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Exhibit 10.28
APEX ONLINE LEARNING INC.
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement dated as of July 2, 1999, is entered into by and between
Apex Online Learning Inc., a Washington corporation (the "Company"), and the
entity listed on Exhibit A hereto (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the Closing (as
defined in Section 2) will have, duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of 2,000,000 shares of its Series B Preferred
Stock, $0.001 par value per share (the "Series B Preferred"), having the rights,
restrictions, privileges and preferences set forth in the Designation of Series
B Preferred Stock attached hereto as Exhibit B (the "Series B Designation"). The
Company has, or before the Closing will have, adopted and filed the Series B
Designation with the Secretary of State of the State of Washington.
1.2 Sale of Shares. Subject to the terms and conditions of
this Agreement, at the Closing the Company will sell and issue to the Purchaser,
and the Purchaser will purchase, the number of shares of Series B Preferred set
forth opposite the Purchaser's name on Exhibit A for the purchase price of $5.00
per share (the "Purchase Price"). The shares of Series B Preferred sold under
this Agreement are referred to as the "Shares."
1.3 Use of Proceeds. The Company will use the proceeds from
the sale of the Shares for product development and other general corporate
purposes.
2. Closings.
2.1 Initial Closing. The closing (the "Closing") of the sale
and purchase of the Shares under this Agreement shall take place at the offices
of ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. at 10:00 am.,
on July 2, 1999, or at such other time, date and place as are mutually agreeable
to the Company and the Purchaser but in no event later than July 15, 1999. At
the Closing, the Company shall deliver to the Purchaser a certificate for the
number of Shares being purchased at the Closing by the Purchaser, registered in
the name of the Purchaser, against payment to the Company of the Purchase Price,
by wire transfer, check, cancellation of indebtedness or other method acceptable
to the Company. The date of the Closing is hereinafter referred to as the
"Closing Date." If at the Closing any of the conditions specified in Section 5
shall not have been fulfilled, the Purchaser shall, at its election,
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be relieved of all of its obligations under this Agreement without thereby
waiving any other rights it may have by reason of such failure or such
non-fulfillment.
2.2 Subsequent Closings. In the event that, prior to the
second anniversary of Closing, the Company sells shares of its Preferred Stock
to an investor (a "Subsequent Purchaser"), the Company shall at the time of each
such sale (a "Subsequent Closing") also sell and the Purchaser shall purchase
shares of Preferred Stock of the Company for an aggregate purchase price equal
to one-half of the amount paid by the Subsequent Purchaser; provided, that the
maximum amount the Purchaser shall be obligated to invest to purchase Preferred
Stock pursuant to this Section 2.2 shall be $5,000,000. The price per share to
be paid by the Purchaser for Preferred Stock at a Subsequent Closing shall be
$5.00 per share, unless the price being paid by the Subsequent Purchaser at such
Subsequent Closing is less than $2.00 per share, in which event the price to be
paid by the Purchaser at such Subsequent Closing shall equal $5.00 per share
multiplied by a fraction the numerator of which is the price per share being
paid by the Subsequent Purchaser at such Subsequent Closing and the denominator
of which is $2.00. Any Preferred Stock issued to the Purchaser or a Subsequent
Purchaser at a Subsequent Closing shall be issued to the Purchaser pursuant to a
purchase agreement substantially identical to this Agreement (or on such other
terms as the Purchaser may agree in its sole discretion) and to the Subsequent
Purchaser on terms no more favorable to the Subsequent Purchaser than the terms
of this Agreement and the Shareholders Agreement of even date herewith between
the Company, the Purchaser and the Existing Shareholders named therein (the
"Shareholders Agreement"). The Preferred Stock issued to the Purchaser at a
Subsequent Closing shall be (a) Series B Preferred if the price per share to be
paid by the Purchaser at such Subsequent Closing is $5.00, (b) if the price per
share to be paid by the Purchaser at such Subsequent Closing is less than $5.00,
a new series of Preferred Stock containing terms substantially identical to the
Series B Preferred, except that the original issue price and initial conversion
value reflected in the terms of such new series of Preferred Stock shall be the
lower purchase price, or (c) Preferred Stock containing such other terms as the
