CONVERSION AND EXCHANGE AGREEMENT Exhibit 4.8
THIS AGREEMENT, dated November 25, 2002, is by and among CONCORDE CAREER
COLLEGES, INC., a Delaware corporation (the "Company") and the following holders
(the "Holders") of Class B voting convertible preferred stock of the Company
(the "Preferred Stock"):
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Name of Holder Description of Preferred Stock
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Xxxxxx, Xxxxxxx Strategic Partners 50,414 shares Class B Voting Convertible
Fund, L.P. Preferred Stock
Strategic Associates, L.P. 2,895 shares Class B Voting Convertible
Preferred Stock
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Background of the Agreement
(a) The Company, in an effort to streamline its equity structure in
order to enhance long term stockholder value and to position the Company
for a listing on the NASDAQ National Market, desires to restructure its
capital stock by converting the Preferred Stock to common stock of the
Company.
(b) In order to implement the capitalization restructuring, the
Company has requested that the Holders agree to such conversion of the
Preferred Stock.
(c) To complete the capitalization restructuring and to allow the
Company to increase long term stockholder value and position itself for
listing on the NASDAQ National Market, the Holders are willing to agree to
such exchange and conversion of the Preferred Stock pursuant to the terms
and conditions set forth in this Agreement.
Agreement
On the basis of the foregoing, it is agreed as follows:
CONVERSION OF PREFERRED STOCK. SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THIS AGREEMENT, ON THE CONVERSION DATE
(AS DEFINED IN SECTION 5(A) BELOW) (A) THE PREFERRED STOCK SHALL BE
CONVERTED (THE "CONVERSION") INTO THAT NUMBER OF SHARES (THE
"CONVERTED SHARES") OF THE COMMON STOCK OF THE COMPANY, PAR
VALUE $0.10 PER SHARE ("COMMON STOCK"), APPEARING OPPOSITE EACH
HOLDER'S NAME ON SCHEDULE 1 ATTACHED HERETO; AND (B) THE
COMPANY SHALL PAY EACH HOLDER A CASH PAYMENT IN AN AMOUNT
THAT IS EQUAL TO $4.08 PER SHARE OF PREFERRED STOCK BENEFICIALLY
OWNED BY SUCH HOLDER UPON THE CONVERSION DATE, (THE
"ACCELERATED DIVIDEND PAYMENT"). NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED WITHIN THE COMPANY'S CERTIFICATE OF
DESIGNATION, AS AMENDED, THE PARTIES HERETO AGREE THAT THE
ACCELERATED DIVIDEND PAYMENT INCLUDES ALL DIVIDEND PAYMENTS
OWED TO THE HOLDERS THROUGH THE YEARS ENDED DECEMBER 31, 2002
AND DECEMBER 31, 2003.
DELIVERY OF PREFERRED STOCK CERTIFICATES. TOGETHER WITH THIS
AGREEMENT, EACH HOLDER SHALL DELIVER TO THE COMPANY THE
CERTIFICATE OR CERTIFICATES REPRESENTING THE PREFERRED STOCK,
DULY ENDORSED FOR TRANSFER TO THE COMPANY OR ACCOMPANIED BY A
DULY EXECUTED STOCK POWER IN FAVOR OF THE COMPANY
(COLLECTIVELY, THE "PREFERRED STOCK CERTIFICATES"). THE COMPANY
AGREES TO HOLD THE PREFERRED STOCK CERTIFICATES UNTIL THE
CONVERSION DATE AND TO PROMPTLY RETURN THE PREFERRED STOCK
CERTIFICATES TO THE RESPECTIVE HOLDERS IF THIS AGREEMENT IS
TERMINATED PRIOR TO THE CONVERSION DATE. IF THE PREFERRED STOCK
CERTIFICATES ARE NOT BEING DELIVERED TOGETHER WITH THIS
AGREEMENT, THE HOLDERS AGREE TO PROMPTLY DELIVER THE
PREFERRED STOCK CERTIFICATES TO, OR AS DIRECTED BY, THE COMPANY.
REPRESENTATIONS BY THE COMPANY. THE COMPANY HEREBY REPRESENTS
AND WARRANTS TO THE HOLDERS AS FOLLOWS:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation.
(b) The Converted Shares have been duly authorized and, upon delivery
to each Holder of the Common Stock Certificates pursuant to Section 5(b)
below, will be validly issued and outstanding, fully paid and
non-assessable shares of Common Stock of the Company.
