EXHIBIT 10.19
________________________________________
SECURITIES PURCHASE AGREEMENT
________________________________________
Series D Redeemable Preferred Stock of Career Education Corporation
($15,000,000)
and
Warrants to Purchase Class E Common Stock of Career Education Corporation
(Exercisable for 36,186 Aggregate Shares,
$.01 per share Exercise Price)
Dated as of May 30, 1997
TABLE OF CONTENTS
(Not Part of the Agreement)
Page
----
1. AUTHORIZATION OF FINANCING............................................ 2
2. PURCHASE AND SALE OF SECURITIES; CLOSING.............................. 2
2.1. PURCHASE AND SALE.............................................. 2
2.2. CLOSING........................................................ 2
3. CONDITIONS TO EACH CLOSING............................................ 3
3.1. CLOSING OF THE ▇▇▇▇▇ ACQUISITION AND CLOSING OF LASALLE LOANS.. 3
3.2. OPINION OF COUNSEL............................................. 3
3.3. REPRESENTATIONS AND WARRANTIES................................. 3
3.4. PURCHASE PERMITTED BY APPLICABLE LAWS.......................... 4
3.5. NO ADVERSE LEGISLATION, ACTION OR DECISION..................... 4
3.6. APPROVALS AND CONSENTS......................................... 5
3.7. PROCEEDINGS.................................................... 5
3.8. SERIES D PREFERRED STOCK AND WARRANT CERTIFICATES.............. 5
3.9. STOCKHOLDERS AGREEMENT......................................... 5
3.10. AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
AND CERTIFICATE OF DESIGNATION................................ 6
3.11. COMPLIANCE CERTIFICATE......................................... 6
3.12. ADDITIONAL INFORMATION......................................... 6
3.13. NO CHANGE RESULTING IN MATERIAL ADVERSE EFFECT................. 6
4. FUTURE ACQUISITIONS................................................... 6
4.1. CONDITIONS TO FUTURE ACQUISITIONS.............................. 6
4.2. LIMITATION OF COMPANY'S RIGHT TO MAKE ANY FUTURE ACQUISITION... 7
4.3. [REDEMPTION OF UNUSED PROCEEDS SUBSEQUENT TO JULY 31, 1997].... 7
5. AFFIRMATIVE COVENANTS................................................. 8
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS......................... 8
5.2. USE OF PROCEEDS................................................ 8
5.3. RESERVATION OF SHARES.......................................... 8
6. NEGATIVE COVENANTS.................................................... 8
6.1. WITHHOLDING TAXES............................................... 8
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7. OTHER REMEDIES......................................................... 9
8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY............... 9
8.1. ORGANIZATION; AUTHORITY.......................................... 9
8.2. AUTHORIZATION.................................................... 10
8.3. CAPITAL STOCK AND RELATED MATTERS................................ 11
8.4. LITIGATION....................................................... 12
8.5. COMPLIANCE....................................................... 12
8.6. OFFERING......................................................... 13
8.7. CONFLICTING AGREEMENTS........................................... 13
8.8. GOVERNMENTAL PERMITS, CONSENTS, ETC.............................. 14
8.9. FEES AND COMMISSIONS............................................. 14
8.10. RESERVATION OF SHARES........................................... 14
9. REPRESENTATIONS OF THE PURCHASERS...................................... 14
9.1. PURCHASE OF SECURITIES........................................... 14
9.2. INCORPORATION AND AUTHORIZATION OF INSTITUTIONAL INVESTORS....... 14
9.3. NO CONFLICTS..................................................... 15
9.4. NO BROKERS' FEES................................................. 15
10. DEFINITIONS............................................................ 15
11. MISCELLANEOUS.......................................................... 19
11.1. PAYMENTS........................................................ 19
11.2. EXPENSES; INDEMNITY............................................. 20
11.3. CONSENT TO AMENDMENTS; SUBORDINATION............................ 21
11.4. PERSONS DEEMED OWNERS........................................... 21
11.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.... 21
11.6. SUCCESSORS AND ASSIGNS.......................................... 22
11.7. NOTICES......................................................... 22
11.8. DESCRIPTIVE HEADINGS, ETC....................................... 22
11.9. GOVERNING LAW; CHOICE OF FORUM.................................. 23
11.10. WAIVER OF JURY TRIAL........................................... 24
11.11. ISSUANCE OF SECURITIES TO ▇▇▇▇▇▇▇................................... 24
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES:
---------
Schedule 1 Investments
Schedule 8.2 Authorization
Schedule 8.3 Capitalization
Schedule 8.4 Litigation
Schedule 8.7 Conflicting Agreements
Schedule 8.8 Governmental Permits
EXHIBITS:
--------
Exhibit A Form of Amendment to Restated Certificate of Incorporation
Exhibit B Form of Certificate of Designations for Series D Preferred Stock
Exhibit C Form of Warrant Certificate
Exhibit D Form of Opinion of the Company's Counsel
Exhibit E Form of Second Amendment to Stockholders Agreement
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of May 30, 1997, is made
by and among CAREER EDUCATION CORPORATION, a Delaware corporation (the
"Company"), ▇▇▇▇▇▇ EQUITY CAPITAL CORPORATION, an Illinois corporation
("▇▇▇▇▇▇"), ELECTRA INVESTMENT TRUST P.L.C. ("EIT") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇") (▇▇▇▇▇▇▇ is sometimes referred to herein as the "Individual
Investor"). ▇▇▇▇▇▇ and EIT are sometimes collectively referred to herein as the
"Institutional Investors." The Institutional Investors and the Individual
Investor are sometimes collectively referred to herein as the "Purchasers."
W I T N E S S E T H:
WHEREAS, Purchasers are the holders of issued and outstanding capital
stock of the Company, and issued and outstanding warrants and other options and
rights to purchase capital stock of the Company.
WHEREAS, the Company has requested additional equity financing in the
amount of up to Fifteen Million Dollars ($15,000,000) from Purchasers, and
desires to sell the Series D Preferred Stock and the Warrants (as each is
hereinafter defined, and collectively, the "Securities") to the Purchasers, for
the purpose of providing funds for, among other things, the acquisition of The
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Schools, Inc. (the "▇▇▇▇▇ Acquisition") and for the acquisition
of either or both of IAMD, Limited, an Illinois corporation and International
Academy of Merchandising and Design (Canada), Limited, an Ontario corporation by
the Company (each, a "Future Acquisition"); and
WHEREAS, the Purchasers desire, upon the terms and conditions
hereinafter provided, to purchase from the Company the Securities;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
bound, hereby agree as follows:
Certain terms used in this Agreement are defined in Section 10 hereof.
Unless otherwise indicated, references to statutes are to statutes of the United
States. Accounting terms used herein shall be construed in accordance with
GAAP. In addition, unless the contrary intention appears, terms and expressions
having a defined or generally accepted meaning under the securities laws of the
United States shall have the same meaning in this Agreement.
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1. AUTHORIZATION OF FINANCING.