Purchaser may agree in its sole discretion. The Preferred Stock issued to the
Subsequent Purchaser at a Subsequent Closing shall be (x) a new series of
Preferred Stock (other than a series issued to the Purchaser) containing terms
substantially identical to the Series B Preferred, except that the original
issue price and initial conversion value reflected in the terms of such new
series of Preferred Stock shall be the purchase price paid by such Subsequent
Purchaser, or (y) Preferred Stock containing such other terms as the Purchaser
may agree in its sole discretion. Notwithstanding the foregoing provisions of
this Section 2, so long as the Purchaser holds at least 500,000 shares (as
adjusted for stock splits, stock dividends, recapitalizations or similar events)
of Series B Preferred Stock, (i) in no event shall the Company sell any equity
securities to any investor (other than the Purchaser) that (A) manages, operates
or owns any public or private school having any grade level from pre-K through
and including grade 12 and offering a curriculum that includes mathematics,
science and humanities and (B) has annual revenues of more than $5,000,000 from
such activity and (ii) without the prior written
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approval of the Purchaser, which shall not be unreasonably withheld, the
Subsequent Purchaser shall only be ▇▇▇▇ ▇. ▇▇▇▇▇, Vulcan Ventures Incorporated
or another party which is not principally engaged in the business of making debt
or equity investments or an affiliate of such a party. The Company shall not
issue Series B Preferred Stock to any party other than the Purchaser. If any
shares of designated Series B Preferred Stock remain unissued after the second
anniversary hereof, the Board of Directors of the Company may amend the
resolution establishing such series to decrease (but not below the number of
shares of such series then outstanding) the number of shares of such series, and
the number of shares constituting the decrease shall thereafter constitute
authorized but undesignated shares.
3. Representations of the Company. Except as disclosed by the
Company in Exhibit C hereto, the Company hereby represents and warrants to the
Purchaser that the statements contained in this Section 3 are true, complete and
correct.
3.1 Organization and Standing. The Company is a corporation
duly organized and validly existing under the laws of the State of Washington
and has full corporate power and authority to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and perform
this Agreement and the Shareholders Agreement and to carry out the transactions
contemplated by this Agreement and the Shareholders Agreement. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in every other jurisdiction in which the failure so to qualify would have a
material adverse effect on the business, prospects, assets or condition
(financial or otherwise) of the Company (a "Company Material Adverse Effect").
The Company has furnished to the Purchaser true and complete copies of its
Articles of Incorporation and Bylaws, each as amended to date and presently in
effect. The Company has at all times complied with all provisions of its
Articles of Incorporation and Bylaws and is not in default under, or in
violation of, any such provision.
3.2 Capitalization. The authorized capital stock of the
Company (immediately prior to the Closing) consists of 60,000,000 shares of
Common Stock, $0.001 par value per share (the "Common Stock"), of which 1,000
shares are issued and outstanding, 4,441,208 shares have been reserved for
issuance pursuant to the 1999 Stock Option/Stock Issuance Plan of the Company,
as may be amended from time to time (the "Stock Option Plan"), and 5,050,000
shares have been reserved for conversion of issued and outstanding Series A
Preferred Stock and 40,000,000 shares of Preferred Stock, $0.001 par value per
share, of which 7,550,000 shares have been designated as Series A Preferred
Stock, of which 5,050,000 shares are issued and outstanding, and of which
2,000,000 shares have been designated as Series B Preferred, none of which
shares are issued and outstanding. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as provided in this Agreement or the Stock Option Plan,
(i) no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
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the Company is authorized or outstanding, (ii) the Company has no obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company. All
of the issued and outstanding shares of capital stock of the Company have been
offered, issued and sold by the Company in compliance with applicable federal
and state securities laws.
3.3 Subsidiaries, Etc. The Company has no subsidiaries and
does not own or control, directly or indirectly, any shares of capital stock of
any other corporation or any interest in any partnership, joint venture or other
non-corporate business enterprise.
