Delaware | 8221 | 20-3356009 | ||
(State or Other Jurisdiction
of
Incorporation or Organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Steven D. Pidgeon, Esq.
|
Mark A. Stegemoeller, Esq. | |
David P. Lewis, Esq.
|
Steven B. Stokdyk, Esq. | |
DLA Piper LLP (US)
|
Latham & Watkins LLP | |
2415 East Camelback Road, Suite 700
|
355 South Grand Avenue | |
Phoenix, Arizona 85016
|
Los Angeles, California 90071 | |
(480) 606-5100
|
(213) 485-1234 | |
Large accelerated
filer
o
|
Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Proposed Maximum
|
Proposed Maximum
|
|||||||||||
Title of Each Class of
|
Amount to be
|
Offering Price Per
|
Aggregate Offering
|
Amount of
|
||||||||
Security To be Registered | Registered(1) | Share(2) | Price(2) | Registration Fee(3) | ||||||||
Common Stock, par value $0.01 per share
|
12,075,000 | $20.00 | $241,500,000 | $9,491 | ||||||||
(1) | Includes 1,575,000 shares of Common Stock issuable upon exercise of the underwriters over-allotment option. |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act. |
(3) | $9,039 previously paid |
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
|
Per Share | Total | |||||||
Public offering price
|
$ | $ | ||||||
Underwriting discounts
|
$ | $ | ||||||
Proceeds, before expenses, to us
|
$ | $ |
Credit Suisse | Merrill Lynch & Co. |
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|
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35 | ||||||||
36 | ||||||||
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63 | ||||||||
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98 | ||||||||
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114 | ||||||||
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124 | ||||||||
129 | ||||||||
131 | ||||||||
134 | ||||||||
137 | ||||||||
137 | ||||||||
137 | ||||||||
139 | ||||||||
139 | ||||||||
139 | ||||||||
F-1 | ||||||||
EX-3.1 | ||||||||
EX-3.2 | ||||||||
EX-4.1 | ||||||||
EX-4.2 | ||||||||
EX-5.1 | ||||||||
EX-10.1 | ||||||||
EX-10.2 | ||||||||
EX-10.3 | ||||||||
EX-10.4 | ||||||||
EX-10.5 | ||||||||
EX-10.21 | ||||||||
EX-23.2 |
1
2
| we are unable to attract and retain students as a result of the highly competitive markets in which we operate; | |
| we are unable to comply with the extensive regulatory requirements to which our business is subject, including requirements governing the Title IV federal student financial aid programs, state laws and regulations, and accrediting commission requirements; |
3
| we experience any student, regulatory, reputational, or other events that adversely affect our graduate degree offerings, from which we currently derive a significant portion of our revenues; |
| we experience damage to our reputation or other adverse effects in connection with any compliance audit; regulatory action; investigation, including the investigation of Grand Canyon University currently being conducted by the Office of Inspector General of the U.S. Department of Education; or litigation, including the pending qui tam action regarding the manner in which we have compensated our enrollment personnel; or as a result of negative publicity affecting us or other companies in the for-profit postsecondary education sector; |
| we are unable to attract and retain key personnel needed to sustain and grow our business; | |
| our students are unable to obtain student loans on affordable terms, or at all; | |
| adverse economic or other developments affect demand in our core disciplines; or | |
| we are unable to develop new programs or expand our existing programs in a timely and cost-effective manner. |
4
Common stock offered by us | 10,500,000 shares |
Common stock outstanding after this offering | 41,999,354 shares |
Use of proceeds | We estimate that the net proceeds to us from this offering will be approximately $179.7 million, or approximately $207.6 million if the underwriters exercise their over-allotment option in full, based on the midpoint of the price range set forth on the cover page of this prospectus and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. |
As described in Use of Proceeds and Special Distribution, we will use the proceeds of this offering to pay a special distribution to our stockholders of record as of September 26, 2008, in the amount of 75% of the gross proceeds received by us from the sale of stock in this offering, including any proceeds we receive from the underwriters exercise of their over-allotment option, before underwriting discounts and commissions and estimated offering expenses. We also intend to use up to $16.0 million of the proceeds of this offering to repurchase an outstanding warrant to purchase shares of our common stock. We intend to use the remaining proceeds to pay the expenses of this offering and for general corporate purposes. |
The payment of the special distribution in the amount described above permits a return of capital to all of our stockholders as of the record date, and does so without significantly decreasing our capital resources or requiring these stockholders to sell their shares. Of the estimated aggregate amount of the special distribution of $149.6 million (exclusive of any amounts that may be received from the underwriters exercise of the over-allotment option), assuming an initial public offering price of $19.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, $81.1 million will be paid in respect of shares of our capital stock over which our directors and executive officers are deemed to exercise sole or shared voting or investment power. These proceeds will be allocated as set forth in the following table. |
Special Distribution | ||||
(In thousands) | ||||
Directors
|
||||
Chad N.
Heath
(1)
|
$ | 45,849 | ||
D. Mark
Dorman
(1)
|
$ | 45,849 | ||
Executive Officers
|
||||
Brent D. Richardson
|
$ | 16,766 | ||
John E. Crowley
|
$ | 1,736 | ||
Christopher C. Richardson
|
$ | 16,775 | ||
All directors and executive officers as a group
|
$ | 81,127 |
(1) | Represents shares owned by Endeavour Capital Fund IV, L.P. and certain affiliated funds. D. Mark Dorman and Chad N. Heath, two |
5
of our directors, are managing directors of Endeavour Capital IV, LLC, the general partner of such funds. |
See Special Distribution and Certain Relationships and Related Transactions Special Distribution for additional information regarding the beneficiaries of the special distribution. | ||
Dividend policy | Except with respect to the special distribution, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. | |
Risk factors | You should carefully read and consider the information set forth under the heading titled Risk Factors and all other information set forth in this prospectus before deciding to invest in shares of our common stock. | |
Proposed Nasdaq Global Market symbol | LOPE |
| no exercise by the underwriters of their option to purchase up to 1,575,000 additional shares from us; |
| a 1,826 for one split of our outstanding common stock effected on September 29, 2008; |
| the automatic conversion of all outstanding shares of Series A convertible preferred stock into 10,870,178 shares of common stock upon the closing of the offering; |
| the filing of an amendment to our certificate of incorporation to provide for the automatic conversion of all outstanding shares of Series C preferred stock into 1,410,526 shares of common stock upon the closing of the offering based on a conversion price equal to the initial public offering price per share, assuming an initial public offering price of $19.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus; |
| the repurchase by us of an outstanding warrant to purchase 909,348 shares of common stock at an exercise price of $0.58 per share for $16.0 million in cash, as described under Use of Proceeds; |
| the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the effectiveness of this offering; and |
| the rounding of all fractional share amounts to the nearest whole number. |
6
8
Year Ended December 31,
Six Months Ended June 30,
2005
2006
2007
2007
2008
(Restated)
(1)
(Unaudited)
(In thousands, except enrollment
and per share data)
$
51,793
$
72,111
$
99,326
$
44,071
$
70,275
28,063
31,287
39,050
17,555
24,028
14,047
20,093
35,148
14,186
27,473
12,968
15,011
17,001
8,377
10,960
1,619
2,678
3,782
1,629
1,488
56,697
69,069
94,981
41,747
63,949
(4,904
)
3,042
4,345
2,324
6,326
(3,098
)
(2,827
)
(2,975
)
(1,515
)
(1,507
)
276
912
1,172
692
432
(7,726
)
1,127
2,542
1,501
5,251
(3,440
)
529
1,016
600
2,027
(4,286
)
598
1,526
901
3,224
(527
)
(349
)
(167
)
(521
)
$
(4,286
)
$
71
$
1,177
$
734
$
2,703
$
(0.23
)
$
0.00
$
0.06
$
0.04
$
0.14
$
(0.23
)
$
0.00
$
0.03
$
0.02
$
0.08
18,470
18,853
18,923
18,853
19,089
18,470
36,858
35,143
35,052
32,623
$
817
$
2,387
$
7,406
$
3,234
$
3,983
$
1,879
$
2,396
$
3,300
$
1,473
$
2,269
$
(895
)
$
9,074
$
11,723
$
5,551
$
10,294
6,212
8,406
12,497
9,032
14,847
2,210
2,256
2,257
1,300
1,663
7
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As of June 30, 2008
Pro Forma,
as
Actual
Adjusted
(5)
(Unaudited)
(In thousands)
$
7,206
$
21,316
80,548
94,658
29,420
29,420
1,894
1,894
32,469
(8,440
)
38,139
(1)
Our financial statements at December 31, 2006 and 2007 and
for each of the three years in the period ended
December 31, 2007 have been restated. See Note 3,
Restatement of Financial Statements, in our
financial statements that are included elsewhere in this
prospectus.
(2)
On August 24, 2005, we converted from a limited liability
company to a taxable corporation. For all periods subsequent to
such date, we have been subject to corporate-level U.S.
federal and state income taxes.
(3)
Adjusted EBITDA is defined as net income (loss) plus interest
expense net of interest income, plus income tax expense
(benefit), and plus depreciation and amortization (EBITDA), as
adjusted for (i) royalty payments incurred pursuant to an
agreement with our former owner that has been terminated as of
April 15, 2008, as discussed in Managements
Discussion and Analysis of Financial Condition and Results of
Operations Factors affecting
comparability Settlement with former owner and
Note 2 to our financial statements that are included
elsewhere in this prospectus, and (ii) management fees and
expenses that are no longer paid or that will no longer be
payable following completion of this offering.
We present Adjusted EBITDA because we consider it to be an
important supplemental measure of our operating performance. We
also make certain compensation decisions based, in part, on our
operating performance, as measured by Adjusted EBITDA. See
Compensation Discussion and Analysis Impact of
Performance on Compensation. All of the adjustments made
in our calculation of Adjusted EBITDA are adjustments to items
that management does not consider to be reflective of our core
operating performance. Management considers our core operating
performance to be that which can be affected by our managers in
any particular period through their management of the resources
that affect our underlying revenue and profit generating
operations during that period. Management fees and expenses and
royalty expenses paid to our former owner are not considered
reflective of our core operating performance.
in developing our internal budgets and strategic plan;
as a measurement of operating performance;
as a factor in evaluating the performance of our management for
compensation purposes; and
in presentations to the members of our board of directors to
enable our board to have the same measurement basis of operating
performance as are used by management to compare our current
operating results with corresponding prior periods and with the
results of other companies in our industry.
However, Adjusted EBITDA is not a recognized measurement under
U.S. generally accepted accounting principles, or GAAP, and
when analyzing our operating performance, investors should use
Adjusted EBITDA in addition to, and not as an alternative for,
net income, operating income, or any other performance measure
presented in accordance with GAAP, or as an alternative to cash
flow from operating activities or as a measure of our liquidity.
Because not all companies use identical calculations, our
presentation of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies.
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Adjusted EBITDA has limitations as an analytical tool, as
discussed under Managements Discussion and Analysis
of Financial Condition and Results of Operations
Non-GAAP Discussion.
The following table provides a reconciliation of net income
(loss) to Adjusted EBITDA, which is a non-GAAP measure, for the
periods indicated:
Year Ended December 31,
Six Months Ended June 30,
2005
2006
2007
2007
2008
(Restated)
(1)
(Unaudited)
(In thousands)
$
(4,286
)
$
598
$
1,526
$
901
$
3,224
2,822
1,915
1,803
823
1,075
(3,440
)
529
1,016
600
2,027
1,879
2,396
3,300
1,473
2,269
(3,025
)
5,438
7,645
3,797
8,595
1,619
2,678
3,782
1,629
1,488
511
958
296
125
211
$
(895
)
$
9,074
$
11,723
$
5,551
$
10,294
(a)
Reflects the royalty fee arrangement with the former owner of
Grand Canyon University in which we agreed to pay a stated
percentage of cash revenue generated by our online programs. As
a result of the settlement of a dispute with our former owner,
we are no longer obligated to pay this royalty, although the
settlement includes a prepayment of future royalties that will
be amortized in 2008 and future periods. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors
affecting comparability Settlement with former
owner and Note 2 to our financial statements, which
are included elsewhere in this prospectus.
(b)
Reflects management fees and expenses of $0.1 million,
$0.3 million, and $0.3 million for the years ended
December 31, 2005, 2006, and 2007, respectively, and
$0.1 million and $0.2 million for the six month
periods ended June 30, 2007 and 2008, respectively, to the
general partner of Endeavour Capital, and an aggregate of
$0.4 million and $0.7 million for the years ended
December 31, 2005 and 2006, respectively, to an entity
affiliated with a former director and another affiliated with a
significant stockholder, in each case following their investment
in us. The agreements relating to these arrangements have all
terminated or will terminate by their terms upon the closing of
this offering. See Certain Relationships and Related
Transactions.
(4)
The decrease in the number of ground students on June 30,
2007 and 2008 in comparison to December 31, 2006 and 2007
is attributable to the fact that a portion of our ground
students typically do not enroll in classes during the summer
months. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Seasonality.
(5)
For a description of the offering and pro forma adjustments, see
Capitalization.
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10
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13
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authorizes the Department of Education to purchase Title IV
loans from lenders, thereby providing capital to the lenders to
enable them to continue making Title IV loans to students;
and
14
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permits the Department of Education to designate institutions
eligible to participate in a lender of last resort
program, under which federally recognized student loan guaranty
agencies will be required to make Title IV loans to all
otherwise eligible students at those institutions.
15
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16
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17
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18
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20
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the reduced availability of, or higher interest rates and other
costs associated with, Title IV loan funds or other sources
of financial aid;
the emergence of more successful competitors;
factors related to our marketing, including the costs and
effectiveness of Internet advertising and broad-based branding
campaigns and recruiting efforts;
performance problems with our online systems;
failure to maintain institutional and specialized accreditations;
the requirements of the education agencies that regulate us
which restrict schools initiation of new programs and
modification of existing programs;
the requirements of the education agencies that regulate us
which restrict the ways schools can compensate their recruitment
personnel;
increased regulation of online education, including in states in
which we do not have a physical presence;
restrictions that may be imposed on graduates of online programs
that seek certification or licensure in certain states;
student dissatisfaction with our services and programs;
adverse publicity regarding us, our competitors, or online or
for-profit education generally;
price reductions by competitors that we are unwilling or unable
to match;
a decline in the acceptance of online education;
an adverse economic or other development that affects job
prospects in our core disciplines; and
a decrease in the perceived or actual economic benefits that
students derive from our programs.
21
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22
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23
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24
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25
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26
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inadequate Internet infrastructure;
security and privacy concerns;
the unavailability of cost-effective Internet service and other
technological factors; and
changes in government regulation of Internet use.
