Exhibit 10.23
REGISTRATION RIGHTS AGREEMENT
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REGISTRATION RIGHTS AGREEMENT, dated as of February 3, 1998, between
Career Education Corporation, a corporation organized under the laws of
Delaware (the "Company"), and ▇▇▇▇▇▇ Equity Capital Corporation, a corporation
organized under the laws of Delaware ("Stockholder").
W I T N E S S E T H:
WHEREAS, the Stockholder owns 2,549,944 shares (the "Shares") of Common
Stock, par value $.01 per share, of the Company (the "Common Stock"); and
WHEREAS, in connection with, and as consideration for Stockholder's
approval of, the consummation of an initial public offering, the Company has
agreed to provide the Stockholder certain registration rights pursuant to the
terms of this Agreement; and
WHEREAS, Electra Investment Trust P.L.C., a corporation organized under
the laws of England and Wales, and Electra Associates, Inc., a Delaware
corporation, are parties to that certain Registration Rights Agreements with
the Company dated as of July 31, 1995, as amended by Amendment No. 1 dated the
date hereof (as so amended, the "Electra Registration Rights Agreement");
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement, capitalized terms used
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herein shall have the meanings set forth in the preambles hereto and in this
Section 1.
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1.1. "Affiliate" shall mean a person who controls or is controlled
by or under common control with another person.
1.2. "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.3. "Common Stock" shall mean the Common Stock of the character
authorized on the date hereof or, in the case of a conversion, reclassification
or exchange of such shares of such Common Stock, shares of the stock into or
for which such shares of Common Stock shall be converted, reclassified or
exchanged, and all provisions of this Agreement shall be applied appropriately
thereto and to any stock resulting from any subsequent conversion,
reclassification or exchange therefor.
1.4. "Electra" shall mean collectively Electra Investment Trust
P.L.C., a corporation organized under the laws of England and Wales, and
Electra Associates, Inc., a Delaware corporation, together with their
respective successors and permitted assigns under the Electra Registration
Rights Agreement.
1.5. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute enacted hereafter, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
1.6. "Holder" shall mean any holder of Registrable Securities;
provided, however, that any Person who acquires any of the Registrable
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Securities in a distribution pursuant to a registration statement filed by the
Company under the Securities Act or pursuant to a sale under Rule 144 under
the Securities Act shall not be considered a Holder.
1.7. "Initiating Holders" shall mean the Holders of Registrable
Securities representing (i) at least fifty-one percent (51%) of the
Registrable Securities then outstanding.
1.8. "IPO" shall mean (i) the time at which the Company becomes a
registered public company under the Exchange Act subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, or (ii) the first
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time at which an offering, whether primary or secondary, of Common Stock or
options, warrants or other securities convertible into or exchangeable or
exercisable for Common Stock, is registered pursuant to an effective
registration statement (other than a registration statement on Form S-4 or Form
S-8 or any successor forms thereto) filed by the Company under the Securities
Act or (iii) the merger of the Company into a corporation or other entity
which at the time of such merger is required to file reports, proxy statements
and other information with the Commission pursuant to Section 13(a), 13(c), 14
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or 15(d) of the Exchange Act. An Initial Public Offering will be deemed to be
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consummated (i) on the date such registration is declared effective by the
Commission and (ii) in the case of a merger, upon the effectiveness of the
merger.
1.9. "Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
1.10. "Register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement with the
Commission in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
1.11. "Registrable Securities" shall mean the (i) the Shares and
(ii) any other shares of Common Stock acquired after the date of this Agreement
and held by the Stockholder from time to time; provided, however, that any such
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Registrable Securities shall cease to be included within the definition of
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the
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Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been sold as permitted by
Rule 144 (or any successor provision) under the Securities Act, (c) they shall
have been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration of them
under the Securities Act or (d) they shall have ceased to be outstanding.
1.12. "Registration Expenses" shall mean all expenses incurred by
the Company in compliance with this Agreement, excluding underwriters'
discounts and commissions but including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, the compensation of regular employees of the Company and the fees and
expenses of one counsel for all Holders, all blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration.
1.13. "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
1.14. "Selling Expenses" shall mean all underwriting discounts and
commissions applicable to the sale of Registrable Securities.