3.4 Securityholder Lists and Agreements. Attached as Exhibit D
is a true and complete list of the securityholders of the Company, showing the
number of shares of Common Stock or other securities of the Company held by each
securityholder as of the date of this Agreement and, in the case of options,
warrants and other convertible securities, the exercise price thereof and the
number and type of securities issuable thereunder (the parties acknowledge that
the aggregate granted option amounts shown on Exhibit D may be less than actual
aggregate grants but not by more than 10%). Except as provided in this
Agreement, there are no agreements, written or oral, between the Company and any
holder of its securities, or, to the best of the Company's knowledge, among any
holders of its securities, relating to the acquisition (including without
limitation rights of first refusal, anti-dilution or pre-emptive rights),
disposition, registration under the Securities Act of 1933, as amended (the
"Securities Act"), or voting of the capital stock of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, have been, or
will be on or prior to the Closing, duly authorized by all necessary corporate
action on the part of the Company, and all such shares have been duly reserved
for issuance. The Shares when so issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, and the shares of
Common Stock issuable upon conversion of the Shares, when issued upon such
conversion, will be duly and validly issued, fully paid and nonassessable.
3.6 Authority; No Conflict. The execution, delivery and
performance by the Company of this Agreement and the Shareholders Agreement, and
the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the adoption and filing of the Series B
Designation, have been
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duly authorized by all necessary corporate and shareholder action. This
Agreement and the Shareholders Agreement have each been duly executed and
delivered by the Company and each constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms, subject as to enforcement
of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The execution
and delivery of this Agreement and the Shareholders Agreement and the
performance by the Company of the transactions contemplated thereby and
compliance with their respective provisions by the Company will not (a) conflict
with or violate any provision of the Articles of Incorporation or Bylaws of the
Company, (b) except with respect to the filing of the Series B Designation,
require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (each of the foregoing is hereafter referred to as a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which the Company is a party or by which
the Company is bound or to which its assets are subject, other than any of the
foregoing events listed in this clause (c) which do not and will not,
individually or in the aggregate, result in a Company Material Adverse Effect,
(d) result in the imposition of any Security Interest upon any assets of the
Company or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its properties or assets. For
purposes of this Agreement, "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge, or other lien (whether arising by
contract or by operation of law).
3.7 Consents. No consent, approval, waiver, permit, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority or any other individual, partnership,
corporation, unincorporated organization or association, limited liability
company, trust or other entity (collectively, a "Person") is required on the
part of the Company in connection with the execution and delivery of this
Agreement and the Shareholders Agreement, the offer, issuance, sale and delivery
of the Shares, the issuance and delivery of the shares of Common Stock of the
Company issuable upon conversion or exchange of the Shares or consummation by
the Company of the other transactions to be consummated at the Closings, as
contemplated by this Agreement and the Shareholders Agreement, except such as
shall have been made or obtained prior to and shall be effective on and as of
the Closings and such filings required to be made after the Closings under
applicable federal and state securities laws. Based on the representations made
by the Purchaser in Section 4 of this Agreement, the offer and
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sale of the Shares to the Purchaser will be in compliance with applicable
federal and state securities laws.
3.8 Litigation. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to the best of the Company's
knowledge, threatened, against the Company, or, to the best of the Company's
knowledge, any director, executive officer or key employee of the Company, or
affecting any of the Company's assets or properties, which questions the
validity of this Agreement or the Shareholders Agreement or the right of the
Company to enter into and perform the transactions contemplated by this
Agreement and the Shareholders Agreement or otherwise seeks to enjoin or
challenges such transactions, or which might result, either individually or in
the aggregate, in a Company Material Adverse Effect.
3.9 Financial Statements; No Undisclosed Liabilities.
(a) The Company has furnished to the Purchaser a complete
and correct copy of the unaudited balance sheet of the Company (the "Balance
Sheet") at March 31, 1999 (the "Balance Sheet Date") and the related statement
of operations (collectively, the "Financial Statements"). The Financial
Statements are complete and correct, are in accordance with the books and
records of the Company and present fairly the financial condition and results of
operations of the Company, as at the dates and for the periods indicated, and
have been prepared in accordance with generally accepted accounting principles
consistently applied, except that the Financial Statements may not be in
accordance with generally accepted accounting principles only with respect to
the absence of footnotes normally contained therein and are subject to normal
year-end audit adjustments which in the aggregate will not be material.
