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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [_] Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
Career Education Corporation
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(Name of Registrant as Specified In Its Charter)
Robert Steven Bostic
James E. Copeland, Jr.
R. William Ide
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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2006 ANNUAL MEETING OF STOCKHOLDERS
OF
CAREER EDUCATION CORPORATION
------------------------------
PROXY STATEMENT
OF
R. STEVEN BOSTIC
------------------------------
To my Fellow Career Education Corporation Stockholders:
This Proxy Statement and the accompanying BLUE Proxy Card are being
furnished to stockholders ("Stockholders") of Career Education Corporation
("CEC") in connection with the solicitation of proxies by Robert Steven Bostic
and the other Nominees (as defined below) to be used at the 2006 Annual Meeting
(the "Annual Meeting") of Stockholders of CEC to be held at 3:00pm, Central
Daylight Time, on Thursday, May 18, 2006 at the Chicago Marriott Northwest, 4800
Columbine Boulevard, Hoffman Estates, Illinois, and at any adjournments,
postponements or continuations thereof. This Proxy Statement and the BLUE Proxy
Card are first being furnished to Stockholders on or about April [o], 2006.
At the Annual Meeting, the Mr. Bostic will seek to elect to the Board
of Directors of CEC (the "Board") a slate of three nominees, comprised of Mr.
Bostic, James E. Copeland, Jr. and R. William Ide in opposition to the slate
proposed by the current Board. Each of the nominees (each a "Nominee" and,
collectively, the "Nominees") has consented, if elected, to serve as a director
of CEC and to being named in this Proxy Statement and in the Nominees' other
soliciting materials as a Nominee.
CEC has significant problems to resolve relating to pending litigation,
its probationary status with the Southern Association of Colleges and Schools
("SACS"), and investigations by the U.S. Department of Justice ("DOJ"), the US
Department of Education ("DOE"), and other regulatory bodies. We believe that
our Nominees are the best qualified candidates to lead CEC in a new direction,
solve many of the problems in which CEC is currently embroiled and create
Stockholder value.
THE NOMINEES ARE INDEPENDENT AND COMMITTED TO ACTING IN THE BEST
INTEREST OF ALL STOCKHOLDERS. WE BELIEVE THAT YOUR VOICE IN THE FUTURE OF CEC
CAN BEST BE EXPRESSED THROUGH THE ELECTION OF THE NOMINEES. ACCORDINGLY, WE URGE
YOU TO VOTE YOUR BLUE PROXY CARD FOR THE ELECTION OF MESSRS. BOSTIC, COPELAND,
AND IDE.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION ON THE RECORD DATE, ONLY IT CAN VOTE SUCH SHARES
AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT
THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE ON
YOUR BEHALF THE BLUE PROXY CARD AS SOON AS POSSIBLE.
IMPORTANT
The election of the Nominees requires the affirmative vote of a
plurality of the votes cast by Stockholders present in person or represented by
proxy, assuming a quorum is present or otherwise represented at the Annual
Meeting. As a result, your vote is extremely important in deciding the future of
CEC. We urge you to mark, sign, date and return the enclosed BLUE Proxy Card to
vote FOR the election of Messrs. Bostic, Copeland, and Ide.
WE URGE YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY CEC. IF YOU HAVE
ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BEFORE IT IS VOTED BY DELIVERING A
LATER-DATED PROXY CARD, OR BY VOTING IN PERSON AT THE ANNUAL MEETING, OR BY
DELIVERING TO CEC (ATTENTION: JANICE L. BLOCK, SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY) A WRITTEN NOTICE STATING THAT THE PROXY IS REVOKED. SEE
"VOTING PROCEDURES" AND "PROXY PROCEDURES" BELOW.
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If you have any questions about giving your proxy or require
assistance, please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue - 20th Floor
New York, NY 10022
Stockholders Call Toll-Free: 1-877-750-9499
Banks or Brokers Call Collect: 1-212-750-5833
Only holders of record of CEC's voting securities as of the close of
business on March 21, 2006, the record date for the Annual Meeting (the "Record
Date"), are entitled to notice of and to vote at, the Annual Meeting and any
adjournments or postponements thereof. According to CEC's preliminary proxy
statement filed with the Securities and Exchange Commission (the "SEC") on April
5, 2006 under cover of Schedule 14A (the "CEC Preliminary Proxy Statement"), as
of the Record Date there were outstanding 98,139,223 shares of common stock, par
value $0.01 per share, of CEC ("Shares"). Stockholders of record at the close of
business on the Record Date will be entitled to one vote at the Annual Meeting
for each Share held on the Record Date.
As of March 28, 2006, the Nominees and their affiliates collectively
may be deemed to beneficially own an aggregate of 1,081,340 Shares, representing
approximately 1.1% of the reported outstanding Shares. The Nominees and their
affiliates intend to vote such Shares FOR the election of the Nominees.
PLEASE VOTE FOR MESSRS. BOSTIC, COPELAND AND IDE BY RETURNING YOUR
COMPLETED BLUE PROXY CARD TODAY.
BACKGROUND
In 1995, Mr. Bostic founded the holding company that owned and operated
the American InterContinental University ("AIU"), an institution of higher
education accredited by SACS consisting of seven branch campuses, and merged his
holdings in AIU with CEC in 2001. Mr. Bostic is currently the beneficial owner
of 1,081,340 Shares, representing approximately 1.1% of the reported outstanding
Shares, which he received in connection with the merger of EduTrek
International, Inc. ("EduTrek") with and into CEC. EduTrek was a holding company
that owned and operated the American InterContinental University ("AIU"). At the
time of the merger, AIU was fully accredited by SACS and had no pending
regulatory probes.
