exemption from such registration is available."
2.5 Acknowledgment of Continuing Obligation. The Company will,
if Holder exercises this Warrant in part, upon request of the Holder,
acknowledge in writing the Company's continuing obligation to the Holder in
respect of any rights to which the Holder shall continue to be entitled after
such exercise in accordance with this Warrant, provided, that the failure of the
Holder to make any such request shall not affect the continuing obligation of
the Company to the Holder in respect of such rights.
2.6 Exercise Period. The Company and Purchaser agree to
negotiate in good faith to modify or extend the Exercise Period in the event
that either the Company or Purchaser deems it appropriate to modify or extend
such Exercise Period.
2.7 Termination of Warrant. During the Exercise Period, in the
event that Holder fails to exercise this Warrant after the Company has provided
Holder (i) twenty (20) days prior written notice of its intention to pay in full
and redeem the Debenture on a particular date (the "Repayment Date"), and (ii)
thirty (30) days after the Redemption Date within which to exercise this
Warrant, then this Warrant shall terminate and thereafter be null and void.
Notwithstanding the preceding sentence, in the event that the Company repays and
redeems the Debenture in full on or before August 25, 1998, this Warrant shall
remain in full force and effect until September 25, 1998, when it shall expire.
SECTION 3
Ownership of this Warrant.
3.1 Deemed Holder. The Company may deem and treat the person
in whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
3.2 Exchange, Transfer and Replacement. This Warrant is
non-detachable from the Debenture and may not be transferred, assigned, sold,
pledged or otherwise hypothecated ("Transferred") except with the Debenture, and
if so Transferred, then only as permitted under the terms and conditions of the
Debenture and the Debenture Purchase Agreement; provided, however, that if the
Company repays and redeems the Debenture in full on or before August 25, 1998,
this Warrant shall remain in full force and effect until September 25, 1998.
This Warrant and all rights hereunder are transferable in whole or in part upon
the books of the Company by the Holder in person or by duly authorized attorney,
and a new Warrant shall be made and delivered by the Company, of the same tenor
as this Warrant but registered in the name of the transferee, upon surrender of
this Warrant duly endorsed at said office or agency of the Company. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, or indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant, provided,
however, that if the Holder of this Warrant is the original Holder, an affidavit
of lost Warrant shall be sufficient for all purposes of this Section 3.2. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
reasonable expenses, taxes (other than stock transfer taxes and income taxes)
and other charges payable by it in connection with the preparation, execution
and delivery of Warrant Shares pursuant to this Section 3.2.
3.3 Antidilution.
(a) If at any time while all or any portion of this Warrant
remains outstanding all or any portion of this Warrant shall be exercised
subsequent to (i) any sales of shares of Common Stock of the Company at a price
per share less than the Exercise Price per share then applicable to this
Warrant, or (ii) any issuance of any security convertible into shares of Common
Stock of the Company with a conversion price per share less than the Exercise
Price per share then applicable to this Warrant, or (iii) any issuance of any
option, warrant or other right to purchase shares of Common Stock of the Company
at any Exercise Price per share less than the Exercise Price per share then
applicable to this Warrant (except pursuant to an employee or director stock
option plan or similar compensation plan approved by the Board of Directors);
then in any and every such event the Exercise Price per share for this Warrant
shall be reduced and shall be equal to such lower sales, conversion or Exercise
Price per share.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, reorganization or liquidation
of the Company occurring after the date hereof, as a result of which such shares
of any class shall be issued in respect of outstanding shares of Common Stock of
the Company (or shall be issuable in respect of securities convertible into
shares of Common Stock) or upon exercise of rights (other than this Warrant) to
purchase shares of Common Stock or shares of such Common
Stock shall be changed into the same or a different number of shares of the same
or another class or classes, the Holder exercising this Warrant shall receive
the aggregate number and class of shares which such Holder would have received
if this Warrant had been exercised immediately before such stock dividend,
split-up, recapitalization, merger, consolidation, combination or exchange of
shares, reorganization or liquidation.
SECTION 4
Special Agreements of the Company
The Company covenants and agrees that:
4.1 The Company will reserve and set apart and have at all
times, free from preemptive rights, a number of shares of authorized but
unissued Common Stock deliverable upon the exercise of this Warrant or of any
other rights or privileges provided for therein sufficient to enable the Company
at any time to fulfill all its obligations thereunder.
4.2 This Warrant shall be binding upon any corporation or
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all of the Company's assets.
SECTION 5
Notices
Any notice or other document required or permitted to be given
or delivered to the Holder or the Company shall be delivered, or sent by
certified or registered mail, to the Holder or the Company at the address as set
forth in Section 10.4 of the Debenture Purchase Agreement.
SECTION 6
Governing Law
This Warrant shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Delaware, without giving
effect to its conflicts of laws provisions.
SECTION 7
Assignment
Notwithstanding any provision of this Warrant which may be
construed to the contrary, this Warrant and any rights hereunder shall not be
assignable by the Holder except in accordance with the provisions governing
assignments hereof set forth in the Debenture Purchase Agreement, dated as of
February 25, 1997, among the Company and Holder, and any attempt by Holder to
assign this Warrant or any rights hereunder other than in accordance therewith
shall be void and of no force and effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, and to be dated as of February 25, 1997.
ATTEST: CONCORDE CAREER COLLEGES, INC.