(c) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and constitutes the legal, valid and binding
agreement of the Company, enforceable against it in accordance with its
terms.
(d) After making due inquiry, neither this Agreement, nor any Schedule
nor any instruments delivered by the Company or its representatives to the
Holders in connection with this Agreement or the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not
misleading.
(e) Each form, report, schedule, registration statement and definitive
proxy statement filed by the Company with the Securities and Exchange
Commission ("SEC") prior to the date hereof (as such documents have been
amended prior to the date hereof, the "SEC Reports"), as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended and the rules and regulations promulgated
thereunder applicable to such SEC Reports, and none of the SEC Reports when
filed (or if amended or superseded by a filing prior to the date hereof,
then on the date of such filing) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of
the Company included in the SEC Reports as of their respective dates comply
as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries as of the dates thereof and the consolidated
results of their operations, stockholders' equity and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
and recurring year-end audit adjustments not material in amount). None of
the Company's subsidiaries has filed, or is obligated to file, any forms,
reports, schedules, statements or other documents with the SEC. The
adoption of any SEC rule, regulation or Staff Accounting Bulletin effective
on or after January 1, 2000, has not adversely impacted and will not
adversely impact, in any material respect, the amount or timing of revenue
recognition by the Company or any of its subsidiaries as compared to their
respective prior revenue recognition practices. Neither the Company nor any
of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), other than
liabilities and obligations (i) fully reflected or reserved against in the
financial statements included in the SEC Reports, or (ii) incurred since
September 30, 2002 in the ordinary course of business.
REPRESENTATIONS BY THE HOLDERS. EACH HOLDER HEREBY
REPRESENTS AND WARRANTS TO THE COMPANY AS FOLLOWS:
(a) It is the record and beneficial owner of the Preferred Stock, and
such ownership is free and clear of any liens or encumbrances of any kind.
(b) It has all requisite power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by such Holder
and constitutes the legal, valid and binding agreement of the Holder,
enforceable against the Holder in accordance with its terms.
CONVERSION DATE; CONDITIONS TO EFFECTIVENESS.
(a) The second business day following the day a shelf registration
covering the Converted Stock and Common Stock held by the Holders
(the "Shelf Registration") has been declared effective shall be
referred to as the "Conversion Date." On the Conversion Date,
subject to the satisfaction or waiver of the conditions set forth
below, (A) the Company shall (y) cause the Conversion to occur
pursuant to Section 1 hereof; and (z) pay by wire transfer of
immediately available funds the Accelerated Dividend Payment as
set forth in Section 1 hereof; and (B) the Holders shall deliver
the Preferred Stock Certificates pursuant to Section 2 hereof.
(b) The obligation of each Holder to proceed with the conversion and
exchange of the Preferred Stock as provided herein shall be
subject to the following conditions:
1. On the Conversion Date, the Company shall execute and deliver to
each Holder a certificate or certificates representing the
Converted Shares, issued in the name of such Holder (the "Common
Stock Certificates") for the number of Converted Shares appearing
opposite such Holder's name on Schedule 1, which shall be freely
tradable in accordance with federal and applicable state
securities laws.
2. Each Holder shall have received from the Company the Accelerated
Dividend Payment.
3. Each Holder shall have received an executed copy of the Amended
and Restated Stockholders' Agreement by and among the Company and
Holders in a form that is the same as Exhibit A (the
"Stockholders' Agreement").
4. All registrations and qualifications of the Converted Shares
issued to the Holders on the Conversion Date required under
federal and applicable state securities laws shall have been
obtained for the lawful execution, delivery and performance of
this Agreement.
5. The Shelf Registration shall have been declared and shall be
effective and the Company shall bear all costs and expenses
incurred in connection with the Shelf Registration.
6. Since September 30, 2002, there shall not have occurred any
events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a material adverse
effect on the business, prospects, financial condition or
operations of the Company or the ability of the Company to
consummate the transactions contemplated hereby.
7. Since September 30, 2002, the Company shall have operated its
business in the ordinary course, diligently and in good faith,
consistent with past management practices; and the Company shall
have maintained all of its properties in customary repair, order
and condition, reasonable wear and tear excepted and will not
have engaged in any significant or unusual transaction.
8. The Registration Rights Agreement dated February 25, 1997 by and
between the Company and the Holders shall have been amended and
restated to have terms consistent with those in Article 6 of the
Stockholders' Agreement.
