Exhibit 99.12
EXECUTION COPY
Xxxxxxx Education, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
March 9, 2004
New Mountain Partners, L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
MidOcean Capital Investors, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
New Mountain Xxxxxxx Trust
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to (1) the Preferred Stock Purchase
Agreement, dated as of November 28, 2000 (the "Preferred Stock Purchase
Agreement"), by and among Xxxxxxx Education, Inc., a Maryland corporation
(the "Company"), New Mountain Partners, L.P. ("New Mountain") and MidOcean
Capital Investors, L.P. (formerly known as DB Capital Investors, L.P.,
"MidOcean"), pursuant to which, among other things, the Company issued and
sold to New Mountain and MidOcean an aggregate of 5,769,231 shares of the
Company's Series A Convertible Preferred Stock, par value $0.01 per share
("Series A Preferred Stock"); (2) the Shareholders' Agreement, dated as of
March 16, 2001 (the "Shareholders' Agreement"), by and between New Mountain
and MidOcean; (3) the Registration Rights Agreement, dated May 15, 2001
(the "Registration Rights Agreement"), by and among New Mountain, MidOcean
and the Company; (4) the Articles Supplementary of the Company, as filed
with the State Department of Assessments and Taxation of Maryland on May
15, 2001 (the "Articles Supplementary"), which, among other things, set
forth the powers, rights and other terms of the Series A Preferred Stock;
(5) the Amendment and Joinder to the Shareholders' Agreement, dated as of
January 14, 2004 (the "Joinder Agreement"), by and among New Mountain,
MidOcean and New Mountain Xxxxxxx Trust ("New Mountain Trust" and, together
with New Mountain and MidOcean, the "Selling Stockholders"); (6) the letter
agreement, dated February 3, 2004, by and among New Mountain, MidOcean and
the Company (the "Letter Agreement"); and (7) the Support and Option
Agreement, dated as of November 28, 2000, by and among the Company, Xxx X.
Xxxxxx, individually and in any Representative Capacity, and New Mountain
and MidOcean (the "Option Agreement").
At the request of the Selling Stockholders, the Company
has prepared and filed with the Securities and Exchange Commission
a registration statement on Form S-3 (File No. 333-112499) (the
"Registration Statement") in connection with the registration
New Mountain Partners, L.P.
MidOcean Capital Investors, L.P.
New Mountain Xxxxxxx Trust
March 9, 2004
of 3,450,000 shares of the Company's common stock, par value $.01 per share
("Common Stock"), for resale by the Selling Stockholders and certain
management selling stockholders. In connection with the offering contemplated
by the Registration Statement (including the sale of any shares of Common
Stock pursuant to the Over-allotment Option (as defined below), the
"Offering"), the Company, the Selling Stockholders and Management (as defined
below) intend to enter into an underwriting agreement (the "Underwriting
Agreement") with one or more underwriters led by Credit Suisse First Boston
LLC (the "Underwriters"). A form of the Underwriting Agreement has been
provided to the parties to this letter agreement. Capitalized terms used but
not defined herein shall have the meanings ascribed to such terms in the
Underwriting Agreement.
The Company and the Selling Stockholders agree as follows:
1. Number of Shares to be Sold. Notwithstanding anything to the
contrary contained in the Shareholders' Agreement, the Registration Rights
Agreement or the Joinder Agreement, New Mountain shall be permitted to sell in
the Offering 1,855,139 shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock owned by New Mountain (including up to
243,121 shares of Common Stock pursuant to the Over-allotment Option),
MidOcean shall be permitted to sell in the Offering 1,091,879 shares of Common
Stock including (i) 858,879 shares of Common Stock issuable upon conversion of
shares of Series A Preferred Stock owned by MidOcean (including up to 91,879
shares of Common Stock pursuant to the Over-allotment Option) and (ii) 233,000
shares of Common Stock issuable upon exercise of the option granted to it
pursuant to the Option Agreement (the "Xxxxxx Shares"), and New Mountain Trust
shall be permitted to sell in the Offering 387,982 shares of Common Stock
issuable upon conversion of shares of Series A Preferred Stock owned by New
Mountain Trust. The Offering shall also include the 115,000 Management Shares
(as set forth below). Of the 450,000 shares of Common Stock to be sold in the
Offering pursuant to the over-allotment option (the "Over-allotment Option")
to be granted to the Underwriters by New Mountain, MidOcean and certain
members of the Company's management ("Management") pursuant to the
Underwriting Agreement, up to 243,121 shares shall be sold by New Mountain, up
to 91,879 shares shall be sold by MidOcean, and up to 115,000 shares shall be
sold by Management (the "Management Shares"). All of the shares of Common
Stock to be sold by New Mountain and MidOcean pursuant to the Over-allotment
Option shall be issued upon conversion of shares of Series A Preferred Stock.