/s/ Lisa M. Henak By: /s/ Jack L. Brozman
- ------------------------------------ --------------------------------
Lisa M. Henak, Secretary Jack L. Brozman, President and
Chief Executive Officer
Exhibit 12
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
CONCORDE CAREER COLLEGES, INC.
5% Subordinated Debenture due 2003
$3,316,250 February 25, 1997
FOR VALUE RECEIVED, CONCORDE CAREER COLLEGES, INC., a Delaware corporation
(the "Company"), hereby promises to pay to CAHILL, WARNOCK STRATEGIC PARTNERS
FUND, L.P., or permitted assigns ("Strategic Partners" or the "Holder"), the
principal amount of Three Million Three Hundred Sixteen Thousand Two Hundred
Fifty Dollars ($3,316,250) on February 25, 2003, and to pay interest on the
unpaid principal amount hereof, from the date hereof until paid in full, at the
annual rate of five percent (5%). Interest shall be computed on the basis of a
360 day year and the actual number of days elapsed. Accrued and unpaid interest
shall be due and payable quarterly in arrears on February 28, May 31, August 31,
and November 30 of each year from the date hereof until the entire principal
amount is paid. All amounts due and owing hereunder shall be payable in lawful
money of the United States of America, in immediately available funds, at the
principal office of the Holder or at such other place as the Holder may
designate from time to time in writing to the Company. Any payment on this
Debenture coming due on a Saturday, a Sunday or a day which is a legal holiday
in the place at which a payment is to be made hereunder shall be made on the
next succeeding day which is a business day in such place, and any such
extension of the time of payment shall be included in the computation of
interest hereunder. This Debenture is issued pursuant and subject to and is
entitled to the benefits of a certain Debenture and Warrant Purchase Agreement
dated as of February 25, 1997 between the Company and Strategic Partners (the
"Debenture Purchase Agreement").
Subject to the terms of the Debenture Purchase Agreement (including, but
not limited to, the subordination provisions thereof), upon the occurrence or
existence of an Event of Default (as defined in the Debenture Purchase
Agreement) the Holder may, by notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable to the Holder hereunder or under the Debenture
Purchase Agreement to be forthwith due and payable, whereupon this Debenture,
all such accrued interest and all such amounts shall become and be forthwith due
and payable, and in addition thereto, and not in substitution therefor, the
Holder shall be entitled to exercise any one or more of the rights and remedies
provided by applicable law. Failure to exercise any right or remedy under this
Debenture or available under applicable law shall not constitute a waiver of
such option or such other remedies or of the right to exercise any of the same
in the event of any subsequent Event of Default. The Company and all makers,
sureties, guarantors, endorsers and other persons assuming obligations pursuant
to this Debenture hereby waive presentment, protest, demand, notice of dishonor
and all other notices and all defenses and pleas on the grounds of any extension
or extension of the time of payments or the due dates hereof, in whole or in
part, before or after maturity, with or without notice. No renewal or extension
of this Debenture, no release of any obligor and no delay in enforcement of this
Debenture or in exercising any right
or power hereunder shall affect the liability of any obligor hereunder. The
pleading of any statute of limitations as a defense to any demand against any
obligor is expressly waived.
1. Warrant. As part of the consideration for the loan evidenced by this
Debenture, the Company has authorized and issued a non-detachable Warrant,
attached to this Debenture as Exhibit 1 (the "Warrant"), to Holder. If the
Holder exercises the Warrant at any time after August 25, 1998 and on or before
February 25, 2003 (the "Exercise Period"), the Warrant would entitle Holder to
purchase an aggregate of 2,438,419 shares of the Company's Common Stock, at an
exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments
as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the
event that Holder fails to exercise this Warrant after the Company has provided
Holder (i) twenty (20) days prior written notice of its intention to pay in full
and redeem the Debenture on a particular date (the "Repayment Date"), and (ii)
thirty (30) days after the Redemption Date within which to exercise this
Warrant, then this Warrant shall terminate and thereafter be null and void.
Notwithstanding the preceding sentence, in the event that the Company repays and
redeems the Debenture in full on or before August 25, 1998, this Warrant shall
remain in full force and effect until September 25, 1998, when it shall then
expire.
2. Prepayment.
(a) Voluntary Payment. The Company may prepay or redeem all or part of the
Debenture prior to maturity hereof, without penalty, with twenty (20) days'
prior written notice thereof to Holder.
(b) Mandatory Prepayment. In the event that the Company consummates a
registered underwritten public offering covering the offer and sale of Common
Stock for the account of the Company in which net proceeds to the Company of the
public offering equals or exceeds $15 million (a "Public Offering"), then the
Company must apply, at the request of Holder, the proceeds of such Public
Offering (to the extent available after payment of all Senior Indebtedness (as
defined in Section 12(e) below) to prepay the unpaid principal amount and
outstanding interest of this Debenture.
3. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Debenture, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment due to such event. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on exercise of the Warrant attached
hereto above the Exercise Price then in effect, (b) will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of the
Warrant attached hereto from time to time and (c) will not consolidate with or
merge into any other person or permit any such person to consolidate with or
merge into the Company, unless such other person (or, in the case of a merger or
consolidation in which the Company is the surviving entity, the person issuing
the securities involved in such merger or consolidation) shall expressly assume
in writing and will be bound by all the terms of this Debenture and the Warrant
attached hereto.