2. Requested Registration.
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2.1. Request for Registration. The Initiating Holders, by written
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request to the Company, may require the Company to effect a registration with
respect to Registrable Securities at any time after an IPO. If the Initiating
Holders elect to exercise their rights under this Section 2.1 the Company
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shall:
(a) promptly give written notice of the proposed registration to all
other Holders (the "Demand Registration Notice"); and
(b) as soon as practicable but not later than sixty (60) days after
receipt of the request from the Initiating Holders, use its best
efforts and take all appropriate action to file such registration
statement with the Commission, and shall use its best efforts and take
all appropriate action to effect such registration as soon as possible
following such filing (including, without limitation, the execution of
an undertaking to file post-effective amendments, appropriate
qualification under the blue sky or other state securities laws
requested by Initiating Holders and appropriate compliance with
applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution
of all or such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request given within thirty (30) days after receipt of the
Demand Registration Notice; provided, however, that the Company shall
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not be obligated to
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effect any such registration pursuant to this Section 2 (i) if a
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registration pursuant to this Section 2 has been declared or ordered
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effective within the prior twelve months or (ii) after the third such
registration pursuant to this Section 2 has been declared or ordered
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effective; provided, further, however, that if with respect to the
last remaining demand registration right the Holders shall not be
permitted to include all of the Registrable Securities requested to be
so included therein pursuant to the operation of Section 2.5 below, the
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Holders shall be granted an additional demand registration exercisable
in accordance with this Section 2.
2.2. Additional Shares to be Included. The registration statement
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filed pursuant to the request of the Initiating Holders may, subject to the
provisions of Section 2.5 below, include (a) other securities of the Company
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(the "Additional Shares") which are held by officers or directors of the
Company or which are held by Persons who, by virtue of agreements with the
Company, are entitled to include their securities with the Holders referred to
in Section 2.1 above (collectively, the "Other Shareholders"), and (b)
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securities of the Company being sold for the account of the Company (the
"Company Shares").
2.3. Withdrawal of Registration. If the Initiating Holders inform the
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Company by written notice that they are withdrawing their registration request
made pursuant to Section 2.1 above and the Initiating Holders pay all of the
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Company's Registration Expenses with respect to such registration incurred to
the date of such notice, then the registration statement need not be filed and
all efforts pursuant to this Agreement will not count as a registration (or an
exercise of rights) under this Section 2, provided, however, that if the
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Company decides to proceed with the registration on its own behalf, or on
behalf of any other shareholders, then the Initiating Holders shall not be
required to pay any of the Company's Registration Expenses and such
registration will not count as a registration (or an exercise of rights) under
this Section 2.
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2.4. Underwriting.
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(a) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 2 and the Company shall include
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such information in the Demand Registration Notice, and such Demand
Registration Notice shall also state that any registration pursuant to
this Section 2 shall be conditioned upon such Holder's participation in
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such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein and
subject to the limitations provided herein. A Holder may elect to
include in such underwriting all or a part of the Registrable
Securities he holds.
(b) The Company shall (together with all Holders, officers,
directors and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the
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underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders.
2.5. Limitations on Shares to Included.
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Notwithstanding any other provision of this Section 2, if the representative of
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the underwriters advises the Company or the Initiating Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten or that the inclusion of Additional Shares or Company Shares may
adversely affect the sale price (of the shares to be registered) that may be
obtained, first the Additional Shares shall be excluded from such registration
to the extent so required by such limitation, then the Company Shares shall be
excluded from such registration to the extent so required by such limitation,
and if a limitation of the number of shares is still required, the number of
shares that may be included in the registration and underwriting shall be
allocated (i) first to the Holders, such that the Holders shall be entitled to
include a number of shares equal to seventy percent (70%) of the shares
requested for inclusion in such registration, and (ii) the remaining shares,
if any to the Holders and Electra, pro rata based on the number of Registrable
Securities or Additional Shares requested to be included in such registration
after excluding shares already included in such registration as provided in
clause (i) above. If the Company or any Holder of Registrable Securities,
officer, director or Other Shareholder who has requested inclusion in such
registration as provided above disapproves of the terms of any such
underwriting, such Person may elect to withdraw such Person's Registrable
Securities, Additional Shares or Company Shares, as the case may be, therefrom
by written notice to the Company, the underwriter and the Initiating Holders.