Since CEC has been run by the current management team, it has been the
subject of numerous investigations, sanctions, and lawsuits, which the Nominees
believe have hurt CEC's student population and the Stockholders. In September of
2004, CEC announced that the DOJ was conducting an investigation concerning CEC,
which is ongoing. In June of 2005, the DOE notified CEC that it was reviewing
CEC's consolidated financial statements and annual compliance audit opinions for
the years 2000 through 2003 and that it was initiating school program reviews at
certain of CEC's educational institutions. On December 6, 2005, the Commission
on Colleges ("COC") of SACS placed AIU on probationary status for a period of
twelve months for numerous violations of SACS' Principles of Accreditation,
including regulations relating to "integrity". Probation applies to the entire
institution, including all programs, branch campuses and off-campus sites as
well as AIU's distance learning program. As stated in COC's Disclosure Statement
dated December 14, 2005, regarding the status of AIU, "probation is COC's most
serious sanction, short of loss of membership, and is imposed on an institution
for failure to correct deficiencies of significant non-compliance." In October
of 2005, CEC's Texas Culinary Acadamy ("TCA") was reviewed by the Texas Higher
Education Coordinating Board ("THECB") for compliance with certain Texas
education laws, and TCA was given 90 days to perform remediation or risk losing
degree-granting authority. CEC's Lehigh Valley College ("Lehigh Valley") is
currently being reviewed by the Bureau of Consumer Protection of the Office of
the Attorney General in Pennsylvania ("Pennsylvania AG"). The Pennsylvania AG
has requested certain documents from Lehigh Valley, including information
relating to Lehigh Valley's recruitment practices, student complaints, and
financial aid policies and procedures, which CEC provided to the Pennsylvania AG
in August of 2005. The California Bureau for Private Postsecondary and
Vocational Education ("BPPVE") has sought to place CEC's Brooks Institute for
Photography ("BIP") on conditional approval to operate, which would result in,
among other things, limitations on BIP's right to enroll students until BIP
verifies and discloses certain placement information for each 2003 graduate,
provides certain assurances about information to be described in manuals used
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by admissions representatives and provides restitution to all students from May
4, 1999 to present. In May of 2005, CEC's Sanford Brown Institute-Iselin
("SBI-Iselin") received a letter from the New Jersey Department of Labor and
Workforce Development ("DLWD") expressing concerns regarding allegations against
SBI-Iselin reported in a 60 Minutes segment that aired on January 30, 2005 and
requesting an explanation of the issues raised in the 60 Minutes story and an
argument that would convince the DLWD that SBI-Iselin should be allowed to
continue to operate. SBI-Iselin submitted a formal written response to the DLWD
in July 2005 and received verbal confirmation that they could proceed with
SBI-Iselin's application submission in September 2005. In January 2006,
SBI-Iselin submitted its license renewal application to DLWD for review and is
awaiting a response. In addition, CEC and certain members of its senior
management are the subject of numerous lawsuits brought by stockholders, current
and former students, and employees. Disclosure regarding all of the foregoing
investigations, inquiries and litigation can be found in greater detail in CEC's
most recent Form 10-K for the fiscal year ending December 31, 2005 and in CEC's
other public filings with the SEC. Although it is difficult to assign specific
costs to these problems we know CEC is trading at a price to earnings ratio
level substantially below many of its peers (see "Market Performace" below).
In April of 2005, due to his concern about the numerous regulatory
actions and lawsuits confronting CEC, as well as the fact that CEC's Shares were
trading at a substantial discount to their peers in the education sector, Mr.
Bostic submitted four stockholder proposals to be voted upon at CEC's 2005
annual meeting and solicited proxies from CEC's Stockholders in connection with
those proposals. Mr. Bostic's proposals, intended to improve CEC's corporate
governance, were to (1) withhold authority for each of CEC's three nominees for
re-election to the Board, (2) declassify the Board, (3) grant Stockholders
holding one-third of the outstanding Shares the right to call a meeting of
Stockholders and (4) repeal CEC's stockholder rights plan, or "poison pill". Mr.
Bostic's proposals were publicly endorsed Institutional Shareholder Services
("ISS") and Glass Lewis & Co. ("Glass Lewis"), two leading independent proxy
advisory firms. In addition, a third leading independent proxy advisory firm,
Proxy Governance Inc., recommended that Stockholders withhold their vote from
CEC's three nominees and that Stockholders vote in favor of Mr. Bostic's
proposal to grant Stockholders holding one-third of the outstanding Shares the
right to call a meeting of Stockholders. In its report, Glass Lewis made the
following statements:
"For shareholders, the last eighteen months at Career Education has
been a nightmare that most would love to forget, in our opinion. The
stock is down more than 60%, the Company is under investigation by no
less than four federal agencies, the board and the Company are being
sued in securities class actions and employment lawsuits, some have
accused key members of management of timing sales of stock suspiciously
well, the Company has been forced to restate three years of financials
and key accreditation bodies are threatening to pull credentials that
are essential to the Company continuing to do business. We are aware of
few companies with as many bad marks... The Company and its schools
judge student performance every day; at the annual meeting, we believe
shareholders have their chance to turn the tables and declare that the
Company has abjectly failed its owners."
None of the proxy advisory firms referenced above have, as of yet,
taken a position with regard to the matters to be voted upon at the Annual
Meeting. In its annual report on the 2005 proxy season, ISS noted that at CEC's
2005 annual meeting, 69% of votes cast were withheld from CEC's three nominees.
ISS further noted that this "withhold percentage appears to be the highest ever
recorded." In spite of the overwhelming withhold vote against CEC's three
nominees, all were elected to the Board. The Board accelerated the termination
of CEC's shareholder rights plan, or "poison pill", which expired on August 15,
2005. Until faced with another proxy contest, CEC took the position that Mr.
Bostic's remaining proposals were non-binding and took no action to implement
them.
Since the 2005 annual meeting, the problems afflicting CEC have not
improved and appear to have worsened in light of AIU's probationary status.
CEC's stock price continues to languish relative to the price to earnings ratio
levels of its peers in the education sector (see "Market Performance"). In Mr.
Bostic's view, CEC's recently announced amendments to its organizational
documents do not go far enough toward implementing the corporate governance
reforms that were proposed by Mr. Bostic and so strongly endorsed by CEC's
Stockholders at the last annual meeting. Mr. Bostic believes that CEC's Board
needs strong, independent advocates for shareholder rights and good corporate
governance. In Mr. Bostic's view, the current Board has failed the Stockholders
and change is urgently required. In addition, while the three current directors
whose terms expire this year and who have
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been nominated by CEC for re-election at the 2006 annual meeting may technically
satisfy the NASDAQ National Market's criteria for director independence, they
have been selected by a Nominating and Governance Committee with ties to CEC's
senior management. Thomas Lally, the Chairman of the Nominating and Governance
Committee, is the former President of Heller Equity Capital Corporation, a
venture capital firm that also formerly employed John Larson, CEC's President
and Chief Executive Officer, as well as Patrick Pesch, CEC's Executive Vice
President and Chief Financial Officer.
On February 8, 2006, Mr. Bostic sent a letter to Mr. Larson expressing
his disappointment with the failure by CEC's Board and management to
expeditiously take the actions Mr. Bostic believes are necessary to restore
CEC's damaged reputation, enhance the quality of educational standards and
programs that are critical to CEC's success, and to address and resolve in a
timely way the regulatory and operational problems weighing on CEC. In his
letter, Mr. Bostic also requested a public response from CEC not later than
February 13, 2006 to seven specific questions about CEC's plans for reforms to
address its ongoing regulatory and operational problems. On February 8, 2006,
CEC sent a letter to Mr. Bostic's counsel stating that CEC would not comment on
the issues raised in the letter prior to CEC's earnings call, scheduled for
February 15, 2006. On February 10, 2006, Mr. Bostic issued a press release
announcing his intent to nominate an alternate slate of three directors for
election to CEC's Board at the 2006 annual meeting, and on February 16, 2006 Mr.
Bostic formally notified CEC of his intention to nominate Messrs. Copeland and
Ide, in addition to himself, for election to the Board at CEC's 2006 annual
meeting.
MARKET PERFORMANCE
CEC's stock price continues to languish relative to the price to
earnings ratio levels of its peers in the education sector. CEC's preliminary
proxy statement filed on March 22, 2006 contains "an index of peer companies"
which CEC has selected for the purposes of comparing cumulative total returns of
CEC against the returns of such "peer companies". The "peer companies" selected
by CEC are the following: Apollo Group Inc. ("APOL"), Corinthian Colleges, Inc.