27
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28
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inability to maintain uniform standards, controls, policies, and
procedures;
distraction of managements attention from normal business
operations during the integration process;
inability to obtain, or delay in obtaining, approval of the
acquisition from the necessary regulatory agencies, or the
imposition of operating restrictions or a letter of credit
requirement on us or on the acquired school by any of those
regulatory agencies;
expenses associated with the integration efforts; and
unidentified issues not discovered in our due diligence process,
including legal contingencies.
29
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our quarterly or annual earnings or earnings of other companies
in our industry;
the publics reaction to our press releases, our other
public announcements, and our filings with the SEC;
changes in earnings estimates or recommendations by research
analysts who track our common stock or the stocks of other
companies in our industry;
changes in our number of enrolled students;
new laws or regulations or new interpretations of laws or
regulations applicable to our business;
seasonal variations in our student population;
the availability and cost of Title IV funds, other student
financial aid, and private loans;
the failure to maintain or keep in good standing our regulatory
approvals and accreditations;
changes in accounting standards, policies, guidance,
interpretations, or principles;
changes in general conditions in the U.S. and global
economies or financial markets, including those resulting from
war, incidents of terrorism, or responses to such events;
an adverse economic or other development that affects job
prospects in our core disciplines;
litigation involving our company, or investigations or audits by
regulators into the operations of our company or our
competitors, including the investigation of Grand Canyon
University currently being conducted by the Office of Inspector
General of the Department of Education, the pending
qui
tam
action regarding the manner in which we have compensated
our enrollment personnel, and the review being conducted by the
Attorney General of the State of Arizona regarding
institutions student loan practices; and
sales of common stock by our directors, executive officers, and
significant stockholders.
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31
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32
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our failure to comply with the extensive regulatory framework
applicable to our industry, including Title IV of the
Higher Education Act and the regulations thereunder, state laws
and regulatory requirements, and accrediting commission
requirements;
the results of the ongoing investigation by the Department of
Educations Office of Inspector General and the pending
qui tam
action regarding the manner in which we have
compensated our enrollment personnel, and possible remedial
actions or other liability resulting therefrom;
the ability of our students to obtain federal Title IV
funds, state financial aid, and private financing;
risks associated with changes in applicable federal and state
laws and regulations and accrediting commission standards;
our ability to hire and train new, and develop and train
existing, enrollment counselors;
the pace of growth of our enrollment;
our ability to convert prospective students to enrolled students
and to retain active students;
our success in updating and expanding the content of existing
programs and developing new programs in a cost-effective manner
or on a timely basis;
industry competition, including competition for qualified
executives and other personnel;
risks associated with the competitive environment for marketing
our programs;
failure on our part to keep up with advances in technology that
could enhance the online experience for our students;
our ability to manage future growth effectively;
general adverse economic conditions or other developments that
affect job prospects in our core disciplines; and
other factors discussed under the headings Risk
Factors, Managements Discussion and Analysis
of Financial Condition and Results of Operations,
Business, and Regulation.
33
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42
117
121
F-16
F-19
II-4
34
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Date of Acquisition
Original Acquisition
of Shares to Which
Cost of Shares to Which
Amount of
Special Distribution
Special Distribution
Special
Relates
Relates
(1)
Distribution
(2)
(In thousands)
August 24, 2005
$
16,000
$
42,917
December 18, 2007
5,863
2,931
21,863
45,849
February 2, 2004
3,042
22,423
August 24, 2005
3,250
8,717
December 18, 2007
3,271
1,636
9,563
32,776
February 2, 2004
1,443
16,299
December 18, 2007
934
467
2,377
16,766
February 2, 2004
36
12,363
December 18, 2007
1,223
611
1,259
12,974
August 24, 2005
16,000
42,917
December 18, 2007
5,863
2,931
21,863
45,849
August 24, 2005
16,000
42,917
December 18, 2007
5,863
2,931
21,863
45,849
February 2, 2004
1,443
16,299
December 18, 2007
934
467
2,377
16,776
February 2, 2004
164
1,678
December 18, 2007
117
58
281
1,736
February 2, 2004
1,443
16,308
December 18, 2007
934
467
2,377
16,775
$
26,898
$
81,127
35
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(1)
On August 24, 2005, we converted from a limited liability
company to a taxable corporation. The reported acquisition cost
of shares of common stock represents the value of the capital
contributions originally made to acquire the limited liability
company interests that were converted into common stock upon
such conversion plus capital contributions for which no
additional interests were issued, less capital distributions.
(2)
The special distribution is being paid in respect of our common
stock, Series A convertible preferred stock, and
Series C preferred stock, in each case on an as-converted
basis. Upon the closing of this offering, shares of the
Series A convertible preferred stock will convert into
shares of common stock on a 1,826-for-one basis and shares of
the Series C preferred stock will convert into shares of
common stock at a rate equal to their liquidation preference per
share divided by the initial public offering price per share,
which is estimated to be $19.00 per share, which is the
midpoint of the range set forth on the cover page of this
prospectus.
(3)
Represents shares held of record by Endeavour Capital
Fund IV, L.P., Endeavour Associates Fund IV, L.P., and
Endeavour Capital Parallel Fund IV, L.P., which we refer to
as the Endeavour Entities. Messrs. Chad N. Heath and D.
Mark Dorman, each of whom is a managing director of Endeavor
Capital IV, LLC, the general partner for each of the Endeavour
Entities, are members of our board of directors.
(4)
Represents shares held of record by 220 GCU, L.P., 220
Education, L.P., 220-SigEd, L.P., and SV One, L.P.
(5)
Represents shares held of record by Rich Crow Enterprises, LLC
and Masters Online, LLC, of which Brent Richardson, Chris
Richardson, and Staci Buse are members and, in each case, which
are attributable to, and beneficially owned by, Brent
Richardson, Chris Richardson, or Staci Buse, as applicable.
(6)
Represents shares held of record by Rich Crow Enterprises, LLC,
of which John Crowley is a member, which are attributable to,
and beneficially owned by, John Crowley.
36
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on an actual basis;
on a pro forma basis, giving effect to:
(i)
the automatic conversion of all outstanding shares of Series A
convertible preferred stock into 10,870,178 shares of
common stock upon the closing of the offering; and
(ii)
the automatic conversion of all outstanding shares of Series C
preferred stock into 1,410,526 shares of common stock upon
the closing of the offering at a conversion rate equal to their
liquidation preference per share divided by the initial public
offering price per share, which is estimated to be $19.00 per
share, which is the midpoint of the range set forth on the cover
page of this prospectus; and
on a pro forma, as adjusted basis, giving effect to the pro
forma adjustments above, as well as:
(i)
our sale of 10,500,000 shares of our common stock in this
offering (at an assumed initial public offering price of $19.00
per share, which is the midpoint of the range set forth on the
cover page of this prospectus) and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us;
(ii)
the payment of a special distribution to our existing
stockholders of 75% of the gross proceeds from the sale of
common stock by us in this offering, including any proceeds we
receive from the underwriters exercise of their
over-allotment option, which will occur promptly upon the
consummation of this offering (and the closing of the exercise
of the over-allotment option, if applicable);
(iii)
the repurchase by us of an outstanding warrant to purchase
common stock for $16.0 million in cash as described in
Use of Proceeds; and
(iv)
the amendment and restatement of our certificate of
incorporation in connection with the closing of this offering,
which will increase our authorized capital stock.
37
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As of June 30, 2008
Pro Forma,
Actual
Pro Forma
as Adjusted
(In thousands, except share data)
$
7,206
$
7,206
$
21,316
29,420
$
29,420
$
29,420
1,894
$
1,894
$
1,894
18,610
0
13,859
192
315
420
6,508
38,854
52,859
10
10
10
(15,150
)
(15,150
)
(15,150
)
(8,440
)
24,029
38,139
$
55,343
$
55,343
$
69,453
(1)
A $1.00 increase or decrease in the assumed initial public
offering price of $19.00 per share would increase or decrease
cash, cash equivalents, and short-term marketable securities by
$1.9 million, would increase or decrease additional paid-in
capital by $1.9 million, and would increase or decrease
total stockholders equity and total capitalization by
$1.9 million, after deducting the underwriting discount,
the repurchase of the warrant described in the introductory
paragraph to this table, and the payment of a special
distribution to our existing stockholders of 75% of the gross
proceeds from the sale of common stock by us in this offering.
Similarly, any increase or decrease in the number of shares that
we sell in the offering will increase or decrease our net
proceeds in proportion to such increase or decrease, as
applicable, multiplied by the offering price per share, less
underwriting discounts and commissions.
38
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$
19.00
June 30, 2008
$
0.67
4.57
(0.46
)
(0.38
)
(3.56
)
0.84
$
18.16
39
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Average
Shares Purchased
Total Consideration
Price Per
Number
Percent
Amount
Percent
Share
(Dollars in thousands)
31,499,354
75.0
%
$
40,300
16.8
%
$
1.28
10,500,000
25.0
%
199,500
83.2
%
$
19.00
41,999,354
100.0
%
$
239,800
100.0
%
$
5.71
40
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February 2, 2004
Six Months Ended
to December 31,
Year Ended December 31,
June 30,
2004
(2)
2005
2006
2007
2007
2008
(Unaudited)
(Restated)
(1)
(Unaudited)
(In thousands, except enrollment and per share data)
$
25,629
$
51,793
$
72,111
$
99,326
$
44,071
$
70,275
19,705
28,063
31,287
39,050
17,555
24,028
9,735
14,047
20,093
35,148
14,186
27,473
10,828
12,968
15,011
17,001
8,377
10,960
448
1,619
2,678
3,782
1,629
1,488
40,716
56,697
69,069
94,981
41,747
63,949
(15,087
)
(4,904
)
3,042
4,345
2,324
6,326
(1,135
)
(3,098
)
(2,827
)
(2,975
)
(1,515
)
(1,507
)
10
276
912
1,172
692
432
(16,212
)
(7,726
)
1,127
2,542
1,501
5,251
(3,440
)
529
1,016
600
2,027
(16,212
)
(4,286
)
598
1,526
901
3,224
(527
)
(349
)
(167
)
(521
)
$
(16,212
)
$
(4,286
)
$
71
$
1,177
$
734
$
2,703
N/A
$
(0.23
)
$
0.00
$
0.06
$
0.04
$
0.14
N/A
$
(0.23
)
$
0.00
$
0.03
$
0.02
$
0.08
N/A
18,470
18,853
18,923
18,853
19,089
N/A
18,470
36,858
35,143
35,052
32,623
$
24,376
$
817
$
2,387
$
7,406
$
3,234
$
3,983
$
1,136
$
1,879
$
2,396
$
3,300
$
1,473
$
2,269
$
(13,503
)
$
(895
)
$
9,074
$
11,723
$
5,551
$
10,294
3,141
6,212
8,406
12,497
9,032
14,847
1,852
2,210
2,256
2,257
1,300
1,663
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As of
As of December 31,
June 30,
2004
2005
2006
2007
2008
(Unaudited)
(Unaudited)
(Restated)
(1)
(Unaudited)
(In thousands)
$
3,476
$
2,579
$
14,361
$
23,210
$
7,206
30,892
51,859
61,232
88,568
80,548
24,360
24,789
29,728
29,228
29,420
4,511
2,635
2,462
2,408
1,894
25,590
21,390
31,948
32,469
(7,645
)
(12,111
)
(11,723
)
(10,386
)
(8,440
)
(1)
Our financial statements at December 31, 2006, and 2007 and
for each of the three years in the period ended
December 31, 2007 have been restated. See Note 3,
Restatement of Financial Statements, in our
financial statements that are included elsewhere in this
prospectus.
(2)
On February 2, 2004, we acquired the assets of Grand Canyon
University from a non-profit foundation and converted its
operations from non-profit to for-profit status. While the
university has continuously operated since 1949, for accounting
and financial statement reporting purposes, we treat the date of
acquisition and conversion to for-profit status as the date of
inception of our business.
(3)
On August 24, 2005, we converted from a limited liability
company to a taxable corporation. For all periods subsequent to
such date, we have been subject to corporate-level U.S.
federal and state income taxes.
(4)
Adjusted EBITDA is defined as net income (loss) plus interest
expense net of interest income, plus income tax expense
(benefit), and plus depreciation and amortization (EBITDA), as
adjusted for (i) royalty payments incurred pursuant to an
agreement with our former owner that has been terminated as of
April 15, 2008, as discussed in Managements
Discussion and Analysis of Financial Condition and Results of
Operations Factors affecting
comparability Settlement with former owner and
Note 2 to our financial statements that are included
elsewhere in this prospectus, and (ii) management fees and
expenses that are no longer paid or that will no longer be
payable following completion of this offering.
We present Adjusted EBITDA because we consider it to be an
important supplemental measure of our operating performance. We
also make certain compensation decisions based, in part, on our
operating performance, as measured by Adjusted EBITDA. See
Compensation Discussion and Analysis Impact of
Performance on Compensation. All of the adjustments made
in our calculation of Adjusted EBITDA are adjustments to items
that management does not consider to be reflective of our core
operating performance. Management considers our core operating
performance to be that which can be affected by our managers in
any particular period through their management of the resources
that affect our underlying revenue and profit generating
operations during that period. Management fees and expenses and
royalty expenses paid to our former owner are not considered
reflective of our core operating performance.
Our management uses Adjusted EBITDA:
in developing our internal budgets and strategic plan;
as a measurement of operating performance;
as a factor in evaluating the performance of our management for
compensation purposes; and
in presentations to the members of our board of directors to
enable our board to have the same measurement basis of operating
performance as are used by management to compare our current
operating results with corresponding prior periods and with the
results of other companies in our industry.
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However, Adjusted EBITDA is not a recognized measurement under
GAAP, and when analyzing our operating performance, investors
should use Adjusted EBITDA in addition to, and not as an
alternative for, net income, operating income, or any other
performance measure presented in accordance with GAAP, or as an
alternative to cash flow from operating activities or as a
measure of our liquidity. Because not all companies use
identical calculations, our presentation of Adjusted EBITDA may
not be comparable to similarly titled measures of other
companies. Adjusted EBITDA has limitations as an analytical
tool, as discussed under Managements Discussion and
Analysis of Financial Condition and Results of
Operations Non-GAAP Discussion.
The following table presents data relating to Adjusted EBITDA,
which is a non-GAAP measure, for the periods indicated:
Six Months
Ended
Year Ended December 31,
June 30,
2005
2006
2007
2007
2008
Restated
(1)
(Unaudited)
(In thousands)
$
(4,286
)
$
598
$
1,526
$
901
$
3,224
2,822
1,915
1,803
823
1,075
(3,440
)
529
1,016
600
2,027
1,879
2,396
3,300
1,473
2,269
(3,025
)
5,438
7,645
3,797
8,595
1,619
2,678
3,782
1,629
1,488
511
958
296
125
211
$
(895
)
$
9,074
$
11,723
$
5,551
$
10,294
(a)
Reflects the royalty fee arrangement with the former owner of
Grand Canyon University in which we agreed to pay a stated
percentage of cash revenue generated by our online programs. As
a result of the settlement of a dispute with the former owner,
we are no longer obligated to pay this royalty, although the
settlement includes a prepayment of future royalties that will
be amortized in 2008 and future periods. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors
affecting comparability Settlement with former
owner and Note 2 to our financial statements that are
included elsewhere in this prospectus.