If the withdrawal of any Registrable Securities, Additional Shares or Company
Shares, as the case may be, would allow, within the marketing limitations set
forth above, the inclusion in the underwriting of a greater number of shares of
Registrable Securities, Company Shares or Additional Shares, then, to the
extent practicable and without delaying the underwriting, the Company shall
offer first to the Holders and/or Electra, as the case may be, second for the
Company's own account and third to the Other Shareholders an opportunity to
include additional shares of Registrable Securities, Company Shares or
Additional Shares, as the case may be, in the proportions discussed above.
3. Company Registration.
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3.1. If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising any demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 (under the Securities Act) transaction, the Company will:
(a) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
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(b) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests made by any Holder within thirty (30) days after
receipt of the written notice from the Company described in clause (a)
above, except as set forth in Section 3.3 below. Such written request
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may specify all or a part of a Holder's Registrable Securities.
3.2. Underwriting. If the registration of which the Company gives
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notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.1(a). The right of any Holder to require registration
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pursuant to this Section 3 shall be conditioned upon such Holder's
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participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any officers, directors or Other
Shareholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
3.3. Limitations on Shares to be Included. With respect to Company
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registrations or registrations effected by the Company for the account of a
security holder or holders exercising any demand registration rights, not
withstanding any other provision of this Section 3, if the representative of
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the underwriters advises the Company in writing that marketing factors require
a limitation or elimination on the number of shares to be underwritten, the
representative may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all Holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first, to the
Company for securities being sold for its own account, second, if any among
Electra and Holders in the ratio of two-thirds (2/3) to Electra and one-third
to the Holders, until such time as Electra holds less than thirty-five percent
(35%) of the shares of Registrable Securities (as defined in the Electra
Registration Rights Agreement) held by Electra as of the date of this Agreement
(as such number may be adjusted for stock splits, dividends, recapitalizations,
reorganizations or similar events), third, if any, among the Holders and
Electra pro rata based upon the number of Registrable Securities or Additional
Shares, as the case may be, requested to be so included in such registration
after excluding shares already included in such registration as provided in
clause first and clause second, and fourth, among all officers, directors or
Other Shareholders (including those Shareholders other than Electra exercising
demand registration rights and on whose account the Company determined to
register its securities pursuant to the exercise of such demand registration
right, or otherwise), in each case in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities or Additional Shares which
they had requested to be included in such registration at the time of filing
the registration statement; provided, however, that if such registration is
effected by the Company on behalf of Electra exercising any demand registration
rights pursuant to the Electra Registration Rights Agreement, the number of
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shares that are entitled to be included in the registration and underwriting
shall be allocated first, to Electra such that Electra shall be entitled
to include a number of shares equal to seventy-five percent (75%) of the
shares requested for inclusion in such registration, second, if any, among
the Holders and Electra, pro rata based on the number of Registratable
Securities or Additional Shares requested to be included in such registration
after excluding shares already included in such registration as provided
in clause first above, third, if any, to the Company for securities being
sold for its own account, and fourth, among all officers, directors or Other
Shareholders (including those shareholders (other than Electra) exercising
demand registration rights and on whose account the Company determined to
register its securities pursuant to the exercise of such demand registration
right, or otherwise). If any Holder of Registrable Securities or any officer,
director or Other Shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter.
3.4. Withdrawal from Registration. Any Holder requesting inclusion
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of Registrable Securities pursuant to this Section 3 may, at any time prior to
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the effective date of the registration statement relating to such registration,
revoke such request by delivering written notice of such revocation to the
Company; provided, however, that if the Company, in consultation with its
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financial and legal advisors, determines that such revocation would materially
delay the registration or otherwise require a recirculation of the prospectus
contained in the registration statement, then such Holder shall have no such
right to revoke its request. If the withdrawal of any Registrable Securities or
Additional Shares would allow, within the marketing limitations set forth
above, the inclusion in the underwriting of a greater number of shares of
Registrable Securities or Additional Shares, then, to the extent practicable
and without delaying the underwriting, the Company shall offer first to the
Holders and/or Electra and second to the Other Shareholders an opportunity to
include additional shares of Registrable Securities or Additional Shares, as
the case may be in the proportions discussed in Section 3.3 above.