("COCO"), DeVry Inc. ("DV"), Education Management Corporation ("EDMC"), ITT
Educational Services, Inc. ("ESI"), and Strayer Education, Inc. ("STRA"). We
have set forth below a graph comparing CEC's price to earnings ratio to those of
the "peer companies" identified by CEC in its preliminary proxy statement.
CEC vs. Peer Group P/E Ratios (Quarterly) - Last 2 Years
[GRAPHIC OMITTED - Line Chart]
CEC APOL COCO
Date Pe Ratio Date Pe Ratio Date Pe Ratio
3/31/2004 42.2015 3/31/2004 55.5871 3/31/2004 37.5114
6/30/2004 30.5772 6/30/2004 51.3314 6/30/2004 27.337
9/30/2004 17.4417 9/30/2004 39.2353 9/30/2004 15.6744
12/31/2004 21.8579 12/31/2004 40.1542 12/31/2004 22.1706
3/31/2005 16.7122 3/31/2005 34.77 3/31/2005 18.7143
6/30/2005 16.6409 6/30/2005 33.4274 6/30/2005 16.8026
9/30/2005 15.2618 9/30/2005 26.8785 9/30/2005 19.5147
12/30/2005 14.5095 12/30/2005 22.8937 12/30/2005 20.2931
3/31/2006 16.2349 3/31/2006 18.8824 3/31/2006 24.8276
DV EDMC ESI
Date Pe Ratio Date Pe Ratio Date Pe Ratio
3/31/2004 38.1646 3/31/2004 33.3298 3/31/2004 22.446
6/30/2004 33.439 6/30/2004 31.9029 6/30/2004 24.529
9/30/2004 30.4559 9/30/2004 24.6667 9/30/2004 20.8382
12/31/2004 31.5636 12/31/2004 27.9661 12/31/2004 24.6373
3/31/2005 36.3846 3/31/2005 21.5348 3/31/2005 23.8916
6/30/2005 45.0226 6/30/2005 24.8398 6/30/2005 24.9626
9/30/2005 37.9482 9/30/2005 22.5786 9/30/2005 21.8363
12/30/2005 35.5872 12/30/2005 22.0766 12/30/2005 25.1532
3/31/2006 40.516 3/31/2006 27.4063 3/31/2006 27.2553
STRA
Date Pe Ratio
3/31/2004 50.1974
6/30/2004 44.9879
9/30/2004 44.751
12/31/2004 40.0693
3/31/2005 38.8082
6/30/2005 28.5629
9/30/2005 30.2949
12/30/2005 28.7423
3/31/2006 31.3681
Source: Bloomberg, April 10, 2006
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Mr. Bostic believes that CEC's positive revenue and earnings growth over the
last several years have been largely counterbalanced by the numerous problems in
which CEC has been embroiled, as evidenced by CEC's lower price to earnings
ratio relative to its peers in the education sector. Mr. Bostic believes that
until CEC has new leadership and a fresh approach to solving its problems, CEC's
price to earnings ratio will remain lower than its peers. No assurance can be
given that the election of Mr. Bostic's nominees will result in any increase in
CEC's price to earnings ratio.
WHY VOTE FOR MR. BOSTIC'S NOMINEES?
On December 6, 2005, COC of SACS placed AIU on probationary status for
a period of twelve months for fifteen violations of COC of SACS's Principles of
Accreditation. Among other findings, COC of SACS determined CEC not to be in
compliance with the "Prologue to Principles of Accreditation: (Integrity of
student academic records and accuracy in recruiting and admission practices)."
The portion of the Prologue to the Principles of Accreditation that discusses
"integrity" states:
"Integrity, essential to the purpose of higher education, functions as
the basic contract defining the relationship between the Commission and
each of its member institutions. It is a relationship in which all
parties agree to deal honestly and openly with their constituencies and
with one another. Without this commitment, no relationship can exist or
be sustained between the Commission and its member institutions. The
Commission's requirements, policies, processes, procedures, and
decisions are predicated on integrity. The Commission on Colleges
expects integrity to govern the operation of institutions. Therefore,
evidence of intentionally withholding information, deliberately
providing inaccurate information to the public, or failing to provide
timely and accurate information to the Commission will be seen as the
lack of a full commitment to integrity and may result in the loss of
membership in the Commission on Colleges."
As described above under "Background", on February 8, 2006, Mr. Bostic
sent a letter to John Larson, CEC's President and Chief Executive Officer,
requesting a public response from CEC not later than February 13, 2006 to seven
specific questions about CEC's plans for reforms to address its ongoing
regulatory and operational problems. CEC did not provide a response to any of
these questions. On February 15, 2006, CEC held its quarterly earnings call for
the fiscal year ended December 31, 2005. During the earnings call, CEC's
management again did not take the opportunity to address any of the questions
raised in Mr. Bostic's February 8, 2006 letter. In light of CEC's failure to
respond to any of Mr. Bostic's questions or to otherwise produce a detailed plan
for curing CEC's violations of the COC of SACS's Principles of Accreditation in
the time allotted by the COC of SACS, we believe that there is no credible
evidence that CEC's current management is capable of doing so, thus risking
CEC's accreditation by SACS.
We believe that the Nominees' qualifications and experience demonstrate
that they can bring to the Board the highest standards of integrity and a
commitment to good corporate governance. From 1995 to 2001, Mr. Bostic was the
Chairman and Chief Executive Officer of the holding company that owned AIU prior
to its acquisition by CEC. During that period, AIU was not cited for any
violations of COC of SACS' Criteria for Accreditation, the predecessor to COC of
SACS' Principles of Accrediation. To Mr. Bostic's knowledge, from 1995 to 2001,
AIU was not cited for, nor did it receive written notice of, non-compliance with
SACS criteria. Mr. Copeland is the former Chief Executive Officer of Deloitte &
Touche LLP and Deloitte Touche Tohmatsu (collectively "Deloitte & Touche") and
currently sits on the board of directors of three public companies. Since
approximately June 2003, Mr. Copeland has been a Senior Fellow for Corporate
Governance with the U.S. Chamber of Commerce. Mr. Ide is a partner of the law
firm McKenna Long & Aldridge and has represented public companies in a number of
turnaround and transition situations in a range of industries and market
sectors, and he has experience addressing regulatory, competition, capital
markets issues. Mr. Ide was Counselor to the United States Olympic Committee,
for whom he oversaw the investigation of allegations of malfeasance during the
bid for the Salt Lake City Games and the development and implementation of the
Committee's correction strategies. Mr. Ide is also a former President of the
American Bar Association.
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If elected, the Nominees intend to implement changes in CEC's
management policies to the extent necessary to ensure the following :
o That CEC's centrally administered quality control processes are
streamlined and efficient;
o That CEC's model for targeting and recruiting students results in the
admission of high-quality students;
o That CEC's curriculum development is at a level sufficient to result
in high student satisfaction and retention and a low level of bad debt
write-offs;
o That CEC adheres to "best practices" for management training and
development in order to create high morale and minimize employee turnover; and
o That CEC's tuition rates and annual increases are set at levels
competitive with and comparable to peer institutions.