4. Chief Financial Officer's Certificate as Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock issuable on the
exercise of the Warrant attached hereto, the Chief Financial Officer of the
Company will promptly compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such adjustment
or readjustment, the Exercise Price resulting therefrom, and the increase or
decrease, if any, of the number of shares purchasable at such price upon
exercise of the Warrant showing in detail the facts and computation upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such certificate to each registered holder of this Debenture, and will,
on the written request at any time of the holder of this Debenture, furnish to
such holder a like certificate setting forth the Exercise Price of the Debenture
at the time in effect and showing how it was calculated.
5. Notices of Record Date, etc. In the event the Company (a) takes a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or (b)
consolidates or merges into, or transfers all or substantially all of its assets
to, another corporation, or (c) dissolves or liquidates (the events described in
the foregoing clauses (b) and (c) being hereinafter referred to as a
"Fundamental Change"), then and in each such event the Company will mail or
cause to be mailed to the registered holder of this Debenture a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
Fundamental Change is to be effected, and the time, if any to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property, if any, deliverable on
any Fundamental Change and (iii) the amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant is to be offered or made. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), or a favorable vote of
stockholders, if either is required. Such notice shall be mailed at least 20
days prior to the date specified in such notice on which any such action is to
be taken or 20 days prior to the record date therefor, whichever is earlier.
6. Reservation of Warrant Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the Warrant
attached hereto, all shares of Common Stock from time to time issuable upon such
exercise.
7. Transfer. Subject to applicable federal and state securities laws, the
transfer of this Debenture and all rights hereunder, in whole or in part, is
registrable at the office or agency of the Company by the holder hereof in
person or by his duly authorized attorney, upon surrender of this Debenture
properly endorsed, provided that this Debenture (and any rights of the Holder
hereunder) is non-transferable except to a person or entity controlled by, or
under common control with, the Holder. Each taker and holder of this Debenture,
by taking or holding the same, consents and agrees that this Debenture, when
endorsed in blank, shall be deemed negotiable, and that the holder hereof, when
this Debenture shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Debenture as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Debenture, or to the registration of transfer hereof on the
books of the Company; and until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder for all purposes, and the Company shall not be affected by notice to the
contrary.
8. Register. The Company shall maintain, at the principal office of the
Company (or such other office as it may designate by notice to the holder
hereof), a register for the Debenture, in which the Company shall record the
name and address of the person in whose name a Debenture has been issued, as
well as the name and address of each transferee and each prior owner of such
Debenture.
9. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such loss, theft or destruction of this Debenture, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Debenture, the Company at its expense will execute and
deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a
Debenture held by Holder its nominee or any of its partners, principals,
officers or directors is lost, stolen or destroyed, the affidavit of a general
partner or any principal or corporate officer of Holder setting forth the
circumstances with respect to such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the company of a new
Debenture in replacement of such lost, stolen or destroyed Debenture.
10. Remedies. The Company stipulates that the remedies at law of the holder
of this Debenture in the event of any default or threatened default by the
Company in the performance of or compliance with any of the
terms of this Debenture are not and will not be adequate, and that such terms
may be specifically enforced pursuant to a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
11. No Sinking Fund; Payment Unsecured. No sinking fund or similar
provision shall be required to fund payment of principal or interest under this
Debenture. Payment of principal and interest on this Debenture is unsecured.
12. Subordination.
(a) Subordination to Senior Indebtedness. The payment of the principal
of and interest on this Debenture is hereby expressly made subordinate and
junior in right of payment to the prior payment in full of all principal of and
interest on all Senior Indebtedness (as defined below) whether now outstanding
or hereafter incurred, created or assumed.
(b) Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of
the Company. In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its creditors, as such, or
to its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether nor not involving
insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be
entitled to receive payment in full of all principal and interest on all Senior
Indebtedness before the Holder of this Debenture is entitled to receive any
payment on account of principal or interest upon this Debenture and to that end
(but subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of this
Section upon the Senior Indebtedness and the holders thereof with respect to
this Debenture and the Holder thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of the Senior Indebtedness shall be
entitled to receive for application in payment hereof any payment or
distribution of any kind or character, whether in cash or property or securities
which may be payable or deliverable in any such proceedings in respect of this
Debenture.
(c) Subrogation to Rights of Holders of Senior Indebtedness. Subject
to the payment in full of all principal and interest on all Senior Indebtedness,
the Holder of this Debenture shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to the Senior Indebtedness.
(d) No Payment on Debentures When Senior Indebtedness in Default. In
the event and during the continuation of any default in the payment of principal
or interest on any Senior Indebtedness beyond any applicable grace, notice or
cure period, or if any Event of Default (as defined in the Debenture Purchase
Agreement) with respect to Senior Indebtedness shall have occurred and be
continuing permitting the holders of such Senior Indebtedness to accelerate the
maturity thereof, unless and until such default or Event of Default shall have
been cured or waived or shall have ceased to exist, then no payment of principal
or interest shall be made by the Company on this Debenture.