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3.5. Termination or Withdrawal by Company. The Company shall
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have the right to terminate or withdraw any registration initiated by it under
this Section 3 prior to the effectiveness of such registration whether or not
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any Holder has elected to include securities in such registration.
4. Registration on Form S-3. In addition to the their rights set
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forth in Sections 2 and 3 above, if at any time (i) Initiating Holders request
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that the Company file a registration statement on Form S-3 (or any successor
form thereto) for a public offering of all or any portion of the Registrable
Securities held by such requesting Holder or Holders, and (ii) the Company is a
registrant entitled to use Form S-3 (or any successor form thereto) to register
such securities, then the Company shall use its best efforts to register
(including by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested in such request) under the Securities Act on
Form S-3 (or any successor form thereto), for public sale in accordance with
the method of disposition specified in such notice, the number of shares of
Registrable Securities specified in such notice.
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5. Expenses of Registration. Subject to Section 2.3, all Registration
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Expenses incurred in connection with the registration or qualification of, or
compliance with, any registration statement under Sections 2, 3 and 4 of this
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Agreement, shall be borne by the Company. All Selling Expenses shall be borne
pro rata by each Holder and each Other Shareholder in accordance with the
number of shares sold.
6. Registration Procedures.
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6.1. In the case of each registration to be effected by the Company
pursuant to this Agreement, the Company will keep each Holder advised in
writing as to the initiation of each registration and all amendments thereto
and as to the completion thereof, advise any such Holder, upon request, of the
progress of such proceedings, use its best efforts to effect the registration
of any Registrable Securities under the Securities Act, and will, at its
expense:
(a) Prepare and file with the Commission a registration statement
covering such Registrable Securities and use its best efforts to cause
such registration statement to be declared effective by the Commission
and to keep such registration effective for a period of one hundred
eighty (180) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs; provided, however, that the Company
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shall keep such registration effective for longer than one hundred
and eighty (180) days if the costs and expenses associated with
such extended registration are borne by the selling Holders; provided,
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further, however, that in the case of any registration of Registrable
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Securities on Form S-3 which are intended to be offered on a continuous
or delayed basis, such 180-day period shall be extended, if necessary,
to keep the registration statement effective until all such Registrable
Securities are sold, provided that (1) Rule 415 under the Securities
Act, or any successor rule under the Securities Act, permits an
offering on a continuous or delayed basis, and (2) applicable rules
and regulations under the Securities Act governing the obligation
to file a post-effective amendment permit the incorporation by
reference into the registration statement of information contained
in periodic report filed pursuant to Section 13 or 15(d) of the
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Exchange Act, in lieu of filing a post-effective amendment which
(y) includes any prospectus required by Section 10(a)(3) of the
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Securities Act or (z) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement;
(b) Subject to the provisions set forth in Section 6.1(a) above,
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prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by
such registration statement until such time as all of such Registrable
Securities have
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been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration
statement;
(c) Furnish to each seller of Registrable Securities covered by such
registration statement and each Holder two conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller or Holder, as the case may be, may reasonably request;
(d) Promptly notify each seller of Registrable Securities covered
by such registration statement and each Holder at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing;
(e) Use its best efforts (i) to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such states of the
United States of America where an exemption is not available and as the
sellers of Registrable Securities covered by such registration
statement shall reasonably request, (ii) to keep such registration or
qualification in effect for so long as such registration statement
remains in effect and (iii) to take any other action which may be
reasonably necessary or advisable to enable such sellers to consummate
the disposition in such jurisdictions of the securities to be sold by
such sellers, except that the Company shall not for any such purpose be
required to (x) qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this clause (e) be obligated to be so qualified, or
(y) subject itself to taxation in any such jurisdiction;
(f) Use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by
such other federal or state governmental agencies or authorities as may
be necessary in the opinion of counsel to the Company and counsel to
the seller or sellers of Registrable Securities to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Securities;
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(g) Use its best efforts to list all such Registrable Securities
registered in such registration on each securities exchange or
automated quotation system on which the Common Stock of the Company is
then listed;
(h) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities and a CUSIP number for all
such Registrable Securities, in each case not later than the effective
date of such registration;
(i) Enter into such customary agreements (including underwriting
agreements in customary form and reasonably acceptable to the Company)
and take all such other actions as the holders of a majority of the
Registration Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(j) Make available for inspection by any seller of Registrable
Securities and each Holder, any underwriter participating in any
disposition pursuant to such registration statement, and any attorney
or accountant retained by any such seller, Holder or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information
reasonably requested by any such seller, Holder, underwriter, attorney
or accountant in connection with such registration statement, which
information shall be subject to reasonable restrictions concerning
confidentiality and non-disclosure;
(k) Furnish to each selling Holder upon request a signed
counterpart, addressed to the selling Holder, of
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement and in form reasonably acceptable
to the Company and such Holder, and
(ii) "comfort" letters signed by the Company's independent public
accountants who have examined and reported on the Company's
financial statements included in the registration statement, to the
extent permitted by the standards of the American Institute of
Certified Public Accountants, in the case of (i) and (ii) covering
substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of
the accountants' "comfort" letters) with respect to events
subsequent to the date of the financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities;
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(l) Furnish to each selling Holder a copy of all correspondence from or to
the Commission in connection with any such offering;
(m) In the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification
of any Registrable Securities included in such registration statement for sale
in any jurisdiction, the Company will use its reasonable best efforts promptly
to obtain the withdrawal of such order; and
(n) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and, if required, make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder.