--------------------------
The Company has authorized the issuance, sale and delivery of (a)
15,000 shares of its Series D Redeemable Preferred Stock, par value $.01 per
share, with a stated value of $1,000 per share (the "Series D Preferred Stock"),
which series has the rights, restrictions, privileges and preferences as set
forth in the Certificate of Designations for the Series D Preferred Stock of the
Company, substantially in the form of Exhibit B attached hereto, as amended by
the Amendment to Restated Certificate of Incorporation substantially in the form
of Exhibit A attached hereto (the "Certificate of Designations"), and (b) the
detachable warrants to be issued in connection with each issuance of Series D
Preferred Stock in accordance with Schedule 1 attached hereto (collectively, the
"Warrants" and each individually, a "Warrant") to purchase a maximum aggregate
of 36,186 shares of Class E Common Stock of the Company, at an exercise price of
$.01 per share, evidenced by one or more warrant certificates (the "Warrant
Certificates") to be substantially in the form of Exhibit C attached hereto.
2. PURCHASE AND SALE OF SECURITIES; CLOSING.
----------------------------------------
2.1. PURCHASE AND SALE.
-----------------
The Company hereby agrees to issue and sell to each Purchaser and each
Purchaser, severally and not jointly, agrees, subject to the terms and
conditions herein set forth and in reliance upon the representations, warranties
and agreements of the Company herein contained, to purchase at the Closings from
the Company for the purchase price set forth opposite such Purchaser's name in
Schedule 1 attached hereto, (a) the aggregate number of shares of Series D
Preferred Stock set forth opposite such Purchaser's name under the heading Total
Investment in Schedule 1 attached hereto, and registered in such Purchaser's
name (or, in the case of ▇▇▇▇▇▇ and EIT, the name of such Institutional
Investor's nominee, as such Institutional Investor shall request) and (b) the
aggregate number of Warrants set forth opposite such Purchaser's name under the
heading Total Investment in Schedule 1 attached hereto, in the form of one or
more Warrant Certificates, registered in such Purchaser's name (or, in the case
of ▇▇▇▇▇▇ and EIT, the name of such Institutional Investor's nominee, as such
Institutional Investor shall request).
2.2. CLOSING.
-------
The purchase and delivery of the Securities shall take place at the
offices of Goldberg, Kohn, Bell, Black, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., ▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at one or more closings (each, a
"Closing"). Subject to the satisfaction or waiver of the conditions described
in Section 3 below, the Closing of the purchase and sale of the Securities set
forth opposite each Purchaser's name under the heading Initial Investment in
Schedule 1 attached hereto, shall be held simultaneously with the execution and
delivery of this Agreement, or at such other place or on such other date as the
Institutional Investors and the Company may agree upon, but in no event later
than May 30, 1997 (the "Initial Closing Date"). Subject to the satisfaction or
waiver of the
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conditions described in Section 3 and Section 4 below, each Closing of the
purchase and sale of Securities, or any portion thereof, set forth opposite each
Purchaser's name under the heading Subsequent Investment in Schedule 1 attached
hereto, shall be held simultaneously with the Closing of a Future Acquisition
which the Company intends to finance with the proceeds of such Subsequent
Investment. Simultaneously with each Closing or as promptly as practicable
thereafter, the Company will deliver one or more certificates evidencing the
appropriate number of shares of Series D Preferred Stock and one or more
certificates evidencing the appropriate number of Warrants to each Purchaser,
against payment by such Purchaser of the purchase price therefor by transfer of
immediately available funds to such bank or other financial institution as the
Company may direct in writing, for credit to the Company's account The date of
each Closing hereunder is sometimes referred to as a "Closing Date".
Notwithstanding anything to the contrary contained herein, each Purchaser shall
be permitted, at its option, to purchase all of the Securities set forth
opposite such Purchaser's name on Schedule 1 at the Initial Closing.
3. CONDITIONS TO EACH CLOSING.
--------------------------
Each Purchaser's obligation to purchase and pay for the Securities to
be sold in connection with the Initial Investment and each Subsequent Investment
is subject to the satisfaction prior to or at each Closing of each of the
following conditions:
3.1. CLOSING OF THE ▇▇▇▇▇ ACQUISITION AND CLOSING OF LASALLE LOANS.
-------------------------------------------------------------
With respect to the Initial Closing only, the ▇▇▇▇▇ Acquisition shall
close simultaneously with the Initial Closing, in accordance with the terms and
subject to the conditions approved by the Board of Directors of the Company,
without any material deviation therefrom. The transactions contemplated by that
certain Credit Agreement dated as of May 30, 1997 by and among the Company,
LaSalle National Bank, as agent and certain lenders thereunder, shall close
simultaneously with the Initial Closing, in accordance with the terms and
subject to conditions approved by the Board of Directors of the Company, without
any material deviation therefrom.
3.2. OPINION OF COUNSEL.
------------------
Simultaneously with each Closing or as promptly as practicable
thereafter, the Institutional Investors shall have received from Goldberg, Kohn,
Bell, Black, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd., special counsel to the Company, an
opinion substantially in the form set forth in Exhibit D, addressed to the
Institutional Investors, dated the Closing Date and otherwise reasonably
satisfactory in form and substance to such parties.
3.3. REPRESENTATIONS AND WARRANTIES.
------------------------------
The representations and warranties of the Company contained in this
Agreement and those otherwise made in any writing by the Company, furnished in
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connection with or pursuant to this Agreement and the ▇▇▇▇▇ Acquisition or
Future Acquisitions to be financed hereby, as applicable (the "Transaction
Documents") or in connection with the transactions contemplated hereby or
thereby, shall be true and correct when made and at the time of such Closing
(unless expressly made as of a particular date) as though made at such time, and
the Company shall have performed or complied with the covenants, conditions and
agreements contained in this Agreement and the applicable Transaction Documents
required to be performed and complied with by the Company at or prior to such
Closing, other than covenants, conditions and agreements contained in such
Transaction Documents which have been waived by the parties thereto and
disclosed to the Institutional Investors on or prior to such Closing.
3.4. PURCHASE PERMITTED BY APPLICABLE LAWS.
-------------------------------------
The purchase of and payment for the Securities to be purchased at such
Closing shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act) and shall not
subject the Purchasers to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation or order.
Each Purchaser shall have received such certificates or other evidence as they
may reasonably request to establish compliance with the conditions set forth in
this Section 3.4.
3.5. NO ADVERSE LEGISLATION, ACTION OR DECISION.
------------------------------------------
After the date hereof and prior to the applicable Closing Date, no
legislation, order, rule, ruling or regulation shall have been enacted or made
by or on behalf of any governmental body, department or agency, nor shall have
any legislation been introduced and favorably reported for passage to either
House of Congress by any committee of either such House to which such
legislation has been referred for consideration or any state legislature in any
jurisdiction in which the Company operates or by any committee of such
legislature to which such legislation has been referred for consideration, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in any Institutional Investor's judgment, would
have a Material Adverse Effect. There shall be no action, suit, investigation,
or proceeding pending, or to the Company's knowledge, threatened, against or
affecting the Company or any of its Subsidiaries, the Company's or any such
Subsidiary's properties or rights, or any of the Company's or any such
Subsidiary's Affiliates, officers or directors, before any court, arbitrator or
administrative or governmental body which (a) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement or the applicable Transaction Documents or (b) questions the validity
or legality of any such transactions or seeks to recover damages or to obtain
other relief in connection with any such transactions, and, to the Company's
knowledge, there shall be no valid basis for any such action, proceeding or
investigation.