(e) Definition of Senior Indebtedness. The term "Senior Indebtedness,"
as used in this Debenture, shall mean the principal and interest on the
following, whether outstanding at the date of execution of the Debenture
Purchase Agreement or thereafter incurred, created, assumed, modified, renewed
or extended: (w) indebtedness of the Company for money borrowed (including the
loan with Security Bank, as defined in the Debenture Purchase Agreement); (x)
the financial obligations of the Company to CenCor existing as of the date
hereof (which will be repaid in full and released at Closing as defined in the
Debenture Purchase Agreement); (y) obligations of the Company as lessee under
any lease of property which is reflected on the Company's balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed
by a Subsidiary or of any obligations of a Subsidiary under any lease or
property which is reflected on the Subsidiary's balance sheet as a capitalized
lease in accordance with GAAP.
13. Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent pursuant to this Debenture
shall be given, served and sent in accordance with the provisions of the
Debenture Purchase Agreement.
14. Miscellaneous. This Debenture and the Warrant attached hereto and any
term hereof or therein may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. Any amendment, modification
or addition to this Warrant is subject to the provisions governing same in the
Debenture Purchase Agreement. This Debenture and the Warrant attached hereto
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware (excluding the choice of law rules thereof). The headings
in this Debenture and the Warrant attached hereto are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be duly
executed on its behalf as of the date first hereinabove set forth.
CONCORDE CAREER COLLEGES, INC.
By:/s/ Jack L. Brozman
-------------------------------------------
Jack L. Brozman
President and Chief Executive Officer
Exhibit 13
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.
THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED.
CONCORDE CAREER COLLEGES, INC.
5% Subordinated Debenture due 2003
$183,750 February 25, 1997
FOR VALUE RECEIVED, CONCORDE CAREER COLLEGES, INC., a Delaware corporation
(the "Company"), hereby promises to pay to STRATEGIC ASSOCIATES, L.P., or
permitted assigns ("Strategic Associates" or the "Holder"), the principal amount
of One Hundred Eighty Three Thousand Seven Hundred Fifty Dollars ($183,750) on
February 25, 2003, and to pay interest on the unpaid principal amount hereof,
from the date hereof until paid in full, at the annual rate of five percent
(5%). Interest shall be computed on the basis of a 360 day year and the actual
number of days elapsed. Accrued and unpaid interest shall be due and payable
quarterly in arrears on February 28, May 31, August 31, and November 30 of each
year from the date hereof until the entire principal amount is paid. All amounts
due and owing hereunder shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Holder
or at such other place as the Holder may designate from time to time in writing
to the Company. Any payment on this Debenture coming due on a Saturday, a Sunday
or a day which is a legal holiday in the place at which a payment is to be made
hereunder shall be made on the next succeeding day which is a business day in
such place, and any such extension of the time of payment shall be included in
the computation of interest hereunder. This Debenture is issued pursuant and
subject to and is entitled to the benefits of a certain Debenture and Warrant
Purchase Agreement dated as of February 25, 1997 between the Company and
Strategic Associates (the "Debenture Purchase Agreement").
Subject to the terms of the Debenture Purchase Agreement (including, but
not limited to, the subordination provisions thereof), upon the occurrence or
existence of an Event of Default (as defined in the Debenture Purchase
Agreement) the Holder may, by notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable to the Holder hereunder or under the Debenture
Purchase Agreement to be forthwith due and payable, whereupon this Debenture,
all such accrued interest and all such amounts shall become and be forthwith due
and payable, and in addition thereto, and not in substitution therefor, the
Holder shall be entitled to exercise any one or more of the rights and remedies
provided by applicable law. Failure to exercise any right or remedy under this
Debenture or available under applicable law shall not constitute a waiver of
such option or such other remedies or of the right to exercise any of the same
in the event of any subsequent Event of Default. The Company and all makers,
sureties, guarantors, endorsers and other persons assuming obligations pursuant
to this Debenture hereby waive presentment, protest, demand, notice of dishonor
and all other notices and all defenses and pleas on the grounds of any extension
or extension of the time of payments or the due dates hereof, in whole or in
part, before or after maturity, with or without notice. No renewal or extension
of this Debenture, no release of any obligor and no delay in enforcement of this
Debenture or in exercising any right or power hereunder shall affect the
liability of any obligor hereunder. The pleading of any statute of limitations
as a defense to any demand against any obligor is expressly waived.
1. Warrant. As part of the consideration for the loan evidenced by this
Debenture, the Company has authorized and issued a non-detachable Warrant,
attached to this Debenture as Exhibit 1 (the "Warrant"), to Holder. If the
Holder exercises the Warrant at any time after August 25, 1998 and on or before
February 25, 2003 (the "Exercise Period"), the Warrant would entitle Holder to
purchase an aggregate of 135,110 shares of the Company's Common Stock, at an
exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments
as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the
event that Holder fails to exercise this Warrant after the Company has provided
Holder (i) twenty (20) days prior written notice of its intention to pay in full
and redeem the Debenture on a particular date (the "Repayment Date"), and (ii)
thirty (30) days after the Redemption Date within which to exercise this
Warrant, then this Warrant shall terminate and thereafter be null and void.
Notwithstanding the preceding sentence, in the event that the Company repays and
redeems the Debenture in full on or before August 25, 1998, this Warrant shall
remain in full force and effect until September 25, 1998, when it shall expire.
2. Prepayment.
(a) Voluntary Payment. The Company may prepay or redeem all or part of the
Debenture prior to maturity hereof, without penalty, with twenty (20) days'
prior written notice thereof to Holder.