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6.2 It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that the Holders proposing to
register Registrable Securities shall furnish to the Company such information
regarding them, the Registrable Securities held by them, and the intended
method of distribution of such Registrable Securities as the Company shall
reasonably request and as shall be required in connection with the action to
be taken by the Company.
6.3 In connection with the preparation and filing of each registration
statement under this Agreement, the Company will give the Holders on whose
behalf such Registrable Securities are to be registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each such Holder such
access to the Company's books and records and such opportunities to discuss
the business of the Company with its officers, its counsel and the independent
public accountants who have certified the Company's financial statements, as
shall be necessary, in the opinion of such Holders or such underwriters or
their respective counsel, in order to conduct a reasonable or diligent
investigation within the meaning of the Securities Act. Without limiting the
foregoing, each registration statement, prospectus, amendment, supplement or
any other document filed with respect to a registration under this Agreement
shall be subject to review and reasonable approval by the Holders registering
Registrable Securities in such registration and by their counsel.
7. Indemnification.
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7.1 Indemnification by the Company. In the event of any registration of
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any securities of the Company under the Securities Act, the Company will
indemnify and
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hold harmless each Holder, each of its officers, directors, partners, employees,
agents, attorneys and consultants and each Person controlling such Holder, and
each underwriter, if any, and each Person who controls any underwriter, against
all claims, losses, damages and liabilities, joint and several (or actions,
proceedings or settlements in respect thereof) arising out of or based upon any
untrue settlement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any registration,
qualification or compliance, or based upon any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors, partners, employees, agents, attorneys
and consultants and each Person controlling such Holder, each such underwriter
and each Person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability or action; provided, however,
-------- -------
that the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability, or expense arises out of or is based on any
untrue statement or omission made in reliance upon and based upon written
information furnished to the Company by such Holder or underwriter and expressly
stated to be specifically for use therein.
7.2. Indemnification by the Holders. Each Holder will, if Registrable
-------------------------------
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its officers, directors, partners, employees, agents, attorneys
and consultants, and each underwriter, if any, of the Company's securities
covered by such a registration statement, each Person who controls the Company
(other than such Holder) or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and each of their officers, directors, partners, employees, agents, attorneys
and consultants, and each Person controlling such Holder or other stockholder,
against all claims, losses, damages, expenses and liabilities, joint and several
(or actions in respect thereof) arising out of or based upon any untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, each of its officers, directors, partners, employees, agents, attorneys
and consultants, each underwriter or control Person, each other Holder and each
of their officers, directors, partners, employees, agents, attorneys and
consultants and each Person controlling such Holder or other shareholder for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement,
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prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder with
respect to such Holder and expressly stated to be specifically for use therein;
provided, however, that the liability of any such Holder under this Section 7.2
----------------- -----------
shall be limited to the amount of proceeds received by such Holder in the
offering giving rise to such liability.
