-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TthO0LkxRn1mo7qinIPWF6610YAUXLdYC2EclsNONzBzyPMETIA/WMPo2PDwDID/ vZN87LjCEs226o12X0bnEA== 0000903893-97-000442.txt : 19970310 0000903893-97-000442.hdr.sgml : 19970310 ACCESSION NUMBER: 0000903893-97-000442 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19970307 SROS: NONE GROUP MEMBERS: CAHILL EDWARD L GROUP MEMBERS: CAHILL, WARNOCK & CO., LLC GROUP MEMBERS: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. GROUP MEMBERS: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. GROUP MEMBERS: DAVID L. WARNOCK GROUP MEMBERS: STRATEGIC ASSOCIATES, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONCORDE CAREER COLLEGES INC CENTRAL INDEX KEY: 0000832483 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 431440321 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-40233 FILM NUMBER: 97552168 BUSINESS ADDRESS: STREET 1: 1100 MAIN ST STREET 2: 12TH & BALTIMORE PO BOX 26610 CITY: KANSAS CITY STATE: MO ZIP: 64196 BUSINESS PHONE: 8164748002 MAIL ADDRESS: STREET 1: 1100 MAIN STREET STREET 2: STE 416 CITY: KANSAS CITY STATE: MO ZIP: 64105 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CAHILL EDWARD L CENTRAL INDEX KEY: 0001025665 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: A STREET 2: 10 NORTH CALVERT ST STE 735 CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4102441300 MAIL ADDRESS: STREET 1: 10 NORTH CALVERT ST STREET 2: SUITE 735 CITY: BALTIMORE STATE: MD ZIP: 21202 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ___________)* Concorde Career Colleges, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) - -------------------------------------------------------------------------------- Common Stock, $.10 Par Value Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 20651H 10 2 - -------------------------------------------------------------------------------- (CUSIP Number) Walter H. Stowell, Esq. Testa, Hurwitz & Thibeault, LLP 125 High Street, Boston, MA 02110 (617) 248-7000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 25, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. - -------------------- *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Edward L. Cahill SSN: ###-##-#### - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON David L. Warnock SSN: ###-##-#### - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock Strategic Partners, L.P. IRSN: 52-1970604 - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------- ---------------------------------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock Strategic Partners Fund, L.P. IRSN: 52-1970619 - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |X| (b) |_| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC, BK - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Cahill, Warnock & Company, LLC IRSN: 52-1931617 - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |_| (b) |X| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) AF - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Maryland Limited Liability Company - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) OO - --------- ---------------------------------------------------------------------- SCHEDULE 13D - ----------------------------------------- CUSIP NO. 20651H 10 2 - ----------------------------------------- - --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Strategic Associates, L.P. IRSN: 52-1991689 - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) |X| (b) |_| - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 SOURCE OF FUNDS (See Instructions) WC - --------- ---------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_| PURSUANT TO ITEMS 2(d) or 2(e) - --------- ---------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware Limited Partnership - --------------------------- -------- ------------------------------------------- 7 SOLE VOTING POWER -0- NUMBER OF SHARES -------- ------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,602,940 -------- ------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON WITH -------- ------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,602,940 - --------- ---------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,602,940 - --------- ---------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN |X| SHARES (See Instructions) - --------- ---------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - --------- ---------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) PN - --------- ---------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER: This statement relates to the Common Stock, $.10 par value per share (the "Shares"), of Concorde Career Colleges, Inc., a Delaware corporation (the "Issuer"). The address of the Issuer's principal executive offices is 1100 Main Street, Suite 416, Kansas City, MO 64105. ITEM 2. IDENTITY AND BACKGROUND: This statement is being filed by (i) Cahill, Warnock Strategic Partners Fund, L.P. ("Strategic Partners Fund"), (ii) Cahill Warnock Strategic Partners, L.P. ("Strategic Partners"), the sole general partner of Strategic Partners Fund, (iii) Strategic Associates, L.P. ("Strategic Associates"), (iv) Cahill, Warnock & Company, LLC ("Cahill, Warnock & Co."), the sole general partner of Strategic Associates, (v) Edward L. Cahill ("Cahill"), a general partner of Strategic Partners and a member of Cahill, Warnock & Co., and (vi) David L. Warnock ("Warnock"), a general partner of Strategic Partners and a member of Cahill, Warnock & Co. Strategic Partners Fund, Strategic Partners, Strategic Associates, Cahill, Warnock & Co., Cahill and Warnock are sometimes referred to collectively herein as the "Reporting Persons." The address of the principal business and principal office of Strategic Partners Fund, Strategic Partners, Strategic Associates and Cahill, Warnock & Co. is 1 South Street, Suite 2150, Baltimore, MD 21202. The business address of Cahill and Warnock is 1 South Street, Suite 2150, Baltimore, MD 21202. The state of organization for Strategic Partners Fund, Strategic Partners and Strategic Associates is Delaware. The state of organization for Cahill, Warnock & Co. is Maryland. Both Cahill and Warnock are citizens of the United States of America. The principal business of Strategic Partners Fund and Strategic Associates is to make private equity investments in micro-cap public companies seeking capital for expansion or undergoing a restructuring of ownership. The principal business of Strategic Partners is to act as the sole general partner of Strategic Partners Fund. The principal business of Cahill, Warnock & Co. is to act as the sole general partner of Strategic Associates and Camden Partners, L.P. ("Camden Partners") and to manage the activities of Strategic Partners Fund, Strategic Associates and Camden Partners. The principal occupations of Cahill and Warnock are their activities on behalf of Strategic Partners Fund, Strategic Partners, Strategic Associates, Cahill, Warnock & Co. and Camden Partners. The principal business of Camden Partners is to make passive investments in public companies. The principal office of Camden Partners is 1 South Street, Suite 2150, Baltimore, MD 21202. During the five years prior to the date hereof, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding ending in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding a violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION: On February 25, 1997 Strategic Partners Fund acquired 39,752 shares of Class B Voting Convertible Preferred Stock of the Issuer for a total purchase price of $1,081,255. The preferred stock acquired by Strategic Partners Fund is currently convertible into 795,040 shares of the Issuer's Common Stock. The working capital of Strategic Partners Fund was the source of funds for this purchase. No part of the purchase price was or will be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the preferred stock. On February 25, 1997, Strategic Partners Fund acquired 473,750 shares of the Issuer's Common Stock for a total purchase price of $473,750. The funds used to purchase the Common Stock were borrowed from Wilmington Trust Company pursuant to a certain Promissory Note and Loan Agreement dated February 5, 1997, by and among Strategic Partners Fund and Wilmington Trust Company (attached hereto as Exhibit 3). The Promissory Note and Loan Agreement provides Strategic Partners Fund with a revolving line of credit of up to $8,000,000. On February 25, 1997 Strategic Associates acquired 2,895 shares of Class B Voting Convertible Preferred Stock of the Issuer for a total purchase price of $78,744. The preferred stock acquired by Strategic Associates is currently convertible into 57,900 shares of the Issuer's Common Stock. The working capital of Strategic Associates was the source of funds for this purchase. No part of the purchase price was or will be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the preferred stock. On February 25, 1997 Strategic Associates acquired 26,250 shares of the Issuer's Common Stock for a total purchase price of $26,250. The working capital of Strategic Associates was the source of funds for this purchase. No part of the purchase price was or will be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the common stock. ITEM 4. PURPOSE OF TRANSACTION: Strategic Partners Fund and Strategic Associates acquired the Issuer's securities for investment purposes. Depending on market conditions, their continuing evaluation of the business and prospects of the Issuer and other factors, Strategic Partners Fund and Strategic Associates may dispose of or acquire additional securities of the Issuer. Except as stated below, none of the Reporting Persons has any present plans which relate to or would result in: (a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Issuer or of any of its subsidiaries; (d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Issuer; (f) Any other material change in the Issuer's business or corporate structure; (g) Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) Any action similar to any of those enumerated above. Exception. Pursuant to the terms of a certain Convertible Preferred Stock Purchase Agreement dated as of February 25, 1997, by and among the Issuer, Strategic Partners Fund and Strategic Associates, (the "Stock Purchase Agreement")(attached hereto as Exhibit 6), Strategic Partners Fund shall purchase an additional 12,500 shares of Class B Voting Convertible Preferred Stock of the Issuer on March 21, 1997. Exception. On February 25, 1997, pursuant to a certain Subordinated Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic Partners Fund (attached hereto as Exhibit 8), Strategic Partners Fund purchased from the Issuer a 5% Subordinated Debenture due February 25, 2003 in the principal amount of $3,316,250 (attached hereto as Exhibit 12). As partial consideration for the purchase, Strategic Partners Fund was granted warrants to purchase 2,438,419 shares of the Issuer's Common Stock at an exercise price of $1.36 per share (attached hereto as Exhibit 10). The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Exception. On February 25, 1997, pursuant to a certain Subordinated Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic Associates (attached hereto as Exhibit 9), Strategic Associates purchased from the Issuer a 5% Subordinated Debenture due February 25, 2003 in the principal amount of $183,750 (attached hereto as Exhibit 13). As partial consideration for the purchase, Strategic Associates was granted warrants to purchase 135,110 shares of the Issuer's Common Stock at an exercise price of $1.36 per share (attached hereto as Exhibit 11). The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Exception. Pursuant to the terms of a certain Stockholders' Agreement, dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund, Strategic Associates, Jack L. Brozman, The Estate of Robert F. Brozman and the Robert F. Brozman Trust Under Agreement Dated December 28, 1989 (the "Stockholders' Agreement") (attached hereto as Exhibit 5), the parties thereto agreed to fix the size of the Board of Directors of the Issuer at six (6), and each shareholder who is a party to the agreement agreed to vote all of its shares of stock of the Issuer to elect certain persons to the Board of Directors of the Issuer. As a consequence of this agreement, at present, Strategic Partners Fund and Strategic Associates collectively shall have the authority to elect two members of the Board of Directors. ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER: (a) Strategic Partners Fund is the record owner of 39,752 shares of Class B Voting Convertible Preferred Stock of the Issuer (the "Fund Preferred Stock"). The Fund Preferred Stock is currently convertible into 795,040 shares of the Issuer's Common Stock (the "Fund Conversion Shares"). Strategic Partners Fund has a right to acquire an additional 12,500 shares of Class B Voting Convertible Preferred Stock (the "Second Closing Preferred Stock") within 60 days of the date hereof. The Second Closing Preferred Stock is convertible into 250,000 shares of the Issuer's Common Stock (the "Second Closing Conversion Shares"). In addition, Strategic Partners Fund is the record owner of 473,750 shares of Common Stock of the Issuer (the "Fund Common Stock"). Strategic Associates is the record owner of 2,895 shares of Class B Voting Convertible Preferred Stock of the Issuer (the "Associates Preferred Stock"). The Associates Preferred Stock is currently convertible into 57,900 shares of the Issuer's Common Stock (the "Associates Conversion Shares"). In addition, Strategic Associates is the record owner of 26,250 shares of Common Stock of the Issuer (the "Associates Common Stock"). The Fund Conversion Shares, the Second Closing Conversion Shares, the Fund Common Stock, the Associates Conversion Shares and the Associates Common Stock are sometimes referred to herein collectively as the "Concorde Shares". Because of their relationship as affiliated entities, both Strategic Partners Fund and Strategic Associates may be deemed to own beneficially the Concorde Shares. As general partners of Strategic Partners Fund and Strategic Associates, respectively, Strategic Partners and Cahill, Warnock & Co. may be deemed to own beneficially the Concorde Shares. As the individual general partners of Strategic Partners and as the members of Cahill, Warnock & Co., both Cahill and Warnock may be deemed to own beneficially the Concorde Shares. By virtue of the Stockholders' Agreement (attached hereto as Exhibit 5) each of the Reporting Persons may be deemed to share voting power with respect to each share of the Issuer's stock subject to the agreement. Consequently, the Reporting Persons may be deemed to beneficially own, in addition to the Concorde Shares, an additional 3,337,048 shares of the Issuer's Common Stock (the "Agreement Shares"). Strategic Partners Fund disclaims beneficial ownership of the Associates Conversion Shares, the Associates Common Stock and the Agreement Shares. Strategic Associates disclaims beneficial ownership of the Fund Conversion Shares, the Second Closing Conversion Shares, the Fund Common Stock and Agreement Shares. Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim beneficial ownership of the Concorde Shares and the Agreement Shares. Each of the Reporting Persons may be deemed to own beneficially 19.9% of the Issuer's Common Stock, which percentage is calculated based upon (i) 6,961,776 shares of Common Stock reported outstanding by the Issuer in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996, and (ii) the number of shares of Common Stock (1,102,940) issuable upon conversion of the Fund Preferred Stock, the Second Closing Preferred Stock and Associates Preferred Stock. The calculation of beneficial ownership percentage does not reflect potential deemed beneficial ownership of the Agreement Shares. In Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic Partners and the limited partners of Strategic Partners Fund agreed that any securities of a particular issuer that are acquired by both Strategic Partners Fund and Strategic Associates shall be sold or otherwise disposed of at substantially the same time, on substantially the same terms and in amounts proportionate to the size of each of their investments. As a consequence, Strategic Associates and Strategic Partners Fund may be deemed to be members of a group pursuant to Rule 13d-5(b)(1) of the Securities Exchange Act of 1934. Strategic Partners, Cahill, Warnock & Co., Cahill and Warnock each disclaim membership in the aforementioned group. (b) Number of Shares as to which each such person has (i) Sole power to vote or direct the vote: 0 shares for each Reporting Person; (ii) Shared power to vote or direct the vote: 1,602,940* shares for each Reporting Person; (iii) Sole power to dispose or to direct the disposition: 0 shares for each Reporting Person; (iv) Shared power to dispose or to direct the disposition: 1,602,940* shares for each Reporting Person. * Does not reflect potential deemed beneficial ownership of the Agreement Shares. (c) Except as set forth above, none of the Reporting Persons has effected any transaction in the Shares during the last 60 days. (d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, the Shares beneficially owned by any of the Reporting Persons. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER: In Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund, dated July 26, 1996 (attached hereto as Exhibit 2), Strategic Partners and the limited partners of Strategic Partners Fund agreed that any securities of a particular issuer that are acquired by both Strategic Partners Fund and Strategic Associates shall be sold or otherwise disposed of at substantially the same time, on substantially the same terms and in amounts proportionate to the size of each of their investments. Pursuant to the terms of a certain Registration Rights Agreement dated as of February 25, 1997, by and among the Issuer, Strategic Partners Fund and Strategic Associates (attached hereto as Exhibit 7), subject to certain exceptions and limitations, Strategic Partners Fund and Strategic Associates are granted certain demand and "piggyback" registration rights. Pursuant to the terms of the Stock Purchase Agreement, by and among the Issuer, Strategic Partners Fund and Strategic Associates (attached hereto as Exhibit 6), on February 25, 1997 Strategic Partners Fund acquired 39,752 shares of Class B Voting Convertible Preferred Stock and Strategic Associates acquired 2,895 shares of Class B Voting Convertible Preferred Stock. In addition, pursuant to this agreement, Strategic Partners Fund shall purchase an additional 12,500 shares of Class B Voting Convertible Preferred Stock of the Issuer on March 21, 1997. Pursuant to the terms of the Stockholders' Agreement, dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund, Strategic Associates, Jack L. Brozman, The Estate of Robert F. Brozman and the Robert F. Brozman Trust Under Agreement Dated December 28, 1989 (the parties to the agreement, with the exception of the Issuer, may be referred to herein collectively as the "Securityholders")(attached hereto as Exhibit 5), the parties thereto agreed to fix the size of the Board of Directors of the Issuer at six (6), and the Securityholders agreed to vote all of their shares of stock of the Issuer to elect certain persons to the Board of Directors of the Issuer. As a consequence of the agreement, at present, Strategic Partners Fund and Strategic Associates shall collectively have the authority to elect two members of the Board of Directors. The Stockholders' Agreement also contains provisions restricting transfer of any shares of stock owned the Securityholders, and, under certain circumstances, grants each Securityholder a right of first refusal in the event one of the other Securityholders wants to transfer all or a portion of its shares. In addition, subject to certain restrictions and limitations, this agreement grants the Securityholders certain demand and "piggyback" registration rights. Pursuant to this agreement, Strategic Partners Fund and Strategic Associates are granted certain preemptive rights which allow them to participate in certain equity offerings of the Issuer to the extent necessary to maintain their respective proportional interest in the Issuer. Pursuant to a certain Subordinated Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic Partners Fund (attached hereto as Exhibit 8), Strategic Partners Fund purchased from the Issuer a 5% Subordinated Debenture due February 25, 2003 in the principal amount of $3,316,250 (attached hereto as Exhibit 12). As partial consideration for the purchase, Strategic Partners Fund was granted warrants to purchase 2,438,419 shares of the Issuer's Common Stock at an exercise price of $1.36 per share (attached hereto as Exhibit 10). The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Pursuant to the terms of a certain Common Stock Purchase Warrant dated February 25, 1997 (attached hereto as Exhibit 10) granted by the Issuer, Strategic Partners Fund is granted warrants to purchase 2,438,419 shares of the Issuer's Common Stock at an exercise price of $1.36 per share. The exercise price is subject to adjustment upon the occurrence of certain dilution events. The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Upon the occurrence of a certain firm commitment underwritten public offering of Common Stock by the Issuer, this warrant may become mandatorily exercisable. The sole party to this agreement is the Issuer. Pursuant to the terms of a certain 5% Subordinated Debenture due February 25, 2003 (attached hereto as Exhibit 12) the Issuer agrees to pay Strategic Partners Fund the principal amount of $3,316,250 and to pay interest on any unpaid principal at the annual rate of five percent. Upon the occurrence of a certain underwritten public offering of Common Stock by the Issuer, Strategic Partners Fund may, in its discretion, require the Issuer to apply the proceeds from that offering to prepay the unpaid principal amount and outstanding interest on this Debenture. The sole party to this agreement is the Issuer. Pursuant to a certain Subordinated Debenture and Warrant Purchase Agreement by and between the Issuer and Strategic Associates (attached hereto as Exhibit 9), Strategic Associates purchased from the Issuer a 5% Subordinated Debenture due February 25, 2003 in the principal amount of $183,750 (attached hereto as Exhibit 13). As partial consideration for the purchase, Strategic Associates was granted warrants to purchase 135,110 shares of the Issuer's Common Stock at an exercise price of $1.36 per share (attached hereto as Exhibit 11). The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Pursuant to the terms of a certain Common Stock Purchase Warrant dated February 25, 1997 (attached hereto as Exhibit 11) granted by the Issuer, Strategic Associates is granted warrants to purchase 135,110 shares of the Issuer's Common Stock at an exercise price of $1.36 per share. The exercise price is subject to adjustment upon the occurrence of certain dilution events. The warrants do not become exercisable until August 25, 1998 and, subject to certain exceptions, expire on February 25, 2003. Upon the occurrence of a certain firm commitment underwritten public offering of Common Stock by the Issuer, this warrant may become mandatorily exercisable. The sole party to this agreement is the Issuer. Pursuant to the terms of a certain 5% Subordinated Debenture due February 25, 2003 (attached hereto as Exhibit 13) the Issuer agrees to pay Strategic Associates the principal amount of $183,750 and to pay interest on any unpaid principal at the annual rate of five percent. Upon the occurrence of a certain underwritten public offering of Common Stock by the Issuer, Strategic Associates may, in its discretion, require the Issuer to apply the proceeds from that offering to prepay the unpaid principal amount and outstanding interest on this Debenture. The sole party to this agreement is the Issuer. Pursuant to the terms of a certain Stock Purchase Agreement dated as of February 25, 1997 by and among Strategic Partners Fund, Strategic Associates and The Estate of Robert F. Brozman (attached hereto as Exhibit 14), the Estate of Robert F. Brozman sold 473,750 shares of the Issuer's Common Stock to Strategic Partners Fund and 26,250 shares of the Issuer's Common Stock to Strategic Associates. The Common Stock was sold for $1.00 per share. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS: Exhibit 1 - Agreement regarding filing of joint Schedule 13D. Exhibit 2 - Amendment No. 1 to the Limited Partnership Agreement of Strategic Partners Fund. Exhibit 3 - Promissory Note and Loan Agreement dated February 5, 1997 by and among Strategic Partners Fund and Wilmington Trust Company. Exhibit 4 - Pledge and Security Agreement dated February 5, 1997 by and among Strategic Partners Fund and Wilmington Trust Company, in its capacity as "financial intermediary" and "secured party" (as those terms are defined therein). Exhibit 5 - Stockholders' Agreement dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund, Strategic Associates, Jack L. Brozman, The Estate of Robert F. Brozman and the Robert F. Brozman Trust Under Agreement dated December 28, 1989. Exhibit 6 - Convertible Preferred Stock Purchase Agreement dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund and Strategic Associates. Exhibit 7 - Registration Rights Agreement dated as of February 25, 1997 by and among the Issuer, Strategic Partners Fund and Strategic Associates. Exhibit 8 - Subordinated Debenture and Warrant Purchase Agreement dated as of February 25, 1997 by and between the Issuer and Strategic Partners Fund. Exhibit 9 - Subordinated Debenture and Warrant Purchase Agreement dated as of February 25, 1997 by and between the Issuer and Strategic Associates. Exhibit 10 - Common Stock Purchase Warrant dated February 25, 1997 granting Strategic Partners Fund the right to purchase up to 2,438,419 shares of the Issuer's Common Stock at a purchase price of $1.36 per share. Exhibit 11 - Common Stock Purchase Warrant dated February 25, 1997 granting Strategic Associates the right to purchase up to 135,110 shares of the Issuer's Common Stock at a purchase price of $1.36 per share. Exhibit 12 - 5% Subordinated Debenture due February 25, 2003 in the principal amount of $3,316,250. Exhibit 13 - 5% Subordinated Debenture due February 25, 2003 in the principal amount of $183,750. Exhibit 14 - Stock Purchase Agreement dated February 25, 1997 by and among Strategic Partners Fund, Strategic Associates and The Estate of Robert F. Brozman. SCHEDULE 13D SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. Dated: March 4, 1997 /s/ Edward L. Cahill ----------------------------------------- Edward L. Cahill /s/ David L. Warnock ----------------------------------------- David L. Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its Sole General Partner By: /s/ Edward L. Cahill ------------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ------------------------------------- David L. Warnock, General Partner CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ----------------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ----------------------------------------- David L. Warnock, General Partner STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock & Co., LLC, its sole General Partner By: /s/ Edward L. Cahill ------------------------------------ Edward L. Cahill, Member By: /s/ David L. Warnock ------------------------------------ David L. Warnock, Member CAHILL, WARNOCK & CO., LLC By: /s/ Edward L. Cahill ----------------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock ----------------------------------------- David L. Warnock, Member EX-99.1 2 AGREEMENT REGARDING JOINT FILING Exhibit 1 AGREEMENT Pursuant to Rule 13d-1(f)(1) under the Securities Exchange Act of 1934, the undersigned hereby agree that only one statement containing the information required by Schedule 13D need be filed with respect to the ownership by each of the undersigned of shares of stock of Concorde Career Colleges, Inc. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. Executed this 4th day of March, 1997. /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill /s/ David L. Warnock ---------------------------------- David L. Warnock CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: Cahill, Warnock Strategic Partners, L.P., its Sole General Partner By: /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ---------------------------------- David L. Warnock, General Partner CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ---------------------------------- David L. Warnock, General Partner STRATEGIC ASSOCIATES, L.P. By: Cahill, Warnock & Co., LLC, its sole General Partner By: /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock ---------------------------------- David L. Warnock, Member CAHILL, WARNOCK & CO., LLC By: /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill, Member By: /s/ David L. Warnock ---------------------------------- David L. Warnock, Member EX-99.2 3 AMENDED LIMITED PARTNERSHIP AGREEMENT Exhibit 2 AMENDMENT NO. 1 TO LIMITED PARTNERSHIP AGREEMENT OF CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. AMENDMENT NO. 1 dated as of the 26th day of July, 1996, by and among Cahill, Warnock Strategic Partners, L.P., a Delaware limited partnership, as general partner (the "General Partner") of Cahill, Warnock Strategic Partners Fund, L.P., a Delaware limited partnership (the "Partnership"), and the Limited Partners of the Partnership listed on Schedule A to the Limited Partnership Agreement of the Partnership, dated as of April 11, 1996 (the "Partnership Agreement"), at least 66 2/3% in interest of whom have executed a counterpart signature page to this Amendment No. 1: WHEREAS, immediately prior to the admission on the date hereof of additional Limited Partners to the Partnership pursuant to Section 8(c) of the Partnership Agreement, the parties hereto desire to amend the Partnership Agreement and approve Amendment No. 1 to the Management Agreement, the form of which Management Agreement is attached to the Partnership Agreement as Schedule B. NOW, THEREFORE, the parties hereto, in consideration of the premises and the agreements herein contained and intending to be legally bound hereby, agree as follows: 1. Section 4(k)(2) of the Partnership Agreement is amended by deleting the second sentence thereof in its entirety and substituting the following: "Notwithstanding Section 4(e)(1) to the contrary, the Principals may organize, after the date of this Agreement, other investment funds and client investment vehicles for the benefit of employees, associates and advisors of the General Partner and the Principals and for investors who may be strategically important to the Partnership, specifically for the purpose of co-investing with the Partnership; provided that the aggregate amount of capital committed to such other investment funds and client investment vehicles does not exceed $7 million; and provided, further, that any such investment funds or client investment vehicles which are managed by the General Partner or the Principals shall sell or otherwise dispose of each such co-investment at substantially the same time and on substantially the same terms as the Partnership in amounts proportionate to the relative size of the investments made by such investment funds and client investment vehicles and the Partnership." 2. Section 7(a) of the Partnership Agreement is amended by deleting the first sentence thereof in its entirety and substituting the following: "The Partnership shall have a Valuation Committee which shall consist of at least three (3) but not more than five (5) members, none of whom shall be an officer, director, member or employee of the General Partner, the Management Company or any affiliate thereof, and none of whom shall be related to any Principal." 3. Section 8(a) of the Partnership Agreement is amended by adding the following text at the end thereof: "Each notice for an Additional Capital Contribution from the General Partner shall include a general description of the purposes and uses for which the Additional Capital Contribution is being called including, for example, the payment of Partnership expenses (including the Management Fee) and the purchase of Portfolio Company Securities; provided that the General Partner shall not be required to identify the purposes and uses of 100% of any Additional Capital Contribution or be required to identify the name of any particular Portfolio Company or proposed Portfolio Company. After the fourth anniversary of the last admittance of any additional Limited Partners pursuant to Section 8(c) hereof, the General Partner shall not make any further calls for Additional Capital Contributions for the purpose of investing in the Securities of any entity that was not a Portfolio Company (including as a Portfolio Company for such purpose, any predecessor of such entity) on such anniversary date, except with the approval of the Valuation Committee. After the fifth anniversary of the last admittance of any additional Limited Partners pursuant to Section 8(c) hereof, the General Partner shall not make any further calls for Additional Capital Contributions for the purpose of investing in the Securities of any entity that was a Portfolio Company (including as a Portfolio Company for such purpose, any predecessor of such entity) on such anniversary date, except with the approval of the Valuation Committee." 4. Section 11(b) of the Partnership Agreement is amended by adding the following subsection (8) at the end thereof: "(8) An amount equal to 50% of all distributions made to the General Partner, other than (A) Tax Distributions plus (B) distributions the General Partner would have received if it had made its Capital Contributions as a Limited Partner and did not hold an interest as a General Partner (excluding any Tax Distributions on account thereof which are included in (A)), shall be used by the General Partner immediately upon distribution thereof to prepay any promissory notes contributed by the General Partner to the Partnership." 5. Section 16 of the Partnership Agreement is amended by adding the following text at the end thereof: "No Principal will voluntarily assign, pledge, mortgage, hypothecate, sell or otherwise dispose of or encumber (a "Disposition") all or any part of his interest in the allocations made to the General Partner of "20% of such additional Net Realized Gain" pursuant to Section 10(b)(1)(A)(iv) (the "20% carried interest"), except for (a) Dispositions to members of his immediate family or trusts for the benefit of such general partner or members of his immediate family (and, in the case of any Dispositions to such family members or such trusts, the transferee shall thereafter be subject, as to further transfers, to the same restrictions on transfer as were applicable to the transferor), (b) Dispositions to other persons who are associated with or employed by the General Partner, the Principals or the Management Company, and (c) Dispositions to another Principal; provided, that, the Dispositions of all Principals pursuant to clauses (a) and (b) shall not exceed in the aggregate 45% of their aggregate interests in the 20% carried interest." 6. Section 19(c) of the Partnership Agreement is amended by adding the following text at the end thereof: "The General Partner shall transmit to each Partner within sixty (60) days after the close of each fiscal year, a report describing any fees and other remuneration which, pursuant to Section 4(b) of the Management Agreement, reduced the Management Fee payable in such fiscal year. Such description will be organized by the type of such fees and other remuneration (e.g., director's fees and consulting fees) and the dollar amount attributable to each such category." 7. Pursuant to Section 7 of the Management Agreement, the Limited Partners hereby consent to Amendment No. 1 to the Management Agreement dated the date hereof, which amends Section 4(b) of the Management Agreement by adding the following text at the end thereof: "If in any year such reductions exceed the Management Fee otherwise payable, the excess amount of such reductions shall be carried forward on a year-by-year basis." IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the day and year first above written. GENERAL PARTNER CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. By: /s/ Edward L. Cahill ---------------------------------- Edward L. Cahill, General Partner By: /s/ David L. Warnock ---------------------------------- David L. Warnock, General Partner AMENDMENT NO. 1 TO LIMITED PARTNERSHIP AGREEMENT OF CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. LIMITED PARTNER SIGNATURE PAGE The undersigned Limited Partner hereby executes Amendment No. 1 to Limited Partnership Agreement of Cahill, Warnock Strategic Partners Fund, L.P. and hereby authorizes this signature page to be attached to a counterpart of such document executed by the General Partner of Cahill, Warnock Strategic Partners Fund, L.P. Please type or print exact name of Limited Partner * -------------------------------- Please sign here By -------------------------------- Please type or print exact name of signer -------------------------------- Please type or print title of signer Title -------------------------------- * Signature pages of the limited partners will be provided upon request. EX-99.3 4 PROMISSORY NOTE Exhibit 3 PROMISSORY NOTE AND LOAN AGREEMENT Borrower: Cahill, Warnock Strategic Partners Fund, L.P. 1 South Street, Suite 2150 Baltimore, MD 21202 Lender: Wilmington Trust Company 1100 N. Market Street Wilmington, DE 19890 I. LOAN TERMS 1.1. PROMISE TO PAY. Cahill, Warnock Strategic Partners Fund, L.P. ("Borrower") promises to pay to Wilmington Trust Company ("Lender") the principal amount of Eight Million and 00/100 Dollars ($8,000,000) or so much thereof as may be extended and outstanding, together with interest on the unpaid outstanding principal balance thereof (the "Loan"). 1.2. REVOLVING LINE OF CREDIT. This Promissory Note and Loan Agreement ("Note") evidences a revolving line of credit for the maximum amount of Eight Million and 00/100 Dollars ($8,000,000) provided that the maximum aggregate amount of credit the Lender shall extend hereunder, upon request from the Borrower, is the lesser of 75% of the then anticipated capital contribution call to Borrower's Limited Partners ("Capital Call") or $8,000,000; provided further that each extension of credit hereunder ("Advance") shall have a maturity date of less than 90 days so that the principal amount of any Advance will be repaid within 90 days of the date of such Advance. The unpaid principal balance owing on this Note at any time may be evidenced by Lender's internal records which will be provided to Borrower from time to time upon Borrower's request. Lender will have no obligation to Advance funds under this Note if Borrower has failed to comply with the covenants of Section III of this Note or if the Borrower is in default under the terms of Section IV of this Note or any agreement that Borrower has with Lender, including any agreement made in connection with the signing of this Note. 1.3. PAYMENT. Borrower will pay all outstanding principal plus all accrued and unpaid interest under each Advance when due and payable. Interest shall be calculated from the date of each Advance until repayment of each Advance. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will make all payments to Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payment will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. 1.4. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the WILMINGTON TRUST COMPANY'S NATIONAL COMMERCIAL RATE (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender will utilize a prime lending rate as published in the Wall Street Journal. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The Index currently is 8.25% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index, resulting in an initial rate of 8.25% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. 1.5. PREPAYMENT. Borrower may prepay from time to time in whole or in part without penalty or premium all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest on the principal which remains outstanding. Rather, they will reduce the principal balance due. 1.6 SECURITY. This Note and the Borrower's obligations hereunder are secured by a pledge of all assets held in a sub account to Account Number 36054, known as Account Number 36054-1 by Wilmington Trust Company as Agent for Borrower Under Agreement dated February 29, 1996, as more specifically described in and pledged pursuant to the Pledge and Security Agreement ("the Security Agreement") entered into between the Bank and the Borrower as of this date. 1.7. LATE CHARGE. If a payment is not made within 15 days of the date such payment becomes due, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $5.00, whichever is greater. 1.8. NOTICE AND MANNER OF ADVANCES. Borrower shall give Lender at least 1 business days' oral notice to be followed by telecopy or written fax notice of any request for Advances under this Note. Such notice shall constitute an affirmative representation that Borrower is not in default of this Agreement and that Borrower is in compliance with all of the covenants in Section III hereof. Such Advances hereunder will be made in immediately available funds by crediting the amount thereof to the Borrower's account with Wilmington Trust Company or by other means acceptable to Lender. Advances shall only be made pending the receipt of Additional Capital Contributions under the Borrower's Limited Partnership Agreement. Advances under this Note may be requested in writing by Borrower or by an Authorized Person (as defined below). All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office set forth in Section 5.1. The following party or parties are authorized to request Advances under the line of credit until Lender receives from Borrower written notice of revocation of their authority and/or the designation of the appointment of other authorized persons: Edward L. Cahill and David L. Warnock (individually, an "Authorized Person"). Borrower agrees to be liable for all sums either: (a) Advanced in accordance with the instructions of an Authorized Person; or (b) credited to any of Borrower's accounts with Lender upon the instructions of an Authorized Person. 1.9. ANNUAL FEE. Borrower will pay an annual fee equal to 1/4% of the unused Note balance calculated and charged quarterly and in arrears directly to the Borrower's Custody Account 36054-0. 1.10. TERMINATION DATE. The Revolving Line of Credit and this Note will terminate at the earlier of December 31, 1998 or 90 days after the eighth Capital Call subsequent to the date of this Note; provided, however, the Lender retains the right to terminate this loan if any of the Limited Partners withdraw their subscription. 1.11. GENERAL PARTNERS OF CAHILL, WARNOCK STRATEGIC PARTNERS, L.P. a) If an individual general partner of the general partner of the Borrower no longer serve as general partner of the general partner of the Borrower, then such person shall remain liable to the Lender for any Advances outstanding at the time such person ceases to serves as a general partner, to the full extent such person would be liable to the Lender under Delaware law if such person continued to serve as a general partner of the general partner of the Borrower. b) In the event that either Edward L. Cahill or David L. Warnock no longer serves as a general partner of the general partner of the Borrower, the Lender has the right to refuse to make any Advances under the Note. If the Lender exercises this right, the Borrower may terminate the Note without penalty. c) Notwithstanding anything to the contrary contained herein, the failure of either Edward L. Cahill or David L. Warnock to continue to serve as a general partner of the general partner of the Borrower, shall in no way be considered a default or trigger any acceleration or penalties under the Note. II. BORROWER'S REPRESENTATIONS AND WARRANTIES 2.1. ORGANIZATION AND STANDING. The Borrower is a Limited Partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware and is duly qualified to do business in each jurisdiction in which the conduct of its business requires such qualification and would be materially and adversely affected in the absence thereof. The Borrower is in compliance with all applicable law and regulations governing the conduct of its business and governing consummation of the transactions contemplated herein, except for any such failures to so comply that will or do not, singly or in the aggregate, have a material adverse effect on the business, assets, financial conditions, operations, or prospects of Borrower. 2.2. POWER AND AUTHORITY. The execution, delivery, and performance hereof by Borrower are within its powers, have been duly authorized by all necessary action, and are not in contravention of law or the terms of its Limited Partnership Agreement or any amendment thereto, or any indenture, agreement, or undertaking to which Borrower is a party or by which it is bound. 2.3. VALID AND BINDING OBLIGATION. This Agreement constitutes the legal, valid, and binding obligations of Borrower, enforceable in accordance with their respective terms, subject to applicable bankruptcy and insolvency laws and laws affecting creditors' rights and the enforcement thereof generally. 2.4. NO LEGAL BAR. The execution, delivery, and performance of this Agreement, and the borrowing contemplated by this Agreement do not and will not violate any Requirement of Law or any contractual obligation of Borrower and will not result in, or require, the creation or imposition of any lien on any of its properties or revenues pursuant to any Requirement of Law or any contractual obligation, which violation or lien would have a material adverse effect on the business, assets, financial condition, operations, or prospects of Borrower. For the purposes of this Section, "Requirement of Law" means the Limited Partnership Agreement or other organizational or governing documents of a given entity and any law, treaty, rule or regulation, or determination of any arbitrator or court or other governmental authority, in each case applicable to or binding upon such entity or any of its property or to which such entity or any of its property is subject. 2.5. LITIGATION. There is not now pending against the Borrower, nor to the knowledge of the general partner of Borrower, nor is there threatened by written communication, any litigation, investigation, or proceeding the outcome of which would, in any case or in the aggregate, materially and adversely affect the assets or financial condition of Borrower, taken as a whole, or seriously affect their continued material operations. 2.6. CONSENT OR FILING. No consent, approval, or authorization of, any court, any governmental body or authority, or any other person or entity is required in connection with the valid execution, delivery, or performance of this Agreement or any document required by this Agreement or in connection with any of the transactions contemplated thereby. 2.7. DISCLOSURE. No representation or warranty made by Borrower in this Agreement, in any of the other Loan Documents, or in any other document furnished in connection herewith or therewith contains any misrepresentation of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading with respect to any material facts. There is no fact known to the Borrower (and not known to Lender) that materially and adversely affects, or that in the future could reasonably be expected to materially and adversely affect, the business, assets, financial condition, operations, or prospects of Borrower. III. BORROWER'S COVENANTS 3.1. INDEBTEDNESS. The Borrower, without prior written consent of Lender, will not create, incur, assume, or suffer to exist liability for, contingently or otherwise (including, without limitation, any guaranty of the indebtedness of another person), any indebtedness for borrowed money, except: (a) current indebtedness of Borrower to Wilmington Trust Company; (b) unsecured current liabilities incurred with trade creditors in the ordinary course of business other than those which are for money borrowed or are evidenced by bonds, debentures, notes or other similar instruments; 3.2. EXISTENCE AND QUALIFICATION. Borrower shall do, or cause to be done, all things necessary to preserve, renew, and keep in full force and effect its Limited Partnership Agreement between and among Cahill Warnock Strategic Partners, L.P. and the limited partners listed on Schedule A of the Limited Partnership Agreement in compliance with all material laws applicable to it, operate its business in a proper manner and substantially as presently operated or proposed to be operated; and at all times shall maintain, preserve, and protect its franchises and trade names and preserve its property used or useful in the conduct of its business, and keep the same in good repair, working order, and condition, and from time to time make, or cause to be made, all needful and proper repairs, renewals, replacements, betterments, and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. 3.3. FINANCIAL STATEMENTS. Borrower shall keep its books of account in accordance with GAAP and shall furnish to Lender within 120 days after the close of its fiscal year a statement of assets and liabilities as of the close of such year, a statement of operations and a statement of changes in net assets for such year. Such statements shall be consolidated statements of the Borrower and shall be audited and certified by Borrower's independent public accountants. 3.4. TAXES AND CLAIMS. Borrower shall promptly pay and discharge; (a) all taxes, assessments, and governmental charges upon or against Borrower, or their assets, including payroll taxes, prior to the date on which penalties attach thereto, unless and to the extent that such taxes are being diligently contested in good faith and by appropriate proceedings and appropriate reserves therefor have been established; and (b) all lawful claims, whether for labor, materials, supplies, services, or anything else that reasonably might or could, if unpaid, become a lien or charge upon the properties or assets of Borrower unless and to the extent only that the same are transferred to bond, being diligently contested in good faith and by appropriate proceedings, and appropriate reserves therefor have been established. 3.5. BOOKS AND RECORDS. Borrower shall: (a) maintain at all times true and complete books, records, and accounts in which true and correct entries shall be made of its transactions in accordance with GAAP; and (b) by means of appropriate quarterly entries reflected in its accounts and in all financial statements furnished pursuant to Section 3.3 of this Agreement, establish proper liabilities and reserves for all taxes and proper reserves, for depreciation, renewal and replacement, obsolescence, and amortization of its properties and bad debts, all in accordance with GAAP. 3.6. INSPECTION BY LENDER; AUDITS. Borrower shall allow any authorized representative of Lender to visit and inspect, any of the properties of Borrower, or to examine the books of account and other Partnership financial records and Partnership financial files of Borrower, to make copies thereof and to discuss the finances and financial accounts of Borrower with its officers and employees, all at such reasonable times and as often as Lender may reasonably request; provided that Borrower need not disclose to Lender any information which may result in a violation of the Securities Act of 1933 or the Securities and Exchange Act of 1934. 3.7. PAY INDEBTEDNESS TO LENDER AND PERFORM OTHER COVENANTS. Borrower shall make full and timely payments of the principal of and interest on this Note and all other indebtedness of Borrower to Lender hereunder, whether now existing or hereafter arising, and duly comply with all the terms and covenants contained in each of the instruments and documents given to Lender pursuant to this Agreement at the times and places and in the manner set forth herein. 