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3.6. APPROVALS AND CONSENTS.
----------------------
The Company shall have duly received all material authorizations,
waivers, consents, approvals, licenses, franchises, permits and certificates
(collectively, "Consents") by or of all federal, state and local governmental
authorities and all material Consents by or of all other Persons necessary or
advisable for the issuance of the applicable Securities, and all thereof shall
be in full force and effect at the time of Closing.
3.7. PROCEEDINGS.
-----------
All proceedings taken or to be taken in connection with the
transactions contemplated hereby and in the applicable Transaction Documents,
and all documents incident thereto, shall be reasonably satisfactory in form and
substance to each Institutional Investor, and each Institutional Investor shall
have received all such counterpart originals or certified or other copies of
such documents as it may request.
3.8. SERIES D PREFERRED STOCK AND WARRANT CERTIFICATES.
-------------------------------------------------
The Company shall have delivered to each Purchaser one or more Series
D Preferred Stock certificates and one or more Warrant certificates representing
the aggregate number of shares of Series D Preferred Stock and Warrants being
purchased from the Company by such Purchaser at or promptly after the applicable
Closing.
3.9. STOCKHOLDERS AGREEMENT.
----------------------
The Second Amendment to the Amended and Restated Stockholders'
Agreement of the Company, in the form of Exhibit E hereto, shall have been
executed and delivered by and to all parties thereto.
3.10. AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION AND
------------------------------------------------------
CERTIFICATE OF DESIGNATION.
--------------------------
The Amendment to Restated Certificate of Incorporation and Certificate
Designation of Series D Preferred Stock increasing the number of authorized
shares of Class A Common Stock to 600,000, the number of authorized shares of
Class E Non-voting Common Stock to 200,000 and the number of authorized shares
of Series D Preferred Stock to 25,000, in the form of Exhibit A shall have been
approved by the requisite stockholders and the Board of Directors of the Company
and shall have been executed and duly filed with the Delaware Secretary of
State, and shall remain in full force and effect, and since the date of such
filing, the Company will not have adopted or filed any other document or
instrument amending or modifying the Restated Certificate of Incorporation or
the Certificate of Designation of Series D Preferred Stock.
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3.11. COMPLIANCE CERTIFICATE.
----------------------
Each Purchaser shall have received an Officers' Certificate, dated as
of each Closing Date, certifying that the conditions specified in this Section 3
required to be fulfilled on such Closing Date (other than actions required to be
taken by such Purchaser) have been fulfilled.
3.12. ADDITIONAL INFORMATION.
----------------------
The Company shall have executed and/or delivered such other
information and documentation as each Purchaser and its counsel may reasonably
request. Each Purchaser shall have received such other documents and opinions,
in form and substance satisfactory to its counsel, relating to matters incident
to the ▇▇▇▇▇ Acquisition and the transactions contemplated by the Transaction
Documents.
3.13. NO CHANGE RESULTING IN MATERIAL ADVERSE EFFECT.
----------------------------------------------
Since February 28, 1997, there shall have been no change in the
business or operations of the Company, nor any other event, which has had, or is
likely to have, in any Institutional Investor's reasonable judgment, a Material
Adverse Effect.
Any condition specified in this Section 3 (or in Section 4 below) may
be waived with respect to any Purchaser upon express written consent executed by
such Purchaser.
4. FUTURE ACQUISITIONS.
-------------------
4.1. CONDITIONS TO FUTURE ACQUISITIONS.
---------------------------------
Following the Initial Closing, the Company shall be permitted to use
the proceeds from the sale of Securities hereunder which are not used to fund
the ▇▇▇▇▇ Acquisition (the "Unused Proceeds") to fund Future Acquisitions,
subject to the satisfaction, or waiver by each Institutional Investor, prior to
or at the Closing of such Future Acquisitions, of each of the following
conditions:
(a) No Event of Default. No default or event of default shall exist
or be continuing under the Senior Loan Agreement, other than any default or
event of default caused by the Purchasers' failure to purchase all or any
of the Series D Preferred Stock or Warrants or which would be cured by the
purchase of the Series D Preferred Stock and Warrants being requested by
the Company.
(b) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and those otherwise
made in any writing by the Company furnished in connection with or pursuant
to this Agreement and the Future Acquisition in question (the "Future
Acquisition Transaction Documents") and in connection with the
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transactions contemplated hereby and thereby, shall be true and correct in
all material respects as of the closing of the Future Acquisition (unless
expressly made as of a particular date).
(c) Conditions. The Company shall have performed or complied with
the covenants, conditions and agreements contained in this Agreement and
the applicable Future Acquisition Transaction Documents required to be
performed and complied with by the Company at or prior to such closing,
other than covenants, conditions and agreements contained in such future
Acquisition Transaction Documents which have been waived by the parties
thereto and disclosed to the Institutional Investors on or prior to such
closing.
(d) Approval of Company Board of Directors; Use of Proceeds. The
Unused Proceeds shall be used to fund a Future Acquisition previously
approved by the Board of Directors of the Company, which approval shall
include the affirmative vote of the ▇▇▇▇▇▇ Director (as defined in the
Stockholders Agreement), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (or any successor to his seat on
the Board of Directors), provided that a new approval of the Board of
Directors shall be required in order to fund one Future Acquisition without
the other or to fund a Future Acquisition after June 30, 1997, which
approval shall include the approval of the ▇▇▇▇▇▇ Director.
(e) Prior Notice. The Company shall have given to each Purchaser
written notice of the proposed closing of the Future Acquisition not less
than five (5) days prior to the date of the Closing for such Future
Acquisition, which notice shall indicate the nature of the Future
Acquisition and the aggregate consideration to be paid by the Company. Any
Purchaser who has not previously purchased all or a sufficient portion of
the Securities set forth opposite such Purchaser's name on Schedule 1 to
fund its portion of such Future Acquisition shall be obligated to purchase
such additional
4.2. LIMITATION OF COMPANY'S RIGHT TO MAKE ANY FUTURE ACQUISITION.
------------------------------------------------------------
Notwithstanding any provision of this Agreement to the contrary, in no
event shall the Company be permitted to obligate any Purchaser to fund any
Future Acquisitions after the earlier of July 31, 1997, or (ii) the occurrence
of a Triggering Event.
4.3. REDEMPTION OF UNUSED PROCEEDS SUBSEQUENT TO JULY 31, 1997.
---------------------------------------------------------
Notwithstanding any provision of this Agreement to the contrary, in
the event that the Company has not used all or any portion of the Unused
Proceeds to fund Future Acquisitions before the earlier of (i) July 31, 1997, or
(ii) the occurrence of a
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Triggering Event, then the Investors will cause the Company to redeem such
number of shares of Series D Preferred Stock issued hereunder in respect of
Subsequent Investments from each of the Purchasers of such shares, to the extent
the proceeds of such Subsequent Investments constitute Unused Proceeds, so as to
return such Unused Proceeds to the applicable Purchasers, for a redemption price
equal to the Liquidation Value (as defined in the Certificate of Designations)
of such Securities, and, in connection with such redemption, the number of the
Warrants allocable to the redeemed shares of Series D Preferred Stock in
accordance with Schedule 1 attached hereto shall be cancelled.