(b)
Reflects management fees and expenses of $0.1 million,
$0.3 million, and $0.3 million for the years ended
December 31, 2005, 2006, and 2007, respectively, and
$0.1 million and $0.2 million for the six month
periods ended June 30, 2007 and 2008, respectively, to the
general partner of Endeavour Capital, and an aggregate of
$0.4 million and $0.7 million for the years ended
December 31, 2005 and 2006, respectively, to an entity
affiliated with a former director and another affiliated with a
significant stockholder, in each case following their investment
in us. The agreements relating to these arrangements have all
terminated or will terminate by their terms upon the closing of
this offering. See Certain Relationships and Related
Transactions.
(5)
The decrease in the number of ground students on June 30,
2007 and 2008 in comparison to December 31, 2006 and 2007
is attributable to the fact that a portion of our ground
students typically do not enroll in classes during the summer
months. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Seasonality.
43
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
44
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45
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December 31,
June 30,
2005
2006
2007
2007
2008
#
%
#
%
#
%
#
%
#
%
6,204
73.7
7,812
73.3
9,156
62.1
7,641
74.0
10,051
60.9
2,218
26.3
2,850
26.7
5,598
37.9
2,691
26.0
6,459
39.1
8,422
100.0
10,662
100.0
14,754
100.0
10,332
100.0
16,510
100.0
December 31,
June 30,
2005
2006
2007
2007
2008
#
%
#
%
#
%
#
%
#
%
6,212
73.8
8,406
78.8
12,497
84.7
9,032
87.4
14,847
89.9
2,210
26.2
2,256
21.2
2,257
15.3
1,300
12.6
1,663
10.1
8,422
100.0
10,662
100.0
14,754
100.0
10,332
100.0
16,510
100.0
*
Includes our traditional on-campus
students, as well as our professional studies ground students.
46
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47
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48
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49
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In connection with our formation in February 2004, an entity
owned in part by our Executive Chairman and our General Counsel
contributed certain intangible assets to us, and we improperly
recorded these contributed assets at our estimate of their fair
value rather than at their carryover basis.
In connection with our acquisition of Grand Canyon University
from the former owner in February 2004, we improperly
accounted for a perpetual royalty arrangement between us and the
former owner as goodwill rather than as a current period
expense. Later, in connection with a settlement agreement we
entered into with the former owner in 2007 that provided for a
termination of this royalty arrangement, we improperly accounted
for a partial settlement payment as a current period expense
rather than as a prepaid royalty subject to amortization.
In connection with our entry into a lease agreement for our
ground campus and buildings in June 2004, we improperly
accounted for the arrangement as an operating lease rather than
accounting for certain components of the lease as a capital
lease.
In all periods, we failed to properly account for the issuance
of certain common stock and equity linked instruments to third
parties.
During the six month period ended June 30, 2008, we
concluded that a significant increase in our allowance for
doubtful accounts was required. A portion of the increase has
been determined to be the correction of an error from prior
periods and thus the accompanying financial statements have been
restated to reflect this increase.
We failed to properly account for deferred taxes at the date of
conversion from a limited liability company to a corporation.
50
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engaging a new Chief Financial Officer and hiring additional
financial and accounting personnel, all of whom have experience
managing or working in the corporate accounting department of a
large publicly traded education company;
making numerous process changes in the financial reporting area,
including additional oversight and review; and
conducting training of our accounting staff for purposes of
enabling them to recognize and properly account for transactions
of the type described above.
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Six Months
Ended
Year Ended December 31,
June 30,
2005
2006
2007
2007
2008
(Restated)
(1)
(Unaudited)
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
54.2
43.4
39.3
39.8
34.2
27.1
27.9
35.4
32.2
39.1
25.0
20.8
17.1
19.0
15.6
3.2
3.7
3.8
3.7
2.1
109.5
95.8
95.6
94.7
91.0
(9.5
)
4.2
4.4
5.3
9.0
(5.9
)
(3.9
)
(3.0
)
(3.5
)
(2.1
)
0.5
1.2
1.2
1.6
0.6
(14.9
)
1.5
2.6
3.4
7.5
(6.6
)
0.7
1.0
1.4
2.9
(8.3
)
0.8
1.6
2.0
4.6
(1)
Our financial statements at December 31, 2006 and 2007 and
for each of the three years in the period ended
December 31, 2007 have been restated. See Note 3,
Restatement of Financial Statements, included in our
financial statements, which are presented elsewhere in this
prospectus.
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53
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54
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55
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56
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First Quarter
Second Quarter
Third Quarter
Fourth Quarter
(In thousands, except enrollment data)
(unaudited)
(restated)
$
16,695
$
16,009
$
17,580
$
21,827
7,545
7,154
7,540
9,048
4,449
4,515
5,376
5,753
3,215
3,645
3,645
4,506
438
387
1,354
499
15,647
15,701
17,915
19,806
1,048
308
(335
)
2,021
(215
)
(499
)
(317
)
(884
)
833
(191
)
(652
)
1,137
391
(90
)
(306
)
534
$
442
$
(101
)
$
(346
)
$
603
9,088
8,137
10,217
10,662
$
23,213
$
20,858
$
24,401
$
30,854
8,845
8,710
9,976
11,519
6,008
8,178
10,105
10,857
3,614
4,763
3,471
5,153
607
1,022
956
1,197
19,074
22,673
24,508
28,726
4,139
(1,815
)
(107
)
2,128
(448
)
(375
)
(526
)
(454
)
3,691
(2,190
)
(633
)
1,674
1,475
(875
)
(253
)
669
$
2,216
$
(1,315
)
$
(380
)
$
1,005
11,397
10,332
13,448
14,754
$
35,709
$
34,566
11,620
12,408
12,586
14,887
4,541
6,419
1,022
466
29,769
34,180
5,940
386
(560
)
(515
)
5,380
(129
)
2,076
(49
)
$
3,304
$
(80
)
17,486
16,510
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Payments Due by Period
Less than
Years
Years
More than
Total
1 Year
2-3
4-5
5 Years
$
2.4
$
0.6
$
1.3
$
0.5
$
0.0
52.5
3.7
7.0
6.8
35.0
2.3
2.3
30.4
2.2
4.2
3.7
20.3
$
87.6
$
6.5
$
14.8
$
11.0
$
55.3
(1)
See Note 8, Notes Payable and Capital Lease
Obligations, to our financial statements, which are
included elsewhere in this prospectus, for a discussion of our
long term debt and capital lease obligations.
(2)
See Note 9, Commitments and Contingencies, to
our financial statements, which are included elsewhere in this
prospectus, for a discussion of our operating lease obligations.
59
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cash expenditures for capital expenditures or contractual
commitments;
changes in, or cash requirements for, our working capital
requirements;
60
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interest expense, or the cash requirements necessary to service
interest or principal payments on our indebtedness;
the cost or cash required to replace assets that are being
depreciated or amortized; and
the impact on our reported results of earnings or charges
resulting from (i) royalties to our prior owner, including
amortization of royalties prepaid in connection with our
settlement, or (ii) management fees and expenses that were
payable until completion of this offering.
Six Months Ended
Year Ended December 31,
June 30,
2005
2006
2007
2007
2008
Restated
(a)
(Unaudited)
(In thousands)
$
(4,286
)
$
598
$
1,526
$
901
$
3,224
2,822
1,915
1,803
823
1,075
(3,440
)
529
1,016
600
2,027
1,879
2,396
3,300
1,473
2,269
(3,025
)
5,438
7,645
3,797
8,595
1,619
2,678
3,782
1,629
1,488
511
958
296
125
211
$
(895
)
$
9,074
$
11,723
$
5,551
$
10,294
(a)
Our financial statements at December 31, 2006 and 2007 and
for each of the three years in the period ended
December 31, 2007 have been restated. See Note 3,
Restatement of Financial Statements in our financial
statements that are included elsewhere in this prospectus.
(b)
Reflects the royalty fee arrangement with the former owner of
Grand Canyon University in which we agreed to pay a stated
percentage of cash revenue generated by our online programs. As
a result of the settlement of a dispute with the former owner,
we are no longer obligated to pay this royalty, although the
settlement includes a prepayment of future royalties that will
be amortized in 2008 and future periods. See Note 2 to our
financial statements included with this prospectus.
(c)
Reflects management fees and expenses of $0.1 million,
$0.3 million, and $0.3 million for the years ended
December 31, 2005, 2006, and 2007, respectively, and
$0.1 million and $0.2 million for the six month
periods ended June 30, 2007 and 2008, respectively, to the
general partner of Endeavour Capital, and an aggregate of
$0.4 million and $0.7 million for the years ended
December 31, 2005 and 2006, respectively, to an entity
affiliated with a former director and another affiliated with a
significant stockholder following their investment in us. The
agreements relating to these arrangements have all terminated or
will terminate by their terms upon the closing of this offering.
See Certain Relationships and Related Transactions.
61
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62
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focus on our core disciplines of education, business, and
healthcare;
convenient and flexible online delivery platform targeted at
working adults;
innovative marketing, recruitment, and retention
approach; and
expanding portfolio of academically rigorous, career-oriented
program offerings.
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Education services was the second largest industry in the United
States and accounted for approximately 13 million jobs.
Nearly half of these jobs were teaching positions that require
at least a bachelors degree, and some required a
masters or doctoral degree. The BLS projected that job
openings in the education services sector will grow by
1.4 million between 2006 and 2016 as a result of overall
population growth and a nationwide focus on improving education
and access to education.
Management, business, and financial occupations comprised
15 million jobs across all industries. The BLS projected
that job opportunities in this field will grow 10% between 2006
and 2016, adding a total of 1.6 million jobs during that
period.
Healthcare was the largest industry in the United States,
accounting for approximately 14 million jobs and
encompassing seven of the 20 fastest growing occupations. The
BLS projected that employment growth in the healthcare sector
will increase by 3.0 million jobs between 2006 and 2016
principally due to increased demand for healthcare services as a
result of growth in the population in older age groups, rising
life expectancy, and advances in medical technology.
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Academically rigorous, career oriented
curricula.
We create academically rigorous
curricula that are designed to enable all students to gain the
foundational knowledge, professional competencies, and
demonstrable skills required to be successful in their chosen
fields. Our curriculum is designed and delivered by faculty that
are committed to delivering a high quality, rigorous education.
We design our curricula to address specific career-oriented
objectives that we believe working adult students in the
disciplines we serve are seeking. Through this combination, we
believe that we produce graduates that can compete and become
leaders in their chosen fields.
Qualified faculty.
We demonstrate our
commitment to high quality education by hiring and contracting
qualified faculty with relevant practical experience.
Substantially all of our current faculty members hold at least a
masters degree in their respective field and approximately
38% of our faculty members hold a doctoral degree. Many of our
faculty members are able to integrate relevant, practical
experiences from their professional careers into the courses
they teach. We invest in the professional development of our
faculty members by providing training in ground and online
teaching techniques, hosting events and discussion forums that
foster sharing of best practices, and continually assessing
teaching effectiveness through peer reviews and student
evaluations.
Standardized course design.
We employ a
standardized curriculum development process to ensure a
consistent learning experience with frequent faculty-student
interaction in our courses. We thereafter continuously review
our programs in an effort to ensure that they remain consistent,
up-to-date,
and effective in producing the desired learning outcomes. We
also regularly review student surveys to identify opportunities
for course modifications and upgrades.
Effective student services.
We establish teams
comprised of academic and administrative personnel that act as
the primary support contact point for each of our students,
beginning at the application stage and continuing through
graduation. In recent years, we have also concentrated on
improving the technology used to support student learning,
including enhancing our online learning platform and further
improving student services through the implementation of online
interfaces. As a result, many of our support services, including
academic, administrative, library, and career services, are
accessible online, generally allowing users to access these
services at a time and in a manner that is generally convenient
to them.
Continual academic oversight.
We have
centralized the academic oversight and assessment functions for
all of our programs through our Office of Assessment and
Institutional Research, which continuously evaluates the
academic content, delivery method, faculty performance, and
desired learning outcomes for each of our programs. We
continuously assess outcomes data to determine whether our
students graduate with the knowledge, competencies, and skills
that are
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necessary to succeed in the workplace. The Office and Assessment
and Institutional Research also initiates and manages periodic
examinations of our curricula by internal and external reviewers
to evaluate and verify program quality and workplace
applicability. Based on these processes and student feedback, we
determine whether to modify or discontinue programs that do not
meet our standards or market needs, or to create new programs.
The Office and Assessment and Institutional Research also
oversees regular reviews of our programs conducted by
accrediting commissions.
Flexibility in program delivery.
We also seek
to meet market demands by providing students with the
flexibility to take courses exclusively online or to combine
online coursework with various campus and onsite options. For
example, based on market demand, particularly in connection with
our nursing programs, we have established satellite locations at
multiple hospitals that allow nursing students to take clinical
courses onsite while completing other course work online. We
have established similar onsite arrangements with other major
employers, including schools and school districts through which
students can pursue student teaching opportunities. This
flexibility raises our profile among employers, encourages
students to take and complete courses and eliminates
inconveniences that tend to lessen student persistence.
Small class size.
Over 90% of our online
classes had 25 or fewer students, with no classes exceeding 40
students, and over 80% of our ground classes had 25 or fewer
students. These class sizes provide each student with the
opportunity to interact directly with course faculty and to
receive individualized feedback and attention while also
affording our faculty with the opportunity to engage proactively
with a manageable number of students. We believe this
interaction enhances the academic quality of our programs by
promoting opportunities for students to participate actively and
thus build the requisite knowledge, competencies, and skills.
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Specialized Accreditations and Program Approvals
2006 - 2008*
2007 - 2017
2006 - 2016 (B.S.)
2006 - 2011 (M.S.)
2006 - 2016 (B.S.)
2006 - 2011 (M.S.)
2008 - 2013
*
We have had our site visit related
to the renewal of this specialized program approval and are not
aware of any factors that could cause this specialized program
approval not to be renewed in the ordinary course.
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the College of Education, which has a nearly
60-year
history as one of Arizonas leading teachers colleges
and consistently graduates teachers who meet or exceed state
averages on the Arizona Educator Proficiency Assessment exams;
the Ken Blanchard College of Business, which has a well-known
brand among our target student population, an advisory board
that includes nationally recognized business leaders, and a
reputation for offering career-oriented degree programs,
including an Executive MBA and programs in leadership,
innovation, and entrepreneurship;
the College of Nursing and Health Sciences, which has a strong
reputation within the Arizona healthcare community and is the
second largest nursing program in Arizona; and
the College of Liberal Arts, which develops and provides many of
the general education course requirements in our other colleges
and also serves as one of the vehicles through which we offer
programs in additional targeted disciplines.