3.8. LITIGATION. Borrower will promptly notify Lender upon the commencement of any action, suit, claim, counterclaim, or proceeding against or investigation of Borrower where the damage claim is in excess of $50,000 or where the litigation may materially and adversely affect the Borrower's business (except when the alleged liability is fully covered by insurance, excluding application of any standard deductible). If any such action, suit, claim, counterclaim, proceeding (where the alleged liability is not so covered by insurance) involves an amount in excess of $100,000 or where the litigation could reasonably be expected to materially and adversely affect Borrower's business, Borrower shall also provide Lender, upon request, with an opinion of counsel concerning the litigation or investigation and the probable outcome thereof. Any suit filed by a Limited Partner that materially impacts such Limited Partner's ability to meet its Capital Contributions under the Limited Partnership Agreement and any suit filed by a Limited Partner against the Borrower regardless of the amount shall immediately be reported to the Lender. 3.9. REGULATORY ENFORCEMENT ACTIONS. Borrower shall promptly notify Lender of the institution of: any investigation, any indictment, the filing of any complaint, the issuance of any cease and desist order or injunction, or the imposition of any fine or non-monetary sanction, by any civil or criminal, federal or civil, regulatory enforcement agency, district attorney's office, attorney general's office or U.S. Attorney's office which involves Borrower and could reasonably be expected to have a material adverse effect on Borrower. Such notification shall include a description of the event that led to such action by such enforcement agency. 3.10. DEFAULTS OR ASSESSMENTS. Borrower shall promptly notify Lender in writing of: (a) any material assessment by any taxing authority for unpaid taxes as soon as Borrower has knowledge thereof and shall supply Lender with copies of all notices from the Internal Revenue Service or any other taxing authority with respect to any such matter; and (b) any default by Borrower in the performance of (or any material modification of, or waivers granted in connection with) any of the terms or conditions contained in any agreement, mortgage, indenture, or instrument to which Borrower is a party or which is binding upon Borrower, including, but not limited to, any default in, material modification of, or waiver granted in connection with, the Borrower's compliance with any agreement with the Limited Partners of the Cahill Warnock Strategic Partners Fund, L.P. and of any default by Borrower in the payment of any of its indebtedness which default may, singly or in the aggregate, have a material adverse effect on the business, assets, financial condition, operations, or prospects of Borrower taken as a whole. 3.11. CHANGE OF NAME, PRINCIPAL PLACE OF BUSINESS, ETC. Borrower shall notify Lender immediately of any change in the name of Borrower, the principal place of business of Borrower, the office where the books and records of Borrower are kept, or any change in the registered agent of Borrower for the purpose of service process. 3.12. MERGERS, ETC. Without Lender's consent, Borrower shall not wind up, liquidate or dissolve itself, reorganize, merge or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or substantially all of its assets to any person. 3.13. LIMITED PARTNERSHIP AGREEMENT. The Borrower shall not change, amend or alter the Limited Partnership Agreement of the Cahill, Warnock Strategic Partners Fund L.P. dated April 11, 1996 in a manner which could effect Borrower's ability to fulfill its obligations under this Agreement without prior written consent of the Lender. IV. DEFAULT, RIGHT TO FUTURE ADVANCES AND REMEDIES UPON DEFAULT 4.1. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment within five (5) business days after the same becomes due to Lender hereunder ; (b) Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender, and such failure continues for fifteen (15) business days after written notice to Borrower that Lender considers such failure to be a default; (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any person, (including the Limited Partners) that may materially and adversely affect Borrower's ability to repay this Note or perform Borrower's obligations under this Note and such default continues for fifteen (15) business days after written notice to Borrower that Lender considers such default to be a default hereunder; (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes a general assignment for the benefit of creditors or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; (e) Borrower, or any of its affiliates, becomes subject to any civil or criminal order or decree by any regulatory agency and that action has a material adverse effect on Borrower, and Borrower fails to have such action effectively stayed, discharged, vacated or set aside within thirty (30) days of the institution of such action; (f) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is determined to be false or misleading in any material respect at the time made or furnished; or (g) A material adverse change occurs in Borrower's financial condition, or Lender in good faith reasonably believes the prospect of payment or performance of the indebtedness is materially impaired, provided that Lender notifies Borrower in writing of such default and Borrower fails to cure such default within ten (10) business days of such notice. 4.2. BORROWER'S RIGHT TO ADVANCES. Borrower shall not be entitled to any further Advances under the Revolving Line of Credit evidenced by this Note if any of the following happens: (a) Borrower fails to make any payment after the same becomes due to Lender hereunder ; (b) Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender; (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any person, (including the Limited Partners) that may materially and adversely affect Borrower's ability to repay this Note or perform Borrower's obligations under this Note and such default continues for fifteen (15) business days after written notice to Borrower that Lender considers such default to be a default hereunder; (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes a general assignment for the benefit of creditors or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; (e) Borrower, or any of its affiliates, becomes subject to any civil or criminal enforcement order or decree by any regulatory agency and that action has a material adverse effect on Borrower; (f) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is determined to be false or misleading in any material respect at the time made or furnished; or (g) A material adverse change occurs in Borrower's financial condition, or Lender in good faith reasonably believes the prospect of payment or performance of the indebtedness is materially impaired. If the conditions described herein are addressed by the Borrower in such a way that default under Section 4.1 is avoided or cured, Borrower shall thereafter be entitled to Advances under this Note until the reoccurrence of a condition described herein. 4.3. LENDER'S RIGHTS. Upon default, as set forth in Section 4.1, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount provided that the Borrower will not incur a late charge under Section 1.7 unless payment is not made within 15 days of the date such payment was to originally become due. Upon default, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 3.000 percent points over the Index. The interest rate will not exceed the maximum rate permitted by applicable law. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's reasonable attorney's fees and Lender's legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post- judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. V. MISCELLANEOUS 5.1. NOTICES. Any notice, consent, request, or other communication to a party required or permitted hereunder shall be deemed to have been duly given or made (a) on the date delivered in person, (b) on the date indicated on the return receipt if mailed postage prepaid, by certified or registered mail, with return receipt requested, (c) on the date transmitted by facsimile, if sent by 1:30 P.M. Eastern Time, for purposes of Advances, and 2:30 P.M. Eastern Time for all other purposes, and confirmation of receipt thereof is reflected or obtained, or (d) if sent by Federal Express or other nationally recognized overnight courier or overnight express U.S. Mail, with service charges prepaid, then on the next business day after delivery to the courier of mail (in time for and specifying next day delivery). Such notices shall be sent to a party at its address or facsimile number as follows, unless otherwise designated in writing: If to Borrower: Cahill, Warnock Strategic Partners Fund, L.P. 1 South Street, Suite 2150 Baltimore, MD 21202 Attn: David L. Warnock Edward L. Cahill Telephone No. (410) 895-3800 If to Lender: Wilmington Trust Company 1100 North Market Street Wilmington, Delaware 19890 Attn: Gloria Zook Diodato Telephone No. (302) 651-8850 5.2. RIGHTS AND REMEDIES NOT WAIVED. Lender may delay or forego enforcing any of its rights or remedies under this Note without losing them. 5.3. GOVERNING LAW. This Note has been delivered to Lender and accepted by Lender in the State of Delaware. This Note shall be governed by and construed in accordance with the laws of the State of Delaware. 5.4. JURISDICTION. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of New Castle County, the State of Delaware. 5.5. JURY TRIAL WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. 5.6. WAIVER OF PRESENTMENT. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. 5.7. AMENDMENTS. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone other than the Borrower. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. 5.8. INTEGRATION. The Note contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. IN WITNESS WHEREOF, the parties have caused this Note and Loan Agreement to be executed by their respective duly authorized officers. LENDER BORROWER Wilmington Trust Company Cahill, Warnock Strategic Partners Fund, L.P. By: Cahill, Warnock Strategic Partners, L.P. By: /s/ Douglas Cornforth By: /s/ Edward L. Cahill ---------------------- --------------------------- Douglas Cornforth, Edward L. Cahill, Vice President General Partner By: /s/ Gloria Z. Diadato By: /s/ David L. Warnock ---------------------- --------------------------- Gloria Zook Diodato, David L. Warnock, Sr Banking Officer General Partner Date: February 5, 1997 Date: February 5, 1997 EX-99.4 5 PLEDGE AND SECURITY AGREEMENT Exhibit 4 PLEDGE AND SECURITY AGREEMENT (BANK AS LENDER/PARTNERSHIP PLEDGOR) This Pledge and Security Agreement (this "Agreement") is made as of the 5th day of February, 1997, by and among Cahill, Warnock Strategic Partners Fund, L.P., a Delaware limited partnership, as pledgor ("Pledgor"), Wilmington Trust Company, a Delaware banking corporation, as lender ("Secured Party"), and Wilmington Trust Company, a Delaware banking corporation, as financial intermediary ("Financial Intermediary"). WITNESSETH: WHEREAS, Pledgor has executed and delivered to Secured Party its Promissory Note and Loan Agreement in the principal amount of $8,000,000 (the "Note") to evidence a loan in the form of a revolving line of credit (the "Loan") made to Pledgor by Secured Party; and WHEREAS, Pledgor maintains a Pledged Account (as hereinafter defined) with Financial Intermediary that contains Securities (as hereinafter defined), which Account and Securities Pledgor desires to pledge to Secured Party and in which Pledgor desires to grant to Secured Party a first priority perfected security interest to secure Pledgor's obligations in connection with the Loan; and WHEREAS, to induce Secured Party to make the Loan, Pledgor has agreed to execute and deliver to Secured Party this Agreement. NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Pledgor, Secured Party and Financial Intermediary hereby agree as follows: SECTION 1. PLEDGE OF SECURITY. To secure the payment and performance of the Obligations (as defined in Section 2 hereof), Pledgor hereby pledges, grants and assigns to Secured Party a lien in and first priority perfected security interest against all of Pledgor's right, title and interest in and to (i) a custody/investment agency account in the name of Pledgor with Financial Intermediary and further identified by Financial Intermediary as Account Number 36054-1 (the "Pledged Account"), (ii) any and all now owned or hereafter acquired cash, securities, instruments or other property of any kind whatsoever which are included now or at any time hereafter in the Pledged Account (jointly and severally, the "Securities") including, without limitation, the Securities now held in the Pledged Account and listed on Exhibit A attached hereto and incorporated herein, (iii) all interest, dividends and income of any kind now or hereafter derived from any property in the Pledged Account, and (iv) any and all proceeds (as defined in Section 9-306 of the Uniform Commercial Code as in effect in the State of Delaware (the "UCC")) of all the foregoing (items (i)-(iv) being hereinafter referred to as the "Collateral"). SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement is made for the benefit of Secured Party to secure (i) the payment of the principal of and interest on the Note from time to time (including, without limitation, interest accruing after the date of any filing by Pledgor of any petition in bankruptcy or the commencement of any bankruptcy, insolvency or similar proceeding with respect to Pledgor), (ii) the payment of any indebtedness or obligations of Pledgor relating to any guaranty in connection with the Loan or this Agreement, (iii) the payment of all other indebtedness and obligations relating to the Loan (including, without limitation, the payment of any taxes, assessments or fees referred to in the Note, this Agreement or any other documents relating to the Loan), including any extensions, replacements, modifications, substitutions, amendments and renewals thereof made in accordance with the terms thereof (the obligations referred to in clauses (i), (ii) and (iii) hereof being referred to jointly and severally herein as the "Obligations"). SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Pledgor hereby represents, warrants and covenants as follows: (a) Pledgor is organized under the laws of the State of Delaware; Pledgor has all requisite power and authority to execute, deliver and perform its obligations under this Agreement; the general partner of Pledgor is Cahill, Warnock Strategic Partners, L.P., a Delaware limited partnership, the general partners of which are Edward L. Cahill and David L. Warnock; and Pledgor shall not change the General Partner of Pledgor without prior written notice to Secured Party. (b) Pledgor is the sole legal and beneficial owner of the Collateral, including, without limitation, the Securities. (c) Pledgor has not sold, assigned, pledged, created a lien or security interest in, or otherwise transferred any interest in, the Collateral to any other person or entity, and without Secured Party's prior written consent, Pledgor will not sell, assign, transfer, convey grant a lien or security interest in or otherwise dispose of all, or any portion of, the Collateral, including, without limitation, the Securities, except in accordance with the provisions of Section 4 hereof. (d) Unless otherwise agreed to in writing by Secured Party, the Securities shall comply with the criteria specified in Exhibit A at all times that any amounts are due and unpaid to Secured Party under the Note. In addition, Pledgor shall direct all limited partners of Pledgor to deliver capital contributions to the Pledged Account. Pursuant to Pledgor's Limited Partnership Agreement, capital contributions are expected to be funded in cash within 30 days of each capital call. No Collateral (including, without limitation, cash) will be removed from the Pledged Account until any then outstanding principal balance and any accrued and unpaid interest on the Note is paid in full. (e) Pledgor shall furnish or cause to be furnished to Secured Party, from time to time, such additional information and copies of such documents relating to this Agreement, the Collateral, and Pledgor's financial condition as Secured Party may reasonably request. (f) Pledgor shall, upon the request of Secured Party or Financial Intermediary, furnish to Secured Party or Financial Intermediary, such further information, execute and deliver to Secured Party or Financial Intermediary such other documents evidencing that all right, title and interest of Pledgor in the Collateral have been pledged and assigned to Secured Party, and do such other acts and things, all as Secured Party or Financial Intermediary may at any time reasonably request relating to the perfection or protection of Secured Party's interests created by this Agreement or for the purpose of carrying out the intent of this Agreement. (g) All compensation, charges, fees, taxes, costs, and expenses relating to the Pledged Account, Collateral or this Agreement shall be paid by Pledgor, and Secured Party shall have no responsibility for such amounts nor shall any such amounts be deductible from the Collateral, except as otherwise provided or permitted in Section 6(m) hereof. (h) Pledgor agrees to pay promptly when due all taxes, assessments or governmental charges with respect to the Collateral. (i) Pledgor shall cause, as a precautionary measure, a financing statement to be duly filed with the office of the Secretary of State of the State of Delaware (Uniform Commercial Code Division) and such other filing offices as reasonably requested by Secured Party with respect to the Collateral, and shall provide satisfactory evidence of such filing(s) to Secured Party. The financing statement shall cover all of Pledgor's interest in the Collateral. (j) Financial Intermediary and Secured Party shall have no liability to Pledgor for, and Pledgor hereby absolutely, unconditionally and irrevocably waive any and all charges, damages, taxes or claims of any kind or nature whatsoever with respect to the selection of Collateral for liquidation or the order of liquidation of the Collateral. SECTION 4. INSTRUCTIONS TO FINANCIAL INTERMEDIARY. (a) Pledgor hereby authorizes and instructs Financial Intermediary from the date of this Agreement not to permit Pledgor or any other party to receive any payments, proceeds or other distributions (whether of money or property) from the Collateral without the express written permission of Secured Party; provided, however, that such permission shall not be required so long as no amounts are then due and unpaid to Secured Party under the Note. Notwithstanding the foregoing, prior to the written notice to Financial Intermediary from Secured Party of an Event of Default (as hereinafter defined), except as provided herein, Pledgor may retain all rights and privileges of ownership of the Securities (i.e., voting) and Secured Party authorizes Financial Intermediary to distribute the interest and dividends earned on the Securities to Pledgor, provided that upon notification from Secured Party to Financial Intermediary that an Event of Default has occurred, Financial Intermediary shall cease distributing interest or dividends earned on the Securities to Pledgor and, if instructed by Secured Party, Financial Intermediary shall distribute such interest and dividends to Secured Party. (b) Secured Party hereby authorizes Financial Intermediary to follow instructions provided by or on behalf of Pledgor with respect to the reinvestment, sale or other disposition of the Collateral; provided that Pledgor hereby agrees that all Collateral in the Pledged Account, including, without limitation, all proceeds of any sale or disposition thereof in the Pledged Account, shall be invested in securities satisfying the criteria identified on Exhibit A attached hereto and made part hereof (as modified from time to time with the written agreement of the Secured Party) at all times that any amounts are due and unpaid to Secured Party under the Note. Pledgor agrees to notify any investment manager of the investment restrictions for the Pledged Account and Collateral, and Pledgor agrees to remain liable for the failure of any investment manager to comply with the investment guidelines. (c) Pledgor instructs Financial Intermediary to provide written confirmation on the date hereof that all of Pledgor's right, title and interest in the Collateral, including the Pledged Account and the Securities, have been pledged and assigned to Secured Party. (d) Pledgor agrees that, if an Event of Default occurs, Secured Party is authorized and empowered to direct Financial Intermediary to liquidate the Collateral then held in the Pledged Account and remit the proceeds to Secured Party to be applied in the priority set forth in Section 9 below. Pledgor agrees that Financial Intermediary shall have no duty to make any inquiry upon being notified in writing by Secured Party that an Event of Default has occurred and Financial Intermediary shall have no liability for thereafter acting upon Secured Party's instructions. Neither Financial Intermediary nor Secured Party shall have any liability to Pledgor for, and Pledgor hereby absolutely, unconditionally and irrevocably waives, any and all charges, damages, taxes or claims of any kind or nature whatsoever with respect the selection of Securities for liquidation or the order of liquidation of Securities constituting the Collateral. SECTION 5. DELIVERY OF COLLATERAL TO FINANCIAL INTERMEDIARY. The Collateral shall be held in the possession of Financial Intermediary on behalf of, and as agent and bailee for, Secured Party in the Pledged Account. Financial Intermediary hereby agrees and certifies that all of the Collateral is, by book entry or otherwise, identified by Financial Intermediary as belonging to (i.e., subject to a security interest in favor of) Secured Party. In furtherance of the foregoing, Financial Intermediary, by its execution and delivery of this Agreement, shall be deemed to have confirmed and to have sent confirmation to Secured Party of the transfer of the security interest in the Collateral to Secured Party and by book entry or otherwise identified all such Collateral as belonging to Secured Party. SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF FINANCIAL INTERMEDIARY. Financial Intermediary represents, warrants and covenants to and with Pledgor and Secured Party that: (a) It is a "Financial Intermediary" within the meaning of 6 Del. C., Section 8-313. (b) It has notification of Secured Party's security interest in the Collateral, but no notice or knowledge of any adverse claim or liens against any of the Collateral (including, without limitation, purchase money liens, federal tax liens or liens arising under the Employee Retirement Income Security Act of 1974, as amended). (c) It has full power and authority to execute, deliver and perform its obligations under this Agreement. (d) This Agreement has been duly authorized, executed and delivered by it, and is enforceable against it. (e) It shall send copies of all correspondence, statements and information relating to the Collateral, including the Pledged Account, to Secured Party at the same time it sends any such correspondence, statements and information to Pledgor. (f) Except as otherwise provided in Section 4 hereof, it shall not purchase, sell or otherwise dispose of any of the Collateral, without the prior written consent of Secured Party. (g) Except as otherwise provided in Section 4 hereof, it shall not make any distribution or payment of any kind arising out of the Pledged Account to Pledgor or any other person or entity, without the prior written consent of Secured Party. Financial Intermediary agrees that, upon receipt of written notice by Secured Party that an Event of Default has occurred, Financial Intermediary shall at the direction of Secured Party proceed to sell or otherwise liquidate the Collateral and remit the proceeds to Secured Party and send all distributions of interest and dividend income earned on the Collateral to Secured Party. (h) Its books and records shall reflect that Pledgor has transferred its interest in the Collateral to Secured Party. (i) It shall make appropriate entries on its books and records to evidence, and hereby acknowledges, that all Collateral being held by Financial Intermediary is being held as agent of and bailee for the benefit of Secured Party. (j) That all Collateral in the Pledged Account, will be held (i) by Financial Intermediary in a Financial Intermediary designated account, or (ii) by Financial Intermediary with The Depository Trust Company ("DTC") in New York, New York, the Federal Reserve Bank of Philadelphia, in another registered clearing corporation, or (iii) in an account in the name of Financial Intermediary maintained with an agent bank in New York (collectively or individually, a "Clearing Corporation"). (k) With respect to all Securities carried in the account of Financial Intermediary with a Clearing Corporation, Financial Intermediary has received from such Clearing Corporation confirmation of such Clearing Corporation holding all such Securities for the account of Financial Intermediary. (l) The certifications as set forth above are based on the current operating procedures of Financial Intermediary in accordance with the laws and regulations currently in effect. (m) It hereby absolutely, unconditionally, and irrevocably subordinates any and all claims, liens, pledges, security interests, encumbrances, demands, set-offs or charges of any kind or nature whatsoever with respect to the Collateral to the interest of Secured Party. SECTION 7. EVENTS OF DEFAULT. Notwithstanding anything contained in this Agreement to the contrary, an event of default shall occur under this Agreement (an "Event of Default") upon the occurrence of a default, after the expiration of any applicable grace period, under the Note, or the breach by Pledgor of any representation, warranty or covenant contained in this Agreement as determined by Secured Party, or the failure by Pledgor to perform any obligation under this Agreement as determined by Secured Party, and such breach or failure continues for fifteen (15) business days after written notice to Pledgor that Secured Party considers such breach or failure to be a default. SECTION 8. REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default, Secured Party shall have all of the rights and remedies under this Agreement, including the remedy set forth in Section 4 hereof to liquidate the Collateral held in the Pledged Account and cause Financial Intermediary to remit the proceeds so generated to Secured Party and, to the extent that such proceeds remitted to Secured Party do not equal the Obligations, Pledgor hereby waives and relinquishes, to the maximum extent permitted by law, any and all rights to claim that Secured Party may not proceed against them for any deficiency. Upon the occurrence of any Event of Default, in addition to all rights of Secured Party under this Agreement, Secured Party shall have all rights and remedies of a secured party under the UCC and under any applicable law, as the same may from time to time be in effect. Among other things, Secured Party may sell the Collateral under any applicable Uniform Commercial Code and apply the proceeds in the manner set forth in Section 9. SECTION 9. APPLICATION OF PROCEEDS OF SALE OF COLLATERAL. The proceeds of any disposition of all, or any part of, the Collateral shall be applied by Secured Party as follows: FIRST: To the payment of all costs and expenses incurred by Secured Party in order to obtain such proceeds or monies, including but not limited to all court costs and the reasonable fees and disbursements of counsel for Secured Party, and to the repayment of all advances made by Secured Party hereunder for the account of Pledgor; SECOND: To the payment in full or reduction of interest that is due Secured Party in connection with the Obligations; THIRD: To the payment in full or reduction of any remaining undischarged principal obligations due Secured Party in connection with the Obligations; FOURTH: To the payment in full or reduction of any remaining undischarged obligations due Secured Party in connection with the Obligations; and FIFTH: Any excess of such proceeds not needed to pay Secured Party the amounts described in paragraphs First, Second, Third and Fourth above shall be paid over to Pledgor or as any court of competent jurisdiction shall order. SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby constitutes and appoints Secured Party the Attorney-in-Fact of Pledgor for the purpose of carrying out the provisions of this Agreement and to take any action and executing any instrument which Secured Party may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, Secured Party shall have the right, after the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Secured Party's name or in the name of Pledgor, to settle, compromise, prosecute or defend any action, claim or proceeding with respect to the Collateral and to sell, assign, endorse, pledge, transfer and make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating Secured Party to make any inquiry as to the nature of sufficiency of any payment received by it, to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof of the monies due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of Pledgor or to any claim or action against Secured Party. SECTION 11. TERMINATION. This Agreement and the liens and security interest created hereunder shall terminate when Secured Party gives Pledgor and Financial Intermediary written notice that all of the Obligations relating to the Loan have been indefeasibly paid in full and when Secured Party has no further obligation to extend credit under the Note, at which time Secured Party shall execute and deliver to Pledgor all documents which Pledgor shall reasonably request to evidence termination of such security interest provided, however, that all indemnities of Pledgor contained in this Agreement shall survive termination of this Agreement. SECTION 12. INDEMNITY AND EXPENSES. Pledgor agrees to indemnify Secured Party and Financial Intermediary from and against any and all claims, losses and liabilities growing out of or resulting from the failure of Pledgor to comply with the terms and conditions of this Agreement (including, without limitation, enforcement of, this Agreement, the Note and any other documents relating to the Loan and all claims and demands of all persons at any time claiming the Collateral or any interest therein), except claims, losses or liabilities resulting from Secured Party's or Financial Intermediary's gross negligence or willful misconduct. Pledgor agrees to pay on demand all out-of-pocket expenses (including the reasonable fees and expenses of Secured Party's and Financial Intermediary's counsel, experts and agents) in any way relating to the enforcement or protection of the rights of Secured Party or Financial Intermediary hereunder. SECTION 13. MISCELLANEOUS PROVISIONS. (a) Notices. All notices given pursuant to any provision of this Agreement shall be in writing and hand delivered, with a receipt being obtained therefor, or sent by United States registered or certified mail, return receipt requested, postage prepaid, or by Federal Express or other overnight courier service, or via telecopier, at the following addresses or such other addresses as to which the parties hereto may be notified in writing from time to time: Pledgor: Cahill, Warnock Strategic Partners Fund, L.P. Attention: David L. Warnock 1 South Street, Suite 2150 Baltimore, Maryland 21202 Secured Party: Wilmington Trust Company Attention: Gloria Diodato, Commercial Loan Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Financial Intermediary: Wilmington Trust Company Attention: Corporate Custody Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 All such notices shall be deemed to have been given when received (if hand delivered or telecopied) or two (2) days after deposit in the mails (if mailed) or the next business day (if sent by Federal Express or other overnight courier service); provided that any notice to Financial Intermediary shall be effective only upon receipt. (b) AMENDMENTS. All amendments and modifications of this Agreement must be in writing and signed by the party against whom the same is sought to be enforced. (c) SEVERABILITY. If any term or provision of this Agreement or the application thereof shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision, shall be valid and may be enforced to the fullest extent permitted by law. (d) NO DUTY TO PRESERVE COLLATERAL. Except as required by applicable law, Secured Party shall not be obligated to take any steps necessary to preserve any rights in the Collateral or in any security therefore against any other party, which obligation Pledgor hereby assumes. (e) ASSIGNMENT. This Agreement, including the covenants and agreements contained herein, shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. (f) NO WAIVER; CUMULATIVE RIGHTS. To the extent permitted by applicable law, no failure on the part of Secured Party to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Secured Party of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy and power hereby granted to Secured Party or allowed it by law or other agreement shall be cumulative and not exclusive, and may be exercised by Secured Party from time to time. (g) EXECUTION AND COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterpart shall together constitute but one and the same instrument. (h) CONFLICTS OF INTEREST ACKNOWLEDGMENT. Pledgor acknowledges that Secured Party and Financial Intermediary are the same corporate entity and waives any conflict of interest which may exist as a result. Pledgor agrees that Wilmington Trust Company, in its capacity as Financial Intermediary, is not charged with any special knowledge arising from its role as Secured Party nor is Wilmington Trust Company, in either capacity, under a duty to inquire of, or inform, its various departments and divisions supporting its various roles in this transaction regarding any aspect of the transaction set forth in this Agreement. In addition, Pledgor acknowledges that Wilmington Trust Company may be designated from time to time by Pledgor to act as investment manager on behalf of Pledgor, and if so designated, Pledgor hereby waives any and all claims of conflict of interest for Wilmington Trust Company to serve in such capacity. SECTION 14. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware; provided, however, that with respect to Collateral, if any, located in the State of New York, the laws of the State of New York shall govern the perfection and priority of security interests in such Collateral. To induce Secured Party to enter into this Agreement and to induce Secured Party to make the Loan, Pledgor hereby irrevocably agrees that, to the extent permitted by applicable law, subject to Secured Party's sole and absolute election, all actions or proceedings that arise out of or in connection with this Agreement shall be litigated in courts within the State of Delaware. Pledgor hereby consents to personal jurisdiction in any state or federal court located within the State of Delaware. To the extent permitted under applicable law, Pledgor hereby waives any right it may have to transfer or change the venue of any litigation between Pledgor and Secured Party in accordance with this paragraph. EACH OF PLEDGOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN. The provisions of this Section 14 are a material inducement for Secured Party's entering into the Loan and the transactions contemplated herein. Pledgor hereby acknowledges that it has reviewed the provisions of this Section 14 with its independent counsel. IN WITNESS WHEREOF, Pledgor, Secured Party and Financial Intermediary intending to be legally bound hereby, have duly executed this Agreement under seal and caused it to be dated the day and year first above written. [Seal] CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., as Pledgor, by its sole General Partner, Cahill, Warnock Strategic Partners, L.P., by its General Partners Witness: /s/ Gary Merwitz /s/ Edward L. Cahill ------------------ --------------------------------- Edward L. Cahill, General Partner Witness: /s/ Gary Merwitz /s/ David L. Warnock ------------------ --------------------------------- David L. Warnock, General Partner [SEAL] WILMINGTON TRUST COMPANY, as Secured Party Attest: /s/ Gloria Z. Diodato By: /s/ Douglas J. Cornforth --------------------- -------------------------- Title: Senior Banking Officer Title: Vice President [SEAL] WILMINGTON TRUST COMPANY, as Financial Intermediary Attest: /s/ Gloria Z. Diodato By: /s/ David B. Young --------------------- -------------------------- Title: Senior Banking Officer Title: Senior Financial Services Officer EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT AMONG CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., AS PLEDGOR, WILMINGTON TRUST COMPANY, AS SECURED PARTY, AND WILMINGTON TRUST COMPANY, AS FINANCIAL INTERMEDIARY LIST OF INITIAL SECURITIES Initially, no assets will be held in the Pledged Account. CRITERIA FOR SECURITIES (TYPE, RATING, ETC.) The Pledged Account (account number 36054--1) will be the repository for the limited partners' cash contributions from the date of receipt, which is expected to be no more than 30 days after the capital call is made, until these funds are used to purchase securities for the Fund or to pay expenses. Cash in the Pledged Account may be invested in U.S. Treasury Bills, U.S. Treasury Notes and/or U.S. Treasury Bonds or shares of money market mutual funds invested primarily in U.S. Treasury securities, including any such mutual fund managed by Financial Intermediary or any affiliate thereof. EXHIBIT "A" TO FINANCING STATEMENT NAMING CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., AS DEBTOR, AND WILMINGTON TRUST COMPANY, AS SECURED PARTY All of Debtor's right, title and interest in and against an agency/custody account in the name of Debtor with Wilmington Trust Company, as bailee and financial intermediary ("WTC"), and further identified by WTC as WTC Account Number 36054-1 (the "Pledged Account"); any and all now owned or hereafter acquired securities which are included now or at any time hereafter in the Pledged Account, as defined in the Pledge and Security Agreement dated as of February 5, 1997 (the "Pledge and Security Agreement"), by and among the Debtor, Wilmington Trust Company, as Secured Party, and WTC; any and all instruments, cash, general intangibles or other property of any kind whatsoever now or hereafter held in the Pledged Account, including, without limitation, all interest, dividends and income of any kind now or hereafter derived from any property in the Pledged Account; and any and all proceeds (as defined in Section 9-306 of the Uniform Commercial Code as in effect in the State of Delaware) of all the foregoing (all of the foregoing being hereinafter referred to as the "Collateral"). Interested parties may contact Wilmington Trust Company during normal business hours to view specific records describing the Collateral, including a copy of the Pledge and Security Agreement. EX-99.5 6 STOCKHOLDERS' AGREEMENT Exhibit 5 STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND AMONG CONCORDE CAREER COLLEGES, INC. AND THE STOCKHOLDERS IDENTIFIED HEREIN TABLE OF CONTENTS ARTICLE 1.DEFINITIONS ........................................ 1 1.1. Defined Terms ...................................... 1 ARTICLE 2. BOARD; COMMITTEE .................................. 4 2.1. Number and Election of Directors. .................. 4 2.2. Removal of Directors ............................... 4 2.3. Vacancies .......................................... 4 2.4. Proxies ............................................ 5 2.5. Compensation. ...................................... 5 2.6. Information ........................................ 5 2.7. Insurance. ......................................... 5 ARTICLE 3. CERTAIN CORPORATE ACTION ......................... 5 3.1. Approval of Preferred Stock Directors. ............. 5 3.2. Approval of Preferred Stock Holders. ............... 5 ARTICLE 4. TRANSFER OF SHARES ............................... 6 4.1. Restrictions on Transfer. .......................... 6 4.2. Certain Permitted Transfers ........................ 6 4.3. Rights of First Refusal ............................ 7 4.4. Restrictions in Connection with Registrations ...... 9 ARTICLE 5. REGISTRATION RIGHTS .............................. 9 5.1. Sale or Transfer of Shares ......................... 9 5.2. Public Offering Shares. ............................ 9 ARTICLE 6. PREEMPTIVE RIGHTS ................................ 18 6.1. Preemptive Rights. ................................ 19 ARTICLE 7. TERMINATION ...................................... 20 ARTICLE 8. REPRESENTATIONS .................................. 20 8.1. Representation of Company. ........................ 20 8.2. Representation of Cahill, Warnock Purchasers. ..... 20 8.3. Representation of the Brozman Estate. ............. 21 8.4. Representation of the Brozman Trust. .............. 21 ARTICLE 9. MISCELLANEOUS .................................... 21 9.1. Certificate Legend. ............................... 21 9.2. Negotiable Form. .................................. 22 9.3. Enforcement ....................................... 22 9.4. Specific Performance .............................. 22 9.5. Transferees. ...................................... 22 9.6. Notices ........................................... 22 9.7. Binding Effect; Assignment. ....................... 24 9.8. Governing Law. .................................... 24 9.9. Severability ...................................... 24 9.10.Entire Agreement. ................................. 24 9.11.Counterparts. ..................................... 24 9.12.Amendment; Waiver. ................................ 24 9.13.Captions .......................................... 24 STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT dated as of February 25, 1997 (this "Agreement") by and among CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"); the parties identified on the signature pages under the heading "Cahill, Warnock Parties" (the "Cahill, Warnock Parties"); and the parties identified on the signature pages under the heading "Other Holders" (collectively, the "Other Holders"). The Cahill, Warnock Parties and the Other Holders are referred to herein collectively as the "Securityholders." WHEREAS, the Company has entered into a Convertible Preferred Stock Purchase Agreement, of even date herewith (the "Stock Purchase Agreement"), with the Cahill, Warnock Parties, pursuant to which the Cahill, Warnock Parties have acquired shares of the Company's Convertible Preferred Stock on the terms and conditions set forth therein; WHEREAS, the Company proposes to issue and sell, and the Cahill Warnock Parties wish to purchase, Debentures and Warrants pursuant to Debenture and Warrant Purchase Agreements, between the Company and the Cahill, Warnock Parties, of even date herewith; WHEREAS, the Estate of Robert F. Brozman proposes to sell, and the Cahill, Warnock Parties wish to purchase, 500,000 shares of common stock of the Company, pursuant to a Stock Purchase Agreement, of even date herewith, between the Company and the Cahill, Warnock Parties; WHEREAS, on the date hereof, each Securityholder owns the shares of capital stock of the Company or options exercisable for shares of capital stock of the Company set forth opposite its name on Exhibit A hereto; WHEREAS, the Securityholders desire to enter in this Agreement with the Company; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS 1.1. Defined Terms. The following terms are defined as follows: "Affiliate" means, with respect to any Person, (i) any Person in which such Person holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 5% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 5% of the outstanding equity securities or equity interests in a Person and (ii) any brother, sister, parent, child or spouse of such Person or any Person described in clause (i). "Board" shall mean the Board of Directors of the Company. "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" shall mean the Company's common stock, par value $.10 per share. "Common Stock Equivalent" shall mean, with respect to any Securityholder, the number of shares of Common Stock owned by such Securityholder and the number of shares of Common Stock into which any shares of Convertible Preferred Stock owned by such Securityholder shall be convertible and the number of shares of Common Stock into which any options owned by any Securityholder shall be exercisable as of the date of determination thereof. "Conversion Stock" shall mean Common Stock into which shares of Convertible Preferred Stock shall have been converted. "Convertible Preferred Stock" shall mean the Company's Convertible Preferred Stock, par value $.10 per share, having such rights, preferences and privileges as may be in effect from time to time. "Encumbrances" shall mean any and all liens, claims, charges, security interests, options or other legal or equitable encumbrances. "Exchange Act" shall mean the Securities Exchange Act of 1934 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Preferred Stock Directors" shall mean the directors nominated by the Preferred Stock Holders pursuant to Section 2.1(a). "Preferred Stock Holders" shall mean all holders of the Convertible Preferred Stock issued and outstanding at any time. "Prime Rate" shall mean the prime rate publicly announced by The Chase Manhattan Bank, N.A. from time to time. "Pro Rata Share" shall mean the percentage of Transfer Shares (as defined in Section 4.3) being offered by a Transferring Securityholder (as defined in Section 4.3) that each other Securityholder shall be entitled to purchase, if any. Such percentage shall be determined by dividing the number of Shares of such other Securityholder by the aggregate number of all Shares of Securityholders entitled to participate in the purchase of such Transfer Shares (as defined in Section 4.3). "Qualified Offering" shall mean the consummation of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of Common Stock for the account of the Company in which (i) the net proceeds of the public offering price equals or exceeds $20 million and (ii) the public offering price per share of Common Stock equals or exceeds $4.00. "Registered Securities" shall mean securities that have been registered under the Securities Act. "Sale of the Company" shall mean (i) consummation of a merger or consolidation of the Company with or into another person that is not a parent or subsidiary of the Company as a result of which those persons who were stockholders of the Company immediately prior to such transaction own, in the aggregate, less than a majority of the outstanding voting capital stock of the surviving or resulting corporation, (ii) the consummation of the sale or other disposition of a majority of the outstanding shares of voting capital stock of the Company to a person that is not a parent or subsidiary of the Company or (iii) the consummation of the sale or other disposition of all or substantially all of the Company's assets to a person that is not a parent or subsidiary of the Company. "Securities Act" shall mean the Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Senior Management" shall mean the Company's Chairman, Chief Executive Officer and Chief Financial Officer, and any other manager of the Company who receives from the Company an annual base compensation equal to or in excess of $100,000. "Shares" shall mean any shares of capital stock of the Company, including, without limitation, Common Stock and Convertible Preferred Stock, now or hereafter issued. "Subsidiary" shall mean any corporation of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by the Company. ARTICLE 2. BOARD; COMMITTEE 2.1. Number and Election of Directors. (a) Number of Directors. Subject to the next succeeding sentence, the Board shall consist of six directors, (i) four directors nominated by the Board of Directors (excluding the Preferred Stock Directors) or by the holders of a majority of the shares of Common Stock in accordance with the Company's Bylaws (excluding the Preferred Stock) (which nominees shall initially be the incumbent directors and the new Chief Executive Officer) (collectively, the "Company Directors"), and (ii) two directors (the "Preferred Stock Directors") nominated by the Preferred Stock Holders. All such action shall have been taken as may be necessary to elect such a Board of Directors of the Company effective upon the Closing of this Agreement and the Stock Purchase Agreement. The Preferred Stock Holders shall have the right to nominate the Preferred Stock Directors so long as the Preferred Stock Holders maintain ownership in the aggregate of at least 50% of the Conversion Stock and Common Stock Equivalents acquired by them pursuant to this Agreement. (b) Election of Nominees. On the date hereof, and at each annual meeting of stockholders of the Company or any special meeting called for the purpose of electing directors of the Company (or by consent of stockholders in lieu of any such meeting) or at such other time or times as the Securityholders may agree, the Securityholders shall vote all of their respective Shares entitled to vote in favor of the election of all of the persons nominated in accordance with Section 2.1(a) and no other person. (c) Term. The Preferred Stock Directors and the Company Directors shall each hold office as a director of the Company until their successors are duly elected and qualified. 2.2. Removal of Directors. No Securityholder shall vote any Shares in favor of the removal of a director nominated by one or more of the other Securityholders hereunder unless the right of any such Securityholder to so designate such director shall no longer exist; provided, however, that upon the request of Preferred Stock Holders holding a majority of the Common Stock Equivalents to remove a director previously nominated by such persons, the Securityholders shall vote all of their Shares in favor of (i) the removal of such director and (ii) the election of any replacement director as may be designated by such Securityholder(s). 2.3. Vacancies. If any vacancy occurs in the Board because of death, disability, resignation, retirement or removal of a director in accordance with this Agreement, the Securityholder that nominated the person creating such vacancy shall nominate a successor, and all Securityholders shall vote their Shares in favor of the election of such successor to the Board. Any vacancy that occurs shall be filled as promptly as possible upon the request of the group having the right to nominate a person to fill such vacancy. 2.4. Proxies. Neither the Company nor any Securityholder shall give any proxy or power of attorney to any person or entity that permits the holder thereof to vote in his discretion on any matter that may be submitted to the Company's stockholders for their consideration and approval, unless such proxy or power of attorney is made subject to and is exercised in conformity with the provisions of this Agreement. 2.5. Compensation. Each Preferred Stock Director and Company Director (collectively the "Directors") shall be reimbursed by the Company for all direct out-of-pocket expenses reasonably incurred in connection with their services as directors and each Director shall receive from the Company an annual director's fee. 2.6. Information. The Company agrees to deliver to each of the Directors the information specified in Section 9.1 of the Stock Purchase Agreement. 2.7. Insurance. The Company agrees to obtain and maintain insurance, in an amount acceptable to the Purchasers, to indemnify each Director against any liability incurred by him or her arising as a result of his or her acting as a director of the Company. ARTICLE 3. CERTAIN CORPORATE ACTION 3.1. Approval of Preferred Stock Directors. The Company agrees that it shall not, without the prior approval of a majority of the Company Directors and a majority of the Preferred Stock Directors: (a) redeem or otherwise purchase any outstanding Shares; (b) enter into any material transaction with any Affiliate (other than a transaction between the Company and any of its Subsidiaries); (c) change the number of Directors on the Board; (d) amend, modify or waive any provision of this Agreement. 