We believe that the implementation of these measures would increase the
price to earnings ratio of CEC.
The Nominees currently do not intend to propose that CEC enter into an
extraordinary transaction such as a merger, acquisition or sale of all CEC's
assets. However, the Nominees would consider such a transaction, consistent with
their fiduciary duties, if such a transaction were proposed.
PARTICIPANTS IN SOLICITATION OF PROXIES
The Nominees are the sole participants in the solicitation of proxies.
Mr. Bostic is the beneficial owner of 456,970 Shares held in brokerage
accounts in his name. In addition, Mr. Bostic is the beneficial owner of 613,370
Shares held by the Robert Steven Bostic Revocable Trust, a Florida trust of
which Mr. Bostic is the sole trustee. Mr. Bostic is also the beneficial owner of
11,000 Shares held by The Bostic Family Foundation, a charitable foundation
administered by Mr. Bostic and members of his family. Other than these holdings,
neither Mr. Bostic nor any of his associates owns beneficially, directly or
indirectly, any securities of CEC or of any parent or subsidiary of CEC. In
aggregate, Mr. Bostic is the beneficial owner of 1,081,340 Shares, representing
approximately 1.1% of the reported outstanding Shares. Neither Mr. Bostic nor
his affiliates own beneficially, directory or indirectly, any additional
securities of CEC or of any parent or subsidiary of CEC.
Neither Mr. Copeland, nor any of his associates owns beneficially,
directly or indirectly, any securities of CEC or of any parent or subsidiary of
CEC.
Neither Mr. Ide, nor any of his associates owns beneficially, directly
or indirectly, any securities of CEC or of any parent or subsidiary of CEC.
Information concerning Messrs. Bostic, Copeland and Ide, including
their ages and business backgrounds, may be found below under the heading
"PROPOSAL 1: ELECTION OF DIRECTORS." Mr. Bostic's business address is White Oaks
Capital LLC, 1600 Frederica Road #10, St. Simons Island, Georgia 31522. Mr.
Copeland's business address is 4359 Riverview Drive, Duluth, GA 30097. Mr. Ide's
business address is McKenna Long & Aldridge LLP, 303 Peachtree St. NE, Ste.
5300, Atlanta, GA 30308.
OWNERSHIP OF NOMINEES
The following table sets forth the number of Shares beneficially owned
by each of the Nominees.
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Number of Shares Percentage of
Name and Address Beneficially Owned Outstanding Shares
------------------------------------- ------------------ --------------------
R. Steven Bostic 1,081,340 1.1%
White Oaks Capital LLC
1600 Frederica Road #10
St. Simons Island, Georgia 31522
James E. Copeland, Jr. 0 0%
4359 Riverview Drive
Duluth, GA 30097
R. William Ide 0 0%
McKenna Long & Aldridge LLP, 303
Peachtree St. NE, Ste. 5300
Atlanta, GA 30308
None of the Nominees may be deemed to be the beneficial owner (as that
term is defined in Rule 13d-3 under the Act) of more than 5% of the reported
outstanding Shares.
All transactions in the securities of CEC effected within the past two
years by the Nominees and their affiliates are contained in Appendix I attached
hereto.
OTHER INFORMATION
Other than as disclosed in this Proxy Statement, none of the Nominees
is, or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of CEC, including,
but not limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies.
None of the Nominees has any position or office with CEC.
Mr. Bostic has no arrangements or understandings with any person
pursuant to which he was selected to be a nominee.
Mr. Bostic has agreed to indemnify Messrs. Copeland and Ide against all
liabilities, costs and expenses (including reasonable legal fees and expenses)
incurred by them in connection with any threatened, pending or completed claim,
demand, action, suit or proceeding to which either Mr. Copeland or Mr. Ide is a
party or threatened to be made a party by reason of Mr. Copeland's or Mr. Ide's
nomination for election as a director of CEC, except for such liabilities,
costs, and expenses arising from either Mr. Copeland's or Mr. Ide's fraud, gross
negligence, or willful misconduct.
Mr. Bostic has agreed with his fellow nominee, Mr. Copeland, that if
Mr. Bostic is elected as a director of CEC, Mr. Copeland will not, subject to
his fiduciary duties, take any action in his capacity as director of CEC, nor
vote in favor of any corporate action by CEC, that would result in Deloitte
Touche being either advantaged or disadvantaged in competing for nonaudit
services of CEC, so long as Mr. Copeland remains a director of CEC and Mr.
Copeland's circumstances comply with the related fee limitations and other
requirements related to the independence of directors as set forth by law or by
applicable regulations, including those of NASDAQ, or by CEC's Board.
Mr. Copeland has entered into a Memorandum of Understanding with
Deloitte & Touche that requires him as a retired Partner and Chief Executive
Officer of Deloitte & Touche to obtain approval from the Chairman of the Board
of Directors of Deloitte & Touche for post-retirement activities, including
membership on boards of directors. Mr. Copeland has received such approval to
serve as a director of the Board, if elected. Mr. Copeland has no further
arrangements or understandings with any other person pursuant to which he was
selected to be a nominee. Mr.
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Copeland has agreed with Deloitte & Touche that he will not attempt to sell
Deloitte & Touche's services to any company for which he serves as a director,
and that Mr. Copeland's compensation and duties as a consultant to Deloitte &
Touche would not relate to or involve any services to any such company or its
subsidiaries.
None of the Nominees nor any of their respective associates have any
further arrangement or understanding with any person with respect to (A) any
future employment by CEC or its affiliates or (B) any future transactions to
which CEC or any of its affiliates will or may be a party. None of the Nominees
or their respective associates has a material interest in any transaction or
series of transactions engaged in by CEC since the beginning of CEC's last
fiscal year. However, Mr. Bostic sent a letter to CEC requesting reimbursement
for expenses incurred by him during his proxy solicitation for the 2005 annual
meeting of Stockholders. None of the Nominees during the past ten years has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
None of the entities referred to in this Proxy Statement with which the
Nominees have been involved during the past five years is a parent, subsidiary,
or other affiliate of CEC.
PROPOSAL 1: ELECTION OF DIRECTORS
The Nominees propose that the Stockholders elect Messrs. Bostic,
Copeland and Ide as directors of CEC at the Annual Meeting. There can be no
assurance as to whether any of CEC's current directors or nominees, if elected,
would serve with any of the Nominees if one or more of the Nominees is elected.
In the event that one or more of the Nominees is elected and that one or more of
CEC's current directors or nominees declines to serve with such Nominee or
Nominees, CEC's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that director vacancies may be filled by the directors
then in office.
Background information about the Nominees is set forth below. Other
than the indemnification arrangements described above under the heading "Other
Information". The Nominees are not receiving any compensation from any of the
Nominees or any of their affiliates in connection with this proxy solicitation.
If elected by the Stockholders at the Annual Meeting, it is expected that a
Nominee could receive compensation similar to the compensation received by the
other independent directors of CEC.
