EXHIBIT 10.28
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Corinthian Colleges, Inc.
Subordinated Note
and
Warrant Purchase Agreement
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Dated as of October 17, 1996
TABLE OF CONTENTS
Page
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STATEMENT OF AGREEMENT...................................................... 3
Section 1. Defined Terms........................................... 3
Section 2. Purchase and Sale of the Notes.......................... 15
Section 3. Issuance of Warrants.................................... 16
Section 4. Conditions to Closings.................................. 16
Section 5. Representations and Warranties of Company............... 18
Section 6. Representations and Warranties of the Purchasers........ 21
Section 7. Financial Reporting..................................... 23
Section 8. Affirmative Covenants................................... 26
Section 9. Negative Covenants...................................... 27
Section 10. Financial Tests......................................... 32
Section 11. Events of Default....................................... 33
Section 12. Consequences of Event of Default........................ 35
Section 13. Miscellaneous........................................... 36
Form of Note Between CCI and Purchasers.......................... Exhibit A
i
Subordinated Note and
Warrant Purchase Agreement
This is a SUBORDINATED NOTE and WARRANT PURCHASE AGREEMENT dated as of
October 17, 1996 ("Agreement") by and among Corinthian Colleges, Inc. ("CCI"), a
Delaware corporation, Primus Capital Fund III Limited Partnership ("Primus"), an
Ohio limited partnership and Banc One Capital Partners II, Ltd., an Ohio limited
liability company ("BOCP II").
Primus and BOCP II are referred to collectively as the "Purchasers." The
CCI and the Purchasers are referred to individually as a "Party" and
collectively as the "Parties."
BACKGROUND
A. CCI.
CCI is engaged in the business of acquiring and operating post-secondary
vocational schools.
B. Acquisition Transaction.
CCI is a party to a Master Purchase Agreement, dated as of October 17,
1996, by and among CCI, ▇▇▇▇▇▇▇▇ College, Inc. ("▇▇▇▇▇▇▇▇") and certain
subsidiaries of ▇▇▇▇▇▇▇▇ listed therein, and the Schools Acquisition Agreement,
dated as of October 17, 1996, by and among ▇▇▇▇▇▇ Colleges, Inc., a Delaware
corporation, Florida Metropolitan University, Inc., a Florida corporation,
▇▇▇▇▇▇▇▇ and certain subsidiaries of ▇▇▇▇▇▇▇▇ listed therein (collectively the
"Asset Purchase Agreements"). The Asset Purchase Agreements provides for the
acquisition by CCI of certain colleges ("▇▇▇▇▇▇▇▇ Schools") owned by ▇▇▇▇▇▇▇▇
(the "Acquisition").
C. Existing Notes.
Pursuant to a Subordinated Secured Note and Warrant Purchase Agreement
dated June 30, 1995 ("Prior Purchase Agreement") CSI (as defined herein) issued
and sold to (i) Primus Subordinated Secured Notes due June 30,2000, in the
aggregate principal amount of $500,000, and (ii) LLC Subordinated Secured Notes
due June 30, 2000, in the aggregate principal amount of $2,000,000 (collectively
the "Existing Notes"). The Existing Notes will be paid in full and canceled on
the Closing Date.
D. Existing Advances.
Pursuant to a Credit Facility Agreement dated as of June 30, 1995 ("Prior
Credit Facility") by and between CSI and LLC, LLC agreed to make advances to CSI
in an amount not to exceed $2,000,000 at any one time outstanding. Any such
advances outstanding at the Closing Date ("Existing Advances") shall be paid in
full and canceled as of the Closing Date.
E. Senior Loans.
Pursuant to a Note Purchase and Revolving Credit Agreement dated as of
October 17, 1996, ("Senior Credit Agreement") by and between Prudential and CCI,
CCI will issue and sell and Prudential will purchase $22,500,000 aggregate
principal amount of 10.27% Senior Secured Term Notes due October 17, 2003
("Senior Notes"). Pursuant to the Senior Credit Agreement, Prudential will also
provide CCI with a revolving credit facility of up to $5,000,000 of principal
amount at any one time outstanding ("Senior Advances").
F. Prudential Warrants.
CCI has agreed, pursuant to the Senior Credit Agreement to issue to
Prudential a Stock Subscription Warrant dated as of the date hereof,
("Prudential Warrants") to purchase 5,376.34 shares of Class A Common of CCI.
G. Purchase and Sale of Notes.
Upon the terms and subject to the conditions set forth in this Agreement,
CCI shall issue and sell to (i) BOCP II and BOCP II shall purchase Subordinated
Notes in the aggregate principal amount of $4,000,000, and (ii) Primus and
Primus shall purchase Subordinated Notes in the aggregate principal amount of
$1,000,000 for $1,000,000, each due September 30, 2004 (collectively, the
"Notes").
H. Capitalization.
The capital stock of CCI consists of 9,000,000 shares of Class A voting
common stock, $0.01 par value ("Class A Common") authorized, of which 111,660
shares are issued and outstanding, 500,000 shares of Class B non-voting common
stock, $0.01 par value, ("Class B Common") authorized, of which 32,090 shares
are issued and outstanding, and 500,000 shares of preferred stock, of which 18,
125 shares of 6% Redeemable Class A preferred stock, $1.00 par value, $100
liquidation value ("Class A Preferred") are issued and outstanding.
I. Warrants.
Upon the terms and subject to the conditions set forth in this Agreement,
CCI shall issue and sell to Primus warrants to purchase 806.45 shares of Class A
Common, and to BOCP II warrants to purchase 3225.81 shares of Class B Common
(collectively, the "Warrants").
The shares of Class A Common and Class B Common issuable upon exercise of
the Warrants are referred to collectively as the "Warrant Shares" and represent,
as of the date hereof, in the aggregate approximately 3% of the Outstanding
Common Stock after giving effect to the issuance of the Warrant Shares and the
exercise of the Prudential Warrants.
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J. Use of Proceeds.
The proceeds from the sale and issuance of the Senior Notes and the Notes
shall be used for among other things the Acquisition and the payment in full of
the Existing Notes and Existing Advances.
STATEMENT OF AGREEMENT
In consideration of their mutual promises set forth in this Agreement, the
Parties hereby agree as follows.
Section 1. Defined Terms.
As used herein, the following terms shall have the following meanings,
unless the context otherwise requires, as modified, amended or restated from
time to time as provided for herein.
1.1 "Accountant" means the Company's independent public accountant
selected and approved in the manner provided for in this Agreement.
1.2 "Accountant'S Statement" means, with respect to each Annual Financial
Statement, a written statement of such Accountant stating in effect that in the
course of their Audit with respect to such Financial Statement no Default has
come to their attention, or, if a Default has come to their attention, stating
the nature and period of existence of such Default.
1.3 "Accounting Periods" means the Fiscal Year, Quarter or Month, as
applicable.
1.4 "Accounting Statements" means collectively, with respect to any
Accounting Period, statements of income, changes in financial position (cash
flow) and shareholders' equity for such Accounting Period and a statement of
financial condition as at the end of such Accounting Period.
1.5 "Acquisition" means the acquisition by CCI of the ▇▇▇▇▇▇▇▇ Schools
from ▇▇▇▇▇▇▇▇ pursuant to the Asset Purchase Agreements.
1.6 "Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, CCI or another
specified Person, except a Subsidiary. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
1.7 "Agreement" means this Subordinated Note and Warrant Purchase
Agreement dated October 17, 1996.
1.8 "Affirmative Covenants" means the covenants of CCI set forth in
Section 8.
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1.9 "Annual Financial Statements" means, with respect to each Fiscal
Year, the consolidated and consolidating Accounting Statements of the Company
with respect to such Fiscal Year, presented with corresponding Accounting
Statements for the preceding Fiscal Year, which Accounting Statements shall be
Audited, prepared in accordance with GAAP and presented in reasonable detail
(including appropriate footnotes) and in a form satisfactory to the Purchasers.
1.10 "Asset Purchase Agreements" shall have the meaning set forth in
Paragraph B.
1.11 "Audit" or "Audited" means, with respect to the consolidated Annual
Financial Statements, an examination without limitation as to scope by the
Accountant in accordance with generally accepted auditing standards for the
purpose of expressing an opinion of such Accounting Statements.
1.12 "Audit Report" means, with respect to the consolidated (but not the
consolidating) Annual Financial Statements, the report of the Accountant
indicating the scope of the Audit with respect to such Statements and setting
forth the opinion of such Accountant with respect to such Annual Financial
Statements as a whole, or an assertion to the effect that an overall opinion
cannot be expressed. The Audit Report shall set forth any qualification to such
opinion and, when such an overall opinion cannot be expressed, set forth the
reasons therefore.
1.13 "Board of Directors" means the board of directors of CCI and, as
applicable and to the extent permitted by law, any committee of such board of
directors authorized to exercise the powers of the board of directors.
1.14 "BOCP II" means Banc One Capital Partners II, Ltd., an Ohio limited
liability company, together with its successors and assigns.
1.15 "Business Day" means any day other than a Saturday, Sunday or day
upon which banking institutions are authorized or required by law or executive
order to be closed in the City of Columbus, Ohio.
1.16 "CCI" means Corinthian Colleges, Inc., a Delaware corporation,
together with its successors and assigns.
1.17 "CSI" means Corinthian Schools, Inc., a Delaware corporation and a
wholly owned subsidiary of CCI.
1.18 "Capitalization" means, at any time of determination, Senior
Indebtedness plus (i) Subordinated Debt designated in writing by BOCP II in
their sole discretion as eligible for inclusion in computing Capitalization and
(ii) shareholders equity.
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1.19 "Capital Stock" of any Person means, any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including each class of common stock and preferred stock of such Person or
partnership interests and any warrants, options or other rights to acquire such
stock or interests.
1.20 "Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within 90 days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within 90 days from the date of acquisition, of any domestic commercial bank
having capital and surplus in excess of $200,000,000, which has, or the holding
company of which has, a commercial paper rating of at least A-1 or the
equivalent thereof by Standard & Poors Corporation or P-1 or the equivalent
thereof by ▇▇▇▇▇'▇.
1.21 "Cash Flow" means, as to any period, Net Income plus (i) depreciation
and amortization expense, (ii) Interest Expense and (iii) income tax expense.
1.22 "Cash Flow from Operations" means, as to any period, cash flow from
operations calculated in accordance with GAAP and as set forth on the Company's
statement of cash flows delivered to the Purchasers pursuant to Section 7.