5. AFFIRMATIVE COVENANTS.
---------------------
The Company hereby covenants from and after the date of this
Agreement, so long as any Securities remain outstanding, as follows:
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS.
--------------------------------------
The Company covenants that it will deliver, or cause to be delivered,
to each Purchaser, the financial statements and other reports described in
Section 5.1 of the Electra Securities Agreement, in the form and in accordance
with the deadlines for delivery of such financial statements and other reports
set forth in the Electra Securities Agreement.
5.2. USE OF PROCEEDS.
---------------
The Company shall use all of the proceeds received from the sale of
the Securities pursuant to this Agreement to fund (a) the ▇▇▇▇▇ Acquisition and
related costs and expenses and (b) any Future Acquisition permitted hereunder
and any related costs and expenses. The Company shall invest any Unused
Proceeds in a segregated, interest bearing account pending disbursement in
connection with a Future Acquisition or application to a redemption pursuant to
Section 4.3 above.
5.3. RESERVATION OF SHARES.
---------------------
The Company shall at all times keep reserved, and available for
issuance, the number of shares of Common Stock for issuance upon exercise of all
of the Warrants (as such number may be adjusted from time to time pursuant to
the terms of the Warrants).
6. NEGATIVE COVENANTS.
------------------
The Company hereby covenants from and after the date of this
Agreement, so long as any Securities remain outstanding, as follows:
6.1. WITHHOLDING TAXES.
-----------------
(a) The Company covenants that it will not withhold United States
withholding taxes from payments to be made to holders of the Securities if
such holders (i) are corporations organized under the laws of a
jurisdiction
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outside the United States or are otherwise persons not resident in the
United States for United States federal income tax purposes, and (ii)
provide the Company, upon the Company's reasonable request, with one or
more of Internal Revenue Service Form W-8, Form 4224 or other applicable
forms, certificates or documents certifying as to entitlement to an
exemption from any such withholding requirements.
(b) The Company covenants that it will not withhold United States
withholding taxes from payments to be made to holders of the Securities in
excess of an applicable treaty rate if such holders (i) are corporations
organized under the laws of jurisdictions outside the United States or are
otherwise persons not resident in the United States for United States
federal income tax purposes, and (ii) provide the Company, upon the
Company's reasonable request, with one or more of certifications of their
residence address, Internal Revenue Service Form 1001 or other applicable
forms, certificates or documents certifying as to entitlement to a reduced
rate of withholding under any such withholding requirements.
(c) Neither subsection 6.1(a) nor subsection 6.1(b) hereof shall
require the Company to apply an exemption or reduced rate of withholding
during any period when it shall have received notice or has knowledge (i)
that the residence information previously provided on any applicable form,
certificate or document is incorrect and no corrected form, certificate or
document as applicable has been provided to the Company, or (ii) of any
other information which would render such exemption or reduced rate
inapplicable.
7. OTHER REMEDIES.
--------------
No remedy conferred in this Agreement upon the holder of any
Securities is intended to be exclusive of any other remedy available to such
holder, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE COMPANY.
--------------------------------------------------------
The Company hereby represents, covenants and warrants for the benefit
of each holder from time to time of the Securities and the Purchasers, as of the
applicable Closing, and after giving effect to the transactions contemplated by
this Agreement to be consummated simultaneously with such Closing, as follows:
8.1. ORGANIZATION; AUTHORITY.
-----------------------
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties
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and to carry on its business as presently conducted and as proposed to be
conducted. Each of the Company and its Subsidiaries is duly qualified and in
good standing as a foreign corporation duly authorized to do business in each
jurisdiction where it owns or leases property or in which the conduct of its
business requires it so to qualify or be licensed, except in those jurisdictions
in which the failure to qualify will not individually or in the aggregate have a
Material Adverse Effect. Other than the Subsidiaries, the Company does not own
of record or beneficially any Capital Stock or equity interest or investment in
any corporation, association, partnership, joint venture or other entity. The
Company and each of its Subsidiaries have furnished Purchasers with true,
correct and complete copies of its Certificate of Incorporation (including,
without limitation, the Certificate of Designations) and By-Laws, each as
amended to date.
8.2. AUTHORIZATION.
-------------
All corporate action on the part of the Company and its directors and
stockholders necessary for the authorization, execution, delivery and
performance by (a) the Company of this Agreement, the Series D Preferred Stock
certificates, the Warrants and the other transactions to be consummated in
connection with the applicable Closing, and (b) the consummation of the
transactions contemplated herein and therein shall have been taken or will be
taken prior to such Closing. Each of the Transaction Documents to which the
Company is a party is the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms. The execution, delivery
and performance by the Company of each Transaction Document to which it is a
party and compliance therewith and the issuance and sale of the shares of Series
D Preferred Stock and the Warrants will not result in any violation of and will
not (i) conflict with, or result in a breach of, any of the terms of, or
constitute a default under, (a) any provision of state or Federal law to which
the Company is subject, (b) the Company's Certificate of Incorporation
(including, without limitation, the Certificate of Designations) or By-Laws, or
(c) any mortgage, indenture, agreement, instrument, judgment, decree, order,
rule or regulation, or other restriction to which the Company is a party or by
which it is bound, or (ii) result in the creation of any Lien (except as
contemplated by the Senior Loan Documents) upon any of the properties or assets
of the Company pursuant to any such term, or (iii) except as set forth on
Schedule 8.2, result in the suspension, revocation, impairment, forfeiture or
non-renewal of any permit, license, authorization or approval applicable to the
Company's operations or any of its assets or properties. No stockholder has any
preemptive rights or rights of first refusal by reason of the issuance of the
Warrants or the shares of Series D Preferred Stock which have not previously
been waived. The issued and outstanding shares of Series D Preferred Stock have
been duly and validly issued and are fully paid and non-assessable. The shares
of Common Stock issuable upon exercise of the Warrants, have, in each case, been
duly and validly reserved, and are not subject to any preemptive rights or
rights of first refusal which have not previously been waived, and, upon
issuance, will be validly issued, fully paid and non-assessable.