7.3 Notices of Claims Procedures etc. Each party entitled to
--------------------------------
indemnification under this Section 7 (the "Indemnified Party") shall give notice
---------
to the party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
--------
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at the Indemnified Party's
sole expense, provided, further, that the failure of any Indemnified Party to
-----------------
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7 unless such failure is prejudicial to the
---------
ability of Indemnifying Party to defend such claim or action. Notwithstanding
the foregoing, such Indemnified Party shall have the right to employ its own
counsel in any such litigation, proceeding or other action if (i) the employment
of such counsel has been authorized by the Indemnifying Party, in its sole and
absolute discretion, or (ii) the named parties in any such claims (including any
impleaded parties) include any such Indemnified Party and the Indemnified Party
and the Indemnifying Party shall have been advised in writing (in suitable
detail) by counsel to the Indemnified Party either (A) that there may be one or
more legal defenses available to such Indemnified Party which are different from
or additional to those available to the Indemnifying Party, or (B) that there is
a conflict of interest by virtue of the Indemnified Party and the Indemnifying
Party having common counsel, in any of which events, the legal fees and expenses
of a single counsel for all Indemnified Parties with respect to each such claim,
defense thereof, or counterclaims thereto, shall be borne by Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement (x) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation, or (y) which requires action other than the payment of money by the
Indemnifying Party. Each Indemnified Party shall cooperate to the extent
reasonably required and furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
7.4 Contribution. If the indemnification provided for in this Section 7
------------ ---------
shall for any reason be held by a court to be unavailable to an Indemnified
Party under Section 7.1 or 7.2 hereof in respect of any loss, claim, damage or
----------- ---
liability, or any action in respect thereof, then, in lieu of the amount paid or
payable under Section 7.1 or 7.2, the Indemnified
----------- ---
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Party and the Indemnifying Party under Section 7.1 or 7.2 shall contribute to
----------- ---
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement; provided, that for purposes of this clause (ii), the relative
--------
benefits received by the prospective sellers shall be deemed not to exceed the
amount of proceeds received by such prospective sellers. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
-------------
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Such prospective sellers'
obligations to contribute as provided in this Section 7.4 are several in
-----------
proportion to the relative value of their respective Registrable Securities
covered by such registration statement and not joint. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld.
8. Information by Holder. Each Holder of Registrable Securities shall
---------------------
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
9. Transfer or Assignment of Registration Rights. The rights with respect
---------------------------------------------
to any Registrable Securities to cause the Company to register such securities
granted to a Holder by the Company under this Agreement may be transferred or
assigned by a Holder, in whole or in part, to a transferee or assignee of any
Registrable Securities, and, in such case, the Company shall be given written
notice stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned.
10. Rule 144 and Rule 144A. At such time as the Company becomes subject
----------------------
to the reporting requirements of the Exchange Act, the Company shall file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and will
take all actions reasonably necessary to enable holders of Registrable
Securities to sell such securities without registration under the Securities Act
within the limitation of the provisions of (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, if applicable or
(c) any similar rules or
-14-
regulations hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
11. Liquidated Damages. In the event that the Company fails to comply with
------------------
any provision of Section 2, 3 or 4 hereof upon written request of the Holder(s)
------------ -
of Registrable Securities requesting registration thereunder, the Company
shall, within thirty (30) days after the date of receipt by the Company of a
demand from such Holder(s) for payment, pay to such Holder as liquidated
damages for its noncompliance an amount equal to the Current Market Price
multiplied by (x) the number of shares of Common Stock proposed to be sold
pursuant to the registration or qualification in question or (y) in the case of
a request in accordance with Section 4 hereof for a shelf registration pursuant
---------
to Rule 415 under the Securities Act, such lesser number of shares of Common
Stock as may be specified by the Holder(s) in such demand for payment;
provided, however, that the election of the Holder(s) to demand payment of
-------- -------
liquidated damages with respect to less than all of the shares of Common Stock
proposed to be sold pursuant to such shelf registration shall not prevent the
Holder(s) from any subsequent exercise of registration rights under this
Agreement with respect to the shares of Common Stock for which payment was not
demanded. Payment of such amount at any closing shall be made in immediately
available funds. Upon payment to such Holder of such liquidated damages, such
Holder shall assign to the Company the Registrable Securities proposed to be
sold pursuant to the registration or qualification (or such lesser number of
shares of Registrable Securities as specified in the demand for payment) in
question without any representation or warranty (other than that the Holder has
not taken any action which would impair its ownership of or right to transfer
to the Company the Registrable Securities). At any such closing, the Holders of
the Registrable Securities shall deliver the certificates evidencing such
securities to the Company, accompanied by stock powers duly endorsed in blank
or duly executed instruments of transfer, any other documents that are
necessary to transfer to the Company good title to such of the securities to be
transferred, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims and options of whatever nature other than those
imposed hereunder. The Company agrees that the amount of actual damages that
would be sustained by the Holder as a result of the failure of the Company to
comply with any provisions of Section 2, 3 or 4 hereof is not capable of
------------ -
ascertainment on any other basis. The Holders hereby acknowledge that the
refusal of the Commission to declare effective any registration statement filed
by the Company or the inability of any Holder to sell any offered Registrable
Securities due to a lack of liquidity or marketability shall not, in and of
itself, be evidence of a failure by the Company to comply with Section 2, 3 or
------------
4 hereof.