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*
Indicates program was offered on
ground only.
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College of Nursing and Health Sciences
College of Liberal Arts
Degree Program
Emphasis
Degree Program
Emphasis
Master of Science Nursing
Bachelor of Science in Nursing
Bachelor of Science
Nursing Leadership in Healthcare
Systems
Clinical Nurse Specialist*
Clinical Nurse Specialist (Education
Focus)*
Nursing Education
Biology Basic Science*
Biology Pre-Medicine*
Biology Pre-Pharmacy*
Biology Pre-Physician
Assistant*
Biology Pre-Physical Therapy*
Biology Pre-Occupational
Therapy*
Biology Pre-Veterinary*
Health Science: Professional Development
and Advanced Patient Care
Medical Imaging Sciences
Athletic Training*
Corporate Fitness and Wellness*
Bachelor of Arts in History*
Bachelor of Science
Bachelor of Arts
Justice Studies*
Psychology
Sociology*
Communications Digital Media*
Communications Graphic Design*
Communications Public
Relations*
English Literature*
Interdisciplinary Studies
Communication
Christian Leadership
Intercultural Studies
Christian Studies
Biblical/Theological Studies
Christian Studies Pastoral
Ministry
Christian Studies Worship
Ministry
Christian Studies Youth
Ministry
Christian Leadership
Undergraduate Minors
Business
Expression*
Family Studies
Health Education*
History*
Justice Studies*
Physical Education*
Political Science*
Psychology*
Recreation*
Social Sciences*
Sociology*
Spanish*
*
Indicates program was offered on
ground only.
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Internet and affiliate advertising, which generates the majority
of our leads and which includes purchasing leads from
aggregators and also engaging in targeted, direct email
advertising campaigns, and coordinated campaigns with various
affiliates;
search engine optimization techniques, through which we seek to
obtain high placement in search engine results in response to
key topic and word searches and drive traffic to our website;
seminar and event marketing, in which our marketing and
enrollment personnel host group events at various venues,
including community colleges, corporations, and hospitals;
referrals from existing students, alumni, and employees;
a national accounts program that seeks to develop relationships
with employers in our core disciplines, including healthcare
providers, school districts, emergency services providers, and
large corporations, that may be interested in providing
dedicated and customized online and onsite educational
opportunities to their employees, and to encourage senior
executives to participate in executive training
programs; and
print and direct mail advertising campaigns, and other public
relations and communications efforts, including promoting our
athletic programs and student and alumni events.
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June 30, 2008
December 31, 2007
# of Students
% of Total
# of Students
% of Total
10,051
60
.9
9,156
62
.1
%
6,459
39
.1
5,598
37
.9
%
16,510
100
.0
14,754
100
.0
%
June 30, 2008
December 31, 2007
# of Students
% of Total
# of Students
% of Total
14,847
89
.9
12,497
84
.7
%
1,663
10
.1
2,257
15
.3
%
16,510
100
.0
14,754
100
.0
%
*
Includes our traditional ground
students, as well as our professional studies ground students.
Enrollment of our ground students is typically lower at
June 30 as compared to December 31 because a portion
of our ground students are not enrolled in classes during the
summer months.
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FFEL.
Under the FFEL Program, banks and other
lending institutions make loans to students. The FFEL Program
includes the Federal Stafford Loan Program, the Federal PLUS
Program (which provides loans to graduate and professional
studies students as well as parents of dependent undergraduate
students), and the Federal Consolidation Loan Program. If a
student defaults on an FFEL loan, payment to the lender is
guaranteed by a federally recognized guaranty agency, which is
then reimbursed by the Department of Education. Students who
demonstrate financial need may qualify for a subsidized Stafford
loan. With a subsidized Stafford loan, the federal government
pays the interest on the loan while the student is in school and
during grace periods and any approved periods of deferment,
until the students obligation to repay the loan begins.
Unsubsidized Stafford loans are not based on financial need, and
are available to students who do not qualify for a subsidized
Stafford loan or, in some cases, in addition to a subsidized
Stafford loan. Loan funds are disbursed to us, and we in turn
disburse the amounts in excess of tuition and fees to students.
Effective July 1, 2008, under the Federal Stafford Loan
Program, a dependent undergraduate student can borrow up to
$5,500 for the first academic year, $6,500 for the second
academic year, and $7,500 for each of the third and fourth
academic years. Students classified as independent,
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and dependent students whose parents were denied a parent loan
for undergraduate students, can obtain up to an additional
$4,000 for each of the first and second academic years and an
additional $5,000 for each of the third and fourth academic
years. Students enrolled in graduate programs can borrow up to
$20,500 per academic year. Students enrolled in certain
graduate-level health programs can receive an additional $12,500
per academic year.
Pell.
Under the Pell Program, the Department
of Education makes grants to undergraduate students who
demonstrate financial need. Effective July 1, 2008, the
maximum annual grant a student can receive under the Pell
Program is $4,731. Under the August 2008 reauthorization of the
Higher Education Act, students will be able for the first time
to receive Pell Grant funds for attendance on a year-round
basis, which means that the amount a student can receive in a
given year will be more than the traditionally defined maximum
annual amount.
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availability of career-oriented and accredited program offerings;
the types of degrees offered and marketability of those degrees;
reputation, regulatory approvals, and compliance history of the
school;
convenient, flexible and dependable access to programs and
classes;
qualified and experienced faculty;
level of student support services;
cost of the program;
marketing and selling effectiveness; and
the time necessary to earn a degree.
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whether the institution and the program were approved by the
state in which the graduate seeks licensure, or by a
professional association;
whether the program from which the student graduated meets all
requirements for professional licensure in that state;
whether the institution and the program are accredited and, if
so, by what accrediting commissions; and
whether the institutions degrees are recognized by other
states in which a student may seek to work.
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The Association of Collegiate Business Schools and Programs
accredits our Master of Business Administration degree program
and our Bachelor of Science degree programs in Accounting,
Business Administration, and Marketing;
The Commission on Collegiate Nursing Education accredits our
Bachelor of Science in Nursing and Master of Science
Nursing degree programs; and
The Commission on Accreditation of Athletic Training Education
accredits our Athletic Training Program.
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comply with all applicable Title IV program requirements;
have an adequate number of qualified personnel to administer the
Title IV programs;
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have acceptable standards for measuring the satisfactory
academic progress of its students;
not have student loan cohort default rates above specified
levels;
have various procedures in place for awarding, disbursing and
safeguarding Title IV funds and for maintaining required
records;
administer the Title IV programs with adequate checks and
balances in its system of internal controls;
not be, and not have any principal or affiliate who is, debarred
or suspended from federal contracting or engaging in activity
that is cause for debarment or suspension;
provide financial aid counseling to its students;
refer to the Department of Educations Office of Inspector
General any credible information indicating that any student,
parent, employee, third-party servicer or other agent of the
institution has engaged in any fraud or other illegal conduct
involving the Title IV programs;
submit all required reports and financial statements in a timely
manner; and
not otherwise appear to lack administrative capability.
require the institution to repay Title IV funds its
students previously received;
transfer the institution from the advance method of payment of
Title IV funds to heightened cash monitoring status or the
reimbursement system of payment;
place the institution on provisional certification
status; or
commence a proceeding to impose a fine or to limit, suspend or
terminate the institutions participation in the
Title IV programs.
equity ratio, which measures the institutions capital
resources, financial viability and ability to borrow;
primary reserve ratio, which measures the institutions
ability to support current operations from expendable
resources; and
net income ratio, which measures the institutions ability
to operate at a profit or within its means.
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authorizes the Department of Education to purchase Title IV
loans from lenders, thereby providing capital to the lenders to
enable them to continue making Title IV loans to students;
and
permits the Department of Education to designate institutions
eligible to participate in a lender of last resort
program, under which federally recognized student loan guaranty
agencies will be required to make Title IV loans to all
otherwise eligible students at those institutions.
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46
Executive Chairman
55
Chief Executive Officer
52
Chief Operating Officer
36
General Counsel and Director
38
Chief Financial Officer
47
Executive Vice President
59
Chief Administrative Officer
53
Chief Information Officer
46
Grand Canyon University President
34
Director
47
Director
62
Director-Nominee
64
Director-Nominee
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Brent D. Richardson, our Chief Executive Officer;
John E. Crowley, our Chief Operating Officer;
Christopher C. Richardson, our General Counsel;
Timothy R. Fischer, currently our Chief Administrative Officer
and formerly our Chief Financial Officer; and
Michael S. Lacrosse, our Chief Information Officer.
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Compensation should be related to
performance.
We believe that the
performance-based portion of an individuals total
compensation should increase as the individuals business
responsibilities increase. Thus, a material portion of executive
compensation should be linked to our and the individuals
performance, which also serves to align the named executive
officers interests with those of our investors.
Compensation should be competitive and cost effective.
We
believe that our compensation programs should foster an
innovative, high integrity, and performance-oriented culture
that serves to attract, motivate, and retain executives and
other key employees with the appropriate skill sets to lead us
through expected future growth in a dynamic and competitive
environment. Accordingly, we should provide compensation in
amounts necessary to achieve these goals and which is of fair
value relative to other positions in Grand Canyon University.
Founders with significant equity stakes require limited
incentives.
As founders of our company, Brent Richardson and
Chris Richardson have significant equity ownership in Grand
Canyon University. We believe that the Richardsons
ownership stake provides a level of motivation that would not be
appreciably enhanced through material cash bonus opportunities
or the grant of further equity incentives. Accordingly, in 2007,
the Richardsons were compensated solely through base salary and
limited perquisites.
Base salaries should be the largest component of
compensation
. Our compensation programs should reflect base
salaries as being compensation for the named executive officers
to perform the essential elements of their respective jobs, and
cash bonuses as a reward for superior company and individual
performance. In this regard, base salary should be the largest
component of cash compensation, with cash bonuses being
significantly less than base salaries.
Compensation should be paid in cash.
As a
private company whose equity securities were not publicly traded
prior to completion of this offering, we believed that the true
compensatory value to be accorded to equity-based incentives
would be difficult for both us and a recipient to determine.
Accordingly, we have not in the past utilized equity-based
incentives and have instead focused entirely on providing the
opportunity for our named executive officers to earn total cash
compensation at levels that enable us to achieve the motivation
and retention goals described above.
Base salary.
We typically agree upon a base
salary with a named executive officer at the time of initial
employment, which may or may not be reflected in an employment
agreement. The amount of base salary agreed upon, which is not
at risk, reflects our views as to the individual
executives
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past experience, future potential, knowledge, scope of
anticipated responsibilities, skills, expertise, and potential
to add value through performance, as well as competitive
industry salary practices. Although minimum base salaries for
Brent Richardson, John Crowley, and Chris Richardson are set by
their respective employment agreements, as described below, we
review executive salaries annually and may adjust them based on
an evaluation of the companys performance for the year and
the performance of the functional area(s) under an
executives scope of responsibility. For example, base
salaries for each of Brent Richardson, John Crowley, and Chris
Richardson were increased from $250,000 in fiscal 2006 to
$292,019 in fiscal 2007 as a result of the growth in our net
revenue and Adjusted EBITDA for 2006, which was driven, in part,
by the leadership and execution of our strategy by these named
executive officers. We also consider qualitative criteria, such
as education and experience requirements, complexity, and scope
or impact of the position compared to other executive positions
internally.
Bonuses.
We provide cash bonuses, which are
at-risk, to recognize and reward our named executive officers
with cash payments above base salary based on our success in a
given year. In the past, we have awarded bonuses on a
discretionary basis, and we have not implemented or followed a
formal bonus plan tied to specific financial and non-financial
objectives.
Perquisites.
We seek to compensate our named
executive officers at levels that eliminate the need for
perquisites and enable each individual officer to provide for
his or her own needs. Accordingly, in 2007, the only perquisite
we provided to any of our named executive officers was allowing
Brent Richardson to utilize a car leased by Grand Canyon
University.
Other.
We offer other employee benefits to key
executives for the purpose of meeting current and future health
and security needs for the executives and their families. These
benefits, which we generally offer to all eligible employees,
include medical, dental, and life insurance benefits; short-term
disability pay; long-term disability insurance; flexible
spending accounts for medical expense reimbursements; and a
401(k) retirement savings plan. The 401(k) retirement savings
plan is a defined contribution plan under Section 401(a) of
the Code. Employees may make pre-tax contributions into the
plan, expressed as a percentage of compensation, up to
prescribed IRS annual limits.
Salary continuation.
Each of Brent Richardson,
John Crowley, and Chris Richardson has a written employment
agreement under which he will receive continuing salary payments
for a stated period of time following termination of employment,
unless such termination constitutes termination for cause. Under
these agreements, Brent Richardson would continue to receive his
then-current base salary for a period of 12 months
following termination of employment, while John Crowley and
Chris Richardson would receive such salary continuation for a
period of six months following termination of employment,
subject to an option by us to extend the period to
12 months if we seek to extend their post-termination
non-compete and related covenants.
Benefits continuation.
Under their agreements,
Brent Richardson, John Crowley, and Chris Richardson would
also receive continuation of benefits during the applicable
salary continuation period.
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enrollment growth;
program development and expansion; and
regulatory compliance.
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all stock option grants, restricted stock awards, and other
equity based awards, which we collectively refer to as
stock-based grants, must be approved by the compensation
committee;
all stock-based grants will be approved at formal meetings
(including telephonic) of the compensation committee;
the date for determining the strike price and similar
measurements will be the date of the meeting (or a date shortly
after the meeting) or, in the case of an employee, director, or
consultant not yet hired, appointed, or retained, respectively,
the subsequent date of hire, appointment, or retention, as the
case may be;
if our board of directors implements an annual stock-based
grant, the grant will be approved at a regularly scheduled
meeting of the compensation committee during the first part of
the year, but after the annual earnings release, if any. We
believe that coordinating any annual award grant after our
annual earnings release, if any, will generally result in this
grant being made at a time when the public is in possession of
all material information about us;
the annual grant to executive officers and directors, if any,
will occur at the same time as the annual grant to other
employees;
we will not intentionally grant stock-based awards before the
anticipated announcement of materially favorable news or
intentionally delay the grant of stock-based awards until after
the announcement of materially unfavorable news; and
the compensation committee will approve stock-based grants only
for persons specifically identified at the meeting by management.
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All Other
Year
Salary
(1)
Bonus
(2)
Compensation
Total
2007
$
292,019
$
$
15,312
(3)
$
307,331
2007
292,019
14,000
306,019
2007
292,019
292,019
2007
194,500
25,000
219,500
2007
160,385
25,000
185,385
(1)
For Brent Richardson, John Crowley, and Chris Richardson,
represents the minimum base salary payable under their
respective employment agreements of $250,000, as adjusted for
fiscal year 2007 by the board of directors.
(2)
Represents cash bonuses awarded to the recipients by the board
of directors on a discretionary basis.