-10-
8.3. CAPITAL STOCK AND RELATED MATTERS.
---------------------------------
Immediately following the Closing, (a) the authorized capital stock of
the Company will consist of (i) 600,000 shares of Class A Voting Common Stock,
par value $.01 per share, of which 5,250 shares will be issued and outstanding,
(ii) 100,000 shares of Class B Voting Common Stock, par value $.0l per share, of
which 5,100 shares will be issued and outstanding, (iii) 100,000 shares of Class
C Non-Voting Common Stock, par value $.01 per share, of which 69,900 shares will
be issued and outstanding, (iv) 100,000 shares of Class D Non-Voting Common
Stock, par value $.01 per share, of which no shares will be issued and
outstanding and 27,484 shares will be reserved for issuance upon the exercise of
certain warrants held by Electra and The Provident Bank, (v) 200,000 shares of
Class E Non-Voting Common Stock, par value $.01 per share, of which 1,648 shares
will be issued and outstanding and 13,400 shares will be reserved for issuance
upon exercise of certain management stock options, 1,315 shares will be reserved
for issuance upon exercise of certain warrants held by The Provident Bank and
45,110 shares will be reserved for issuance upon exercise of the Warrants and
certain other warrants, (vi) 50,000 shares of Series A Preferred Stock, par
value $.01 per share, of which 7,852 shares will be issued and outstanding,
(vii) 1,000 shares of Series B Preferred Stock, par value $.01 per share, none
of which shares will be issued and outstanding, (viii) 5,000 shares of Series C
Preferred Stock, par value $.01 per share, of which 4,954 shares of Series C
Preferred Stock will be issued to Electra and outstanding, and (ix) 25,000
shares of Series D Preferred Stock, par value $.01 per share, per share, of
which 21,125 shares will be issued and outstanding and 1,375 shares will be
reserved for issuance upon the closing of unconsummated Subsequent Investments,
(b) no shares of Common Stock will be owned or held by or for the account of the
Company; (c) all of the issued and outstanding shares of the Company's Capital
Stock will be validly issued and outstanding, fully paid and non-assessable and
will be owned of record (other than shares attributable to ▇▇▇▇▇▇▇, which shall
be owned of record by First Chicago, Custodian, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇) and, to
the best knowledge of the Company, beneficially, free and clear of any Liens
(except as may be contemplated by the Senior Loan Documents) by the individuals
and entities and in the amounts set forth on Schedule 1 and Schedule 8.3 hereof;
(d) except for the Class A Voting Common Stock, the Class B Voting Common Stock,
the Class C Non-Voting Common Stock, warrants for the Class D Non-Voting Common
Stock, the Class E Non-Voting Common Stock and certain warrants and options for
the Class E Non-Voting Common Stock, the Series A Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock, and the Warrants, and except as
set forth on Schedule 8.3 hereto, the Company has no, and at the time of the
Initial Closing, will not have, outstanding stock or securities convertible into
or exchangeable for any shares of its Capital Stock, or any outstanding rights
(either preemptive or other) to subscribe for or to purchase, or any outstanding
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any outstanding calls, commitments or claims of
any character relating to, any Capital Stock or any stock or securities
convertible into or exchangeable for any Capital Stock of the Company, or any
outstanding demand or piggyback registration rights to register any Capital
Stock or any stock or securities convertible into or exchangeable for
-11-
the Capital Stock of the Company (other than rights of certain Purchasers which
have been waived or are being waived simultaneously herewith); (e) except with
respect to the Series C Preferred Stock, the Series A Preferred Stock and the
Series D Preferred Stock, the Company will not be subject to any obligation
(contingent or other) to repurchase, otherwise acquire or retire any shares of
Capital Stock; and (f) the Company has no knowledge of any agreement (except as
set forth in this Agreement, the Electra Securities Agreement or the
Stockholders Agreement) restricting the transfer of any shares of the Company's
Capital Stock, except as set forth on Schedule 8.3. Schedule 8.3 sets forth the
number of shares of Capital Stock, the holders thereof, and the percentage held
by each holder of the issued and outstanding Capital Stock of the Company and
each Subsidiary at the time of the Closing of the Initial Investment and after
giving effect to the Initial Investment.
8.4. LITIGATION.
----------
Except as disclosed on Schedule 8.4 hereto, there is no action, suit,
investigation or proceeding pending, or, to the Company's knowledge threatened,
or any basis therefor or threat thereof, in, nor is there any existing judgment,
order or decree of, any court, governmental authority, arbitration board or
tribunal, foreign or domestic to which the Company or any of its Subsidiaries is
or may be named as a party or its property is or may be subject or which
challenges this Agreement or any of the transactions contemplated hereby, or to
the Company's knowledge, to which any officer, employee or stockholder of the
Company or any of its Subsidiaries is subject, and the Company has no knowledge
of any unasserted claim, the assertion of which is likely and which, if
asserted, will seek damages, an injunction or other legal, equitable, monetary
or nonmonetary relief which claim individually or collectively with other such
unasserted claims, if granted, or actions, suits, investigations or proceedings
would have a Material Adverse Effect or which challenges this Agreement or any
of the other Transaction Documents or any of the transactions contemplated
hereby or thereby. No legislation, order, rule, ruling or regulation has been
enacted or made by or on behalf of any governmental body, department or agency,
nor to the Company's knowledge has there been any legislation introduced and
favorably reported for passage to either House of Congress by any committee of
either such House to which such legislation has been referred for consideration
or any state legislature in any jurisdiction in which the schools operated by
the Company and its Subsidiaries operate or by any committee of such legislature
to which such legislation has been referred for consideration, nor to the
Company's knowledge has any decision of any court of competent jurisdiction
within the United States been rendered which, in the Company's judgment, would
have a Material Adverse Effect.
8.5. COMPLIANCE.
----------
(a) Neither the Company nor any Subsidiary is in violation of any
statute, law, ordinance, governmental rule or regulation (including
environmental laws) or any judgment, order or decree (federal, state, local
or foreign) to which it is subject, except where such violation would not
have,
-12-
and is not likely to result in, a Material Adverse Effect, nor has it
failed to obtain any, and it possesses all, licenses, permits, franchises
or other governmental authorizations necessary for the ownership or
operation of its properties or the conduct of its business as presently
conducted and as proposed to be conducted, except where the failure to so
obtain or to so possess would not have, and is not likely to result in, a
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in violation of any
term of its Certificate of Incorporation, as amended (including, without
limitation, the Certificate of Designations in the case of the Company), or
By-Laws, as amended.
(c) Neither the Company nor any Subsidiary is in violation of any
term of any Contract, judgment, decree, order, statute, rule or regulation
to which either the Company or any Subsidiary is subject or which would
permit any party to any Contract to terminate, amend or modify such
Contract, except for any violations which do not cause, and are not likely
to result in, a Material Adverse Effect. To the Company's knowledge,
neither the Company nor any Subsidiary has waived any right or default by
any party under any Contract. All Contracts are in full force and effect,
and the Company and its Subsidiaries each have no knowledge that any party
to any Contract, or any parties to any Contract is or is seeking or
presently intends to seek to (i) terminate, amend or modify such Contract
or (ii) upon the expiration of such Contract, not renew such Contract on
terms substantially similar to those terms currently in such Contract,
except where the termination, amendment, modification or failure to renew
does not have, and is not likely to result in, a Material Adverse Effect.
8.6. OFFERING.
--------
Based upon the representations and warranties of each Purchaser set
forth in Section 9 hereof, the offer, sale and issuance of the shares of Series
D Preferred Stock, the Warrants, and the shares of Common Stock issuable upon
the exercise of the Warrants are all exempt from the registration requirements
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or other jurisdiction, and neither the Company
nor anyone acting on its behalf will take any action hereafter that would cause
the lose of such exemption.