-
"Current Market Price" shall mean the average closing price per share of
Common Stock for the forty-five (45) consecutive trading days beginning on the
Determination Date. "Determination Date" shall mean, with respect to a
requested registration pursuant to Section 2 or 3 of this Agreement, the date
--------- -
which is thirty (30) days after the date of such request, and with respect to a
requested registration pursuant to Section 4 of this Agreement, the date which
---------
is fifteen (15) days after the date of such
-15-
request. The closing price for each day shall be, as reported in The Wall Street
Journal or, if not reported therein, as reported in another newspaper of
national circulation chosen by the Board of Directors of the Corporation, the
closing sales price or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way, on the New York Stock
Exchange Composite Tape, or if the Common Stock is not then listed or admitted
to trading on the New York Stock Exchange, on the largest principal national
securities exchange on which such stock is then listed or admitted to trading,
or if not listed or admitted to trading on any national securities exchange,
then the average of the last reported sales price for such shares in the
over-the-counter market, as reported on the National Association of Securities
Dealers Automated Quotation System, or, if such sales prices shall not be
reported thereon, the average of the closing bid and asked prices so reported,
or, if such bid and asked prices shall not be reported thereon, as the same
shall be reported by the National Quotation Bureau Incorporated, or, if such
firm at the time is not engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business and selected by the
Company or, if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc., selected by the Company. If the Company
shall not have a class of equity securities registered under the Securities
Exchange Act of 1934, as amended, "Current Market Price" shall be determined as
follows: first, by an investment banking firm selected by the holders of a
-----
majority of the Registrable Securities requested to be included in such
registration, which determination shall be made within (30) days after the
delivery of the demand for payment, second, if such determination shall not be
------
satisfactory to the Company, as evidenced by a written objection by the Company
to the holders of the Registrable Securities requested to be included in such
registration, within two weeks of receipt by the Company of such determination,
the Company shall be entitled to select an investment banking firm which shall
make its own determination within thirty (30) days of its appointment, and if
such determination shall differ by less than 10% from the determination of the
investment banking firm selected by the holders of a majority of the Registrable
Securities requested to be included in such registration, the Current Market
Price shall be the average of such determinations and third, if such
-----
determinations shall differ by 10% or more, such investment banking firms shall
appoint a third investment banking firm which shall make its own determination
within two weeks of its appointment, which determination shall be binding upon
the Company and the holders of the Registrable Securities requested to be
included in such registration. Any and all determinations made pursuant to this
Section 11 shall be performed by an investment banking firm experienced in the
----------
conduct of corporate valuations and shall be based upon the fair market value of
100% of the Company on a consolidated basis if sold as a going concern, without
giving effect to any discount for lack of liquidity of the shares of Common
Stock or to the fact that the shares of Common Stock are privately held or that
the Company has no class of equity securities registered under the Securities
Exchange Act of 1934, as amended, or to any discount relating to, or
reclassification because of, the right of any stockholder of the Company to sell
its shares of Common Stock to the Company.
-16-
12. No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Without limiting the generality of the foregoing, the Company will not hereafter
enter into any agreement with respect to its securities which grants or modifies
any existing agreement with respect to its securities to grant to the holder of
its securities (a) in connection with an incidental registration of such
securities equal or higher priority to the rights granted to the Holders under
Section 2, 3 and 4 of this Agreement or (b) in connection with a demand
------------ -
registration the right to require registration of any of its securities before
the earlier of (i) the date on which the holders shall have exercised any demand
registration rights under Section 2 hereof or (ii) the Company shall have
---------
consummated an IPO and any lock-up period applicable to the Holders of the
Registrable Securities shall have terminated.