2. Board Representation.
(a) Following completion of the Offering, pursuant to Section 10
of the Articles Supplementary, the number of members of the Board of Directors
of the Company (the "Board") that New Mountain shall be entitled to elect
shall be reduced from 40% of the total members of the Board to one member.
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New Mountain Partners, L.P.
MidOcean Capital Investors, L.P.
New Mountain Xxxxxxx Trust
March 9, 2004
(b) In connection therewith, New Mountain hereby acknowledges
that effective upon completion of the Offering, Xxxxxx X. Xxxxxx, J. Xxxxx
Xxxxx and Xxxxx X. Xxxxxxx (the "Directors") will resign from the Board and
any committees thereof.
3. Conversion of Series A Preferred Stock.
(a) The execution by the Selling Stockholders of the
Underwriting Agreement shall (except as provided in Section 3(e) below)
constitute written notice (as required by Section 7(b) of the Articles
Supplementary) to the Company that New Mountain, MidOcean and New Mountain
Trust shall have elected, pursuant to Section 7(a) of the Articles
Supplementary, to convert, effective as of the closing (the "First
Closing") occurring on the First Closing Date, the Applicable Firm Number
(as defined below) of shares of Series A Preferred Stock held by such
Selling Stockholder into shares of Common Stock (the "Conversion").
Certificates evidencing the shares of Common Stock issuable upon such
Conversion shall be issued in the name of, and shall be delivered by the
Company to, the respective Selling Stockholders against delivery pursuant
to Section 3(f) below of certificate(s) representing the Applicable Firm
Number of shares of Series A Preferred Stock, at least one business day
prior to the First Closing, such delivery to be made at the location of
such First Closing. "Applicable Firm Number" means that number of shares of
Series A Preferred Stock which, if converted into shares of Common Stock in
accordance with Section 7 of the Articles Supplementary (taking into
account all accumulated and unpaid dividends thereon to but not including
the Conversion Date (the First Closing Date) in accordance with the
Articles Supplementary and the Letter Agreement), would result in the
issuance upon such Conversion of 1,612,018 shares of Common Stock in the
case of New Mountain, 767,000 shares of Common Stock in the case of
MidOcean and 387,982 shares of Common Stock in the case of New Mountain
Trust. The Company acknowledges and agrees that the certificates registered
in the name of New Mountain, MidOcean, and New Mountain Trust,
respectively, representing 1,454,205 shares, 691,914 shares, and 350,000
shares of Series A Preferred Stock represent, in addition to the 1,454,205
shares, 691,914 shares, and 350,000 shares of Series A Preferred Stock
indicated on the face of such certificates, an additional 157,813 shares,
75,086 shares and 37,982 shares of Series A Preferred Stock representing
accrued dividends to but not including the First Closing Date, in
accordance with the Articles Supplementary and the Letter Agreement. As a
result, the Applicable Firm Number of shares of Series A Preferred Stock
evidenced by such certificates as of the First Closing Date equals
1,454,205 in the case of New Mountain, 691,914 in the case of MidOcean, and
350,000 in the case of New Mountain Trust.
(b) The delivery by the Underwriters to the Company,
New ountain, MidOcean and Management of each notice referred to
in Section 3 of the Underwriting Agreement of the exercise of the
Over-allotment Option (the "Underwriters' Notice") shall (except
as provided in Section 3(e) below) constitute a
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New Mountain Partners, L.P.
MidOcean Capital Investors, L.P.