3.2. Approval of Preferred Stock Holders. The Company agrees it shall not, without the approval of Preferred Stock Holders holding a majority of the Preferred Stock: (a) issue any class or series of equity security senior to or on a parity with the Convertible Preferred Stock as to payment of dividends or senior to or on a parity with the Convertible Preferred Stock as to payments on a dissolution, liquidation or winding-up of the Company; (b) enter into any agreement or arrangement of any kind that would restrict the Company's ability to perform its obligations under this Agreement or the Stock Purchase Agreement; (c) amend the Certificate of Designation, the certificate of incorporation or the by-laws of the Company in any manner that would impair, reduce or affect the rights of the Convertible Preferred Stock; (d) merge or consolidate with any other entity or sell all or substantially all of its assets; or (e) liquidate or dissolve. ARTICLE 4. TRANSFER OF SHARES 4.1. Restrictions on Transfer. (a) So long as this Agreement is in effect, no Securityholder shall sell, assign, transfer, give, encumber, pledge, hypothecate or in any other way dispose of any Shares or options exercisable for Shares (any of which being a "Transfer") except as provided in this Agreement. (b) Each Securityholder agrees that it will not Transfer any of its Shares or options exercisable for Shares except as permitted under the Securities Act or applicable state securities laws or any rule or regulation promulgated thereunder. No Transfer in violation of this Agreement shall be made or recorded on the books of the Company and any such Transfer shall be void and of no force or effect. Subject to the terms of this Agreement, the Securityholders shall be entitled to exercise all rights of ownership of their Shares and any such options, and the transferability of any such options shall, in addition to the terms hereof, be subject to the terms and conditions contained therein. 4.2. Certain Permitted Transfers. The Company and the Securityholders acknowledge and agree that any of the following Transfers shall be deemed to be in compliance with this Agreement: (a) a Transfer in accordance with the provisions of Section 4.3 hereof or through a sale in a registered offering in accordance with Article 5 hereof; (b) a Transfer from the Cahill, Warnock Parties to any of their partners, limited partners or employees; (c) subject to Section 9.5 hereof, a Transfer upon the death of a Securityholder to his executors, administrators and testamentary trustees; and (d) subject to Section 9.5 hereof, a Transfer of Shares made for nominal consideration or as a gift in compliance with applicable federal and state securities laws to the Securityholder's spouse, parents or issue or to a trust, the beneficiaries of which, or to a corporation or partnership the stockholders or partners of which, include only the Securityholder and such Securityholder's spouse or issue (any such transferee, together with any transferee pursuant to Section 4.2(c), being a "Permitted Transferee"); (e) a Transfer from the Estate to the Trust; and (f) a Transfer from the Trust to the beneficiaries thereof provided such beneficiaries are bound by a voting trust agreement or similar arrangement reasonably satisfactory to the Cahill Warnock Parties. 4.3. Rights of First Refusal. (a) Each Securityholder agrees that, subject to the restrictions on Transfers contained in Sections 4.4, 4.5 and 4.6, if any Securityholder (for purposes of this Section 4.3, a "Transferring Securityholder") wishes to Transfer any or all of the Shares then owned by such Transferring Securityholder, other than as provided in Section 4.2 or 4.5 hereof, then such Transferring Securityholder shall first give a written notice (the "Transfer Notice") to the Company and each Securityholder specifying the number of Shares such Transferring Securityholder wishes to Transfer (the "Transfer Shares"), containing an irrevocable offer (open to acceptance for a period of 30 days after the date such Transfer Notice is received) to sell the Transfer Shares to each Securityholder other than the Transferring Securityholder (collectively the "Transfer Offerees") at the price per share stated in the Transfer Notice, which price shall be equal to the price per Share offered to such Securityholder by a bona fide third-party offeror (the "Transfer Price"), and stating whether such offer is conditioned upon purchase of all the Transfer Shares by the Transfer Offerees. (b) Each Securityholder shall have the right to purchase all or a portion of the Transfer Shares in proportion to their respective Pro Rata Share. A Transfer Offeree who wishes to purchase Transfer Shares shall provide the Company and the other Transfer Offerees with written notice specifying the number of Transfer Shares (up to such Transfer Offeree's Pro Rata Share) as to which such Transfer Offeree desires to accept the offer within 10 business days of the giving of such notice by the Transfer Offerees, and may, at the Transfer Offeree's option, indicate the maximum number of Transfer Shares such Transfer Offeree would purchase in excess of such Transfer Offeree's Pro Rata Share (the "Excess Amount"). If one or more Transfer Offerees declines to participate in such purchase or elects to purchase less than such Transfer Offeree's Pro Rata Share, then the Remaining Transfer Shares shall automatically be deemed to be accepted by Transfer Offerees who specified an Excess Amount in their respective notice of acceptance, allocated among such Transfer Offerees (with rounding to avoid fractional shares) in proportion to their respective Pro Rata Share but in no event shall an amount greater than a Transfer Offeree's Excess Amount be allocated to such Transfer Offeree. Any excess Transfer Shares shall be allocated among the remaining Transfer Offerees whose specified Excess Amount has not been satisfied (with rounding to avoid fractional shares) in proportion to their respective Pro Rata Shares, and such procedure shall be employed until the entire Excess Amount of each Transfer Offeree has been satisfied or all Transfer Shares have been allocated. The Company and the Preferred Stock Holders shall have the right but not the obligation to purchase any Transfer Shares remaining thereafter. (c) If the offer is accepted by any Transfer Offerees and, if the offer is conditioned on the purchase of all Transferee Shares, all Transfer Shares have been accepted for purchase, the Company, on behalf of all purchasing Transfer Offerees, shall provide the Transferring Securityholder with written notice of such acceptance specifying the number of the Transfer Shares as to which each Transfer Offeree is accepting the offer (a "Notice of Acceptance") within 30 days after the Transfer Notice is received. (d) The closing of the purchase by the Transfer Offerees of the Transfer Shares pursuant to this Section 4.3 shall take place at the principal offices of the Company on the fifteenth business day after the Notice of Acceptance is given. At such closing, each of the Transfer Offerees who has elected to purchase Transfer Shares shall deliver a certified check or checks in the appropriate amount to the Transferring Securityholder against delivery of duly endorsed certificates representing the Transfer Shares to be purchased. The Transfer Shares shall be delivered free and clear of all Encumbrances other than those imposed by this Agreement. (e) If any Transfer Shares allocated to a Transfer Offeree are not purchased by such Transfer Offeree (the "Transfer Default Shares"), such Transfer Default Shares may be purchased by the Company promptly following any such default. Nothing contained herein shall prejudice any Person's right to maintain any cause of action or pursue any other remedies available to it as a result of such default. (f) If, at the end of the thirtieth (30th) day after the Transfer Notice is received, the Company has not delivered an effective Notice of Acceptance of the offer contained in such Transfer Notice, or if it has delivered a Notice of Acceptance covering less than all of the Transfer Shares, then the Transferring Securityholder shall have 90 days in which to Transfer any or all of the Transfer Shares not accepted for purchase by the Transfer Offerees, at a price not lower than the Transfer Price and on terms no more favorable to the transferee than those contained in the Transfer Notice, to any third party; provided, however, that no Transfer may be made to any third party unless and until such third party delivers to the Company an executed consent to be bound by the provision of this Agreement in form and substance reasonably satisfactory to the Company. Promptly after any Transfer pursuant to this Section 4.3, the Transferring Securityholder shall notify the Company of the consummation thereof and shall furnish such evidence of the completion and time of completion of such Transfer and of the terms thereof as the Company may request. If, at the end of such 90-day period, the Transferring Securityholder has not completed the Transfer of all of the Transfer Shares, the Transferring Securityholder shall no longer be permitted to Transfer such Shares pursuant to this Section 4.3(f) without again complying with this Section 4.3 in its entirety. If the Transferring Securityholder determines at any time within such 90-day period that the Transfer of all or any part of such Transfer Shares at a price not lower than the Transfer Price and on terms no more favorable to the transferee than those contained in the Transfer Notice is impractical, such Securityholder may terminate all attempts to Transfer such Transfer Shares and recommence the procedures of this Section 4.3 in their entirety without waiting for the expiration of such 90-day period by delivering written notice of such decision to the Company. 4.4. Restrictions in Connection with Registrations. Each Securityholder agrees not to effect any public sale or distribution of Shares, including any sale pursuant to Rule 144, during the seven (7) days prior to the effective date of a registration statement effected pursuant to the terms hereof and during such period of time beginning on such effective date as may be required by the underwriters of such offering and agreed to by the Company, but in no event exceeding nine (9) months (in each case except as part of such registration). Each Securityholder hereby acknowledges that such Securityholder shall have no right to include its Shares in any registration of Shares, except as expressly provided in Article 6. ARTICLE 5. REGISTRATION RIGHTS 5.1. Sale or Transfer of Shares. (a) In addition to the other transfer restrictions set forth in this Agreement, the shares of Common Stock and any shares of Common Stock issued or issuable upon conversion of the Convertible Preferred Stock shall not be sold or transferred unless either (i) they first shall have been registered under the Securities Act, or (ii) the Company first shall have been furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect that such sale or transfer is exempt from the registration requirements of the Securities Act. (b) Notwithstanding the foregoing, no registration or opinion of counsel shall be required for a transfer by a Purchaser that is a partnership to a partner of such partnership. 5.2. Public Offering Shares. (a) Demand Registration. At any time and from time to time but excluding the period beginning December 1 and ending March 1 in any year, if the Company receives written notice from Preferred Stock Holders holding a majority of the Convertible Preferred Stock, which notice demands the registration of all or at least 500,000 shares of the Conversion Stock issued or issuable upon conversion of Convertible Preferred Stock, and specifies the intended methods of disposition thereof, then the Company shall promptly (and in any event within 10 days after its receipt of such demand) provide notice thereof to the other Securityholders in accordance with this Section 5.2 (which other Securityholders shall have the right to include any shares of Common Stock and any shares of Common Stock issued or issuable upon conversion of Convertible Preferred Stock or exercise of options to purchase Common Stock held by them in such registration) and cause to be prepared a registration statement, file the registration statement within 60 days after the date of such request (45 days in the case of a Form S-3) (using Form S-3 or other "short form," if available and advised by counsel), to the end that such Conversion Stock issued or issuable upon conversion of Convertible Preferred Stock, may be sold thereunder as soon as it becomes effective, and the Company will use its reasonable best efforts to ensure that a distribution of the Conversion Stock pursuant to the registration statement may continue for up to nine months from the date of the effective date of the registration statement. Each such registration shall hereinafter be called a "Demand Registration." The Preferred Stock Holders shall be entitled to request one Demand Registration. A Demand Registration shall not count as such until a registration statement becomes effective; provided, that if, after it has become effective, the offering pursuant to the registration statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental authority, such registration be deemed not to have been effected unless such stop order, injunction or other order shall subsequently have been vacated or otherwise removed. The Preferred Stock Holders shall select the underwriters of any offering pursuant to a registration statement filed pursuant to this Section 5.2(a), subject to the approval of the Company, which approval shall not be unreasonably withheld. Any selected underwriter shall be a well-recognized firm in good standing. (b) "Piggyback" Registration Rights. Subject to applicable stock exchange rules and securities regulations, at least 30 days prior to any public offering of any of its Common Stock for the account of the Company or any other person (other than a registration statement on Form S-4 or S- 8 (or any successor forms under the Securities Act) or other registrations relating solely to employee benefit plans or any transaction governed by Rule 145 of the Securities Act), other than pursuant to the exercise of any Demand Registration pursuant to Section 5.2(a), the Company shall give written notice of such proposed filing and of the proposed date thereof to each Securityholder and if, on or before the twentieth (20th) day following the date on which such notice is given, the Company shall receive a written request from any such holder requesting that the Company include among the securities covered by such registration statement any Shares of Common Stock, Shares of Common Stock issued or issuable upon conversion of Convertible Preferred Stock or the exercise of options to purchase Common Stock owned by such Securityholder for offering for sale in a manner and on terms set forth in such request, the Company shall include such Shares in such registration statement, if filed, so as to permit such Shares to be sold or disposed of in the manner and on the terms of the offering thereof set forth in such request. Each such registration shall hereinafter be called a "Piggyback Registration." The Company shall select the underwriters of any offering pursuant to a registration statement filed pursuant to this Section 5.2(b), subject to the approval of the Purchasers, which approval shall not be unreasonably withheld. (c) Terms and Conditions of Registration or Qualification. In connection with any registration statement filed pursuant to Sections 5.2(a) or 5.2(b) hereof, the following provisions shall apply. (i) The obligations of the Company to use its reasonable best efforts to cause the registration of Shares under the Securities Act are subject to the limitation, condition and qualification that the Company shall be entitled to postpone for a reasonable period of time (but not exceeding 90 days in any one year period) the filing of any registration statement otherwise required to be filed by it if the Company in good faith determines that such registration and offering would (A) interfere with any financing, acquisition, corporate reorganization or other material transaction or event involving the Company or any of its subsidiaries or (B) require premature disclosure thereof or of conditions, circumstances or events affecting the Company or the Company's industry which are not yet fully developed or ripe for disclosure, in which event the Company shall promptly give the Securityholders requesting registration thereof written notice of such determination and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, the Securityholders requesting registration shall have the right to withdraw the request for registration by giving written notice to the Company within 15 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which Holders are entitled under this Agreement. (ii) If the managing underwriter advises that the inclusion in such registration or qualification of some or all of the Shares sought to be registered exceeds the number (the "Saleable Number") that can be sold in an orderly fashion or without adversely affecting the offering, then the number of Shares offered shall be limited to the Saleable Number and shall be allocated as follows: (A) If such registration is being effected pursuant to a Piggyback Registration, (1) first, all the Shares the Company (or in the exercise of demand registration rights by other stockholders of the Company, the selling stockholder(s) exercising such rights) proposes to register and (2) second, the difference between the Saleable Number and the number to be included pursuant to clause (1) above, allocated to the Preferred Stock Holders pro rata on the basis of the relative number of Shares offered for sale by each Preferred Stock Holder; and (B) if such registration is being effected pursuant to a Demand Registration other than in connection with the first public offering of Common Stock of the Company after the date of this Agreement, (1) first, the entire Saleable Number allocated first to the Preferred Stock Holders pro rata on the basis of the relative number of Shares offered for sale by each such Securityholder, and then among all other selling Securityholders pro rata on the basis of the relative number of Shares offered for sale by each such Securityholder and (2) second, the difference (if positive) between the Saleable Number and the number to be included pursuant to clause (1) above, allocated to the Company; and (C) if such registration is being effected pursuant to a Demand Registration and would be the first public offering of Common Stock after the date of this Agreement and the Company wishes to sell, for its own account, shares of Common Stock in such offering, then the Saleable Number shall be allocated evenly to the Purchasers, on one hand, and the Company, on the other hand, to the extent of the number of Shares offered by the Purchasers. (iii) The selling Securityholders will promptly provide the Company with such information as the Company shall reasonably request in order to prepare such registration statement and, upon the Company's request, each selling Securityholder shall provide such information in writing and signed by such holder and stated to be specifically for inclusion in the registration statement. In the event that the distribution of the Shares covered by the registration statement shall be effected by means of an underwriting, the right of any selling Securityholder to include its Shares in such registration shall be conditioned on such holder's execution and delivery of a customary underwriting agreement with respect thereto; provided, however, that except with respect to information concerning such holder and such holder's intended manner of distribution of the Shares, no selling Securityholder shall be required (as a selling Securityholder exercising registration rights) to make any representations or warranties in such agreement as a condition to the inclusion of its Shares in such registration. (iv) The Company shall bear all expenses in connection with the preparation of any registration statement filed pursuant to Section 5.2(a), including the fees and disbursements of one counsel for the selling Securityholders. (v) The Company shall bear all expenses in connection with the preparation of any registration statement filed pursuant to Section 5.2(b), excluding (A) the fees and disbursements of counsel for the selling Securityholders, and (B) the underwriting fees, discounts or commissions with respect to Shares of the selling Securityholders, which shall be borne by the selling Securityholders. (vi) Following the effective date of such registration statement, the Company shall, upon the request of the selling Securityholders, forthwith supply such number of prospectuses (including preliminary prospectuses and amendments and supplements thereto) meeting the requirements of the Securities Act or such other securities laws where the registration statement or prospectus has been filed and such other documents as are referred to in the registration statement as shall be requested by the selling Securityholders to permit such holders to make a public distribution of their Shares, provided that the selling Securityholders furnish the Company with such appropriate information relating to such holders' intentions in connection therewith as the Company shall reasonably request in writing. (vii) The Company shall prepare and file such amendments and supplements to such registration statement as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act or such other securities laws where the registration statement has been filed with respect to the offer and sale or other disposition of the shares covered by such registration statement during the period required for distribution of the Shares, which period shall not be in excess of six (6) months from the effective date of such registration statement. (viii) The Company shall use its reasonable best efforts to register or qualify the Shares of the selling Securityholders covered by any such registration statement under such securities or Blue Sky laws in such jurisdictions as the Securityholders may reasonably request; provided, however, that the Company shall not be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified in order to comply with such request. (ix) In connection with any registration pursuant to Article 5, the Company will as expeditiously as possible: (A) cause the Shares covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the selling Securityholders to consummate the disposition of such Shares; (B) notify each selling Securityholder at any time of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (C) cause all Shares covered by the registration statement to be listed on each securities exchange on which similar securities issued by the Company are then listed and, unless the same already exists, provide a transfer agent, registrar and CUSIP number for all such Shares not later than the effective date of the registration statement; (D) enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as the holders of a majority of the voting power of the Shares being sold or the underwriters retained by such holders, if any, reasonably request in order to expedite or facilitate the disposition of such Shares; (E) make available for inspection by any selling Securityholder, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration statement, provided that such Inspectors shall have first executed and delivered to the Company a confidentiality agreement in customary form protecting the confidentiality of such information; (F) obtain "cold comfort" letters and updates thereof from the Company's independent public accountants and an opinion from the Company's counsel in customary form and covering such matters of the type customarily covered by "cold comfort" letters and opinion of counsel, respectively, as the holders of a majority of the voting power of the Shares of the selling Securityholders shall reasonably request; and (G) otherwise comply with all applicable rules and regulations of the Commission, and make available to its Securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months 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. (x) Each selling Securityholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.2(c)(ix)(B), such holder will forthwith discontinue disposition of its Shares pursuant to the registration statement covering such Shares until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by such Section 5.2(c)(ix)(B) and, if so directed by the Company, such holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Shares current at the time of receipt of such notice. (xi) Each selling Securityholder agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Shares of Common Stock, and not to effect any such public sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company in each case, other than as part of an offering made pursuant to a registration statement filed and affected by this Agreement during the 15 days prior to, and during the 90-day period (or such longer period as each selling Securityholder agrees with the underwriter of such offering) beginning on the effective date of such registration statement (except as part of such registration) provided that each selling Securityholder has received written notice of such registration at least 15 days prior to such effective date. (d) Exceptions to Registration Obligations. The Company shall not be required to effect any registration of Shares pursuant to Section 5.2(a) or Section 5.2(b) hereof if either: (i) it shall deliver to the selling Securityholders requesting such registration an opinion of counsel in form reasonably satisfactory to such selling Securityholder to the effect that all such Shares held by such selling Securityholder may be sold in the public market without registration under the Securities Act (e.g., pursuant to Rule 144) and any applicable state securities laws; or (ii) it shall offer to purchase all the Shares sought by the selling Securityholder to be registered, at a purchase price per Share equal to the average, over the ten (10) trading days immediately after the selling Securityholder's request for Demand Registration or Piggyback Registration, of the average on each such trading day of the bid and ask price (or high and low sales price, if applicable) for a share of Common Stock of the Company on the exchange or quotation system upon which the Common Stock is traded or quoted. (e) Transfer Restrictions. The transfer restrictions contained in Article 4 of this Agreement shall not apply to any offering of Shares pursuant to this Section 5.2. (f) Indemnification. (i) In the event of the registration or qualification of any Shares of the Securityholders under the Securities Act or any other applicable securities laws pursuant to the provisions of this Section 5.2, the Company agrees to indemnify and hold harmless each Securityholder thereby offering such Shares for sale (a "Seller"), underwriter, broker or dealer, if any, of such Shares, and each other person, if any, who controls any such Seller, underwriter, broker or dealer within the meaning of the Securities Act or any other applicable securities laws, from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which such Seller, underwriter, broker or dealer or controlling person may become subject under the Securities Act or any other applicable securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Shares were registered or qualified under the Securities Act or any other applicable securities laws, any preliminary prospectus or final prospectus relating to such Shares, or any amendment or supplement thereto, or arise out of or are based upon the 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 any rule or regulation under the Securities Act or any other applicable securities laws applicable to the Company or relating to any action or inaction required by the Company in connection with any such registration or qualification and will reimburse each such Seller, underwriter, broker or dealer and each such controlling person for any legal or other expenses reasonably incurred by such Seller, underwriter, broker or dealer or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in such registration statement, such preliminary prospectus, such final prospectus or such amendment or supplement thereto or violation in reliance upon and in conformity with written information furnished to the Company by such Seller, underwriter, broker, dealer or controlling person specifically and expressly for use in the preparation thereof; and provided, further, that the Company shall not be liable to any person who participates as an underwriter in the offering or sale of Shares or any other person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Shares to such person if such statement or omission was corrected in such final prospectus so long as such final prospectus, and any amendments or supplements thereto, have been furnished to such underwriter. (ii) In the event of the registration or qualification of any Shares of the Securityholders under the Securities Act or any other applicable securities laws for sale pursuant to the provisions of this Section 5.2, each selling Securityholder, each underwriter, broker and dealer, if any, of such Shares, and each other person, if any, who controls any such selling Securityholder, underwriter, broker or dealer within the meaning of the Securities Act, agrees severally, and not jointly to indemnify and hold harmless the Company, each person who controls the Company within the meaning of the Securities Act, and each officer and director of the Company from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which the Company, such controlling person or any such officer or director may become subject under the Securities Act or any other applicable securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such Shares were registered or qualified under the Securities Act or any other applicable securities laws, any preliminary prospectus or final prospectus relating to such Shares, or any amendment or supplement thereto, or arise out of or are based upon an untrue statement or the 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 any rule or regulation under the Securities Act or any other applicable securities laws applicable to the Company or relating to any action or inaction required by the Company in connection with any such registration or qualification and will reimburse each such Seller, underwriter, broker or dealer and each such controlling person for any legal or other expenses reasonably incurred by such Seller, underwriter, broker or dealer or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action, which untrue statement or omission or violation was made therein in reliance upon and in conformity with written information furnished to the Company by such selling Securityholder, underwriter, broker, dealer or controlling person specifically for use in connection with the preparation thereof, and will reimburse the Company, such controlling person and each such officer or director for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that no selling Securityholder will be liable under this Section 5.2(f)(ii) for any amount in excess of the net proceeds paid to such selling Securityholder of Shares sold by it unless such liability arises from such written information furnished to the Company with knowledge of its misleading nature or an intent to defraud. (iii) Promptly after receipt by a person entitled to indemnification under this Section 5.2(f) (an "indemnified party") of notice of the commencement of any action or claim relating to any registration statement filed under Section 5.2(a) or 5.2(b) or as to which indemnity may be sought hereunder, such indemnified party will, if a claim for indemnification hereunder in respect thereof is to be made against any other party hereto (an "indemnifying party"), give written notice to such indemnifying party of the commencement of such action or claim, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party otherwise than pursuant to the provisions of this Section 5.2(f) and shall also not relieve the indemnifying party of its obligations under this Section 5.2(f) except to the extent that the indemnifying party is actually prejudiced thereby. In case any such action is brought against an indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled (at its own expense) to participate in and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense, with counsel reasonably satisfactory to such indemnified party, of such action and/or to settle such action and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than the reasonable cost of investigation; provided, however, that no indemnifying party shall enter into any settlement agreement without the prior written consent of the indemnified party unless such indemnified party is fully released and discharged from any such liability. Notwithstanding the foregoing, the indemnified party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such suit, action, claim or proceeding, (B) the indemnifying party shall not have employed counsel (reasonably satisfactory to the indemnified party) to take charge of the defense of such action, suit, claim or proceeding, or (C) such indemnified party shall have reasonably concluded, based upon the advice of counsel, that there may be defenses available to it that are different from or additional to those available to the indemnifying party which, if the indemnifying party and the indemnified party were to be represented by the same counsel, could result in a conflict of interest for such counsel or materially prejudice the prosecution of the defenses available to such indemnified party. If any of the events specified in clauses (A), (B) or (C) of the preceding sentence shall have occurred or shall otherwise be applicable, then the fees and expenses of one counsel or firm of counsel selected by a majority in interest of the indemnified parties (and reasonably acceptable to the indemnifying party) shall be borne by the indemnifying party. If, in any such case, the indemnified party employs separate counsel, the indemnifying party shall not have the right to direct the defense of such action, suit, claim or proceeding on behalf of the indemnified party and the indemnified party shall assume such defense and/or settle such action; provided, however, that an indemnifying party shall not be liable for the settlement of any action, suit, claim or proceeding effected without its prior written consent, which consent shall not be unreasonably withheld. ARTICLE 6. PREEMPTIVE RIGHTS 6.1. Preemptive Rights. If, after the date hereof and prior to the conversion of the Convertible Preferred Stock by Preferred Stock Holders holding a majority of the Convertible Preferred Stock, the Company shall propose to issue or sell New Securities (as hereinafter defined) or enter into any contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance or sale of any New Securities, each Preferred Stock Holder shall have the right to purchase that number of New Securities at the same price and on the same terms proposed to be issued or sold by the Company so that such holder would after the issuance or sale of all of such New Securities, hold the same proportional interest of the then outstanding Shares (assuming that any securities or other rights convertible or exchangeable into or exercisable for Shares have been converted, exchanged or exercised) as was held by it prior to such issuance and sale (the "Proportionate Percentage"). "New Securities" shall mean any securities or other rights convertible or exchangeable into or exercisable for Shares; provided, however, that "New Securities" does not include: (i) Common Stock issued or issuable on conversion of the Convertible Preferred Stock or upon the exercise of options outstanding on the date hereof; (ii) Shares issued pursuant to any rights or agreements including, without limitation, any security convertible or exchangeable, with or without consideration, into or for any stock, options and warrants, provided that the rights established by this Section 6.1 apply with respect to the initial sale or grant by the Company of such rights or agreements; (iii) securities issued by the Company as part of any public offering pursuant to an effective registration statement under the Securities Act; (iv) Shares issued in connection with any stock split, stock dividend, recapitalization, spin-off, or split-off of the Company; (v) Shares issued to management, directors or employees of, or consultants to, the Company pursuant to plans outstanding as of the date hereof, and options to purchase Shares issued in accordance with such plans or pursuant to other plans approved by the Board and options to purchase Shares issued in accordance with such plans; (vi) securities issued in connection with any merger or acquisition by the Company; and (vii) securities issued in any single transaction in which (A) the purchase price for such securities is less than $1,000,000 and (B) such purchase price per share of Common Stock or per Common Stock Equivalent is not less than the then applicable Conversion Price per share of the Convertible Preferred Stock. The Company shall give the Preferred Stock Holders written notice of its intention to issue and sell New Securities, describing the type of New Securities, the price and the general terms and conditions upon which the Company proposes to issue the same. The Preferred Stock Holders shall have 15 days from the giving of such notice to agree to purchase all (or any part) of its Proportionate Percentage of New Securities for the price and upon the terms and conditions specified in the notice by giving written notice of the Company and stating therein the quantity of New Securities to be purchased. If the Preferred Stock Holders fail to timely exercise in full such right, the Company shall have 120 days thereafter to sell the New Securities in respect of which the Preferred Stock Holders' rights were not exercised, at a price and upon general terms and conditions no more favorable to the purchasers thereof than specified in the Company's notice to the Preferred Stock Holders pursuant to this Section 7.1. If the Company has not sold the New Securities within such 120 days, the Company shall not thereafter issue or sell any New Securities, without first offering such securities to the Preferred Stock Holders in the manner provided above. ARTICLE 7. TERMINATION This Agreement shall terminate automatically upon the consummation of (a) a Qualified Offering, or (b) a Sale of the Company. Notwithstanding the foregoing, the provisions of Article 5 of this Agreement shall survive and continue in effect subsequent to the consummation of a Qualified Offering until the third anniversary of the date of consummation of a Qualified Offering. ARTICLE 8. REPRESENTATIONS 8.1. Representation of Company. The execution, delivery, and performance by the Company of this Agreement and all other agreements in connection with this Agreement required to be executed by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action. This Agreement and all other agreements have been duly executed and delivered by the Company and constitute valid and binding obligations of the Company enforceable in accordance with their respective terms. The execution of and performance of the transactions contemplated by this Agreement and all other agreements and compliance with their provisions by the Company will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions, or provisions of, or constitute a default under, or require a consent or waiver under, its Certificate of Incorporation or by-laws or any indenture, lease, agreement or other instrument to which the company is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to the Company. 8.2. Representation of Cahill, Warnock Purchasers. The execution, delivery, and performance by the Cahill, Warnock Parties of this Agreement and all other agreements required to be executed by the Cahill, Warnock Parties and the consummation by the Cahill, Warnock Parties of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action. This Agreement and all other agreements have been duly executed and delivered by the Cahill, Warnock Parties and constitute valid and binding obligations of the Cahill, Warnock Parties enforceable in accordance with their respective terms. The execution of and performance of the transactions contemplated by this Agreement and all other agreements and compliance with their provisions by the Cahill, Warnock Parties will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions, or provisions of, or constitute a default under, or require a consent or waiver under any agreements applicable to the Cahill, Warnock Parties. 8.3. Representation of the Brozman Estate. The execution, delivery, and performance by the Executor of the Brozman Estate of this Agreement and all other agreements required to be executed by the Executor of the Brozman Estate and the consummation by the Executor of the Brozman Estate of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action by the Brozman Estate. This Agreement and all other agreements have been duly executed and delivered by the Executor of the Brozman Estate and constitute valid and binding obligations of the Brozman Estate enforceable in accordance with their respective terms. The execution of and performance of the transactions contemplated by this Agreement and all other agreements and compliance with their provisions by the Brozman Estate will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions, or provisions of, or constitute a default under, or require a consent or waiver under any applicable agreements applicable to the Brozman Estate. 8.4. Representation of the Brozman Trust. The execution, delivery, and performance by the Trustee of the Robert F. Brozman Trust Under Agreement dated December 28, 1989 (the "Brozman Trust") of this Agreement and all other agreements required to be executed by the Trustee of the Brozman Trust and the consummation by the Trustee of the Brozman Trust of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action by the Brozman Trust. This Agreement and all other agreements have been duly executed and delivered by the Trustee of the Brozman Trust and constitute valid and binding obligations of the Brozman Trust enforceable in accordance with their respective terms. The execution of and performance of the transactions contemplated by this Agreement and all other agreements and compliance with their provisions by the Brozman Trust will not violate any provision of law and will not conflict with or result in any breach of any of the terms, conditions, or provisions of, or constitute a default under, or require a consent or waiver under any applicable agreements applicable to the Brozman Trust. ARTICLE 9. MISCELLANEOUS 9.1. Certificate Legend. Upon execution of this Agreement, the stock certificates representing Shares held by the Stockholders shall contain substantially the following legend, in addition to any other legends deemed reasonably appropriate or necessary by the Company: "This certificate is transferable only upon compliance with and subject to the provisions of a Stockholders' Agreement among the Company and certain Securityholders, a copy of which Agreement is on file in the office of the Secretary of the Company at its principal place of business. The Company will furnish a copy of such Agreement to the record holder of this Certificate, without charge, upon written request to the Company at its principal place of business or registered office." 9.2. Negotiable Form. Whenever any Shares are to be delivered or sold pursuant to this Agreement, the person selling such Shares shall deliver such certificates or other instruments duly endorsed or accompanied by appropriate stock powers or assignments separate from the certificate or instrument. 9.3. Enforcement. No Shares shall be Transferred on the books of the Company and no Transfer thereof shall be effective unless and until the terms and provisions of this Agreement are complied with, and in cases of violation of this agreement by the attempted Transfer of the Shares without compliance with the terms and provisions thereof, such Transfer shall be invalid and of no effect, and the Company and/or any of the Securityholders who are not attempting to Transfer the Shares shall have the right to compel the Securityholder who is attempting to Transfer the Shares, and/or the purported transferee, to Transfer and deliver the same in accordance with the applicable provisions of this Agreement. 9.4. Specific Performance. The parties hereto recognize that it is to the benefit of the Company and the Securityholders that this Agreement be carried out; and for those and other reasons, the parties hereto would be irreparably damaged if this Agreement is not specifically enforced in the event of a breach hereof. If any controversy concerning the rights or obligations to purchase or sell any Shares arises, or if this Agreement is breached, the parties hereto hereby agree that remedies at law might be inadequate and that, therefore, such rights and obligations, and this Agreement, shall be enforceable by specific performance. The remedy of specific performance shall not be an exclusive remedy, but shall be cumulative of all other rights and remedies of the parties hereto at law, in equity or under this Agreement. 9.5. Transferees. The Company and the Securityholders shall cause any transferee of any Shares or options exercisable for shares held by any Securityholder to execute a consent, in form and substance reasonably acceptable to the Company, to be bound by the terms and conditions of this Agreement and upon execution thereof such future Securityholder shall be entitled to the rights of an owner of the Shares held by such transferee hereunder, provided that the foregoing shall not apply to Shares that have been sold pursuant to an effective registration statement under the Securities Act or Rule 144 thereunder. 9.6. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in person, transmitted by telecopier or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address as any such party may notify to the other parties in writing: (a) if to the Company: Concorde Career Colleges, Inc. 1100 Main Street Suite 416 Kansas City, MO 64105 Attn: Jack L. Brozman with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Attn: Thomas W. Van Dyke (b) if to the Cahill, Warnock Parties: c/o Cahill, Warnock & Company, LLC One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: David Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esquire Facsimile No.: (410) 986-2828 (c) if to any of the Other Holders, to the respective Other Holder as set forth below: Jack L. Brozman 8607 Cedar Prairie Village, KS 66207 The Brozman Estate c/o Jack L. Brozman 1100 Main Street Suite 416 Kansas City, MO 64105 The Brozman Trust c/o Jack L. Brozman 1100 Main Street Kansas City, MO 64105 A notice or communication will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, 3 business days after dispatch. 9.7. Binding Effect; Assignment. This Agreement, including the rights and conditions contained herein in connection with disposition of Shares, shall be binding upon the parties hereto, together with their respective executors, administrators, successors, personal representatives, heirs and assigns permitted under this Agreement. 9.8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. 9.9. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provisions shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 9.10. Entire Agreement. This Agreement together with the Certificate of Designation embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to the subject matter hereof. 9.11. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. 9.12. Amendment; Waiver. This Agreement may be amended, modified or supplemented only by a written instrument executed by the Company and the Securityholders. 9.13. Captions. The captions of this Agreement are for convenience of reference only and shall not limit or otherwise affect any of the terms or provisions hereof. [Balance of Page Left Blank Intentionally -- Signature Page Follows] STOCKHOLDERS' AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman ---------------------------------------- Name: Jack L. Brozman Title: President and Chief Executive Officer CAHILL, WARNOCK PARTIES: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., its General Partner By: /s/ David L. Warnock ---------------------------------------- Name: David L. Warnock Title: a General Partner STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, LLC, its General Partner By: /s/ David L. Warnock ---------------------------------------- Name: David L. Warnock Title: Managing Member OTHER HOLDERS: JACK L. BROZMAN, in his individual capacity By: /s/ Jack L. Brozman --------------------------------------- THE ESTATE OF ROBERT F. BROZMAN By: /s/ Jack L. Brozman --------------------------------------- Jack L. Brozman, Executor ROBERT F. BROZMAN TRUST UNDER AGREEMENT DATED DECEMBER 28, 1989 By: /s/ Jack L. Brozman ---------------------------------------- Jack L. Brozman, Trustee EX-99.6 7 STOCK PURCHASE AGREEMENT Exhibit 6 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND AMONG CONCORDE CAREER COLLEGES, INC., CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. AND STRATEGIC ASSOCIATES, L.P. TABLE OF CONTENTS SECTION 1 1 Definitions 1 1.1. Defined Terms. 1 SECTION 2 4 Authorization and Sale of Convertible Preferred Stock 4 2.1. Authorization of Convertible Preferred Stock. 4 2.2. Sale and Purchase of Convertible Preferred Stock. 4 SECTION 3 5 Closing Dates; Delivery 5 3.1. Closing Dates 5 3.2. Delivery. 5 SECTION 4 5 Representations and Warranties of the Company 5 4.1. Organization, Good Standing and Qualification. 5 4.2. Capitalization. 5 4.3. Subsidiaries 6 4.4. Partnerships 7 4.5. Authorization 7 4.6. Governmental Consents. 7 4.7. Litigation 7 4.8. Certain Events; Insurance 8 4.9. Patents and Trademarks. 8 4.10. Compliance with Other Instruments and Legal Requirements. 8 4.11. Material Agreements; Action. 9 4.12. Disclosure 9 4.13. Brokers' Fees 9 4.14. Registration Rights. 9 4.15. Corporate Documents 10 4.16. Real Property 10 4.17. Tangible Personal Property 11 4.18. Environmental Matters 11 4.19. Financial Statements. 12 4.20. Changes 13 4.21. Employee Benefit Plans 13 4.22. Taxes 17 4.23. Insurance. 17 4.24. Minute Books 17 4.25. Labor and Employment Matters. 18 4.26. Use of Proceeds 18 4.27. Accreditation and State Licensure/ Approval. 18 4.28. No Undisclosed Liabilities 19 4.29. Licenses and Permits 19 4.30. U.S. Department of Education Certification and Eligibility 20 SECTION 5 22 Representations, Warranties and Covenants of the Purchasers 22 5.1. Accredited Investor; Experience; Risk 22 5.2. Investment 22 5.3. Legends; Opinion Requirement 22 5.4. Authorization 23 5.5. Governmental Consents 23 5.6. Brokers' Fees 23 SECTION 6 24 Covenants 24 6.1. Access to Information 24 6.2. Publicity 24 6.3. Register of Securities 24 6.4. Removal of Legend 25 SECTION 7 25 Conditions to Closing of Purchasers 25 7.1. Representations and Warranties Correct 25 7.2. Covenants 25 7.3. Opinion of Company's Counsel 25 7.4. No Material Adverse Change 25 7.5. Certificate of Designation. 25 7.6. Stockholders' Agreement 26 7.7. State Securities Laws 26 7.8. CenCor Obligations 26 7.9. Issuance of Shares 26 7.10. Certificates 26 7.11. Debenture and Warrant Purchase Agreements. 26 7.12. Debentures and Warrants 26 7.13. Registration Rights Agreement. 26 SECTION 8 27 Conditions to Closing of the Company 27 8.1. Representations 27 8.2. Covenants 27 8.3. Stockholders' Agreement 27 8.4. Opinion of Purchasers' Counsel 27 8.5. No Material Adverse Change 27 8.6. State Securities Laws. 27 8.7. Purchase Price. 27 8.8. Certificate 27 8.9. Debenture and Warrant Purchase Agreements. 27 8.10. Registration Rights Agreement 28 SECTION 9 28 Covenants of the Company 28 9.1. Information. 28 9.2. Additional Agreements 30 SECTION 10 31 Miscellaneous 31 10.1. Amendment; Waiver. 31 10.2. Notices 31 10.3. Survival of Representations, Warranties and Covenants 32 10.4. Severability. 32 10.5. Successors and Assigns 32 10.6. Entire Agreement 32 10.7. Choice of Law 32 10.8. Counterparts 33 10.9. Costs and Expenses 33 10.10.Indemnification 33 10.11.Limits on Liability 34 10.12.No Third-Party Beneficiaries. 34 CONCORDE CAREER COLLEGES, INC. CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of February 25, 1997 (this "Agreement"), by and among CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of the State of Delaware, and STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of the State of Delaware. Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. together may be referred to herein as the "Purchasers." WHEREAS, the Company has issued and outstanding the shares of capital stock described in Section 4.2 hereof and the Company has reserved for issuance additional shares of capital stock upon the exercise of the outstanding convertible securities identified in Section 4.2; WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to purchase, shares of the Company's Convertible Preferred Stock, par value $0.10 per share (the "Convertible Preferred Stock") on the terms and conditions set forth herein; WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to purchase, Debentures and Warrants pursuant to Debenture and Warrant Purchase Agreements, between the Company and Purchasers, of even date herewith; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: SECTION 1 Definitions 1.1. Defined Terms. The following terms are defined as follows: "Affiliate" means, with respect to any Person, (i) any Person in which such Person holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 5% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 5% of the outstanding equity securities or equity interests in a Person and (ii) any brother, sister, parent, child or spouse of such Person or any Person described in clause (i). "Benefit Arrangement" means any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is an Employee Benefit Plan, including, without limitation, employment agreements, severance agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, any plans subject to Section 125 of the Code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "CenCor" means CenCor, Inc., a Delaware corporation. "Code" means the Internal Revenue Code of 1986 (or any successor thereto), as amended from time to time. "Company Benefit Arrangement" means any Benefit Arrangement sponsored or maintained by the Company or its Subsidiaries or with respect to which the Company or a Subsidiary has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company or the Subsidiaries. "Company Plan" means, as of the Closing Date, any Employee Benefit Plan for which the Company or any Subsidiary is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the Company or any Subsidiary or to which the Company or any Subsidiary is obligated to make payments, in each case with respect to any present or former employees of the Company or the Subsidiaries. "Company's Knowledge" or derivations thereof shall mean the actual knowledge of the executive officers of the Company. "Employee Benefit Plan" has the meaning given in Section 3(3) of ERISA. "Environmental Law" means any foreign, federal, state or local statute, regulation, ordinance or rule of common law as now or hereafter in effect in any way relating to the protection of the environment including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. 651 et seq.) and the regulations promulgated pursuant thereto. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulation or rule issued thereunder. "ERISA Affiliate" means any person that together with the Company, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company is or has been a general partner. "Hazardous Material" means any substance, material or waste that is regulated by the United States, the foreign jurisdictions in which the Company or its Subsidiaries conducts business, or any state or local governmental authority including, without limitation, petroleum and its by-products, asbestos, and any material or substance that is defined as a "hazardous waste," "hazardous substance," "hazardous material," "restricted hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant," "toxic waste" or "toxic substance" under any provision of Environmental Law. "Lien" means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Multiemployer Plan" means any Employee Benefit Plan described in Section 3(37) of ERISA. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permits" means any approvals, authorizations, consents, licenses, permits or certificates. "Permitted Exceptions" means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance that have been made available to the Company; (ii) statutory Liens for current taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve is established therefor; (iii) mechanics', carriers', workers', repairers' and similar Liens arising or incurred in the ordinary course of business that are not material to the business, operations and financial condition of the property so encumbered or the Company or its Subsidiaries; (iv) zoning, entitlement and other land use and environmental regulations by any governmental body, provided that such regulations have not been violated; and (v) such other imperfections in title, charges, easements, restrictions and encumbrances that do not materially detract from the value of or materially interfere with the present use of any Company Property (as hereinafter defined) subject thereto or affected thereby. "Person" means an individual, partnership, limited liability company, corporation, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Qualified Plan" means any Employee Benefit Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor environment, or into or out of any property; "Remedial Action" means all actions to (x) clean up, remove, treat or in any other way address any Hazardous Material; (y) prevent the Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (z) perform pre-remedial studies and investigations or post- remedial monitoring and care. "Subsidiaries" means each corporation in which the Company owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests. "Welfare Plan" means any Employee Benefit Plan described in Section 3(1) of ERISA. SECTION 2 Authorization and Sale of Convertible Preferred Stock 2.1. Authorization of Convertible Preferred Stock. At the First Closing (as defined in Section 3.1), the Company will have authorized the issuance and sale of 55,147 shares of Convertible Preferred Stock, having the rights, preferences, privileges and restrictions set forth in the Certificate of Designation attached to this Agreement as Exhibit A hereto (the "Certificate of Designation"). 2.2. Sale and Purchase of Convertible Preferred Stock. In reliance on the representations and warranties of the Company contained herein and subject to the terms and conditions hereof, the Purchasers agree to purchase from the Company, severally and in the amounts set forth on Exhibit B hereto, and the Company agrees to sell to the Purchasers 55,147 shares of Convertible Preferred Stock for the purchase price of $27.20 per share. SECTION 3 Closing Dates; Delivery 3.1. Closing Dates. The initial closing of the purchase and sale of certain of the Convertible Preferred Stock in the amounts as set forth on Schedule 3.1 (the "First Closing") shall be held at the offices of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri on February 25, 1997, or on such other date or at such other place as the Purchasers and the Company shall mutually agree (the date of the Closing being referred to herein as the "First Closing Date"). The second closing of the purchase and sale of certain of the Convertible Preferred Stock in the amounts as set forth on Schedule 3.1 (the "Second Closing") shall be held at the offices of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri on March 21, 1997, or on such other date or at such other place as the Purchasers and the Company shall mutually agree (the date of the Closing being referred to herein as the "Second Closing Date"). 3.2. Delivery. At the First Closing and the Second Closing, the Company shall deliver to each Purchaser a certificate or certificates evidencing the shares of Convertible Preferred Stock being purchased by it registered in such Purchaser's name against delivery to the Company of payment in an amount equal to the full purchase price of the shares of Convertible Preferred Stock being purchased by such Purchaser by certified check or wire transfer to an account designated by the Company in the amounts set forth on Schedule 3.2. SECTION 4 Representations and Warranties of the Company The Company hereby represents and warrants to, and agrees with, each Purchaser as follows: 4.1. Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the business, financial condition, or operations of the Company and its Subsidiaries (a "Material Adverse Effect"). 4.2. Capitalization. (a) The authorized capital stock of the Company is 20,000,000 shares, consisting of 19,400,000 shares of common stock, par value $.10 per share ("Common Stock") of which 6,966,576 shares are issued and outstanding, and 600,000 shares of preferred stock, par value $.10 per share ("Preferred Stock"), of which 233,817 shares are Class A Redeemable Preferred Stock issued and outstanding and owned by CenCor to be redeemed at the First Closing. Schedule 4.2 lists the options and warrants of the Company issued and outstanding prior to the First Closing. At the First Closing, the Company will have reserved for issuance 1,102,940 shares of Common Stock upon conversion of the authorized shares of Convertible Preferred Stock and at least 600,000 shares of Common Stock in connection with a new option to be issued to the Company's new chief executive officer. Schedule 4.2 sets forth a true and correct list of the stockholders of record maintained by the Company's transfer agent with respect to the issued and outstanding shares of capital stock of the Company as of December 31, 1996. Except as listed on Schedule 4.2, there are no outstanding securities of the Company convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating the Company to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of the Company, other than the Stockholders' Agreement in the form of Exhibit C hereto (the "Stockholders' Agreement"), the Registration Rights Agreement dated of even date herewith among the parties hereto, the First Amendment to the Settlement Agreement, dated as of December 31, 1996, among the parties thereto. No outstanding options, warrants or other securities exercisable for or convertible into shares of capital stock of the Company require anti-dilution adjustments by reason of the consummation of the transactions contemplated hereby. (b) The issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable. The shares of Convertible Preferred Stock to be issued pursuant to this Agreement, upon delivery to the Purchasers of certificates therefor against payment in accordance with the terms of this Agreement, and the shares of Common Stock issuable upon conversion of such Convertible Preferred Stock of the Company when \issued upon conversion of such Convertible Preferred Stock in accordance with the Certificate of Designation, (i) will be validly issued, fully paid and nonassessable, (ii) will be free and clear of all Liens, other than any created by the holder thereof and the restrictions imposed by the Stockholders' Agreement and (iii) assuming that the representations of the Purchasers in Section 5 hereof are true and correct, will be issued in compliance with all applicable federal and state securities laws. 4.3. Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of all Subsidiaries of the Company, showing (as to each such Subsidiary) the date of its incorporation, the jurisdiction of its incorporation, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders of such Subsidiaries and the number and percentage of the outstanding shares of each such class owned, directly or indirectly, by all such stockholders, including the Company. The outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and nonassessable and all such shares represented as being owned by the Company are owned by it, except as listed on Schedule 4.3, free and clear of all Liens. There are no outstanding securities of any Subsidiary convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of any Subsidiary, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating any Subsidiary to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of any Subsidiary. 4.4. Partnerships. The Company is not a party to, and does not hold, any equity interests in any partnership or limited partnership of any kind. 4.5. Authorization. The Company has all requisite corporate power and authority to execute and deliver this Agreement and each agreement, document or instrument adopted, entered into or delivered in connection herewith (the "Transaction Documents") and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Agreement and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate, including stockholder action on the part of the Company. Each Transaction Document has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement and the Stockholders' Agreement may be limited by federal or state securities laws or public policy relating thereto. 4.6. Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the valid execution and delivery by the Company of the Transaction Documents to which it is a party, or the consummation by the Company of the transactions contemplated by the Transaction Documents to which it is a party, except for such filings as have been made prior to the First Closing. 4.7. Litigation. All pending claims, suits, or proceedings against the Company, its Subsidiaries, and its schools are set forth on Schedule 4.7. None of the pending claims, suits, or proceedings listed on Schedule 4.7 seeks to enjoin the consummation of this Agreement or the Stockholders Agreement, nor does management believe that any pending claims, suits or proceedings materially adversely affect the operation or financial condition of, or result in the payment of material damages by, the Company, its Subsidiaries or any of the schools, taken as a whole. The Company, its Subsidiaries, and the schools represent that each of the claims, suits, and proceedings or litigation contained on Schedule 4.7 is without merit and intend to vigorously defend the Company, the affected Subsidiary or the affected school in all matters pertaining to such claims, suits or proceedings. Except as set forth on Schedule 4.7, there are no pending or threatened claims, suits or proceedings against the Company, its Subsidiary or its schools. To the Company's Knowledge, there is no investigation by any governmental agency pending or threatened against the Company, its Subsidiaries, or its schools which might result in any such suit, action or other proceeding, except as disclosed on Schedule 4.7. 4.8. Certain Events; Insurance. Except for matters covered by Section 4.7 hereof, there has been no event or accident at any premises owned or operated by the Company or any of its Subsidiaries involving personal injury or that otherwise could reasonably be expected to result in monetary liability to the Company or any of its Subsidiaries that has not been adequately covered by insurance sufficient in amount to pay any and all foreseeable liabilities arising therefrom or in connection therewith, subject to a reasonable deductible. 4.9. Patents and Trademarks. The Company and its Subsidiaries have sufficient title and ownership of (or rights under license agreements to use) all patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes ("Intellectual Property") necessary for their businesses. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company or any of its Subsidiaries bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes of any other Person. A list of all patents, patent applications, registered trademarks, trademark applications, registered copyrights and copyright applications owned by the Company or any of its Subsidiaries is set forth on Schedule 4.9. Within the past five years, the Company has not received any communications alleging that the Company or any of its Subsidiaries has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets, proprietary rights and processes of any other Person, nor is the Company aware of any such violations. 4.10. Compliance with Other Instruments and Legal Requirements. (a) None of the Company or any of its Subsidiaries is in violation or default of any provisions of its certificate of incorporation, by-laws, or comparable organizational documents. Except as listed on Schedule 4.10, none of the Company or any of its Subsidiaries is in violation or default in any material respect under any provision, instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound or of any provision of any federal, state or local statute, rule or regulation applicable to the Company or any of its Subsidiaries (including, without limitation, any law, rule or regulation relating to protection of the environment and the maintenance of safe and sanitary premises). Except under the agreements with CenCor, the execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement, or require any consent, waiver or approval thereunder, or constitute an event that results in the creation of any Lien upon any assets of the Company or any of its Subsidiaries. (b) Except as set forth on Schedule 4.10, the Company and its Subsidiaries have all material Permits of all governmental entities required to conduct their respective businesses as proposed to be conducted. 4.11. Material Agreements; Action. Except as set forth on Schedule 4.11, there are no material contracts, agreements, commitments, understandings or proposed transactions, whether written or oral, to which the Company or any of its Subsidiaries is a party or by which it is bound that involve or relate to: (i) any of their respective officers, directors stockholders or partners or any Affiliate thereof; (ii) the sale of any of the assets of the Company or any of its Subsidiaries other than in the ordinary course of business; (iii) covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with the Company or any of its Subsidiaries in any line of business or in any geographical area; (iv) the acquisition by the Company or any of its Subsidiaries of any operating business or the capital stock of any other Person; (v) the borrowing of money; (vi) the expenditure of more than $100,000 in the aggregate or the performance by any party more than one year from the date hereof or (vii) the license of any Intellectual Property, other material proprietary right to or from the Company or any of its Subsidiaries. There have been made available to the Purchasers and their representatives true and complete copies of all such agreements. All such agreements are in full force and effect and are the legal, valid and binding obligation of the Company or its Subsidiaries, enforceable against them in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). None of the Company or any of its Subsidiaries is in default under any such agreements nor is any other party to any such agreements in default thereunder in any respect. 4.12. Disclosure. To the Company's knowledge, after making due inquiry, neither this Agreement nor any Schedule hereto nor any certificates or instruments delivered by the Company or its representatives to the Purchasers 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 required to be contained therein not misleading. 4.13. Brokers' Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement. 4.14. Registration Rights. Except as provided in the Stockholders' Agreement, the Company has not granted or agreed to grant any registration rights, including piggyback registration rights, to any Person. 4.15. Corporate Documents. The Certificate of Incorporation and the By-laws of the Company, as amended, are in the form set forth in Exhibits D and E hereto, respectively. 4.16. Real Property. (a) Neither the Company nor its Subsidiaries owns any real property or fee simple interests in real property. Schedule 4.16 sets forth a complete list of all real property and interests in real property leased by the Company and its Subsidiaries (individually, a "Real Property Lease" and the real properties specified in such leases, together with the Owned Properties, being referred to herein individually as a "Company Property" and collectively as the "Company Properties") as lessee or lessor. The Company Property constitutes all interests in real property currently used or currently held for use in connection with the business of the Company and its Subsidiaries and which are necessary for the continued operation of the business of the Company and its Subsidiaries as the business is currently conducted. The Company and its Subsidiaries have a valid and enforceable leasehold interest under each of the Real Property Leases, and none of the Company or any of its Subsidiaries has received any written notice of any default or event which, with notice or lapse of time, or both, would constitute a default by the Company or any of its Subsidiaries under any of the Real Property Leases. All of the Company Property, buildings, fixtures and improvements thereon owned or leased by the Company and its Subsidiaries are in good operating condition and repair (subject to normal wear and tear) except for deficiencies which do not have a Material Adverse Effect. The Company has delivered or otherwise made available to the Purchasers true, correct and complete copies of the Real Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) The Company and its Subsidiaries have all material certificates of occupancy and Permits of any governmental body necessary or useful for the current use and operation of each Company Property, and the Company and its Subsidiaries have fully complied with all material conditions of the Permits applicable to them. No default or violation, or event which, with the lapse of time or giving of notice or both would become a default or violation, has occurred in the due observance of any such Permit. (c) There does not exist any actual, threatened or contemplated condemnation or eminent domain proceedings that affect any Company Property or any part thereof, and none of the Company or any of its Subsidiaries has received any notice, oral or written, of the intention of any governmental body or other Person to take or use all or any part thereof. (d) None of the Company or any of its Subsidiaries has received any written notice from any insurance company that has issued a policy with respect to any Company Property requiring performance of any structural or other repairs or alterations to such Company Property. (e) Except as set forth on Schedule 4.16, none of the Company or any of its Subsidiaries owns or holds, and is not obligated under or a party to, any option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any real estate or any portion thereof or interest therein. 4.17. Tangible Personal Property. (a) Schedule 4.17 sets forth all leases of personal property ("Personal Property Leases") involving annual payments in excess of $50,000 relating to personal property used in the business of the Company and its Subsidiaries or to which the Company or any of its Subsidiaries is a party or by which the properties or assets of the Company or any of its Subsidiaries is bound. The Company has delivered or otherwise made available to the Purchasers true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements thereto. (b) Each of the Company and its Subsidiaries has a valid leasehold interest under each of the Personal Property Leases under which it is a lessee, and there is no material default under any Personal Property Lease by the Company or any of its Subsidiaries, by any other party thereto, and no event has occurred which, with the lapse of time or the giving of notice or both would constitute a material default thereunder. (c) Except as set forth on Schedule 4.17, each of the Company and its Subsidiaries has good and marketable title to all of the items of tangible personal property reflected in the balance sheets referred to in Section 4.19 (except as sold or disposed of subsequent to the date thereof in the ordinary course of business consistent with past practice), free and clear of any and all Liens other than the Permitted Exceptions. All such items of tangible personal property that, individually or in the aggregate, are material to the operation of the business of the Company and its Subsidiaries are in good condition and in a state of good maintenance and repair (ordinary wear and tear excepted) and are suitable for the purposes used. (d) All of the items of tangible personal property used by the Company and its Subsidiaries under the Personal Property Leases are in good condition and repair (ordinary wear and tear excepted) and are suitable for the purposes used except for deficiencies which do not have a Material Adverse Effect. 4.18. Environmental Matters. (a) to the Company's Knowledge, the operations of each of the Company and its Subsidiaries are in compliance with all applicable Environmental Laws and all Permits issued pursuant to Environmental Laws or otherwise; (b) to the Company's Knowledge, each of the Company and its Subsidiaries has obtained all Permits required under all applicable Environmental Laws necessary to operate its business; (c) none of the Company or any of its Subsidiaries is the subject of any outstanding written order, agreement or arrangement with any governmental authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a Hazardous Material; (d) none of the Company or any of its Subsidiaries has received any written communication alleging either or both that the Company or any of its Subsidiaries may be in violation of any Environmental Law, or any Permit issued pursuant to Environmental Law, or may have any liability under any Environmental Law; (e) to the Company's Knowledge, none of the Company or any of its Subsidiaries has any current contingent liability in connection with any Release of any Hazardous Materials into the indoor or outdoor environment (whether on-site or off-site); (f) to the Company's Knowledge, there are no investigations of the business, operations, or currently or previously owned, operated or leased property of the Company or any of its Subsidiaries pending or threatened that could lead to the imposition of any liability pursuant to Environmental Law; (g) to the Company's Knowledge, there is not located at any of the properties owned, leased or operated by the Company or any of its Subsidiaries any (i) underground storage tanks, (ii) asbestos-containing material or (iii) equipment containing polychlorinated biphenyls; and (h) the Company has provided to the Purchasers all environmentally related audits, studies, reports, analyses and results of investigations, if any, that have been performed by or for the Company in the last five (5) years with respect to the currently or previously owned, leased or operated properties of the Company or any of its Subsidiaries. 4.19. Financial Statements. The Company has delivered to each Purchaser its audited consolidated balance sheets as at December 31, 1994 and December 31, 1995, and the related statements of income, changes in stockholders' equity and cash flows for the fiscal periods then ended and its unaudited financial statements as at the end of and for the twelve-month period ended December 31, 1996 (collectively the "Financial Statements"). The Financial Statements have been prepared from the books and records of the Company and fairly reflect in all material respects the consolidated financial position and results of operations, shareholders' equity and cash flows of the Company and its Subsidiaries as at the dates and for the periods reflected thereon in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as noted therein and except for the failure of the unaudited financial statements to include the footnotes required by generally accepted accounting principles, and subject, in the case of the unaudited financial statements, to normal year-end audit adjustments that will not in the aggregate be material. The Company maintains a standard system of accounting established and administered in accordance with generally accepted accounting principles. The books and records of the Company accurately reflect in all material respects the transactions to which the Company or any of its Subsidiaries is a party or by which any of their properties are subject or bound, and such books and records have been properly maintained. 4.20. Changes. Except as set forth on Schedule 4.20, since December 31, 1996, there has not been: (a) any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse; (b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results or business of the Company or any of its Subsidiaries; (c) any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it outside of the ordinary course of business or that otherwise could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; (d) any satisfaction or discharge of any Lien or payment of any obligation by the Company or any of its Subsidiaries that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; (e) any change or amendment to a contract or arrangement by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound or subject that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; (f) other than in the ordinary course of business, any material increase in any compensation arrangement or agreement with any employee of the Company or any of its Subsidiaries receiving compensation in excess of $50,000 annually; (g) any events or circumstances that otherwise could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; or (h) none of the Company or any of its Subsidiaries has since December 31, 1996 (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock or equity interests, (ii) incurred any indebtedness for money borrowed in excess of $20,000, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses not exceeding $20,000, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights for consideration in excess of $20,000 in any one transaction or series of related transactions. 4.21. Employee Benefit Plans (a) Schedule 4.21(a) contains a complete and accurate list of all Company Plans and Company Benefit Arrangements. Schedule 4.21(a) specifically identifies all Company Plans (if any) that are Qualified Plans. (b) With respect, as applicable, to Employee Benefit Plans and Benefit Arrangements: (i) true, correct, and complete copies of all the following documents with respect to each Company Plan and Company Benefit Arrangement, to the extent applicable, have been delivered to Purchasers: (A) all documents constituting the Company Plans and Company Benefit Arrangements, including but not limited to, trust agreements, insurance policies, service agreements, and formal and informal amendments thereto; (B) the most recent Forms 5500 or 5500C/R and any financial statements attached thereto and those for the prior three years; (C) the last Internal Revenue Service determination letter, the last IRS determination letter that covered the qualification of the entire plan (if different), and the materials submitted by the Company to obtain those letters; (D) the most recent summary plan description; (E) the most recent written descriptions of all non-written agreements relating to any such plan or arrangement; (F) all reports submitted within the four years preceding the date of this Agreement by third-party administrators, actuaries, investment managers, consultants, or other independent contractors; (G) all notices that were given within the three years preceding the date of this Agreement by the IRS, Department of Labor, or any other governmental agency or entity with respect to any plan or arrangement; and (H) employee manuals or handbooks containing personnel or employee relations policies; (ii) the Concorde Career Colleges, Inc. Profit Sharing and 401(k) Retirement Savings Plan (the Company 401(k) Plan) is the only Qualified Plan. The Company has never, and since their formation or acquisition by the Company or the Company's former parent corporation, CenCor (the "Subsidiary Start Date"), the Subsidiaries have never maintained or contributed to another Qualified Plan which has not heretofore been terminated. To the Company's Knowledge, there have been no claims against the Company or any Subsidiary since such Subsidiary's Start Date under or alleging any such other Qualified Plan. The Company 401(k) Plan substantially qualifies under Section 401(a) of the Code, and any trusts maintained pursuant thereto are exempt from federal income taxation under Section 501 of the Code, and, to the Company's Knowledge, nothing has occurred with respect to the design or operation of any Qualified Plans that would likely cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code; (iii) the Company has never, and since their respective Subsidiary Start Dates, any Subsidiary has never, sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan), and, to the Company's Knowledge, nothing has occurred with respect to the design or operation of any Employee Benefit Plan that would likely cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code; (iv) to the Company's Knowledge, each Company Plan and each Company Benefit Arrangement has been substantially maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other laws, including federal and state securities laws; (v) there are no pending claims or lawsuits by, against, or relating to any Employee Benefit Plans or Benefit Arrangements that are not Company Plans or Company Benefit Arrangements that would, if successful, result in liability of the Company or any Stockholder, and no claims or lawsuits have been asserted, instituted or, to the knowledge of the Company, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, against the assets of any trust or other funding arrangement under any such Company Plan, by or against the Company or the Subsidiaries with respect to any Company Plan or Company Benefit Arrangement, or by or against the plan administrator or any fiduciary of any Company Plan or Company Benefit Arrangement, and the Company does not have Knowledge of any fact that would likely form the basis for a meritorious claim or lawsuit. The Company Plans and Company Benefit Arrangements are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the Department of Labor, or any other governmental agency or entity, and no matters are pending with respect to the Company 401(k) Plan under the IRS's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs; (vi) no Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would prohibit the transactions contemplated by this Agreement or that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions contemplated by this Agreement; (vii) to the Company's Knowledge, with respect to each Company Plan, there has occurred no non- exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for the Company or any Stockholder, officer, director, or employee of the Company; (viii) to the Company's Knowledge, all reporting, disclosure, and notice requirements of ERISA and the Code have been substantially satisfied with respect to each Company Plan and each Company Benefit Arrangement; (ix) all amendments and actions required to bring the Company Benefit Plans into conformity with the applicable provisions of ERISA, the Code, and other applicable laws have been made or taken except to the extent such amendments or actions (A) are not required by law to be made or taken until after the Effective Date and (B) are disclosed on Schedule 4.21(b); (x) to the Company's Knowledge, payment has been made of all amounts that the Company and each Subsidiary is required to pay as contributions to the Company Benefit Plans as of the last day of the most recent fiscal year of each of the plans ended before the date of this Agreement; all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with GAAP as of the Balance Sheet Date; and all monies withheld from employee paychecks with respect to Company Plans have been transferred to the appropriate plan within 30 days of such withholding; (xi) except as disclosed on Schedule 4.21(b)(xi), the Company and the Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust, reserve, premium stabilization, or similar account, nor do they provide benefits through a voluntary employee beneficiary association as defined in Section 501(c)(9); (xii) to the Company's Knowledge, no statement, either written or oral, has been made by the Company or the Subsidiaries to any person with regard to any Company Plan or Company Benefit Arrangement that was not in accordance with the Company Plan or Company Benefit Arrangement and that would likely have an adverse economic consequence to the Company or the Subsidiaries; (xiii) to the Company's Knowledge, the Company and the Subsidiaries have no liability (whether actual, contingent, with respect to any of its assets or otherwise) with respect to any Employee Benefit Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with respect to any Employee Benefit Plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate; (xiv) to the Company's Knowledge, all group health plans of the Company and its ERISA Affiliates have been operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code; (xv) to the Company's Knowledge, no employee or former employee of the Company or beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits, including, without limitation, death or medical benefits (whether or not insured) beyond retirement or other termination of employment as described in Statement of Financial Accounting Standards No. 106, other than (i) death or retirement benefits under a Qualified Plan, (ii) deferred compensation benefits accrued as liabilities on the Closing Statement or (iii) continuation coverage mandated under Section 4980B of the Code or other applicable law. (c) Schedule 4.21(c) hereto sets forth an accurate list, as of the date hereof, of all officers, directors, and key employees of the Company and lists all employment agreements with such officers, directors, and key employees and the rate of compensation (and the portions thereof attributable to salary, bonus, and other compensation respectively) of each such person as of (a) December 31, 1996 and (b) the date hereof. 4.22. Taxes. Except as set forth on Schedule 4.22, all federal, state, local and foreign tax returns, reports and statements required to be filed by the Company or any of its Subsidiaries have been filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed and, to the Company's Knowledge, all such returns, reports and statements were true, complete and correct in all material respects. All taxes, charges and other impositions due and payable by the Company or any of its Subsidiaries have been paid except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books and records of the Company or such Subsidiary in accordance with generally accepted accounting principles consistently applied, and where such non-payment would not have a Material Adverse Effect. The provision for taxes of each of the Company and its Subsidiaries as shown in the Financial Statements is sufficient for all taxes, charges and other impositions of any nature due or accrued as of the date hereof, whether or not assessed or disputed. To the Company's Knowledge, proper and accurate amounts have been withheld by each of the Company and its Subsidiaries from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective governmental agencies. The Company has not received notice of any audit or of any proposed deficiencies from any governmental authority, and no controversy with respect to taxes of any type is pending or threatened. Except for routine filing extensions granted as a matter of right under applicable law, none of the Company or any of its Subsidiaries has executed or filed with the Internal Revenue Service or any other governmental authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any taxes, charges or other impositions. None of the Company or any of its Subsidiaries has agreed or has been requested to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. Further, none of the Company or any of its Subsidiaries has any obligation under any written tax-sharing agreement. None of the Company or any of its Subsidiaries has elected, pursuant to the Code, to be treated as a Subchapter S corporation or a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the Code. 4.23. Insurance. Schedule 4.23 sets forth a complete and accurate list of all policies of insurance of any kind or nature covering the Company and its Subsidiaries and any of their respective employees, properties or assets, including, without limitation, policies of life, disability, fire, theft, workers compensation, employee fidelity and other casualty and liability insurance. All such policies are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Company and its Subsidiaries. None of the Company or any of its Subsidiaries is in default of any policies of insurance. None of the Company or any of its Subsidiaries has been refused insurance or had any policy of insurance terminated (other than at its request). 4.24. Minute Books. The minute books of the Company and each of its Subsidiaries contain a complete summary of all material actions by their respective directors and stockholders since the date of their respective incorporation (or acquisition, in the case of Subsidiaries) and reflect all transactions referred to in such minutes accurately in all material respects. 4.25. Labor and Employment Matters. With respect to employees of and service providers to the Company and the Subsidiaries: (a) the Company and the Subsidiaries are and have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice; (b) there is not now, nor within the past three years has there been, any unfair labor practice complaint against the Company or any Subsidiary pending or, to the Company's Knowledge, threatened before the National Labor Relations Board or any other comparable authority; (c) there is not now, nor within the past three years has there been, any labor strike, slowdown or stoppage actually pending or, to the Company's or any Subsidiary's knowledge, threatened against or directly affecting the Company or any Subsidiary; (d) to the Company's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending and, to the Company's Knowledge, no claims therefor exist or have been threatened; (f) the employees of the Company and the Subsidiaries are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against the Company or any Subsidiary or currently being negotiated by the Company or any Subsidiary; and (g) to the Company's Knowledge, all persons classified by the Company or its Subsidiaries as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and the Company and its Subsidiaries have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. To the Company's knowledge, none of the employees of the Company or any of its Subsidiaries is obligated under any contract or other agreement (including licenses, covenants or commitments of any nature), or subject to any judgment, decree or order of any court or administrative agency, that materially interferes with the use of the employee's best efforts to promote the interests of the Company and its Subsidiaries or conflicts with the business as proposed to be conducted by the Company or its Subsidiaries. 4.26. Use of Proceeds. The Company shall use the net proceeds from the issuance and sale of the Convertible Preferred Stock to redeem, retire, and repay its obligations to CenCor in their entirety on terms substantially in the form of the Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated December 30, 1996. 4.27. Accreditation and State Licensure/Approval. (a) Schedule 4.27(a) contains a complete and accurate statement of the accreditation granted to each of the Company and its Subsidiaries, the date that accreditation was last granted, and the current term of accreditation. Except as set forth on Schedule 4.27(a), none of the schools or educational and training programs of the Company and its Subsidiaries are on probation or warning, having been directed to show cause why accreditation should not be revoked, or are subject to an action by an accrediting agency to withdraw or deny accreditation. To the Company's knowledge, there are no facts, circumstances, or omissions concerning their schools that would likely lead to such actions by an accrediting agency. (b) The Company, its Subsidiaries, and its schools have substantially complied with all stipulations, conditions and other requirements imposed by the schools' accrediting agencies at the time of, or since, the last grant of accreditation, including but not limited to the timely filing of all required reports and responses. Such reports and responses demonstrate improvement in the compliance of the schools with accrediting standards. (c) The Company, its Subsidiaries, and its schools have secured all requisite approvals from its institutional accrediting agencies for the educational and training programs currently offered. Without limiting the effect of this representation and warranty, the school located in Miami, Florida has secured the approval of the Accrediting Commission of Career Schools and Colleges of Technology ("ACCSCT") to offer its Dental Assistant and Patient Care Assistant programs, and the school located in Tampa, Florida has secured the approval of ACCSCT to offer its Dental Radiographers program. (d) To the Company's Knowledge, the Company, its Subsidiaries, and its schools have secured all requisite licenses to operate in the states in which they are located and all requisite approvals from such states for the educational and training programs currently offered. Without limiting the effect of this representation and warranty, the school located in Denver, Colorado has secured state approval of its Practical Nursing program; the school in San Diego, California has secured state approval for its Dental Assisting program; and the school located in Anaheim, California has secured state approval for its Vocational Nurse, Dental Assistant and other programs. (e) The Company, its Subsidiaries, and its schools have secured all requisite approvals from the schools' accrediting agencies and the states in which the schools are located to consummate the transaction provided for in this Agreement and in the Stockholders' Agreement or, in the event that approval has not been secured, have reasonably determined that no such approval is required. 4.28. No Undisclosed Liabilities. Except as, and to the extent, reserved for in the Financial Statements and the notes thereto or as set forth on Schedule 4.28 attached hereto and made a part hereof or in any filings with the Securities and Exchange Commission (the "SEC"), to the Company's Knowledge, the Company does not on the date hereof have any material liabilities or obligations, whether accrued, absolute or contingent, determined or undetermined, or whether due or to become due, nor, to the Company's Knowledge, does any basis exist for such liabilities or obligations other than those incurred in the ordinary course of business since December 31, 1996. 4.29. Licenses and Permits. Schedule 4.29 attached hereto and made a part hereof is a complete list of all governmental licenses and permits and other governmental authorizations and approvals required for the conduct of the Business as presently conducted (collectively, the "Permits"). 4.30 U.S. Department of Education Certification and Eligibility (a) Schedule 4.30(a) contains a complete and accurate statement of the U.S. Department of Education certification and eligibility status for each of the schools owned by the Company and its Subsidiaries, including the date that certification was last granted and the current terms of certification. Each of the schools listed on Schedule 4.30(a) is certified by the U.S. Department of Education to participate in all programs authorized by the Higher Education Act of 1965, as amended (the "Higher Education Act"). None of the schools are subject to limitation, suspension or termination proceedings, or subject to any other action or proceeding by the U.S. Department of Education that would likely result in the loss of certification or eligibility or a material liability or fine. To the Company's Knowledge, there are no facts, circumstances, or omissions concerning their schools that would likely lead to such an action by the U.S. Department of Education. (b) The Company and its Subsidiaries have accurately and completely disclosed to the U.S. Department of Education the ownership interests in all of the schools and have secured all requisite approvals for such ownership; based upon the Letter of Steven Z. Finley of the Office of General Counsel at the Department of Education dated February 14, 1997 to Mark L. Pelesh, the consummation of the transactions provided for in this Agreement and in the Stockholders' Agreement do not require the approval of the Department of Education. (c) Each of the schools listed on Schedule 4.30(a) is in material compliance with all rules, regulations and requirements established by the U.S. Department of Education pertaining to each school's eligibility and participation in Title IV of the Higher Education Act and other federal student financial aid funding programs set forth at 34 C.F.R. 600 et seq. The Company does not have Knowledge of facts, circumstances, or omissions concerning the schools that would likely result in a finding of material non-compliance with regard to such rules, regulations and requirements. Without limiting the foregoing, the Company, its Subsidiaries and its schools also represent that: (1) Each of the schools satisfies the standards of financial responsibility and administrative capability, as established by the U.S. Department of Education and as set forth at 34 C.F.R. 668.15-668.16, including all requirements pertaining to satisfactory academic progress. Further, each program offered by the schools is an eligible program in accordance with the requirements of 34 C.F.R. 668.8. (2) Except as set forth on Schedule 4.30(c)(2), each of the schools provides refunds substantially in accordance with applicable state and federal refund policies and as required pursuant to 34 C.F.R. 668.22. To the extent that the U.S. Department of Education previously determined that any of the schools failed to comply with applicable state or federal refund requirements. Except as set forth on Schedule 4.30(c)(2), the Company and its Subsidiaries have taken or are taking appropriate corrective action to ensure that all refunds are made in accordance with such requirements, the schools have satisfied all U.S. Department of Education findings regarding non-compliance with applicable refund requirements by posting letters of credit in accordance with 34 C.F.R. 668.15(b)(5), and none of the schools is subject to any further action or to the imposition of a liability by the U.S. Department of Education as a result of the school's non- compliance with applicable refund requirements. (3) Each of the schools receives no greater than eighty-five percent (85%) of its revenues from Title IV or other federal student financial aid funds and satisfies the requirements regarding tuition revenue established by the Department of Education as set forth at 34 C.F.R. 600.5. Schedule 4.30(c)(3) contains a correct statement of each school's percentage of revenue from such federal funding sources. (4) The cohort default rates published by the U.S. Department of Education for fiscal years 1990 through 1994 for the schools of the Company and its Subsidiaries are listed on Schedule 4.30(c)(4). All rates except for those published for fiscal year 1991 are considered official by the U.S. Department of Education. Based on the cohort default rates supplied by the Department for fiscal year 1994, San Diego, Anaheim, and, assuming the use of the prepublication rates, the San Bernardino schools have cohort default rates attributed to them of 25% or over for three consecutive years and could be declared ineligible to participate in Federal Family Education Loan ("FFEL") programs. If the 1991 cohort default rates are certified as official, the Jacksonville, Portland, Tampa and Miami schools also could be found to have cohort default rates attributed to them of over 25% for three consecutive years and could be declared ineligible to participate in the FFEL programs. Notwithstanding the foregoing and with the understanding that the Company does not have the servicing records for 1994, the Company believes that the cohort default rate information supplied and published by the Department of Education with respect to the schools referred to above is erroneous and when corrected will demonstrate that each of the schools' cohort default rates are within acceptable thresholds but it has no assurance that such correction will be made. In addition, the Company, the affected Subsidiaries and the affected schools have filed, or intend to timely file, all requisite administrative and judicial actions, challenges, and appeals regarding the veracity of cohort default rates published by the U.S. Department of Education in those instances in which the published cohort default rates for a school exceeds or equals 25%. (5) Each of the schools has established a default reduction plan and submitted such plans to the U.S. Department of Education in accordance with 34 C.F.R. 674.6 for Fiscal Years 1995 and 1996. (6) Each of the schools disburses federal Pell Grant payments substantially in accordance with procedures that comply with 34 C.F.R. 690.63. (d) The U.S. Department of Education program reviews and compliance audits conducted at each of the schools since 1991 have not materially adversely affected the Company, its Subsidiaries or its schools nor has any program review or compliance audit resulted in the imposition of any material liability, financial or otherwise, affecting the Company, its Subsidiaries or its schools, except as disclosed on Schedule 4.30(d) or Forms 10- K and Forms 10-Q previously filed by the Company with the SEC. The Company, its Subsidiaries, and its schools have substantially complied with all the findings and conditions arising from the program reviews and compliance audits. To the extent that any program review or audit remains pending or unresolved. Except as disclosed on Schedule 4.30(d), there are no issues or findings of non-compliance which, to the Company's Knowledge would likely result in the loss of certification or eligibility or a material liability or fine. SECTION 5 Representations, Warranties and Covenants of the Purchasers Each of the Purchasers (severally and not jointly), hereby represents and warrants to and agrees with the Company, as follows: 5.1. Accredited Investor; Experience; Risk. Such Purchaser is an accredited investor within the definition of Regulation D of the Securities Act of 1933 (the "Securities Act"). Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Convertible Preferred Stock pursuant to this Agreement and recognizes that it must bear the economic risk of its investment in the Convertible Preferred Stock for an indefinite period of time. 5.2. Investment. Such Purchaser is acquiring the Convertible Preferred Stock for investment purposes only, for its own account and not as a nominee or agent for any other Person, and not with a view to, or for resale in connection with, any distribution thereof in violation of applicable law. Such Purchaser understands that the Convertible Preferred Stock has not been registered under the Securities Act or applicable state securities laws and that, accordingly, neither the Convertible Preferred Stock nor the shares of Common Stock issuable upon conversion thereof will be transferable except upon satisfaction of the registration and prospectus delivery requirements of such laws or pursuant to an available exemption therefrom. Such Purchaser is not acquiring the Convertible Preferred Stock for purposes of acquiring or changing "control" (as defined in Rule 405 of the Securities Exchange Act of 1934) of the Company. 5.3. Legends; Opinion Requirement. Such Purchaser hereby agrees with the Company as follows: (a) The certificates evidencing the Convertible Preferred Stock and the shares of Common Stock issuable upon conversion thereof, and each certificate issued in transfer thereof, will bear the following legend and any applicable legend required by the Stockholders' Agreement: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER." (b) If such Purchaser desires to sell or otherwise dispose of all or any part of the Convertible Preferred Stock or shares of Common Stock issuable upon conversion thereof owned by it under an exemption from registration under the Securities Act, and if requested by the Company, such Purchaser shall deliver to the Company an opinion of counsel, which may be counsel for the Company, that such exemption is available. 5.4. Authorization. Such Purchaser represents that it has all requisite power and authority to enter into and perform its obligations under the Transaction Documents to which it is a party. Assuming the due authorization, execution and delivery of the Transaction Documents by each other party thereto, each Transaction Document to which such Purchaser is a party constitutes a valid and binding obligation of such Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement and the Stockholders' Agreement may be limited by federal or state securities laws or public policy relating thereto. 5.5. Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of such Purchaser is required in connection with the valid execution and delivery by such Purchaser of the Transaction Documents to which it is a party, or the consummation by such Purchaser of the transactions contemplated by the Transaction Documents to which it is a party, except for such filings as have been made prior to the First Closing. 5.6. Brokers' Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Purchasers. SECTION 6 Covenants 6.1. Access to Information. The Company agrees that, after the First Closing Date, the Purchasers shall be entitled, through their respective officers, employees and representatives (including, without limitation, their respective legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Company and its Subsidiaries and such examination of the books, records and financial condition of the Company and its Subsidiaries as the Purchasers reasonably request and to make extracts and copies of such books and records. Any such investigation and examination shall be conducted during regular business hours and under reasonable circumstances, and the Company shall cooperate, and shall cause its Subsidiaries to cooperate, fully therein. No investigation by the Purchasers prior to or after the date of this Agreement shall diminish or obviate any of the representations, warranties, covenants or agreements of the Company contained in this Agreement or in any certificates, instruments or other documents delivered by the Company or its representatives to the Purchasers in connection with this Agreement or the transactions contemplated hereby. In order that the Purchasers may have full opportunity to make such physical, business, accounting and legal review, examination or investigation as any of them may reasonably request of the affairs of the Company and its Subsidiaries, the Company shall cause the officers, employees, consultants, agents, accountants, attorneys and other representatives of the Company and its Subsidiaries to cooperate fully with such representatives in connection with such review and examination. 6.2. Publicity. Neither the Company nor the Purchasers shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other parties hereto, which approval will not be unreasonably withheld or delayed, unless disclosure is otherwise required by applicable law, provided that, to the extent required by applicable law, the party intending to make such release shall use its best efforts consistent with such applicable law to consult with the other parties hereto with respect to the text thereof. 6.3. Register of Securities. The Company or its duly appointed agent shall maintain a separate register for the shares of the Company's Convertible Preferred Stock and Common Stock, in which it shall register the issue and sale of all such shares. All transfers of such securities shall be recorded on the register maintained by the Company or its agent, and the Company shall be entitled to regard the registered holder of such securities as the actual holder of the securities so registered until the Company or its agent is required to record a transfer of such securities on its register. Subject to Section 5.3 the Company or its agent shall be required to record any such transfer when it receives such security to be transferred duly and properly endorsed by the registered holder thereof or by its attorney duly authorized in writing. 6.4. Removal of Legend. Subject to any contrary rule, regulation or advice of the SEC or its staff, any legend endorsed on a certificate pursuant to Section 5.3 and any stop transfer instructions and record notations with respect thereto shall be removed and the Company shall issue a certificate without such legend to the holder thereof at such time as (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, or (iii) such securities are otherwise sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(l) thereof so that all transfer restrictions with respect to such securities are removed upon the consummation of such sale and the seller of such securities provides the Company an opinion of counsel (which may be counsel for the Company), which shall be in form and content reasonably satisfactory to the Company, to the effect that such securities in the hands of the purchaser thereof are freely transferable without restriction or registration under the Securities Act in any public or private transaction. SECTION 7 Conditions to Closing of Purchasers Each Purchaser's obligation to purchase the Convertible Preferred Stock at each of the Closings is, at the option of such Purchaser, subject to the fulfillment on or prior to each of the Closing Dates of the following conditions: 7.1. Representations and Warranties Correct. The representations and warranties made by the Company in Section 4 hereof shall be true and correct when made, and shall be true and correct on each of the Closing Dates with the same force and effect as if they had been made on and as of such date. 7.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to each of the Closing Dates shall have been performed or complied with in all material respects. 7.3. Opinion of Company's Counsel. The Purchasers shall have received from Bryan Cave, L.L.P., counsel to the Company, an opinion addressed to the Purchasers, dated the First Closing Date, in substantially the form of Exhibit F hereto. 7.4. No Material Adverse Change. Since December 31, 1996, 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. 7.5. Certificate of Designation. The Certificate of Designation shall have been duly adopted and executed by the Company and filed with the Delaware Secretary of State. 7.6. Stockholders' Agreement. The Stockholders' Agreement shall have been executed and delivered by all the parties thereto. All such action shall have been taken as may be necessary to elect a Board of Directors of the Company, effective upon the First Closing, in accordance with the Stockholders' Agreement. 7.7. State Securities Laws. All registrations, qualifications and Permits required under applicable state securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. 7.8. CenCor Obligations. The Company shall have executed appropriate legal documentation and releases, on terms reasonably satisfactory to the Purchasers, redeeming, retiring and repaying all of the Company's obligations to CenCor on terms substantially in the form of the Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated December 30, 1996. 7.9. Issuance of Shares. At the First Closing, the Company shall be prepared to issue 42,647 shares of Convertible Preferred Stock pursuant to this Agreement. At the Second Closing, the Company shall be prepared to issue 12,500 shares of Convertible Preferred Stock pursuant to this Agreement. 7.10. Certificates. Each of the Purchasers shall have received a certificate of the President or a Vice President of the Company to the effect set forth in Sections 7.1, 7.2, 7.4, 7.6 and 7.8. 7.11. Debenture and Warrant Purchase Agreements. The Debenture and Warrant Purchase Agreements shall have been executed and delivered by all the parties thereto. 7.12. Debentures and Warrants. The Company shall be prepared to issue the Debentures and Warrants pursuant to the Debenture Purchase Agreements, of even date herewith, between the Company and Purchasers. 7.13. Registration Rights Agreement. The Registration Rights Agreement, of even date herewith, between the Company and Purchasers, shall have been executed and delivered by all the parties thereto. SECTION 8 Conditions to Closing of the Company The Company's obligation to issue and sell the Convertible Stock at each of the Closing is, at the option of the Company, subject to the fulfillment of the following conditions: 8.1. Representations. The representations and warranties made by each Purchaser in Section 5 hereof shall be true and correct when made, and shall be true and correct on each of the Closing Dates with the same force and effect as if they had been made on and as of such date. 8.2. Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchasers on or prior to each of the Closing Dates shall have been performed or complied with in all respects. 8.3. Stockholders' Agreement. The Stockholders' Agreement shall have been executed and delivered by all other parties thereto. All such action shall have been taken as may be necessary to elect a Board of Directors of the Company, effective upon the First Closing, in accordance with the Stockholders' Agreement. 8.4. Opinion of Purchasers' Counsel. The Company shall have received from Wilmer, Cutler & Pickering, counsel to the Purchasers, an opinion addressed to the Company, dated the First Closing Date, in substantially the form of Exhibit H hereto. 8.5. No Material Adverse Change. Since December 31, 1996, 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. 8.6. State Securities Laws. All registrations, qualifications and Permits required under applicable state securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. 8.7. Purchase Price. At the First Closing, the Purchasers shall have tendered the purchase price for the Convertible Preferred Stock of One Million One Hundred Sixty Thousand Dollars ($1,160,000). At the Second Closing, the Purchasers shall have tendered the purchase price for the Convertible Preferred Stock of Three Hundred Forty Thousand Dollars ($340,000). 8.8. Certificate. The Company shall have received a certificate from the Purchasers to the effect set forth in Sections 8.1 and 8.2. 8.9. Debenture and Warrant Purchase Agreements. The Debenture and Warrant Purchase Agreements, of even date herewith, between the Company and Purchasers, shall have been executed and delivered by all the parties thereto. 8.10. Registration Rights Agreement. The Registration Rights Agreement, of even date herewith, between the Company and Purchasers, shall have been executed and delivered by all the parties thereto. SECTION 9 Covenants of the Company 9.1. Information. The Company covenants and agrees that so long as the Purchasers own of the shares of Convertible Preferred Stock or shares of Common Stock into which any such shares of Convertible Preferred Stock shall have been converted, the Company shall deliver to such Purchaser the information specified in this Section 9.1 unless any such Purchaser at any time specifically requests that such information not be delivered to it. (a) Monthly Financial Statements. As soon as available, but in any event not later than forty-five (45) days after the end of each monthly fiscal period (other than the last monthly fiscal period of the fourth fiscal quarter of the Company), the unaudited consolidated balance sheet of the Company and its Subsidiaries as at the end of each such period and the related unaudited consolidated statements of income and cash flows of the Company and its Subsidiaries for such period and for the elapsed period in such fiscal year, all in reasonable detail and stating in comparative form (i) the figures as of the end of and for the comparable periods of the preceding fiscal year and (ii) the figures reflected in the operating budget for such period as specified in the financial plan of the Company delivered pursuant to Section 9.1(e) hereof. All such financial statements shall be prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods reflected therein except as stated therein and shall be accompanied by a certificate of the Company's president or chief financial officer to such effect. (b) Material Litigation. Within ten (10) days after the Company learns of the commencement or written threat of commencement of any litigation or proceeding against the Company or any of its Subsidiaries or any of their respective assets that would likely be expected to have a Material Adverse Effect, written notice of the nature and extent of such litigation or proceeding. (c) Material Agreements. Within five (5) days after the receipt by the Company of written notice of the occurrence of a default by the Company or any of its Subsidiaries under any material contract, agreement or document to which it is a party or by which it is bound, written notice of the nature and extent of such default. (d) Other Reports and Statements. Promptly (but in any event within ten (10) days) after any distribution to its stockholders generally, to its directors or to the financial community of an annual report, definitive proxy statement, registration statement or other similar report or communication, a copy of each such annual report, proxy statement, registration statement or other similar report or communication and promptly (but in any event within ten (10) days) after any filing by the Company with the SEC or with any national securities exchange, of any publicly available annual or periodic or special report or proxy statement or registration statement, a copy of such report or statement and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's business. (e) Budgets. As soon as available, but in any event not later than thirty (30) days prior to the beginning of each fiscal year of the Company, the financial plan of the Company for such fiscal year, including, without limitation, a cash flow projection and operating budget, calculated monthly, as contained in its operating plan approved by the Company's Board of Directors as well as any updates or revisions to such plan as soon as available. (f) Accountants' Management Letters, Etc. Promptly after receipt by the Company, copies of all accountants' management letters and all management and board responses to such letters, and copies of all certificates as to compliance, defaults, material adverse changes, material litigation or similar matters relating to the Company and its Subsidiaries, which shall be prepared by the Company or its officers and delivered to the third parties. (g) Stockholders' Lists. As prepared in connection with the Company's proxy solicitation for its annual meeting of shareholders each year and as soon as practicable after preparation thereof: (i) a list of stockholders as of the record date for such meeting, as prepared by the Company's transfer agent, showing the names and addresses of stockholders of record and number of shares of Common Stock held; and (ii) one or more tables of lists identifying: (A) any grants of options or stock appreciation or similar rights in the last fiscal year as required by Item 402(c) of Regulation S-K; (B) any exercise of options or stock appreciation or similar rights in the last fiscal year as required by Item 402(d) of Regulation S-K; and (C) any repricing of options or stock appreciation or similar rights in the last fiscal year as required by Item 402(k) of Regulation S-K. In addition, a list as of December 31 of the previous fiscal year of any grants, exercises, conversions or repricing of warrants or convertible securities of the Company (not described in subparagraph (ii) above) in the last fiscal year, and the name of each holder thereof together with the amount of such security held and the issuance and exercise price thereof. (h) Other Information and Access. From time to time, and promptly, such additional information regarding results of operations, financial condition or business of the Company and its Subsidiaries, including, without limitation, cash flow analyses, projections and minutes of any meetings of the Board of Directors, as the Purchasers may reasonably request, and access, at reasonable times and on reasonable prior notice, to the books, records and properties of the Company and its Subsidiaries, provided that Purchaser and its representatives execute and deliver to the Company an appropriate confidentiality agreement relating thereto. 9.2. Additional Agreements. (a) Rule 144. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will timely 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 SEC thereunder, to the extent required from time to time to enable each Purchaser to sell shares of Convertible Preferred Stock and the shares of Common Stock into which the Convertible Preferred Stock may be converted without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Purchaser, the Company will deliver a written statement as to whether it has complied with such requirements. (b) Rule 144A Information. The Company will, as promptly as practicable after, but in any event within thirty (30) days after, a written request from any Purchaser provide the information required in Rule 144A(d)(4) under the Securities Act to such Purchaser and any Person designated by any Purchaser to the Company as a prospective buyer in a transaction pursuant to Rule 144A. (c) Transaction with Affiliates. Except for employee or director compensation, stock bonus, stock option or similar plans or arrangements approved by the Board of Directors, neither the Company nor any Subsidiary of the Company shall, directly or indirectly, enter into any transaction or agreement with any holder of five percent (5%) or more of any class of capital stock of the Company or with any Affiliate of the Company or of any such stockholder or extend or modify any existing agreement with any such stockholder or Affiliate, unless the transaction or agreement is reviewed and approved by a majority of the disinterested directors of the Board of Directors of the Company. (d) Publicity. Except as may be required by law, the Company shall not use the name of, or make reference to, any Purchaser or any of its Affiliates in any press release or in any public manner without such Purchaser's prior written consent. SECTION 10 Miscellaneous 10.1. Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified, supplemented or waived, except by a written instrument executed by (i) the Company and (ii) the Purchasers holding a majority in interest of the Convertible Preferred Stock issued and sold pursuant to this Agreement and the shares of Common Stock issuable upon conversion thereof. 10.2. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person, transmitted by facsimile transmission (fax) or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing: (a) if to the Company: Concorde Career Colleges, Inc. 1100 Main Street Suite 416 Kansas City, MO 64105 Attn: Jack L. Brozman Facsimile No.: (816) 474-7610 with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Attn: Thomas W. Van Dyke Facsimile No.: (913) 338-7777 (b) if to the Purchasers: c/o Cahill, Warnock & Company One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: David L. Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esq. Facsimile No.: (410) 986-2828. A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. 10.3. Survival of Representations, Warranties and Covenants. All representations and warranties made in, pursuant to or in connection with this Agreement shall survive the execution and delivery of this Agreement, any investigation at any time made by or on behalf of any Purchaser, and the sale and purchase of the Convertible Preferred Stock and payment therefor for a period of two (2) years; provided, however, that the representations and warranties made in Section 4.22 (Taxes) shall survive the applicable statutory period of limitations with respect to any liabilities covered thereby. 10.4. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 10.5. Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto, including, without limitation, each transferee of all or any portion of the Convertible Preferred Stock. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto. 10.6. Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written, among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof. 10.7. Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. 10.8. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 10.9. Costs and Expenses. The Company shall pay (i) all reasonable out-of-pocket expenses (including legal fees) incurred by Purchasers in connection with the negotiation of the Transaction Documents, up to a maximum of $25,000, plus (ii) the reasonable legal fees and expenses incurred by Wilmer, Cutler & Pickering for the period on or after February 10, 1997 in connection with the preparation, execution and delivery of the Transaction Documents. 10.10. Indemnification. (a) The Company agrees to indemnify and hold harmless the Purchasers and their Affiliates, and their respective partners, co-investors, officers, directors, employees, agents, consultants, attorneys and advisers (each, an "Indemnified Party"), from and against any and all actual losses, claims, damages, liabilities, costs and expenses (including, without limitation, environmental liabilities, costs and expenses and all reasonable fees, expenses and disbursements of counsel), joint or several (hereinafter collectively referred to as a "Loss"), which may be incurred by or asserted or awarded against any Indemnified Party in connection with or in any manner arising out of or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby or any use made or proposal to be made with the proceeds of the Purchasers' purchase of the Convertible Preferred Stock pursuant to this Agreement, whether or not such investigation, litigation or proceeding is brought by the Company, any of its Subsidiaries, shareholders or creditors, whether or not any of the transactions contemplated by this Agreement or the other Transaction Documents are consummated, except to the extent such Loss is found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. (b) An Indemnified Party shall give written notice to the Company of any claim with respect to which it seeks indemnification within ten (10) days after the discovery by such parties of any matters giving arise to a claim for indemnification pursuant to Section 10.10(a); provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Company of its obligations under this Section 10.10, except to the extent that the Company is actually prejudiced by such failure to give notice. In case any such action or claim is brought against any Indemnified Party, the Company shall be entitled to participate in and, unless in the reasonable good faith judgment of the Indemnified Party a conflict of interest between such Indemnified Party and the Company may exist in respect of such action or claim, to assume the defense thereof, with counsel satisfactory to the Indemnified Party and after notice from the Company to the Indemnified Party of its election so to assume the defense thereof, the Company shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In any event, unless and until the Company elects in writing to assume and does so assume the defense of any such action or claim the Indemnified Party's costs and expenses arising out of the defense, settlement or compromise of any such action or claim shall be Losses subject to indemnification hereunder. If the Company elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The Company shall not be liable for any settlement of any action or claim effected without its written consent. Anything in this Section 10.10 to the contrary notwithstanding, the Company shall not, without the Indemnified Party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof that imposes any future obligation on the Indemnified Party or that does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party, a release from all liability in respect of such claim. (c) Purchaser hereby agrees to indemnify and hold harmless the Company and its respective directors, officers, affiliates, attorneys or advisers (the "Company Group") from and against any Loss sustained, incurred, paid or required to be paid by any of the Company Group which arises out of the inaccuracy or breach by Purchaser of any representation or warranty contained in this Agreement. 10.11. Limits on Liability. The Company agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company or any of its Subsidiaries, shareholders or creditors, for or in connection with the transactions contemplated by this Agreement or the other Transaction Documents, except to the extent such liability is found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct or the misrepresentations of the Indemnified Party, but in no event shall an Indemnified Party be liable for punitive, exemplary or consequential damages. The maximum aggregate liability under and with respect to this Agreement, the transactions contemplated hereby, or any claims associated herewith shall be One Million Five Hundred Thousand Dollars ($1,500,000) plus reasonable attorneys' fees. The foregoing limitation on indemnification shall not apply with respect to any claim for intentional fraud. 10.12. No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any person (specifically including any employees of the Company and its Subsidiaries) or entity that is not a party to this Agreement. [Balance of Page Left Blank Intentionally -- Signature Page Follows] CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the Company and the Purchasers have caused this Agreement to be executed effective as of the date first above written. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman ----------------------------------------- Name: Jack L. Brozman Title: President and Chief Executive Officer CAHILL, WARNOCK PURCHASERS: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., ----------------------------------------- its General Partner By: /s/ David L. Warnock ----------------------------------------- Name: David L. Warnock Title: a General Partner STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, LLC, its ----------------------------------------- General Partner By: /s/ David L. Warnock ----------------------------------------- Name: David L. Warnock Title: Managing Member Exhibit B NAME TOTAL NUMBER OF SHARES TOTAL COST - ---- ---------------------- ---------- Cahill, Warnock Strategic 52,252 $1,421,255 Partners Fund, L.P. Strategic Associates, L.P 2,895 $ 78,744 Schedule 3.2 NUMBER OF SHARES PURCHASE PRICE FIRST CLOSING Cahill, Warnock Strategic 39,752 $1,081,255 Partners Fund, L.P. Strategic Associates, L.P. 2,895 $78,744 SECOND CLOSING Cahill, Warnock Strategic 12,500 $340,000 Partners Fund, L.P. EX-99.7 8 REGISTRATION RIGHTS AGREEMENT Exhibit 7 REGISTRATION RIGHTS AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND AMONG CONCORDE CAREER COLLEGES, INC., CAHILL WARNOCK STRATEGIC PARTNERS FUND, L.P. AND STRATEGIC ASSOCIATES, L.P. TABLE OF CONTENTS SECTION 1 Registration Rights .................................... 1 1.1 Demand Registration Rights. ....................... 1 1.2 "Piggyback" Registration Rights. .................. 2 1.3 Terms and Conditions of Registration or Qualification. .................................... 2 1.4 Exceptions to Registration Obligations. ........... 6 1.5 Indemnity. ........................................ 6 SECTION 2 Miscellaneous .......................................... 9 2.1 Additional Actions and Documents. ................. 9 2.2 No Assignment. .................................... 9 2.3 Entire Agreement; Amendment. ...................... 9 2.4 Limitation on Benefits. ........................... 9 2.5 Binding Effect. ................................... 9 2.6 Governing Law. .................................... 10 2.7 Notices. .......................................... 10 2.8 Headings. ......................................... 11 2.9 Execution in Counterparts. ........................ 11 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of February 25, 1997, by and among CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of the State of Delaware, and STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of the State of Delaware (collectively, the "Purchasers"). WHEREAS, the Company and the Purchasers have entered into Debenture and Warrant Purchase Agreements, dated as of February 25, 1997 (the "Debenture Purchase Agreements"); WHEREAS, pursuant to the Debenture Purchase Agreements, the Company and the Purchasers desire to enter into this Agreement to provide Purchasers with certain stock registration rights and to address related matters; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties agree as follows: SECTION 1 Registration Rights 1.1 Demand Registration Rights. At any time after the date hereof but excluding the period beginning December 1 and ending March 1 in any year, Purchasers may request, in writing, registration for sale under the Securities Act of 1933, as amended (the "Act"), of all or at least 500,000 shares of the Common Stock, par value $0.10 per share, of the Company (the "Shares") then held by Purchasers or issuable to Purchasers upon exercise of the Warrants of even date herewith, issued by the Company to Purchasers pursuant to the Debenture Purchase Agreements. The Company shall thereafter, as expeditiously as practicable, use its reasonable best efforts (i) to prepare and file with the Securities and Exchange Commission (the "SEC") under the Act, a registration statement on the appropriate form (using Form S-3 or other "short form," if available and advised by counsel) covering all of the Shares specified in the demand request, within 60 days after the date of such request (45 days in the case of a Form S-3) and (ii) to cause such registration statement to be declared effective. The Purchasers shall select the underwriter of any offering pursuant to a registration statement filed pursuant to this Section 1.1, subject to the approval of the Company, which approval shall not be unreasonably withheld. Any selected underwriter shall be a well-recognized firm in good standing. The Company shall not be required to comply with more than one (1) request by Purchasers for demand registration ("Demand Registration") pursuant to this Section 1.1. A demand registration shall not count as such until a registration statement becomes effective; provided, that if, after it has become effective, the offering pursuant to the registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental authority, such registration be deemed not to have been effected unless such stop order, injunction or other order shall subsequently have been vacated or otherwise removed. 1.2 "Piggyback" Registration Rights. Subject to applicable stock exchange rules and securities regulations, at least 30 days prior to any public offering of any of its Common Stock for the account of the Company or any other person (other than a registration statement on Form S-4 or S- 8 (or any successor forms under the Securities Act) or other registrations relating solely to employee benefit plans or any transaction governed by Rule 145 of the Securities Act), other than pursuant to the exercise of any Demand Registration pursuant to Section 1.1, the Company shall give written notice of such proposed filing and of the proposed date thereof to Purchasers and if, on or before the twentieth (20th) day following the date on which such notice is given, the Company shall receive a written request from Purchasers requesting that the Company include among the securities covered by such registration statement any Shares of Common Stock or Shares of Common Stock issued or issuable upon exercise of the Warrant for offering for sale in a manner and on terms set forth in such request, the Company shall include such Shares in such registration statement, if filed, so as to permit such Shares to be sold or disposed of in the manner and on the terms of the offering thereof set forth in such request. Each such registration shall hereinafter be called a "Piggyback Registration." The Company shall select the underwriters of any offering pursuant to a registration statement filed pursuant to this Section 1.2, subject to the approval of the Purchasers, which approval shall not be unreasonably withheld. 1.3 Terms and Conditions of Registration or Qualification. In connection with any registration statement filed pursuant to Sections 1.1 or 1.2 hereof, the following provisions shall apply. (a) The obligations of the Company to use its reasonable best efforts to cause the registration of Shares under the Securities Act are subject to the limitation, condition and qualification that the Company shall be entitled to postpone for a reasonable period of time (but not exceeding 90 days in any one year period) the filing of any registration statement otherwise required to be filed by it if the Company in good faith determines that such registration and offering would (i) interfere with any financing, acquisition, corporate reorganization or other material transaction or event involving the Company or any of its subsidiaries or (ii) require premature disclosure thereof or of conditions, circumstances or events affecting the Company or the Company's industry which are not yet fully developed or ripe for disclosure, in which event the Company shall promptly give the securityholders requesting registration thereof written notice of such determination and an approximation of the anticipated delay. If the Company shall so postpone the filing of a registration statement, the Purchasers shall have the right to withdraw the request for registration by giving written notice to the Company within 15 days after receipt of the notice of postponement and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which Purchasers are entitled under this Agreement. (b) If the managing underwriter advises that the inclusion in such registration or qualification of some or all of the Shares sought to be registered exceeds the number (the "Saleable Number") that can be sold in an orderly fashion or without adversely affecting the offering, then the number of Shares offered shall be limited to the Saleable Number and shall be allocated as follows: (i) If such registration is being effected pursuant to a Piggyback Registration under Section 1.2, (1) first, all the Shares the Company (or in the exercise of demand registration rights, the selling stockholder(s) exercising such rights) proposes to register and (2) second, the difference between the Saleable Number and the number to be included pursuant to clause (1) above, allocated first to the Purchasers pro rata on the basis of the relative number of Shares offered for sale by each Purchaser; and (ii) if such registration is being effected pursuant to a Demand Registration other than in connection with the first public offering after the date of this Agreement of Common Stock of the Company, (1) first, the entire Saleable Number allocated first to the Purchasers on the basis of the relative number of Shares offered for sale by Purchasers, and then among all other selling securityholders pro rata on the basis of the relative number of Shares offered for sale by each such securityholder and (2) second, the difference (if positive) between the Saleable Number and the number to be included pursuant to clause (1) above, allocated to the Company; (iii) if such registration is being effected pursuant to a Demand Registration pursuant to Section 1.1 and would be the first public offering of Common Stock after the date of this Agreement and the Company wishes to sell, for its own account, shares of Common Stock in such offering, then the Saleable Number shall be allocated to the Purchasers, on one hand, and the Company, on the other hand, equally, to the extent of the number of Shares offered by the Purchasers. (c) Purchasers will promptly provide the Company with such information as the Company shall reasonably request in order to prepare such registration statement and, upon the Company's request, each Purchaser shall provide such information in writing and signed by such Purchaser and stated to be specifically for inclusion in the registration statement. In the event that the distribution of the Shares covered by the registration statement shall be effected by means of an underwriting, the right of any Purchaser to include its Shares in such registration shall be conditioned on such Purchaser's execution and delivery of a customary underwriting agreement with respect thereto; provided, however, that except with respect to information concerning such holder and such Purchaser's intended manner of distribution of the Shares, no Purchaser shall be required as a Purchaser exercising registration rights to make any representations or warranties in such agreement as a condition to the inclusion of its Shares in such registration. (d) The Company shall bear all expenses in connection with the preparation of any registration statement filed pursuant to Section 1.1, including the fees and disbursements of one counsel for Purchasers. (e) The Company shall bear all expenses in connection with the preparation of any registration statement filed pursuant to Section 1.2, excluding (A) the fees and disbursements of counsel for Purchasers, and (B) the underwriting fees, discounts or commissions with respect to Shares of Purchasers, which shall be borne by Purchasers. (f) Following the effective date of such registration statement, the Company shall, upon the request of Purchasers, forthwith supply such number of prospectuses (including preliminary prospectuses and amendments and supplements thereto) meeting the requirements of the Securities Act or such other securities laws where the registration statement or prospectus has been filed and such other documents as are referred to in the registration statement as shall be requested by Purchasers to permit such Purchasers to make a public distribution of their Shares, provided that Purchasers furnish the Company with such appropriate information relating to such Purchasers' intentions in connection therewith as the Company shall reasonably request in writing. (g) The Company shall prepare and file such amendments and supplements to such registration statement as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act or such other securities laws where the registration statement has been filed with respect to the offer and sale or other disposition of the shares covered by such registration statement during the period required for distribution of the Shares, which period shall not be in excess of six (6) months from the effective date of such registration statement. (h) The Company shall use its reasonable best efforts to register or qualify the Shares of Purchasers covered by any such registration statement under such securities or Blue Sky laws in such jurisdictions as Purchasers may reasonably request; provided, however, that the Company shall not be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified in order to comply with such request. (i) In connection with any registration pursuant to Sections 1.1 and 1.2, the Company will as expeditiously as possible: (A) cause the Shares covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Purchasers to consummate the disposition of such Shares; (B) notify each Purchaser at any time of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the Purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (C) cause all Shares covered by the registration statement to be listed on each securities exchange on which similar securities issued by the Company are then listed and, unless the same already exists, provide a transfer agent, registrar and CUSIP number for all such Shares not later than the effective date of the registration statement; (D) enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as Purchasers or the underwriters retained by such holders, if any, reasonably request in order to expedite or facilitate the disposition of such Shares; (E) make available for inspection by any Purchaser, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration statement, provided that such Inspectors shall have first executed and delivered to the Company a confidentiality agreement in customary form protecting the confidentiality of such information; (F) obtain "cold comfort" letters and updates thereof from the Company's independent public accountants and an opinion from the Company's counsel in customary form and covering such matters of the type customarily covered by "cold comfort" letters and opinion of counsel, respectively, as Purchasers may reasonably request; and (G) otherwise comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months 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. (j) Each Purchaser agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 1.3(i)(B), such holder will forthwith discontinue disposition of its Shares pursuant to the registration statement covering such Shares until such Purchaser's receipt of the copies of the supplemented or amended prospectus contemplated by such Section 1.3(i)(B) and, if so directed by the Company, such Purchaser will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Purchaser's possession, of the prospectus covering such Shares current at the time of receipt of such notice. (k) Each Purchaser agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Shares of Common Stock, and not to effect any such public sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company in each case, other than as part of an offering made pursuant to a registration statement filed and affected by this Agreement during the 15 days prior to, and during the 90-day period (or such longer period as each Purchaser agrees with the underwriter of such offering) beginning on the effective date of such registration statement (except as part of such registration) provided that each Purchaser has received written notice of such registration at least 15 days prior to such effective date. 1.4 Exceptions to Registration Obligations. The Company shall not be required to effect any registration of Shares pursuant to Section 1.1 or Section 1.2 hereof if either: (a) it shall deliver to the Purchaser requesting such registration an opinion of counsel in form reasonably satisfactory to such Purchaser to the effect that all such Shares held by such Purchaser may be sold in the public market without registration under the Securities Act (e.g., pursuant to Rule 144) and any applicable state securities laws; or (b) it shall offer to purchase all the Shares sought by the Purchaser to be registered, at a purchase price per Share equal to the average, over the ten (10) trading days immediately after the Purchaser's request for Demand Registration or Piggyback Registration, of the average on each such trading day of the bid and ask price (or high and low sales price, if applicable) for a share of Common Stock of the Company on the exchange or quotation system upon which the Common Stock is traded or quoted. 1.5 Indemnity. (a) In the event of the registration or qualification of any Shares of the securityholders under the Securities Act or any other applicable securities laws pursuant to the provisions of Sections 1.1 and 1.2, the Company agrees to indemnify and hold harmless each Purchaser thereby offering such Shares for sale (a "Seller"), underwriter, broker or dealer, if any, of such Shares, and each other person, if any, who controls any such Seller, underwriter, broker or dealer within the meaning of the Securities Act or any other applicable securities laws, from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which such Seller, underwriter, broker or dealer or controlling person may become subject under the Securities Act or any other applicable securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Shares were registered or qualified under the Securities Act or any other applicable securities laws, any preliminary prospectus or final prospectus relating to such Shares, or any amendment or supplement thereto, or arise out of or are based upon the 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 any rule or regulation under the Securities Act or any other applicable securities laws applicable to the Company or relating to any action or inaction required by the Company in connection with any such registration or qualification and will reimburse each such Seller, underwriter, broker or dealer and each such controlling person for any legal or other expenses reasonably incurred by such Seller, underwriter, broker or dealer or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission made in such registration statement, such preliminary prospectus, such final prospectus or such amendment or supplement thereto or violation in reliance upon and in conformity with written information furnished to the Company by such Seller, underwriter, broker, dealer or controlling person specifically and expressly for use in the preparation thereof; and provided, further, that the Company shall not be liable to any person who participates as an underwriter in the offering or sale of Shares or any other person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Shares to such person if such statement or omission was corrected in such final prospectus so long as such final prospectus, and any amendments or supplements thereto, have been furnished to such underwriter. (b) In the event of the registration or qualification of any Shares of Seller under the Securities Act or any other applicable securities laws for sale pursuant to the provisions of Sections 1.1 and 1.2, each Seller, each underwriter, broker and dealer, if any, of such Shares, and each other person, if any, who controls any such Seller, underwriter, broker or dealer within the meaning of the Securities Act, agrees severally, and not jointly to indemnify and hold harmless the Company, each person who controls the Company within the meaning of the Securities Act, and each officer and director of the Company from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which the Company, such controlling person or any such officer or director may become subject under the Securities Act or any other applicable securities laws or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement under which such Shares were registered or qualified under the Securities Act or any other applicable securities laws, any preliminary prospectus or final prospectus relating to such Shares, or any amendment or supplement thereto, or arise out of or are based upon an untrue statement or the 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 any rule or regulation under the Securities Act or any other applicable securities laws applicable to the Company or relating to any action or inaction required by the Company in connection with any such registration or qualification, which untrue statement or omission or violation was made therein in reliance upon and in conformity with written information furnished to the Company by such selling securityholder, underwriter, broker, dealer or controlling person specifically for use in connection with the preparation thereof, and will reimburse the Company, such controlling person and each such officer or director for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that no Seller will be liable under this Section 1.4(b) for any amount in excess of the net proceeds paid to such selling securityholder of Shares sold by it unless such liability arises from such written information furnished to the Company with knowledge of its misleading nature or an intent to defraud. (c) Promptly after receipt by a person entitled to indemnification under this Section 1.4 (an "indemnified party") of notice of the commencement of any action or claim relating to any registration statement filed under Section 1.1 or 1.2 or as to which indemnity may be sought hereunder, such indemnified party will, if a claim for indemnification hereunder in respect thereof is to be made against any other party hereto (an "indemnifying party"), give written notice to such indemnifying party of the commencement of such action or claim, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party otherwise than pursuant to the provisions of this Section 1.4 and shall also not relieve the indemnifying party of its obligations under this Section 1.4 except to the extent that the indemnifying party is actually prejudiced thereby. In case any such action is brought against an indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled (at its own expense) to participate in and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense, with counsel reasonably satisfactory to such indemnified party, of such action and/or to settle such action and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than the reasonable cost of investigation; provided, however, that no indemnifying party shall enter into any settlement agreement without the prior written consent of the indemnified party unless such indemnified party is fully released and discharged from any such liability. Notwithstanding the foregoing, the indemnified party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such suit, action, claim or proceeding, (B) the indemnifying party shall not have employed counsel (reasonably satisfactory to the indemnified party) to take charge of the defense of such action, suit, claim or proceeding, or (C) such indemnified party shall have reasonably concluded, based upon the advice of counsel, that there may be defenses available to it that are different from or additional to those available to the indemnifying party which, if the indemnifying party and the indemnified party were to be represented by the same counsel, could result in a conflict of interest for such counsel or materially prejudice the prosecution of the defenses available to such indemnified party. If any of the events specified in clauses (A), (B) or (C) of the preceding sentence shall have occurred or shall otherwise be applicable, then the fees and expenses of one counsel or firm of counsel selected by a majority in interest of the indemnified parties (and reasonably acceptable to the indemnifying party) shall be borne by the indemnifying party. If, in any such case, the indemnified party employs separate counsel, the indemnifying party shall not have the right to direct the defense of such action, suit, claim or proceeding on behalf of the indemnified party and the indemnified party shall assume such defense and/or settle such action; provided, however, that an indemnifying party shall not be liable for the settlement of any action, suit, claim or proceeding effected without its prior written consent, which consent shall not be unreasonably withheld. SECTION 2 Miscellaneous 2.1 Additional Actions and Documents. Each of the parties hereto hereby agrees to use its good faith best efforts to bring about the consummation of this Agreement, and to take or cause to be taken such further actions, to execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments, and to obtain such consents, as may be necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and conditions of this Agreement. 