8.7. CONFLICTING AGREEMENTS.
----------------------
Neither the Company nor any of its Subsidiaries is a party to any
Contract or subject to any restriction which would have, or would be likely to
have, a Material Adverse Effect. Except as set forth on Schedule 8.7 hereto,
neither the Company nor any of its Subsidiaries is a party to or otherwise
subject to any Contract which limits the amounts of,
-13-
or otherwise imposes restrictions on, the issuance of the Warrants, the Series D
Preferred Stock or the Common Stock (upon the exercise of the Warrants).
8.8. GOVERNMENTAL PERMITS, CONSENTS, ETC.
-----------------------------------
Except as set forth on Schedule 8.8, no consent, approval,
authorization, exemption or other action by, or notice to or filing with, any
court or administrative or governmental body which has not been obtained, taken
or made is required in connection with the execution and delivery of this
Agreement or the Transaction Documents, the consummation of the transactions
contemplated hereby or thereby or fulfillment of or compliance with the terms
and provisions hereof.
8.9. FEES AND COMMISSIONS.
--------------------
No broker's or finder's fee or commission will be payable by the
Company with respect to the issuance and sale of the Securities or the
transactions contemplated hereby.
8.10. RESERVATION OF SHARES.
---------------------
The Company has reserved for issuance the number of its authorized but
unissued shares of Common Stock necessary to permit the exercise in full of all
the outstanding Warrants.
9. REPRESENTATIONS OF THE PURCHASERS.
---------------------------------
Each Purchaser represents, severally and not jointly, and in making
its purchase hereunder it is specifically understood and agreed, that:
9.1. PURCHASE OF SECURITIES.
----------------------
Such Purchaser is purchasing the Securities set forth opposite his or
its name on Schedule 1 hereto for its own account, (a) for investment purposes
and not with a view to or for sale in connection with any distribution thereof;
and (b) it, he or she is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act. Such Purchaser agrees that
it will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any of the Securities purchased by it
hereunder (or solicit any offers to buy, purchase, or otherwise acquire or take
a pledge of any of such Securities), except in compliance with the Securities
Act, the Exchange Act, any applicable state securities or blue sky laws and the
Stockholders Agreement.
9.2. INCORPORATION AND AUTHORIZATION OF INSTITUTIONAL INVESTORS.
----------------------------------------------------------
In the case of each Institutional Investor, such Institutional
Investor is a corporation duly organized, validly existing and in good standing
under the laws of its
-14-
jurisdiction of incorporation and such Institutional Investor has the full legal
right, power and authority to enter into this Agreement and to perform its
obligations hereunder without the need for the consent of any other person; and
this Agreement has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of such Institutional Investor
enforceable against such Institutional Investor in accordance with the terms
hereof.
9.3. NO CONFLICTS.
------------
The execution, delivery and performance by such Purchaser of this
Agreement and each Transaction Document to which it is a party and compliance
therewith and the purchase of the Securities will not result in any violation of
and will not conflict with, or result in a breach of, any of the terms of, or
constitute a default under, (a) any provision of state, Federal or foreign law
to which it is subject, (b) where applicable, its Certificate of Incorporation
or By-Laws, or (c) any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation, or other restriction to which it is a party
or by which it is bound.
9.4. NO BROKERS' FEES.
----------------
Such Purchaser has not agreed or committed to pay any broker's or
finder's fee or commission with respect to the purchase of the Securities or the
transactions contemplated hereby.
10. DEFINITIONS.
-----------
For the purpose of this Agreement, the following terms shall have the
meanings specified with respect thereto below:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person, but shall exclude, with respect
to the Company, Electra and any transferee that might be deemed to be an
Affiliate of the Company solely by reason of its ownership of Securities
purchased by EIT under this Agreement or any other agreement or securities
issued in exchange for any such Securities, or by reason of its benefiting
from any agreements or covenants of the Company contained in this
Agreement. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Securities Purchase Agreement, as this
Agreement may be amended from time to time, together with all Exhibits and
Schedules hereto.
-15-
"By-Laws" means for any Person all By-Laws, Codes of Regulation or
other equivalent charter documents in the jurisdiction of incorporation of
such Person, all as amended.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of, rights
to acquire, or interests in (however designated) corporate stock,
including, without limitation, any security which is convertible into or
exercisable for such corporate stock.
"Certificate of Designations" has the meaning set forth in Section 1
---------
hereof.
"Certificate of Incorporation" means for any Person all Certificates
of Incorporation, Articles of Incorporation or other equivalent charter
documents in the jurisdiction of incorporation of such Person, all as
amended.
"Closing" has the meaning specified in Section 2.2 hereof.
-----------
"Closing Date" has the meaning specified in Section 2.2 hereof.
-----------
"Common Stock" means the Company's common stock, par value $.01 per
share.
"Company" means Career Education Corporation, a Delaware corporation,
and its successors and assigns.
"Consents" has the meaning specified in Section 3.6 hereof.
-----------
"Contract" means any written or oral contract, agreement, commitment,
note, bond, pledge, lease, sublease, deed, mortgage, guaranty, indenture,
license, option, consulting agreement, supply contract, repair contract,
distribution agreement, purchase order, joint venture agreement, franchise,
technology and know-how agreement, employment agreement, instrument or any
other contractual commitment that is binding on any Person or its property,
which provide for payments from or to such Person of $50,000 or more after
the date hereof.
"Damages" has the meaning set forth in subsection 11.2(b) hereof.
------------------
"EAI" means Electra Associates, Inc., a Delaware corporation, and its
successors and assigns.
"EIT" means Electra Investment Trust P.L.C., a corporation organized
under the laws of England and Wales, and its successors and assigns.
-16-
"Electra" means EIT and EAI.
"Electra Securities Agreement" means that certain Securities Purchase
Agreement dated as of July 31, 1995 between the Company and Electra, as
amended from time to time.
"Exchange Act" means the Securities Act of 1934, as amended, from time
to time, and any successor statute or law thereto.
"Future Acquisition" has the meaning set forth in the second recital
to this Agreement.
"GAAP" means generally accepted accounting principles in the United
States as in effect at the time any determination is made or financial
statement is required hereunder as promulgated by the American Institute of
Certified Public Accountants, the Accounting Principles Board, the
Financial Accounting Standards Board or any other body existing from time
to time which is authorized to establish or interpret such principles,
applied on a consistent basis throughout any applicable period, subject to
any change required by a change in GAAP; provided, however, that if any
change in generally accepted accounting principles during the term of this
Agreement affects the calculation of any financial covenant or
determination of value contained herein, the parties hereto hereby agree to
amend this Agreement to the effect that each such financial covenant or
determination of value is not more or less restrictive than such covenant
as in effect on the date hereof.
"▇▇▇▇▇ Acquisition" has the meaning set forth in the second recital to
this Agreement.
"▇▇▇▇▇▇" means, collectively, ▇▇▇▇▇▇ Equity Capital Corporation, a
Delaware corporation, and any entity controlling or under common control
with ▇▇▇▇▇▇ Equity Capital Corporation, and their successors and assigns.
"Individual Investors" has the meaning set forth in the introductory
paragraph of this Agreement.
"Initial Closing Date" has the meaning set forth in Section 2.2
hereof.