New Mountain Xxxxxxx Trust
March 9, 2004
written notice (as required by Section 7(b) of the Articles Supplementary) to
the Company that New Mountain and MidOcean shall have elected, pursuant to
Section 7(a) of the Articles Supplementary, to convert, effective as of the
closing (the "Option Closing") occurring on the applicable Option Closing
Date, the Applicable Option Number (as defined below) of shares of Series A
Preferred Stock held by New Mountain and MidOcean into the number of shares of
Common Stock in respect of which the Over-allotment Option is exercised (the
"Option Conversion"). Certificate(s) evidencing such number of shares of
Common Stock issuable upon such Option Conversion to New Mountain and MidOcean
shall be issued in the name of, and shall be delivered by the Company to, New
Mountain and MidOcean against delivery pursuant to Section 3(f) below of
certificate(s) representing the Applicable Option Number of shares of Series A
Preferred Stock, at least one business day prior to the Option Closing, such
delivery to be made at the location of such Option Closing. "Applicable Option
Number" means that number of shares of Series A Preferred Stock which, if
converted into shares of Common Stock in accordance with Section 7 of the
Articles Supplementary (taking into account all accumulated and unpaid
dividends thereon to but not including the Conversion Date (the date of the
Option Closing) in accordance with the Articles Supplementary and the Letter
Agreement), would result in the issuance upon such Option Conversion of the
number of shares of Common Stock in respect of which New Mountain and
MidOcean, as applicable, would sell to the Underwriters pursuant to the
Over-allotment Option.
(c) The number of shares of Common Stock issuable upon the
Conversion and the Option Conversion referred to in Sections 3(a) and 3(b)
above shall be computed in accordance with the Articles Supplementary and the
Letter Agreement. Any cash in lieu of fractional shares of Common Stock
payable upon the Conversion or Option Conversion shall be payable to the
Selling Stockholders, as applicable.
(d) The Company hereby waives any requirement that the Company
receive any additional formal written Conversion Notice (as defined in Section
7(b) of the Articles Supplementary) from the Selling Stockholders with respect
to the shares of Series A Preferred Stock to be converted into shares of
Common Stock as contemplated by paragraphs (a) and (b) above.
(e) The parties hereby agree that the Conversion Date (as defined
in Section 7(b) of the Articles Supplementary) with respect to the Applicable
Firm Number of shares of Series A Preferred Stock and the Applicable Option
Number of shares of Series A Preferred Stock shall be the First Closing Date
and the applicable Option Closing Date, respectively; provided, however, that
the Conversion and the Option Conversion shall occur if and only if the First
Closing and the Option Closing, respectively, occur; and provided, further,
that if the First Closing does not occur by March 31, 2004, no notice of
conversion by the Selling Stockholders shall be deemed to have been given to
the Company and no conversion of such shares of Series A Preferred Stock shall
occur or be deemed to have occurred by reason of this letter agreement, and
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New Mountain Partners, L.P.
MidOcean Capital Investors, L.P.
New Mountain Xxxxxxx Trust
March 9, 2004
in which case, the Company shall return the certificates evidencing the shares
of Series A Preferred Stock referred to in Section 3(f) below to New Mountain,
MidOcean and New Mountain Trust as applicable, not later than the earlier of
the date of termination of the Underwriting Agreement or March 31, 2004.
(f) At least one business day prior to the First Closing, each of
New Mountain, MidOcean and New Mountain Trust shall surrender to the Company
at the location of the First Closing certificate(s) evidencing at least their
respective Applicable Firm Number of shares of Series A Preferred Stock, duly
endorsed and free and clear of all liens and encumbrances (other than
encumbrances that, pursuant to Section 4 below, shall cease upon the sale of
the shares of Common Stock in the Offering), as provided in Section 7(b) of
the Articles Supplementary. At least one business day prior to each Option
Closing, New Mountain and MidOcean shall surrender, if such Selling
Stockholder is selling shares of Common Stock in such Option Closing, to the
Company at the location of the Option Closing certificate(s) evidencing at
least the Applicable Option Number of shares of Series A Preferred Stock, duly
endorsed and free and clear of all liens and encumbrances (other than
encumbrances that, pursuant to Section 4 below, shall cease upon the sale of
the shares of Common Stock in the Offering), as provided in Section 7(b) of
the Article Supplementary.
(g) If any of the certificates evidencing the shares of Series A
Preferred Stock surrendered in accordance with paragraph (f) above evidence a
number of shares of Series A Preferred Stock greater than the Applicable Firm
Number or the Applicable Option Number being converted, the Company shall
issue and deliver to the applicable Selling Stockholder at the First Closing
and/or any Option Closing a certificate or certificates evidencing the number
of shares of Series A Preferred Stock evidenced by such surrendered
certificates that shall not have been converted into shares of Common Stock.