1.23 "CFO Certificate" means, with respect to the Quarterly Financial
Statements and the consolidating Annual Financial Statements, a certificate
signed by the chief financial officer of CCI stating in effect that such
Financial Statements, when delivered, (i) were, to the best of his knowledge,
complete and correct in all material respects, (ii) were prepared in accordance
with GAAP, and (iii) fairly present the results of operations for the applicable
Accounting Period and the financial condition as at the end of such Accounting
Period. The CFO Certificate shall be presented in a standard form reasonably
satisfactory to the Purchaser.
1.24 "Change of Control" means (i) an event or series of events by which
any Person or Persons or other entities acting in concert as a partnership or
other group (a "Group of Persons") shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases, merger,
consolidation or otherwise, have become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act), of 50% or more of the Voting
Power of CCI, (ii) CCI is merged with or into another corporation with the
effect that immediately after such transaction the stockholders of CCI
immediately prior to such transaction hold less than a majority of the combined
Voting Power of the Person surviving the transaction, or (iii) the direct or
indirect, sale, lease, exchange or other transfer of all or substantially all of
the assets of CCI to any Person or group of Persons.
1.25 "Class A Common" shall have the meaning set forth in Paragraph H.
1.26 "Class B Common" shall have the meaning set forth in Paragraph H.
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1.27 "Class A Preferred" shall have the meaning set forth in Paragraph H.
1.28 "Closing Date" means October 17, 1996, or such later date as the
Parties shall mutually agree.
1.29 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.30 "Common Stock" means the shares of Class A Common and Class B Common
of CCI treated as a single class of stock, at any time outstanding.
1.31 "Company" means CCI, together with its Subsidiaries, treated as a
consolidated entity for accounting purposes.
1.32 "Compliance Certificate" means, with respect to each Fiscal Year and
each Quarter, a certificate signed by the chief financial officer of CCI (i)
stating that no Default has occurred and is continuing, (ii) stating that, to
the best of his knowledge, CCI is in compliance with each of the Affirmative
Covenants and each of the Negative Covenants, and (iii) setting forth in
reasonable detail a computation of each of the Financial Tests as of the end of
the applicable Fiscal Year or Quarter. The Compliance Certificate shall be
presented in a standard form reasonably satisfactory to the Purchasers.
1.33 "Convertible Securities" shall have the meaning set forth in the
Warrant Certificates.
1.34 "Default" means an Event of Default, or an event which with notice,
lapse of time or both, as provided for in Section 11 would constitute an Event
of Default.
1.35 "Disposition" means (i) a merger, consolidation or other business
combination in which CCI is the surviving entity and CCI's stockholders receive
cash or non-cash consideration in exchange for or in respect of their shares of
Capital Stock of CCI or (ii) the sale, lease, conveyance, transfer or other
disposition (other than the grant of a security interest) in any single
transaction or series of related transactions of all or substantially all of the
assets of CCI.
1.36 "Dividends" in respect of any corporation means:
(i) Cash distributions or any other distributions on, or in
respect of, any class of equity security of such
corporation, except for distributions made solely in shares
of securities of the same class; and
(ii) Any and all funds, cash or other payments made in respect
of the redemption, repurchase or acquisition of such
securities.
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1.37 "EBIT" means, as to any period, Net Income plus all amounts deducted
in arriving at such Net Income amount in respect of (i) Interest Expense and
(ii) income tax expense.
1.38 "EBITDA" means, as of any date, the earnings (before extraordinary
items, interest income or expense, taxes, depreciation, amortization, other non-
cash charges and rents) of the Company for the preceding four (4) Quarters
determined in accordance with GAAP.
1.39 "Environmental Laws" means any and all laws, statutes, judgments,
ordinances, rules, regulations, orders, determinations, interpretations, or
guidance of any governmental authority pertaining to health or the environment
in effect in any and all jurisdictions in which CCI, if any, is conducting or at
any time has conducted business, or where any property of CCI, if any, whether
leased or owned, is located, or where any hazardous substances generated or
disposed of by CCI, if any, are located, including, without limitation, the
Federal Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation and Liability Act of 1980, as amended, the Federal Clean Water Act,
as amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conversion and Recovery Act of 1976, as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Emergency
Planning and Community Right-to-Know Act, as amended, the Oil Pollution Act of
1990, the National Environmental Policy Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Atomic Energy Act, as amended, the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, and other environmental
conservation or protection laws, now existing or hereafter enacted.
1.40 "ERISA" means the Employee Retirement Security Act of 1974, as
amended from time to time.
1.41 "ERISA Affiliate" means all members of the group of corporations and
trades or businesses (whether or not incorporated) which, together with CCI, are
treated as a single employer under Section 414 of the Code.
1.42 "ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by CCI or any
ERISA Affiliate with respect to which CCI has a fixed or contingent liability.
1.43 "Event of Default" shall have the meaning set forth in Section 11.
1.44 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor law.
1.45 "Existing Advances" means advances made by LLC to CSI pursuant to the
Prior Credit Facility in an amount not to exceed $2,000,000 at any one time
outstanding, which will be paid in full and canceled as of tile Closing Date.
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1.46 "Existing Notes" means the $2,500,000 principal amount of
Subordinated Secured Notes due June 30, 2000 issued and sold by CSI to BOCP II,
LP and Primus pursuant to the Prior Purchase Agreement, which will be paid in
full and canceled as of the Closing Date.
1.47 "Existing Warrant Shares" means the 1,250 shares of Class A Common
issued to Primus and the 5,000 shares of Class B Common issued to LLC upon the
exercise of warrants purchased by Primus and LLC pursuant to the Prior Purchase
Agreement.
1.48 "Financial Statements" means the Annual Financial Statements, Monthly
Financial Statements and Quarterly Financial Statements of the Company.
1.49 "Financial Tests" means the financial tests with respect to the
Company set forth in Section 10, which tests are based upon the Annual, Monthly
and Quarterly Financial Statements and determined as of the end of each
Fiscal Year, Month and Quarter.
1.50 "Fiscal Year" means each year ended on June 30, or other fiscal year
of CCI adopted in the manner provided for in this Agreement. Each Fiscal Year
consists of four Quarters.
1.51 "Fixed Charges" means, as to any period, the sum of (i) Interest
Expense, (ii) scheduled principal payments in respect of the Indebtedness of the
Company, including without limitation the Notes, and (iii) Operating Lease
Payments.
1.52 "GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
1.53 "Indebtedness" means with respect to the Company, as of any date of
determination, the sum (without duplication) at such date of (i) all
indebtedness of the Company for borrowed money or for the deferred purchase
price of property or services or which is evidenced by a note, bond, debenture,
or similar instrument, reflected on the most recent Financial Statements, (ii)
all obligations of the Company under any financing lease, (iii) all obligations
of the Company in respect of letters of credit, acceptances, or similar
obligations issued or created for the account of the Company, (iv) all guaranty
obligations of the Company, and (v) all liabilities secured by any lien on any
property owned by the Company, whether or not the Company has assumed or
otherwise become liable for the payment thereof.
1.54 "Inflation Factor" for a year means the quotient (expressed as a
decimal fraction) of (i) the Consumer Price Index for Southern California
published by the U.S. Department of Labor, Bureau of Labor Statistics (if the
issuance of this index is discontinued, the official index published by a
federal governmental agency, which is most nearly equivalent to such index, as
determined by the Purchasers and CCI), as at the end of such year, divided by
(ii) the same index as at the end of the previous year.
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1.55 "Initial Public Offering" means the first offer and sale to the
public by CCI or any holders of shares of any class of its Capital Stock,
pursuant to a registration statement that has been declared effective by the
SEC; provided, however, that the gross proceeds of the shares issued and sold by
CCI are at least $20,000,000.
1.56 "Intellectual Property" means patents, trademarks, service marks,
trade names, copyrights, curricula, knowhow or similar intellectual property.
1.57 "Interest Expense" means, as to any period, all interest expense,
including without limitation, all commission, discounts, or related amortization
or other fees and charges with respect to letters of credit and bankers'
acceptance financing and the net costs associated with interest swap
obligations, amortization of debt expense and original issue discount and the
interest portion of any deferred payment obligation (including leases of all
types), calculated in accordance with the effective interest method.
1.58 "Interest Rate" shall have the meaning set forth in Section 2.2(b).
1.59 "Investment" means any loan, advance or capital contribution to, or
investment in, or purchase or otherwise acquisition of any Capital Stock,
securities or evidences of Indebtedness of any Person.
1.60 "Key Man Policies" shall have the meaning set forth in Section 4(d).
1.61 "Lender Reports" means, without duplication of statements,
certificates, notices or reports furnished to the Purchasers pursuant to Section
7.1 of this Agreement, copies of all financial statements, certificates,
notices, reports or other information furnished to any bank, financial
institution or note purchaser pursuant to the requirements of any loan or note
purchase or similar agreement with respect to any material Indebtedness of the
Company.
1.62 "Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (whether statutory or otherwise), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the uniform commercial code or comparable law
of any jurisdiction in respect of any of the foregoing).
1.63 "LLC" means BOCP II, Limited Liability Company, an Ohio limited
liability company and successor by merger to BancOne Capital Partners II,
Limited Partnership, a Delaware limited partnership. LLC is an Affiliate of
BOCP II.
1.64 "Management Group" means collectively, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ St.
Pierre, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
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1.65 "Management Letters" means any letter or report furnished by the
Accountants to management of CCI in connection with any Audit or otherwise
describing findings or recommendations with respect to the accounting or
management practices or procedures of CCI and, including, all reports submitted
to CCI by the Accountants in connection with any interim or special audit made
by the Accountants.
1.66 "Maturity Date" means with respect to the Notes, September 30, 2004.
1.67 "Minutes" means all minutes, minutes of written action or reports
(including schedules and exhibits thereto) of a shareholder's meeting or actions
and all meetings of actions of the board of directors or any committee thereof
or appointed thereby of CCI or any subsidiary.
1.68 "Month" means a calendar month.
1.69 "Monthly Financial Statements" means, with respect to each Month, the
consolidated Accounting Statements of the Company with respect to such Month,
which Accounting Statements shall be prepared and presented in the manner
customary for purposes of dissemination for management of CCI.
1.70 "Negative Covenants" means the covenants of CCI set forth in Section
9.
1.71 "Net Income" means, as to any period, gross revenues of the Company
less all expenses and other proper charges (including taxes on income), but
excluding (i) extraordinary gains, (ii) any gains or losses resulting from the
sale or other disposition of capital assets, (iii) undistributed earnings of any
Person) which is not a Subsidiary, (iv) gains arising from changes in accounting
principles, (v) gains arising from the write-up of assets, (vi) any earnings of
a Person acquired through purchase, merger or consolidation or otherwise by the
Company for any period prior to the date of acquisition and (vii) any gains or
losses resulting from the retirement or extinguishment of Indebtedness.