(b) Mandatory Prepayment. In the event that the Company consummates a
registered underwritten public offering covering the offer and sale of Common
Stock for the account of the Company in which net proceeds to the Company of the
public offering equals or exceeds $15 million (a "Public Offering"), then the
Company must apply, at the request of Holder, the proceeds of such Public
Offering (to the extent available after payment of all Senior Indebtedness (as
defined in Section 12(e) below) to prepay the unpaid principal amount and
outstanding interest of this Debenture.
3. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Debenture, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment due to such event. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on exercise of the Warrant attached
hereto above the Exercise Price then in effect, (b) will take all action that
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens and charges with respect to the issue thereof, on the exercise of the
Warrant attached hereto from time to time and (c) will not consolidate with or
merge into any other person or permit any such person to consolidate with or
merge into the Company, unless such other person (or, in the case of a merger or
consolidation in which the Company is the surviving entity, the person issuing
the securities involved in such merger or consolidation) shall expressly assume
in writing and will be bound by all the terms of this Debenture and the Warrant
attached hereto.
4. Chief Financial Officer's Certificate as Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock issuable on the
exercise of the Warrant attached hereto, the Chief Financial Officer of the
Company will promptly compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such adjustment
or readjustment, the Exercise Price resulting therefrom, and the increase or
decrease, if any, of the number of shares purchasable at such price upon
exercise of the Warrant showing in detail the facts and computation upon which
such adjustment or readjustment is based. The Company will forthwith mail a copy
of each such certificate to each registered holder of this Debenture, and will,
on the written request at any time of the holder of this Debenture, furnish to
such holder a like certificate setting forth the Exercise Price of the Debenture
at the time in effect and showing how it was calculated.
5. Notices of Record Date, etc. In the event the Company (a) takes a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or
property, or to receive any other right, or (b) consolidates or merges into, or
transfers all or substantially all of its assets to, another corporation, or (c)
dissolves or liquidates (the events described in the foregoing clauses (b) and
(c) being hereinafter referred to as a "Fundamental Change"), then and in each
such event the Company will mail or cause to be mailed to the registered holder
of this Debenture a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such Fundamental Change is to be effected, and the time, if any to
be fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property, if any,
deliverable on any Fundamental Change and (iii) the amount and character of any
stock or other securities, or rights or options with respect thereto, proposed
to be issued or granted, the date of such proposed issue or grant and the
persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or a favorable
vote of stockholders, if either is required. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken or 20 days prior to the record date therefor, whichever is
earlier.
6. Reservation of Warrant Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the Warrant
attached hereto, all shares of Common Stock from time to time issuable upon such
exercise.
7. Transfer. Subject to applicable federal and state securities laws, the
transfer of this Debenture and all rights hereunder, in whole or in part, is
registrable at the office or agency of the Company by the holder hereof in
person or by his duly authorized attorney, upon surrender of this Debenture
properly endorsed, provided that this Debenture (and any rights of the Holder
hereunder) is non-transferable except to a person or entity controlled by, or
under common control with, the Holder. Each taker and holder of this Debenture,
by taking or holding the same, consents and agrees that this Debenture, when
endorsed in blank, shall be deemed negotiable, and that the holder hereof, when
this Debenture shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Debenture as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Debenture, or to the registration of transfer hereof on the
books of the Company; and until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder for all purposes, and the Company shall not be affected by notice to the
contrary.
8. Register. The Company shall maintain, at the principal office of the
Company (or such other office as it may designate by notice to the holder
hereof), a register for the Debenture, in which the Company shall record the
name and address of the person in whose name a Debenture has been issued, as
well as the name and address of each transferee and each prior owner of such
Debenture.
9. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such loss, theft or destruction of this Debenture, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Debenture, the Company at its expense will execute and
deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a
Debenture held by Holder its nominee or any of its partners, principals,
officers or directors is lost, stolen or destroyed, the affidavit of a general
partner or any principal or corporate officer of Holder setting forth the
circumstances with respect to such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the company of a new
Debenture in replacement of such lost, stolen or destroyed Debenture.
10. Remedies. The Company stipulates that the remedies at law of the holder
of this Debenture in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Debenture are not and will not be adequate, and that such terms may be
specifically enforced pursuant to a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
11. No Sinking Fund; Payment Unsecured. No sinking fund or similar
provision shall be required to fund payment of principal or interest under this
Debenture. Payment of principal and interest on this Debenture is unsecured.
12. Subordination.
(a) Subordination to Senior Indebtedness. The payment of the principal
of and interest on this Debenture is hereby expressly made subordinate and
junior in right of payment to the prior payment in full of all principal of and
interest on all Senior Indebtedness (as defined below) whether now outstanding
or hereafter incurred, created or assumed.
(b) Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of
the Company. In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its creditors, as such, or
to its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company, whether nor not involving
insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be
entitled to receive payment in full of all principal and interest on all Senior
Indebtedness before the Holder of this Debenture is entitled to receive any
payment on account of principal or interest upon this Debenture and to that end
(but subject to the power of a court of competent jurisdiction to make other
equitable provision reflecting the rights conferred by the provisions of this
Section upon the Senior Indebtedness and the holders thereof with respect to
this Debenture and the Holder thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of the Senior Indebtedness shall be
entitled to receive for application in payment hereof any payment or
distribution of any kind or character, whether in cash or property or securities
which may be payable or deliverable in any such proceedings in respect of this
Debenture.