13. Benefits of Agreement; Successors and Assigns. This Agreement shall
---------------------------------------------
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns, legal representative and heirs. This Agreement
does not create, and shall not be construed as creating any rights enforceable
by any other Person.
14. Transfer of Rights. All rights of Stockholder under this Agreement
------------------
shall be transferable by Stockholder to an Affiliate who executes an instrument
in form and substance satisfactory to the Company in which it agrees to be bound
by the terms of this Agreement as if an original signatory hereto, in which case
such Transferee shall thereafter be a "Stockholder" for all purposes of this
Agreement. Upon any transfer of the registration rights or benefits of this
Agreement, Stockholder shall give Company written notice prior to or promptly
following such transfer stating the name and address of the transferee and
identifying the securities with respect to which such rights are being assigned.
Such notice shall include or be accompanied by a written undertaking by the
transferee to comply with the obligations imposed hereunder.
15. Best Registration Rights. If the Company grants to any Person with
------------------------
respect to any security issued by the Company or any of its Affiliates
registration rights that provide for terms that are in any manner more favorable
to the holder of such registration rights than the terms granted to Stockholder
other than the number of demand registrations or the minimum amount of shares
required to exercise demand registration rights (or if the Company amends or
waives any provision of any agreement providing registration rights of others or
takes any other action whatsoever to provide for terms that are more favorable
to other holders than the terms provided to Stockholder other than the number of
demand registration rights), then this Agreement shall immediately be deemed
amended to provide the Stockholder with any (or all) of such more favorable
terms as Stockholder shall elect to include herein.
16. Complete Agreement. This Agreement constitutes the complete
------------------
understanding among the parties with respect to its subject matter and
supersedes all existing agreements and understandings, whether oral or written,
among them. No alteration or modification of any provisions of this Agreement
shall be valid unless made in writing and signed, on the one
-17-
hand, by a majority of the Registrable Securities then outstanding and, on the
other, by the Company.
17. Section Headings. The Section headings contained in this Agreement
----------------
are for reference purposes only and shall no affect in any way the meaning or
interpretation of this Agreement.
Notices. All notices, offers, acceptances and other communications
-------
required or permitted to be given or to otherwise be made to any party to this
Agreement shall be deemed to be sufficient if contained in a written instrument
delivered by hand, first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, if to the Company, to it at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, and if to any Holder, to the
address of such Holder as set forth in the stock transfer books of the
Corporation. All such notices and communications shall be deemed to have been
duly given; at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
the next business day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery. Any part may change the address to
which each such notice or communication shall be sent by giving written notice
to the other parties of such new address in the manner provided herein for
giving notice.
18. Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of Illinois without giving
effect to the provisions, policies or principles thereof respecting conflict or
choice of laws.
19. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ANY LEGAL ACTION OR
----------------------------------------------
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY MATTERS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT
IN RESPECT THEREOF SHALL BE BROUGHT EXCLUSIVELY IN THE STATE OF FEDERAL COURTS
LOCATED IN THE STATE OF ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY AND STOCKHOLDER EACH IRREVOCABLY CONSENT TO SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, OR BY RECOGNIZED INTERNATIONAL EXPRESS CARRIER OR DELIVERY SERVICE, TO
THE COMPANY OR STOCKHOLDER AT THEIR RESPECTIVE ADDRESSES REFERRED TO IN THIS
AGREEMENT. THE COMPANY AND THE STOCKHOLDER EACH HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY
-18-
FURTHER IRREVOCABLY WAIVES AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN
THIS AGREEMENT SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
20. Counterparts. This Agreement may be executed in one or more
------------
counterparts each of which shall be deemed an original but all of which taken
together shall constitute one and the same agreement.
21. Severability. Any provision of this Agreement which is determined to
------------
be illegal, prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such illegality, prohibition or
unenforceability without invalidating the remaining provisions hereof which
shall be severable and enforceable according to their terms and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
-19-
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first set forth above.
CAREER EDUCATION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. Klettle
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Klettle
Title: Senior Vice President CEO
▇▇▇▇▇▇ EQUITY CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
-20-