1.72 "Non-Surviving Combination" means any merger, consolidation or other
business combination by CCI with one or more other entities in a transaction in
which CCI is not the surviving entity.
1.73 "Notes" means $4,000,000 aggregate principal amount Subordinated
Notes issued and sold by CCI to BOCP II and the $1,000,000 aggregate principal
amount of Subordinated Notes issued and sold to Primus, pursuant to this
Agreement, each due September 30, 2004, and "Note" means any one of such Notes.
The Notes are in the form of Exhibit A.
1.74 "Obligations" means (i) all amounts owed by CCI to the Purchasers
evidenced by the Notes, and (ii) all other present and future indebtedness and
obligations of CCI to the Purchasers however created, arising or evidenced,
direct or indirect, absolute or contingent, due or to become
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due, now or hereafter existing (other than under the Warrant Certificates,
Existing Warrant Shares or the Purchased Capital Stock).
1.75 "Operating Lease Payments" means, as to any period, all payments
under operating leases.
1.76 "Outstanding Common Stock" means, as of any date, all shares of
Common Stock then outstanding plus the maximum number of shares of Common Stock
issuable in respect of Convertible Securities and options and warrants to
purchase shares of Common Stock or Convertible Securities outstanding on such
date (whether or not the rights to convert, exchange or exercise thereunder are
presently exercisable), including the maximum number of shares issuable under
the Warrants; provided that the maximum number of shares of Common Stock
issuable in respect of Convertible Securities and options and warrants to
purchase shares of Common Stock or Convertible Securities outstanding on such
date shall be adjusted in accordance with the "treasury stock" method determined
under generally accepted accounting principles pursuant to Accounting Principles
Board Opinion 15.
1.77 "Parties" means CCI and the Purchasers collectively, and "Party"
means any one of the Parties.
1.78 "Percentage of Net Income Capacity Transferred" means, with respect
to each asset Transferred by CCI or a Subsidiary, the percentage of Company Net
Income produced by, or attributable to, such asset during the twelve Quarter
period most recently ended prior to the effective date of such Transfer.
1.79 "Permitted Liens" means Liens securing Senior Indebtedness.
1.80 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority or any other form of equity.
1.81 "▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇▇ College, Inc., together with its successors
and assigns.
1.82 "▇▇▇▇▇▇▇▇ Schools" means the colleges to be acquired by CCI from
▇▇▇▇▇▇▇▇ pursuant to the Asset Purchase Agreements.
1.83 "Primus" means Primus Capital Fund III Limited Partnership, an Ohio
limited partnership, together with its successors and assigns.
1.84 "Prior Credit Facility" means the Credit Facility Agreement dated as
of June 30, 1995, by and between CSI and LLC.
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1.85 "Prior Purchase Agreement" means the Subordinated Secured Note and
Warrant Purchase Agreement dated as of June 30, 1995 by and among CSI, LLC, and
Primus, which Agreement will be canceled effective as of the Closing Date.
1.86 "Prudential" means The Prudential Insurance Company of America,
together with its successors and assigns.
1.87 "Prudential Warrants" means the warrants held by Prudential which are
evidenced by a Stock Subscription Warrant dated as of the date hereof.
1.88 "Purchase Shares" shall have the meaning set forth in the Warrant
Certificate.
1.89 "Purchased Assets" shall have the meaning set forth in the Asset
Purchase Agreements.
1.90 "Purchased Capital Stock" means (i) the 14,500 shares of Class A
Preferred and the 55,000 shares of Class A Common purchased by Primus, and (ii)
the 3,625 shares of Class A Preferred, the 5,410 shares of Class A Common and
the 8,340 shares of Class B Common purchased by LLC pursuant to the Stock
Purchase Agreement.
1.91 "Purchasers" means BOCP II and Primus.
1.92 "Put Option" shall have the meaning set forth in the Rights
Agreement.
1.93 "Quarter" means each of the three Month fiscal periods ending
March 31, June 30, September 30 and December 31.
1.94 "Quarterly Financial Statements" means, with respect to each Quarter,
the consolidated Accounting Statements of the Company with respect to such
Quarter and the current Fiscal Year to date, presented with corresponding
Accounting Statements for the same Quarter and Fiscal Year to date period for
the preceding Fiscal Year, which Accounting Statements shall be prepared in
accordance with GAAP (subject to applicable year end adjustments) and presented
in reasonable detail (but omitting footnotes that would substantially duplicate
footnotes contained in the most recent Annual Financial Statements).
1.95 "Quick Assets" means at any time of determination, all cash, Cash
Equivalents, marketable securities and accounts receivable (net of bad debt
reserve).
1.96 "Related Documents" means the Warrant Certificates, Rights Agreements
and the Registration Rights Agreement.
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1.97 "Registration Rights Agreement" means the Amended and Restated
Registration Agreement dated as of the date hereof by and among CCI, Prudential,
Primus, LLC, Management Group and BOCP II.
1.98 "Responsible Officer" means the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of CCI or
any other officer of CCI involved principally in its financial administration of
its controllership function.
1.99 "Restricted Payments" means any of the following:
(i) any dividend on any class of CCI's Capital Stock;
(ii) any other distribution on account of any class of CCI's
Capital Stock; and
(iii) any redemption, purchase or other acquisition, direct or
indirect, of any shares of CCI's Capital Stock.
1.100 "Rights Agreement" means the Rights Agreement dated as of the date
hereof by and among CCI, Purchasers, Management Group and LLC providing for
certain preemption rights and put options.
1.101 "SEC" means the United States Securities and Exchange Commission (or
any governmental body or agency succeeding to its functions).
1.102 "Securities Act" means the Securities Act of 1933, as amended, and
any successor law.
1.103 "Security Reports" means all financial statements, proxy statements,
notices and reports furnished to the shareholders or securities holders of CCI
and all registration statements and reports (including reports on Forms 10-K,
10-Q and 8-K) filed with the SEC.
1.104 "Senior Advances" means advances of up to $5,000,000 of principal
amount at any one time outstanding against the revolving credit facility
provided for in the Senior Credit Agreement, including all extensions, renewals
and refinancings.
1.105 "Senior Credit Agreement" means the Note Purchase and Revolving
Credit Agreement dated as of the date hereof, by and between Prudential and CCI
providing for the issue and sale of $22,500,000 principal amount of Senior Notes
and up to $5,000,000 of Senior Advances, including all extensions, renewals and
refinancings thereof.
1.106 "Senior Indebtedness" means the Senior Notes and the Senior
Advances.
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1.107 "Senior Lender" means Prudential.
1.108 "Senior Notes" means the $22,500,000 aggregate principal amount of
10.27% Senior Secured Term Notes due September 30, 2003, issued pursuant to the
Senior Credit Agreement, including all extensions, renewals and refinancings
thereof.
1.109 "Subordinated Debt" means Indebtedness of the Company which is
subordinated, in a manner satisfactory to and approved in writing by the
Purchasers, to the Indebtedness of CCI evidenced by the Notes.
1.110 "Subordination Agreement" means the Subordination and Standstill
Agreement dated as of the date hereof, by and among Prudential, BOCP II and
Primus.
1.111 "Subsidiary" means any corporation, all of the stock of every class
of which, except directors' qualifying shares, shall at the time as of which any
determination is being made, be owned by CCI either directly or through
Subsidiaries.
1.112 "Transfer" means, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
1.113 "Trigger Event" means any of the following events: (i) an Initial
Public Offering; (ii) a Change of Control; (iii) a Disposition; or (iv) a Non-
Surviving Combination.
1.114 "Twelve Month Percentage of Net Income Capacity Transferred" means,
with respect to any twelve Month period ending on any date after June 30, 1998,
the sum of the Percentages of Net Income Capacities Transferred for each asset
of CCI and its subsidiaries that is Transferred during such period.
1.115 "UCC" means the Uniform Commercial Code as in effect in the State of
Ohio.
1.116 "Voting Power" means with respect to any corporation the power to
vote for or designate members of the board of directors of such corporation,
whether exercised by virtue of the record ownership of stock, under a close
corporation or similar agreement or under an irrevocable proxy.
1.117 "Warrant Certificates" means the certificates issued by CCI to the
Purchasers evidencing the Warrants.
1.118 "Warrant Shares" means the shares of Class A Common of CCI issuable
to Primus and the shares of Class B Common of CCI issuable to BOCP II upon
exercise of the Warrants, together with other shares of Common Stock or
Convertible Securities purchased or acquired as provided for in the Warrant
Certificates.
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1.119 "Warrants" means the warrants to purchase an aggregate of 806.45
shares of Class A Common issued and sold by CCI to Primus and 3,225.81 shares of
Class B Common issued and sold by CCI to BOCP II pursuant to this Agreement. The
Warrants are evidenced by Warrant Certificates.
Section 2. Purchase and Sale of the Notes.
Upon the terms and subject to the conditions set forth in this Agreement,
CCI shall issue and sell to BOCP II and BOCP II shall purchase from CCI Notes in
the aggregate principal amount of $4,000,000, for a purchase price of $4,000,000
and CCI shall issue and sell to Primus and Primus shall purchase from CCI Notes
in the aggregate principal amount of $1,000,000, for a purchase price of
$1,000,000. Such purchases and sales shall be consummated on the Closing Date
as provided for in this Agreement, and on such date the Purchasers shall make
payment of the purchase price of the Notes being purchased by wire transfer to
an account designated by CCI.
2.1 Application of Proceeds.
On the Closing Date, CCI shall apply the proceeds from the sale of the
Notes to the payment in full of the Existing Notes and the Existing Advances,
together with all accrued but unpaid interest thereon, and shall thereupon cause
the Prior Purchase Agreement and Prior Credit Facility to be cancelled. The
balance of such proceeds, if any, may thereafter be applied to any proper
corporate purpose, including the funding of the Acquisition.
2.2 Terms of the Notes
The Notes shall include the following terms and shall be substantially in
the form of Exhibit A.
(a) Term. The Notes shall be dated the date of this Agreement and
shall be due and payable in full on or before the Maturity Date.
(b) Interest Rate. Interest shall accrue on the unpaid principal
balance of the Notes at a fixed rate equal to 12% per annum. Interest shall be
calculated on the basis of the actual number of days elapsed over a year
consisting of four Quarters each consisting of 90 days.