(c) Subrogation to Rights of Holders of Senior Indebtedness. Subject
to the payment in full of all principal and interest on all Senior Indebtedness,
the Holder of this Debenture shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets or
securities of the Company applicable to the Senior Indebtedness.
(d) No Payment on Debentures When Senior Indebtedness in Default. In
the event and during the continuation of any default in the payment of principal
or interest on any Senior Indebtedness beyond any applicable grace, notice or
cure period, or if any Event of Default (as defined in the Debenture Purchase
Agreement) with respect to Senior Indebtedness shall have occurred and be
continuing permitting the holders of such Senior Indebtedness to accelerate the
maturity thereof, unless and until such default or Event of Default shall have
been cured or waived or shall have ceased to exist, then no payment of principal
or interest shall be made by the Company on this Debenture.
(e) Definition of Senior Indebtedness. The term "Senior Indebtedness,"
as used in this Debenture, shall mean the principal and interest on the
following, whether outstanding at the date of execution of the Debenture
Purchase Agreement or thereafter incurred, created, assumed, modified, renewed
or extended: (w) indebtedness of the Company for money borrowed (including the
loan with Security Bank, as defined in the Debenture Purchase Agreement); (x)
the financial obligations of the Company to CenCor existing as of the date
hereof (which will be repaid in full and released at Closing as defined in the
Debenture Purchase Agreement); (y) obligations of the Company as lessee under
any lease of property which is reflected on the Company's balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed
by a Subsidiary or of any obligations of a Subsidiary under any lease or
property which is reflected on the Subsidiary's balance sheet as a capitalized
lease in accordance with GAAP.
13. Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent pursuant to this Debenture
shall be given, served and sent in accordance with the provisions of the
Debenture Purchase Agreement.
14. Miscellaneous. This Debenture and the Warrant attached hereto and any
term hereof or therein may be changed, waived, discharged or terminated only by
an instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. Any amendment, modification
or addition to this Warrant is subject to the provisions governing same in the
Debenture Purchase Agreement. This Debenture and the Warrant attached hereto
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware (excluding the choice of law rules thereof). The headings
in this Debenture and the Warrant attached hereto are for purposes of reference
only, and shall not limit or otherwise affect any of the terms hereof. The
invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be duly
executed on its behalf as of the date first hereinabove set forth.
CONCORDE CAREER COLLEGES, INC.
By: /s/ Jack L. Brozman
-------------------------------------------
Jack L. Brozman
President and Chief Executive Officer
Exhibit 14
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 25, 1997
BY AND AMONG
THE ESTATE OF ROBERT F. BROZMAN,
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
AND
STRATEGIC ASSOCIATES, L.P.
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated February 25, 1997,
between THE ESTATE OF ROBERT F. BROZMAN (the "Seller" or the "Estate") by Jack
L. Brozman as executor of the Estate (the "Executor"), and CAHILL, WARNOCK
STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of
the State of Delaware, and STRATEGIC ASSOCIATES, L.P., a limited partnership
organized under the laws of the State of Delaware. Cahill, Warnock Strategic
Partners Fund, L.P. and Strategic Associates, L.P. together may be referred to
herein as the "Purchasers."
WHEREAS, CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the
"Company") has agreed to issue shares of the Company's Convertible Preferred
Stock, par value $0.10 per share, to the Purchasers pursuant to the Convertible
Preferred Stock Purchase Agreement, dated February 25, 1997 between the Company
and the Purchasers (the "Preferred Agreement"); and
WHEREAS, the Seller is the owner of certain shares of the common stock of
the Company, par value $0.10 per share ("Common Stock"), which the Seller
desires to sell and transfer to the Purchasers, and the Purchasers desire to
purchase from the Seller, all on the terms set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
Purchase and Sale
1.1. Purchase and Sale of the Shares. Subject to the terms and conditions
of this Agreement, at the Closing (as defined in Section 1.3) the Seller shall
sell, assign, transfer, convey and deliver to the Purchasers, and the Purchasers
shall purchase from the Seller, severally and in the amounts set forth on
Exhibit A hereto, FIVE HUNDRED THOUSAND (500,000) shares of Common Stock of the
Company (the "Shares"), at the purchase price specified in Section 1.2, free and
clear of all liens, claims, charges, security interests, and other restrictions
or encumbrances of any nature.
1.2. Purchase Price. The purchase price for the Shares shall be FIVE
HUNDRED THOUSAND DOLLARS ($500,000) in the aggregate (being ONE DOLLAR ($1.00)
per share of Common Stock), to be delivered at the Closing to the Seller in full
payment for the Shares by certified check or wire transfer to an account
designated by the Seller.
1.3. Closing Date. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares hereunder (the "Closing") shall take place
at the office of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City,
Missouri on February 25, 1997 (the "Closing Date"), unless another place or date
or manner of closing is agreed to by the Seller and the Purchasers.
1.4. Seller's Deliveries. At the Closing, the Seller shall deliver to each
Purchaser (i) a certificate or certificates evidencing the Shares being
purchased by it as set forth in Exhibit A hereto, duly endorsed for transfer or
accompanied by instruments of transfer reasonably satisfactory in form and
substance to the Purchasers and their counsel, and (ii) such other evidence of
the performance of all covenants and satisfaction of all conditions required of
the Seller by this Agreement, at or prior to the Closing, as the Purchasers or
their counsel may reasonably require.