(3)
Represents the value of lease payments made by Grand Canyon
University on a vehicle utilized by Mr. Richardson.
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(4)
Mr. Fischer was appointed our Chief Administrative Officer
effective July 1, 2008. During 2007, he served as our Chief
Financial Officer.
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Named Executive
Officer
Triggering
Event
(1)(2)
Payment/Benefit
Material Conditions
Separation by Mr. Richardson for Good Reason or
termination by us without Cause
Continued payment of base salary and provision of benefits for
12 months following separation
Mr. Richardson must abide by the confidentiality,
non-competition, non-solicitation and non-disparagement
covenants discussed above for 24 months
$
300,373
Termination by us for Cause, death or disability of
Mr. Richardson, separation by Mr. Richardson without Good
Reason, or sale of Grand Canyon University
No severance payments, but Mr. Richardson will receive benefits
as determined in accordance with the plans or programs providing
for such benefits
See above
8,354
Separation by Mr. Crowley for Good Reason or
termination by us without Cause
Continued payment of base salary and provision of benefits for
six months following separation, with the option by us to extend
such payments (and related benefits) for up to 12 months
following separation
Mr. Crowley must abide by the confidentiality, non-competition,
non-solicitation and non-disparagement covenants discussed above
for 12 months (subject to extension to 24 months)
295,004
Termination by us for Cause, death or disability of
Mr. Crowley, separation by Mr. Crowley without Good
Reason, or sale of Grand Canyon University
No severance payments, but Mr. Crowley will receive benefits as
determined in accordance with the plans or programs providing
for such benefits
See above
2,985
Separation by Mr. Richardson for Good Reason or
termination by us without Cause
Continued payment of base salary and provision of benefits for
six months following separation, with the option by us to extend
such payments (and related benefits) for up to 12 months
following separation
Mr. Richardson must abide by the confidentiality,
non-competition, non-solicitation and non-disparagement
covenants discussed above for 12 months (subject to extension to
24 months)
300,373
Termination by us for Cause, death or disability of
Mr. Richardson, separation by Mr. Richardson without Good
Reason, or sale of Grand Canyon University
No severance payments, but Mr. Richardson will receive benefits
as determined in accordance with the plans or programs providing
for such benefits
See above
8,354
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(1)
Good Reason is generally defined in the employment
agreements to include a resignation within 30 days after
the occurrence of any one of the following: (a) the failure
by us to pay amounts owed to the executive following
15 days prior written notice of such failure; (b) the
assignment to the executive of duties materially inconsistent
with the executives title or the failure to elect or
reelect the executive to his position; or (c) a requirement
by us that the executive perform services at a location that is
more than 50 miles from our main campus.
(2)
Cause is generally defined in the employment
agreements to include: (a) the executives commission
of a felony or crime involving moral turpitude, any other
willful act or omission involving dishonesty or fraud with
respect to us or our customers or suppliers, misappropriation of
our funds or assets for personal use or engaging in conduct
bringing substantial public disgrace or disrepute to us;
(b) the executives neglect of duties following
notice, gross misconduct in performance of duties or material
and repeated failure to perform duties; (c) the
executives engaging in conduct that constitutes cause for
separation under applicable law, and (d) the
executives breaching the confidentiality, non-competition,
non-solicitation,
and
non-disparagement
covenants applicable to him.
(3)
Assumes that, in the case of Chris Richardson and John Crowley,
we exercise our option to extend severance payments beyond the
required six month period, as described in the table above. Also
assumes health insurance premiums of $696.20 per month, $248.74
per month, and $696.20 per month for Brent Richardson, John
Crowley, and Chris Richardson, respectively, over the periods
indicated.
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Date of Acquisition
Original Acquisition
of Shares to Which
Cost of Shares to Which
Amount of
Special Distribution
Special Distribution
Special
Relates
Relates
(1)
Distribution
(2)
(In thousands)
August 24, 2005
$
16,000
$
42,917
December 18, 2007
5,863
2,931
21,863
45,849
February 2, 2004
3,042
22,423
August 24, 2005
3,250
8,717
December 18, 2007
3,271
1,636
9,563
32,776
February 2, 2004
1,443
16,299
December 18, 2007
934
467
2,377
16,776
February 2, 2004
36
12,363
December 18, 2007
1,223
611
1,259
12,974
August 24, 2005
16,000
42,917
December 18, 2007
5,863
2,931
21,863
45,849
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Date of Acquisition
Original Acquisition
of Shares to Which
Cost of Shares to Which
Amount of
Special Distribution
Special Distribution
Special
Relates
Relates
(1)
Distribution
(2)
(In thousands)
August 24, 2005
16,000
42,917
December 18, 2007
5,863
2,931
21,863
45,849
February 2, 2004
1,443
16,299
December 18, 2007
934
467
2,377
16,776
February 2, 2004
164
1,678
December 18, 2007
117
58
281
1,736
February 2, 2004
1,443
16,308
December 18, 2007
934
467
2,377
16,775
$
26,898
$
81,127
(1)
On August 24, 2005, we converted from a limited liability
company to a taxable corporation. The reported acquisition cost
of shares of common stock represents the value of the capital
contributions originally made to acquire the limited liability
company interests that were converted into common stock upon
such conversion plus capital contributions for which no
additional interests were issued, less capital distributions.
(2)
The special distribution is being paid in respect of our common
stock, Series A convertible preferred stock, and
Series C preferred stock, in each case on an as-converted
basis. Upon the closing of this offering, shares of the
Series A convertible preferred stock will convert into
shares of common stock on a 1,826-for-one basis and shares of
the Series C preferred stock will convert into shares of
common stock at a rate equal to their liquidation preference per
share divided by the initial public offering price per share,
which is estimated to be $19.00 per share, which is the midpoint
of the range set forth on the cover page of this prospectus.
(3)
Represents shares held of record by the Endeavour Entities.
Messrs. Chad N. Heath and D. Mark Dorman, each of whom is a
managing director of Endeavor Capital IV, LLC., the general
partner of each of the Endeavour Entities, are members of our
board of directors.
(4)
Represents shares held of record by 220 GCU, L.P., 220
Education, L.P., 220-SigEd, L.P., and SV One, L.P.
(5)
Represents shares held of record by Rich Crow Enterprises, LLC
and Masters Online, LLC, of which Brent Richardson, Chris
Richardson, and Staci Buse are members and, in each case, which
are attributable to, and beneficially owned by, Brent
Richardson, Chris Richardson, or Staci Buse, as applicable.
(6)
Represents shares held of record by Rich Crow Enterprises, LLC,
of which John Crowley is a member, which are attributable to,
and beneficially owned by, John Crowley.
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each person, or group of affiliated persons, known to us to own
beneficially 5% or more of our outstanding common stock;
each of our directors and director-nominees;
each of our executive officers; and
all of our directors and executive officers as a group.
The outstanding shares of our Series A convertible
preferred stock are converted into 10,870,178 shares of common
stock;
The outstanding shares of our Series C preferred stock,
which will convert into common stock upon the closing of the
offering based on a conversion price equal to the initial public
offering price per share, are converted into
1,410,526 shares of common stock at an initial public
offering price of $19.00 per share, which is the midpoint
of the range set forth on the cover page of this prospectus;
We will issue 10,500,000 shares of common stock in the
offering;
We will grant 104,998 shares of fully vested restricted
stock to Brian E. Mueller, and fully vested options to
purchase 28,296 shares of our common stock to each of
Timothy N. Fischer, Michael S. Lacrosse, and Kathy
Player, immediately following the effectiveness of the offering;
and
Brent and Chris Richardson will be granted the right to vote an
additional 12,160,950 shares of our common stock as a
result of the voting agreement that will be effective upon the
closing of this offering, as described in the notes below the
table.
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Beneficially
Beneficially
Beneficially
Owned Prior to the
Owned After
Owned After
Offering
(1)
Offering
Over-Allotment
(2)
Shares
Percent
Shares
Percent
Shares
Percent
Principal Stockholders:
9,652,157
30.6
%
9,652,157
22.9
%
9,652,157
22.1
%
6,935,807
22.0
%
6,935,807
16.5
%
6,935,807
15.9
%
3,445,801
10.9
%
3,445,801
8.2
%
3,445,801
7.9
%
2,896,051
9.2
%
2,896,051
6.9
%
2,896,051
6.6
%
3,445,801
10.9
%
19,053,417
45.3
%
19,053,417
43.6
%
104,998
*
104,998
*
394,728
1.3
%
394,728
*
394,728
*
3,446,666
10.9
%
19,053,417
45.3
%
19,053,417
43.6
%
28,296
*
28,296
*
28,296
*
28,296
*
28,296
*
28,296
*
9,652,157
30.6
%
9,652,157
22.9
%
9,652,157
22.1
%
9,652,157
30.6
%
9,652,157
22.9
%
9,652,157
22.1
%
16,939,352
53.8
%
28,895,460
68.5
%
28,895,460
66.0
%
*
Represents beneficial ownership of less than 1%
(1)
The percentage of beneficial ownership as to any person as of a
particular date is calculated by dividing the number of shares
beneficially owned by such person, which includes the number of
shares as to which such person has the right to acquire voting
or investment power within 60 days after such date, by the
sum of the number of shares outstanding as of such date plus the
number of shares as to which such person has the right to
acquire voting or investment power within 60 days after
such date. Consequently, the denominator for calculating
beneficial ownership percentages may be different for each
beneficial owner.
(2)
Amounts presented assume that the over-allotment option is
exercised in full.
(3)
Consists of:
7,692,938 shares of common stock issuable upon the
conversion of shares of Series A convertible preferred
stock and approximately 525,402 shares of common stock
issuable upon the conversion of shares of Series C
preferred stock, in each case held of record by Endeavour
Capital Fund IV, L.P.;
471,108 shares of common stock issuable upon the conversion
of shares of Series A convertible preferred stock and
approximately 32,215 shares of common stock issuable upon
the conversion of shares of Series C preferred stock, in each
case held of record by Endeavour Associates Fund IV, L.P.;
and
871,002 shares of common stock issuable upon the conversion
of shares of Series A convertible preferred stock and
approximately 59,493 shares of common stock issuable upon
the conversion of shares of Series C preferred stock, in
each case held of record by Endeavour Capital Parallel
Fund IV, L.P.
Endeavour Capital IV, LLC is the general partner of the
Endeavour Entities, and has voting and dispositive power with
respect to the shares held by the Endeavour Entities.
Messrs. Chad N. Heath and D. Mark Dorman, each of whom is a
managing director of Endeavour Capital IV, LLC and serves on our
board of directors, disclaim beneficial ownership of these
shares except to the extent of his respective pecuniary
interest. The address for these entities is 920 SW Sixth Avenue,
Suite 1400, Portland, Oregon 97204.
Table of Contents
(4)
Consists of
1,835,130 shares of common stock issuable upon the
conversion of shares of Series A convertible preferred
stock and approximately 125,341 shares of common stock
issuable upon the conversion of shares of Series C
preferred stock, in each case held of record by 220 GCU, L.P.;
1,297,172 shares of common stock and approximately
59,728 shares of common stock issuable upon the conversion
of shares of Series C preferred stock, in each case held of
record by 220 Education, L.P.;
1,037,752 shares of common stock and approximately
47,784 shares of common stock issuable upon the conversion
of shares of Series C preferred stock, in each case held of
record by 220-SigEd, L.P.; and
2,421,404 shares of common stock and approximately
111,495 shares of common stock issuable upon the conversion
of shares of Series C preferred stock, in each case held of
record by SV One, L.P.
220 Management, LLC is the general partner of 220 GCU GP,
L.P. and SV One GP, L.P., which are the general partners of 220
GCU, L.P. and SV One L.P., respectively. 220 Management, LLC is
also the general partner of 220 Education, L.P., which is the
general partner of 220 SigEd, L.P. 220 Management, LLC has
dispositive power with respect to the shares held by 220 GCU,
L.P., 220 Education, L.P., 220 SigEd, L.P., and SV One, L.P.,
which we collectively refer to as the 220 Entities, and is
affiliated with Charles M. Preston III, one of our former
directors who directly or indirectly controls 220 Education,
L.P. The address for these entities is
c/o 220
Partners, LLC, One American Center, 600 Congress Avenue,
Suite 200, Austin, Texas 78701. Pursuant to a proxy and
voting agreement to be effective upon the closing of this
offering, Messrs. Brent Richardson and Chris Richardson
have voting power over the shares beneficially owned by the 220
Entities other than the shares of common stock issuable upon
conversion of the Series A convertible preferred stock. Each of
Messrs. Brent Richardson and Chris Richardson disclaim
beneficial ownership of such shares, except to the extent of
such voting interest.
(5)
Consists of 3,347,452 shares of common stock held of record
by Rich Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon the conversion
of Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, Ms. Staci L. Buse, who is the sister
of Brent Richardson and Chris Richarson. Pursuant to a proxy and
voting agreement to be effective upon the closing of this
offering, Messrs. Brent Richardson and Chris Richardson
have voting power over the shares beneficially owned by
Ms. Buse. Each of Messrs. Brent Richardson and Chris
Richardson disclaims beneficial ownership of such shares, except
to the extent of such voting interest.
(6)
Consists of 2,767,321 shares of common stock and
approximately 128,730 shares of common stock issuable upon
the conversion of shares of Series C preferred stock.
Michael Clifford is the managing director of and has dispositive
power with respect to the shares held by Significant Ventures,
LLC. The address for Significant Ventures, LLC is 243 North
Highway 101, Suite 11, Solana Beach, California 92075.
Pursuant to a proxy and voting agreement to be effective upon
the closing of this offering, Messrs. Brent Richardson and
Chris Richardson have voting power over the shares beneficially
owned by Significant Ventures, LLC. Each of Messrs. Brent
Richardson and Chris Richardson disclaim beneficial ownership of
such shares, except to the extent of such voting interest.
(7)
Prior to this offering, the total for Brent D. Richardson
consists of 3,347,452 shares of common stock held of record
by Rich Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon the conversion
of Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, Mr. Richardson.
(8)
Consists of 382,435 shares of common stock and
approximately 12,294 shares of common stock issuable upon
the conversion of Series C preferred stock, in each case
held of record by Rich Crow Enterprises, LLC, in each case which
are attributable to, and beneficially owned by, Mr. John
Crowley. Pursuant to a proxy and voting agreement to be
effective upon the closing of this offering, Messrs. Brent
Richardson
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and Chris Richardson have voting power over the shares
beneficially owned by Mr. Crowley. Each of
Messrs. Brent Richardson and Chris Richardson disclaim
beneficial ownership of such shares, except to the extent of
such voting interest.
(9)
Prior to this offering, the total for Christopher C. Richardson
consists of 3,348,317 shares of common stock held of record
by Rich Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon conversion of
Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, Mr. Richardson.
(10)
Following this offering, the total for Brent D. Richardson and
Christopher C. Richardson consists of:
3,347,452 shares of common stock held of record by Rich
Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon the conversion
of Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, Mr. Brent D. Richardson.