"Initial Public Offering" means an initial underwritten public
offering and sale for cash by the Company of the Common Stock of the
Corporation to an underwriter or underwriters pursuant to a "firm
commitment" underwriting agreement and a registration statement declared
effective by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, in which (i) the minimum equity valuation of the
Company is $45,000,000 before December 31, 1999 and $55,000,000 thereafter,
and (ii) the Company receives gross proceeds of at least $20,000,000.
-17-
"Institutional Investors" has the meaning set forth in the
introductory paragraph of this Agreement.
"▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual residing at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditions sale or other title retention agreement, any
lease in the nature thereof and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Material Adverse Effect" means a material adverse effect on the
business, condition (financial or other), assets, properties or operations
or prospects of the Company and its Subsidiaries, taken as a whole.
"Officers' Certificate" means a certificate signed in the name of the
Company, as applicable, by its chief executive officer, president or one of
its vice presidents and by its chief financial officer, treasurer or
controller.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof, and any other legal entity.
"Preferred Shares" means the shares of Series D Preferred Stock of the
Company.
"Purchasers" has the meaning set forth in the introductory paragraph
of this Agreement.
"Securities" means the Warrants and the Series D Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Loan Agreement" means that certain Credit Agreement dated as
of May 30, 1997 by and among the Company and various of its Subsidiaries
and LaSalle National Bank, as agent and certain lenders thereunder, as
amended from time to time.
"Senior Loan Documents" means the Senior Loan Agreement and the
documents entered into in connection with or provided for in the Senior
Loan Agreement.
-18-
"Series D Preferred Stock" means the Series D Redeemable Preferred
stock of the Company, par value $.01 per share with a stated value of
$1,000.00 per share.
"Stockholders Agreement" means that certain Amended and Restated
Stockholders Agreement dated as of July 31, 1995 among the Company and the
Purchasers, as amended by that certain First Amendment to Amended and
Restated Stockholders Agreement, dated as of February 28, 1997 among the
Company and Purchasers and as further amended by that certain Second
Amendment to Amended and Restated Stockholders Agreement of even date
herewith among the Company, Purchaser and the other stockholders of the
Company.
"Subsidiary" means, with respect to any Person, any corporation or
similar entity, a majority of the Capital Stock or other equity of which,
except directors' qualifying shares, shall, at the time as of which any
determination is being made, be owned by such Person either directly or
through Subsidiaries.
"Transaction Documents" has the meaning set forth in Section 3.3
hereof.
"Triggering Event" means (i) a sale, lease or exchange of all or
substantially all of the assets of the Company, (ii) a sale by the
Stockholders of all or substantially all of the outstanding shares of
Common Stock, or (iii) an Initial Public Offering.
"United States" or "U.S." means the United States of America.
"Warrant Certificate" shall have the meaning set forth in Section 1
hereof.
"Warrants" shall have the meaning set forth in Section 1 hereof.
11. MISCELLANEOUS.
-------------
11.1. PAYMENTS.
--------
The Company agrees that, so long as any Purchaser shall hold any
Securities, it will make payments in respect of such Securities, in compliance
with the terms of this Agreement, and the other Transaction Documents, by wire
transfer of immediately available funds for credit to such account or accounts
as such Purchaser may designate in writing.
-19-
11.2. EXPENSES; INDEMNITY.
-------------------
(a) The Company hereby agrees, whether or not the transactions hereby
contemplated shall be consummated, to pay, and save any holder harmless against
liability for the payment of, the costs and expenses incurred by such holder,
including, without limitation, the reasonable fees and disbursements of counsel
engaged by ▇▇▇▇▇▇, EIT and the Individual Investors, in connection with (i) any
subsequent proposed amendment to, modification of, or proposed consent under
(whether or not such proposed modification shall be effected or proposed consent
granted) and (ii) the costs and expenses, including attorney's fees, incurred by
▇▇▇▇▇▇, EIT and the Individual Investors, in enforcing its rights under, any of
this Agreement, the Warrants or the Series D Preferred Stock or in responding to
any subpoena or other legal process issued in connection with this Agreement or
the transactions contemplated hereby or by reason of such Purchaser's having
acquired any Security, including without limitation, costs and expenses incurred
in any bankruptcy case involving the Company or any of its Subsidiaries;
provided, however, that the Company shall not be obligated to pay any costs,
fees or expenses incurred by any holder solely by reason of such holder's gross
negligence or willful misconduct. The obligations of the Company under this
Section 11.2 shall survive the transfer of any Securities or portion thereof or
interest therein by any Purchaser or any subsequent holder of the Securities and
the redemption of the Preferred Shares.
(b) Notwithstanding any investigation performed by any Purchaser
prior to any Closing, the Company shall indemnify, save and hold harmless,
release and discharge each holder of any Securities and all of its officers,
directors, stockholders, agents, representatives, consultants, employees, and
Affiliates, and all of its heirs, successors and permitted assigns from and
against any and all damages, obligations, cases, claims, deficiencies,
penalties, interest, expenses, fines, assessments, charges and costs (including
attorneys' fees and court costs) and other liabilities of any kind, including,
without limitation, environmental liabilities (collectively, "Damages"), arising
from, out of or in any manner connected with or based on (i) notwithstanding any
disclosure in this Agreement (including the exhibits and schedules attached
hereto) or otherwise, the breach of any covenant of the Company or the failure
by the Company to perform any of its obligations contained herein or in any of
the agreements, documents or instruments required to be executed and delivered
by the Company in connection with the transactions contemplated hereby and in
any other Transaction Documents, (ii) any inaccuracy in or breach of any
representation or warranty of the Company under this Agreement or any agreement,
document or instrument required to be executed and delivered by the Company in
connection with the transactions contemplated hereby and in any other
Transaction Documents, (iii) notwithstanding any disclosure in this Agreement
(including the exhibits and schedules attached hereto) or otherwise, any and all
acts, omissions, events, conditions or circumstances involving or related to the
assets, properties, businesses, operations or activities of the Company, any of
its Subsidiaries or any predecessor of any thereof, whether occurring or
existing on, prior to or after
-20-
the Initial Closing, except if any such Damages arise solely as a result of such
Person's gross negligence or willful misconduct.
11.3. CONSENT TO AMENDMENTS; SUBORDINATION.
-------------------------------------
(a) This Agreement may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company shall have obtained the written consent to such
amendment, action or omission to act, of the holders of eighty percent (80%) of
the number of shares of Series D Preferred Stock at the time outstanding, and
each holder of any shares of Series D Preferred Stock at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 11.3. No
course of dealing between the Company and the holder of any share of Series D
Preferred Stock nor any delay in exercising any rights hereunder or under any
share of Series D Preferred Stock shall operate as a waiver of any rights of any
holder of such shares of Series D Preferred Stock.
(b) Once the Preferred Shares have been redeemed in full, this
Agreement may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment, action or
omission to act, of the holders of eighty percent (80%) of the then outstanding
Warrants, and each holder of Warrants at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 11.3.
11.4. PERSONS DEEMED OWNERS.
---------------------
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any shares of Series D Preferred Stock is
registered as the owner and holder of such shares of Series D Preferred Stock
for the purpose of receiving payment of the liquidation value of, and dividends
on, such shares and for all other purposes whatsoever.