(c) The obligation of the Company to proceed with the issuance of the
Converted Shares on conversion and exchange of the Preferred Stock as
provided herein shall be subject to the following conditions:
(i) The Company shall have received from each Holder the original
Preferred Stock Certificates held by each Holder for cancellation on or
before the Conversion Date, or shall have provided the Company with an
affidavit of lost certificate and indemnity agreement reasonably
satisfactory to the Company in respect of any liability which the
Company may incur as a result of any claims which may subsequently be
asserted against the Company in respect of the Preferred Stock
Certificates.
9. The Company shall have received an executed copy of the
Stockholders' Agreement.
10. All registrations and qualifications of the Converted Shares issued
to the Holders on the Conversion Date required under federal and
applicable state securities laws shall have been obtained for the
lawful execution, delivery and performance of this Agreement.
EFFECT OF CONVERSION AND EXCHANGE.
(a) Notwithstanding anything to contrary contained within the
Certificate of Designations of the Preferred Stock, dated February 15, 1997
or the Certificate of Correction, dated March 3, 1997, each of the Holders
acknowledges and agrees that the issuance of the Converted Shares on
conversion and exchange of the Preferred Stock shall constitute
satisfaction in full of any liability or obligation of the Company in
respect of the Preferred Stock, and that, from and after the Conversion
Date, the Company shall have no liability to the Holder, or to the
successors, representatives or assigns of the Holder, in respect of or
based on the Preferred Stock or the Preferred Stock Certificates, except
the right to receive the Accelerated Dividend Payment and the Converted
Shares as provided herein.
(b) Notwithstanding Section 10.1 of that certain Convertible Preferred
Stock Purchase Agreement by and among the Company and the Holders, dated
February 25, 1997 and amended on March 20, 1997 (the "Purchase Agreement"),
the parties hereto acknowledge and agree that the following sections of the
Purchase Agreement shall be deleted in their entirety and shall have no
force or effect: Section 6, entitled Covenants and Section 9, entitled
Covenants of the Company. Except as specifically provided in this Section
6(b), all of the provisions, terms and conditions of the Purchase Agreement
shall remain in full force and effect.
TERMINATION.
(a) This Agreement will automatically terminate ninety (90) days from
the date hereof if the Conversion Date has not yet occurred.
(b) The Holders will have the right to terminate this Agreement if, on the
Conversion Date, the Company has not satisfied any of the conditions set
forth in Section 5(b) hereof, unless the Holders waive such condition in
writing.
(c) The Company will have the right to terminate this Agreement if, on the
Conversion Date, the Holders have not satisfied any of the conditions set
forth in Section 5(c) hereof, unless the Company waives such condition in
writing.
MISCELLANEOUS.
(a) Each party hereto agrees to execute and deliver, on request of the
other party, such further documents or certificates as such party may
request in order to further evidence and confirm the transactions described
herein, and, in particular, to confirm the cancellation and termination of
all obligations of the Company in respect of the Preferred Stock and the
Preferred Stock Certificates from and after the Conversion Date.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(c) The terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of the Company and each Holder and their
respective successors and assigns.
(d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which shall constitute
one and the same instrument.
(e) The headings of any paragraph of this Agreement are for convenience
only and shall not be used to interpret any provision hereof.
(f) No modification hereof shall be binding or enforceable unless in
writing and signed on behalf of the party against whom enforcement is
sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
COMPANY HOLDER
CONCORDE CAREER COLLEGES, INC. XXXXXX, XXXXXXX STRATEGIC
PARTNERS FUND, L.P.
By: XXXXXX XXXXXXX STRATEGIC
By: /s/ Xxxx X. Xxxxxxx PARTNERS, L.P., its general partner
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Xxxx X. Xxxxxxx
President By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
A General Partner
STRATEGIC ASSOCIATES, L.P.
By: Xxxxxx, Xxxxxxx Strategic Partners,
L.P., its general partner
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
A General Partner
S-1
Schedule 1
Schedule of existing Preferred Stock and Common Stock to be issued on
conversion
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Shares of Preferred
Stock Beneficially Shares of Common Stock to
Name of Shareholder Owned Prior to be issued on conversion
conversion
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Xxxxxx, Xxxxxxx Strategic 50,414 504,140
Partners Fund, L.P. (1)
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Strategic Associates, L.P. (2) 2,895 28,950
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