2.2 No Assignment. The right of Purchasers herein are personal and may not be assigned or transferred to any third party without the Company's prior express written consent. 2.3 Entire Agreement; Amendment. This Agreement, including the other writings referred to herein or delivered pursuant hereto, constitutes the entire agreement among the parties hereto with respect to the transactions contemplated herein, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, or discharge is sought. 2.4 Limitation on Benefits. It is the explicit intention of the parties hereto that no person or entity other than the parties hereto (and their respective successors and assigns) is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns. 2.5 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 2.6 Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of Delaware (excluding the choice of law rules thereof). 2.7 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery (including delivery by courier), or facsimile transmission, addressed as follows: (a) If to the Company: Concorde Career Colleges, Inc. 1100 Main Street Suite 416 Kansas City, MO 64105 Attn: Jack L. Brozman Facsimile No.: (816) 474-7610 with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Attn: Thomas W. Van Dyke Facsimile No.: (913) 338-7777 (b) if to the Purchasers: c/o Cahill, Warnock & Company, LLC One South Street, Suite 2150 Baltimore, Maryland 21202 Attn: David Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esquire Facsimile No.: (410) 986-2828 Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or facsimile transmission confirmation being deemed conclusive (but not exclusive) evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 2.8 Headings. Article and Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 2.9 Execution in Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of each party appear on each counterpart; but it shall be sufficient that the signature of each party appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of all of the parties hereto. [Remainder of Page Left Blank Intentionally -- Signature Page Follows] IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first above written. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman Name: Jack L. Brozman Title: President and Chief Executive Officer CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL, WARNOCK STRATEGIC PARTNERS, L.P., its General Partner By: /s/ David L. Warnock Name: David L. Warnock Title: a General Partner STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, L.L.C., its General Partner By: /s/ David L. Warnock Name: David L. Warnock Title: Managing Member EX-99.8 9 DEBENTURE AND WARRANT PURCHASE AGREEMENT Exhibit 8 SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND BETWEEN CONCORDE CAREER COLLEGES, INC. AND CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. TABLE OF CONTENTS SECTION 1 Authorization, Purchase and Sale of Debenture; Issuance of Warrant ........................................... 1 1.1 Authorization of the Debenture. ..................... 1 1.2 Authorization of the Warrant. ...................... 1 1.3 Purchase and Sale of Debenture. ..................... 1 1.4 Issuance of Warrants. .............................. 2 SECTION 2 Certain Terms of the Debenture and Warrant ............... 2 2.1 Certain Terms of the Debenture. ..................... 2 2.2 Certain Terms of the Warrants. ...................... 3 2.3 Replacement of Debenture or Warrant. ................ 3 2.4 Registration, etc. .................................. 3 SECTION 3 Conditions to Purchaser's Obligation ..................... 4 3.1 Preferred Stock Transfer. ........................... 4 3.2 Registration Rights Agreement ....................... 4 3.3 Certificate that Representations True at Closing. ................................................. 4 3.4 Covenants of the Company. ........................... 4 3.5 No Injunction. ...................................... 4 3.6 Approvals ........................................... 5 3.7 Opinion of Seller's Counsel. ........................ 5 SECTION 4 Conditions to Company's Obligations ...................... 5 4.1. Preferred Stock Transfer ............................ 5 4.2 Certificate That Representations True at Closing .................................................. 5 4.3 Covenants of Purchaser. ............................. 5 4.4 No Injunction ....................................... 5 4.5 Opinion of Purchaser's Counsel ...................... 6 SECTION 5 Representations and Warranties of the Company ............ 6 5.1 Authority; Validity ................................. 6 5.2 No Conflicts ........................................ 6 5.3 Consents and Approvals .............................. 6 5.4 Representations and Warranties Regarding the Company. ................................................. 6 5.5 Accuracy of Information. ............................ 7 SECTION 6 Representations and Warranties of Purchaser .............. 7 6.1 Authority. .......................................... 7 6.2 No Conflicts ........................................ 7 6.3 Investment Representations .......................... 7 SECTION 7 Events of Default ....................................... 8 7.1 Events of Default. .................................. 8 7.2 Annulment of Defaults. .............................. 9 SECTION 8 Covenants of the Company ................................. 10 8.1 General Covenants of the Company. ................... 10 SECTION 9 Subordination of Debentures .............................. 14 9.1 Subordinate to Senior Indebtedness .................. 14 9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. ................... 14 9.3 Subrogation to Rights of Holders of Senior Indebtedness. ............................................ 14 9.4 No Payment on Debentures When Senior Indebtedness in Default. ......................................... 14 9.5 Definition of Senior Indebtedness. .................. 14 SECTION 10 Miscellaneous ....................................... 15 10.1 Indemnification. .................................... 15 10.2 No Waiver; Cumulative Remedies. ..................... 15 10.3 Amendments, Waiver and Consents. .................... 15 10.4 Notices. ............................................ 16 10.5 Costs and Expenses. ................................. 17 10.6 Binding Effect; Assignment .......................... 17 10.7 Survival of Representations and Warranties. ......... 17 10.8 Prior Agreements. ................................... 17 10.9 Governing Law. ...................................... 17 10.10 Headings. .......................................... 17 10.11 Counterparts. ...................................... 18 10.12 Further Assurances ................................. 18 SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT THIS SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT (the "Debenture Agreement") is made as of February 25, 1997, by and between CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company") and CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of the State of Delaware (the "Purchaser"). WHEREAS, the Company has agreed to issue 52,252 shares of the Company's Class B Voting Convertible Preferred Stock, par value $0.10 per share, to the Purchaser pursuant to the Convertible Preferred Stock Purchase Agreement, of even date herewith, between the Company and Purchaser (the "Preferred Agreement"); WHEREAS, the Company wishes to sell to Purchaser, and Purchaser wishes to purchase from the Company, the Company's Debenture and non-detachable Warrant; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereby agree as follows: SECTION 1 Authorization, Purchase and Sale of Debenture; Issuance of Warrant 1.1 Authorization of the Debenture. The Company has authorized the issuance and sale to Purchaser of the Company's Debenture in the original principal amount of Three Million Three Hundred Sixteen Thousand Two Hundred Fifty Dollars ($3,316,250). Such Debenture shall be substantially in the form set forth as Exhibit 1.1 (the "Debenture"). The Debenture shall be repayable at the times and under the terms and conditions specified therein. 1.2 Authorization of the Warrant. The Company has authorized the issuance of a Warrant as part of the consideration for the loan evidenced by the Debenture. The Warrant entitles Purchaser to purchase an aggregate of 2,438,419 shares of the Company's Common Stock, at an exercise price of $1.36 per share, subject to any adjustment as set forth in Section 3.3 of the Warrant. The Warrant shall be substantially in the form set forth as Exhibit 1.2 (the "Warrant"). The Company has reserved a sufficient number of shares of Common Stock for issuance upon exercise of the Warrant. (The shares of Common Stock issuable upon exercise of the Warrant are referred to as the "Warrant Shares.") 1.3 Purchase and Sale of Debenture. (a) The Closing. The Company agrees to issue and sell to Purchaser, and subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, Purchaser agrees to purchase, the Debenture for the purchase price (the "Purchase Price") of Three Million Three Hundred Sixteen Thousand Two Hundred Fifty Dollars ($3,316,250). Such purchase and sale shall take place at a closing (the "Closing") to be held by exchange of documents on February 25, 1997, or on such other date as may be mutually agreed, at the offices of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri (the date of such Closing is the "Closing Date"). At the Closing, the Company will issue to Purchaser the Debenture. At the Closing, Purchaser will deliver to the Company, by wire transfer of immediately available funds to an account designated by the Company by written notice to Purchaser, the Purchase Price. (b) Use of Proceeds. The Company agrees to use the full proceeds, to the extent required, from the sale of the Debenture to settle, redeem, and release its financial obligations to CenCor, Inc. ("CenCor"), pursuant to the Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated December 30, 1996, by and among CenCor, the Company and certain of the Company's affiliates (the "CenCor Obligations"). 1.4 Issuance of Warrants. At the Closing, the Company agrees to issue to Purchaser, as part of the consideration for the loan evidenced by the Debenture, the Warrant substantially in the form as set forth in Exhibit 1.2. SECTION 2 Certain Terms of the Debenture and Warrant 2.1 Certain Terms of the Debenture. All principal, interest and amounts outstanding under the Debenture shall be due and payable in full on February 25, 2003. The Debenture shall bear interest at an annual rate of five percent (5%). Accrued and unpaid interest shall be due and payable quarterly in arrears on February 28, May 31, August 31, and November 30 of each year until maturity. The Debenture may be prepaid or redeemed, in whole or in part, by the Company prior to maturity, without penalty, with twenty (20) days prior written notice thereof to the Purchaser. In the event that the Company consummates an underwritten registered public offering covering the offer and sale of Common Stock for the account of the Company in which net proceeds to the Company of the public offering equals or exceeds $15 million (a "Public Offering"), then the Company must apply, at the request of Purchaser, the proceeds of such Public Offering (to the extent available after payment of all Senior Indebtedness (as defined in Section 9.5)) to prepay the unpaid principal amount and outstanding interest on the Debenture. Payments of principal and interest on the Debenture shall be made directly by wire transfer to an account designated by Purchaser by written notice to the Company or by check duly mailed or delivered to Purchaser at its address set forth in Section 8.4 of the Agreement. The Debenture (and any rights of the Purchaser hereunder or related thereto) is non- transferable except to a person or entity controlled by, or under common control with, Purchaser. No sinking fund or similar provision shall be required to fund payment of principal or interest under the Debenture. Payment of principal and interest on the Debenture is unsecured. 2.2 Certain Terms of the Warrants. The Warrant shall initially be exercisable into 2,438,419 shares of Common Stock. The Warrant shall initially be exercisable at any time between August 25, 1998 and February 25, 2003, subject to earlier termination upon redemption of the Debenture (the "Exercise Period"). The Warrant entitles Holder to purchase an aggregate of 2,438,419 shares of the Company's Common Stock, at an exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall then expire. The Warrant may be exercised in whole or in part by payment in cash, bank cashier's check, certified check, or, at the option of Purchaser, by reduction in the principal amount of the Debenture (or forgiveness of any accrued and unpaid interest thereon), in an amount equal to the exercise price with respect to the Warrant being exercised. The Warrant shall have an initial exercise price of $1.36 per share of Common Stock. 2.3 Replacement of Debenture or Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Debenture or Warrant and, if requested in the case of any such loss, theft or destruction, upon delivery of an indemnity bond or other agreement or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Debenture or Warrant, the Company will issue a new Debenture or Warrant, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Debenture or Warrant; provided, however, if any Debenture or Warrant of which Purchaser, its nominee, or any of its partners, officers or principals is the registered holder is lost, stolen or destroyed, the affidavit of such principal or general partner or any principal or corporate officer of such holder setting forth the circumstances with respect to such loss, theft or destruction, together with an agreement to indemnify the Company with respect thereto shall be accepted as satisfactory evidence thereof, and no bond or other security shall be required as a condition to the execution and delivery by the Company of a new Debenture or Warrant in replacement of such lost, stolen or destroyed Debenture or Warrant. 2.4 Registration, etc. The Company shall maintain at its principal office a register with respect to the Debenture and Warrant and shall record therein the name(s) and address(es) of the respective registered holder(s) thereof, to which notices are to be sent and the address(es) to which payments (in the case of the Debenture) are to be made as designated by the registered holder if other than the address of such holder, and the particulars of all permitted transfers, exchanges and replacements of the Debenture and Warrant. Provided that such transfer is permitted herein, the Company shall record on such register any and all transfers of the Debenture and Warrant by or for the registered holder or such holder's executors or administrators or their duly appointed attorney, in form reasonably satisfactory to the Company, in order to maintain an accurate record of the holder(s) thereof. Each Debenture and Warrant issued hereunder, whether originally or upon transfer, exchange or replacement, shall be registered on the date of execution thereof by the Company. The registered holder of a Debenture and Warrant issued hereunder shall be that individual, corporation, partnership, joint venture, trust or unincorporated organization or other entity (a "Person") in whose name the Debenture and Warrant has been so registered by the Company. A registered holder shall be deemed the owner of a Debenture or Warrant for all purposes of this Agreement and, subject to the provisions hereof, shall be entitled to all of the benefits thereof and rights thereunder free from all equities or rights of set off or counterclaim between the Company and the transferor of such registered holder or any previous registered holder of such Debenture or Warrant. SECTION 3 Conditions to Purchaser's Obligation The obligation of Purchaser to purchase and pay for the Debenture at the Closing is subject to the following conditions, which may be waived by Purchaser at its sole discretion: 3.1 Preferred Stock Transfer. The Preferred Agreement between the Company and Purchaser shall have been fully executed and the closing of the transactions provided for therein, including but not limited to the execution of the Stockholders' Agreement, of even date herewith, by and among the Company, the Purchaser and other stockholders (the "Stockholders' Agreement"), shall have closed and be complete prior to or simultaneously with the issuance of the Debenture and payment therefor. 3.2 Registration Rights Agreement. The Company and Purchaser shall have entered into the Registration Rights Agreement substantially in the form set forth as Exhibit 3.2 hereto. 3.3 Certificate that Representations True at Closing. Purchaser shall have received the executed certificate of an executive officer of the Company to the effect that each of the Company's representations and warranties herein and in any document or instrument delivered to Purchaser hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 3.4 Covenants of the Company. The Company shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, including but not limited to the closing deliveries required of it. 3.5 No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of the Company, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Purchaser, would make it inadvisable to consummate such transactions. 3.6 Approvals. The execution and the delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been approved by all regulatory authorities whose approvals are required by law and by all third parties whose approvals are required by an agreement binding upon the Company. It is acknowledged by all parties that the approval of the Department of Education is not required to close this transaction. 3.7 Opinion of Seller's Counsel. Purchaser shall have received from Bryan Cave, LLP, counsel to the Company, an opinion addressed to Purchaser, dated the Closing Date, in substantially the form of Exhibit A hereto. SECTION 4 Conditions to Company's Obligations The obligation of the Company to issue and sell the Debenture at the Closing is subject to the following conditions, which may be waived by the Company at its sole discretion: 4.1. Preferred Stock Transfer. The Preferred Agreement between the Company and Purchaser shall have been fully executed and the closing of the transactions provided for therein, including but not limited to the execution of the Stockholders' Agreement, of even date herewith, by and among the Company, the Purchaser and other stockholders (the "Stockholders' Agreement"), shall have closed and be complete prior to or simultaneously with the issuance of the Debenture and payment therefor. 4.2 Certificate That Representations True at Closing. The Company shall have received the executed certificate of the Purchaser to the effect that each of the Purchaser's representations and warranties herein and in any document or instrument delivered to the Company hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 4.3 Covenants of Purchaser. Purchaser shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, including but not limited to the closing deliveries required of it. 4.4 No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of Purchaser, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Company, would make it inadvisable to consummate such transactions. 4.5 Opinion of Purchaser's Counsel. Purchaser shall have received from Wilmer, Cutler & Pickering, counsel to Purchaser, an opinion addressed to the Company, dated the Closing Date, in substantially the form of Exhibit B hereto. SECTION 5 Representations and Warranties of the Company The Company hereby represents and warrants to Purchaser as follows: 5.1 Authority; Validity. The Company has the full legal right, power and authority to enter into this Agreement and to issue the Debenture and Warrant in accordance with the terms of this Agreement. This Agreement has been duly and validly executed by the Company and this Agreement, the Debenture and Warrant constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement may be limited by federal or state securities laws or public policy thereto. 5.2 No Conflicts. Subject to the repayment and satisfaction of the CenCor obligations, the execution, delivery and performance of this Agreement, the Debenture and Warrant and the consummation of the transactions by the Company contemplated hereby and thereby will not conflict with, violate or result in a breach or constitute a default under any mortgage, indenture, loan agreement or other agreement or instrument binding upon the Company, or any order, decree, statute, ordinance, regulation or other law applicable to the Company. 5.3 Consents and Approvals. Subject to the repayment and satisfaction of the CenCor obligations, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or any third party is required in connection with the execution, delivery and performance of this Agreement, the Debenture and Warrant by the Company and the consummation of the transactions by the Company hereunder. 5.4 Representations and Warranties Regarding the Company. In order to induce the Purchasers to enter into this Agreement, the Company hereby represents and warrants that each of the representations and warranties regarding the Company set forth in Section 4 of the Preferred Agreement is true, complete and accurate in all material respects. 5.5 Accuracy of Information. To the knowledge of the executive officers of the Company, none of this Agreement, the Debenture, the Warrant nor any certificate, instrument or other agreement (including, but not limited to, the Preferred Agreement and Stockholders' Agreement) furnished or to be furnished by or on behalf of the Company, contains or will contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. SECTION 6 Representations and Warranties of Purchaser 6.1 Authority. Purchaser is duly organized and validly existing and has the full legal right, power and authority to enter into this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Purchaser and constitutes a valid and binding obligation of Purchaser, enforceable in accordance with its terms. 6.2 No Conflicts. The execution, delivery and performance of this Agreement and the consummation of the transactions by Purchaser contemplated hereby will not conflict with, violate or result in a breach or constitute a default under, any mortgage, indenture, loan agreement or other agreement or instrument, or any order, decree, statute, ordinance, regulation or other law applicable to the Purchaser. 6.3 Investment Representations. Purchaser hereby represents and warrants to the Company as follows: (a) It is acquiring the Debenture and the Warrant for its own account for investment, and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"); (b) It is an "Accredited Investor" as defined under the Securities Act; (c) It is aware and it acknowledges that neither the Debenture nor the Warrant is registered under the Securities Act or any state securities laws, and that the Debenture and the Warrant are each subject to certain restrictions on the subsequent transfer and/or sale thereof; and (d) It is not acquiring the Debenture or the Warrant for purposes of acquiring or changing "control" (as defined under Rule 405 of the Securities Exchange Act of 1934, as amended) of the Company. SECTION 7 Events of Default 7.1 Events of Default. For so long as any indebtedness under the Debenture shall be outstanding, the following events shall constitute an event of default hereunder ("Events of Default"): (a) The Company shall fail to pay any installment of principal of or interest on the Debenture when due and any such failure shall not be cured by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (b) The Company shall default in the performance of any covenant contained in Section 7 of this Agreement, any covenant set forth in the Preferred Agreement, or any covenant in the Stockholders' Agreement, and any such failure shall not be cured by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (c) Any representation or warranty made by the Company or any Subsidiary in this Agreement or by the Company or any Subsidiary (or any officers of the Company or any Subsidiary) in any certificate, instrument or written statement contemplated by or made or delivered pursuant to or in connection with this Agreement, the Preferred Agreement, or the Stockholders' Agreement, shall prove to have been incorrect when made in any material respect; or (d) The Company or any Subsidiary shall fail to perform or observe any other term, covenant or agreement contained in the Preferred Agreement, the Stockholders' Agreement, the Debenture, or Warrant on its part to be performed or observed and any such failure shall not be cured or by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (e) The Company or any Subsidiary shall (i) admit in writing its inability to pay its debts generally as they become due; (ii) commence a voluntary case under Title 11 of the United States Code as from time to time in effect, or authorize, by appropriate proceedings of its Board of Directors or other governing body, the commencement of such a voluntary case; (iii) file an answer or other pleading omitting or failing to deny the material allegations of a petition filed against it commencing an involuntary case under such Title 11, or seek, consent to or acquiesce in the relief therein provided, or fail to controvert timely the material allegations of any such petition; (iv) suffer the entry of an order for relief in any involuntary case commenced under said Title 11; (v) seek relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief; (vi) suffer the entry of an order by a court of competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors, or (C) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property (not otherwise covered by subsection (f) below); or (vii) make an assignment for the benefit of, or enter into a composition with, its creditors, or appoint or consent to the appointment of a receiver or other custodian or all or a substantial part of its property; or (f) Any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against the property of the Company or any Subsidiary in an aggregate amount which exceeds $2,500,000 and such judgment, writ, or similar process shall not be released, vacated or fully bonded or stayed pending appeal within sixty (60) days after its issue or levy; or (g) The Company fails to prepay the unpaid principal amount of the Debenture and outstanding interest thereon in the event of a Public Offering to the extent available after payment of all Senior Indebtedness. Upon the occurrence of any Event of Default, and in any such event, Purchaser or any other holder of any Debenture may, by notice to the Company, declare the entire unpaid principal amount of such Debenture, all interest accrued and unpaid thereon and all other amounts payable to such holder under such Debenture or this Agreement to be forthwith due and payable, whereupon such Debenture, all such accrued interest and all such amounts shall become and be forthwith due and payable (unless there shall have occurred an Event of Default under Section 6.1(e) in which case all such accounts shall automatically become due and payable without such declaration), without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company with respect to itself and its Subsidiaries. Upon the occurrence of any Event of Default, the Warrant shall immediately become exercisable, at the option of the Holder, for that number of shares of Common Stock issuable upon exercise of the Warrant. 7.2 Annulment of Defaults. Section 7.1 is subject to the condition that, if at any time after the principal of any Debenture shall have become due and payable, and before any judgment or decree for the payment of the moneys so due shall have been entered, all arrears of interest upon such Debenture and all other sums payable to the holder of such Debenture under or such Debenture and under this Agreement (except the principal amount which by such declaration shall have become payable) shall have been duly paid, and every other default and Event of Default shall have been made good or cured, then and in every such case the holder of such Debenture, by written instrument delivered to the Company, may rescind and annul such declaration and its consequences; but no such rescission or annulment shall extend to or affect any other or subsequent default or Event of Default or impair any right of the holders of any other Debenture consequent thereon. SECTION 8 Covenants of the Company 8.1 General Covenants of the Company. Without limiting any other covenants and provisions hereof, the Company covenants and agrees that, as long as any of the Debenture is outstanding, it will perform and observe the following covenants and provisions and will cause each Subsidiary to perform and observe such of the following covenants and provisions as are applicable to such Subsidiary: (a) Punctual Payment. The Company shall pay the principal of and interest on the Debenture at the times and place and in the manner provided in the Debenture and herein. (b) Payment of Taxes. The Company shall pay and discharge, and cause each Subsidiary to pay and discharge, all material taxes, assessments and governmental charges or levies imposed on it or upon its income or profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might likely (in the Company's opinion) become a lien or charge upon any properties of the Company or any Subsidiary, provided that neither the Company nor the Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim which is being contested and/or negotiated in good faith and by appropriate proceedings if the Company or Subsidiary concerned shall have set aside on its books adequate (in the Company's opinion) reserves with respect thereto. The Company shall pay, when due, or in conformity with customary trade terms, all material lease obligations, all material trade debt, and all other material indebtedness incident to the operations of the Company, except such as are being contested in good faith and by appropriate proceedings if the Company shall have set aside on its books adequate reserves with respect thereto. (c) Maintenance of Insurance. The Company shall maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates. (d) Preservation of Corporate Existence. The Company shall preserve and maintain, and cause each Subsidiary to preserve and maintain, its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified, and cause each Subsidiary to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its business and operations or the ownership of its properties; the Company shall preserve and maintain, and cause each Subsidiary to preserve and maintain, all licenses and other rights to use patents, processes, licenses, trademarks, trade names, inventions, intellectual property rights or copyrights owned or used by and necessary to the conduct of its business; provided, however, that the Company shall not be required to preserve any such Subsidiary, license or right if the Board of Directors shall determine that the preservation is no longer desirable in the conduct of the Company's business and that the loss thereof is not, and will not be, adverse in any material respect to the holder of the Debenture. (e) Compliance with Laws. The Company shall use its best efforts to comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which could materially adversely affect its business or condition, financial or otherwise. (f) Access to Information. In the Event of a Default (as defined in Section 7.1 above), the Company shall permit Purchaser or any representatives thereof, at any reasonable time and from time to time, to receive, to examine and make copies of and extract from the records and books of account of (including, but not limited to unaudited balance sheets of the Company as at the end of each month and unaudited statements of income and of cash flows of the Company for each month and for the current fiscal year to the end of each month, setting forth in comparative form the Company's budget for the corresponding periods for the current fiscal year, all in reasonable detail and duly certified by the chief financial officer of the Company as having been prepared in accordance with generally accepted accounting principles consistently applied), and visit and inspect the properties of, the Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company and any Subsidiary with any of their officers or directors and independent accountants. Purchaser agrees and acknowledges that, upon access to and receipt of such information, it shall keep such information confidential and that such information may constitute proprietary information and/or trade secrets of the Company. (g) Keeping of Records and Books of Account. The Company shall keep, and cause each Subsidiary to keep, adequate records and books of account, in which complete entries shall be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such Subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. (h) Maintenance of Properties, etc. The Company shall maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties, necessary or useful in the proper conduct of its business, in good repair, working order and condition, ordinary wear and tear excepted, except as otherwise determined by the Board of Directors. (i) Compliance with ERISA. The Company shall use its best efforts to comply, and cause each Subsidiary to comply, with the provisions of ERISA and the Code, and the rules and regulations thereunder, which are applicable to any Plan. Neither the Company nor any Subsidiary shall permit any event or condition it knows to exist which would likely permit any such plan to be terminated under circumstances which would cause the lien provided for in Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary. (j) Dealings with Affiliates. Except for employee or director compensation, stock bonus, stock option or similar plans or arrangements approved by the Board of Directors, the Company will not enter or permit any Subsidiary to enter into any transaction with any holder of five percent (5%) or more of any class of capital stock of the Company, or any member of their families or any corporation or other entity in which any one or more of such stockholders or members of their immediate families directly or indirectly holds five percent (5%) or more of any class of capital stock except in the ordinary course of business and on terms not less favorable to the Company or the Subsidiary than it would obtain in a transaction between unrelated parties. (k) SEC Reports. The Company shall file all reports and other information and documents which it is required to file with the Securities and Exchange Commission ("SEC") pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The Company will cause any quarterly and annual reports, proxy statements and any other documents which it mails to its stockholders to be mailed to the registered holder of the Debenture. If the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will prepare, for the first three quarters of each fiscal year, quarterly financial statements substantially equivalent to the financial statements required to be included in a report on Form 10-Q under the Exchange Act. The Company will also prepare, on an annual basis, complete audited consolidated financial statements, including, but not limited to, a balance sheet, a statement of income and retained earnings, a statement of changes in financial position and all appropriate notes. All such financial statements will be prepared in accordance with generally accepted accounting principles consistently applied, except for changes with which the Company's independent accountants concur, and except that quarterly statements may be subject to year-end adjustments. The Company will cause a copy of such financial statements to be mailed to the registered holder of the Debenture as soon as available within sixty (60) days after the close of each of the first three quarters of each fiscal year and within one hundred twenty (120) days after the close of each fiscal year. The holder of the Debenture and prospective purchasers designated by such holder will have the right to obtain from the Company upon request by such holder or prospective purchasers, during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, the information required by paragraph d (4)(i) of Rule 144A under the Securities Act. (l) Debt. The Company shall not and shall not permit any Subsidiary to create, incur, assume or suffer to exist any secured debt in excess of $5 million outstanding principal amount, excluding purchase money indebtedness for office equipment or fixtures. (m) Proceeds from Public Offering. The Company will apply, at the request of Purchaser, the proceeds of a Public Offering to prepay the unpaid principal amount and outstanding interest on the Debenture, to the extent that proceeds are available after payment in full of any Senior Indebtedness (as defined in Section 9.5). SECTION 9 Subordination of Debentures 9.1 Subordinate to Senior Indebtedness. The Company agrees, and Purchaser by its acceptance hereof likewise agrees, that the payment of the principal of and interest on this Debenture is hereby expressly made subordinate and junior in right of payment to the prior payment in full of all principal of and interest on all Senior Indebtedness (as defined below) whether now outstanding or hereafter incurred, created or assumed. 9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection herewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be entitled to receive payment in full of all principal and any interest on all Senior Indebtedness before the Holder of this Debenture is entitled to receive any payment on account of principal or interest upon this Debenture and to that end (but subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred by the provisions of this Section upon the Senior Indebtedness and the holders thereof with respect to this Debenture and the Holder thereof by a lawful plan of reorganization under applicable bankruptcy law) the holders of the Senior Indebtedness shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities which may be payable or deliverable in any such proceedings in respect of this Debenture. 9.3 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all principal and interest on all Senior Indebtedness, the Holder of this Debenture shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness. 9.4 No Payment on Debentures When Senior Indebtedness in Default. In the event and during the continuation of any default in the payment of principal or interest on any Senior Indebtedness beyond any applicable grace, notice or cure period, or if any Event of Default (as defined in Section 7.1) with respect to Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness to accelerate the maturity thereof, unless and until such default or Event of Default shall have been cured or waived or shall have ceased to exist, then no payment of principal or interest shall be made by the Company on this Debenture. 9.5 Definition of Senior Indebtedness. The term "Senior Indebtedness," as used in this Agreement, shall mean the principal and interest on the following, whether outstanding at the date of execution of this Agreement or thereafter incurred, created, assumed, modified, renewed or extended: (w) indebtedness of the Company for money borrowed (including the loan with Security Bank); (x) the financial obligations of the Company to CenCor existing as of the date hereof (which will be repaid in full and released at Closing); (y) obligations of the Company as lessee under any lease of property which is reflected on the Company's balance sheet as a capitalized lease in accordance with generally accepted accounting principles ("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed by a Subsidiary or of any obligations of a Subsidiary under any lease of property which is reflected on the Subsidiary's balance sheet as a capitalized lease in accordance with GAAP. SECTION 10 Miscellaneous 10.1 Indemnification. The Company hereby agrees to indemnify, exonerate and hold Purchaser and each of its partners, and their stockholders, officers, directors, employees and agents free and harmless from and against any and all actions, causes of action, suits, litigation, losses, liabilities and damages, investigations or proceedings instituted by any governmental agency or any other Person, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements, incurred by the indemnitee or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part directly or indirectly with proceeds from the sale by the Company of any securities hereunder, or (b) the execution, delivery, performance or enforcement of this Agreement or any instrument contemplated hereby by any of the indemnitees, except in each such case to the extent any such indemnified liabilities arise on account of such indemnitee's gross negligence, willful misconduct or bad faith. Purchaser hereby agrees to indemnify, exonerate and hold the Company and its stockholders, officers, directors, employees and agents free and harmless from and against any and all actions, causes of action, suits, litigation, losses, liabilities and damages, investigations or proceedings instituted by any governmental agency or any other Person, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements, incurred by the indemnitee or any of them as a result of, or arising out of, or relating to the execution, delivery, performance or enforcement of this Agreement or any instrument contemplated hereby by any of the indemnitees, except in each such case to the extent any such indemnified liabilities arise on account of such indemnitee's gross negligence, willful misconduct or bad faith. 10.2 No Waiver; Cumulative Remedies. No failure or delay on the part of any party in exercising any right, power or remedy hereunder or thereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10.3 Amendments, Waiver and Consents. No amendment, modification or addition to this Agreement, and no waiver of or consent to noncompliance with any covenant or other provision of this Agreement, or the Debenture shall be effective unless in writing and duly executed by the party against whom enforcement of such amendment, modification, addition, waiver or consent is sought. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In addition, no amendment, modification or addition to this Agreement or the Debenture that is material or affects the economic or subordination provisions hereof (but excluding any postponement, delay or exercises of the Exercise Period of the Warrants) shall be effective without the prior written consent of Security Bank of Kansas City (for so long as such bank is a lender to the Company). 10.4 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery (including delivery by courier), or facsimile transmission, addressed as follows: (a) if to the Company: Concorde Career Colleges, Inc. 1100 Main Street Suite 416 Kansas City, MO 64105 Facsimile No.: (816) 474-7610 Attn: Jack L. Brozman with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Facsimile No.: (913) 338-7777 Attn: Thomas W. Van Dyke (b) if to Purchaser: c/o Cahill, Warnock & Company One South Street, Suite 2150 Baltimore, MD 21202 Attn: David L. Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esq. Facsimile No.: (410) 986-2828. Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger being deemed conclusive (but not exclusive) evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10.5 Costs and Expenses. The Company agrees to pay all Purchaser's reasonable legal fees and expenses (incurred by Wilmer, Cutler & Pickering for the period on or after February 10, 1997) in connection with the preparation, execution and delivery of this Agreement, the Debenture, the Warrant and other instruments and documents to be delivered hereunder. 10.6 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Purchaser and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Purchaser. The parties hereto agree that the Warrant is attached to the Debenture and the Warrant may not be assigned separately from the Debenture. 10.7 Survival of Representations and Warranties. All representations and warranties made in this Agreement, the Debenture or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof until the payment in full of the outstanding principal and accrued interest of the Debenture, except for those representations and warranties of the Company made in the Preferred Agreement and incorporated herein, which shall survive as provided in the Preferred Agreement. 10.8 Prior Agreements. This Agreement, the Debenture, the Warrant, and the instruments in documents referred to herein constitutes the entire agreement between the parties and supersedes any prior understandings or agreements concerning the subject matter hereof. 10.9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (excluding the choice of laws provisions thereof). 10.10 Headings. Article, Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 10.11 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. 10.12 Further Assurances. From and after the date of this Agreement, upon the request of Purchaser, the Company and each Subsidiary shall execute and deliver such instruments, documents and other writings as may be necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Debenture, the Debenture Shares and the other agreements and instruments contemplated hereby. [Balance of Page Left Blank Intentionally -- Signature Page Follows] IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first above written. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman ------------------------------------------- Name: Jack L. Brozman Title: President and Chief Executive Officer CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., ------------------------------------------- its General Partner By: /s/ David L. Warnock ------------------------------------------- Name: David L. Warnock Title: a General Partner EX-99.9 10 DEBENTURE AND WARRANT PURCHASE AGREEMENT Exhibit 9 SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND BETWEEN CONCORDE CAREER COLLEGES, INC. AND STRATEGIC ASSOCIATES, L.P. SECTION 1 Authorization, Purchase and Sale 1 1.1 Authorization of the Debenture. 1 1.2 Authorization of the Warrant. 1 1.3 Purchase and Sale of Debenture 1 1.4 Issuance of Warrants. 2 SECTION 2 Certain Terms of the Debenture and Warrant 2 2.1 Certain Terms of the Debenture. 2 2.2 Certain Terms of the Warrants. 3 2.3 Replacement of Debenture or Warrant 3 2.4 Registration, etc. 3 SECTION 3 Conditions to Purchaser's Obligation 4 3.1 Preferred Stock Transfer. 4 3.2 Registration Rights Agreement. 4 3.3 Certificate that Representations True at Closing. 4 3.4 Covenants of the Company. 4 3.5 No Injunction. 4 3.6 Approvals. 5 3.7 Opinion of Seller's Counsel. 5 SECTION 4 Conditions to Company's Obligations 5 4.1. Preferred Stock Transfer. 5 4.2 Certificate That Representations True at Closing. 5 4.3 Covenants of Purchaser. 5 4.4 No Injunction. 5 4.5 Opinion of Purchaser's Counsel. 6 SECTION 5 Representations and Warranties of the Company 6 5.1 Authority; Validity. 6 5.2 No Conflicts. 6 5.3 Consents and Approvals. 6 5.4 Representations and Warranties Regarding the Company. 6 5.5 Accuracy of Information. 7 SECTION 6 Representations and Warranties of Purchaser 7 6.1 Authority 7 6.2 No Conflicts. 7 6.3 Investment Representations. 7 SECTION 7 Events of Default 8 7.1 Events of Default. 8 7.2 Annulment of Defaults. 9 SECTION 8 Covenants of the Company 10 8.1 General Covenants of the Company. 10 SECTION 9 Subordination of Debentures 14 9.1 Subordinate to Senior Indebtedness. 14 9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. 14 9.3 Subrogation to Rights of Holders of Senior Indebtedness. 14 9.4 No Payment on Debentures When Senior Indebtedness in Default 14 9.5 Definition of Senior Indebtedness. 14 SECTION 10 Miscellaneous 15 10.1 Indemnification. 15 10.2 No Waiver; Cumulative Remedies. 15 10.3 Amendments, Waiver and Consents 15 10.4 Notices. 16 10.5 Costs and Expenses. 17 10.6 Binding Effect; Assignment. 17 10.7 Survival of Representations and Warranties 17 10.8 Prior Agreements 17 10.9 Governing Law. 17 10.10 Headings 17 10.11 Counterparts 18 10.12 Further Assurances 18 SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT THIS SUBORDINATED DEBENTURE AND WARRANT PURCHASE AGREEMENT (the "Debenture Agreement") is made as of February 25, 1997, by and between CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company") and STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of the State of Delaware (the "Purchaser"). WHEREAS, the Company has agreed to issue 52,252 shares of the Company's Class B Voting Convertible Preferred Stock, par value $0.10 per share, to the Purchaser pursuant to the Convertible Preferred Stock Purchase Agreement, of even date herewith, between the Company and Purchaser (the "Preferred Agreement"); WHEREAS, the Company wishes to sell to Purchaser, and Purchaser wishes to purchase from the Company, the Company's Debenture and non-detachable Warrant; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereby agree as follows: SECTION 1 Authorization, Purchase and Sale of Debenture; Issuance of Warrant 1.1 Authorization of the Debenture. The Company has authorized the issuance and sale to Purchaser of the Company's Debenture in the original principal amount of One Hundred Eighty Three Thousand Seven Hundred Fifty Dollars ($183,750). Such Debenture shall be substantially in the form set forth as Exhibit 1.1 (the "Debenture"). The Debenture shall be repayable at the times and under the terms and conditions specified therein. 1.2 Authorization of the Warrant. The Company has authorized the issuance of a Warrant as part of the consideration for the loan evidenced by the Debenture. The Warrant entitles Purchaser to purchase an aggregate of 135,110 shares of the Company's Common Stock, at an exercise price of $1.36 per share, subject to any adjustment as set forth in Section 3.3 of the Warrant. The Warrant shall be substantially in the form set forth as Exhibit 1.2 (the "Warrant"). The Company has reserved a sufficient number of shares of Common Stock for issuance upon exercise of the Warrant. (The shares of Common Stock issuable upon exercise of the Warrant are referred to as the "Warrant Shares.") 