3,348,317 shares of common stock held of record by
Rich Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon conversion of
Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, Mr. Christopher C. Richardson.
3,347,452 shares of common stock held of record by Rich
Crow Enterprises, LLC and Masters Online, LLC and
98,349 shares of common stock issuable upon the conversion
of Series C preferred stock held of record by Rich Crow
Enterprises, LLC, in each case which are attributable to, and
beneficially owned by, the sister of Messrs. Brent
Richardson and Chris Richardson.
382,435 shares of common stock held of record by Rich Crow
Enterprises, LLC and approximately 12,294 shares of common
stock issuable upon the conversion of Series C preferred
stock held of record by Rich Crow Enterprises, LLC, in each case
which are attributable to, and beneficially owned by,
Mr. John Crowley.
The shares held by the 220 Entities and the shares
held by Significant Ventures, as described in Notes (4) and (5)
above.
310,694 shares of common stock and 12,998 shares of
common stock issuable upon the conversion of Series C preferred
stock held of record by other stockholders.
Pursuant to a proxy and voting agreement to be effective upon
the closing of this offering, Messrs. Brent Richardson and
Chris Richardson have voting power over the shares beneficially
owned by their sister and by Mr. Crowley, as well as those
covered by the 220 Entities (except as noted in
note (4) above), Significant Ventures, and the other
stockholders. Each of Messrs. Brent Richardson and Chris
Richardson disclaims beneficial ownership of such shares, except
to the extent of such voting interest.
(11)
Consists of 9,035,048 shares of common stock issuable upon
conversion of Series A convertible preferred stock and
617,109 shares of common stock issuable upon the conversion
of Series C preferred stock, in each case held of record by
the Endeavour Entities (see note (3) above).
Messrs. Chad N. Heath and D. Mark Dorman, each of whom is a
managing member of Endeavour Capital IV, LLC, the general
partner of the Endeavour Entities, and serves on our board of
directors, disclaim beneficial ownership of these shares except
to the extent of his respective pecuniary interest.
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124
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125
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126
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before the stockholder became interested, the board of directors
approved either the business combination or the transaction
which resulted in the stockholder becoming an interested
stockholder;
upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also
officers, and employee stock plans, in some instances; or
at or after the time the stockholder became interested, the
business combination was approved by the board of directors of
the corporation and authorized at an annual or special meeting
of the stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.
any breach of the directors duty of loyalty to us or our
stockholders;
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law;
any unlawful payments related to dividends or unlawful stock
repurchases, redemptions or other distributions; or
any transaction from which the director derived an improper
personal benefit.
we will indemnify our directors, officers and, in the discretion
of our board of directors, certain employees, to the fullest
extent permitted by the DGCL, subject to limited exceptions,
including an exception for indemnification in connection with a
proceeding (or counterclaim) initiated by such persons; and
we will advance expenses, including attorneys fees, to our
directors and, in the discretion of our board of directors,
certain officers and employees, in connection with legal
proceedings, subject to limited exceptions.
127
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no shares will be available for sale on the date of this
prospectus;
no shares will be available for sale under Rule 144 or
Rule 701 beginning 90 days after the date of this
prospectus; and
all of our shares of common stock shares will be eligible for
sale upon the expiration of the
lock-up
agreements, as more particularly and except as described below,
beginning after expiration of the
lock-up
period pursuant to Rule 144 or Rule 701.
one percent of the number of shares of common stock then
outstanding, which will equal approximately 421,044 shares
immediately after this offering; and
the average weekly trading volume of our common stock during the
four calendar weeks preceding the filing of a notice on
Form 144 with respect to the sale.
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FOR
NON-U.S.
HOLDERS
a citizen or resident of the United States, including an alien
individual who is a lawful permanent resident of the United
States or meets the substantial presence test under
section 7701(b)(3) of the Code;
a corporation (or an entity treated as a corporation) created or
organized in the United States or under the laws of the United
States, any state thereof, or the District of Columbia;
an estate, the income of which is subject to U.S. federal
income tax regardless of its source; or
a trust, if (i) a U.S. court can exercise primary
supervision over the administration of the trust and one or more
U.S. persons can control all substantial decisions of the
trust, or (ii) it has a valid election to be treated as a
U.S. person in effect.
131
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the gain is effectively connected with a trade or business
carried on by the
Non-U.S. Holder
within the United States;
the
Non-U.S. Holder
is an individual who holds shares of common stock as capital
assets and is present in the United States for 183 days or
more in the taxable year of disposition and various other
conditions are met; or
our common stock constitutes a U.S. real property interest
by reason of our status as a United States real property
holding corporation, or USRPHC, for U.S. federal
income tax purposes at any time within the shorter of the
five-year period preceding the disposition or the
Non-U.S. Holders
holding period for our common stock.
132
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the broker has documentary evidence in its files that the holder
is a
Non-U.S. Holder
and other conditions are met; or
the holder otherwise establishes an exemption.
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Number of Shares
Incorporated
10,500,000
Per Share
Total
Without
With
Without
With
Over-allotment
Over-allotment
Over-allotment
Over-allotment
134
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the information presented in this prospectus and otherwise
available to the underwriters;
the history of and the prospects for the industry in which we
will compete;
the ability of our management;
the prospects for our future earning;
the present state of our development and our current financial
condition;
the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies; and
the general condition of the securities markets at the time of
the offering.
135
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option.
In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option.
The underwriters may close out any covered short position by
either exercising their over-allotment option
and/or
purchasing shares in the open market.
Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In
determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase in the offering.
Penalty bids permit the representative to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
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137
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the purchaser is entitled under applicable provincial securities
laws to purchase the common stock without the benefit of a
prospectus qualified under those securities laws,
where required by law, that the purchaser is purchasing as
principal and not as agent,
the purchaser has reviewed the text above under Resale
Restrictions, and
the purchaser acknowledges and consents to the provision of
specified information concerning its purchase of the common
stock to the regulatory authority that by law is entitled to
collect the information.
138
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139
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F-2
Table of Contents
F-3
Table of Contents
Year Ended December 31,
Six Months Ended June 30,
2005
2006
2007
2007
2008
(Restated)
(Unaudited)
$
51,793
$
72,111
$
99,326
$
44,071
$
70,275
28,063
31,287
39,050
17,555
24,028
14,047
20,093
35,148
14,186
27,473
12,968
15,011
17,001
8,377
10,960
1,619
2,678
3,782
1,629
1,488
56,697
69,069
94,981
41,747
63,949
(4,904
)
3,042
4,345
2,324
6,326
(3,098
)
(2,827
)
(2,975
)
(1,515
)
(1,507
)
276
912
1,172
692
432
(7,726
)
1,127
2,542
1,501
5,251
(3,440
)
529
1,016
600
2,027
(4,286
)
598
1,526
901
3,224
(527
)
(349
)
(167
)
(521
)
$
(4,286
)
$
71
$
1,177
$
734
$
2,703
$
(0.23
)
$
0.00
$
0.06
$
0.04
$
0.14
$
(0.23
)
$
0.00
$
0.03
$
0.02
$
0.08
18,470
18,853
18,923
18,853
19,089
18,470
36,858
35,143
35,052
32,623
$
0.04
$
0.10
$
0.03
$
0.06
26,632
26,798
42,853
40,333
F-4
Table of Contents
Members/Stockholders Deficit
Preferred Stock
Accumulated
Series A Convertible
Series B
Series C
Additional
Other
Preferred Stock
Preferred Stock
Preferred Stock
Membership Interests
Common Stock
Paid-in
Comprehensive
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Units
Amount
Shares
Par Value
Capital
Income
Deficit
Total
$
$
$
1,000,000
$
8,567
$
$
$
$
(16,212
)
$
(7,645
)
(240
)
(240
)
(1,000,000
)
(8,327
)
18,260,000
183
8,144
4,329
14,000
593,450
6
54
60
1,624
4,610
2,163
6,980
(4,286
)
(4,286
)
5,953
18,610
2,163
6,980
18,853,450
189
8,198
(20,498
)
(12,111
)
598
598
35
35
633
(1,298
)
(4,200
)
282
282
(527
)
(527
)
5,953
18,610
865
2,780
18,853,450
189
7,953
35
(19,900
)
(11,723
)
1,526
1,526
44
44
1,570
(865
)
(2,780
)
800
2,780
34
120
2,995
10,409
182,600
1
115
116
(320
)
(320
)
29
(29
)
(29
)
5,953
18,610
3,829
13,338
19,036,050
190
7,719
79
(18,374
)
(10,386
)
3,224
3,224
(69
)
(69
)
3,155
521
(521
)
(521
)
182,600
2
2,994
2,996
(3,684
)
(3,684
)
5,953
$
18,610
$
3,829
$
13,859
$
19,218,650
$
192
$
6,508
$
10
$
(15,150
)
$
(8,440
)
Table of Contents
Year Ended December 31,
Six Months June 30,
2005
2006
2007
2007
2008
(Restated)
(Unaudited)
$
(4,286
)
$
598
$
1,526
$
901
$
3,224
2,632
4,664
6,257
3,185
4,052
1,879
2,396
3,300
1,473
2,269
(3,693
)
(2,148
)
(1,656
)
(186
)
129
19
(17
)
(112
)
(5,356
)
(5,974
)
(8,573
)
(4,139
)
(3,868
)
(149
)
(451
)
(442
)
(230
)
(266
)
51
202
(107
)
(257
)
288
(727
)
1,663
253
(204
)
1,098
(1,351
)
(646
)
3,802
1,639
576
253
2,280
(2,294
)
(2,353
)
1,405
2,668
1,538
4,236
2,165
604
(5,920
)
978
2,678
3,782
1,629
(7,428
)
(3,000
)
3,000
(6,972
)
6,800
7,103
3,792
(1,264
)
(817
)
(2,387
)
(7,406
)
(3,234
)
(3,983
)
(9,152
)
(2,499
)
9,045
(149
)
(62
)
2,470
(9,969
)
6,658
(7,555
)
(3,296
)
(4,012
)
(2,306
)
(1,179
)
(1,230
)
(623
)
(719
)
(6,000
)
14,000
6,000
(6,000
)
(1,250
)
4,590
4,684
4,200
5,725
(4,200
)
(240
)
(497
)
(153
)
(125
)
(2,484
)
16,044
(1,676
)
9,301
(748
)
(10,728
)
(897
)
11,782
8,849
(252
)
(16,004
)
3,476
2,579
14,361
14,361
23,210
$
2,579
$
14,361
$
23,210
$
14,109
$
7,206
$
2,994
$
2,523
$
2,645
$
1,318
$
2,382
$
$
397
$
4,964
$
3,000
$
762
$
858
$
5,945
$
676
$
365
$
760
7,000
5,725
14,000
8,327
2,908
120
29
167
521
282
116
116
2,996
887
(2,316
)
F-6
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data)
1.
Nature of
Business
2.
Summary
of Significant Accounting Policies
$26,750 in cash;
the assumption of a $1,500 note payable to a third party (the
Kirksville Note);
F-7
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
the issuance by the Company to the Institute of a warrant (the
Institute Warrant) to purchase a 10.0% non-dilutable
equity interest in the Company for an exercise price of $1
during a one month period beginning in July 1, 2011 subject
to a right for the Company to repurchase the warrant at any time
prior to its exercise for $6,000.
the satisfaction in full of all past royalties due to the
Institute under the Royalty Agreement and the elimination of the
existing obligation to pay royalties for online student revenues
in perpetuity;
the repurchase of the Institute Warrant;
the acquisition by the Company of the real property and related
building located on the Campus that was owned by the Institute
and not transferred in connection with the Ancillary Agreement;
the termination of a sublease agreement pursuant to which the
Institute leased office space on the Campus;
the assumption by the Company of all future payment obligations
in respect to certain gift annuities made to the school by
donors prior to the acquisition; and
the satisfaction in full of the $1,250 Institute Loan (including
all accrued and unpaid interest thereon).
F-8
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
($ in thousands)
$
3,000
19,500
$
22,500
$
8,730
6,000
2,257
327
(887
)
6,073
$
22,500
F-9
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-10
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
Year Ended December 31,
Six Months Ended June 30,
2005
2006
2007
2007
2008
$
3,098
$
2,925
$
3,102
$
1,579
$
1,534
98
127
64
27
$
3,098
$
2,827
$
2,975
$
1,515
$
1,507
F-11
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-12
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-13
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-14
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
3.
Restatement
of Financial Statements
December 31, 2006
December 31, 2007
As Reported
As Restated
As Reported
As Restated
$
8,525
$
4,798
$
13,193
$
7,114
1,592
2,984
2,338
4,640
861
893
1,304
1,349
25,339
23,036
46,046
42,314
250
317
2,027
2,835
1,986
2,806
62,477
61,232
91,163
88,568
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS
DEFICIT
189
189
190
190
7,671
7,953
7,321
7,719
(18,374
)
(19,900
)
(15,383
)
(18,374
)
(10,479
)
(11,723
)
(7,792
)
(10,386
)
62,477
61,232
91,163
88,568
F-15
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
December 31, 2005
December 31, 2006
December 31, 2007
As Reported
As Restated
As Reported
As Restated
As Reported
As Restated
$
54,760
$
56,697
$
67,279
$
69,069
$
92,499
$
94,981
(2,967
)
(4,904
)
4,832
3,042
6,828
4,345
(3,016
)
(3,098
)
(2,909
)
(2,827
)
(3,070
)
(2,975
)
(5,707
)
(7,726
)
2,835
1,127
4,930
2,542
(1,894
)
(3,440
)
1,184
529
1,939
1,016
(3,813
)
(4,286
)
1,651
598
2,991
1,526
$
(0.21
)
$
(0.23
)
$
0.06
$
0.00
$
0.14
$
0.06
$
(0.21
)
$
(0.23
)
$
0.03
$
0.00
$
0.08
$
0.03
4.
Restricted
Cash and Investments
As of December 31, 2006
Gross
Gross
Estimated
Adjusted
Unrealized
Unrealized
Fair
Cost
Gains
(Losses)
Value
$
108
$
$
$
108
550
10
560
2,358
48
2,406
$
3,016
$
58
$
$
3,074
As of December 31, 2007
Gross
Gross
Estimated
Adjusted
Unrealized
Unrealized
Fair
Cost
Gains
(Losses)
Value
$
258
$
$
$
258
550
18
(1
)
567
2,358
115
2,473
$
3,166
$
133
$
(1
)
$
3,298
As of June 30, 2008
Gross
Gross
Estimated
Adjusted
Unrealized
Unrealized
Fair
Cost
Gains
(Losses)
Value
$
2,804
$
$
$
2,804
549
18
(1
)
566
$
3,353
18
(1
)
$
3,370
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
As of December 31,
As of
2006
2007
June 30, 2008
$
108
$
359
$
2,904
402
335
255
997
1,032
211
1,567
1,572
0
$
3,074
$
3,298
$
3,370
5.