(b) Since the Balance Sheet Date, the Company has not
incurred any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company (including the notes thereto), other than in the ordinary course of
business, consistent with past practice.
3.10 Taxes. The Company has withheld or collected from each
payment made to its employees the amount of all taxes required to be withheld or
collected therefrom and has paid all such amounts to the appropriate taxing
authorities when due. Neither the Company nor any of its stockholders has ever
filed (a) an election pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as an S Corporation or
(b) consent pursuant to Section 341(f) of the Code relating to collapsible
corporations. The Company's net operating losses for federal income tax
purposes, as set forth in the Financial Statements, are not subject to any
limitations imposed by Section 382 of the
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Code, and consummation of the transactions contemplated by this Agreement or by
any other agreement, understanding or commitment, contingent or otherwise, to
which the Company is a party or by which it is otherwise bound will not have the
effect of limiting the Company's ability to use such net operating losses in
full to offset such taxable income.
3.11 Insurance. The Company maintains valid policies of
workers' compensation insurance and of insurance with respect to its properties
and business of the kinds and in the amounts not less than is customarily
obtained by corporations of established reputation engaged in the same or
similar business or may otherwise be required by law, including, without
limitation, insurance against loss, damage, fire, theft, public liability and
other risks.
3.12 Intellectual Property.
(a) The Company owns, free and clear of all Security
Interests, or has the valid right to use all Intellectual Property (as defined
below in this Section 3.12) used by it in its business as currently conducted or
as currently proposed to be conducted. No other person or entity (other than
licensors of software that is generally commercially available, licensors of
Intellectual Property under the agreements disclosed pursuant to paragraph (d)
below and non-exclusive licensees of the Company's Intellectual Property in the
ordinary course of the Company's business) has any rights to any of the
Intellectual Property owned or used by the Company, and, to the Company's
knowledge, no other person or entity is infringing, violating or
misappropriating any of the Intellectual Property that the Company owns. For
purposes of this Agreement, "Intellectual Property" means all (i) patents and
patent applications, (ii) copyrights and registrations thereof, (iii) mask works
and registrations and applications for registration thereof, (iv) computer
software, data and documentation, (v) trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced to
practice, know-how, manufacturing and production processes and techniques,
research and development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (vi) trademarks, service marks,
trade names, domain names and applications and registrations therefor and (vii)
other proprietary rights relating to any of the foregoing.
(b) To the best knowledge of the Company after reasonable
inquiry, none of the activities or business conducted by the Company or proposed
to be conducted by the Company infringes, violates or constitutes a
misappropriation of (or in the past infringed, violated or constituted a
misappropriation of) any Intellectual Property of any other person or entity.
The Company has not received any complaint, claim or notice alleging any such
infringement, violation or misappropriation, and to the knowledge of the
Company, there is no basis for any such complaint, claim or notice.
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(c) Exhibit C hereto identifies each (i) patent that has
been issued or assigned to the Company with respect to any of its Intellectual
Property, (ii) pending patent application that the Company has made with respect
to any of its Intellectual Property, (iii) any copyright or trademark
registration or application with respect to the Company's Intellectual Property,
and (iv) license or other agreements pursuant to which the Company has granted
any rights to any third party with respect to any of its Intellectual Property.
(d) Exhibit C hereto identifies each agreement with a
third party pursuant to which the Company obtains rights to Intellectual
Property material to the business of the Company (other than software that is
generally commercially available) that is owned by a party other than the
Company. Other than license fees for software that is generally commercially
available, the Company is not obligated to pay any royalties or other
compensation to any third party in respect of its ownership, use or license of
any of its Intellectual Property.
(e) The Company has taken reasonable precautions (i) to
protect its rights in its Intellectual Property and (ii) to maintain the
confidentiality of its trade secrets, know-how and other confidential
Intellectual Property, and to the Company's knowledge, there have been no acts
or omissions (other than those made based on reasonable, good faith business
decisions) by the officers, directors, shareholders and employees of the Company
the result of which would be to materially compromise the rights of the Company
to apply for or enforce appropriate legal protection of the Company's
Intellectual Property.