ROBERT STEVEN BOSTIC, age 62. Since September 2005, Mr. Bostic's
principal occupation is Chairman of White Oaks Capital LLC ("WOC"). WOC's
principal business is the ownership of Live Oaks Development LLC ("LOD"), First
ArtWorks and the Island Design and Architectural Center ("IDAC"), and its
principal business address is 1600 Frederica Road #10, St. Simons Island,
Georgia 31522. Since August 2004, Mr. Bostic has served as Chairman of LOD.
LOD's principal business is real estate development. Since August 2005, Mr.
Bostic has served as Chairman of First ArtWorks. First ArtWorks' principal
business is promoting and funding the arts in the K-8 school market. Since May
2005, Mr. Bostic has served as Chairman of IDAC. IDAC's principal business is as
a design center. From 1995 until January 2001, Mr. Bostic was the Chairman and
Chief Executive Officer of EduTrek, a holding company that owned and operated
AIU, an institution of higher education consisting of seven accredited
universities. In January 2001, EduTrek was merged with and into CEC. Commencing
in January 2001, Mr. Bostic was retired, until he assumed the position of
Chairman of LOD in August 2004.
JAMES E COPELAND, Jr., age 61. Mr. Copeland is retired. From June 1999
until his retirement in May 2003, Mr. Copeland served as a Partner and Chief
Executive Officer of Deloitte & Touche. Deloitte & Touche's principal business
is the provision of professional services. Mr. Copeland continues to provide
consulting services to Deloitte & Touche on an "as needed" basis. His principal
residence and place of business is 4359 Riverview Drive, Duluth, GA 30097. Mr.
Copeland serves as a member of the Board of Directors of Coca-Cola Enterprises
Inc. ("CCE"). CCE's principal business is beverage bottling and distribution.
Mr. Copeland also serves as chair of CCE's compensation committee and as a
member of CCE's audit, nominating/corporate governance and affiliated
transaction committees. Mr. Copeland serves as a member of the Board of
Directors of ConocoPhillips ("COP"). COP's principal business is the production
and distribution of petroleum. Mr. Copeland also serves on COP's audit
committee. Mr. Copeland serves as a member of the Board of Directors of Equifax
Inc. ("EFX"). EFX's principal business is the compilation and sale of credit
information. Mr. Copeland also serves as the chair of EFX's audit committee.
Since June 2003, Mr. Copeland has been a part-time Global Scholar at Georgia
State University's J. Mack Robison College of Business. Since approximately June
2003, Mr. Copeland has been a Senior Fellow for Corporate Governance with the
U.S. Chamber of Commerce.
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R. WILLIAM IDE, age 65. Since January 2003, Mr. Ide's principal
occupation is Partner at the law firm McKenna Long & Aldridge LLP ("MLA"). MLA's
principal business is the provision of legal services, and its principal place
of business is 303 Peachtree St. NE, Ste. 5300, Atlanta, GA 30308. Mr. Ide
serves as a member of the Board of Directors of AFC Enterprises ("AFC"). AFC's
principal business is as a franchisor and operator of Popeyes(R) Chicken &
Biscuits restaurants. Mr. Ide also serves as chair of AFC's nominating/corporate
governance committee and as a member of its executive and audit committees. Mr.
Ide serves as a member of the Board of Directors of Albemarle Corporation
("AC"). AC's principal business is chemical production. Mr. Ide also serves on
AC's audit and nominating/corporate governance committees. From July 2002 to
January 2003 Mr. Ide's principal occupation was Counsel to MLA. From July 2001
to July 2002, Mr. Ide's principal occupation was as an attorney at law in
private practice. From November 1996 to June 2001, Mr. Ide served as Senior
Vice-President, General Counsel and Secretary of Monsanto Company ("MS"). MS's
principal business is the provision of agricultural products to farmers.
WE STRONGLY URGE YOU TO VOTE FOR THE ELECTION OF MESSRS. BOSTIC,
COPELAND AND IDE BY SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD
IN THE POSTAGE PAID ENVELOPE PROVIDED TO YOU WITH THIS PROXY STATEMENT. IF YOU
HAVE SIGNED THE BLUE PROXY CARD AND NO MARKING IS MADE, YOU WILL BE DEEMED TO
HAVE GIVEN A DIRECTION TO VOTE ALL THE SHARES REPRESENTED BY THE BLUE PROXY CARD
FOR THE ELECTION OF MESSRS. BOSTIC, COPELAND AND IDE.
Except as set forth herein, none of the Nominees: (i) owns any
securities of CEC of record but not beneficially; (ii) owns beneficially any
securities of CEC or any parent or subsidiary of CEC; (iii) has any agreement or
understanding with any person with respect to any future employment by CEC or
its affiliates; (iv) has any agreement or understanding with any person with
respect to any future transactions to which CEC or any of its affiliates will or
may be a party; (v) has engaged in or had a direct or indirect interest in any
transaction, or series of similar transactions, since the beginning of CEC's
last fiscal year, or any currently proposed transaction, or series of similar
transactions, to which CEC or any of its subsidiaries was or is to be a party,
in which the amount involved exceeds $60,000; (vi) borrowed any funds for the
purpose of acquiring or holding any securities of CEC; (vii) is presently, or
has been within the past year, a party to any contract, arrangement or
understanding with any person with respect to securities of CEC; or (viii) will
receive any special compensation in connection with the proxy solicitation.
Other than as disclosed in this Proxy Statement, no securities of CEC are
beneficially owned by any of the associates of the Nominees.
OTHER PROPOSALS
PROPOSAL 2: PROPOSAL TO DECLASSIFY THE BOARD
According to the CEC Preliminary Proxy Statement, at the Annual
Meeting, CEC intends to seek Stockholder approval to amend the Certificate to
declassify the Board. The proposed amendment provides that beginning at the
Annual Meeting, those directors previously elected for three-year terms of
office will, upon the expiration of their three-year terms, be eligible for
re-election by the Stockholders to one-year terms such that beginning at CEC's
2008 annual meeting of Stockholders, all directors would be subject to annual
election to one-year terms.
Mr. Bostic believes that an immediate, full declassification of the
Board would be preferable to the gradual declassification of the Board proposed
by CEC. CEC's proposal would not result in the full declassification of the
Board until the 2008 annual meeting of the Stockholders. An immediate, full
declassification of the Board would, in Mr. Bostic's view, make CEC's directors
more accountable to the Stockholders by affording them the opportunity to vote
on the election of each director annually, not just once every three years. At
CEC's 2005 annual meeting, Stockholders voted 65.5% of the outstanding Shares in
favor of Mr. Bostic's proposal for the full declassification of the Board.
However, while Mr. Bostic believes that Proposal 1 does not go far enough to
make the Board accountable to Stockholders, he believes that it is preferable to
retaining a fully staggered Board and accordingly, he recommends that
Stockholders vote FOR the Board's proposal to amend the certificate to
declassify the Board. Each of the Nominees has indicated that if elected they
will propose to accelerate the declassification of the Board.
The below description is based on the description of Proposal 2 in the
CEC Preliminary Proxy Statement.