11.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
------------------------------------------------------------
All representations and warranties contained herein and under any
other Transaction Documents or made in writing by or on behalf of the Company in
connection herewith or therewith or in connection with the transactions
contemplated hereby or thereby shall survive the execution and delivery of this
Agreement and the Securities, the transfer by any Purchaser of any Securities or
portion thereof or interest therein, or the repurchase or redemption of the
Securities and may be relied upon by any transferee regardless of any
investigation made at any time by or on behalf of such Purchaser; provided,
however, that the representations and warranties set forth in any Transaction
Document shall survive only for such period of time specifically set forth in
such
-21-
Transaction Document to the extent that a shorter period is set forth therein.
Subject to the preceding sentence, this Agreement, the Securities and the other
Transaction Documents embody the entire agreement and understanding among the
Purchasers and the Company with respect to the subject matter hereof and
supersede all prior agreements and understandings relating to the subject matter
hereof.
11.6. SUCCESSORS AND ASSIGNS.
----------------------
All covenants and other agreements in this Agreement contained by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the of the parties hereto whether so expressed or not.
11.7. NOTICES.
-------
All written communications provided for hereunder shall be sent by
first class mail or nationwide overnight delivery service (with charges prepaid)
and (a) if to ▇▇▇▇▇▇, addressed to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier no.: ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, with
copies to Goldberg, Kohn, Bell, Black, ▇▇▇▇▇▇▇▇▇▇ & Moritz, Ltd., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. Black, (b) if to EIT, addressed to it at ▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, Telecopier no.: 011-4471-242-1806, Attention: ▇▇.
▇▇▇▇▇▇ ▇▇▇▇, with a copy to Electra ▇▇▇▇▇▇▇, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇
▇. ▇▇▇▇▇, Senior Vice President, with copies to Pryor, Cashman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopier No.: 212-326-0806,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., or to such other address or addresses as EIT
shall have specified to the parties hereto in writing, (c) if to any of the
Individual Investors, addressed to such holder at such address as such other
holder shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then addressed to
such other holder in care of the last holder of the Securities issued hereunder
which shall have so specified an address to the Company, and (d) if to the
Company, addressed to it at Career Education Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇,
Attention: President, with a copy to: ▇'▇▇▇▇▇▇ and ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., and with a copy to ▇▇▇▇▇▇ Equity Capital
Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telecopier No.: 312-
441-7236, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, or to such other address or addresses as
the Company may have designated in writing to each holder of the Securities at
the time outstanding.
11.8. DESCRIPTIVE HEADINGS, ETC.
--------------------------
The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
References herein to a Section are, unless otherwise specified, to one of the
Sections of this Agreement
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and references to an "Exhibit" or "Schedule" are, unless otherwise specified, to
one of the Exhibits or Schedules to this Agreement.
11.9. GOVERNING LAW; CHOICE OF FORUM.
------------------------------
THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED AT
AND SHALL BE DEEMED TO HAVE BEEN MADE IN CHICAGO, ILLINOIS. THIS AGREEMENT, AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS
(WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULES OR PRINCIPLES) AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES WITH RESPECT TO THE SECURITIES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE
STATE OF DELAWARE (WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULES OR
PRINCIPLES). ANY LEGAL ACTION OR PROCEEDING WITH RESPECT HERETO AND THERETO
SHALL ONLY BE BROUGHT IN THE COURTS OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY AND EACH PURCHASER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS AND IRREVOCABLY WAIVES ANY DEFENSE OR CLAIM TO SUCH JURISDICTION WHICH
EITHER OR BOTH MAY HAVE BASED, DIRECTLY OR INDIRECTLY, ON THE GROUNDS OF FORUM
NON CONVENIENS. IF ANY ACTION IS COMMENCED IN ANY OTHER JURISDICTION, THE
PARTIES HERETO HEREBY CONSENT TO THE REMOVAL OF SUCH ACTION TO THE NORTHERN
DISTRICT OF ILLINOIS. THE COMPANY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM, AS THE DESIGNEE, APPOINTEE AND AGENT, OF THE COMPANY TO RECEIVE, FOR AND
ON BEHALF OF THE COMPANY, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE RIGHTS AND
OBLIGATIONS HEREUNDER OR THEREUNDER OR WITH RESPECT TO THE SECURITIES AND SUCH
SERVICE SHALL BE DEEMED COMPLETED UPON DELIVERY THEREOF TO SUCH AGENT. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY
FORWARDED BY MAIL TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION 11.7, BUT
THE FAILURE OF THE COMPANY TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE
THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY PURCHASER, OR ANY OTHER HOLDER OF ANY OF THE SECURITIES TO SERVE
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PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
11.10. WAIVER OF JURY TRIAL.
--------------------
THE COMPANY AND EACH PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED HEREUNDER. THE COMPANY AND EACH PURCHASER ALSO WAIVE ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THE COMPANY AND EACH PURCHASER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE
COMPANY AND EACH PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
11.11. ISSUANCE OF SECURITIES TO ▇▇▇▇▇▇▇.
---------------------------------
The Company and ▇▇▇▇▇▇▇ hereby agree that upon ▇▇▇▇▇▇▇'▇ prior written
request, any Securities to be issued to ▇▇▇▇▇▇▇ pursuant to this Agreement may
be issued to First Chicago, Custodian, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇ (the "▇▇▇▇▇▇▇
▇▇▇"); provided, that the issuance of such Securities to the ▇▇▇▇▇▇▇ ▇▇▇ would
not result in a breach of the representations and warranties of ▇▇▇▇▇▇▇ in
Section 9 hereof if such representations and warranties were made by the ▇▇▇▇▇▇▇
▇▇▇. ▇▇▇▇▇▇▇ hereby represents and warrants that he is the sole beneficiary of
the ▇▇▇▇▇▇▇ ▇▇▇ with power of direction, and agrees that, in the
-24-
event of the issuance of any Securities to the ▇▇▇▇▇▇▇ ▇▇▇, he will cause the
▇▇▇▇▇▇▇ ▇▇▇ to be bound by the terms of this Agreement, the Stockholders
Agreement and all other agreements governing the rights of the Company's
stockholders to which ▇▇▇▇▇▇▇ is a party. Furthermore, ▇▇▇▇▇▇▇ hereby agrees to
execute and deliver, or to cause the ▇▇▇▇▇▇▇ ▇▇▇ to execute and deliver, such
other documents as the Company may reasonably require in connection with any
issuance of Securities to the ▇▇▇▇▇▇▇ ▇▇▇.
[Signature page follows.]
-25-
IN WITNESS WHEREOF, the Company and each Purchaser have caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
CAREER EDUCATION CORPORATION
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title CEO
--------------------------
▇▇▇▇▇▇ EQUITY CAPITAL CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Title Vice President
--------------------------
ELECTRA INVESTMENT TRUST P.L.C.
By /s/ A.M. VINTON
----------------------------
Name A.M. Vinton
---------------------------
Title Authorized Signatory
--------------------------
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