1.3 Purchase and Sale of Debenture. (a) The Closing. The Company agrees to issue and sell to Purchaser, and subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, Purchaser agrees to purchase, the Debenture for the purchase price (the "Purchase Price") of One Hundred Eighty Three Thousand Seven Hundred Fifty Dollars ($183,750). Such purchase and sale shall take place at a closing (the "Closing") to be held by exchange of documents on February 25, 1997, or on such other date as may be mutually agreed, at the offices of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri (the date of such Closing is the "Closing Date"). At the Closing, the Company will issue to Purchaser the Debenture. At the Closing, Purchaser will deliver to the Company, by wire transfer of immediately available funds to an account designated by the Company by written notice to Purchaser, the Purchase Price. (b) Use of Proceeds. The Company agrees to use the full proceeds, to the extent required, from the sale of the Debenture to settle, redeem, and release its financial obligations to CenCor, Inc. ("CenCor"), pursuant to the Fourth Amendment to the Restructuring, Security and Guaranty Agreement, dated December 30, 1996, by and among CenCor, the Company and certain of the Company's affiliates (the "CenCor Obligations"). 1.4 Issuance of Warrants. At the Closing, the Company agrees to issue to Purchaser, as part of the consideration for the loan evidenced by the Debenture, the Warrant substantially in the form as set forth in Exhibit 1.2. SECTION 2 Certain Terms of the Debenture and Warrant 2.1 Certain Terms of the Debenture. All principal, interest and amounts outstanding under the Debenture shall be due and payable in full on February 25, 2003. The Debenture shall bear interest at an annual rate of five percent (5%). Accrued and unpaid interest shall be due and payable quarterly in arrears on February 28, May 31, August 31, and November 30 of each year until maturity. The Debenture may be prepaid or redeemed, in whole or in part, by the Company prior to maturity, without penalty, with twenty (20) days prior written notice thereof to the Purchaser. In the event that the Company consummates an underwritten registered public offering covering the offer and sale of Common Stock for the account of the Company in which net proceeds to the Company of the public offering equals or exceeds $15 million (a "Public Offering"), then the Company must apply, at the request of Purchaser, the proceeds of such Public Offering (to the extent available after payment of all Senior Indebtedness (as defined in Section 9.5)) to prepay the unpaid principal amount and outstanding interest on the Debenture. Payments of principal and interest on the Debenture shall be made directly by wire transfer to an account designated by Purchaser by written notice to the Company or by check duly mailed or delivered to Purchaser at its address set forth in Section 8.4 of the Agreement. The Debenture (and any rights of the Purchaser hereunder or related thereto) is non-transferable except to a person or entity controlled by, or under common control with, Purchaser. No sinking fund or similar provision shall be required to fund payment of principal or interest under the Debenture. Payment of principal and interest on the Debenture is unsecured. 2.2 Certain Terms of the Warrants. The Warrant shall initially be exercisable into 135,110 shares of Common Stock. The Warrant shall initially be exercisable at any time between August 25, 1998 and February 25, 2003, subject to earlier termination upon redemption of the Debenture (the "Exercise Period"). The Warrant entitles Holder to purchase an aggregate of 135,110 shares of the Company's Common Stock, at an exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall then expire. The Warrant may be exercised in whole or in part by payment in cash, bank cashier's check, certified check, or, at the option of Purchaser, by reduction in the principal amount of the Debenture (or forgiveness of any accrued and unpaid interest thereon), in an amount equal to the exercise price with respect to the Warrant being exercised. The Warrant shall have an initial exercise price of $1.36 per share of Common Stock. 2.3 Replacement of Debenture or Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Debenture or Warrant and, if requested in the case of any such loss, theft or destruction, upon delivery of an indemnity bond or other agreement or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Debenture or Warrant, the Company will issue a new Debenture or Warrant, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Debenture or Warrant; provided, however, if any Debenture or Warrant of which Purchaser, its nominee, or any of its partners, officers or principals is the registered holder is lost, stolen or destroyed, the affidavit of such principal or general partner or any principal or corporate officer of such holder setting forth the circumstances with respect to such loss, theft or destruction, together with an agreement to indemnify the Company with respect thereto shall be accepted as satisfactory evidence thereof, and no bond or other security shall be required as a condition to the execution and delivery by the Company of a new Debenture or Warrant in replacement of such lost, stolen or destroyed Debenture or Warrant. 2.4 Registration, etc. The Company shall maintain at its principal office a register with respect to the Debenture and Warrant and shall record therein the name(s) and address(es) of the respective registered holder(s) thereof, to which notices are to be sent and the address(es) to which payments (in the case of the Debenture) are to be made as designated by the registered holder if other than the address of such holder, and the particulars of all permitted transfers, exchanges and replacements of the Debenture and Warrant. Provided that such transfer is permitted herein, the Company shall record on such register any and all transfers of the Debenture and Warrant by or for the registered holder or such holder's executors or administrators or their duly appointed attorney, in form reasonably satisfactory to the Company, in order to maintain an accurate record of the holder(s) thereof. Each Debenture and Warrant issued hereunder, whether originally or upon transfer, exchange or replacement, shall be registered on the date of execution thereof by the Company. The registered holder of a Debenture and Warrant issued hereunder shall be that individual, corporation, partnership, joint venture, trust or unincorporated organization or other entity (a "Person") in whose name the Debenture and Warrant has been so registered by the Company. A registered holder shall be deemed the owner of a Debenture or Warrant for all purposes of this Agreement and, subject to the provisions hereof, shall be entitled to all of the benefits thereof and rights thereunder free from all equities or rights of set off or counterclaim between the Company and the transferor of such registered holder or any previous registered holder of such Debenture or Warrant. SECTION 3 Conditions to Purchaser's Obligation The obligation of Purchaser to purchase and pay for the Debenture at the Closing is subject to the following conditions, which may be waived by Purchaser at its sole discretion: 3.1 Preferred Stock Transfer. The Preferred Agreement between the Company and Purchaser shall have been fully executed and the closing of the transactions provided for therein, including but not limited to the execution of the Stockholders' Agreement, of even date herewith, by and among the Company, the Purchaser and other stockholders (the "Stockholders' Agreement"), shall have closed and be complete prior to or simultaneously with the issuance of the Debenture and payment therefor. 3.2 Registration Rights Agreement. The Company and Purchaser shall have entered into the Registration Rights Agreement substantially in the form set forth as Exhibit 3.2 hereto. 3.3 Certificate that Representations True at Closing. Purchaser shall have received the executed certificate of an executive officer of the Company to the effect that each of the Company's representations and warranties herein and in any document or instrument delivered to Purchaser hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 3.4 Covenants of the Company. The Company shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, including but not limited to the closing deliveries required of it. 3.5 No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of the Company, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Purchaser, would make it inadvisable to consummate such transactions. 3.6 Approvals. The execution and the delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been approved by all regulatory authorities whose approvals are required by law and by all third parties whose approvals are required by an agreement binding upon the Company. It is acknowledged by all parties that the approval of the Department of Education is not required to close this transaction. 3.7 Opinion of Seller's Counsel. Purchaser shall have received from Bryan Cave, LLP, counsel to the Company, an opinion addressed to Purchaser, dated the Closing Date, in substantially the form of Exhibit A hereto. SECTION 4 Conditions to Company's Obligations The obligation of the Company to issue and sell the Debenture at the Closing is subject to the following conditions, which may be waived by the Company at its sole discretion: 4.1. Preferred Stock Transfer. The Preferred Agreement between the Company and Purchaser shall have been fully executed and the closing of the transactions provided for therein, including but not limited to the execution of the Stockholders' Agreement, of even date herewith, by and among the Company, the Purchaser and other stockholders (the "Stockholders' Agreement"), shall have closed and be complete prior to or simultaneously with the issuance of the Debenture and payment therefor. 4.2 Certificate That Representations True at Closing. The Company shall have received the executed certificate of the Purchaser to the effect that each of the Purchaser's representations and warranties herein and in any document or instrument delivered to the Company hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 4.3 Covenants of Purchaser. Purchaser shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, including but not limited to the closing deliveries required of it. 4.4 No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of Purchaser, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Company, would make it inadvisable to consummate such transactions. 4.5 Opinion of Purchaser's Counsel. Purchaser shall have received from Wilmer, Cutler & Pickering, counsel to Purchaser, an opinion addressed to the Company, dated the Closing Date, in substantially the form of Exhibit B hereto. SECTION 5 Representations and Warranties of the Company The Company hereby represents and warrants to Purchaser as follows: 5.1 Authority; Validity. The Company has the full legal right, power and authority to enter into this Agreement and to issue the Debenture and Warrant in accordance with the terms of this Agreement. This Agreement has been duly and validly executed by the Company and this Agreement, the Debenture and Warrant constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except to the extent that rights to indemnification and contribution under this Agreement may be limited by federal or state securities laws or public policy thereto. 5.2 No Conflicts. Subject to the repayment and satisfaction of the CenCor obligations, the execution, delivery and performance of this Agreement, the Debenture and Warrant and the consummation of the transactions by the Company contemplated hereby and thereby will not conflict with, violate or result in a breach or constitute a default under any mortgage, indenture, loan agreement or other agreement or instrument binding upon the Company, or any order, decree, statute, ordinance, regulation or other law applicable to the Company. 5.3 Consents and Approvals. Subject to the repayment and satisfaction of the CenCor obligations, no consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or any third party is required in connection with the execution, delivery and performance of this Agreement, the Debenture and Warrant by the Company and the consummation of the transactions by the Company hereunder. 5.4 Representations and Warranties Regarding the Company. In order to induce the Purchasers to enter into this Agreement, the Company hereby represents and warrants that each of the representations and warranties regarding the Company set forth in Section 4 of the Preferred Agreement is true, complete and accurate in all material respects. 5.5 Accuracy of Information. To the knowledge of the executive officers of the Company, none of this Agreement, the Debenture, the Warrant nor any certificate, instrument or other agreement (including, but not limited to, the Preferred Agreement and Stockholders' Agreement) furnished or to be furnished by or on behalf of the Company, contains or will contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. SECTION 6 Representations and Warranties of Purchaser 6.1 Authority. Purchaser is duly organized and validly existing and has the full legal right, power and authority to enter into this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Purchaser and constitutes a valid and binding obligation of Purchaser, enforceable in accordance with its terms. 6.2 No Conflicts. The execution, delivery and performance of this Agreement and the consummation of the transactions by Purchaser contemplated hereby will not conflict with, violate or result in a breach or constitute a default under, any mortgage, indenture, loan agreement or other agreement or instrument, or any order, decree, statute, ordinance, regulation or other law applicable to the Purchaser. 6.3 Investment Representations. Purchaser hereby represents and warrants to the Company as follows: (a) It is acquiring the Debenture and the Warrant for its own account for investment, and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"); (b) It is an "Accredited Investor" as defined under the Securities Act; (c) It is aware and it acknowledges that neither the Debenture nor the Warrant is registered under the Securities Act or any state securities laws, and that the Debenture and the Warrant are each subject to certain restrictions on the subsequent transfer and/or sale thereof; and (d) It is not acquiring the Debenture or the Warrant for purposes of acquiring or changing "control" (as defined under Rule 405 of the Securities Exchange Act of 1934, as amended) of the Company. SECTION 7 Events of Default 7.1 Events of Default. For so long as any indebtedness under the Debenture shall be outstanding, the following events shall constitute an event of default hereunder ("Events of Default"): (a) The Company shall fail to pay any installment of principal of or interest on the Debenture when due and any such failure shall not be cured by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (b) The Company shall default in the performance of any covenant contained in Section 7 of this Agreement, any covenant set forth in the Preferred Agreement, or any covenant in the Stockholders' Agreement, and any such failure shall not be cured by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (c) Any representation or warranty made by the Company or any Subsidiary in this Agreement or by the Company or any Subsidiary (or any officers of the Company or any Subsidiary) in any certificate, instrument or written statement contemplated by or made or delivered pursuant to or in connection with this Agreement, the Preferred Agreement, or the Stockholders' Agreement, shall prove to have been incorrect when made in any material respect; or (d) The Company or any Subsidiary shall fail to perform or observe any other term, covenant or agreement contained in the Preferred Agreement, the Stockholders' Agreement, the Debenture, or Warrant on its part to be performed or observed and any such failure shall not be cured or by full performance thereof within ten (10) days after written notice thereof shall have been given to the Company by any registered holder of the Debenture; or (e) The Company or any Subsidiary shall (i) admit in writing its inability to pay its debts generally as they become due; (ii) commence a voluntary case under Title 11 of the United States Code as from time to time in effect, or authorize, by appropriate proceedings of its Board of Directors or other governing body, the commencement of such a voluntary case; (iii) file an answer or other pleading omitting or failing to deny the material allegations of a petition filed against it commencing an involuntary case under such Title 11, or seek, consent to or acquiesce in the relief therein provided, or fail to controvert timely the material allegations of any such petition; (iv) suffer the entry of an order for relief in any involuntary case commenced under said Title 11; (v) seek relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief; (vi) suffer the entry of an order by a court of competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors, or (C) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property (not otherwise covered by subsection (f) below); or (vii) make an assignment for the benefit of, or enter into a composition with, its creditors, or appoint or consent to the appointment of a receiver or other custodian or all or a substantial part of its property; or (f) Any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against the property of the Company or any Subsidiary in an aggregate amount which exceeds $2,500,000 and such judgment, writ, or similar process shall not be released, vacated or fully bonded or stayed pending appeal within sixty (60) days after its issue or levy; or (g) The Company fails to prepay the unpaid principal amount of the Debenture and outstanding interest thereon in the event of a Public Offering to the extent available after payment of all Senior Indebtedness. Upon the occurrence of any Event of Default, and in any such event, Purchaser or any other holder of any Debenture may, by notice to the Company, declare the entire unpaid principal amount of such Debenture, all interest accrued and unpaid thereon and all other amounts payable to such holder under such Debenture or this Agreement to be forthwith due and payable, whereupon such Debenture, all such accrued interest and all such amounts shall become and be forthwith due and payable (unless there shall have occurred an Event of Default under Section 6.1(e) in which case all such accounts shall automatically become due and payable without such declaration), without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company with respect to itself and its Subsidiaries. Upon the occurrence of any Event of Default, the Warrant shall immediately become exercisable, at the option of the Holder, for that number of shares of Common Stock issuable upon exercise of the Warrant. 7.2 Annulment of Defaults. Section 7.1 is subject to the condition that, if at any time after the principal of any Debenture shall have become due and payable, and before any judgment or decree for the payment of the moneys so due shall have been entered, all arrears of interest upon such Debenture and all other sums payable to the holder of such Debenture under or such Debenture and under this Agreement (except the principal amount which by such declaration shall have become payable) shall have been duly paid, and every other default and Event of Default shall have been made good or cured, then and in every such case the holder of such Debenture, by written instrument delivered to the Company, may rescind and annul such declaration and its consequences; but no such rescission or annulment shall extend to or affect any other or subsequent default or Event of Default or impair any right of the holders of any other Debenture consequent thereon. SECTION 8 Covenants of the Company 8.1 General Covenants of the Company. Without limiting any other covenants and provisions hereof, the Company covenants and agrees that, as long as any of the Debenture is outstanding, it will perform and observe the following covenants and provisions and will cause each Subsidiary to perform and observe such of the following covenants and provisions as are applicable to such Subsidiary: (a) Punctual Payment. The Company shall pay the principal of and interest on the Debenture at the times and place and in the manner provided in the Debenture and herein. (b) Payment of Taxes. The Company shall pay and discharge, and cause each Subsidiary to pay and discharge, all material taxes, assessments and governmental charges or levies imposed on it or upon its income or profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might likely (in the Company's opinion) become a lien or charge upon any properties of the Company or any Subsidiary, provided that neither the Company nor the Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim which is being contested and/or negotiated in good faith and by appropriate proceedings if the Company or Subsidiary concerned shall have set aside on its books adequate (in the Company's opinion) reserves with respect thereto. The Company shall pay, when due, or in conformity with customary trade terms, all material lease obligations, all material trade debt, and all other material indebtedness incident to the operations of the Company, except such as are being contested in good faith and by appropriate proceedings if the Company shall have set aside on its books adequate reserves with respect thereto. (c) Maintenance of Insurance. The Company shall maintain, and cause each Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company or such Subsidiary operates. (d) Preservation of Corporate Existence. The Company shall preserve and maintain, and cause each Subsidiary to preserve and maintain, its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified, and cause each Subsidiary to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its business and operations or the ownership of its properties; the Company shall preserve and maintain, and cause each Subsidiary to preserve and maintain, all licenses and other rights to use patents, processes, licenses, trademarks, trade names, inventions, intellectual property rights or copyrights owned or used by and necessary to the conduct of its business; provided, however, that the Company shall not be required to preserve any such Subsidiary, license or right if the Board of Directors shall determine that the preservation is no longer desirable in the conduct of the Company's business and that the loss thereof is not, and will not be, adverse in any material respect to the holder of the Debenture. (e) Compliance with Laws. The Company shall use its best efforts to comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which could materially adversely affect its business or condition, financial or otherwise. (f) Access to Information. In the Event of a Default (as defined in Section 7.1 above), the Company shall permit Purchaser or any representatives thereof, at any reasonable time and from time to time, to receive, to examine and make copies of and extract from the records and books of account of (including, but not limited to unaudited balance sheets of the Company as at the end of each month and unaudited statements of income and of cash flows of the Company for each month and for the current fiscal year to the end of each month, setting forth in comparative form the Company's budget for the corresponding periods for the current fiscal year, all in reasonable detail and duly certified by the chief financial officer of the Company as having been prepared in accordance with generally accepted accounting principles consistently applied), and visit and inspect the properties of, the Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company and any Subsidiary with any of their officers or directors and independent accountants. Purchaser agrees and acknowledges that, upon access to and receipt of such information, it shall keep such information confidential and that such information may constitute proprietary information and/or trade secrets of the Company. (g) Keeping of Records and Books of Account. The Company shall keep, and cause each Subsidiary to keep, adequate records and books of account, in which complete entries shall be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such Subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. (h) Maintenance of Properties, etc. The Company shall maintain and preserve, and cause each Subsidiary to maintain and preserve, all of its properties, necessary or useful in the proper conduct of its business, in good repair, working order and condition, ordinary wear and tear excepted, except as otherwise determined by the Board of Directors. (i) Compliance with ERISA. The Company shall use its best efforts to comply, and cause each Subsidiary to comply, with the provisions of ERISA and the Code, and the rules and regulations thereunder, which are applicable to any Plan. Neither the Company nor any Subsidiary shall permit any event or condition it knows to exist which would likely permit any such plan to be terminated under circumstances which would cause the lien provided for in Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary. (j) Dealings with Affiliates. Except for employee or director compensation, stock bonus, stock option or similar plans or arrangements approved by the Board of Directors, the Company will not enter or permit any Subsidiary to enter into any transaction with any holder of five percent (5%) or more of any class of capital stock of the Company, or any member of their families or any corporation or other entity in which any one or more of such stockholders or members of their immediate families directly or indirectly holds five percent (5%) or more of any class of capital stock except in the ordinary course of business and on terms not less favorable to the Company or the Subsidiary than it would obtain in a transaction between unrelated parties. (k) SEC Reports. The Company shall file all reports and other information and documents which it is required to file with the Securities and Exchange Commission ("SEC") pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). The Company will cause any quarterly and annual reports, proxy statements and any other documents which it mails to its stockholders to be mailed to the registered holder of the Debenture. If the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will prepare, for the first three quarters of each fiscal year, quarterly financial statements substantially equivalent to the financial statements required to be included in a report on Form 10-Q under the Exchange Act. The Company will also prepare, on an annual basis, complete audited consolidated financial statements, including, but not limited to, a balance sheet, a statement of income and retained earnings, a statement of changes in financial position and all appropriate notes. All such financial statements will be prepared in accordance with generally accepted accounting principles consistently applied, except for changes with which the Company's independent accountants concur, and except that quarterly statements may be subject to year-end adjustments. The Company will cause a copy of such financial statements to be mailed to the registered holder of the Debenture as soon as available within sixty (60) days after the close of each of the first three quarters of each fiscal year and within one hundred twenty (120) days after the close of each fiscal year. The holder of the Debenture and prospective purchasers designated by such holder will have the right to obtain from the Company upon request by such holder or prospective purchasers, during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, the information required by paragraph d (4)(i) of Rule 144A under the Securities Act. (l) Debt. The Company shall not and shall not permit any Subsidiary to create, incur, assume or suffer to exist any secured debt in excess of $5 million outstanding principal amount, excluding purchase money indebtedness for office equipment or fixtures. (m) Proceeds from Public Offering. The Company will apply, at the request of Purchaser, the proceeds of a Public Offering to prepay the unpaid principal amount and outstanding interest on the Debenture, to the extent that proceeds are available after payment in full of any Senior Indebtedness (as defined in Section 9.5). SECTION 9 Subordination of Debentures 9.1 Subordinate to Senior Indebtedness. The Company agrees, and Purchaser by its acceptance hereof likewise agrees, that the payment of the principal of and interest on this Debenture is hereby expressly made subordinate and junior in right of payment to the prior payment in full of all principal of and interest on all Senior Indebtedness (as defined below) whether now outstanding or hereafter incurred, created or assumed. 9.2 Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection herewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be entitled to receive payment in full of all principal and any interest on all Senior Indebtedness before the Holder of this Debenture is entitled to receive any payment on account of principal or interest upon this Debenture and to that end (but subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred by the provisions of this Section upon the Senior Indebtedness and the holders thereof with respect to this Debenture and the Holder thereof by a lawful plan of reorganization under applicable bankruptcy law) the holders of the Senior Indebtedness shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities which may be payable or deliverable in any such proceedings in respect of this Debenture. 9.3 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all principal and interest on all Senior Indebtedness, the Holder of this Debenture shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness. 9.4 No Payment on Debentures When Senior Indebtedness in Default. In the event and during the continuation of any default in the payment of principal or interest on any Senior Indebtedness beyond any applicable grace, notice or cure period, or if any Event of Default (as defined in Section 7.1) with respect to Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness to accelerate the maturity thereof, unless and until such default or Event of Default shall have been cured or waived or shall have ceased to exist, then no payment of principal or interest shall be made by the Company on this Debenture. 9.5 Definition of Senior Indebtedness. The term "Senior Indebtedness," as used in this Agreement, shall mean the principal and interest on the following, whether outstanding at the date of execution of this Agreement or thereafter incurred, created, assumed, modified, renewed or extended: (w) indebtedness of the Company for money borrowed (including the loan with Security Bank); (x) the financial obligations of the Company to CenCor existing as of the date hereof (which will be repaid in full and released at Closing); (y) obligations of the Company as lessee under any lease of property which is reflected on the Company's balance sheet as a capitalized lease in accordance with generally accepted accounting principles ("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed by a Subsidiary or of any obligations of a Subsidiary under any lease of property which is reflected on the Subsidiary's balance sheet as a capitalized lease in accordance with GAAP. SECTION 10 Miscellaneous 10.1 Indemnification. The Company hereby agrees to indemnify, exonerate and hold Purchaser and each of its partners, and their stockholders, officers, directors, employees and agents free and harmless from and against any and all actions, causes of action, suits, litigation, losses, liabilities and damages, investigations or proceedings instituted by any governmental agency or any other Person, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements, incurred by the indemnitee or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part directly or indirectly with proceeds from the sale by the Company of any securities hereunder, or (b) the execution, delivery, performance or enforcement of this Agreement or any instrument contemplated hereby by any of the indemnitees, except in each such case to the extent any such indemnified liabilities arise on account of such indemnitee's gross negligence, willful misconduct or bad faith. Purchaser hereby agrees to indemnify, exonerate and hold the Company and its stockholders, officers, directors, employees and agents free and harmless from and against any and all actions, causes of action, suits, litigation, losses, liabilities and damages, investigations or proceedings instituted by any governmental agency or any other Person, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements, incurred by the indemnitee or any of them as a result of, or arising out of, or relating to the execution, delivery, performance or enforcement of this Agreement or any instrument contemplated hereby by any of the indemnitees, except in each such case to the extent any such indemnified liabilities arise on account of such indemnitee's gross negligence, willful misconduct or bad faith. 10.2 No Waiver; Cumulative Remedies. No failure or delay on the part of any party in exercising any right, power or remedy hereunder or thereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10.3 Amendments, Waiver and Consents. No amendment, modification or addition to this Agreement, and no waiver of or consent to noncompliance with any covenant or other provision of this Agreement, or the Debenture shall be effective unless in writing and duly executed by the party against whom enforcement of such amendment, modification, addition, waiver or consent is sought. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In addition, no amendment, modification or addition to this Agreement or the Debenture that is material or affects the economic or subordination provisions hereof (but excluding any postponement, delay or extensions of the Exercise Period of the Warrants) shall be effective without the prior written consent of Security Bank of Kansas City (for so long as such bank is a lender to the Company). 10.4 Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by hand delivery (including delivery by courier), or facsimile transmission, addressed as follows: (a) if to the Company: Concorde Career Colleges, Inc. 1100 Main Street Suite 416 Kansas City, MO 64105 Facsimile No.: (816) 474-7610 Attn: Jack L. Brozman with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Facsimile No.: (913) 338-7777 Attn: Thomas W. Van Dyke (b) if to Purchaser: c/o Cahill, Warnock & Company One South Street, Suite 2150 Baltimore, MD 21202 Attn: David L. Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esq. Facsimile No.: (410) 986-2828. Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger being deemed conclusive (but not exclusive) evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10.5 Costs and Expenses. The Company agrees to pay all Purchaser's reasonable legal fees and expenses (incurred by Wilmer, Cutler & Pickering for the period on or after February 10, 1997) in connection with the preparation, execution and delivery of this Agreement, the Debenture, the Warrant and other instruments and documents to be delivered hereunder. 10.6 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and Purchaser and their respective successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Purchaser. The parties hereto agree that the Warrant is attached to the Debenture and the Warrant may not be assigned separately from the Debenture. 10.7 Survival of Representations and Warranties. All representations and warranties made in this Agreement, the Debenture or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof until the payment in full of the outstanding principal and accrued interest of the Debenture, except for those representations and warranties of the Company made in the Preferred Agreement and incorporated herein, which shall survive as provided in the Preferred Agreement. 10.8 Prior Agreements. This Agreement, the Debenture, the Warrant, and the instruments in documents referred to herein constitutes the entire agreement between the parties and supersedes any prior understandings or agreements concerning the subject matter hereof. 10.9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (excluding the choice of laws provisions thereof). 10.10 Headings. Article, Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 10.11 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. 10.12 Further Assurances. From and after the date of this Agreement, upon the request of Purchaser, the Company and each Subsidiary shall execute and deliver such instruments, documents and other writings as may be necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the Debenture, the Debenture Shares and the other agreements and instruments contemplated hereby. [Balance of Page Left Blank Intentionally -- Signature Page Follows] IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf as of the date first above written. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman ------------------------------------------- Name: Jack L. Brozman Title: President and Chief Executive Officer STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, LLC its General Partner By: /s/ David L. Warnock ------------------------------------------- Name: David L. Warnock Title: Managing Member EX-99.10 11 COMMON STOCK PURCHASE WARRANT Exhibit 10 WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT. THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT, DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. WARRANT TO ACQUIRE SHARES OF COMMON STOCK OF CONCORDE CAREER COLLEGES, INC. February 25, 1997 THIS CERTIFIES THAT CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. ("Holder"), for value received, or its registered assigns, is entitled to purchase, on the terms and subject to the conditions hereinafter set forth, from CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), at any time after August 25, 1998 and on or before February 25, 2003, subject to earlier termination (the "Exercise Period"), that number of shares (the "Warrant Shares") of common stock, par value $.10 per share, of the Company (the "Common Stock"), as set forth in Section 2.1 hereof. SECTION 1 Exercise Price The exercise price at which this Warrant may be exercised shall be $1.36 per share of Common Stock (the "Exercise Price"), subject to any adjustment pursuant to Section 3.3. SECTION 2 Exercise of Warrant, Etc. 2.1 Number of Shares for Which Warrant is Exercisable. This Warrant shall be exercisable for 2,438,419 shares of Common Stock, subject to any adjustment pursuant to Section 3.3. 2.2 Procedure for Exercise of Warrant. The Warrant may be exercised in whole or in part during the Exercise Period by surrendering this Warrant, with the purchase form provided for herein duly executed by Holder or by Holder's duly authorized attorney-in-fact, at the principal office of the Company or at such other office or agency in the United States as the Company may designate by notice in writing to the Holder accompanied by payment in full, in cash, bank cashier's check or certified check payable to the order of the Company, of the Exercise Price payable in respect of the Warrant Shares being exercised. In addition to payments of the Exercise Price by cash or said checks, payment of the Exercise Price with respect to the Warrants being exercised may be made, at the option of the Holder, by the reduction in the principal amount of the Debenture (the "Debenture") issued to the Holder pursuant to the Debenture Purchase Agreement, dated as of February 25, 1997, by and between the Company and the Holder (the "Debenture Purchase Agreement") (or forgiveness of any accrued and unpaid interest thereon, whether or not payment of such interest has been suspended pursuant to the provisions of such Debenture), even during a period in which an Event of Default (as defined in the Debenture Purchase Agreement) has occurred and is continuing under such Debenture, in an amount equal to the Exercise Price with respect to the Warrant being exercised; and in such a case, this Warrant shall be accompanied by said Debenture (with the purchase form duly executed) which shall be substituted and replaced by a new Debenture identical in form and content to the original Debenture except that principal amount shall be appropriately reduced to reflect the reduction in the principal amount applicable to the payment of the Exercise Price with respect to the Warrant being exercised. If fewer than all of the Warrant Shares are being exercised, the Company shall, upon exercise prior to the end of the Expiration Period, execute and deliver to the Holder a new certificate (dated the date hereof) evidencing the balance of the Warrant Shares that remain exercisable. 2.3 Conversion. (a) On or after August 25, 1998, in the event that the Company consummates a firm-commitment underwritten public offering pursuant to an effective registration statement under the Act covering the offer and sale of Common Stock for the account of the Company in which (i) the net proceeds of the public offering price equals or exceeds $20 million and (ii) the public offering price per share of Common Stock equals or exceeds $4.00, then this Warrant shall become mandatorily exercisable within six (6) months for that number of shares of Common Stock issuable upon exercise of the Warrant. (b) In the Event of Default (as defined in the Debenture Purchase Agreement), then this Warrant shall immediately become exercisable, at the option of the Holder, for that number of shares of Common Stock issuable upon exercise of the Warrant. 2.4 Transfer Restriction Legend. Each certificate for Warrant Shares initially issued upon exercise of this Warrant, unless at the time of exercise such Warrant Shares are registered under the Act, shall bear the following legend (and any additional legend required by any securities exchange upon which such Warrant Shares may, at the time of such exercise, be listed) on the face thereof: "These securities have not been registered under the Securities Act of 1933, as amended, or under any state securities laws and may be offered, sold or transferred only if registered pursuant to the provisions of such laws, or if in the opinion of counsel satisfactory to the Company, an exemption from such registration is available." 2.5 Acknowledgment of Continuing Obligation. The Company will, if Holder exercises this Warrant in part, upon request of the Holder, acknowledge in writing the Company's continuing obligation to the Holder in respect of any rights to which the Holder shall continue to be entitled after such exercise in accordance with this Warrant, provided, that the failure of the Holder to make any such request shall not affect the continuing obligation of the Company to the Holder in respect of such rights. 2.6 Exercise Period. The Company and Purchaser agree to negotiate in good faith to modify or extend the Exercise Period in the event that either the Company or Purchaser deems it appropriate to modify or extend such Exercise Period. 2.7 Termination of Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall expire. SECTION 3 Ownership of this Warrant. 3.1 Deemed Holder. The Company may deem and treat the person in whose name this Warrant is registered as the Holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Section 3. 3.2 Exchange, Transfer and Replacement. This Warrant is non-detachable from the Debenture and may not be transferred, assigned, sold, pledged or otherwise hypothecated ("Transferred") except with the Debenture, and if so Transferred, then only as permitted under the terms and conditions of the Debenture and the Debenture Purchase Agreement; provided, however, that if the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998. This Warrant and all rights hereunder are transferable in whole or in part upon the books of the Company by the Holder in person or by duly authorized attorney, and a new Warrant shall be made and delivered by the Company, of the same tenor as this Warrant but registered in the name of the transferee, upon surrender of this Warrant duly endorsed at said office or agency of the Company. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, or indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant, provided, however, that if the Holder of this Warrant is the original Holder, an affidavit of lost Warrant shall be sufficient for all purposes of this Section 3.2. This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any exchange, transfer or replacement. The Company shall pay all reasonable expenses, taxes (other than stock transfer taxes and income taxes) and other charges payable by it in connection with the preparation, execution and delivery of Warrant Shares pursuant to this Section 3.2. 3.3 Antidilution. (a) If at any time while all or any portion of this Warrant remains outstanding all or any portion of this Warrant shall be exercised subsequent to (i) any sales of shares of Common Stock of the Company at a price per share less than the Exercise Price per share then applicable to this Warrant, or (ii) any issuance of any security convertible into shares of Common Stock of the Company with a conversion price per share less than the Exercise Price per share then applicable to this Warrant, or (iii) any issuance of any option, warrant or other right to purchase shares of Common Stock of the Company at any Exercise Price per share less than the Exercise Price per share then applicable to this Warrant (except pursuant to an employee or director stock option plan or similar compensation plan approved by the Board of Directors); then in any and every such event the Exercise Price per share for this Warrant shall be reduced and shall be equal to such lower sales, conversion or Exercise Price per share. (b) If all or any portion of this Warrant shall be exercised subsequent to any stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of shares, reorganization or liquidation of the Company occurring after the date hereof, as a result of which such shares of any class shall be issued in respect of outstanding shares of Common Stock of the Company (or shall be issuable in respect of securities convertible into shares of Common Stock) or upon exercise of rights (other than this Warrant) to purchase shares of Common Stock or shares of such Common Stock shall be changed into the same or a different number of shares of the same or another class or classes, the Holder exercising this Warrant shall receive the aggregate number and class of shares which such Holder would have received if this Warrant had been exercised immediately before such stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of shares, reorganization or liquidation. SECTION 4 Special Agreements of the Company The Company covenants and agrees that: 4.1 The Company will reserve and set apart and have at all times, free from preemptive rights, a number of shares of authorized but unissued Common Stock deliverable upon the exercise of this Warrant or of any other rights or privileges provided for therein sufficient to enable the Company at any time to fulfill all its obligations thereunder. 4.2 This Warrant shall be binding upon any corporation or entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. SECTION 5 Notices Any notice or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered, or sent by certified or registered mail, to the Holder or the Company at the address as set forth in Section 10.4 of the Debenture Purchase Agreement. SECTION 6 Governing Law This Warrant shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to its conflicts of laws provisions. SECTION 7 Assignment Notwithstanding any provision of this Warrant which may be construed to the contrary, this Warrant and any rights hereunder shall not be assignable by the Holder except in accordance with the provisions governing assignments hereof set forth in the Debenture Purchase Agreement, dated as of February 25, 1997, among the Company and Holder, and any attempt by Holder to assign this Warrant or any rights hereunder other than in accordance therewith shall be void and of no force and effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and to be dated as of February 25, 1997. ATTEST: CONCORDE CAREER COLLEGES, IN /s/ Lisa M. Henak By: /s/ Jack L. Brozman - --------------------------- ------------------------ Lisa M. Henak, Secretary Jack L. Brozman, President and Chief Executive Officer EX-99.11 12 COMMON STOCK PURCHASE WARRANT Exhibit 11 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT. THIS WARRANT IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT, DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. WARRANT TO ACQUIRE SHARES OF COMMON STOCK OF CONCORDE CAREER COLLEGES, INC. February 25, 1997 THIS CERTIFIES THAT STRATEGIC ASSOCIATES, L.P. ("Holder"), for value received, or its registered assigns, is entitled to purchase, on the terms and subject to the conditions hereinafter set forth, from CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), at any time after August 25, 1998 and on or before February 25, 2003, subject to earlier termination (the "Exercise Period"), that number of shares (the "Warrant Shares") of common stock, par value $.10 per share, of the Company (the "Common Stock"), as set forth in Section 2.1 hereof. SECTION 1 Exercise Price The exercise price at which this Warrant may be exercised shall be $1.36 per share of Common Stock (the "Exercise Price"), subject to any adjustment pursuant to Section 3.3. SECTION 2 Exercise of Warrant, Etc. 2.1 Number of Shares for Which Warrant is Exercisable. This Warrant shall be exercisable for 135,110 shares of Common Stock, subject to any adjustment pursuant to Section 3.3. 2.2 Procedure for Exercise of Warrant. The Warrant may be exercised in whole or in part during the Exercise Period by surrendering this Warrant, with the purchase form provided for herein duly executed by Holder or by Holder's duly authorized attorney-in-fact, at the principal office of the Company or at such other office or agency in the United States as the Company may designate by notice in writing to the Holder accompanied by payment in full, in cash, bank cashier's check or certified check payable to the order of the Company, of the Exercise Price payable in respect of the Warrant Shares being exercised. In addition to payments of the Exercise Price by cash or said checks, payment of the Exercise Price with respect to the Warrants being exercised may be made, at the option of the Holder, by the reduction in the principal amount of the Debenture (the "Debenture") issued to the Holder pursuant to the Debenture Purchase Agreement, dated as of February 25, 1997, by and between the Company and the Holder (the "Debenture Purchase Agreement") (or forgiveness of any accrued and unpaid interest thereon, whether or not payment of such interest has been suspended pursuant to the provisions of such Debenture), even during a period in which an Event of Default (as defined in the Debenture Purchase Agreement) has occurred and is continuing under such Debenture, in an amount equal to the Exercise Price with respect to the Warrant being exercised; and in such a case, this Warrant shall be accompanied by said Debenture (with the purchase form duly executed) which shall be substituted and replaced by a new Debenture identical in form and content to the original Debenture except that principal amount shall be appropriately reduced to reflect the reduction in the principal amount applicable to the payment of the Exercise Price with respect to the Warrant being exercised. If fewer than all of the Warrant Shares are being exercised, the Company shall, upon exercise prior to the end of the Expiration Period, execute and deliver to the Holder a new certificate (dated the date hereof) evidencing the balance of the Warrant Shares that remain exercisable. 2.3 Conversion. (a) On or after August 25, 1998, in the event that the Company consummates a firm-commitment underwritten public offering pursuant to an effective registration statement under the Act covering the offer and sale of Common Stock for the account of the Company in which (i) the net proceeds of the public offering price equals or exceeds $20 million and (ii) the public offering price per share of Common Stock equals or exceeds $4.00, then this Warrant shall become mandatorily exercisable within six (6) months for that number of shares of Common Stock issuable upon exercise of the Warrant. (b) In the Event of Default (as defined in the Debenture Purchase Agreement), then this Warrant shall immediately become exercisable, at the option of the Holder, for that number of shares of Common Stock issuable upon exercise of the Warrant. 