1.5. Purchasers' Deliveries. At the Closing, each Purchaser shall deliver
to the Seller (i) payment in an amount equal to the full purchase price of the
Shares being purchased by such Purchaser, as set forth as Exhibit A hereto, in
an aggregate amount of $500,000, by certified check or wire transfer to an
account designated by the Seller, and (ii) such other evidence of the
performance of all the covenants and satisfaction of all of the conditions
required of the Purchasers by this Agreement at or before the Closing as the
Seller or its counsel may reasonably require.
SECTION 2
Representations and Warranties of Seller
The Seller hereby represents and warrants to the Purchasers as follows:
2.1. Authority; Validity. The Seller has the full legal right, power and
authority to enter into this Agreement and to transfer the Shares in accordance
with the terms of this Agreement. This Agreement has been duly and validly
executed by the Seller and this Agreement constitutes a legal, valid and binding
obligation of the Seller, enforceable in accordance with its terms.
2.2. No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions by the Seller contemplated
hereby will not conflict with, violate or result in a breach or constitute a
default under any order, decree, statute, ordinance, regulation or other law
applicable to the Seller, including without limitation (i) all applicable state
and federal securities laws and (ii) all applicable laws and regulations
relating to the administration of estates.
2.3. Title to Shares. The Seller is the beneficial owner and the owner of
record of the Shares and has good and valid title to the Shares, free and clear
of all liens, encumbrances, options, claims, charges or security interests of
any kind. Upon delivery of the Shares by the Seller and payment therefor by the
Purchasers, the Seller shall have transferred to the Purchasers good and valid
title to the Shares, free and clear of all liens, encumbrances, options, claims,
charges or security interests of any kind.
2.4. Consents and Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental authority or
any third party is required in connection with the execution, delivery and
performance of this Agreement by the Seller and the consummation of the
transactions by the Seller hereunder.
SECTION 3
Representations and Warranties of Purchasers
3.1. Authority. Each of the Purchasers is duly organized and validly
existing and has the partnership power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
each of the Purchasers and constitutes a valid and binding obligation of each of
the Purchasers, enforceable in accordance with its terms.
3.2. Investment Representations. Each of the Purchasers
hereby represent and warrant to the Seller as follows:
(a) It is acquiring the Shares for its own account for investment, and
not with a view to the distribution thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"); and
(b) It is an "Accredited Investor" as defined under
the Securities Act.
SECTION 4
Conditions Precedent to Obligations of Purchasers
Each Purchaser's obligation to purchase the Shares at the Closing is, at
the option of such Purchaser, subject to the fulfillment on or prior to the
Closing Date of the following conditions:
4.1. Representations True at Closing. Each of the Seller's representations
and warranties herein and in any document or instrument delivered to the
Purchasers hereunder shall be true and correct on the Closing Date with the same
force and effect as though such representations and warranties had been made
again on and as of such time.
4.2. Covenants of the Seller. The Seller shall have duly performed all of
the covenants, acts and undertakings to be performed by it on or prior to the
Closing Date, including but not limited to the closing deliveries required of it
pursuant to Section 1.4.
4.3. No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of the business of the Company, if such action,
proceeding, investigation, regulation or legislation, in the reasonable judgment
of the Purchasers, would make it inadvisable to consummate such transactions.
4.4. Opinion of Seller's Counsel. The Purchasers shall have received from
Bryan Cave, L.L.P., counsel to the Seller, an opinion addressed to the
Purchasers, dated the Closing Date, in substantially the form of Exhibit B
hereto.
SECTION 5
Conditions Precedent to Obligations of Seller
The Seller's obligation to sell the Shares at the Closing is, at the option
of the Seller, subject to the fulfillment of the following conditions:
5.1. Representations True at Closing. The representations and warranties
made by the Purchasers in this Agreement or any document or instrument delivered
to the Seller shall be true and correct on the Closing Date with the same force
and effect as though such representations and warranties had been made again on
and as of such time.
5.2. Covenants of the Purchasers. The Purchasers shall have duly performed
all of the covenants, acts and undertakings to be performed by it on or prior to
the Closing Date.
5.3. No Injunction. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or that is related to, or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or that
is related to or arises out of the business of the Purchasers or the Company, if
such action, proceedings, investigation, regulation or legislation, in the
reasonable judgment of the Seller, would make it inadvisable to consummate the
same.
SECTION 6
Miscellaneous
6.1. Amendment. Neither this Agreement nor any provision hereof may be
amended, modified, supplemented or waived, except by a written instrument
executed by the Seller and the Purchasers.
6.2. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address as such party
may notify to the other parties in writing:
(a) if to the Seller:
Estate of Robert F. Brozman
c/o Jack L. Brozman, Executor
1100 Main Street
Suite 416
Kansas City, MO 64105
Facsimile No.: (816) 474-7610
with a copy to:
Bryan Cave, L.L.P.
7500 College Boulevard
Suite 1100
Overland Park, KS 66210-4035
Facsimile No.: (913) 338-7777
Attn: Thomas W. Van Dyke, Esq.
(b) if to the Purchasers:
c/o Cahill, Warnock & Company
One South Street, Suite 2150
Baltimore, MD 21202
Attn: David L. Warnock
Facsimile No.: (410) 895-3805
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 21202
Attn: John B. Watkins, Esq.
Facsimile No.: (410) 986-2828.