(f) All of the Company's Intellectual Property has been
created by employees of the Company within the scope of their employment by the
Company or by Affiliates or independent contractors of the Company who have
executed agreements expressly assigning all right, title and interest in such
Intellectual Property to the Company. No portion of the Company's Intellectual
Property was jointly developed with any third party other than an Affiliate.
3.13 Compliance. The Company (and its predecessors) has, in
all material respects, complied with all laws, regulations and orders applicable
to its present and proposed business and has all material authorizations,
permits and licenses required thereby, except for those the absence of which
would not have a Company Material Adverse Effect. No violations or notices of
failure to comply have been issued or recorded in respect of such
authorizations, permits and licenses, and the Company has no knowledge of any
reason why such authorizations, permits and licenses may be revoked or
suspended. With respect to any such required authorizations, permits and
licenses, applications for which are either pending or contemplated to be made
pursuant to the business strategy of the Company, the Company does not know of
any reason why such authorizations, permits and licenses should not be approved
and granted by the appropriate Governmental
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Entity. To the best of the Company's knowledge, there is no provision of any
state or federal judgment, decree, order, statute, rule or regulation applicable
to or binding upon the Company, which materially adversely affects or, so far as
the Company may now foresee, in the future is reasonably likely to result in or
have a Company Material Adverse Effect.
3.14 Absence of Changes. Since the Balance Sheet Date and
except for the grant of options pursuant to the Stock Option Plan (i) the
business of the Company has been operated only in the ordinary course,
consistent with past practice, and there has been no material adverse change in
the business, operations, condition (financial or otherwise), results of
operations of the Company, other than changes occurring in the ordinary course
of business (which ordinary course changes have not, individually or in the
aggregate had a Company Material Adverse Effect); (ii) except as reflected in
the unaudited Financial Statements or as described on Exhibit C, the Company has
not authorized or made any distributions, or declared or paid any dividends,
upon or with respect to any of its capital stock, or other equity interests, nor
has the Company redeemed, purchased or otherwise acquired, or issued or sold,
any of its capital stock or other equity interests; and (iii) there has been no
material change in any compensation, arrangement or agreement with any key
employee, director, stockholder or Affiliate (as defined below). "Affiliate" of
a specified person or entity shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the person or entity specified.
3.15 Books and Records. The minute books of the Company
contain complete and accurate records of all actions taken by its shareholders
and its Board of Directors and committees thereof. The stock ledger of the
Company is complete in all material respects and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of the
Company.
3.16 Contracts. Except as set forth in Exhibit C, all of the
contracts and agreements which are material to the business, assets, operations
or condition (financial or otherwise) of the Company are in full force and
effect and constitute valid and binding obligations of the Company; neither the
Company, nor, to the best knowledge of the Company, any other party thereto, is
in default of any of its obligations under any such contracts or agreements in a
manner which could reasonably be expected to have a Company Material Adverse
Effect; and none of such contracts or agreements is currently being
renegotiated.
3.17 Disclosure. Neither this Agreement nor any exhibit
hereto, nor any report, certificate, or instrument furnished to the Purchaser or
its special counsel in connection with the transactions contemplated by this
Agreement, when read together, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained
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herein or therein, in light of the circumstances under which they were made, not
misleading.
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows:
4.1 Investment. The Purchaser is acquiring the Shares, and the
shares of Common Stock into which the Shares may be converted, for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same; and, except as contemplated by this Agreement and the Exhibits
hereto, the Purchaser has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition thereof. The Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
4.2 Organization and Authority. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it and to
enter into and perform this Agreement and the Shareholders Agreement and to
carry out the transactions contemplated by this Agreement and the Shareholders
Agreement. The Purchaser has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company.
4.3 Experience. The Purchaser has carefully reviewed the
representations concerning the Company contained in this Agreement and has made
detailed inquiry concerning the Company, its business and its personnel; the
officers of the Company have made available to the Purchaser any and all written
information which it has requested and have answered to the Purchaser's
satisfaction all inquiries made by the Purchaser; and the Purchaser has
sufficient knowledge and experience in finance and business that it is capable
of evaluating the risks and merits of its investment in the Company and the
Purchaser is able financially to bear the risks thereof.
5. Conditions to the Obligations of the Purchaser. The obligation
of the Purchaser to purchase Shares at the Closing is subject to the
fulfillment, or the waiver by the Purchaser, of each of the following conditions
on or before the Closing:
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and warranty
had been made on and as of that date.