2.4 Transfer Restriction Legend. Each certificate for Warrant Shares initially issued upon exercise of this Warrant, unless at the time of exercise such Warrant Shares are registered under the Act, shall bear the following legend (and any additional legend required by any securities exchange upon which such Warrant Shares may, at the time of such exercise, be listed) on the face thereof: "These securities have not been registered under the Securities Act of 1933, as amended, or under any state securities laws and may be offered, sold or transferred only if registered pursuant to the provisions of such laws, or if in the opinion of counsel satisfactory to the Company, an exemption from such registration is available." 2.5 Acknowledgment of Continuing Obligation. The Company will, if Holder exercises this Warrant in part, upon request of the Holder, acknowledge in writing the Company's continuing obligation to the Holder in respect of any rights to which the Holder shall continue to be entitled after such exercise in accordance with this Warrant, provided, that the failure of the Holder to make any such request shall not affect the continuing obligation of the Company to the Holder in respect of such rights. 2.6 Exercise Period. The Company and Purchaser agree to negotiate in good faith to modify or extend the Exercise Period in the event that either the Company or Purchaser deems it appropriate to modify or extend such Exercise Period. 2.7 Termination of Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall expire. SECTION 3 Ownership of this Warrant. 3.1 Deemed Holder. The Company may deem and treat the person in whose name this Warrant is registered as the Holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Section 3. 3.2 Exchange, Transfer and Replacement. This Warrant is non-detachable from the Debenture and may not be transferred, assigned, sold, pledged or otherwise hypothecated ("Transferred") except with the Debenture, and if so Transferred, then only as permitted under the terms and conditions of the Debenture and the Debenture Purchase Agreement; provided, however, that if the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998. This Warrant and all rights hereunder are transferable in whole or in part upon the books of the Company by the Holder in person or by duly authorized attorney, and a new Warrant shall be made and delivered by the Company, of the same tenor as this Warrant but registered in the name of the transferee, upon surrender of this Warrant duly endorsed at said office or agency of the Company. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, or indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant, provided, however, that if the Holder of this Warrant is the original Holder, an affidavit of lost Warrant shall be sufficient for all purposes of this Section 3.2. This Warrant shall be promptly canceled by the Company upon the surrender hereof in connection with any exchange, transfer or replacement. The Company shall pay all reasonable expenses, taxes (other than stock transfer taxes and income taxes) and other charges payable by it in connection with the preparation, execution and delivery of Warrant Shares pursuant to this Section 3.2. 3.3 Antidilution. (a) If at any time while all or any portion of this Warrant remains outstanding all or any portion of this Warrant shall be exercised subsequent to (i) any sales of shares of Common Stock of the Company at a price per share less than the Exercise Price per share then applicable to this Warrant, or (ii) any issuance of any security convertible into shares of Common Stock of the Company with a conversion price per share less than the Exercise Price per share then applicable to this Warrant, or (iii) any issuance of any option, warrant or other right to purchase shares of Common Stock of the Company at any Exercise Price per share less than the Exercise Price per share then applicable to this Warrant (except pursuant to an employee or director stock option plan or similar compensation plan approved by the Board of Directors); then in any and every such event the Exercise Price per share for this Warrant shall be reduced and shall be equal to such lower sales, conversion or Exercise Price per share. (b) If all or any portion of this Warrant shall be exercised subsequent to any stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of shares, reorganization or liquidation of the Company occurring after the date hereof, as a result of which such shares of any class shall be issued in respect of outstanding shares of Common Stock of the Company (or shall be issuable in respect of securities convertible into shares of Common Stock) or upon exercise of rights (other than this Warrant) to purchase shares of Common Stock or shares of such Common Stock shall be changed into the same or a different number of shares of the same or another class or classes, the Holder exercising this Warrant shall receive the aggregate number and class of shares which such Holder would have received if this Warrant had been exercised immediately before such stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of shares, reorganization or liquidation. SECTION 4 Special Agreements of the Company The Company covenants and agrees that: 4.1 The Company will reserve and set apart and have at all times, free from preemptive rights, a number of shares of authorized but unissued Common Stock deliverable upon the exercise of this Warrant or of any other rights or privileges provided for therein sufficient to enable the Company at any time to fulfill all its obligations thereunder. 4.2 This Warrant shall be binding upon any corporation or entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. SECTION 5 Notices Any notice or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered, or sent by certified or registered mail, to the Holder or the Company at the address as set forth in Section 10.4 of the Debenture Purchase Agreement. SECTION 6 Governing Law This Warrant shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to its conflicts of laws provisions. SECTION 7 Assignment Notwithstanding any provision of this Warrant which may be construed to the contrary, this Warrant and any rights hereunder shall not be assignable by the Holder except in accordance with the provisions governing assignments hereof set forth in the Debenture Purchase Agreement, dated as of February 25, 1997, among the Company and Holder, and any attempt by Holder to assign this Warrant or any rights hereunder other than in accordance therewith shall be void and of no force and effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and to be dated as of February 25, 1997. ATTEST: CONCORDE CAREER COLLEGES, INC. /s/ Lisa M. Henak By: /s/ Jack L. Brozman - ------------------------------------ -------------------------------- Lisa M. Henak, Secretary Jack L. Brozman, President and Chief Executive Officer EX-99.12 13 SUBORDINATED DEBENTURE Exhibit 12 THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT. THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT, DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. CONCORDE CAREER COLLEGES, INC. 5% Subordinated Debenture due 2003 $3,316,250 February 25, 1997 FOR VALUE RECEIVED, CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), hereby promises to pay to CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., or permitted assigns ("Strategic Partners" or the "Holder"), the principal amount of Three Million Three Hundred Sixteen Thousand Two Hundred Fifty Dollars ($3,316,250) on February 25, 2003, and to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the annual rate of five percent (5%). Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed. Accrued and unpaid interest shall be due and payable quarterly in arrears on February 28, May 31, August 31, and November 30 of each year from the date hereof until the entire principal amount is paid. All amounts due and owing hereunder shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Holder or at such other place as the Holder may designate from time to time in writing to the Company. Any payment on this Debenture coming due on a Saturday, a Sunday or a day which is a legal holiday in the place at which a payment is to be made hereunder shall be made on the next succeeding day which is a business day in such place, and any such extension of the time of payment shall be included in the computation of interest hereunder. This Debenture is issued pursuant and subject to and is entitled to the benefits of a certain Debenture and Warrant Purchase Agreement dated as of February 25, 1997 between the Company and Strategic Partners (the "Debenture Purchase Agreement"). Subject to the terms of the Debenture Purchase Agreement (including, but not limited to, the subordination provisions thereof), upon the occurrence or existence of an Event of Default (as defined in the Debenture Purchase Agreement) the Holder may, by notice to the Company, declare the entire unpaid principal amount of this Debenture, all interest accrued and unpaid hereon, and all other amounts payable to the Holder hereunder or under the Debenture Purchase Agreement to be forthwith due and payable, whereupon this Debenture, all such accrued interest and all such amounts shall become and be forthwith due and payable, and in addition thereto, and not in substitution therefor, the Holder shall be entitled to exercise any one or more of the rights and remedies provided by applicable law. Failure to exercise any right or remedy under this Debenture or available under applicable law shall not constitute a waiver of such option or such other remedies or of the right to exercise any of the same in the event of any subsequent Event of Default. The Company and all makers, sureties, guarantors, endorsers and other persons assuming obligations pursuant to this Debenture hereby waive presentment, protest, demand, notice of dishonor and all other notices and all defenses and pleas on the grounds of any extension or extension of the time of payments or the due dates hereof, in whole or in part, before or after maturity, with or without notice. No renewal or extension of this Debenture, no release of any obligor and no delay in enforcement of this Debenture or in exercising any right or power hereunder shall affect the liability of any obligor hereunder. The pleading of any statute of limitations as a defense to any demand against any obligor is expressly waived. 1. Warrant. As part of the consideration for the loan evidenced by this Debenture, the Company has authorized and issued a non-detachable Warrant, attached to this Debenture as Exhibit 1 (the "Warrant"), to Holder. If the Holder exercises the Warrant at any time after August 25, 1998 and on or before February 25, 2003 (the "Exercise Period"), the Warrant would entitle Holder to purchase an aggregate of 2,438,419 shares of the Company's Common Stock, at an exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall then expire. 2. Prepayment. (a) Voluntary Payment. The Company may prepay or redeem all or part of the Debenture prior to maturity hereof, without penalty, with twenty (20) days' prior written notice thereof to Holder. (b) Mandatory Prepayment. In the event that the Company consummates a registered underwritten public offering covering the offer and sale of Common Stock for the account of the Company in which net proceeds to the Company of the public offering equals or exceeds $15 million (a "Public Offering"), then the Company must apply, at the request of Holder, the proceeds of such Public Offering (to the extent available after payment of all Senior Indebtedness (as defined in Section 12(e) below) to prepay the unpaid principal amount and outstanding interest of this Debenture. 3. No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment due to such event. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable on exercise of the Warrant attached hereto above the Exercise Price then in effect, (b) will take all action that may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock, free from all taxes, liens and charges with respect to the issue thereof, on the exercise of the Warrant attached hereto from time to time and (c) will not consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company, unless such other person (or, in the case of a merger or consolidation in which the Company is the surviving entity, the person issuing the securities involved in such merger or consolidation) shall expressly assume in writing and will be bound by all the terms of this Debenture and the Warrant attached hereto. 4. Chief Financial Officer's Certificate as Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of the Warrant attached hereto, the Chief Financial Officer of the Company will promptly compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment, the Exercise Price resulting therefrom, and the increase or decrease, if any, of the number of shares purchasable at such price upon exercise of the Warrant showing in detail the facts and computation upon which such adjustment or readjustment is based. The Company will forthwith mail a copy of each such certificate to each registered holder of this Debenture, and will, on the written request at any time of the holder of this Debenture, furnish to such holder a like certificate setting forth the Exercise Price of the Debenture at the time in effect and showing how it was calculated. 5. Notices of Record Date, etc. In the event the Company (a) takes a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend on, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) consolidates or merges into, or transfers all or substantially all of its assets to, another corporation, or (c) dissolves or liquidates (the events described in the foregoing clauses (b) and (c) being hereinafter referred to as a "Fundamental Change"), then and in each such event the Company will mail or cause to be mailed to the registered holder of this Debenture a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such Fundamental Change is to be effected, and the time, if any to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable on any Fundamental Change and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or a favorable vote of stockholders, if either is required. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken or 20 days prior to the record date therefor, whichever is earlier. 6. Reservation of Warrant Shares. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrant attached hereto, all shares of Common Stock from time to time issuable upon such exercise. 7. Transfer. Subject to applicable federal and state securities laws, the transfer of this Debenture and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company by the holder hereof in person or by his duly authorized attorney, upon surrender of this Debenture properly endorsed, provided that this Debenture (and any rights of the Holder hereunder) is non-transferable except to a person or entity controlled by, or under common control with, the Holder. Each taker and holder of this Debenture, by taking or holding the same, consents and agrees that this Debenture, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Debenture shall have been so endorsed, may be treated by the Company and all other persons dealing with this Debenture as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Debenture, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. 8. Register. The Company shall maintain, at the principal office of the Company (or such other office as it may designate by notice to the holder hereof), a register for the Debenture, in which the Company shall record the name and address of the person in whose name a Debenture has been issued, as well as the name and address of each transferee and each prior owner of such Debenture. 9. Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture and, in the case of any such loss, theft or destruction of this Debenture, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Debenture, the Company at its expense will execute and deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a Debenture held by Holder its nominee or any of its partners, principals, officers or directors is lost, stolen or destroyed, the affidavit of a general partner or any principal or corporate officer of Holder setting forth the circumstances with respect to such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no indemnity bond or other security shall be required as a condition to the execution and delivery by the company of a new Debenture in replacement of such lost, stolen or destroyed Debenture. 10. Remedies. The Company stipulates that the remedies at law of the holder of this Debenture in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Debenture are not and will not be adequate, and that such terms may be specifically enforced pursuant to a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 11. No Sinking Fund; Payment Unsecured. No sinking fund or similar provision shall be required to fund payment of principal or interest under this Debenture. Payment of principal and interest on this Debenture is unsecured. 12. Subordination. (a) Subordination to Senior Indebtedness. The payment of the principal of and interest on this Debenture is hereby expressly made subordinate and junior in right of payment to the prior payment in full of all principal of and interest on all Senior Indebtedness (as defined below) whether now outstanding or hereafter incurred, created or assumed. (b) Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether nor not involving insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be entitled to receive payment in full of all principal and interest on all Senior Indebtedness before the Holder of this Debenture is entitled to receive any payment on account of principal or interest upon this Debenture and to that end (but subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred by the provisions of this Section upon the Senior Indebtedness and the holders thereof with respect to this Debenture and the Holder thereof by a lawful plan of reorganization under applicable bankruptcy law) the holders of the Senior Indebtedness shall be entitled to receive for application in payment hereof any payment or distribution of any kind or character, whether in cash or property or securities which may be payable or deliverable in any such proceedings in respect of this Debenture. (c) Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all principal and interest on all Senior Indebtedness, the Holder of this Debenture shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness. (d) No Payment on Debentures When Senior Indebtedness in Default. In the event and during the continuation of any default in the payment of principal or interest on any Senior Indebtedness beyond any applicable grace, notice or cure period, or if any Event of Default (as defined in the Debenture Purchase Agreement) with respect to Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness to accelerate the maturity thereof, unless and until such default or Event of Default shall have been cured or waived or shall have ceased to exist, then no payment of principal or interest shall be made by the Company on this Debenture. (e) Definition of Senior Indebtedness. The term "Senior Indebtedness," as used in this Debenture, shall mean the principal and interest on the following, whether outstanding at the date of execution of the Debenture Purchase Agreement or thereafter incurred, created, assumed, modified, renewed or extended: (w) indebtedness of the Company for money borrowed (including the loan with Security Bank, as defined in the Debenture Purchase Agreement); (x) the financial obligations of the Company to CenCor existing as of the date hereof (which will be repaid in full and released at Closing as defined in the Debenture Purchase Agreement); (y) obligations of the Company as lessee under any lease of property which is reflected on the Company's balance sheet as a capitalized lease in accordance with generally accepted accounting principles ("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed by a Subsidiary or of any obligations of a Subsidiary under any lease or property which is reflected on the Subsidiary's balance sheet as a capitalized lease in accordance with GAAP. 13. Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent pursuant to this Debenture shall be given, served and sent in accordance with the provisions of the Debenture Purchase Agreement. 14. Miscellaneous. This Debenture and the Warrant attached hereto and any term hereof or therein may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Any amendment, modification or addition to this Warrant is subject to the provisions governing same in the Debenture Purchase Agreement. This Debenture and the Warrant attached hereto shall be construed and enforced in accordance with and governed by the laws of the State of Delaware (excluding the choice of law rules thereof). The headings in this Debenture and the Warrant attached hereto are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the undersigned has caused this Debenture to be duly executed on its behalf as of the date first hereinabove set forth. CONCORDE CAREER COLLEGES, INC. By:/s/ Jack L. Brozman ------------------------------------------- Jack L. Brozman President and Chief Executive Officer EX-99.13 14 SUBORDINATED DEBENTURE Exhibit 13 THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CONCORDE CAREER COLLEGES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT. THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF A DEBENTURE PURCHASE AGREEMENT, DATED AS OF FEBRUARY 25, 1997, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. CONCORDE CAREER COLLEGES, INC. 5% Subordinated Debenture due 2003 $183,750 February 25, 1997 FOR VALUE RECEIVED, CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company"), hereby promises to pay to STRATEGIC ASSOCIATES, L.P., or permitted assigns ("Strategic Associates" or the "Holder"), the principal amount of One Hundred Eighty Three Thousand Seven Hundred Fifty Dollars ($183,750) on February 25, 2003, and to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the annual rate of five percent (5%). Interest shall be computed on the basis of a 360 day year and the actual number of days elapsed. Accrued and unpaid interest shall be due and payable quarterly in arrears on February 28, May 31, August 31, and November 30 of each year from the date hereof until the entire principal amount is paid. All amounts due and owing hereunder shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Holder or at such other place as the Holder may designate from time to time in writing to the Company. Any payment on this Debenture coming due on a Saturday, a Sunday or a day which is a legal holiday in the place at which a payment is to be made hereunder shall be made on the next succeeding day which is a business day in such place, and any such extension of the time of payment shall be included in the computation of interest hereunder. This Debenture is issued pursuant and subject to and is entitled to the benefits of a certain Debenture and Warrant Purchase Agreement dated as of February 25, 1997 between the Company and Strategic Associates (the "Debenture Purchase Agreement"). Subject to the terms of the Debenture Purchase Agreement (including, but not limited to, the subordination provisions thereof), upon the occurrence or existence of an Event of Default (as defined in the Debenture Purchase Agreement) the Holder may, by notice to the Company, declare the entire unpaid principal amount of this Debenture, all interest accrued and unpaid hereon, and all other amounts payable to the Holder hereunder or under the Debenture Purchase Agreement to be forthwith due and payable, whereupon this Debenture, all such accrued interest and all such amounts shall become and be forthwith due and payable, and in addition thereto, and not in substitution therefor, the Holder shall be entitled to exercise any one or more of the rights and remedies provided by applicable law. Failure to exercise any right or remedy under this Debenture or available under applicable law shall not constitute a waiver of such option or such other remedies or of the right to exercise any of the same in the event of any subsequent Event of Default. The Company and all makers, sureties, guarantors, endorsers and other persons assuming obligations pursuant to this Debenture hereby waive presentment, protest, demand, notice of dishonor and all other notices and all defenses and pleas on the grounds of any extension or extension of the time of payments or the due dates hereof, in whole or in part, before or after maturity, with or without notice. No renewal or extension of this Debenture, no release of any obligor and no delay in enforcement of this Debenture or in exercising any right or power hereunder shall affect the liability of any obligor hereunder. The pleading of any statute of limitations as a defense to any demand against any obligor is expressly waived. 1. Warrant. As part of the consideration for the loan evidenced by this Debenture, the Company has authorized and issued a non-detachable Warrant, attached to this Debenture as Exhibit 1 (the "Warrant"), to Holder. If the Holder exercises the Warrant at any time after August 25, 1998 and on or before February 25, 2003 (the "Exercise Period"), the Warrant would entitle Holder to purchase an aggregate of 135,110 shares of the Company's Common Stock, at an exercise price ("Exercise Price") of $1.36 per share, subject to any adjustments as set forth in Section 3.3 of the Warrant. During the Exercise Period, in the event that Holder fails to exercise this Warrant after the Company has provided Holder (i) twenty (20) days prior written notice of its intention to pay in full and redeem the Debenture on a particular date (the "Repayment Date"), and (ii) thirty (30) days after the Redemption Date within which to exercise this Warrant, then this Warrant shall terminate and thereafter be null and void. Notwithstanding the preceding sentence, in the event that the Company repays and redeems the Debenture in full on or before August 25, 1998, this Warrant shall remain in full force and effect until September 25, 1998, when it shall expire. 2. Prepayment. (a) Voluntary Payment. The Company may prepay or redeem all or part of the Debenture prior to maturity hereof, without penalty, with twenty (20) days' prior written notice thereof to Holder. (b) Mandatory Prepayment. In the event that the Company consummates a registered underwritten public offering covering the offer and sale of Common Stock for the account of the Company in which net proceeds to the Company of the public offering equals or exceeds $15 million (a "Public Offering"), then the Company must apply, at the request of Holder, the proceeds of such Public Offering (to the extent available after payment of all Senior Indebtedness (as defined in Section 12(e) below) to prepay the unpaid principal amount and outstanding interest of this Debenture. 3. No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment due to such event. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock receivable on exercise of the Warrant attached hereto above the Exercise Price then in effect, (b) will take all action that may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock, free from all taxes, liens and charges with respect to the issue thereof, on the exercise of the Warrant attached hereto from time to time and (c) will not consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company, unless such other person (or, in the case of a merger or consolidation in which the Company is the surviving entity, the person issuing the securities involved in such merger or consolidation) shall expressly assume in writing and will be bound by all the terms of this Debenture and the Warrant attached hereto. 4. Chief Financial Officer's Certificate as Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of the Warrant attached hereto, the Chief Financial Officer of the Company will promptly compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment, the Exercise Price resulting therefrom, and the increase or decrease, if any, of the number of shares purchasable at such price upon exercise of the Warrant showing in detail the facts and computation upon which such adjustment or readjustment is based. The Company will forthwith mail a copy of each such certificate to each registered holder of this Debenture, and will, on the written request at any time of the holder of this Debenture, furnish to such holder a like certificate setting forth the Exercise Price of the Debenture at the time in effect and showing how it was calculated. 5. Notices of Record Date, etc. In the event the Company (a) takes a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend on, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) consolidates or merges into, or transfers all or substantially all of its assets to, another corporation, or (c) dissolves or liquidates (the events described in the foregoing clauses (b) and (c) being hereinafter referred to as a "Fundamental Change"), then and in each such event the Company will mail or cause to be mailed to the registered holder of this Debenture a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such Fundamental Change is to be effected, and the time, if any to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable on any Fundamental Change and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or a favorable vote of stockholders, if either is required. Such notice shall be mailed at least 20 days prior to the date specified in such notice on which any such action is to be taken or 20 days prior to the record date therefor, whichever is earlier. 6. Reservation of Warrant Shares. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrant attached hereto, all shares of Common Stock from time to time issuable upon such exercise. 7. Transfer. Subject to applicable federal and state securities laws, the transfer of this Debenture and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company by the holder hereof in person or by his duly authorized attorney, upon surrender of this Debenture properly endorsed, provided that this Debenture (and any rights of the Holder hereunder) is non-transferable except to a person or entity controlled by, or under common control with, the Holder. Each taker and holder of this Debenture, by taking or holding the same, consents and agrees that this Debenture, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Debenture shall have been so endorsed, may be treated by the Company and all other persons dealing with this Debenture as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Debenture, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. 8. Register. The Company shall maintain, at the principal office of the Company (or such other office as it may designate by notice to the holder hereof), a register for the Debenture, in which the Company shall record the name and address of the person in whose name a Debenture has been issued, as well as the name and address of each transferee and each prior owner of such Debenture. 9. Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture and, in the case of any such loss, theft or destruction of this Debenture, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Debenture, the Company at its expense will execute and deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a Debenture held by Holder its nominee or any of its partners, principals, officers or directors is lost, stolen or destroyed, the affidavit of a general partner or any principal or corporate officer of Holder setting forth the circumstances with respect to such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and no indemnity bond or other security shall be required as a condition to the execution and delivery by the company of a new Debenture in replacement of such lost, stolen or destroyed Debenture. 10. Remedies. The Company stipulates that the remedies at law of the holder of this Debenture in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Debenture are not and will not be adequate, and that such terms may be specifically enforced pursuant to a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 11. No Sinking Fund; Payment Unsecured. No sinking fund or similar provision shall be required to fund payment of principal or interest under this Debenture. Payment of principal and interest on this Debenture is unsecured. 12. Subordination. (a) Subordination to Senior Indebtedness. The payment of the principal of and interest on this Debenture is hereby expressly made subordinate and junior in right of payment to the prior payment in full of all principal of and interest on all Senior Indebtedness (as defined below) whether now outstanding or hereafter incurred, created or assumed. (b) Payment Over of Proceeds Upon Dissolution, Liquidation, Etc. of the Company. In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether nor not involving insolvency or bankruptcy, then the holders of the Senior Indebtedness shall be entitled to receive payment in full of all principal and interest on all Senior Indebtedness before the Holder of this Debenture is entitled to receive any payment on account of principal or interest upon this Debenture and to that end (but subject to the power of a court of competent jurisdiction to make other equitable provision reflecting the rights conferred by the provisions of this Section upon the Senior Indebtedness and the holders thereof with respect to this Debenture and the Holder thereof by a lawful plan of reorganization under applicable bankruptcy law) the holders of the Senior Indebtedness shall be entitled to receive for application in payment hereof any payment or distribution of any kind or character, whether in cash or property or securities which may be payable or deliverable in any such proceedings in respect of this Debenture. (c) Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all principal and interest on all Senior Indebtedness, the Holder of this Debenture shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness. (d) No Payment on Debentures When Senior Indebtedness in Default. In the event and during the continuation of any default in the payment of principal or interest on any Senior Indebtedness beyond any applicable grace, notice or cure period, or if any Event of Default (as defined in the Debenture Purchase Agreement) with respect to Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness to accelerate the maturity thereof, unless and until such default or Event of Default shall have been cured or waived or shall have ceased to exist, then no payment of principal or interest shall be made by the Company on this Debenture. (e) Definition of Senior Indebtedness. The term "Senior Indebtedness," as used in this Debenture, shall mean the principal and interest on the following, whether outstanding at the date of execution of the Debenture Purchase Agreement or thereafter incurred, created, assumed, modified, renewed or extended: (w) indebtedness of the Company for money borrowed (including the loan with Security Bank, as defined in the Debenture Purchase Agreement); (x) the financial obligations of the Company to CenCor existing as of the date hereof (which will be repaid in full and released at Closing as defined in the Debenture Purchase Agreement); (y) obligations of the Company as lessee under any lease of property which is reflected on the Company's balance sheet as a capitalized lease in accordance with generally accepted accounting principles ("GAAP"); and (z) guarantees by the Company of indebtedness for money borrowed by a Subsidiary or of any obligations of a Subsidiary under any lease or property which is reflected on the Subsidiary's balance sheet as a capitalized lease in accordance with GAAP. 13. Notices. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent pursuant to this Debenture shall be given, served and sent in accordance with the provisions of the Debenture Purchase Agreement. 14. Miscellaneous. This Debenture and the Warrant attached hereto and any term hereof or therein may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Any amendment, modification or addition to this Warrant is subject to the provisions governing same in the Debenture Purchase Agreement. This Debenture and the Warrant attached hereto shall be construed and enforced in accordance with and governed by the laws of the State of Delaware (excluding the choice of law rules thereof). The headings in this Debenture and the Warrant attached hereto are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the undersigned has caused this Debenture to be duly executed on its behalf as of the date first hereinabove set forth. CONCORDE CAREER COLLEGES, INC. By: /s/ Jack L. Brozman ------------------------------------------- Jack L. Brozman President and Chief Executive Officer EX-99.14 15 STOCK PURCHASE AGREEMENT Exhibit 14 - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT DATED AS OF FEBRUARY 25, 1997 BY AND AMONG THE ESTATE OF ROBERT F. BROZMAN, CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. AND STRATEGIC ASSOCIATES, L.P. - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "Agreement"), dated February 25, 1997, between THE ESTATE OF ROBERT F. BROZMAN (the "Seller" or the "Estate") by Jack L. Brozman as executor of the Estate (the "Executor"), and CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P., a limited partnership organized under the laws of the State of Delaware, and STRATEGIC ASSOCIATES, L.P., a limited partnership organized under the laws of the State of Delaware. Cahill, Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P. together may be referred to herein as the "Purchasers." WHEREAS, CONCORDE CAREER COLLEGES, INC., a Delaware corporation (the "Company") has agreed to issue shares of the Company's Convertible Preferred Stock, par value $0.10 per share, to the Purchasers pursuant to the Convertible Preferred Stock Purchase Agreement, dated February 25, 1997 between the Company and the Purchasers (the "Preferred Agreement"); and WHEREAS, the Seller is the owner of certain shares of the common stock of the Company, par value $0.10 per share ("Common Stock"), which the Seller desires to sell and transfer to the Purchasers, and the Purchasers desire to purchase from the Seller, all on the terms set forth herein. NOW, THEREFORE, the parties hereto agree as follows: SECTION 1 Purchase and Sale 1.1. Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, at the Closing (as defined in Section 1.3) the Seller shall sell, assign, transfer, convey and deliver to the Purchasers, and the Purchasers shall purchase from the Seller, severally and in the amounts set forth on Exhibit A hereto, FIVE HUNDRED THOUSAND (500,000) shares of Common Stock of the Company (the "Shares"), at the purchase price specified in Section 1.2, free and clear of all liens, claims, charges, security interests, and other restrictions or encumbrances of any nature. 1.2. Purchase Price. The purchase price for the Shares shall be FIVE HUNDRED THOUSAND DOLLARS ($500,000) in the aggregate (being ONE DOLLAR ($1.00) per share of Common Stock), to be delivered at the Closing to the Seller in full payment for the Shares by certified check or wire transfer to an account designated by the Seller. 1.3. Closing Date. Subject to the conditions set forth in this Agreement, the purchase and sale of the Shares hereunder (the "Closing") shall take place at the office of Bryan Cave LLP, One Kansas City Place, Suite 3500, Kansas City, Missouri on February 25, 1997 (the "Closing Date"), unless another place or date or manner of closing is agreed to by the Seller and the Purchasers. 1.4. Seller's Deliveries. At the Closing, the Seller shall deliver to each Purchaser (i) a certificate or certificates evidencing the Shares being purchased by it as set forth in Exhibit A hereto, duly endorsed for transfer or accompanied by instruments of transfer reasonably satisfactory in form and substance to the Purchasers and their counsel, and (ii) such other evidence of the performance of all covenants and satisfaction of all conditions required of the Seller by this Agreement, at or prior to the Closing, as the Purchasers or their counsel may reasonably require. 1.5. Purchasers' Deliveries. At the Closing, each Purchaser shall deliver to the Seller (i) payment in an amount equal to the full purchase price of the Shares being purchased by such Purchaser, as set forth as Exhibit A hereto, in an aggregate amount of $500,000, by certified check or wire transfer to an account designated by the Seller, and (ii) such other evidence of the performance of all the covenants and satisfaction of all of the conditions required of the Purchasers by this Agreement at or before the Closing as the Seller or its counsel may reasonably require. SECTION 2 Representations and Warranties of Seller The Seller hereby represents and warrants to the Purchasers as follows: 2.1. Authority; Validity. The Seller has the full legal right, power and authority to enter into this Agreement and to transfer the Shares in accordance with the terms of this Agreement. This Agreement has been duly and validly executed by the Seller and this Agreement constitutes a legal, valid and binding obligation of the Seller, enforceable in accordance with its terms. 2.2. No Conflicts. The execution, delivery and performance of this Agreement and the consummation of the transactions by the Seller contemplated hereby will not conflict with, violate or result in a breach or constitute a default under any order, decree, statute, ordinance, regulation or other law applicable to the Seller, including without limitation (i) all applicable state and federal securities laws and (ii) all applicable laws and regulations relating to the administration of estates. 2.3. Title to Shares. The Seller is the beneficial owner and the owner of record of the Shares and has good and valid title to the Shares, free and clear of all liens, encumbrances, options, claims, charges or security interests of any kind. Upon delivery of the Shares by the Seller and payment therefor by the Purchasers, the Seller shall have transferred to the Purchasers good and valid title to the Shares, free and clear of all liens, encumbrances, options, claims, charges or security interests of any kind. 2.4. Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or any third party is required in connection with the execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions by the Seller hereunder. SECTION 3 Representations and Warranties of Purchasers 3.1. Authority. Each of the Purchasers is duly organized and validly existing and has the partnership power and authority to enter into this Agreement. This Agreement has been duly authorized, executed and delivered by each of the Purchasers and constitutes a valid and binding obligation of each of the Purchasers, enforceable in accordance with its terms. 3.2. Investment Representations. Each of the Purchasers hereby represent and warrant to the Seller as follows: (a) It is acquiring the Shares for its own account for investment, and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"); and (b) It is an "Accredited Investor" as defined under the Securities Act. SECTION 4 Conditions Precedent to Obligations of Purchasers Each Purchaser's obligation to purchase the Shares at the Closing is, at the option of such Purchaser, subject to the fulfillment on or prior to the Closing Date of the following conditions: 4.1. Representations True at Closing. Each of the Seller's representations and warranties herein and in any document or instrument delivered to the Purchasers hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 4.2. Covenants of the Seller. The Seller shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, including but not limited to the closing deliveries required of it pursuant to Section 1.4. 4.3. No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of the Company, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of the Purchasers, would make it inadvisable to consummate such transactions. 4.4. Opinion of Seller's Counsel. The Purchasers shall have received from Bryan Cave, L.L.P., counsel to the Seller, an opinion addressed to the Purchasers, dated the Closing Date, in substantially the form of Exhibit B hereto. SECTION 5 Conditions Precedent to Obligations of Seller The Seller's obligation to sell the Shares at the Closing is, at the option of the Seller, subject to the fulfillment of the following conditions: 5.1. Representations True at Closing. The representations and warranties made by the Purchasers in this Agreement or any document or instrument delivered to the Seller shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made again on and as of such time. 5.2. Covenants of the Purchasers. The Purchasers shall have duly performed all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date. 5.3. No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or that is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or that is related to or arises out of the business of the Purchasers or the Company, if such action, proceedings, investigation, regulation or legislation, in the reasonable judgment of the Seller, would make it inadvisable to consummate the same. SECTION 6 Miscellaneous 6.1. Amendment. Neither this Agreement nor any provision hereof may be amended, modified, supplemented or waived, except by a written instrument executed by the Seller and the Purchasers. 6.2. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in person, transmitted by facsimile transmission (fax) or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address as such party may notify to the other parties in writing: (a) if to the Seller: Estate of Robert F. Brozman c/o Jack L. Brozman, Executor 1100 Main Street Suite 416 Kansas City, MO 64105 Facsimile No.: (816) 474-7610 with a copy to: Bryan Cave, L.L.P. 7500 College Boulevard Suite 1100 Overland Park, KS 66210-4035 Facsimile No.: (913) 338-7777 Attn: Thomas W. Van Dyke, Esq. (b) if to the Purchasers: c/o Cahill, Warnock & Company One South Street, Suite 2150 Baltimore, MD 21202 Attn: David L. Warnock Facsimile No.: (410) 895-3805 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, MD 21202 Attn: John B. Watkins, Esq. Facsimile No.: (410) 986-2828. A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered, (ii) if transmitted by facsimile transmission (fax) on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. 6.3. Survival of Representations and Warranties. All representations and warranties made in, pursuant to or in connection with this Agreement, shall survive the execution and delivery of this Agreement, any investigation at any time made by or on behalf of any Purchaser, and the sale and purchase of the Shares and payment therefor for a period of one year from the date of this Agreement. 6.4. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 6.5. Entire Agreement. This Agreement and the other documents described herein or delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written, among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof. 6.6. Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. 6.7. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 6.8. Indemnification. For purposes of this Agreement, the claims described in this Section shall be referred to individually as a "Claim" and collectively as "Claims." (a) Subject to the terms and conditions of this Section, the Seller hereby agrees to indemnify, defend and hold harmless the Purchasers and their affiliates, and their respective partners, co-investors, officers, directors, employees, agents, consultants, attorneys and advisers (the "Purchasers Group") from and against all demands, claims, actions or causes of action, assessments, payments, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties and reasonable attorneys' fees and expenses (collectively "Damages") asserted against, resulting to, imposed upon or incurred by the Purchasers Group, by reason of or resulting from: (i) any breach or non-performance of any covenant to be performed by the Seller under this Agreement; (ii) a breach of any representation or warranty of the Seller contained in or made pursuant to this Agreement; and (iii) any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to this Agreement or the transactions contemplated hereby, whether or not such investigation, litigation or proceeding is brought by the Seller, the Company, any of its subsidiaries, shareholders or creditors, whether or not any of the transactions contemplated by this Agreement are consummated, except to the extent such Damages are found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. (b) The Purchasers hereby agree to indemnify, defend and hold harmless the Seller from any Damages arising by reason of or resulting from: (i) any breach of any covenant or agreement of the Purchasers contained in or made pursuant to this Agreement; and (ii) any breach of any representation or warranty of the Purchasers contained in or made pursuant to this Agreement. 6.9. Conditions of Indemnification. The obligations and liabilities of the Seller, Executor and the Purchasers under this Section with respect to Claims relating to third parties shall be subject to the following terms and conditions: (a) A party seeking indemnification under this Agreement ("Indemnified Party") will give the party required to provide such indemnification (the "Indemnifying Party") prompt written notice of any such Claim, and thereafter the Indemnifying Party will undertake the defense thereof by representatives chosen by it, provided that such representatives are reasonably acceptable to the Indemnified Party. (b) If the Indemnifying Party, within a reasonable time after notice of any such Claim, fails to defend such Claim, the Indemnified Party will, upon written notice to the Indemnifying Party, have the right to undertake the defense, compromise or settlement of such Claim on behalf of and for the account and risk of the Indemnifying Party, subject to the right of the Indemnifying Party to assume the defense of such Claim at any time prior to settlement, compromise or final determination thereof. (c) Anything in this Section to the contrary notwithstanding, (i) if there is a reasonable probability that a Claim may materially and adversely affect an Indemnified Party other than as a result of money damages or other money payments, the Indemnified Party shall have the right, at its own cost and expense, to defend, and with the consent of the Indemnifying Party, to compromise or settle such Claim, and (ii) the Indemnifying Party shall not, without the written consent of the Indemnified Party, its successors and assigns settle or compromise any Claim or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such Claim. 6.10. No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any person (specifically including any employees of the Company and its subsidiaries) or entity that is not a party to this Agreement. 6.11. Brokers. Each party represents and warrants to the other that no broker or finder has acted for it in connection with this Agreement. Consistent with Sections 6.8 and 6.9, each party shall indemnify and hold harmless the other against any Damages arising out of any Claim by any broker or finder employed or alleged to have been employed by such party. 6.12. Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto, including, without limitation, each transferee of all or any portion of the Shares. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto. STOCK PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the Seller and the Purchasers have caused this Agreement to be executed effective as of the date first above written. THE ESTATE OF ROBERT F. BROZMAN By: /s/ Jack L. Brozman ------------------------------------------- Name: Jack L. Brozman Title: Executor CAHILL, WARNOCK PURCHASERS: CAHILL, WARNOCK STRATEGIC PARTNERS FUND, L.P. By: CAHILL WARNOCK STRATEGIC PARTNERS, L.P., its General Partner By: /s/ David L. Warnock ------------------------------------------- Name: David L. Warnock Title: a General Partner STRATEGIC ASSOCIATES, L.P. By: CAHILL, WARNOCK & COMPANY, LLC, its General Partner By: /s/ David L. Warnock ------------------------------------------- Name: David L. Warnock Title: Managing Member EXHIBIT A PURCHASERS Number of Shares of Common Stock Name Being Purchased Aggregate Purchase Price - ---- --------------- ------------------------ Cahill, Warnock Strategic Partners 473,750 $473,750.00 Fund, L.P. Strategic 26,250 $26,250.00 Associates, L.P. -----END PRIVACY-ENHANCED MESSAGE-----