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PROPOSED AMENDMENT TO CERTIFICATE TO DECLASSIFY THE BOARD
Article V of the Certificate currently divides the Board into three
classes. Directors are elected for three-year terms that are staggered among the
three classes. If this proposal is approved by Stockholders, the Certificate
will be amended to provide that those directors previously elected for
three-year terms of office by the Stockholders will complete their three-year
terms and would be eligible for re-election to one-year terms at each annual
meeting of Stockholders thereafter. Beginning with the 2008 annual meeting of
Stockholders, the declassification of the Board would be complete, and all
directors would be subject to annual election to one-year terms.
The Board has also approved conforming amendments to its By-laws
contingent upon approval by the Stockholders of the proposed amendment to the
Certificate to declassify the Board. Article III, Section 3.3 of the By-laws
currently provides that the CEC's directors may only be removed for cause. If
the proposal to declassify the Board is approved, Article III, Section 3.3 of
the By-laws will be amended to provide that any director or the entire Board,
excepting certain Continuing Classified Directors (as defined in Article V of
the proposed Restated Certificate of Incorporation), may be removed from office
at any time by the affirmative vote of the holders of a majority of the voting
power of the shares entitled to vote at an election of directors. The Third
Amended and Restated By-laws amending Article III, Section 3.3 of the By-laws,
will become effective simultaneously with the effective date of the filing of
the Restated Certificate of Incorporation providing for a declassified Board
with the Secretary of State of the State of Delaware.
The proposed Restated Certificate of Incorporation, including the
proposed amendment to Article V of the Certificate to declassify the Board is
attached to the CEC Preliminary Proxy Statement as Exhibit A, and the above
discussion is qualified in its entirety by reference to such exhibit.
We recommend that you vote FOR the Board's proposal to amend the
Certificate to declassify the Board.
PROPOSAL 3: PROPOSAL TO PERMIT STOCKHOLDERS TO CALL SPECIAL MEETINGS OF
STOCKHOLDERS
According to the CEC Preliminary Proxy Statement, CEC intends to seek
Stockholder approval to amend CEC's Certificate to permit Stockholders holding
at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the
Shares to call special meetings of Stockholders.
Mr. Bostic believes that the Stockholders would be better served by a
provision permitting Stockholders holding at least thirty-three and one-third
percent (33 1/3%) of the outstanding Shares to call special meetings of
Stockholders, as was proposed by Mr. Bostic at CEC's 2005 annual meeting and as
was endorsed by votes of 64.2% of the outstanding Shares. In Mr. Bostic's view,
a threshold of sixty-six and two-thirds percent (66 2/3%) of the outstanding
Shares sets the bar for calling a special meeting of Stockholders at an
unreasonably high level, especially given that it is substantially higher than
the majority threshold that would be required to get many significant matters
approved at a special meeting of the Stockholders. Mr. Bostic disagrees with the
Board's assertion in the CEC Preliminary Proxy Statement that a threshold of
thirty-three and one-third percent (33 1/3%) of the outstanding Shares to call a
special meeting of Stockholders would result in disruption to the business of
CEC and impose significant administrative and financial burdens on CEC. Rather,
Mr. Bostic believes that meeting this threshold would require the consensus of a
very substantial block of CEC's Stockholders, and that, this high threshold
having been met, Stockholders could only benefit from being permitted a forum in
which to bring their concerns before the Company. While Mr. Bostic does not
fully support Proposal 3 for the reasons described above, he believes that it is
preferable to the current provisions of the Certificate which deny the
Stockholders any ability to call a special meeting, and accordingly, he
recommends that Stockholders vote FOR the Board's proposal to amend the
Certificate to permit Stockholders holding at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of the Shares to call special meetings of
the Stockholders. Each of the Nominees has indicated that if elected they will
propose to reduce the threshold to thirty-three and one-third percent (33 1/3%).
The below description is based on the description of Proposal 3 in the
CEC Preliminary Proxy Statement.
PROPOSED AMENDMENT TO CERTIFICATE TO PERMIT STOCKHOLDERS TO CALL
SPECIAL MEETINGS OF STOCKHOLDERS.
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Article VI of the Certificate currently provides that special meetings
of Stockholders may only be called pursuant to a resolution approved by a
majority of the Board. If this proposal is approved by Stockholders, Article VI
will be amended to allow Stockholders holding at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of the Shares entitled to vote at an
election of directors to call a special meeting of stockholders.
The Board has also approved conforming amendments to the By-laws
contingent upon approval by the Stockholders of the proposed amendment to the
Certificate to permit Stockholders holding at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of the Shares to call special meetings of
Stockholders. Article II, Section 2.6 of the By-laws currently provides that
special meetings of stockholders may be called only by the Board. If this
proposal is approved, Article II, Section 2.6 of the By-laws will allow
Stockholders holding at least sixty-six and two-thirds percent (66 2/3%) of the
voting power of the Shares entitled to vote at an election of directors to call
a special meeting of Stockholders, subject to certain specified conditions. The
Third Amended and Restated By-laws amending Article II, Section 2.6 of the
By-laws, will become effective simultaneously with the effective date of the
filing of the Restated Certificate of Incorporation permitting the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of shares
of Common Stock to call special meetings of stockholders with the Secretary of
State of the State of Delaware.
The proposed Restated Certificate of Incorporation, including the
proposed amendment to Article VI of the Certificate to permit the Stockholders
holding at least sixty-six and two-thirds percent (66 2/3%) of the voting power
of the Shares to call special meetings of stockholders, is attached to the CEC
Preliminary Proxy Statement as Exhibit A, and the above discussion is qualified
in its entirety by reference to such exhibit.
IMPACT OF THE PROPOSAL ON THE FILLING OF VACANCIES BY THE BOARD
All vacancies on the Board and newly-created directorships will
continue to be filled by the Board. Any director elected to fill a vacancy not
resulting from an increase in the number of directors will hold office for the
same remaining term as that of his or her predecessor and until his or her
successor is elected and qualified.
We recommend that you vote FOR the proposal to amend the Certificate to
permit the Stockholders holding at least sixty-six and two-thirds percent (66
2/3%) of the voting power of the Shares of Common Stock entitled to vote at an
election of directors to call special meetings of Stockholders.
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee of the Board has appointed Ernst & Young LLP,
independent certified public accountants, to serve as independent auditors of
CEC for the year ending December 31, 2006. This firm has audited the accounts of
CEC since 2002.
Stockholder ratification of the selection of Ernst & Young LLP as CEC's
independent auditors is not required by CEC's By-Laws or otherwise. However,
according to the CEC Preliminary Proxy Statements, the Board is submitting to
the stockholders at the Annual Meeting a proposal to ratify the Board'
appointment of Ernst & Young LLP. According to the CEC Preliminary Proxy
Statement, if a majority of the Shares voted at the Annual Meeting, in person or
by proxy, are not voted in favor of the ratification of the appointment of Ernst
& Young LLP, the Audit Committee will consider the facts and circumstances
surrounding the vote and may reconsider such appointment. According to the CEC
Preliminary Proxy Statement, notwithstanding this selection and the ratification
of this selection by Stockholders, the Audit Committee, in its discretion, may
direct the appointment of a different independent accounting firm at any time
during the year if the Audit Committee determines that such a change would be in
the best interests of CEC and its stockholders.