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5.2 Performance. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Closing.
5.3 Opinion of Counsel. The Purchaser shall have received an
opinion from ▇▇▇▇▇▇ Pepper & Shefelman PLLC, counsel for the Company, dated the
Closing Date, addressed to the Purchaser, and satisfactory in form and substance
to the Purchaser.
5.4 Shareholders Agreement. The Shareholders Agreement in the
form attached as Exhibit G shall have been executed and delivered by the parties
thereto. All such action shall have been taken as may be necessary to elect a
Board of Directors of the Company, effective upon the Closing, in accordance
with the Shareholders Agreement.
5.5 Certificates and Documents. The Company shall have
delivered to special counsel to the Purchaser:
(a) The Articles of Incorporation of the Company, as
amended and in effect as of the Closing Date (including the Series B
Designation), certified by the Secretary of State of the State of Washington;
(b) Certificates, as of the most recent practicable dates,
as to the valid existence of the Company issued by the Secretary of State of the
State of Washington;
(c) Bylaws of the Company, certified by its Secretary or
Assistant Secretary as of the Closing Date; and
(d) Resolutions of the Board of Directors and shareholders
of the Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
or Assistant Secretary of the Company as of the Closing Date.
5.6 Compliance Certificates. The Company shall have delivered
to the Purchaser a certificate, executed by the President of the Company, dated
the Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1, 5.2, 5.4 and 5.5 of this Agreement.
5.7 Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchaser and their special counsel,
and the Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
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6. Condition to the Obligations of the Company. The obligations
of the Company under Section 1.2 of this Agreement are subject to fulfillment,
or the waiver, of the following condition on or before the Closing:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser contained in Section 4 shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
6.2 Compliance Certificates. The Purchaser shall have
delivered to the Company, executed by the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Section 6.1 of this Agreement.
7. Affirmative Covenants of the Company.
7.1 Inspection and Observation. The Company shall permit the
Purchaser, or any authorized representative thereof, to visit and inspect the
properties of the Company, including its corporate and financial records, and to
discuss its business and finances with officers of the Company, during normal
business hours following reasonable notice and as often as may be reasonably
requested.
7.2 Financial Statements and Other Information.
(a) The Company shall deliver to the Purchaser:
(i) within 90 days after the end of each fiscal year
of the Company, an audited balance sheet of the Company as at the end of such
year and audited statements of income and of cash flows of the Company for such
year, certified by certified public accountants of established national
reputation selected by the Company, and prepared in accordance with GAAP;
(ii) within 45 days after the end of each fiscal
quarter of the Company (other than the fourth quarter), an unaudited balance
sheet of the Company as at the end of such quarter, and unaudited statements of
income and of cash flows of the Company for such fiscal quarter and for the
current fiscal year to the end of such fiscal quarter;
(iii) within 30 days after the end of each month
(other than the last month of any fiscal quarter), an unaudited balance sheet of
the Company as at the end of such month and unaudited statements of income and
of cash flows of the Company for such month and for the current fiscal year to
the end of such month, setting forth in comparative form the Company's projected
financial statements for the corresponding periods for the current fiscal year;
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(iv) as soon as available, but in any event prior to
the commencement of each new fiscal year, a business plan and projected
financial statements for such fiscal year;
(v) such other notices, information and data with
respect to the Company as the Company delivers to the holders of its capital
stock at the same time it delivers such items to such holders; and
(vi) with reasonable promptness, such other
information and data as the Purchaser may from time to time reasonably request.
(b) The foregoing financial statements shall be prepared
on a consolidated basis if the Company then has any subsidiaries. The financial
statements delivered pursuant to clauses (ii) and (iii) of paragraph (a) shall
be accompanied by a certificate of the chief financial officer of the Company
stating that such statements have been prepared in accordance with GAAP
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
7.3 Material Changes and Litigation. The Company shall
promptly notify the Purchaser of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation brought or, to the
best of the Company's knowledge, threatened against the Company, or against any
officer, director, key employee or principal stockholder of the Company which,
if adversely determined, would have a Company Material Adverse Effect.