(c) Interest Payment Dates. Interest on each Note shall be payable
quarterly in arrears on the last Business Day of each Quarter commencing on the
last Business Day of the Quarter immediately succeeding the Quarter in which
such Note was issued.
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(d) Principal Payments. The unpaid principal amount of the Notes
shall be due and payable pro-rata between the Notes in quarterly installments of
$281,250 beginning October 17, 2000, with the outstanding balance due on the
Maturity Date.
(e) Prepayments. The Notes may be prepaid pro-rata in whole or in
part in amounts of not less than $100,000. Each prepayment of principal shall be
accompanied by the payment of all accrued but unpaid interest through the date
of prepayment.
(f) Subordination. The Notes shall be subordinated to the Senior
Indebtedness pursuant to the Subordination Agreement.
(g) Payments. All payments or prepayments to be made by CCI, with
respect to principal or interest on the Notes shall be due at 1:30 p.m.
Columbus, Ohio time on the day when due and shall be made to the Purchasers in
federal funds or other immediately available lawful money of the United States
of America. Whenever any payment to be made hereunder shall be due other than on
a Business Day, such payment shall be made on the Business Day preceding the due
date.
(h) Financing Fee. As additional consideration for the purchase of
the Notes, CCI shall pay to BOCP II a financing fee of $40,000 and to Primus a
financing fee of $10,000.
Section 3. Issuance of Warrants.
Upon the terms and subject to the conditions set forth in this Agreement,
CCI shall issue and sell to Primus and Primus shall purchase from Company for a
purchase price of $100 warrants to purchase 806.45 shares of Class A Common, and
CCI shall issue and sell to BOCP II and BOCP II shall purchase from CCI for a
purchase price of $100 Warrants to purchase 3,225.81 shares of Class B Common,
which shares collectively represent, as of the date hereof, in the aggregate 3%
of the Outstanding Common Stock, of CCI, after giving effect to the issuance of
such Warrant Shares and exercise of the Prudential Warrants. Such sales and
purchases shall be consummated on the Closing Date as provided for in this
Agreement. The terms and conditions of exercise of such Warrants, including the
time of exercise and the number of Warrant Shares which may be purchased upon
exercise shall be as provided in the Warrant Certificates.
Section 4. Conditions to Closings.
The obligations of the Purchasers to purchase the Notes and Warrants on the
Closing Date is subject to the fulfillment, in a manner reasonably satisfactory
to the Purchasers and their counsel, of each of the following conditions
precedent.
(a) No Event of Default. No Event of Default or event which with
notice, lapse of time or both would constitute an Event of Default has occurred.
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(b) Representations and Warranties. Each of the representations and
warranties of CCI set forth in this Agreement and the Security Agreement shall
be true and correct in all material respects as of the Closing Date.
(c) Senior Credit Agreement. The Senior Credit Agreement shall have
been duly executed and delivered by CCI and the Senior Lender, shall be in full
force and effect, and no event of default under such agreement or event which
with notice, lapse of time or both would constitute an event of default under
such agreement shall have occurred thereunder.
(d) Execution and Delivery of Documents. Each of the following
documents, in form and substance reasonably satisfactory to the Purchasers and
their counsel, shall have been duly executed and delivered:
(i) Warrant Certificates for the purchase of initially 806.45
Warrant Shares issued in the name of Primus and 3,225.81
Warrant Shares issued in the name of BOCP II;
(ii) Senior Credit Agreement;
(iii) Registration Rights Agreement;
(iv) Rights Agreement;
(v) Certified copies of the corporate resolutions of CCI
authorizing the execution, delivery and performance of its
obligations under this Agreement, the Notes, the Related
Documents and any other documents to be delivered pursuant to
this Agreement;
(vi) Certified copies of CCI's Certificate of Incorporation,
including any and all amendments thereto, and a certified
copy of the bylaws of CCI as in effect on the Closing Date;
(vii) A certificate of the Secretary of CCI certifying the names of
the officers of CCI authorized to sign this Agreement, the
Notes, the Warrant Certificates, the Related Documents and
any other documents or certificates to be delivered pursuant
to this Agreement by CCI, together with the true signatures
of such officers;
(viii) Evidence of the issuance to CCI of a key man life insurance
policy in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000) on the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇, and One
Million Dollars ($1,000,000) on the life of ▇▇▇▇ St. Pierre,
naming CCI as the sole beneficiary ("Key Man Policies");
17
(ix) Payment of the closing fee of $40,000 and $10,000 shall
have been made to BOCP II and Primus, respectively;
(x) An opinion of counsel for CCI, addressed to the
Purchasers, in form and substance satisfactory to the
Purchasers and their counsel; and
(xi) Such other opinions, certificates, affidavits, documents
and filings, including any and all UCC filings, as the
Purchasers may deem reasonably necessary or appropriate.
(e) Asset Purchase Agreements. The Asset Purchase Agreements shall
be in full force and effect as of the Closing Date and shall not have been
amended or modified. The conditions precedent to the obligations of CCI to
complete the purchase of the Purchased Assets pursuant to the terms of the Asset
Purchase Agreements shall have been satisfied in full (without reliance on any
waiver by CCI) and the Closing shall have been consummated in accordance with
the terms of the Asset Purchase Agreements. The Seller shall not have any right
under the Asset Purchase Agreements to terminate, and shall not have terminated,
CCI's right to purchase or manage any of the ▇▇▇▇▇▇▇▇ Schools.
Section 5. Representations and Warranties of Company.
The representations and warranties of CCI set forth in this Section 5 shall
survive the purchase and sale of the Notes and Warrants, and any investigation
made by the Purchasers shall not diminish the right of the Purchasers to rely
upon such representations and warranties. The Company represents and warrants to
the Purchasers as follows.
(a) Organization. CCI is a corporation duly organized and validly
existing under the laws of the state of its incorporation and the execution,
delivery and performance of this Agreement, each of the Related Documents and of
any instrument or agreement required by this Agreement and each of the Related
Documents are within CCI's powers, have been duly authorized, and are not in
conflict with the terms of any charter, bylaw or other organizational documents
of CCI.
(b) Good Standing. The Company is properly licensed and in good
standing in each state in which CCI is doing business and CCI has qualified
under, and complied with, where required, the fictitious name statute of each
state in which CCI is doing business and where the failure to do so would have
a material adverse affect on the Company's financial condition or operations.
(c) Information Submitted. Any audited consolidated Annual Financial
Statements and unaudited Monthly and Quarterly Financial Statements of the
Company submitted by CCI to the Purchasers have been prepared in accordance with
GAAP consistently applied, are true
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and correct in all material respects and are complete insofar as may be
necessary to give the Purchasers a true and accurate knowledge of the subject
matter thereof.
(d) No Material Adverse Change. There has been no material adverse
change in the consolidated financial condition of Company since the later of (i)
June 30, 1996, and (ii) date of the most recent Financial Statements submitted
to the Purchasers.
(e) Disclosure. Neither this Agreement nor any other document,
opinion, Accounting Statement, certificate or statement by an officer of CCI
furnished or made by or on behalf of CCI in connection with the transactions
contemplated in this Agreement, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained therein not misleading. There is no fact peculiar to CCI which
materially and adversely affects or in the future may (so far as CCI can
reasonably foresee) materially and adversely affects the business, property or
assets or financial condition of the Company which has not been disclosed to the
Purchasers in this Agreement or in other documents, opinion, Accounting
Statements, certificates or statements furnished to or made by or on behalf of
to the Purchasers in connection with the transactions contemplated by this
Agreement.
(f) No Conflicts. The execution, delivery and performance of this
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement are not in conflict with any law or any material indenture,
agreement or undertaking to which CCI is a party or by which CCI is bound or
affected.
(g) Enforceability. This Agreement is a legal, valid and binding
agreement of CCI, enforceable against CCI in accordance with its terms and each
Related Document, and any instrument or agreement required under this Agreement,
when executed and delivered, will be similarly legal, valid, binding and
enforceable in accordance with their respective terms, except, in either case,
as enforcement thereof may be affected by bankruptcy, moratorium, insolvency or
similar laws affecting creditors' rights generally or by the application by a
court of equitable principles.
(h) Authorization and Consents. No approval, consent, compliance,
exemption or authorization or other action by or notice to, or filing with, any
governmental authority or any other Person pursuant to applicable law, and no
lapse of the waiting period under the applicable law, is necessary or required
in connection with the execution, delivery and performance by the company or
enforcement against CCI of this Agreement or the transactions contemplated
hereby.
(i) Environmental Compliance. The Company and all of its properties
and facilities have, at all time and in all respects, complied with all
Environmental Laws, except where the failure to comply would not have a material
adverse effect on the business, condition (financial or otherwise) or operations
of CCI, assuming all such instances of non-compliance were brought to the
attention of appropriate governmental authorities.
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(j) Labor and Employee Relations Matters.
(i) The Company is not and does not expect to be the subject
of any union organizing activity or labor dispute, nor has
there been any strike of any kind called or, to the
knowledge of CCI, threatened to be called against CCI and
CCI has not violated any applicable federal or state law
or regulation relating to labor or labor practices.
(ii) No present or former employees of CCI have advanced claims
in writing against CCI (whether under any foreign,
federal, state or common law, through a government agency,
under an employment agreement, collective bargaining
agreement, personal service or independent contractor
agreement or otherwise) that are currently pending for (a)
overtime pay, other than overtime pay for the current
payroll period; (b) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the
current payroll period); (c) vacations, time off
(including, without limitation, potential sick leave) or
pay in lieu of vacation or time off, other than vacation
or time off (or pay in lieu thereof) earned in respect of
the current Fiscal Year; (d) any violation of any statute,
ordinance or regulation relating to minimum wages or
maximum hours of work; (e) discrimination against
employees on any basis; (f) unlawful employment or
termination practices; (g) unfair labor practices or
alleged violations of collective bargaining agreements;
(h) any violation of occupational safety and/or health
standards; (i) benefits under any employee plans or
compensation arrangement; and (j) breach of any
employment, personal service or independent contractor
agreement, except any such claims which, in the aggregate,
do not exceed $100,000.
(iii) There is not pending against CCI or, to the knowledge of
CCI threatened, any labor dispute, strike or work stoppage
that does or may materially affect or materially interfere
with CCI's operations.
(iv) There is not pending or, to the knowledge of CCI
threatened, any charge or complaint against CCI by or
before the National Labor Relations Board, any
representative thereof, or any comparable foreign or state
agency or authority.
(v) All collective bargaining agreements to which CCI is a
party have been furnished to the Purchaser hereto.