According to the CEC Preliminary Proxy Statement, it is expected that
representatives of Ernst & Young LLP will be present at the meeting and will be
available to respond to questions. They will be given an opportunity to make a
statement if they desire to do so.
We recommend that you vote FOR the ratification of the appointment of
Ernst & Young LLP as the independent auditors of CEC's financial statements for
the year ending December 31, 2006.
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IF YOU HAVE SIGNED THE BLUE PROXY CARD AND NO MARKING IS MADE, YOU WILL
BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE ALL THE SHARES REPRESENTED BY THE
BLUE PROXY CARD FOR THE FOREGOING PROPOSALS.
VOTING ON OTHER PROPOSALS
The accompanying BLUE Proxy Card will be voted in accordance with your
instruction on such card. You may vote for or vote against, or abstain from
voting on, the proposals described above under the heading "Other Proposals" by
marking the proper box on the BLUE Proxy Card.
The Nominees and their affiliates know of no other business to be
presented at the Annual Meeting. If any other matters should properly come
before the Annual Meeting, it is intended that the persons named on the enclosed
BLUE Proxy Card will vote that proxy on such other matters in accordance with
their judgment. The Nominees will not use such discretionary authority to vote
the proxies for matters of which the Nominees are aware a reasonable time before
the Annual Meeting.
VOTING PROCEDURES
According to the CEC Preliminary Proxy Statement, the voting procedures
for the Annual Meeting are as set forth below. The required quorum for
transaction of business at the Annual Meeting will be a majority of the Shares
as of the Record Date. Votes cast by proxy or in person at the Annual Meeting
will be tabulated by the election inspector appointed for the meeting and will
determine whether or not a quorum is present.
Stockholders as of the close of business on the Record Date
("Stockholders of Record") are entitled to receive notice of, and to vote at,
the Annual Meeting or any adjournments thereof. If you do not hold your Shares
through a brokerage firm, bank nominee or other institution, then you are a
Stockholder of Record and you may vote using any of the following methods:
By Mail: Complete, sign and date the BLUE Proxy Card and return it in
the prepaid envelope. Each executed and returned BLUE Proxy Card or voting
instruction card will be voted in accordance with the directions indicated
thereon, or if no direction is indicated, such proxy will be voted in accordance
with the recommendations of the Nominees contained in this Proxy Statement. If
you are a stockholder of record, and the prepaid envelope is missing, please
mail your completed proxy card to Messrs. Bostic, Copeland and Ide c/o Innisfree
M&A Incorporated, 501 Madison Avenue - 20th Floor, New York, NY 10022.
In person at the Annual Meeting: If you attend the Annual Meeting, you
may deliver your completed BLUE Proxy Card in person, or you may vote in person.
If you hold your shares in a stock brokerage account or by a bank or other
holder of record, you will not be able to vote in person at the Annual Meeting
unless you have previously requested and obtained a "legal proxy" from your
bank, broker or other nominee and present it at the Annual Meeting.
If your Shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can vote such shares and only upon receipt of your
specific instructions. Accordingly, you should contact the person responsible
for your account and give instructions for a BLUE Proxy Card to be signed
representing your shares.
Your vote is important. Whether or not you are able to attend the
Annual Meeting, we urge you to complete the enclosed BLUE Proxy Card and return
it in the enclosed self-addressed pre-paid envelope. All valid proxies received
prior to the meeting will be voted. If you specify a choice with respect to any
item by marking the appropriate box on the proxy, the Shares will be voted in
accordance with that specification. IF NO SPECIFICATION IS MADE, THE PERSONS
NAMED ON THE ENCLOSED BLUE PROXY CARD WILL VOTE YOUR SHARES FOR MESSRS. BOSTIC,
COPELAND AND IDE WITH RESPECT TO PROPOSAL 1, AND FOR PROPOSAL 2, FOR PROPOSAL 3
AND FOR PROPOSAL 4.
PROXY PROCEDURES
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WE STRONGLY URGE YOU TO VOTE FOR THE ELECTION OF MESSRS. BOSTIC,
COPELAND AND IDE. IF YOU WISH TO DO SO, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED BLUE PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
If you have any questions about giving your proxy or require
assistance, please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue - 20th Floor
New York, NY 10022
Stockholders Call Toll-Free: 1-877-750-9499
Banks or Brokers Call Collect: 1-212-750-5833
The accompanying BLUE Proxy Card will be voted at the Annual Meeting in
accordance with your instructions on such card.
REVOCATION OF PROXIES
Any Stockholder who has mailed a WHITE Proxy Card to CEC may revoke it
before it is voted by mailing a duly executed proxy card to the Nominees bearing
a date LATER than the proxy card delivered to CEC. Proxies may also be revoked
at any time prior to voting by: (i) delivering to CEC (Attention: Janice L.
Block, Senior Vice President, General Counsel and Secretary) a written notice
stating that the proxy is revoked; (ii) delivering a duly executed proxy bearing
a later date than the proxy delivered previously; or (iii) attending the Annual
Meeting and voting in person.
Only Stockholders of Record will be entitled to vote. If you were a
Stockholder of Record, you will retain your voting rights at the Annual Meeting
even if you sell such Shares after the Record Date. Accordingly, it is important
that you vote the Shares held by you on the Record Date, or grant a proxy to
vote such Shares on the BLUE Proxy Card, even if you sell such Shares after the
Record Date.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION ON THE RECORD DATE, ONLY IT CAN VOTE SUCH SHARES
AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT
THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE ON
YOUR BEHALF THE BLUE PROXY CARD AS SOON AS POSSIBLE.
SOLICITATION OF PROXIES
Mr. Bostic and the other Nominees may solicit proxies. Proxies will be
solicited by mail, advertisement, telephone, facsimile, other electronic means
and in person. None of those persons will receive additional compensation for
their solicitation efforts.
In addition, Mr. Bostic has retained Innisfree M&A Incorporated
("Innisfree") to assist in this proxy solicitation, for which services Innisfree
will be paid a fee not to exceed $[150,000]. Innisfree will also be reimbursed
for its reasonable out-of-pocket expenses. Mr. Bostic has also agreed to
indemnify Innisfree against certain liabilities and expenses, including certain
liabilities and expenses under the federal securities laws. It is anticipated
that 75 persons will be employed by Innisfree to solicit Stockholders.
Banks, brokers, custodians, nominees and fiduciaries will be requested
to forward solicitation material to beneficial owners of Shares. Mr. Bostic will
reimburse banks, brokers, custodians, nominees and fiduciaries for their
reasonable expenses for sending solicitation material to beneficial owners.
Mr. Bostic's estimate of the total cost to be incurred in connection
with this proxy solicitation is between $[1,000,000 and $1,500,000]. To date,
approximately $[500,000] has been incurred in connection with this consent
solicitation. Mr. Bostic will bear the costs of this consent solicitation and,
if successful, will seek reimbursement of the costs from CEC. The affirmative
vote of the directors other than Mr. Bostic's Nominees would be required to
approve such reimbursement. The Board would be informed of Mr. Bostic's interest
in receiving reimbursement
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and would be required to evaluate the requested reimbursement consistent with
their fiduciary duties to CEC and its Stockholders. Costs related to the
solicitation of consents include expenditures for attorneys, public relations,
printing, advertising, postage, and related expenses and fees.