Property
and Equipment
As of December 31,
As of
2006
2007
June 30, 2008
$
20,562
$
20,562
$
20,562
1,726
2,236
2,253
3,369
8,073
9,583
5,225
9,515
11,464
593
805
1,074
2,757
1,020
1,991
34,232
42,211
46,927
(5,215
)
(8,362
)
(10,467
)
$
29,017
$
33,849
$
36,460
F-17
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
6.
Accrued
Liabilities
As of December 31,
As of
2006
2007
June 30, 2008
$
1,569
$
3,775
$
4,800
671
1,096
221
804
2,022
1,561
$
3,044
$
6,893
$
6,582
7.
Financing
Arrangements
8.
Notes
Payable and Capital Lease Obligations
As of December 31,
As of
2006
2007
June 30, 2008
$
29,161
$
28,451
$
28,814
567
777
606
29,728
29,228
29,420
949
1,150
1,132
$
28,779
$
28,078
$
28,288
F-18
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
As of December 31,
As of
2006
2007
June 30, 2008
$
1,250
$
1,250
$
1,043
840
735
884
169
318
275
2,462
2,408
1,894
374
646
412
$
2,088
$
1,762
$
1,482
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
December 31, 2007
Capital Lease
Obligations
Notes Payable
$
3,744
$
646
3,544
586
3,471
671
3,397
456
3,355
49
34,951
52,462
$
2,408
23,234
$
29,228
9.
Commitments
and Contingencies
December 31,
2007
$
2,203
2,153
2,003
1,852
1,852
20,326
$
30,389
F-20
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
10.
Earnings
Per Share
F-21
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
Six Month Period
Year Ended December 31,
Ended June 30,
2005
2006
2007
2007
2008
18,469,990
18,853,450
18,922,838
18,853,450
19,089,004
14,494,788
12,393,062
12,449,668
10,870,178
3,509,572
3,805,384
3,748,778
2,625,788
21,912
38,346
18,469,990
36,857,810
35,143,196
35,051,896
32,623,316
2,120
6
4,267,362
11.
Preferred
Stock and Equity Transactions
F-22
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-23
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-24
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
12.
Income
Taxes
F-25
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
For the
Six Months
Year Ended December 31,
Ended June 30
2005
2006
2007
2007
2008
$
219
$
2,221
$
2,194
$
494
$
1,814
34
456
478
106
399
253
2,677
2,672
600
2,213
(3,024
)
(1,792
)
(1,358
)
(153
)
(669
)
(356
)
(298
)
(33
)
(3,693
)
(2,148
)
(1,656
)
(186
)
$
(3,440
)
$
529
$
1,016
$
600
$
2,027
Year Ended December 31,
For the Six Months Ended June 30,
2005
2006
2007
2007
2008
(34.0
)%
34.0
%
34.0
%
34.0
%
34.0
%
(2.5
)
5.5
4.7
4.7
4.6
(24.1
)
15.2
0.2
6.0
0.5
0.5
0.7
1.4
0.8
0.8
(44.5
)%
46.9
%
40.0
%
40.0
%
38.6
%
F-26
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
As of December 31,
As of June 30,
2006
2007
2008
$
3,023
$
4,981
$
4,981
(194
)
(286
)
(286
)
155
(55
)
(55
)
2,984
4,640
4,640
1,938
1,712
1,712
(23
)
(52
)
(8
)
2,458
920
1,146
1,146
2,835
2,806
5,308
$
5,819
$
7,446
$
9,948
13.
Regulatory
F-27
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-28
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
14.
Employee
Benefit Plan
15.
Related
Party Transactions
F-29
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
16.
Valuation
and Qualifying Accounts
Balance at
Balance at
Beginning of
Charged to
End of
Year
Expense
Deductions
(1)
Year
$
2,868
2,632
(1,132
)
$
4,368
$
4,368
4,664
(1,652
)
$
7,380
$
7,380
6,257
(1,479
)
$
12,158
$
12,158
4,052
(768
)
$
15,442
(1)
Deductions represent accounts written off, net of recoveries.
17.
Subsequent
Events
F-30
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
F-31
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
18.
Pro Forma
Information (Unaudited)
F-32
Table of Contents
Notes to 2005, 2006, and 2007 Financial Statements (Restated)
Notes to Unaudited Financial Statements for the Six Month
Periods Ended June 30, 2007 and 2008
(In thousands of dollars, except share and per share
data) (Continued)
$
1,177
(734
)
2,703
$
3,146
149,625
$
146,479
7,709,421
Six-Month Period
Year Ended
Ended
December 31, 2007
June 30, 2008
$
1,177
$
2,703
18,922,838
19,089,004
35,143,196
32,623,316
26,632,259
26,798,425
42,852,617
40,332,737
$
0.04
$
0.10
$
0.03
$
0.06
F-33
Table of Contents
Table of Contents
Table of Contents
Item 13.
Other
Expenses of Issuance and Distribution.
$
9,491
23,500
125,000
2,406,000
2,410,000
528,000
50,000
248,009
$
5,800,000
Item 14.
Indemnification
of Directors and Officers.
II-1
Table of Contents
Item 15.
Recent
Sales of Unregistered Securities.
II-2
Table of Contents
Item 16.
Exhibits
and Financial Statement Schedules.
1
.1
Form of Underwriting Agreement#
3
.1
Amended and Restated Certificate of Incorporation
3
.2
Amended and Restated Bylaws
4
.1
Specimen of Stock Certificate
4
.2
Amended and Restated Investor Rights Agreement, dated
September 17, 2008, by and among Grand Canyon
Education, Inc. and the other parties named therein
5
.1
Opinion of DLA Piper LLP (US)
10
.1
Amended and Restated Executive Employment Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and Brent Richardson
10
.2
Amended and Restated Executive Employment Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and Christopher Richardson
10
.3
Amended and Restated Senior Management Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and John Crowley
10
.4
2008 Equity Incentive Plan
10
.5
2008 Employee Stock Purchase Plan
10
.6
Lease Agreement, effective June 28, 2004, by and between
Spirit Finance Acquisitions, LLC and Significant Education, LLC#
10
.7
First Amendment to Lease Agreement, effective September 24,
2004, by and between Spirit Finance Acquisitions, LLC and
Significant Education, LLC#
10
.8
Second Amendment to Lease Agreement, effective August 23,
2005, by and between Spirit Master Funding, LLC and Significant
Education, LLC#
10
.9
Third Amendment to Lease Agreement, effective June 2006, by and
between Spirit Master Funding, LLC and Significant Education,
Inc.#
10
.10
Fourth Amendment to Lease Agreement, effective August 9,
2006, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.11
Fifth Amendment to Lease Agreement, effective December 31,
2006, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.12
Sixth Amendment to Lease Agreement, effective September 30,
2007, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.13
Seventh Amendment to Lease Agreement, effective March 28,
2008, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.14
License Agreement, dated June 30, 2004, by and between
Blanchard Education, LLC and Significant Education, LLC#
10
.15
Letter Agreement, dated February 6, 2006, by and between
The Ken Blanchard Companies and Grand Canyon University#
10
.16
Amendment to License Agreement, dated May 8, 2008, by and
between Blanchard Education, LLC and Grand Canyon Education,
Inc.#
10
.17
Collaboration Agreement, dated July 11, 2005, by and
between Mind Streams, LLC and Significant Education, LLC (as
supplemented by Project One and Project Two)#
10
.18
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and Daniel E. Bachus#
10
.19
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and Brian E.
Mueller#
II-3
Table of Contents
10
.20
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and W. Stan
Meyer#
10
.21
Form of Director and Officer Indemnity Agreement
23
.1
Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
23
.2
Consent of Independent Registered Public Accounting Firm
24
.1
Power of Attorney#
99
.1
Consent of David J. Johnson#
99
.2
Consent of Jack A. Henry#
#
Previously filed.
Indicates a management contract or any compensatory plan,
contract or arrangement.
Item 17.
Undertakings.
Table of Contents
By:
II-5
Table of Contents
1
.1
Form of Underwriting Agreement#
3
.1
Amended and Restated Certificate of Incorporation
3
.2
Amended and Restated Bylaws
4
.1
Specimen of Stock Certificate
4
.2
Amended and Restated Investor Rights Agreement, dated
September 17, 2008, by and among Grand Canyon
Education, Inc. and the other parties named therein
5
.1
Opinion of DLA Piper LLP (US)
10
.1
Amended and Restated Executive Employment Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and Brent Richardson
10
.2
Amended and Restated Executive Employment Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and Christopher Richardson
10
.3
Amended and Restated Senior Management Agreement, dated
September 10, 2008, by and between Grand Canyon Education,
Inc. and John Crowley
10
.4
2008 Equity Incentive Plan
10
.5
2008 Employee Stock Purchase Plan
10
.6
Lease Agreement, effective June 28, 2004, by and between
Spirit Finance Acquisitions, LLC and Significant Education, LLC#
10
.7
First Amendment to Lease Agreement, effective September 24,
2004, by and between Spirit Finance Acquisitions, LLC and
Significant Education, LLC#
10
.8
Second Amendment to Lease Agreement, effective August 23,
2005, by and between Spirit Master Funding, LLC and Significant
Education, LLC#
10
.9
Third Amendment to Lease Agreement, effective June 2006, by and
between Spirit Master Funding, LLC and Significant Education,
Inc.#
10
.10
Fourth Amendment to Lease Agreement, effective August 9,
2006, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.11
Fifth Amendment to Lease Agreement, effective December 31,
2006, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.12
Sixth Amendment to Lease Agreement, effective September 30,
2007, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.13
Seventh Amendment to Lease Agreement, effective March 28,
2008, by and between Spirit Master Funding, LLC and Significant
Education, Inc.#
10
.14
License Agreement, dated June 30, 2004, by and between
Blanchard Education, LLC and Significant Education, LLC#
10
.15
Letter Agreement, dated February 6, 2006, by and between
The Ken Blanchard Companies and Grand Canyon University#
10
.16
Amendment to License Agreement, dated May 8, 2008, by and
between Blanchard Education, LLC and Grand Canyon Education,
Inc.#
10
.17
Collaboration Agreement, dated July 11, 2005, by and
between Mind Streams, LLC and Significant Education, LLC (as
supplemented by Project One and Project Two)#
10
.18
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and Daniel E. Bachus#
10
.19
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and Brian E.
Mueller#
10
.20
Executive Employment Agreement, dated June 25, 2008, by and
between Grand Canyon Education, Inc. and W. Stan
Meyer#
10
.21
Form of Director and Officer Indemnity Agreement
23
.1
Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
23
.2
Consent of Independent Registered Public Accounting Firm
24
.1
Power of Attorney#
Table of Contents
99
.1
Consent of David J. Johnson#
99
.2
Consent of Jack A. Henry#
#
Previously filed.
Indicates a management contract or any compensatory plan,
contract or arrangement.
1
2
3
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Page | ||||
SECTION 1 AGREEMENT GENERAL
|
1 | |||
|
||||
1.1 Definitions
|
1 | |||
|
||||
SECTION 2 REGISTRATION
|
3 | |||
|
||||
2.1 Demand Registration
|
3 | |||
|
||||
2.2 Piggyback Registrations
|
5 | |||
|
||||
2.3 Form S-3 Registration
|
6 | |||
|
||||
2.4 Expenses of Registration
|
7 | |||
|
||||
2.5 Obligations of the Company
|
7 | |||
|
||||
2.6 Termination of Registration Rights
|
8 | |||
|
||||
2.7 Delay of Registration; Furnishing Information
|
8 | |||
|
||||
2.8 Indemnification
|
9 | |||
|
||||
2.9 Assignment of Registration Rights
|
11 | |||
|
||||
2.10 Limitation on Subsequent Registration Rights
|
11 | |||
|
||||
2.11 Market Stand-Off Agreement
|
11 | |||
|
||||
2.12 SEC Compliance
|
12 | |||
|
||||
SECTION 3 COVENANTS OF THE COMPANY
|
12 | |||
|
||||
3.1 Basic Financial Information and Reporting
|
12 | |||
|
||||
3.2 Inspection Rights
|
14 | |||
|
||||
3.3 Taxes
|
14 | |||
|
||||
3.4 Insurance
|
15 | |||
|
||||
3.5 Compliance With Laws
|
15 | |||
|
||||
3.6 Corporate Existence
|
15 | |||
|
||||
3.7 Business Plan
|
15 | |||
|
||||
3.8 Meetings of the Board of Directors
|
15 | |||
|
||||
3.9 Confidentiality of Records
|
15 | |||
|
||||
3.10 Reservation of Common Stock
|
15 | |||
|
||||
3.11 Negative Covenants of the Company
|
15 | |||
|
||||
3.12 Termination of Covenants
|
18 | |||
|
||||
SECTION 4 MISCELLANEOUS
|
18 | |||
|
||||
4.1 Governing Law; Venue
|
18 |
-i-
Page | ||||
4.2 Successors and Assigns
|
18 | |||
|
||||
4.3 Severability
|
18 | |||
|
||||
4.4 Amendment and Waiver
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18 | |||
|
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4.5 Delays or Omissions
|
18 | |||
|
||||
4.6 Notices
|
19 | |||
|
||||
4.7 Headings
|
19 | |||
|
||||
4.8 Complete Agreement
|
19 | |||
|
||||
4.9 Counterparts; Facsimile Copies
|
19 |
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COMPANY : | ||||||
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GRAND CANYON EDUCATION, INC. | ||||||
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By: | /s/ Brent Richardson | ||||
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Name: |
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Its: | Executive Chairman | ||||
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SERIES A PREFERRED STOCKHOLDERS : | ||||||
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ENDEAVOUR CAPITAL FUND IV, L.P. | ||||||
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By: | Endeavour Capital IV, LLC | ||||
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Its: | General Partner | ||||
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By: | /s/ D. Mark Dorman | ||||
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Name: |
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Its: | Principal | ||||
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ENDEAVOUR ASSOCIATES FUND IV, L.P. | ||||||
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By: | Endeavour Capital IV, LLC | ||||
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Its: | General Partner | ||||
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By:
Name: |
/s/ D. Mark Dorman
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Its: | Principal | ||||
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ENDEAVOUR CAPITAL PARALLEL FUND, IV, L.P. | ||||||
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By: | Endeavour Capital IV, LLC | ||||
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Its: | General Partner | ||||
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By:
Name: |
/s/ D. Mark Dorman
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Its: | Principal |
220 GCU, L.P. | ||||||
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By: | 220 GCU GP, L.P | ||||
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Its: | General Partner | ||||
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By: | 220 Management, LLC | ||||
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Its: | General Partner | ||||
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By: | /s/ Charles M. Preston III | ||||
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Name: |
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Its: | Managing Director | ||||
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COMMON STOCKHOLDERS : | ||||||
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RICH CROW LLC | ||||||
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By:
Name: |
/s/ Brent Richardson
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Its: | Manager | ||||
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MASTERS ONLINE, LLC | ||||||
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By: | /s/ Brent Richardson | ||||
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Name: |
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Its: | Manager | ||||
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220 EDUCATION, LP | ||||||
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By: | 220 Management, LLC | ||||
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Its: | General Partner | ||||
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By: | /s/ Charles M. Preston III | ||||
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Name: |
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Its: | Managing Director |
220-SIGED, LP | ||||||
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By: | 220 Education, LP | ||||
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Its: | General Partner | ||||
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By: | 220 Management, LLC | ||||
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Its: | General Partner | ||||
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By: | /s/ Charles M. Preston III | ||||
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Name: |
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Its: | Managing Director | ||||
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SIGNIFICANT VENTURES, LLC | ||||||
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By: | /s/ Michael Clifford | ||||
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Name: |
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Its: | Chairman | ||||
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SV ONE, LP | ||||||
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By: | SV One GP, LP | ||||
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Its: | General Partner | ||||
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By: | SV Holdings, LLC | ||||
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Its: | General Partner | ||||
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By: | /s/ Charles M. Preston III | ||||
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Name: |
|
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Its: | Managing Director | ||||
|
||||||
CAREY FAMILY TRUST | ||||||
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By: | /s/ Jack Carey | ||||
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Name: |
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Its: | Trustee |
LAVACA SIGED, LLC | ||||||
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By: | /s/ Bryan W. Lee | ||||
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Name: |
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Its: | Manager | ||||
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BLANCHARD EDUCATION, LLC | ||||||
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By: | /s/ Thomas McKee | ||||
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Name: |
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Its: | President | ||||
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SPIRIT : | ||||||
|
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SPIRIT MANAGEMENT COMPANY | ||||||
|
||||||
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By: | /s/ Michael T. Bennett | ||||
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Name: |
|
||||
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Its: | Senior Vice President |
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DLA Piper US LLP
2415 East Camelback Road, Suite 700 Phoenix, Arizona 85016-4245 www.dlapiper.com |
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BRENT D. RICHARDSON
|
||||
Dated: September 10, 2008 | By: | /s/ Brent D. Richardson | ||
Address: | ||||
GRAND CANYON EDUCATION, INC.