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(k) No Event of Default. No event has occurred and is continuing or
would result from the transactions described in this Agreement which constitutes
or would constitute an Event of Default or which, upon a lapse of time or notice
or both, would become an Event of Default.
(l) Litigation. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of CCI threatened, against or affecting
CCI or its property, the adverse determination of which will have a material
adverse affect CCI's financial condition or operation or impair CCI's ability to
perform its obligations hereunder or under any instrument or agreement required
hereunder.
(m) Taxes. All tax returns required to be filed by CCI in any
jurisdiction have been filed or extended and all taxes, assessments, fees and
other governmental charges upon CCI or upon any of its properties, income or
franchises have been paid prior to the time that such taxes could give rise to a
lien thereon, unless protested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been established on the
books of CCI. The Company has no knowledge of any proposed tax assessment
against CCI.
(n) Securities Act. The Company has not issued any unregistered
securities in violation of the registration requirements of the Securities Act,
any applicable state securities law, or of any other requirement of law, and is
not violating any rule, regulation, or requirement under the Securities Act or
the Securities and Exchange Act. The Company is not required to qualify an
indenture under the Trust Indenture Act of 1939, as amended, in connection with
its execution and delivery of the Notes.
(o) Indebtedness. Immediately after the date of Closing, CCI will
not have any outstanding Indebtedness other than the Notes, the Senior
Indebtedness, accounts payable and other indebtedness incurred in the ordinary
course of business.
Section 6. Representations and Warranties of the Purchasers.
The representations and warranties of the Purchasers set forth in this
Section 6 shall survive the purchase and sale of the Notes and Warrants, and any
investigation made by CCI shall not diminish the right of CCI to rely upon such
representations and warranties. The Purchasers represent and warrant to CCI as
follows.
(a) Organization. BOCP II represents and warrants that it is a
limited liability company duly organized and validly existing under the laws of
the state of its formation and the execution, delivery and performance of this
Agreement, each of the Related Documents and of any instrument or agreement
required by this Agreement, or each of the Related Documents are within its
powers, have been duly authorized, and are not in conflict with the terms of any
provision of its operating agreement or other organizational papers. Primus
represents and warrants that it is a limited partnership duly organized and
validly existing under the laws of the state of its formation and the execution,
delivery and performance of this Agreement, each of the Related Documents and
21
of any instrument or agreement required by this Agreement, or each of the
Related Documents are within its powers, have been duly authorized, and are not
in conflict with the terms of any provision of its partnership agreement or
other organizational papers.
(b) No Conflicts. The execution, delivery and performance of this
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement are not in conflict with any law or of any material indenture,
agreement or undertaking to which either Purchaser is a party or by which either
Purchaser is bound or affected.
(c) Enforceability. This Agreement is a legal, valid and binding
agreement of each Purchaser, enforceable against each Purchaser in accordance
with its terms, the Related Documents and any other instrument or agreement
required under this Agreement, when executed or delivered, will be legal, valid,
binding and enforceable.
(d) Authorization and Consents. No approval, consent, compliance,
exemption, authorization or other action by, or notice to, or filing with, any
governmental authority or any other Person pursuant to applicable law, and no
lapse of the waiting period under the applicable law, is necessary or required
in connection with the execution, delivery and performance by each Purchaser or
enforcement against each Purchaser of this Agreement or the transactions
contemplated hereby.
(e) Experience. Each Purchaser is an accredited investor within the
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act and
has substantial experience in evaluating and investing in securities of
companies similar to CCI and has made investments of securities other than those
of CCI. Each Purchaser acknowledges that by reason of its business or financial
experience and financial condition, it has the ability to analyze and bear the
entire risk of its investment pursuant to this Agreement.
(f) Investment Intent. Each Purchaser is acquiring its Notes,
Warrant Certificate and Warrant Shares for investment for its own account, not
as a nominee or agent and not with a view to, or for resale in connection with,
any distribution thereof. Each Purchaser understands that the issuance and sale
of such securities purchased by it hereunder (and the issuance to each Purchaser
of Warrant Shares upon the conversion of the Warrant Certificate) have not been,
and will not be, subject to a registration statement filed under the Securities
Act or any applicable state securities law by reason of a specific exemption
from the registration provisions of the Securities Act and such state securities
laws which depend upon, among other things, the bona fide nature of the
investment intent and the accuracy of each Purchaser's representation as
expressed herein.
(g) Rule 144. Each Purchaser acknowledges that the securities which
could be acquired hereunder are restricted securities within the meaning of Rule
144 promulgated under the Securities Act and must be held indefinitely unless
subsequently registered under the Securities Act and applicable state securities
laws or unless an exemption from such registration is available. Each Purchaser
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permits the limited resale of securities purchased in a private placement
subject to the satisfaction of certain
22
conditions including, without limitation, the existence of a public market for
the securities, the availability of certain current public information about
CCI, the resale occurring not less than two years after a party has purchased
and paid for any security to be sold, the sale being effected through a
"broker's transaction" or a transaction directly with a "market maker" as
provided by Rule 144(f), and the number of securities being sold during any
three-month period not exceeding specified limitations.
(h) No Public Market. Each Purchaser understands that no public market
now exists for any of the securities to be purchased by it hereunder and that
CCI has given no assurance that a public market will ever exist for any of CCI's
securities.
(i) Knowledge of Offer. Each Purchaser is aware of and has
investigated CCI's business, management and financial condition, has had the
opportunity to inspect CCI's facilities and has had access to such other
information about CCI as each Purchaser has deemed necessary and desirable to
reach an informed and knowledgeable decision to acquire the securities to be
purchased by it hereunder. The purchase of such securities is not a result of an
advertisement of an offering in connection with the sale of such securities.
Section 7. Financial Reporting.
The obligations and covenants of CCI set forth in this Section 7 shall
terminate upon the later to occur of (i) the exercise of all of the Put Options
(as defined in the Warrant Certificates), and (ii) the date upon which the
Purchasers and LLC are no longer the holder of any Notes, Warrants, Warrant
Shares, Exercised Warrant Shares or Purchased Capital Stock.
7.1 Financial Reports.
The Company shall deliver, or shall cause to be delivered to the Purchasers
the following financial reports within the applicable time periods specified in
this Section.
(a) Annual Financial Statements. The Annual Financial Statements shall
be delivered within ninety (90) days after the end of each Fiscal Year, and
shall be accompanied by the applicable Audit Report, Accountant's Statement, CFO
Certificate and Compliance Certificate.
(b) Quarterly Financial Statements. The Quarterly Financial Statements
shall be delivered within forty-five (45) days after the end of each Quarter
(other than the fourth Quarter) of each Fiscal Year, and shall be accompanied by
the applicable CFO Certificate and Compliance Certificate.
(c) Monthly Financial Statements. The Monthly Financial Statements
shall be delivered promptly upon their dissemination to management of CCI.
23
(d) Projected Financial Statements. The projected Financial Statements
with respect to each succeeding Fiscal Year shall be delivered with sixty (60)
days after the end of the preceding Fiscal Year.
(e) Securities Reports. Any Securities Reports shall be delivered
promptly upon their delivery to shareholders, securities holders or the SEC.
(f) Lender Reports. Any Lender Reports shall be delivered promptly
upon their delivery to any lender or note holder.
(g) Management Letters. Any Management Letters shall be delivered
promptly after receipt thereof.
(h) Minutes. Any Minutes shall be delivered promptly upon the
recording of such Minutes in the records of CCI.
7.2 Other Information.
Promptly upon reasonable written request therefor, CCI shall furnish (or
cause to be furnished) to each Purchaser other financial or other information
with respect to CCI available in the books, records and files of CCI; provided,
however, that if such information cannot be furnished without undue expense, CCI
may require the Purchasers to reimburse it for all reasonable out-of-pocket
expenses incurred in connection with furnishing such information.
7.3 Rule 144A.
The Company shall upon the reasonable written request of a Purchaser,
furnish to any qualified institutional buyer (as such term is defined in Rule
144A under the Securities Act) designated by the Purchaser, such financial or
other information as the Purchaser reasonably determines is necessary in order
to afford compliance with the applicable information requirements under Rule
144A under the Securities Act in connection with any proposed sale of the
Warrants or Warrant Shares, except at such times as CCI is subject to the
reporting requirements of Section 13 or l5(d) of the Exchange Act.
7.4 Preparation of Annual, Monthly and Quarterly Financial Statements in
Accordance with GAAP.
The Company shall maintain adequate books, accounts and records, and to
prepare all Annual and Quarterly Financial Statements required to be delivered
to the Purchasers pursuant to this Section in accordance with GAAP applied in a
manner consistent with the practices, policies and procedures applied in
connection with the preparation of the financial statements of the Company
initially delivered to the Purchasers, except for any changes in such practices,
policies and procedures permitted or approved in the manner provided for in this
Section.
24
7.5 Changes in GAAP and in Practices, Policies and Procedures.
In the event that any such change in policies, practice or procedures would
materially affect the computation of any Financial Test, and unless this
Agreement is amended to make appropriate modifications to such Financial Test,
compliance with all such Financial Test shall be determined on a proforma basis
without giving effect to any such change.
7.6 Notice of Certain Events.
The Company shall give prompt written notice to each Purchaser of the
occurrence of any of the following events:
(i) a Default;
(ii) the occurrence of any event which with notice, lapse of
time or both would constitute an event of default under any
Senior Indebtedness;
(iii) all litigation affecting CCI where the amount claimed is
Two Hundred Fifty Thousand Dollars ($250,000) or more;
(iv) any substantial dispute which may exist between CCI and any
governmental regulatory body or law enforcement authority;
(v) Any other matter which has resulted or might result in a
material adverse change in the Company's financial
condition or operations;
(vi) the loss or destruction of any material asset of CCI; and
(vii) the occurrence of or the entering into any agreement or
letter of intent with respect to any Trigger Event.
7.7 Inspections.
Books, Records, Audits and Inspections. The Company shall maintain adequate
books, accounts and records and prepare all Annual, Quarterly or Monthly
Financial Statements required hereunder in accordance with GAAP consistently
applied, and in compliance with the regulations of any governmental regulatory
body having jurisdiction over CCI or CCI's business and permit employees or
agents of the Purchasers at any reasonable time to inspect Company's properties,
and to examine or audit the Company's books, accounts and records and make
copies and memoranda thereof. In the event any properties, books, accounts or
records are in the possession of or under the control of a third party, CCI
shall direct and hereby authorize such third party to permit access to the
Purchasers' employees or agents for the purpose of performing the inspections,
appraisals, examinations or audits permitted under this Section, and to respond
to any reasonable requests from
25
the Purchasers for information concerning the amount, status or condition of any
assets in a third party's possession or control.