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
facsimile transmission (fax) on the business day of actual confirmed receipt by
the addressee thereof, and (iii) if sent by registered or certified mail, three
(3) business days after dispatch.
6.3. Survival of Representations and Warranties. All representations and
warranties made in, pursuant to or in connection with this Agreement, shall
survive the execution and delivery of this Agreement, any investigation at any
time made by or on behalf of any Purchaser, and the sale and purchase of the
Shares and payment therefor for a period of one year from the date of this
Agreement.
6.4. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
6.5. Entire Agreement. This Agreement and the other documents described
herein or delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subject matter hereof and
thereof and supersede and cancel all prior representations, alleged warranties,
statements, negotiations, undertakings, letters, acceptances, understandings,
contracts and communications, whether verbal or written, among the parties
hereto and thereto or their respective agents with respect to or in connection
with the subject matter hereof.
6.6. Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
6.7. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
6.8. Indemnification. For purposes of this Agreement, the claims described
in this Section shall be referred to individually as a "Claim" and collectively
as "Claims."
(a) Subject to the terms and conditions of this Section, the Seller
hereby agrees to indemnify, defend and hold harmless the Purchasers and their
affiliates, and their respective partners, co-investors, officers, directors,
employees, agents, consultants, attorneys and advisers (the "Purchasers Group")
from and against all demands, claims, actions or causes of action, assessments,
payments, losses, damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and expenses
(collectively "Damages") asserted against, resulting to, imposed upon or
incurred by the Purchasers Group, by reason of or resulting from:
(i) any breach or non-performance of any covenant to be performed
by the Seller under this Agreement;
(ii) a breach of any representation or warranty of the Seller
contained in or made pursuant to this Agreement; and
(iii) any investigation, litigation or proceeding or the
preparation of any defense with respect thereto, arising out of or in connection
with or relating to this Agreement or the transactions contemplated hereby,
whether or not such investigation, litigation or proceeding is brought by the
Seller, the Company, any of its subsidiaries, shareholders or creditors, whether
or not any of the transactions contemplated by this Agreement are consummated,
except to the extent such Damages are found in a final judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct.
(b) The Purchasers hereby agree to indemnify, defend and hold harmless
the Seller from any Damages arising by reason of or resulting from:
(i) any breach of any covenant or agreement of the Purchasers
contained in or made pursuant to this Agreement; and
(ii) any breach of any representation or warranty of the
Purchasers contained in or made pursuant to this Agreement.
6.9. Conditions of Indemnification. The obligations and liabilities of the
Seller, Executor and the Purchasers under this Section with respect to Claims
relating to third parties shall be subject to the following terms and
conditions:
(a) A party seeking indemnification under this Agreement ("Indemnified
Party") will give the party required to provide such indemnification (the
"Indemnifying Party") prompt written notice of any such Claim, and thereafter
the Indemnifying Party will undertake the defense thereof by representatives
chosen by it, provided that such representatives are reasonably acceptable to
the Indemnified Party.
(b) If the Indemnifying Party, within a reasonable time after notice
of any such Claim, fails to defend such Claim, the Indemnified Party will, upon
written notice to the Indemnifying Party, have the right to undertake the
defense, compromise or settlement of such Claim on behalf of and for the account
and risk of the Indemnifying Party, subject to the right of the Indemnifying
Party to assume the defense of such Claim at any time prior to settlement,
compromise or final determination thereof.
(c) Anything in this Section to the contrary notwithstanding, (i) if
there is a reasonable probability that a Claim may materially and adversely
affect an Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right, at its own cost and
expense, to defend, and with the consent of the Indemnifying Party, to
compromise or settle such Claim, and (ii) the Indemnifying Party shall not,
without the written consent of the Indemnified Party, its successors and assigns
settle or compromise any Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party a release from all liability in respect
of such Claim.
6.10. No Third-Party Beneficiaries. Nothing in this Agreement will confer
any third party beneficiary or other rights upon any person (specifically
including any employees of the Company and its subsidiaries) or entity that is
not a party to this Agreement.
6.11. Brokers. Each party represents and warrants to the other that no
broker or finder has acted for it in connection with this Agreement. Consistent
with Sections 6.8 and 6.9, each party shall indemnify and hold harmless the
other against any Damages arising out of any Claim by any broker or finder
employed or alleged to have been employed by such party.
6.12. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, including, without limitation,
each transferee of all or any portion of the Shares. No party hereto may assign
its rights or delegate its obligations under this Agreement without the prior
written consent of the other parties hereto.
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Seller and the Purchasers have caused this
Agreement to be executed effective as of the date first above written.
THE ESTATE OF ROBERT F. BROZMAN
By: /s/ Jack L. Brozman
-------------------------------------------
Name: Jack L. Brozman
Title: Executor
CAHILL, WARNOCK PURCHASERS:
CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P.
By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., its General
Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: a General Partner
STRATEGIC ASSOCIATES, L.P.
By: CAHILL, WARNOCK & COMPANY, LLC, its General Partner
By: /s/ David L. Warnock
-------------------------------------------
Name: David L. Warnock
Title: Managing Member
EXHIBIT A
PURCHASERS
Number of Shares
of Common Stock
Name Being Purchased Aggregate Purchase Price
- ---- --------------- ------------------------
Cahill, Warnock
Strategic Partners 473,750 $473,750.00
Fund, L.P.
Strategic 26,250 $26,250.00
Associates, L.P.