|
||||
Dated: September 10, 2008 | By | /s/ Brian E. Mueller | ||
Name: | Brian E. Mueller | |||
Title: | Chief Executive Officer | |||
Address: |
3300 West Camelback Road
Phoenix, Arizona 85017 |
|||
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CHRISTOPHER C. RICHARDSON
|
||||
Dated: September 10, 2008 | By: | /s/ Christopher C. Richardson | ||
Address: | ||||
GRAND CANYON EDUCATION, INC.
|
||||
Dated: September 10, 2008 | By | /s/ Brian E. Mueller | ||
Name: | Brian E. Mueller | |||
Title: | Chief Executive Officer | |||
Address: |
3300 West Camelback Road
Phoenix, Arizona 85017 |
|||
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(1) | Executives (i) commission of a felony or a crime involving moral turpitude, or the commission of any other willful act or omission involving dishonesty or fraud with respect to the Company or any of its customers or suppliers, or (ii) misappropriation of any funds or assets of the Company for personal use, or (iii) engaging in any conduct bringing the Company into substantial public disgrace or disrepute; | ||
(2) | Executives (i) continued and repeated neglect of his duties in breach of this Agreement following notice of such breach and a failure to cure such breach following a reasonable opportunity to cure, (ii) gross misconduct in the performance of his duties hereunder, or (iii) his material and repeated failure to perform his duties in breach of this Agreement as directed by the Board following notice of such breach and failure to cure such breach following a reasonable opportunity to cure; or | ||
(3) | Executives engaging in conduct constituting cause for Separation under applicable law; or | ||
(4) | Executives engaging in conduct constituting a breach of Article 2 or 3 of this Agreement. |
(1) | The failure of the Company to pay a material amount owing to Executive hereunder; |
7
(2) | The assignment to Executive by the Company of duties materially and adversely inconsistent with Executives title or duties from those set forth in this Agreement or the failure to elect or reelect Executive to such position, except in the event of a termination for Cause, death, disability or by Executive other than for Good Reason; or | ||
(3) | The Companys requirement that Executive perform services under this Agreement at a location that is more than fifty (50) miles from the Current Location, and Executives failure to do so. |
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GRAND CANYON EDUCATION, INC.,
a Delaware corporation |
||||||
|
||||||
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By: | /s/ Brian Mueller | ||||
|
||||||
|
Name: | Brian Mueller | ||||
|
Title: | Chief Executive Officer | ||||
|
||||||
EXECUTIVE: | ||||||
|
||||||
/s/ John Crowley | ||||||
John Crowley |
Page | ||||
1. Establishment, Purpose and Term of Plan
|
1 | |||
1.1 Establishment
|
1 | |||
1.2 Purpose
|
1 | |||
1.3 Term of Plan
|
1 | |||
|
||||
2. Definitions and Construction
|
1 | |||
2.1 Definitions
|
1 | |||
2.2 Construction
|
8 | |||
|
||||
3. Administration
|
9 | |||
3.1 Administration by the Committee
|
9 | |||
3.2 Authority of Officers
|
9 | |||
3.3 Administration with Respect to Insiders
|
9 | |||
3.4 Committee Complying with Section 162(m)
|
9 | |||
3.5 Powers of the Committee
|
9 | |||
3.6 Indemnification
|
10 | |||
|
||||
4. Shares Subject to Plan
|
11 | |||
4.1 Maximum Number of Shares Issuable
|
11 | |||
4.2 Annual Increase in Maximum Number of Shares Issuable
|
11 | |||
4.3 Share Accounting
|
11 | |||
4.4 Adjustments for Changes in Capital Structure
|
11 | |||
|
||||
5. Eligibility, Participation and Award Limitations
|
12 | |||
5.1 Persons Eligible for Awards
|
12 | |||
5.2 Participation in the Plan
|
12 | |||
5.3 Incentive Stock Option Limitations
|
12 | |||
|
||||
6. Stock Options
|
13 | |||
6.1 Exercise Price
|
13 | |||
6.2 Exercisability and Term of Options
|
14 | |||
6.3 Payment of Exercise Price
|
14 | |||
6.4 Effect of Termination of Service
|
15 | |||
6.5 Transferability of Options
|
16 | |||
|
||||
7. Stock Appreciation Rights
|
16 | |||
7.1 Types of SARs Authorized
|
16 | |||
7.2 Exercise Price
|
16 | |||
7.3 Exercisability and Term of SARs
|
16 | |||
7.4 Exercise of SARs
|
17 |
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7.5 Deemed Exercise of SARs
|
17 | |||
7.6 Effect of Termination of Service
|
17 | |||
7.7 Transferability of SARs
|
17 | |||
|
||||
8. Restricted Stock Awards
|
18 | |||
8.1 Types of Restricted Stock Awards Authorized
|
18 | |||
8.2 Purchase Price
|
18 | |||
8.3 Purchase Period
|
18 | |||
8.4 Payment of Purchase Price
|
18 | |||
8.5 Vesting and Restrictions on Transfer
|
18 | |||
8.6 Voting Rights; Dividends and Distributions
|
19 | |||
8.7 Effect of Termination of Service
|
19 | |||
8.8 Nontransferability of Restricted Stock Award Rights
|
19 | |||
|
||||
9. Restricted Stock Unit Awards
|
19 | |||
9.1 Grant of Restricted Stock Unit Awards
|
20 | |||
9.2 Purchase Price
|
20 | |||
9.3 Vesting
|
20 | |||
9.4 Voting Rights, Dividend Equivalent Rights and Distributions
|
20 | |||
9.5 Effect of Termination of Service
|
21 | |||
9.6 Settlement of Restricted Stock Unit Awards
|
21 | |||
9.7 Nontransferability of Restricted Stock Unit Awards
|
21 | |||
|
||||
10. Performance Awards
|
21 | |||
10.1 Types of Performance Awards Authorized
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22 | |||
10.2 Initial Value of Performance Shares and Performance Units
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22 | |||
10.3 Establishment of Performance Period, Performance Goals and Performance
Award Formula
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22 |
10.4 Measurement of Performance Goals
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22 | |||
10.5 Settlement of Performance Awards
|
24 | |||
10.6 Voting Rights; Dividend Equivalent Rights and Distributions
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25 | |||
10.7 Effect of Termination of Service
|
26 | |||
10.8 Nontransferability of Performance Awards
|
26 | |||
|
||||
11. Cash-Based Awards and Other Stock-Based Awards
|
27 | |||
11.1 Grant of Cash-Based Awards
|
27 | |||
11.2 Grant of Other Stock-Based Awards
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27 | |||
11.3 Value of Cash-Based and Other Stock-Based Awards
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27 | |||
11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards
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27 | |||
11.5 Voting Rights; Dividend Equivalent Rights and Distributions
|
28 | |||
11.6 Effect of Termination of Service
|
28 |
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11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards
|
28 | |||
|
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12. Nonemployee Director Awards
|
29 | |||
|
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13. Standard Forms of Award Agreement
|
29 | |||
13.1 Award Agreements
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29 | |||
13.2 Authority to Vary Terms
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29 | |||
|
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14. Change in Control
|
29 | |||
14.1 Effect of Change in Control on Awards
|
29 | |||
14.2 Effect of Change in Control on Nonemployee Director Awards
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30 | |||
14.3 Federal Excise Tax Under Section 4999 of the Code
|
31 | |||
|
||||
15. Compliance with Securities Law
|
31 | |||
|
||||
16. Compliance with Section 409A
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32 | |||
16.1 Awards Subject to Section 409A
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32 | |||
16.2 Deferral and/or Distribution Elections
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32 | |||
16.3 Subsequent Elections
|
33 | |||
16.4 Payment of Section 409A Deferred Compensation
|
33 | |||
|
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17. Tax Withholding
|
35 | |||
17.1 Tax Withholding in General
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35 | |||
17.2 Withholding in Shares
|
35 | |||
|
||||
18. Amendment or Termination of Plan
|
35 | |||
|
||||
19. Miscellaneous Provisions
|
36 | |||
19.1 Repurchase Rights
|
36 | |||
19.2 Forfeiture Events
|
36 | |||
19.3 Provision of Information
|
36 | |||
19.4 Rights as Employee, Consultant or Director
|
36 | |||
19.5 Rights as a Stockholder
|
37 | |||
19.6 Delivery of Title to Shares
|
37 | |||
19.7 Fractional Shares
|
37 | |||
19.8 Retirement and Welfare Plans
|
37 | |||
19.9 Beneficiary Designation
|
37 | |||
19.10 Severability
|
37 | |||
19.11 No Constraint on Corporate Action
|
37 | |||
19.12 Unfunded Obligation
|
38 | |||
19.13 Choice of Law
|
38 |
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Page | ||||
1. Establishment, Purpose and Term of Plan
|
1 | |||
1.1 Establishment
|
1 | |||
1.2 Purpose
|
1 | |||
1.3 Term of Plan
|
1 | |||
|
||||
2. Definitions and Construction
|
1 | |||
2.1 Definitions
|
1 | |||
2.2 Construction
|
5 | |||
|
||||
3. Administration
|
5 | |||
3.1 Administration by the Committee
|
5 | |||
3.2 Authority of Officers
|
6 | |||
3.3 Power to Adopt Sub-plans
|
6 | |||
3.4 Policies and Procedures Established by the Company
|
6 | |||
3.5 Indemnification
|
6 | |||
|
||||
4. Shares Subject to Plan
|
7 | |||
4.1 Maximum Number of Shares Issuable
|
7 | |||
4.2 Annual Increase in Maximum Number of Shares Issuable
|
7 | |||
4.3 Adjustments for Changes in Capital Structure
|
7 | |||
|
||||
5. Eligibility
|
8 | |||
5.1 Employees Eligible to Participate
|
8 | |||
5.2 Exclusion of Certain Stockholders
|
8 | |||
5.3 Determination by Company
|
8 | |||
|
||||
6. Offerings
|
8 | |||
|
||||
7. Participation in the Plan
|
9 | |||
7.1 Initial Participation
|
9 | |||
7.2 Continued Participation
|
9 | |||
|
||||
8. Right to Purchase Shares
|
10 | |||
8.1 Grant of Purchase Right
|
10 | |||
8.2 Calendar Year Purchase Limitation
|
10 | |||
|
||||
9. Purchase Price
|
11 | |||
|
||||
10. Accumulation of Purchase Price through Payroll Deduction
|
11 | |||
10.1 Amount of Payroll Deductions
|
11 | |||
10.2 Commencement of Payroll Deductions
|
11 | |||
10.3 Election to Decrease or Stop Payroll Deductions
|
11 |
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Page | ||||
10.4 Administrative Suspension of Payroll Deductions
|
12 | |||
10.5 Participant Accounts
|
12 | |||
10.6 No Interest Paid
|
12 | |||
|
||||
11. Purchase of Shares
|
12 | |||
11.1 Exercise of Purchase Right
|
12 | |||
11.2 Pro Rata Allocation of Shares
|
13 | |||
11.3 Delivery of Certificates
|
14 | |||
11.4 Return of Plan Account Balance
|
14 | |||
11.5 Tax Withholding
|
14 | |||
11.6 Expiration of Purchase Right
|
14 | |||
11.7 Provision of Reports and Stockholder Information to Participants
|
14 | |||
|
||||
12. Withdrawal from Plan
|
15 | |||
12.1 Voluntary Withdrawal from the Plan
|
15 | |||
12.2 Return of Plan Account Balance
|
15 | |||
|
||||
13. Termination of Employment or Eligibility
|
15 | |||
|
||||
14. Effect of Change in Control on Purchase Rights
|
15 | |||
|
||||
15. Nontransferability of Purchase Rights
|
16 | |||
|
||||
16. Compliance with Securities Law
|
16 | |||
|
||||
17. Rights as a Stockholder and Employee
|
16 | |||
|
||||
18. Notification of Disposition of Shares
|
17 | |||
|
||||
19. Legends
|
17 | |||
|
||||
20. Designation of Beneficiary
|
17 | |||
20.1 Designation Procedure
|
17 | |||
20.2 Absence of Beneficiary Designation
|
18 | |||
|
||||
21. Notices
|
18 | |||
|
||||
22. Amendment or Termination of the Plan
|
18 |
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THE COMPANY: | ||||||
|
||||||
GRAND CANYON EDUCATION, INC, a | ||||||
Delaware corporation | ||||||
|
||||||
|
By | |||||
|
|
|||||
|
Title | |||||
|
||||||
|
||||||
|
Address | |||||
|
||||||
|
||||||
|
||||||
|
||||||
THE INDEMNITEE: | ||||||
|
||||||
Print Name: | ||||||
|
||||||
|
Address | |||||
|
||||||
|
||||||
|
||||||
|
||||||
|
10