Section 8. Affirmative Covenants.
Until payment in full of the Notes and the performance by CCI of all of its
other obligations hereunder, CCI shall, unless each Purchaser waives compliance
therewith in writing:
(a) Insurance. Insure and maintain insurance upon all of its assets
and business properties and public and product liability insurance with
responsible and reputable insurers of such character and in such amounts as are
usually maintained by companies engaged in like business.
(b) Payment of Taxes and Claims. Pay all taxes, assessments and other
governmental charges imposed upon its properties or assets or in respect of any
of its franchises, business, income or profits before any penalty or interest
accrues thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or might become due and payable or become a lien
or charge upon any of its properties or assets, provided that (unless any
material item of property would be lost, forfeited or materially damaged as a
result thereof) no such charge, tax, assessment or claim need be paid if the
amount, applicability or validity thereof is currently being contested in good
faith and if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor.
(c) Compliance with Laws. Comply in all material respects with all
applicable statutes, laws, ordinances and governmental rules, regulations and
orders including, but not limited to, all Environmental Laws, to which it is
subject or which are applicable to its business, properties and assets if
noncompliance therewith would materially adversely affect such business.
(d) Preservation of Existence. Preserve and maintain its corporate
existence, as the case may be, and its rights, franchises and privileges in the
jurisdiction of its incorporation and qualify and remain qualified as a foreign
corporation in each jurisdiction in which the failure to do so would have a
material adverse affect on the Company's financial condition or operations.
(e) Maintenance of Tangible Assets. Maintain its tangible assets in
good condition and repair in accordance with the requirements of its business
and shall not permit any action or omission which might materially impair the
value thereof, normal wear and tear excepted.
(f) Performance of Contracts. Perform and comply with, in accordance
with its terms, all material provisions of each and every material contract,
agreement or instrument now or hereafter binding upon it, except to the extent
it may contest the provisions thereof in good faith and by proper proceedings.
Section 9. Negative Covenants.
26
Until payment in full of the Notes and the performance by CCI of all of its
other obligations hereunder, CCI shall not, unless the prior written consent of
each Purchaser is obtained:
(a) Prepayments. Pay any Indebtedness prior to its scheduled maturity
or scheduled payment date other than the Notes or the Senior Indebtedness.
(b) Liens. Grant, create, incur, assume, permit or suffer to exist any
Lien, upon any of its properties or assets, whether now owned or hereafter
acquired, except, to the extent not otherwise prohibited hereunder:
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings;
(ii) other Liens incidental to the conduct of its business or the
ownership of its property and assets which do not secure
Indebtedness and which do not in the aggregate materially
detract from the value of its property or assets or
materially impair the use thereof in the operation of its
business;
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to CCI or another Subsidiary;
(iv) Liens consisting of mortgages on the real property on which
the ▇▇▇▇▇▇▇▇ Schools are located and which are described on
Schedule 9(b)(iv), provided, that the obligations secured by
such mortgages are non-recourse (on terms satisfactory to
the Purchasers) to CCI or any other obligor;
(v) Liens in favor of the National Education Centers, Inc. on
the assets listed on Schedule 9(b)(v); and
(vi) Permitted Liens.
(c) Capital Expenditures. Make capital expenditures in any Fiscal Year
in an aggregate amount in excess of (i) $2,400,000 for the Fiscal Years ended
June 30, 1997 and 1998 and (ii) for each Fiscal Year thereafter, 2.2% of
Company gross revenues for the Fiscal Year immediately preceding the Fiscal Year
in which such capital expenditures is made.
(d) Leases. Except with respect to any lease of any real property,
enter into or permit to remain in effect any operating lease as lessee, other
operating leases the aggregate amount payable under which (i) for the Quarter
ending December 31, 1996, shall not exceed $300,000; (ii) for the two
consecutive Quarters ending March 3l, 1997, shall not exceed $600,000; (iii)
for the
27
three consecutive Quarters ending June 30, 1997 shall not exceed $900,000; (iv)
for the four consecutive Quarters ending September30, 1997, shall not exceed
$1,200,000; and (v) for any four consecutive Quarters ending on the last day of
a Quarter ending after September 30, 1997, shall not exceed $1,200,000
multiplied by the Inflation Factor for such four Quarters.
(e) Loans, Advances and Investments. Make any loan, advance, or
capital contribution to, or investment in (including any investment in any
corporation, joint venture or partnership), or purchase or otherwise acquire any
of the Capital Stock, securities or evidences of indebtedness of, any Person
(collectively "Investment"), or otherwise acquire any interest in, or control
of, another Person, except for the following:
(i) Cash Equivalents;
(ii) Any acquisition of securities or evidences of indebtedness
of others when acquired by CCI in settlement of accounts
receivable or other debts arising in the ordinary course of
its business, so long as the aggregate amount of any such
securities or evidences of indebtedness is not material to
the business or condition (financial or otherwise) of CCI;
(iii) Make or permit to remain outstanding travel and other
advances to officers and employees of CCI in the ordinary
course of business; and
(iv) other loans, advances and investments (including loans,
advances and investments to or in Subsidiaries), provided
that the aggregate amount thereof, at original cost, at no
time exceeds $300,000.
(f) No Acquisition or Merger. Acquire by purchase or otherwise all or
substantially all of the assets or capital stock, in a single acquisition an
aggregate-amount greater than $250,000, and for all such acquisitions
consummated or committed to be consummated, or with respect to which CCI or a
Subsidiary has entered into an agreement to make such acquisition, in any twelve
consecutive Month period shall not exceed $1,000,000, of any Person. Merge or
consolidate with or into any Person, except that:
(i) Any Subsidiary may merge or consolidate with or into CCI,
provided that CCI is the continuing or surviving
corporation;
(ii) Any Subsidiary may merge or consolidate with or into another
Subsidiary; and
(iii) Subject to the provisions of Section 3 of the Warrant
Certificates, CCI may merge with any other solvent
corporation, provided that (A) CCI shall be the continuing
or surviving corporation and (B) no
28
Event of Default exists or would exist immediately after
giving effect to such merger.
(g) Sale of Stock or Indebtedness of Subsidiaries. Sell or otherwise
dispose of, or part with control of, any shares of stock or Indebtedness of any
Subsidiary, except to CCI or another Subsidiary, and except that all shares of
stock and Indebtedness of any Subsidiary at the time owned by or owed to CCI and
all Subsidiaries may be sold as an entirety for a cash consideration which
represents the fair value (as determined in good faith by the Board of Directors
of CCI) at the time of sale of the shares of stock and Indebtedness sold;
provided, that (i) such sale or other disposition, if treated as a transfer of
assets of such Subsidiary, would be permitted by Section 9(j) and (ii) at the
time of such sale, such Subsidiary shall not own, directly or indirectly, any
shares of stock or Indebtedness of any other Subsidiary (unless all of the
shares of stock and Indebtedness of such other Subsidiary owned directly or
indirectly, by CCI and all Subsidiaries are simultaneously being sold as
permitted by this Section 9(g)).
(h) Sales and Leasebacks. Dispose of any of its assets except for
full, fair and reasonable consideration, or enter into any sale and leaseback
agreement covering any of its fixed or capital assets.
(i) Transfers, Liquidations and Dispositions of Substantial Assets.
Dissolve or liquidate or sell, transfer, lease or otherwise dispose of any
material portion of its property or assets or business, (other than Transfers by
a Subsidiary to CCI or any other Subsidiary incorporated under the laws of any
state of the United States) if at the time of such Transfer and immediately
after giving effect thereto:
(i) the greater of the aggregate net book value or fair market
value of all property Transferred during the twelve month
period prior to such Transfer exceeds $250,000 ; or
(ii) the Twelve Month Percentage of Net Income Capacity
Transferred exceeds 5%.
(j) Restricted Payments. CCI covenants that it shall not, and shall
not permit any Subsidiary to, make, pay or declare, or commit to make, pay or
declare, any Restricted Payment, other than:
(i) dividends paid in cash by CCI on the Class A Preferred,
provided that the dividend rate on the Class A Preferred
shall not exceed 6% (or to the extent shares of Class A
Preferred have not been optionally redeemed by CCI on or
prior to the fifth anniversary of the Closing Date, 12%);
29
(ii) optional redemption of the Class A Preferred on or after
the fifth anniversary of the Closing Date;
(iii) mandatory redemption of the Class A Preferred if the
Company completes an Initial Public Offering;
(iv) repurchase Common Stock from employees of the Company
upon termination of employment pursuant to arrangements
approved by the Board of Directors; and
(v) Restricted Payments made by any Subsidiary to CCI
provided, however, that no Restricted Payment shall be declared, ordered, paid
or made, or committed for, nor shall any sum or property be set aside for any
Restricted Payment, unless at the time thereof and immediately after giving
effect thereto (i) no default or Event of Default is in existence and (ii) the
sum of all Restricted Payments made after June 30, 1996 does not exceed an
amount equal to the sum of(a) 40% (or, in the case of a loss or deficit, minus
100%) of Company Net Income for each Quarter ending after June 30, 1996 and
prior to the date of such proposed Restricted Payment and (b) all interest paid
on the Notes after June 30, 1996 and prior to the date of such proposed
Restricted Payment (including the proposed Restricted Payment if it is an
interest payment on the Notes).
(k) Business Activities. Engage in any business activities or
operations substantially different from or unrelated to its present business.
(l) Transactions with Affiliates. Enter into any transaction,
including without limitation, the purchase, sale or exchange of property or the
rendering of any services, with any affiliate or any partner, officer or
director thereof, enter into, assume or suffer to exist any employment or
consulting contract with any affiliate or any partner, officer or director
thereof or any former or current officer or director of CCI, except any
transaction or contract which is in the ordinary course of CCI's business and
which is upon fair and reasonable terms no less favorable to CCI than it would
obtain in a comparable arms-length transaction with a person not an affiliate.
(m) Compensation of Management Group. Make any payment (whether in
cash or other Property) to the Management Group (other than in Capital Stock of
CCI paid solely in connection with an incentive compensation plan approved by
the Board of Directors of CCI and advances and reimbursement for travel,
entertainment and other customary out-of-pocket expenses in reasonable amounts)
in an aggregate amount in excess of(i) $1,250,000 for the Fiscal Year ending
June 30, 1997 and (ii) for each Fiscal Year thereafter, an amount equal to the
product of (A) the amount permitted to be paid to the Management Group under
this paragraph for the immediately preceding Fiscal Year and (B) the greater of
1.05 and the Inflation Factor for the immediately preceding calendar year;
30
(n) Change of Control. Without the prior written consent of each
Purchaser, permit a Change of Control, or permit at any time more than 70% of
the total issued and outstanding Common Stock to be owned by persons other than
the Management Group.