ADDITIONAL INFORMATION
Certain information regarding the securities of CEC held by CEC's
directors, nominees, management and Stockholders holding 5% or more of the
outstanding Shares is contained in the CEC Preliminary Proxy Statement.
Information concerning the date by which proposals of Stockholders intended to
be presented at the Annual Meeting must be received by CEC for inclusion in the
2006 Proxy Statement and form of proxy for the Annual Meeting is contained in
CEC's Proxy Statement for CEC's 2005 annual meeting of Stockholders. This
information is contained in CEC's public filings. The Nominees assume no
responsibility for the accuracy or completeness of such information.
[remainder of page intentionally blank]
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Date: March 28, 2006
/s/ Robert Steven Bostic
-------------------------------
Robert Steven Bostic
/s/ James E. Copeland, Jr.
-------------------------------
James E. Copeland, Jr.
/s/ R. William Ide
-------------------------------
R. William Ide
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APPENDIX I
SUPPLEMENTAL INFORMATION
Set forth below are the dates and amounts of each Nominee's purchases
and sales of Shares within the past two years.
Name Date Transaction Number
Type of Shares
--------------------------------------------------------------------------------
R. Steven Bostic 08/11/04 Sell Shares 300,000
--------------------------------------------------------------------------------
James E. Copeland, Jr. None
--------------------------------------------------------------------------------
R. William Ide None
--------------------------------------------------------------------------------
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IMPORTANT
1. If your shares are held in your own name, please mark, date and mail the
enclosed BLUE Proxy Card to our Proxy Solicitor, Innisfree M&A
Incorporated, 501 Madison Avenue - 20th Floor, New York, NY 10022, in the
postage-paid envelope provided.
2. If your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can vote such shares and only upon receipt of
your specific instructions. Accordingly, you should contact the person
responsible for your account and give instructions for a BLUE Proxy Card
to be signed representing your shares.
If you have already submitted a WHITE Proxy Card to CEC for the Annual
Meeting, you may change your vote to a vote FOR the election of the Nominees by
marking, signing, dating and returning the enclosed BLUE Proxy Card for the
Annual Meeting, which must be dated after any proxy you may have submitted to
CEC. ONLY YOUR LATEST DATED DULY EXECUTED PROXY FOR THE ANNUAL MEETING WILL
COUNT AT THE ANNUAL MEETING. Proxies may also be revoked at any time prior to
voting by: (i) delivering to CEC (Attention: Janice L. Block, Senior Vice
President, General Counsel and Secretary) a written notice stating that the
proxy is revoked; (ii) delivering a duly executed proxy bearing a later date
than the proxy delivered previously; or (iii) attending the Annual Meeting and
voting in person.
3. If you have any questions about giving your proxy or require assistance,
please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue - 20th Floor
New York, NY 10022
Stockholders Call Toll-Free: 1-877-750-9499
Banks or Brokers Call Collect: 1-212-750-5833
PROXY CARD
CAREER EDUCATION CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY
R. STEVEN BOSTIC
The undersigned hereby appoints Messrs. R. Steven Bostic, James E. Copeland, Jr.
and R. William Ide and each of them, as proxies, with full power of
substitution, to vote the stock of Career Education Corporation ("CEC") which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders or
at any adjournment or postponements thereof, upon the matters set forth in the
Proxy Statement of Mr. Bostic and upon such other matters as may properly come
before the meeting, and revokes any previous proxies with respect to the matters
covered by this proxy. IF NO DIRECTION IS MADE WITH RESPECT TO A PROPOSAL, THIS
PROXY WILL BE VOTED OR INSTRUCTIONS WILL BE GIVEN AS FOLLOWS WITH RESPECT TO ANY
SUCH PROPOSAL: (i) FOR MESSRS. R. STEVEN BOSTIC, JAMES E. COPELAND, JR. AND R.
WILLIAM IDE FOR DIRECTORS, (ii) FOR THE PROPOSAL TO DECLASSIFY THE BOARD, (iii)
FOR THE PROPOSAL TO PERMIT STOCKHOLDERS TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
AND (iv) FOR THE RATIFICATION OF APPOINTMENT OF AUDITORS. THIS PROXY WILL ALSO
BE VOTED AT THE DISCRETION OF THE PROXY HOLDERS UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING. If one or more of Mr. Bostic's nominees for
director is unable or declines to serve as director, this proxy will be voted
for any nominee that Mr. Bostic designates.
Please complete, sign and date the reverse side of this proxy card and return it
in the enclosed envelope.
YOUR VOTE IS VERY IMPORTANT TO US.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
|X| Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder.
WE RECOMMEND A VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED IN
PROPOSAL 1 BELOW.
1. Election of Directors - Nominees:
--------------------------------------------------------------------- ----------------------- -----------------------
Nominee FOR WITHHOLD
---------------------------------------------------------------------
(01) R. Steven Bostic all from all
---------------------------------------------------------------------
(02) James E. Copeland, Jr. nominees nominees
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(03) R. William Ide [_] [_]
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Instruction: To withhold authority
for individual nominee(s), print name(s): ________________________________________________________
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We intend to use this proxy to vote FOR Messrs. Bostic, Copeland and Ide.
There is no assurance that any of CEC's nominees will serve as
directors if Messrs. Bostic, Copeland or Ide is elected to the Board of
Directors. In the event that one or more of Mr. Bostic's nominees is elected and
that one or more of the CEC nominees declines to serve with such nominee or
nominees, then the Second Amended and Restated By-laws of CEC provide that
director vacancies may be filled by a majority vote of the directors then in
office.
WE RECOMMEND A VOTE "FOR" PROPOSALS 2, 3 AND 4 BELOW
--------------------------------------------------------- ------------------- --------------------- ------------------
FOR AGAINST Abstain
--------------------------------------------------------- ------------------- --------------------- ------------------
[_] [_] [_]
2. Proposal to Declassify the Board
----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------- ------------------- --------------------- ------------------
3. Proposal to Permit Stockholders to call Special
Meetings of Stockholders
--------------------------------------------------------- ------------------- --------------------- ------------------
--------------------------------------------------------- ------------------- --------------------- ------------------
4. Ratification of Appointment of Auditors
--------------------------------------------------------- ------------------- --------------------- ------------------
--------------------------------------------------------------------- -----------------------------------------------
Dated
--------------------------------------------------------------------- -----------------------------------------------
Signature(s)
--------------------------------------------------------------------- -----------------------------------------------
Signature(s)
--------------------------------------------------------------------- -----------------------------------------------
Note: Please sign exactly as name appears hereon. If the Shares are
held by joint tenants or as community property, both must sign. When
signing as executor, administrator, trustee or other representative,
please give full title. If a corporation, please sign in full corporate
name by a duly authorized officer. If a partnership, please sign in
partnership name by an authorized person.