(h) MidOcean acknowledges and agrees to provide the requisite
notice and take all such actions as are necessary so that MidOcean can and
will deliver the Xxxxxx Shares to the Company at least one business day prior
to the Closing Date.
4. Consent to Transfers. To the extent, if any, that the consent
of any Selling Stockholder to the conversion of shares of Series A Preferred
Stock as contemplated by Section 3 hereof and/or the sale in the Offering of
the shares of Common Stock issuable upon such conversion is required under the
Company's articles of incorporation or bylaws, Maryland law, the Preferred
Stock Purchase Agreement, the Shareholders' Agreement, the Joinder Agreement
or otherwise, each of the Selling Stockholders hereby grants its consent to
such conversion and subsequent sale.
5
New Mountain Partners, L.P.
MidOcean Capital Investors, L.P.
New Mountain Xxxxxxx Trust
March 9, 2004
5. Applicable Law; Amendments; Counterparts; Signatory Authority.
(a) The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this letter
agreement, without regard to the application of principles of conflicts of
law.
(b) This letter agreement may not be amended or modified except by
a writing executed by all of the parties hereto.
(c) This letter agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same letter agreement.
(d) New Mountain hereby represents and warrants that Xxxxxx X.
Xxxxxxx, the sole Member of New Mountain GP, LLC, which is the general partner
of New Mountain Investments, L.P., which is the general partner of New
Mountain, is duly authorized to sign all stock powers and/or stock
certificates on behalf of New Mountain to effect the sale to the Underwriters
of the shares of Common Stock in connection with the Offering, and New
Mountain hereby agrees to indemnify and hold harmless the Company from and
against any loss arising out of any breach of this representation and
warranty. MidOcean hereby represents and warrants that Xxxxxx Spring, a
Principal of MidOcean Capital Partners, L.P., which is the general partner of
Existing Fund GP, Ltd., which is the general partner of MidOcean, is duly
authorized to sign all stock powers and/or stock certificates on behalf of
MidOcean to effect the sale to the Underwriters of the shares of Common Stock
in connection with the Offering, and MidOcean hereby agrees to indemnify and
hold harmless the Company from and against any loss arising out of any breach
of this representation and warranty. New Mountain Trust hereby represents and
warrants that XxXx Xxxxxxx, a Vice President of Bank of America, N.A., which
is the Trustee of New Mountain Trust is duly authorized to sign all stock
powers and/or stock certificates on behalf of New Mountain Trust to effect the
sale to the Underwriters of the shares of Common Stock in connection with the
Offering, and New Mountain Trust hereby agrees to indemnify and hold harmless
the Company from and against any loss arising out of any breach of this
representation and warranty.
6. Indemnification. The parties hereto acknowledge and agree that
the indemnification and contribution provisions contained in Section 6 of the
Registration Rights Agreement apply to the Offering. For purposes of the
Offering, New Mountain Trust shall be deemed a Covered Holder pursuant to the
Registration Rights Agreement.
7. Termination. This letter agreement shall terminate, shall be
deemed to be void ab initio and shall be of no further force or effect (a) on
the date of termination of the Underwriting Agreement or (b) if the First
Closing Date does not occur on or prior to March 31, 2004.
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Very truly yours,
XXXXXXX EDUCATION, INC.
By: /s/ Xxxxxx X. XxXxxxxx
---------------------------------
Name: Xxxxxx X. XxXxxxxx
Title: Senior Vice President and
General Counsel
Confirmed and agreed as of the date first written above:
NEW MOUNTAIN PARTNERS, L.P.
By: New Mountain Investments, L.P., its general partner
By: New Mountain GP, LLC, its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Member
MIDOCEAN CAPITAL INVESTORS, L.P.
By: MidOcean Capital Partners, L.P., its general partner
By: Existing Fund GP, Ltd., its general partner
By: /s/ Xxxxxx Spring
-------------------------------
Name: Xxxxxx Spring
Title: Principal
NEW MOUNTAIN XXXXXXX TRUST
By: Bank of America, N.A., as Trustee
By: /s/ XxXx Xxxxxxx
-------------------------------
Name: XxXx Xxxxxxx
Title: Vice President