(o) Fiscal Year, Method of Accounting. Change its Fiscal Year or make
any material change in its method of accounting without prior written consent of
each Purchaser.
(p) ERISA Plans. Adopt or agree to maintain or contribute to any ERISA
Plan without the prior written consent of each Purchaser which consent shall not
be unreasonably withheld. The Company shall promptly notify each Purchaser in
writing in the event an ERISA Affiliate adopts and ERISA Plan.
(q) Change in Principal Office. Moves its principal office, executive
office or principal place of business without prior written notice to each
Purchaser.
Section 10. Financial Tests.
Until payment in full of the Notes and the performance by CCI of all its
obligations hereunder, CCI shall, unless each Purchaser waives compliance
therewith in writing, meet the following Financial Tests.
10.1 Quick Ratio. The ratio (expressed as a percentage) of the Company's
Quick Assets to Company current liabilities to be less than (i) 60% at any time
from the Closing Date through June 30, 1997; (ii) 65% at any time during the
Fiscal Year ending June 30, 1998; (iii) 120% at any time during the Fiscal Year
ending June 30, 1999; and (iv) 135% at any time after June 30, 1999.
10.2 Maximum Ratio of Senior Debt to Cash Flow. The ratio (expressed as a
percentage) of Company Senior Indebtedness as at the end of any Quarter to
Company Cash Flow for the four Quarter period ended at the end of such Quarter
to exceed (j) 330% from the Closing Date through September 30, 1997; (ii) 220%
from October 1, 1997 through September 30, 1998; (iii) 165% from October 1, 1998
through September 30, 1999; and (iv) 140% after September 30, 1999.
10.3 Maximum Ratio of Senior Debt to Capitalization. The ratio (expressed
as a percentage) of Company Senior Indebtedness to Company Capitalization to
exceed:
(i) 83% at any time from the Closing Date through March 31, 1997;
(ii) 80% at any time from April 1, 1997 through September 30, 1997;
(iii) 80% at any time from October 1, 1997 through March 31, 1998;
(iv) 80% at any time from April 1, 1998 through September 30, 1998;
(v) 68% at any time from October 1, 1998 through March 31, 1999;
(vi) 58% at any time from April 1, 1999 through September 30, 1999;
(vii) 48% at any time from October 1, 1999 through September 30,
2000; and
31
(viii) 43% at all times after September 30, 2000.
10.4 Maximum Ratio of Total Indebtedness to Capitalization. The ratio
(expressed as a percentage) of Company total Indebtedness to Company
Capitalization to exceed:
(i) 95% at any time from the Closing Date through
September 30, 1997;
(ii) 90% at any time from October 1, 1997 through March 31,
1998;
(iii) 88% at any time from April 1, 1998 through September 30,
1998;
(iv) 70% at any time from October 1, 1998 through
September 30, 1999;
and
(v) 60% at all times after September 30, 1999.
10.5 Minimum Ratio of Cash Flow and Operating Lease Payments to Fixed
Charges. The ratio (expressed as a percentage) of (i) the sum of Company Cash
Flow and Company Operating Lease Payments to (ii) Company Fixed Charges, in each
case for the four Quarter period ending at the end of any Quarter, to be less
than (a) 90% from the Closing Date through September 30, 1998, (b) 135% from
October 1, 1998 through September 30, 1999, and (v) 160% at any time after
September 30, 1999.
10.6 Maximum Ratio of EBIT and Operating Lease Payments to Interest Expense
and Operating Lease Payments. The ratio (expressed as a percentage) of (i) the
sum of EBlT and Company Operating Lease Payments to (ii) Company Interest
Expense and Company Operating Lease Payments, in each case for the four Quarter
period ending at the end of any fiscal quarter to be less than (a) 110% from the
Closing Date through September 30, 1997; (b) 125% from October 1, 1997 through
September 30, 1998; (c) 145% from October 1, 1998 through September 30, 1999;
(d) 158% from October 1, 1999 through September 30, 2000; and (e) 180% after
September 30, 2000.
10.7 Minimum Company Cash Flow. Company Cash Flow From Operations for the
Fiscal Year set forth below to be less than the amount set forth in the table
opposite such Fiscal Year:
Minimum Company
Fiscal Year Cash Flow From Operations
----------- -------------------------
1997 $675,000
1998 $5,700,000
1999 $8,200,000
2000 $10,350,000
2001 and each Fiscal $11,250,000
Year thereafter
32
For purposes of determining the Company's compliance with paragraphs 10.2,
10.4 and 10.5, (i) the Company may include the financial results of the ▇▇▇▇▇▇▇▇
Schools as though the ▇▇▇▇▇▇▇▇ Schools had been acquired by the Company on July
1, 1996 and (ii) prior to June 30, 1997, the Company may annualize the financial
results of the Quarters ending prior to such date and after the Closing Date.
Section 11. Events of Default.
The occurrence of any of the following events shall, at the option of
either Purchaser, constitute an Event of Default ("Event of Default") hereunder
and under the Notes:
(a) Failure to Pay. The Company fails to pay, within two (2) Business
Days of the date when due, any installment of interest or any other sum due
under this Agreement or the Notes in accordance with the terms hereof or
thereof;
(b) Put Option Default. The Company fails to purchase all the
Warrants, Warrant Shares, Purchase Shares, Exercised Warrant Shares or Purchased
Capital Stock required to be purchased by it upon the exercise of a Put Option.
(c) Breach of Representation or Warranty. Any representation or
warranty herein or in any agreement, instrument or certificate executed pursuant
hereto or in connection with any transaction contemplated hereby proves to have
been false or misleading in any material respect when made;
(d) Falsity of Information. Any financial or other information
delivered by CCI to the Purchasers proves to be false or misleading in any
material respect when delivered;
(e) Judgments. A final nonappealable judgment or judgments is or are
entered against CCI in the aggregate amount of Five Hundred Thousand Dollars
($500,000) or more on a claim or claims not covered by insurance;
(f) Failure to Pay Debts; Voluntary Bankruptcy. The Company fails to
pay its debts generally as they come due (or within any applicable grace or cure
periods), or files any petition, proceeding, case or action for relief under any
bankruptcy, reorganization, insolvency, or moratorium law, or any other law or
laws for the relief of, or relating to, debtors;
(g) Involuntary Bankruptcy. An involuntary petition is filed under
any bankruptcy or similar statute against CCI, or a receiver, trustee,
liquidator, assignee, custodian, sequestrator or other similar official is
appointed to take possession of the properties of CCI and such petition or
appointment is not dismissed within ninety (90) days;
33
(h) Governmental Action. Any governmental regulatory authority takes
or institutes action which will materially adversely affect the condition,
operations or ability to pay CCI's obligations under this Agreement, the Notes
or any instrument or agreement required under this Agreement;
(i) Default of Other Financial Obligations. Any default occurs under
the Senior Credit Agreement, any agreement, note or document related to any such
agreement or any other agreement involving the borrowing of money or the advance
of credit to which CCI may be a party as obligor or guarantor, if such default
consists of the failure to pay any Indebtedness in an aggregate principal amount
greater than $500,000 when due or if such default gives to the holder of the
obligation concerned the right to accelerate such Indebtedness;
(j) Default Under Warrant Certificate or Other Agreement. The Company
breaches or defaults in any material respect under any of its obligations
contained in the Warrant Certificates or any other agreement with the
Purchasers;
(k) Financial Reporting Default. The Company fails for a period of
thirty (30) days after notice thereof to comply with the requirements of Section
7.
(l) Affirmative Covenants. The Company fails for a period of thirty
(30) days after written notice thereof to comply in any material respect with
any Affirmative Covenant.
(m) Negative Covenants. The Company fails to comply in any material
respect with any Negative Covenant (i) for a period of thirty (30) days after
written notice thereof with respect to any such breach that is subject to cure,
and (ii) with respect to any other such breach, and a Purchaser gives written
notice thereof.
(n) Financial Tests. The Company fails to comply with any Financial
Test and a Purchaser gives written notice thereof.
(o) Change in Ownership. The Management Group ceases to own 30% of
CCI's Outstanding Common Stock; and
(p) Other Breach Under Agreement. The Company breaches, or defaults in
any material respect under, any term, condition, provision, representation or
warranty contained in this Agreement not specifically referred to in this
Section, provided that with respect to any of the foregoing (other than (a), (g)
and (j)) that is capable of being cured, CCI have failed to cure the same within
thirty (30) days from the receipt of notice thereof from a Purchaser.
34
Section 12. Consequences of Event of Default.
(a) If any Event of Default specified under Section 11, other than
subsections (g) and (h) hereof, shall occur and be continuing, the Purchasers
may, by written notice to CCI, declare the principal and interest accrued on the
Notes and all other obligations of CCI hereunder to be forthwith due and
payable, and the same shall thereupon become immediately due and payable,
without any other or further presentment, demand, protest, notice of default,
notice of intent to accelerate, notice of acceleration or other notice of any
kind, all of which are hereby expressly waived.
(b) If an Event of Default specified under subsections (g) and (h) of
Section 11 hereof shall occur, the unpaid balance of the principal and interest
accrued on the Notes and all other obligations of CCI hereunder shall be
immediately due and payable automatically without presentment, demand, protest,
notice of default, notice of intent to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby expressly waived.
Section 13. Miscellaneous.
(a) No Implied Rights or Waivers. No notice to or demand on CCI in any
case shall entitle CCI to any other or further notice or demand in the same,
similar and other circumstances. Neither any failure nor any delay on the part
of a Purchaser in exercising any right, power or privilege hereunder or under
the Notes or Warrant Certificates shall operate as a waiver thereof, nor shall
a single or partial exercise thereof preclude any other or further exercise of
the same or the exercise of any other right, power or privilege.
(b) Modifications, Amendments or Waivers. The Company and the
Purchasers may from time to time enter into written agreements amending or
changing any provision of this Agreement or the rights hereunder or give waivers
or consents to a departure from the due performance of their obligations
hereunder provided that no departure from CCI's due performance of its
obligations hereunder shall be effective unless agreed to in writing by each
Purchaser.