7.4 Agreements with Employees. The Company shall require all
persons now or hereafter employed by the Company who have access to confidential
and proprietary information of the Company to enter into nondisclosure and
assignment of inventions agreements substantially in the form of Exhibit E, or
such other form as may be approved by the Board of Directors of the Company.
7.5 Directors.
(a) The Company shall promptly reimburse in full each
director of the Company who is not an employee of the Company and who was
elected as a director solely or in part by the holders of Series B Preferred for
all of his reasonable out-of-pocket expenses incurred in attending each meeting
of the Board of Directors of the Company or any committee thereof.
(b) The Board of Directors shall meet on at least a
quarterly basis, in-person or by telephone conference call, unless otherwise
agreed by a
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majority of the members of the Board of Directors who are not employees of the
Company or a subsidiary of the Company.
7.6 Reservation of Common Stock. The Company shall reserve and
maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
7.7 Related Party Transactions. Without the approval of the
Purchaser's representative on the Board of Directors of the Company, which shall
not be unreasonably withheld, the Company shall not enter into any agreement
with any shareholder, officer or director of the Company, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including without limitation
any agreement or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring payments to,
any such person or entity, unless such agreement or arrangement is on terms no
less favorable to the Company than are available from unaffiliated third
parties. This shall not apply to the allocation of the actual costs of human
resources, information systems and accounting services provided to the Company
by Vulcan Northwest Inc. through December 31, 1999.
7.8 Termination of Covenants. The covenants of the Company
contained in Sections 7.1 through 7.7 shall terminate, and be of no further
force or effect, upon the closing of the Company's first public offering of
Common Stock pursuant to an effective registration statement under the
Securities Act, resulting in gross proceeds to the Company of at least
$30,000,000, at a price to the public of at least $10.00 per share (as adjusted
for stock splits, stock dividends, recapitalizations and similar events).
7.9 Co-Development Agreements. The Company and the Purchaser
anticipate working together on one or more co-development agreements, the terms
of which will be determined and set forth in separate agreements. The Company
and the Purchaser agree that the general principles of co-development set forth
on Exhibit H reflect the intent of both parties with respect to such
co-development work.
8. Transfer of Shares.
8.1 Restricted Shares. "Restricted Shares" means (i) the
Shares, (ii) the shares of Common Stock issued or issuable upon conversion of
the Shares, and (iii) any other shares of capital stock of the Company issued in
respect of such shares (as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Restricted Shares shall cease to be
Restricted Shares (x) upon any sale pursuant to a registration statement under
the Securities Act, Section 4(1) of the Securities Act or Rule 144 under the
Securities Act or (y) at such time as they become eligible for sale under Rule
144(k) under the Securities Act.
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8.2 Requirements for Transfer.
(a) Restricted Shares shall not be sold or transferred
unless either (i) they first shall have been registered under the Securities
Act, or (ii) the Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Securities
Act.
(b) Notwithstanding the foregoing, no registration or
opinion of counsel shall be required for (i) a transfer by a Purchaser which is
a corporation to a wholly owned subsidiary of such corporation, a transfer by a
Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, or a transfer by a Purchaser which is a
limited liability company to a member of such limited liability company or a
retired member who resigns after the date hereof or to the estate of any such
member or retired member; provided that the transferee in each case agrees in
writing to be subject to the terms of this Section 8 to the same extent as if it
were the original Purchaser hereunder, or (ii) a transfer made in accordance
with Rule 144 under the Securities Act.
8.3 Legend. Each certificate representing Restricted Shares
shall bear a legend substantially in the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the Company
is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates
representing any Restricted Shares, at the request of the holder thereof, at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.
8.4 Rule 144A Information. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, upon the written request of the Purchaser, provide in writing to the
Purchaser and to any prospective transferee of any Restricted Shares of such
Purchaser the information concerning the Company described in Rule 144A(d)(4)
under the Securities Act ("Rule 144A Information"). The Company also shall, upon
the written request of the Purchaser, cooperate with and assist the Purchaser or
any member of the National Association
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of Securities Dealers, Inc. PORTAL system in applying to designate and
thereafter maintain the eligibility of the Restricted Shares for trading through
PORTAL. The Company's obligations under this Section 8.4 shall at all times be
contingent upon receipt from the prospective transferee of Restricted Shares of
a written agreement to take all reasonable precautions to safeguard the Rule
144A Information from disclosure to anyone other than persons who will assist
such transferee in evaluating the purchase of any Restricted Shares.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement, and the rights and obligations of the
Purchaser hereunder, may be assigned by the Purchaser to any person or entity to
which Shares are transferred by the Purchaser, and such transferee shall also be
deemed a "Purchaser" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company. The
Company may not assign its rights under this Agreement.
9.2 Confidentiality. The Purchaser agrees that it will keep
confidential and will not disclose, divulge or use for any purpose other than to
monitor its investment in the Company any confidential, proprietary or secret
information which the Purchaser may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder ("Confidential Information"), unless such
Confidential Information is known, or until such Confidential Information
becomes known, to the public (other than as a result of a breach of this Section
9.2 by the Purchaser); provided, however, that the Purchaser may disclose
Confidential Information (i) to its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company, (ii) to any
prospective purchaser of any Shares from the Purchaser as long as such
prospective purchaser agrees in writing to be bound by the provisions of this
Section 9.2, (iii) to any affiliate of the Purchaser or to a partner,
stockholder or subsidiary of the Purchaser, provided that such affiliate agrees
in writing to be bound by the provisions of this Section 9.2, or (iv) as may
otherwise be required by law, provided that the Purchaser takes reasonable steps
to minimize the extent of any such required disclosure. "Confidential
Information" does not include any information that the Purchaser (a) already
possesses at the time of disclosure without obligation of confidentiality; (b)
develops independently; or (c) rightfully receive without obligation of
confidentiality from a third party.
9.3 Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby.
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9.4 Expenses. The Company shall pay, at the Closing, the
reasonable fees and disbursements of ▇▇▇▇ and ▇▇▇▇ LLP, special counsel to the
Purchaser, in connection with the preparation of this Agreement and the other
agreements contemplated hereby and the closing of the transactions contemplated
hereby.
9.5 Brokers. The Company and the Purchaser (i) represents and
warrants to the other party hereto that it has not retained a finder or broker
in connection with the transactions contemplated by this Agreement, and (ii)
will indemnify and save the other party harmless from and against any and all
claims, liabilities or obligations with respect to brokerage or finders' fees or
commissions, or consulting fees in connection with the transactions contemplated
by this Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
9.6 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
9.7 Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, the Purchaser shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Washington
(without reference to the conflicts of law provisions thereof).
9.9 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other address or addresses as may have been furnished in writing by the Company
to the Purchaser, with a copy to ▇▇▇▇▇ ▇. Israel, Esq., ▇▇▇▇▇▇ Pepper &
Shefelman PLLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇;
If to the Purchaser, at the address set forth on Exhibit A for such
Purchaser, or at such other address or addresses as may have been furnished to
the Company in
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writing by such Purchaser, with a copy to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇ and ▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Facsimile: (202)
942-8484.
Any party may also give any notice, request, consent or other
communication under this Agreement using any other means (including, without
limitation, personal delivery, messenger service, telecopy, first class mail or
electronic mail), but no such notice, request, consent or other communication
shall be deemed to have been duly given unless and until it is actually received
by the party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
9.10 Complete Agreement. This Agreement (including its
Exhibits) and the Ancillary Agreements constitute the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject
matter.
9.11 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended or terminated
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of a majority of the shares of
Common Stock issued or issuable upon conversion of the Shares. Any amendment,
termination or waiver effected in accordance with this Section 9.11 shall be
binding upon each holder of any Shares (including shares of Common Stock into
which such Shares have been converted) even if they do not execute such consent,
each future holder of all such securities and the Company. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
9.12 Pronouns. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
9.13 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
9.14 Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
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Executed as of the date first written above.
COMPANY:
APEX ONLINE LEARNING INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
PURCHASER:
THE EDISON PROJECT INC.
By: /s/H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
H. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
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EXHIBIT A
Purchaser Information
Name and Address No. of Shares of Aggregate
of the Purchaser Series B Preferred Purchase Price
---------------- ------------------ --------------
The Edison Project Inc. 1,000,000 $5,000,000
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