(c) Expenses. The Company shall pay or cause to be paid and save the
Purchasers harmless against liability for the payment of all reasonable out-of-
pocket expenses, including counsel fees (including fees of BOCP II's outside
counsel and Legal Department not to exceed $25,000) and disbursements, incurred
or paid by the Purchasers in connection with (i) the due diligence inquiries,
negotiation, development, preparation, execution and performance of this
Agreement, the Notes, the Warrant Certificates and the related transactions;
(ii) any requested amendments, waivers or consents pursuant to the provisions
hereof and thereof; and (iii) the enforcement of this Agreement, the Notes, and
the Warrant Certificates, including such reasonable expenses as may be incurred
by the Purchasers in collection of the Notes.
35
(d) Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.
(e) Entire Agreement. This Agreement including the Exhibits or
Schedules hereto, constitutes the entire agreement relating to the subject
matter hereof among the Parties hereto. Each Party acknowledges that no
representation, inducement, promise or agreement has been made, orally or
otherwise, by any other Party, or anyone acting on behalf of any other Party,
unless such representation, inducement, promise or agreement is embodied in this
Agreement expressly or by incorporation.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
(g) Severability. If any provision of this Agreement is held to be
invalid, void or unenforceable, the remaining provisions of this Agreement shall
nevertheless continue in full force and effect.
(h) Third Party Beneficiaries. The obligations of each Party under
this Agreement shall inure solely to the benefit of the other Parties, and no
other person or entity shall be a third party beneficiary of this Agreement.
(i) Rules of Construction. Unless otherwise specified, the following
rules shall be applied in construing the provisions of this Agreement.
(i) Terms that imply gender shall be construed to apply to all
genders.
(ii) References to Sections, Schedules and Exhibits refer to the
numbered Sections of, the Schedules of and the Exhibits
attached to this Agreement.
(iii) Headings to the various Sections of this Agreement are
included solely for purposes of reference and shall be
ignored in construing the provisions of this Agreement.
(iv) The Exhibits and Schedules attached to this Agreement are
incorporated herein by reference.
(v) "Herein", "hereto", "hereof" and words of similar import
refer to this Agreement.
(vi) The word "and" connotes "each and every", and the word "or"
connotes "any one or more".
36
(vii) The word "including" connotes "including without
limitation".
(viii) Any reference to any law or regulation refers to that law
or regulation as amended from time-to-time after the date
of this Agreement and to the corresponding provision of any
successor law or regulation.
(ix) Any reference to any agreement or other document in this
Agreement refers to that agreement or other document as
amended from time-to-time after the date of this Agreement.
(x) The recitals included in this Agreement are the mutual
representations of the Parties and are a part of this
Agreement.
(j) Notices. Any notice or other communication required or permitted
to be made or given under this Agreement, shall be in writing and shall be
deemed to have been received by the Party to whom it is addressed: (i) on the
date indicated on the certified mail return receipt if sent by certified mail
return receipt requested; (ii) on the date actually received if hand delivered
or if transmitted by telefax (receipt of which is confirmed to sender); (iii)
three business days after such notice was deposited in the United States Mail
postage prepaid; or (iv) one business day after such notice was delivered to an
overnight delivery service, addressed, delivered or transmitted in each case as
follows:
PURCHASERS:
Banc One Capital Partners II, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With A Copy to:
Banc One Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
ATTENTION: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Primus Capital Fund III Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
ATTENTION: Loyal ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With A Copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
COMPANY:
Corinthian Colleges, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to:
O'Melveny & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
A Party's address for notice may be changed from time-to-time only by
written notice given to each of the other Parties in accordance with this
Section.
(a) Assignment. Neither this Agreement nor any of the rights or duties
hereunder may be assigned by any Party without the prior written consent of each
of the other Parties, and any assignment attempted without such prior consent
shall be null and void.
38
(b) Further Acts and Documents. Each of the Parties hereby agrees to
execute and deliver such further instruments and to do such further acts and
things as may be necessary or desirable to carry out the purposes of this
Agreement.
(c) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one in the same agreement.
39
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
COMPANY: PURCHASERS:
BANC ONE CAPITAL PARTNERS II,
CORINTHIAN COLLEGES, INC. LTD.
By: BOCP Holdings Corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President By
-----------------------------
Its: Authorized Signer
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By /s/ Loyal ▇. ▇▇▇▇▇▇
----------------------------
Loyal ▇. ▇▇▇▇▇▇
Its President
----------------------------
39
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
COMPANY: PURCHASERS:
BANC ONE CAPITAL PARTNERS II,
CORINTHIAN COLLEGES INC. LTD.
By: BOCP Holdings Corporation
By
--------------------------- By
▇▇▇▇▇ ▇. ▇▇▇▇▇, President ---------------------------
Its: Authorized Signer
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By /s/ Loyal ▇. ▇▇▇▇▇▇
---------------------------
Loyal ▇. ▇▇▇▇▇▇
Its President
--------------------------
39
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
COMPANY: PURCHASERS:
BANC ONE CAPITAL PARTNERS II,
CORINTHIAN COLLEGES, INC. LTD.
By: BOCP Holdings Corporation
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President By
-------------------------------
Its: Authorized Signer
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By
-------------------------------
Loyal ▇. ▇▇▇▇▇▇
Its
------------------------------
40
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
COMPANY: PURCHASERS:
BANC ONE CAPITAL PARTNERS II,
CORINTHIAN COLLEGES, INC. LTD.
By: BOCP Holdings Corporation, Manager
By By /s/
------------------------- ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Its: Authorized Signer
PRIMUS CAPITAL FUND III
LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By
------------------------------------
Loyal ▇. ▇▇▇▇▇▇
Its
-----------------------------------
40
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS.
THIS NOTE IS SUBJECT TO A SUBORDINATION AND STANDSTILL AGREEMENT DATED
OCTOBER 17,1996, BY AND AMONG OTHERS, THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, BOCP II, LIMITED LIABILITY COMPANY, BANCONE CAPITAL
PARTNERS II, LTD., PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP.
Subordinated Note
Due October 17,2004
$________________
Columbus, Ohio
October 17, 1996
This Subordinated Note (the "Note") is executed and delivered under and
pursuant to the terms of that certain Subordinated Note and Warrant Purchase
Agreement dated October 17, 1996, (the "Agreement") by and among Corinthian
Colleges, Inc. ("Company"), a Delaware corporation, as seller and Primus Capital
Fund III Limited Partnership ("Primus"), an Ohio limited partnership and
BancOne Capital Partners II, Ltd. ("BOCP II"), an Ohio limited liability
company, as purchasers.
The Company, together with its successors and assigns is referred to as
the "Maker." _______, together with its successors and assigns, is referred to
as the "Payee."
All defined terms not otherwise defined in this Note will have the
meanings ascribed to them in the Agreement.
FOR VALUE RECEIVED, the Maker promises to pay to the order of the Payee,
at the Payee's office at ________________, the principal amount of ________
Dollars ($____ ) on or before October 17, 2004
A-1
Interest shall be calculated at a fixed rate of interest per annum equal
to twelve percent (12%) ("Interest Rate"). Interest shall be calculated on the
basis of the actual number of days elapsed over a year consisting of four
quarters each consisting of 90 days.
Interest on the unpaid principal balance hereof shall be due and payable
in arrears on December 31, 1996, and continuing on the last Business Day of each
quarter thereafter until payment in full of this Note; provided, however, that
whenever the last day of any such quarter would otherwise occur on a day other
than a Business Day (as defined in the Agreement), the last day of such quarter
shall be deemed to occur on the following Business Day.
Principal shall be payable in quarterly installments of $_____ beginning
October 17, 2000 with the remaining unpaid balance due October 17, 2004.
This Note may be prepaid in whole or in part in amounts of not less than
$100,000.
This Note will be subordinated to the Senior Indebtedness (as defined in
the Agreement) as provided for in the Subordination Agreement (as defined in the
Agreement).
All payments and prepayments to be made by the Maker in respect of
principal or interest on this Note shall be due at 1:30 p.m. Columbus, Ohio time
on the day when due and shall be made to the Payee in federal funds or other
immediately available lawful money of the United States of America. Whenever any
payment to be made hereunder shall be due other than on a Business Day, such
payment shall be made on the Business Day following the due date.
Any assignee of this Note shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to this Note which the
Maker may otherwise have against the assignor of this Note and no such unrelated
counterclaim or defense shall be interposed or asserted by the Maker in any
action or proceeding brought by any such assignee under this Note and any such
right to interpose or assert any such unrelated offset, counterclaim or defense
in any such action or proceeding is hereby expressly waived by the Maker.
Time shall be of the essence in the performance of all obligations of
the Maker under this Note.
This Note is one of the Notes referred to in the Agreement. Reference is
made to the Agreement and Subordination Agreement for provisions for the
subordination of this Note with respect to the to indebtedness of the Maker to
the Senior Lender (as that term is defined in the Agreement) and the
acceleration of the maturity hereof, but neither this reference to the Agreement
and Subordination Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of the Maker to pay the principal of or
interest on this Note when due. All of the terms, conditions, covenants,
representations and warranties of the Agreement and the Subordination Agreement
are incorporated herein by reference as if the same were more fully set forth
herein.
A-2
Upon the occurrence of an Event of Default as specified in the Agreement
or Subordination Agreement, the principal hereof and accrued interest hereon may
be declared to be and shall thereupon become forthwith due and payable, all as
provided in the Agreement and the Subordination Agreement.
To the extent permitted by law, the Maker waives presentment; protest
and demand; notice of protest, demand, dishonor and nonpayment; diligence in
collection.
If at any time the indebtedness evidenced by this Note is collected
through legal proceedings or this Note is placed in the hands of attorneys for
collection, the Maker hereby agrees to pay all reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the holder of this Note in
collecting or attempting to collect such indebtedness.
This Note is made under and governed by the laws of the State of Ohio.
The Payee and the Maker, after consulting or having had the opportunity
to consult with counsel, knowingly, voluntarily and intentionally waive any
right either of them may have to a trial by jury in any litigation based upon or
arising out of this Note or any related instrument or agreement, or any of the
transactions contemplated by this Note, or any course of conduct, dealing,
statements (whether oral or written) or actions of either of them. Neither the
Payee nor the Maker shall seek to consolidate, by counterclaim or otherwise, any
action in which a jury trial has been waived with any other action in which a
jury trial cannot be or has not been waived. In the event of a dispute under
this Note, the parties hereby agree that exclusive jurisdiction and venue lies
in a court of competent jurisdiction in Franklin County, Ohio. These provisions
shall not be deemed to have been modified in any respect or relinquished by
either the Payee or the Maker except by a written instrument executed by both of
them.
WITNESS the due execution hereof with intent to be legally bound hereby.
CORINTHIAN COLLEGES, INC.
By:_________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
A-3
